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https://www.investopedia.com/terms/j/j.asp

J

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-j"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is J? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term J refers to a designation for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasdaq.asp">Nasdaq</a>-listed stocks that specifies that the stock has voting rights. The designation appears as the fifth letter following a dot after a stock's four-letter <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stocksymbol.asp">ticker symbol</a>. It is added to denote a shareholder vote situation. The letter J is a temporary suffix that is removed once the shareholder vote situation is resolved. Other letter designations are used to describe <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/share_class.asp">share classes</a>, foreign issues, preferred issues, and a company's financial status. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>J is a fifth-letter designation used to illustrate that a Nasdaq-listed security has voting rights. </li><li>Nasdaq-listed stocks have four characters, usually letters, known as a ticker symbol.</li><li>Th J appears after a dot at the end of the company's ticker symbol. </li><li>The J-designation is temporary and is removed after the shareholder vote is complete.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-j"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding J </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">Securities</a> that trade on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/04/092404.asp">stock exchanges</a> are represented by a series of characters, usually a set of letters. This arrangement is referred to as a ticker symbol. It allows individuals and companies to execute trades for these securities. Traders can recognize the stock exchange on which these companies trade based on the number of letters in the symbol. For instance, stocks that trade on the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nyse.asp">New York Stock Exchange</a> (NYSE) have three letters while those on the Nasdaq have four. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Publicly-traded stocks also come with suffixes that alert <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shareholder.asp">shareholders</a> to specific situations pertinent to the company. These suffixes appear as a fifth-letter identifier following a dot after a company's ticker symbol. The letter J is one of those suffixes. This designation identifies public security issues that have <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/040315/what-can-shareholders-vote.asp">voting rights</a>. J also reveals that there is more than one issue of a company’s common stock. For example, Google offers two classes of stock to the public—one is voting shares and the other is non-voting. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The letter J is only added temporarily when there is a shareholder vote situation and is removed when the situation has been resolved. Common stock with voting rights is considered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/votingshares.asp">voting stock</a>. The majority of common stock has voting rights. Voting stock, which carries voting rights, allows a shareholder to vote during a shareholder vote situation. The items that might require a shareholder vote include voting on board of director members or corporate transactions like <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/merger.asp">mergers</a>. The exchange removes the designation once the shareholder vote situation is complete. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Since its ticker symbols are comprised of three letters, the NYSE uses a fourth letter to identify unique instances where the issuance varies from normal conditions.</p></div></div></div> <span class="heading-toc" id="toc-j-vs-other-letter-designations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> J vs. Other Letter Designations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The Nasdaq uses a variety of letters, which are called fifth-letter designations, to distinguish stock issuances and the rights that come along with them. J is just one of those designations. As mentioned above, J is a temporary addition to a stock's ticker symbol. Like J, the letter D is also a temporary suffix. D represents a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/newissue.asp" rel="noopener noreferrer">new issue</a>, noting that it’s a corporate reorganization. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> If you see a ticker symbol that has the letter H after a dot, it means that the issuance is the second <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/111114/preferred-stocks-versus-bonds-how-choose.asp" rel="noopener noreferrer">preferred bond</a> of the company. The K at the end of a symbol means the stock is non-voting. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The letter E means the company is delinquent with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp" rel="noopener noreferrer">Securities and Exchange Commission</a> (SEC) filing, while C means the company does not meet all requirements for listing on the Nasdaq. An A or B means it's the company's A or B shares, respectively, and most of the various other letters deal with being a preferred, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertibles.asp" rel="noopener noreferrer">convertible</a>, or rights issuance. </p></div>

## What Is J? The term J refers to a designation for [Nasdaq](https://www.investopedia.com/terms/n/nasdaq.asp)-listed stocks that specifies that the stock has voting rights. The designation appears as the fifth letter following a dot after a stock's four-letter [ticker symbol](https://www.investopedia.com/terms/s/stocksymbol.asp). It is added to denote a shareholder vote situation. The letter J is a temporary suffix that is removed once the shareholder vote situation is resolved. Other letter designations are used to describe [share classes](https://www.investopedia.com/terms/s/share_class.asp), foreign issues, preferred issues, and a company's financial status. ### Key Takeaways * J is a fifth-letter designation used to illustrate that a Nasdaq-listed security has voting rights. * Nasdaq-listed stocks have four characters, usually letters, known as a ticker symbol. * Th J appears after a dot at the end of the company's ticker symbol. * The J-designation is temporary and is removed after the shareholder vote is complete. ## Understanding J [Securities](https://www.investopedia.com/terms/s/security.asp) that trade on [stock exchanges](https://www.investopedia.com/articles/basics/04/092404.asp) are represented by a series of characters, usually a set of letters. This arrangement is referred to as a ticker symbol. It allows individuals and companies to execute trades for these securities. Traders can recognize the stock exchange on which these companies trade based on the number of letters in the symbol. For instance, stocks that trade on the [New York Stock Exchange](https://www.investopedia.com/terms/n/nyse.asp) (NYSE) have three letters while those on the Nasdaq have four. Publicly-traded stocks also come with suffixes that alert [shareholders](https://www.investopedia.com/terms/s/shareholder.asp) to specific situations pertinent to the company. These suffixes appear as a fifth-letter identifier following a dot after a company's ticker symbol. The letter J is one of those suffixes. This designation identifies public security issues that have [voting rights](https://www.investopedia.com/ask/answers/040315/what-can-shareholders-vote.asp). J also reveals that there is more than one issue of a company’s common stock. For example, Google offers two classes of stock to the public—one is voting shares and the other is non-voting. The letter J is only added temporarily when there is a shareholder vote situation and is removed when the situation has been resolved. Common stock with voting rights is considered [voting stock](https://www.investopedia.com/terms/v/votingshares.asp). The majority of common stock has voting rights. Voting stock, which carries voting rights, allows a shareholder to vote during a shareholder vote situation. The items that might require a shareholder vote include voting on board of director members or corporate transactions like [mergers](https://www.investopedia.com/terms/m/merger.asp). The exchange removes the designation once the shareholder vote situation is complete. ### Since its ticker symbols are comprised of three letters, the NYSE uses a fourth letter to identify unique instances where the issuance varies from normal conditions. ## J vs. Other Letter Designations The Nasdaq uses a variety of letters, which are called fifth-letter designations, to distinguish stock issuances and the rights that come along with them. J is just one of those designations. As mentioned above, J is a temporary addition to a stock's ticker symbol. Like J, the letter D is also a temporary suffix. D represents a [new issue](https://www.investopedia.com/terms/n/newissue.asp), noting that it’s a corporate reorganization. If you see a ticker symbol that has the letter H after a dot, it means that the issuance is the second [preferred bond](https://www.investopedia.com/articles/active-trading/111114/preferred-stocks-versus-bonds-how-choose.asp) of the company. The K at the end of a symbol means the stock is non-voting. The letter E means the company is delinquent with a [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) filing, while C means the company does not meet all requirements for listing on the Nasdaq. An A or B means it's the company's A or B shares, respectively, and most of the various other letters deal with being a preferred, [convertible](https://www.investopedia.com/terms/c/convertibles.asp), or rights issuance.

What Is J? The term J refers to a designation for Nasdaq-listed stocks that specifies that the stock has voting rights. The designation appears as the fifth letter following a dot after a stock's four-letter ticker symbol. It is added to denote a shareholder vote situation. The letter J is a temporary suffix that is removed once the shareholder vote situation is resolved. Other letter designations are used to describe share classes, foreign issues, preferred issues, and a company's financial status. Key Takeaways J is a fifth-letter designation used to illustrate that a Nasdaq-listed security has voting rights. Nasdaq-listed stocks have four characters, usually letters, known as a ticker symbol.Th J appears after a dot at the end of the company's ticker symbol. The J-designation is temporary and is removed after the shareholder vote is complete. Understanding J Securities that trade on stock exchanges are represented by a series of characters, usually a set of letters. This arrangement is referred to as a ticker symbol. It allows individuals and companies to execute trades for these securities. Traders can recognize the stock exchange on which these companies trade based on the number of letters in the symbol. For instance, stocks that trade on the New York Stock Exchange (NYSE) have three letters while those on the Nasdaq have four. Publicly-traded stocks also come with suffixes that alert shareholders to specific situations pertinent to the company. These suffixes appear as a fifth-letter identifier following a dot after a company's ticker symbol. The letter J is one of those suffixes. This designation identifies public security issues that have voting rights. J also reveals that there is more than one issue of a company’s common stock. For example, Google offers two classes of stock to the public—one is voting shares and the other is non-voting. The letter J is only added temporarily when there is a shareholder vote situation and is removed when the situation has been resolved. Common stock with voting rights is considered voting stock. The majority of common stock has voting rights. Voting stock, which carries voting rights, allows a shareholder to vote during a shareholder vote situation. The items that might require a shareholder vote include voting on board of director members or corporate transactions like mergers. The exchange removes the designation once the shareholder vote situation is complete. Since its ticker symbols are comprised of three letters, the NYSE uses a fourth letter to identify unique instances where the issuance varies from normal conditions. J vs. Other Letter Designations The Nasdaq uses a variety of letters, which are called fifth-letter designations, to distinguish stock issuances and the rights that come along with them. J is just one of those designations. As mentioned above, J is a temporary addition to a stock's ticker symbol. Like J, the letter D is also a temporary suffix. D represents a new issue, noting that it’s a corporate reorganization. If you see a ticker symbol that has the letter H after a dot, it means that the issuance is the second preferred bond of the company. The K at the end of a symbol means the stock is non-voting. The letter E means the company is delinquent with a Securities and Exchange Commission (SEC) filing, while C means the company does not meet all requirements for listing on the Nasdaq. An A or B means it's the company's A or B shares, respectively, and most of the various other letters deal with being a preferred, convertible, or rights issuance.

https://www.investopedia.com/ask/answers/06/personalinfoandbrokers.asp

Why Do Brokers Ask Investors for Personal Information?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> When investors contact brokers, they are often surprised by the number of requests for personal information. The broker is just complying with the law and rules set forth by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">Securities Exchange Commission (SEC)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Indeed, certain required information must be obtained before a broker can make any trades on behalf of a client. These include your Social Security number or tax ID, your contact information, and whether or not you are an insider at any publicly traded corporation.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Brokers need personal information to comply with tax laws, anti-money laundering regulations, anti-terrorist financing requirements, record-keeping procedures, and to determine suitable investments.</li><li>Broker-dealers in the U.S. need a tax identification number (TIN) from their clients, which is usually a Social Security number (SSN).</li><li>Non-U.S. citizens can usually use a valid passport number, an alien registration card number, or other government-issued ID numbers instead of an SSN.</li><li>Other frequently requested information includes name, address, and date of birth.</li></ul></div></div></div> <span class="heading-toc" id="toc-ssn-requirements-for-trading-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> SSN Requirements for Trading Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Broker-dealers in the U.S. are required to record a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-indentification-number-tin.asp">tax identification number (TIN)</a> for their clients, and this number is usually a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/ssn.asp">Social Security number (SSN)</a>. However, there are several other ways for non-U.S. citizens to supply a TIN. In many cases, a valid passport number, an alien registration card number, and other government-issued ID numbers (such as a driver's license number) can be used.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <span class="heading-toc" id="toc-personal-information"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Personal Information </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Brokers don't ask investors for their personal information to make conversation. There's a perfectly good reason behind it—they have to ask. The type of information required of a broker is spelled out in Rule 17a-3(a)(17) of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seact1934.asp">Securities Exchange Act of 1934</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The rule specifically requires the customer's name, SSN/TIN, mailing address, telephone number, date of birth, employment status (including occupation and whether the customer is an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/associatedperson.asp">associated person</a> of an exchange, a broker, or a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dealer.asp">dealer</a>), annual income, net worth (excluding the value of a primary residence), and investment objectives.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Tax compliance is one reason that brokers need personal information. Investors need to report capital gains, losses, and dividends to the IRS. And brokers must have this data in order to send the required forms each year.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The SEC lists three other reasons why brokers are required to ask for personal information. They are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/suitable.asp">suitability</a>, record-keeping requirements, and anti-terrorist/<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aml.asp">anti-money laundering (AML)</a> laws.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-suitability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Suitability </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Suitability refers to how an investor's financial situation matches the advice and recommendations of a broker. A broker must attempt to understand an investor's circumstances and preferences.<span class="ql-inline-citation" data-cite="4"></span> The broker should then provide recommendations that are suitable for that person and their investment objectives. A broker who does not do that violates rules laid out by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasd.asp">National Association of Securities Dealers</a>.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Relevant information includes an individual's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a>, financial goals, debts, number of years to retirement, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/networth.asp">net worth</a>. A good broker will tailor advice to particular situations. If a broker advises you to take any action that directly contradicts with your financial goals and circumstances, you might even have grounds for legal action. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-record-keeping"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Record-Keeping </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The SEC requires brokers to maintain a current record of personal information. Note that if a client refuses to provide this data, the broker is excused from following the rule. However, the broker must be able to prove that an effort was made to obtain and document the information.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Keep in mind that some personal information may change over time and that it's the investor's responsibility to volunteer such new information to update the record. A broker may also ask for updates on an annual basis, or periodically send the information it has on file to customers so that they can verify whether it is still accurate. Address changes may be of particular importance because the investor will receive a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prospectus.asp">prospectus</a> and other information for each investment.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-terrorism-and-money-laundering"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Terrorism and Money Laundering </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Finally, the broker must provide client information to meet anti-money laundering and anti-terrorist financing requirements. The minimum requirements for this section include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li>Name</li><li>Address (home or business address, not a P.O. Box)</li><li>TIN, such as an SSN</li><li>Date of birth (for a person)<span class="ql-inline-citation" data-cite="4"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> This information allows the broker to verify the client's identity. The client's personal data is cross-checked against lists of known or suspected terrorists.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> These requirements can create issues for misidentified individuals and victims of identity theft. An identity check in such a case may reveal that an identity has been stolen and is being abused for money laundering purposes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Before reaching out to a broker, it is a good idea to review credit reports for signs of unusual activity. One of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-monitoring-services-4846982">best credit monitoring services</a> would likely be useful in this endeavor. There are also services that monitor Social Security numbers to spot potential theft. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <span class="heading-toc" id="toc-additional-information"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Additional Information </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority (FINRA)</a> has a list of other personal information a broker may ask when opening an account. Though not required, it suggests that investors pass these details on so the firm can better serve their trading and investment needs: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li>Contact person: They may ask for the name, address, and telephone number of a trusted contact person. FINRA states that this is not a requirement. This information is only needed if the broker is authorized to disclose information in the event of financial exploitation.<span class="ql-inline-citation" data-cite="3"></span></li> <li>Type of account: The broker may ask investors if they want to open cash accounts or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marginaccount.asp">margin accounts</a>. In a cash account, investors are required to pay for their trades with cash deposits. Margin accounts are needed for using most types of leverage and trading <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a>.</li> <li>Uninvested cash: Investors may also be asked how they intend to deal with cash on hand in their accounts. That includes any money they deposit at regular intervals, dividends, or interest on investments. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/automaticreinvestmentplan.asp">Automatic reinvestment plans</a> usually boost returns in the long run.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-online-brokerages-and-trading-platforms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> Online Brokerages and Trading Platforms </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Some brokerages have traditional offices, which means that investors are able to supply confidential information in person. Transferring data in person can reduce the risk of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/identitytheft.asp">identity theft</a>. When trading online, investors are often required to give up personal information through the trading platform or app. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duediligence.asp">Due diligence</a> is crucial. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Just as with any traditional broker, investors need to know who is getting their information. Read up on the brokerage's background and check out reviews to see if it is legitimate. Beware of fake apps and online platforms designed to harvest personal information. Legitimate apps will usually have a large number of users and reviews.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_50-0"><span class="heading-toc" id="toc-why-do-brokers-ask-for-social-security"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why do brokers ask for social security?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Brokers ask for your social security or other tax identification number because they must report to the IRS what you earn on investments and provide you with the correct tax forms. They also may require this information to verify your identity and prevent money laundering or terrorist financing.<span class="ql-inline-citation" data-cite="9"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_52-0"><span class="heading-toc" id="toc-how-do-you-know-if-the-broker-is-not-a-scammer"></span> <h2 class="mntl-sc-block-questionandanswer__question">How do you know if the broker is not a scammer?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you are unsure, check the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck or the Securities and Exchange Commission’s Investment Adviser Public Disclosure (IAPD) website. Alternatively, you can call FINRA at (800) 289-9999.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_54-0"><span class="heading-toc" id="toc-why-do-you-need-id-to-trade"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why do you need ID to trade?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Brokers are required to ask for ID to verify your identity and act in accordance with various regulations, including anti-money laundering and terrorism laws and know your customer policies.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Don’t be alarmed if your broker starts asking for personal information. They are required by law to ask for certain things, including your name, Social Security and telephone number, date of birth, employment status, and annual income. Normally, getting asked these types of questions is perfectly acceptable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> There are a number of reasons why this kind of information is required. Some are needed to comply with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockrecord.asp">record keeping</a> and anti-terrorist procedures. Others are collected for tax purposes and to make sure you get recommended the right financial products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> You’re better off providing what is asked of you. However, if you have any doubts ask, and when sharing confidential information online be extra careful.<br> </br></p></div>

When investors contact brokers, they are often surprised by the number of requests for personal information. The broker is just complying with the law and rules set forth by the [Securities Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp). Indeed, certain required information must be obtained before a broker can make any trades on behalf of a client. These include your Social Security number or tax ID, your contact information, and whether or not you are an insider at any publicly traded corporation. ### Key Takeaways * Brokers need personal information to comply with tax laws, anti-money laundering regulations, anti-terrorist financing requirements, record-keeping procedures, and to determine suitable investments. * Broker-dealers in the U.S. need a tax identification number (TIN) from their clients, which is usually a Social Security number (SSN). * Non-U.S. citizens can usually use a valid passport number, an alien registration card number, or other government-issued ID numbers instead of an SSN. * Other frequently requested information includes name, address, and date of birth. ## SSN Requirements for Trading Stocks Broker-dealers in the U.S. are required to record a [tax identification number (TIN)](https://www.investopedia.com/terms/t/tax-indentification-number-tin.asp) for their clients, and this number is usually a [Social Security number (SSN)](https://www.investopedia.com/terms/s/ssn.asp). However, there are several other ways for non-U.S. citizens to supply a TIN. In many cases, a valid passport number, an alien registration card number, and other government-issued ID numbers (such as a driver's license number) can be used. ## Personal Information Brokers don't ask investors for their personal information to make conversation. There's a perfectly good reason behind it—they have to ask. The type of information required of a broker is spelled out in Rule 17a-3(a)(17) of the [Securities Exchange Act of 1934](https://www.investopedia.com/terms/s/seact1934.asp). The rule specifically requires the customer's name, SSN/TIN, mailing address, telephone number, date of birth, employment status (including occupation and whether the customer is an [associated person](https://www.investopedia.com/terms/a/associatedperson.asp) of an exchange, a broker, or a [dealer](https://www.investopedia.com/terms/d/dealer.asp)), annual income, net worth (excluding the value of a primary residence), and investment objectives. Tax compliance is one reason that brokers need personal information. Investors need to report capital gains, losses, and dividends to the IRS. And brokers must have this data in order to send the required forms each year. The SEC lists three other reasons why brokers are required to ask for personal information. They are [suitability](https://www.investopedia.com/terms/s/suitable.asp), record-keeping requirements, and anti-terrorist/[anti-money laundering (AML)](https://www.investopedia.com/terms/a/aml.asp) laws. ## Suitability Suitability refers to how an investor's financial situation matches the advice and recommendations of a broker. A broker must attempt to understand an investor's circumstances and preferences. The broker should then provide recommendations that are suitable for that person and their investment objectives. A broker who does not do that violates rules laid out by the [National Association of Securities Dealers](https://www.investopedia.com/terms/n/nasd.asp). Relevant information includes an individual's [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp), financial goals, debts, number of years to retirement, and [net worth](https://www.investopedia.com/terms/n/networth.asp). A good broker will tailor advice to particular situations. If a broker advises you to take any action that directly contradicts with your financial goals and circumstances, you might even have grounds for legal action. ## Record-Keeping The SEC requires brokers to maintain a current record of personal information. Note that if a client refuses to provide this data, the broker is excused from following the rule. However, the broker must be able to prove that an effort was made to obtain and document the information. Keep in mind that some personal information may change over time and that it's the investor's responsibility to volunteer such new information to update the record. A broker may also ask for updates on an annual basis, or periodically send the information it has on file to customers so that they can verify whether it is still accurate. Address changes may be of particular importance because the investor will receive a [prospectus](https://www.investopedia.com/terms/p/prospectus.asp) and other information for each investment. ## Terrorism and Money Laundering Finally, the broker must provide client information to meet anti-money laundering and anti-terrorist financing requirements. The minimum requirements for this section include: * Name * Address (home or business address, not a P.O. Box) * TIN, such as an SSN * Date of birth (for a person) This information allows the broker to verify the client's identity. The client's personal data is cross-checked against lists of known or suspected terrorists. These requirements can create issues for misidentified individuals and victims of identity theft. An identity check in such a case may reveal that an identity has been stolen and is being abused for money laundering purposes. Before reaching out to a broker, it is a good idea to review credit reports for signs of unusual activity. One of the [best credit monitoring services](https://www.investopedia.com/best-credit-monitoring-services-4846982) would likely be useful in this endeavor. There are also services that monitor Social Security numbers to spot potential theft. ## Additional Information The [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp) has a list of other personal information a broker may ask when opening an account. Though not required, it suggests that investors pass these details on so the firm can better serve their trading and investment needs: * Contact person: They may ask for the name, address, and telephone number of a trusted contact person. FINRA states that this is not a requirement. This information is only needed if the broker is authorized to disclose information in the event of financial exploitation. * Type of account: The broker may ask investors if they want to open cash accounts or [margin accounts](https://www.investopedia.com/terms/m/marginaccount.asp). In a cash account, investors are required to pay for their trades with cash deposits. Margin accounts are needed for using most types of leverage and trading [derivatives](https://www.investopedia.com/terms/d/derivative.asp). * Uninvested cash: Investors may also be asked how they intend to deal with cash on hand in their accounts. That includes any money they deposit at regular intervals, dividends, or interest on investments. [Automatic reinvestment plans](https://www.investopedia.com/terms/a/automaticreinvestmentplan.asp) usually boost returns in the long run. ## Online Brokerages and Trading Platforms Some brokerages have traditional offices, which means that investors are able to supply confidential information in person. Transferring data in person can reduce the risk of [identity theft](https://www.investopedia.com/terms/i/identitytheft.asp). When trading online, investors are often required to give up personal information through the trading platform or app. [Due diligence](https://www.investopedia.com/terms/d/duediligence.asp) is crucial. Just as with any traditional broker, investors need to know who is getting their information. Read up on the brokerage's background and check out reviews to see if it is legitimate. Beware of fake apps and online platforms designed to harvest personal information. Legitimate apps will usually have a large number of users and reviews.  ## Why do brokers ask for social security? Brokers ask for your social security or other tax identification number because they must report to the IRS what you earn on investments and provide you with the correct tax forms. They also may require this information to verify your identity and prevent money laundering or terrorist financing. ## How do you know if the broker is not a scammer? If you are unsure, check the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck or the Securities and Exchange Commission’s Investment Adviser Public Disclosure (IAPD) website. Alternatively, you can call FINRA at (800) 289-9999. ## Why do you need ID to trade? Brokers are required to ask for ID to verify your identity and act in accordance with various regulations, including anti-money laundering and terrorism laws and know your customer policies. ## The Bottom Line Don’t be alarmed if your broker starts asking for personal information. They are required by law to ask for certain things, including your name, Social Security and telephone number, date of birth, employment status, and annual income. Normally, getting asked these types of questions is perfectly acceptable. There are a number of reasons why this kind of information is required. Some are needed to comply with [record keeping](https://www.investopedia.com/terms/s/stockrecord.asp) and anti-terrorist procedures. Others are collected for tax purposes and to make sure you get recommended the right financial products. You’re better off providing what is asked of you. However, if you have any doubts ask, and when sharing confidential information online be extra careful.

When investors contact brokers, they are often surprised by the number of requests for personal information. The broker is just complying with the law and rules set forth by the Securities Exchange Commission (SEC). Indeed, certain required information must be obtained before a broker can make any trades on behalf of a client. These include your Social Security number or tax ID, your contact information, and whether or not you are an insider at any publicly traded corporation. Key Takeaways Brokers need personal information to comply with tax laws, anti-money laundering regulations, anti-terrorist financing requirements, record-keeping procedures, and to determine suitable investments.Broker-dealers in the U.S. need a tax identification number (TIN) from their clients, which is usually a Social Security number (SSN).Non-U.S. citizens can usually use a valid passport number, an alien registration card number, or other government-issued ID numbers instead of an SSN.Other frequently requested information includes name, address, and date of birth. SSN Requirements for Trading Stocks Broker-dealers in the U.S. are required to record a tax identification number (TIN) for their clients, and this number is usually a Social Security number (SSN). However, there are several other ways for non-U.S. citizens to supply a TIN. In many cases, a valid passport number, an alien registration card number, and other government-issued ID numbers (such as a driver's license number) can be used. Personal Information Brokers don't ask investors for their personal information to make conversation. There's a perfectly good reason behind it—they have to ask. The type of information required of a broker is spelled out in Rule 17a-3(a)(17) of the Securities Exchange Act of 1934. The rule specifically requires the customer's name, SSN/TIN, mailing address, telephone number, date of birth, employment status (including occupation and whether the customer is an associated person of an exchange, a broker, or a dealer), annual income, net worth (excluding the value of a primary residence), and investment objectives. Tax compliance is one reason that brokers need personal information. Investors need to report capital gains, losses, and dividends to the IRS. And brokers must have this data in order to send the required forms each year. The SEC lists three other reasons why brokers are required to ask for personal information. They are suitability, record-keeping requirements, and anti-terrorist/anti-money laundering (AML) laws. Suitability Suitability refers to how an investor's financial situation matches the advice and recommendations of a broker. A broker must attempt to understand an investor's circumstances and preferences. The broker should then provide recommendations that are suitable for that person and their investment objectives. A broker who does not do that violates rules laid out by the National Association of Securities Dealers. Relevant information includes an individual's risk tolerance, financial goals, debts, number of years to retirement, and net worth. A good broker will tailor advice to particular situations. If a broker advises you to take any action that directly contradicts with your financial goals and circumstances, you might even have grounds for legal action. Record-Keeping The SEC requires brokers to maintain a current record of personal information. Note that if a client refuses to provide this data, the broker is excused from following the rule. However, the broker must be able to prove that an effort was made to obtain and document the information. Keep in mind that some personal information may change over time and that it's the investor's responsibility to volunteer such new information to update the record. A broker may also ask for updates on an annual basis, or periodically send the information it has on file to customers so that they can verify whether it is still accurate. Address changes may be of particular importance because the investor will receive a prospectus and other information for each investment. Terrorism and Money Laundering Finally, the broker must provide client information to meet anti-money laundering and anti-terrorist financing requirements. The minimum requirements for this section include: NameAddress (home or business address, not a P.O. Box)TIN, such as an SSNDate of birth (for a person) This information allows the broker to verify the client's identity. The client's personal data is cross-checked against lists of known or suspected terrorists. These requirements can create issues for misidentified individuals and victims of identity theft. An identity check in such a case may reveal that an identity has been stolen and is being abused for money laundering purposes. Before reaching out to a broker, it is a good idea to review credit reports for signs of unusual activity. One of the best credit monitoring services would likely be useful in this endeavor. There are also services that monitor Social Security numbers to spot potential theft. Additional Information The Financial Industry Regulatory Authority (FINRA) has a list of other personal information a broker may ask when opening an account. Though not required, it suggests that investors pass these details on so the firm can better serve their trading and investment needs: Contact person: They may ask for the name, address, and telephone number of a trusted contact person. FINRA states that this is not a requirement. This information is only needed if the broker is authorized to disclose information in the event of financial exploitation. Type of account: The broker may ask investors if they want to open cash accounts or margin accounts. In a cash account, investors are required to pay for their trades with cash deposits. Margin accounts are needed for using most types of leverage and trading derivatives. Uninvested cash: Investors may also be asked how they intend to deal with cash on hand in their accounts. That includes any money they deposit at regular intervals, dividends, or interest on investments. Automatic reinvestment plans usually boost returns in the long run. Online Brokerages and Trading Platforms Some brokerages have traditional offices, which means that investors are able to supply confidential information in person. Transferring data in person can reduce the risk of identity theft. When trading online, investors are often required to give up personal information through the trading platform or app. Due diligence is crucial. Just as with any traditional broker, investors need to know who is getting their information. Read up on the brokerage's background and check out reviews to see if it is legitimate. Beware of fake apps and online platforms designed to harvest personal information. Legitimate apps will usually have a large number of users and reviews.  Why do brokers ask for social security? Brokers ask for your social security or other tax identification number because they must report to the IRS what you earn on investments and provide you with the correct tax forms. They also may require this information to verify your identity and prevent money laundering or terrorist financing. How do you know if the broker is not a scammer? If you are unsure, check the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck or the Securities and Exchange Commission’s Investment Adviser Public Disclosure (IAPD) website. Alternatively, you can call FINRA at (800) 289-9999. Why do you need ID to trade? Brokers are required to ask for ID to verify your identity and act in accordance with various regulations, including anti-money laundering and terrorism laws and know your customer policies. The Bottom Line Don’t be alarmed if your broker starts asking for personal information. They are required by law to ask for certain things, including your name, Social Security and telephone number, date of birth, employment status, and annual income. Normally, getting asked these types of questions is perfectly acceptable. There are a number of reasons why this kind of information is required. Some are needed to comply with record keeping and anti-terrorist procedures. Others are collected for tax purposes and to make sure you get recommended the right financial products. You’re better off providing what is asked of you. However, if you have any doubts ask, and when sharing confidential information online be extra careful.

https://www.investopedia.com/how-to-inspire-a-love-of-math-5100869

How to Inspire a Love of Math

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> To some, the standard American math curriculum is anything but inspiring. It can be difficult to some, and others may find it boring or causes anxiety.<span class="ql-inline-citation" data-cite="32"></span> In some cases, a lucky few students get the inspiration and motivation required to enjoy and excel in math from a parent or teacher. For others, though, math just doesn't come naturally and they may look to quit at the first opportunity. In this article, we'll look at ways to help inspire someone's interest in math. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Math may not be for everyone; while it can come naturally to some, others may find it disinteresting, boring, challenging, or anxiety-inducing.</li><li>Suggestions for improvement include looking at the field through the perspective of other disciplines, tying math to issues that impact students presently, and focusing on problem-solving vs. rote memorization.</li><li>Teaching math through playing games and by incorporating media can help students deal with anxiety and counteract boredom.</li><li>People with different backgrounds may have gotten different exposure to math, so be mindful to foster an inclusive environment when trying to inspire a passion for math. </li></ul></div></div></div> <span class="heading-toc" id="toc-look-at-math-instruction-through-a-different-lens"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Look at Math Instruction Through a Different Lens </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> By exploring math instruction through the lens of other subjects, we can start to see why the way that it’s usually taught fails to excite most students. What if we taught music the way that we teach math? Students would learn to read and write music on blank sheets of staff paper. They would learn all about music theory but never play an instrument or listen to music. They would miss the joy of making sound or keeping a beat, the emotion of expressing oneself or getting wrapped up in a melody.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> What if we taught art the way that we teach math? Instead of allowing students to paint, they would learn color theory, the ins and outs of different paintbrushes and types of paint, and the names and accomplishments of a few great artists. They would learn how to paint by numbers in high school, but they would never be encouraged to express themselves through painting on a blank canvas—or even scribbling with crayons on printer paper—until graduate school. Most students don’t make it that far. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> “Sadly, our present system of mathematics education is precisely this kind of nightmare,” writes Paul Lockhart in his 2009 essay “A Mathematician’s Lament.” “In fact, if I had to design a mechanism for the express purpose of destroying a child’s natural curiosity and love of pattern-making, I couldn’t possibly do as good a job as is currently being done—I simply wouldn’t have the imagination to come up with the kind of senseless, soul-crushing ideas that constitute contemporary mathematics education.”<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Fortunately, Lockhart and other math teachers have some ideas about how to change things. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-dont-try-to-reform-math-educationscrap-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Don’t Try to Reform Math Education—Scrap It </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> A common refrain is that kids don’t get interested in math because they don’t see the point in learning it. The solution, then, must be to show them <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/salaries-and-compensation-4689802">how math will help them in their careers</a> and adult lives. Lockhart disagrees. He thinks it is the wrong approach because kids don’t care about calculating compound interest.<span class="ql-inline-citation" data-cite="26"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-pullquote" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">How Do We Learn?</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>“We learn things because they interest us now, not because they might be useful later. But this is exactly what we are asking children to do with math.” — Paul Lockhart, “A Mathematician’s Lament”<span class="ql-inline-citation" data-cite="25"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> So what might make math interesting? One idea is to treat it as an art form. The American Mathematical Society’s web page on mathematical imagery is a good source of inspiration that showcases the beauty of infinite loops, the geometry of nature, even the whimsy of fractal pancakes.<span class="ql-inline-citation" data-cite="11"></span> Math comics and graphic novels are two other ways to combine math with art to make the subject more fun and less intimidating. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-tie-math-to-current-events"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Tie Math to Current Events </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Ask students about the topics they would like to explore, then design math lessons around their interests. For instance, teachers can show pupils how to apply math to social justice problems. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> An Advanced Placement high school statistics course can explore wealth inequality and immigration. Algebra 2 and precalculus lessons can be applied to the impact of fundraising on a political candidate’s vote tally. Teachers can consult the best-selling book "High School Mathematics Lessons to Explore, Understand, and Respond to Social Injustice," the website SkewTheScript.org, and the Math and Social Justice wiki for ideas.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-emphasize-problem-solving-over-memorization"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Emphasize Problem Solving Over Memorization </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> An after-school K–12 math program called the Russian School of Mathematics teaches students to solve math problems by thinking through the logic, not by memorizing and regurgitating formulas and proofs.<span class="ql-inline-citation" data-cite="17"></span> Students develop narratives to describe how to solve equations. Given a few numbers, they create their own stories and explanations. The approach is designed to instill an excitement about math that keeps students engaged and helps them learn the material, as reported in <em>The Atlantic</em>.<span class="ql-inline-citation" data-cite="30"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Math is fundamentally about wondering, imagining, and playing, Lockhart writes. It’s about “asking simple and elegant questions about our imaginary creations, and crafting satisfying and beautiful explanations.”<span class="ql-inline-citation" data-cite="27"></span> Depending on whom you ask, it might also be about memorizing multiplication tables, but math education shouldn’t rely so heavily on rote tasks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-play-games-and-incorporate-media"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Play Games and Incorporate Media </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Instead, allow mathematics to be about play. “Play is part of what makes inquiry-based learning and other forms of active learning so effective,” said mathematician Francis Su, in his 2017 farewell speech as outgoing president of the Mathematical Association of America (MAA). “There’s overwhelming evidence that students learn better with active learning.”<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Su believes that by allowing mathematics education to be playful, it can build hopefulness, perseverance, community, and rigorous thinking. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Lockhart suggests doing puzzles and teaching students to play games that require deductive reasoning skills, such as chess, Go, Hex, backgammon, Sprouts, and Nim.<span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> For other ideas, check out the National Math Festival’s collection of suggested puzzles, games, books, and videos for ages 2 through 18+. Participate in the National Math Festival’s online events. Explore the interactive experiences at the National Museum of Mathematics in New York City. Right now, it offers many programs online, including virtual field trips for K–12 classes and YouTube videos. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The “math as play” teaching technique even works at the college level: Check out the inquiry-based learning math books, downloadable as free PDFs, from Discovering the Art of Mathematics, a math approach geared toward liberal arts students. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-foster-inclusive-classrooms"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Foster Inclusive Classrooms </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> What does an inclusive math classroom look like? In many ways, it’s similar to an inclusive classroom in any other subject, where the instructor makes sure to use students’ preferred names and pronouns regardless of what’s listed on the course roster. It’s one that roots out microaggressions and implicit bias from both the instructor and the students. And it’s one where students with different physical abilities are able to access all the course materials.<span class="ql-inline-citation" data-cite="29"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> An inclusive classroom is also one where students learn about contributors to the field from all backgrounds, so they can see themselves as the type of person who could be good at math. In the math classroom, fostering inclusion might mean teaching students about standout mathematicians from all backgrounds.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <span class="heading-toc" id="toc-understand-stereotype-threat"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-heading__text"> Understand Stereotype Threat </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Stereotype threat—in which a reputation for underperformance by members of a certain group actually causes them to underperform—seems to affect women’s and minorities’ outcomes in math. Stereotyped groups may have untapped potential that their teachers can draw out if they learn how to fight back against the threat. Teaching students that math ability is not innate but acquired through effort is another way to reduce the threat.<span class="ql-inline-citation" data-cite="33"></span><span class="ql-inline-citation" data-cite="34"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Also important is not giving an inferior math education to groups that researchers have identified as underperforming. A 2022 study found that ethnically minoritized students had lower STEM GPA when they experienced higher levels and a steeper increase in stereotype risk through college. There remains a lingering correlation between stereotype risk and the performance of minority students.<span class="ql-inline-citation" data-cite="35"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-dont-ignore-math-anxiety"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> Don’t Ignore Math Anxiety </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Two-thirds of math teachers in a representative 2020 survey told the Education Week Research Center that their students experience math anxiety, a challenge that can cause students to avoid math and underperform.<span class="ql-inline-citation" data-cite="8"></span> However, some believe the students can pick it up from elementary school teachers or parents who themselves suffer from math anxiety.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> A pilot program called StoryStrong in Maryland’s Howard County asks eighth-grade students to explore their emotions surrounding math, from the experiences that have shaped their relationship with the subject to their insights on how they can succeed.<span class="ql-inline-citation" data-cite="24"></span> It’s meant to give students the psychological support that they need to develop a positive “math identity.” As it’s so new, how well it works is not known, but it seems to hold promise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <span class="heading-toc" id="toc-advocate-for-struggling-students"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-heading__text"> Advocate for Struggling Students </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Frustrated teachers sometimes write off students who are struggling and tell them that they aren’t cut out for math. Instead, teachers should advocate for them, MAA’s Su urges. Likewise, be aware that we all hold biases about the gender, race, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-economics.asp">socioeconomic</a> status of those who we expect to be good or bad at math.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_60-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-pullquote" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_61-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">What Does a Mathematician Look Like?</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>“The demographics of the mathematical community does not look like the demographics of America. We have left whole segments out of the benefits of the flourishing available in our profession.” — Francis Su, “Mathematics for Human Flourishing”<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Push back when a student says they aren’t a math person. Let them know that even if they struggle with one aspect of math, they might enjoy another type. Emphasize that, as stated above, math ability is not innate and must be acquired. Students who appear to be gifted may just be better educated. Perhaps they got a head start from math-fluent parents. They shouldn’t be the metric against which other students judge themselves. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <span class="heading-toc" id="toc-help-students-pursue-extracurricular-math"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> Help Students Pursue Extracurricular Math </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Struggling or not, students can benefit from math classes and programs outside of school that take a different approach than the typical curriculum and engage pupils in activities that make math fun. Math camps, math circles, and math competitions can provide the spark that a child or teenager needs to increase their math self-esteem and develop an interest in the subject. Financial aid may be available for families who can’t afford the fees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> In the battle against stereotype threat, math anxiety, and mind-numbing curricula, teachers have many weapons to fight back. With a little creativity—and, admittedly, enough flexibility to do anything other than teach students how to pass their next standardized test—instructors can employ art, play, current events, and psychology <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/030516/jim-simons-success-story-net-worth-education-top-quotes.asp">to inspire a love of math in more students</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_69-0"><span class="heading-toc" id="toc-how-can-you-motivate-children-to-learn-math"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can You Motivate Children to Learn Math?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Motivating a child to learn math is similar to motivating a child to learn any number of subjects. Praising the effort rather than the ability of the child learning, being patient and consistent, and finding ways to make learning more interactive can help. </p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-why-is-math-so-difficult-for-many-students"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is Math So Difficult for Many Students?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Traditional math instruction involves rote memorization, frequent testing, and using a multi-step approach to solving problems. All of these factors can make it harder for some students to learn than many other subjects. There are also societal and economic biases that play a role in math and math education that add to the difficulty level for some children.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-what-triggers-math-anxiety"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Triggers Math Anxiety?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Math is a difficult subject for many children, starting from the way it has been traditionally taught. When it's taught in a way that stresses memorization, testing, and the correct solving of problems above all else, it can create distress for students. </p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_75-0"><span class="heading-toc" id="toc-what-are-some-fun-ways-to-learn-math"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Some Fun Ways to Learn Math?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A math curriculum can become more enjoyable when it involves media and technology elements, including video, gaming, and other visual media. Any creative or lighter approach that gets students away from strict memorization and testing can also help with the fun element. </p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> Every individual has their own preferences, and some may simply not care to learn math. Whether it's challenging, boring, overwhelming, or appears pointless, there are many things to considering when trying to inspire others to learn math. Be mindful of how many different factors (interests, demographics, resource access) can play a factor. </p></div>

To some, the standard American math curriculum is anything but inspiring. It can be difficult to some, and others may find it boring or causes anxiety. In some cases, a lucky few students get the inspiration and motivation required to enjoy and excel in math from a parent or teacher. For others, though, math just doesn't come naturally and they may look to quit at the first opportunity. In this article, we'll look at ways to help inspire someone's interest in math. ### Key Takeaways * Math may not be for everyone; while it can come naturally to some, others may find it disinteresting, boring, challenging, or anxiety-inducing. * Suggestions for improvement include looking at the field through the perspective of other disciplines, tying math to issues that impact students presently, and focusing on problem-solving vs. rote memorization. * Teaching math through playing games and by incorporating media can help students deal with anxiety and counteract boredom. * People with different backgrounds may have gotten different exposure to math, so be mindful to foster an inclusive environment when trying to inspire a passion for math. ## Look at Math Instruction Through a Different Lens By exploring math instruction through the lens of other subjects, we can start to see why the way that it’s usually taught fails to excite most students. What if we taught music the way that we teach math? Students would learn to read and write music on blank sheets of staff paper. They would learn all about music theory but never play an instrument or listen to music. They would miss the joy of making sound or keeping a beat, the emotion of expressing oneself or getting wrapped up in a melody.  What if we taught art the way that we teach math? Instead of allowing students to paint, they would learn color theory, the ins and outs of different paintbrushes and types of paint, and the names and accomplishments of a few great artists. They would learn how to paint by numbers in high school, but they would never be encouraged to express themselves through painting on a blank canvas—or even scribbling with crayons on printer paper—until graduate school. Most students don’t make it that far. “Sadly, our present system of mathematics education is precisely this kind of nightmare,” writes Paul Lockhart in his 2009 essay “A Mathematician’s Lament.” “In fact, if I had to design a mechanism for the express purpose of destroying a child’s natural curiosity and love of pattern-making, I couldn’t possibly do as good a job as is currently being done—I simply wouldn’t have the imagination to come up with the kind of senseless, soul-crushing ideas that constitute contemporary mathematics education.” Fortunately, Lockhart and other math teachers have some ideas about how to change things. ## Don’t Try to Reform Math Education—Scrap It A common refrain is that kids don’t get interested in math because they don’t see the point in learning it. The solution, then, must be to show them [how math will help them in their careers](https://www.investopedia.com/salaries-and-compensation-4689802) and adult lives. Lockhart disagrees. He thinks it is the wrong approach because kids don’t care about calculating compound interest. ### How Do We Learn? “We learn things because they interest us now, not because they might be useful later. But this is exactly what we are asking children to do with math.” — Paul Lockhart, “A Mathematician’s Lament” So what might make math interesting? One idea is to treat it as an art form. The American Mathematical Society’s web page on mathematical imagery is a good source of inspiration that showcases the beauty of infinite loops, the geometry of nature, even the whimsy of fractal pancakes. Math comics and graphic novels are two other ways to combine math with art to make the subject more fun and less intimidating. ## Tie Math to Current Events Ask students about the topics they would like to explore, then design math lessons around their interests. For instance, teachers can show pupils how to apply math to social justice problems. An Advanced Placement high school statistics course can explore wealth inequality and immigration. Algebra 2 and precalculus lessons can be applied to the impact of fundraising on a political candidate’s vote tally. Teachers can consult the best-selling book "High School Mathematics Lessons to Explore, Understand, and Respond to Social Injustice," the website SkewTheScript.org, and the Math and Social Justice wiki for ideas. ## Emphasize Problem Solving Over Memorization An after-school K–12 math program called the Russian School of Mathematics teaches students to solve math problems by thinking through the logic, not by memorizing and regurgitating formulas and proofs. Students develop narratives to describe how to solve equations. Given a few numbers, they create their own stories and explanations. The approach is designed to instill an excitement about math that keeps students engaged and helps them learn the material, as reported in *The Atlantic*. Math is fundamentally about wondering, imagining, and playing, Lockhart writes. It’s about “asking simple and elegant questions about our imaginary creations, and crafting satisfying and beautiful explanations.” Depending on whom you ask, it might also be about memorizing multiplication tables, but math education shouldn’t rely so heavily on rote tasks. ## Play Games and Incorporate Media Instead, allow mathematics to be about play. “Play is part of what makes inquiry-based learning and other forms of active learning so effective,” said mathematician Francis Su, in his 2017 farewell speech as outgoing president of the Mathematical Association of America (MAA). “There’s overwhelming evidence that students learn better with active learning.” Su believes that by allowing mathematics education to be playful, it can build hopefulness, perseverance, community, and rigorous thinking. Lockhart suggests doing puzzles and teaching students to play games that require deductive reasoning skills, such as chess, Go, Hex, backgammon, Sprouts, and Nim. For other ideas, check out the National Math Festival’s collection of suggested puzzles, games, books, and videos for ages 2 through 18+. Participate in the National Math Festival’s online events. Explore the interactive experiences at the National Museum of Mathematics in New York City. Right now, it offers many programs online, including virtual field trips for K–12 classes and YouTube videos. The “math as play” teaching technique even works at the college level: Check out the inquiry-based learning math books, downloadable as free PDFs, from Discovering the Art of Mathematics, a math approach geared toward liberal arts students. ## Foster Inclusive Classrooms What does an inclusive math classroom look like? In many ways, it’s similar to an inclusive classroom in any other subject, where the instructor makes sure to use students’ preferred names and pronouns regardless of what’s listed on the course roster. It’s one that roots out microaggressions and implicit bias from both the instructor and the students. And it’s one where students with different physical abilities are able to access all the course materials. An inclusive classroom is also one where students learn about contributors to the field from all backgrounds, so they can see themselves as the type of person who could be good at math. In the math classroom, fostering inclusion might mean teaching students about standout mathematicians from all backgrounds.  ## Understand Stereotype Threat Stereotype threat—in which a reputation for underperformance by members of a certain group actually causes them to underperform—seems to affect women’s and minorities’ outcomes in math. Stereotyped groups may have untapped potential that their teachers can draw out if they learn how to fight back against the threat. Teaching students that math ability is not innate but acquired through effort is another way to reduce the threat. Also important is not giving an inferior math education to groups that researchers have identified as underperforming. A 2022 study found that ethnically minoritized students had lower STEM GPA when they experienced higher levels and a steeper increase in stereotype risk through college. There remains a lingering correlation between stereotype risk and the performance of minority students. ## Don’t Ignore Math Anxiety Two-thirds of math teachers in a representative 2020 survey told the Education Week Research Center that their students experience math anxiety, a challenge that can cause students to avoid math and underperform. However, some believe the students can pick it up from elementary school teachers or parents who themselves suffer from math anxiety. A pilot program called StoryStrong in Maryland’s Howard County asks eighth-grade students to explore their emotions surrounding math, from the experiences that have shaped their relationship with the subject to their insights on how they can succeed. It’s meant to give students the psychological support that they need to develop a positive “math identity.” As it’s so new, how well it works is not known, but it seems to hold promise. ## Advocate for Struggling Students Frustrated teachers sometimes write off students who are struggling and tell them that they aren’t cut out for math. Instead, teachers should advocate for them, MAA’s Su urges. Likewise, be aware that we all hold biases about the gender, race, and [socioeconomic](https://www.investopedia.com/terms/s/social-economics.asp) status of those who we expect to be good or bad at math. ### What Does a Mathematician Look Like? “The demographics of the mathematical community does not look like the demographics of America. We have left whole segments out of the benefits of the flourishing available in our profession.” — Francis Su, “Mathematics for Human Flourishing” Push back when a student says they aren’t a math person. Let them know that even if they struggle with one aspect of math, they might enjoy another type. Emphasize that, as stated above, math ability is not innate and must be acquired. Students who appear to be gifted may just be better educated. Perhaps they got a head start from math-fluent parents. They shouldn’t be the metric against which other students judge themselves. ## Help Students Pursue Extracurricular Math Struggling or not, students can benefit from math classes and programs outside of school that take a different approach than the typical curriculum and engage pupils in activities that make math fun. Math camps, math circles, and math competitions can provide the spark that a child or teenager needs to increase their math self-esteem and develop an interest in the subject. Financial aid may be available for families who can’t afford the fees. In the battle against stereotype threat, math anxiety, and mind-numbing curricula, teachers have many weapons to fight back. With a little creativity—and, admittedly, enough flexibility to do anything other than teach students how to pass their next standardized test—instructors can employ art, play, current events, and psychology [to inspire a love of math in more students](https://www.investopedia.com/articles/investing/030516/jim-simons-success-story-net-worth-education-top-quotes.asp). ## How Can You Motivate Children to Learn Math? Motivating a child to learn math is similar to motivating a child to learn any number of subjects. Praising the effort rather than the ability of the child learning, being patient and consistent, and finding ways to make learning more interactive can help.  ## Why Is Math So Difficult for Many Students? Traditional math instruction involves rote memorization, frequent testing, and using a multi-step approach to solving problems. All of these factors can make it harder for some students to learn than many other subjects. There are also societal and economic biases that play a role in math and math education that add to the difficulty level for some children. ## What Triggers Math Anxiety? Math is a difficult subject for many children, starting from the way it has been traditionally taught. When it's taught in a way that stresses memorization, testing, and the correct solving of problems above all else, it can create distress for students.  ## What Are Some Fun Ways to Learn Math? A math curriculum can become more enjoyable when it involves media and technology elements, including video, gaming, and other visual media. Any creative or lighter approach that gets students away from strict memorization and testing can also help with the fun element.  ## The Bottom Line Every individual has their own preferences, and some may simply not care to learn math. Whether it's challenging, boring, overwhelming, or appears pointless, there are many things to considering when trying to inspire others to learn math. Be mindful of how many different factors (interests, demographics, resource access) can play a factor.

To some, the standard American math curriculum is anything but inspiring. It can be difficult to some, and others may find it boring or causes anxiety. In some cases, a lucky few students get the inspiration and motivation required to enjoy and excel in math from a parent or teacher. For others, though, math just doesn't come naturally and they may look to quit at the first opportunity. In this article, we'll look at ways to help inspire someone's interest in math. Key Takeaways Math may not be for everyone; while it can come naturally to some, others may find it disinteresting, boring, challenging, or anxiety-inducing.Suggestions for improvement include looking at the field through the perspective of other disciplines, tying math to issues that impact students presently, and focusing on problem-solving vs. rote memorization.Teaching math through playing games and by incorporating media can help students deal with anxiety and counteract boredom.People with different backgrounds may have gotten different exposure to math, so be mindful to foster an inclusive environment when trying to inspire a passion for math. Look at Math Instruction Through a Different Lens By exploring math instruction through the lens of other subjects, we can start to see why the way that it’s usually taught fails to excite most students. What if we taught music the way that we teach math? Students would learn to read and write music on blank sheets of staff paper. They would learn all about music theory but never play an instrument or listen to music. They would miss the joy of making sound or keeping a beat, the emotion of expressing oneself or getting wrapped up in a melody.  What if we taught art the way that we teach math? Instead of allowing students to paint, they would learn color theory, the ins and outs of different paintbrushes and types of paint, and the names and accomplishments of a few great artists. They would learn how to paint by numbers in high school, but they would never be encouraged to express themselves through painting on a blank canvas—or even scribbling with crayons on printer paper—until graduate school. Most students don’t make it that far. “Sadly, our present system of mathematics education is precisely this kind of nightmare,” writes Paul Lockhart in his 2009 essay “A Mathematician’s Lament.” “In fact, if I had to design a mechanism for the express purpose of destroying a child’s natural curiosity and love of pattern-making, I couldn’t possibly do as good a job as is currently being done—I simply wouldn’t have the imagination to come up with the kind of senseless, soul-crushing ideas that constitute contemporary mathematics education.” Fortunately, Lockhart and other math teachers have some ideas about how to change things. Don’t Try to Reform Math Education—Scrap It A common refrain is that kids don’t get interested in math because they don’t see the point in learning it. The solution, then, must be to show them how math will help them in their careers and adult lives. Lockhart disagrees. He thinks it is the wrong approach because kids don’t care about calculating compound interest. How Do We Learn? “We learn things because they interest us now, not because they might be useful later. But this is exactly what we are asking children to do with math.” — Paul Lockhart, “A Mathematician’s Lament” So what might make math interesting? One idea is to treat it as an art form. The American Mathematical Society’s web page on mathematical imagery is a good source of inspiration that showcases the beauty of infinite loops, the geometry of nature, even the whimsy of fractal pancakes. Math comics and graphic novels are two other ways to combine math with art to make the subject more fun and less intimidating. Tie Math to Current Events Ask students about the topics they would like to explore, then design math lessons around their interests. For instance, teachers can show pupils how to apply math to social justice problems. An Advanced Placement high school statistics course can explore wealth inequality and immigration. Algebra 2 and precalculus lessons can be applied to the impact of fundraising on a political candidate’s vote tally. Teachers can consult the best-selling book "High School Mathematics Lessons to Explore, Understand, and Respond to Social Injustice," the website SkewTheScript.org, and the Math and Social Justice wiki for ideas. Emphasize Problem Solving Over Memorization An after-school K–12 math program called the Russian School of Mathematics teaches students to solve math problems by thinking through the logic, not by memorizing and regurgitating formulas and proofs. Students develop narratives to describe how to solve equations. Given a few numbers, they create their own stories and explanations. The approach is designed to instill an excitement about math that keeps students engaged and helps them learn the material, as reported in The Atlantic. Math is fundamentally about wondering, imagining, and playing, Lockhart writes. It’s about “asking simple and elegant questions about our imaginary creations, and crafting satisfying and beautiful explanations.” Depending on whom you ask, it might also be about memorizing multiplication tables, but math education shouldn’t rely so heavily on rote tasks. Play Games and Incorporate Media Instead, allow mathematics to be about play. “Play is part of what makes inquiry-based learning and other forms of active learning so effective,” said mathematician Francis Su, in his 2017 farewell speech as outgoing president of the Mathematical Association of America (MAA). “There’s overwhelming evidence that students learn better with active learning.” Su believes that by allowing mathematics education to be playful, it can build hopefulness, perseverance, community, and rigorous thinking. Lockhart suggests doing puzzles and teaching students to play games that require deductive reasoning skills, such as chess, Go, Hex, backgammon, Sprouts, and Nim. For other ideas, check out the National Math Festival’s collection of suggested puzzles, games, books, and videos for ages 2 through 18+. Participate in the National Math Festival’s online events. Explore the interactive experiences at the National Museum of Mathematics in New York City. Right now, it offers many programs online, including virtual field trips for K–12 classes and YouTube videos. The “math as play” teaching technique even works at the college level: Check out the inquiry-based learning math books, downloadable as free PDFs, from Discovering the Art of Mathematics, a math approach geared toward liberal arts students. Foster Inclusive Classrooms What does an inclusive math classroom look like? In many ways, it’s similar to an inclusive classroom in any other subject, where the instructor makes sure to use students’ preferred names and pronouns regardless of what’s listed on the course roster. It’s one that roots out microaggressions and implicit bias from both the instructor and the students. And it’s one where students with different physical abilities are able to access all the course materials. An inclusive classroom is also one where students learn about contributors to the field from all backgrounds, so they can see themselves as the type of person who could be good at math. In the math classroom, fostering inclusion might mean teaching students about standout mathematicians from all backgrounds.  Understand Stereotype Threat Stereotype threat—in which a reputation for underperformance by members of a certain group actually causes them to underperform—seems to affect women’s and minorities’ outcomes in math. Stereotyped groups may have untapped potential that their teachers can draw out if they learn how to fight back against the threat. Teaching students that math ability is not innate but acquired through effort is another way to reduce the threat. Also important is not giving an inferior math education to groups that researchers have identified as underperforming. A 2022 study found that ethnically minoritized students had lower STEM GPA when they experienced higher levels and a steeper increase in stereotype risk through college. There remains a lingering correlation between stereotype risk and the performance of minority students. Don’t Ignore Math Anxiety Two-thirds of math teachers in a representative 2020 survey told the Education Week Research Center that their students experience math anxiety, a challenge that can cause students to avoid math and underperform. However, some believe the students can pick it up from elementary school teachers or parents who themselves suffer from math anxiety. A pilot program called StoryStrong in Maryland’s Howard County asks eighth-grade students to explore their emotions surrounding math, from the experiences that have shaped their relationship with the subject to their insights on how they can succeed. It’s meant to give students the psychological support that they need to develop a positive “math identity.” As it’s so new, how well it works is not known, but it seems to hold promise. Advocate for Struggling Students Frustrated teachers sometimes write off students who are struggling and tell them that they aren’t cut out for math. Instead, teachers should advocate for them, MAA’s Su urges. Likewise, be aware that we all hold biases about the gender, race, and socioeconomic status of those who we expect to be good or bad at math. What Does a Mathematician Look Like? “The demographics of the mathematical community does not look like the demographics of America. We have left whole segments out of the benefits of the flourishing available in our profession.” — Francis Su, “Mathematics for Human Flourishing” Push back when a student says they aren’t a math person. Let them know that even if they struggle with one aspect of math, they might enjoy another type. Emphasize that, as stated above, math ability is not innate and must be acquired. Students who appear to be gifted may just be better educated. Perhaps they got a head start from math-fluent parents. They shouldn’t be the metric against which other students judge themselves. Help Students Pursue Extracurricular Math Struggling or not, students can benefit from math classes and programs outside of school that take a different approach than the typical curriculum and engage pupils in activities that make math fun. Math camps, math circles, and math competitions can provide the spark that a child or teenager needs to increase their math self-esteem and develop an interest in the subject. Financial aid may be available for families who can’t afford the fees. In the battle against stereotype threat, math anxiety, and mind-numbing curricula, teachers have many weapons to fight back. With a little creativity—and, admittedly, enough flexibility to do anything other than teach students how to pass their next standardized test—instructors can employ art, play, current events, and psychology to inspire a love of math in more students. How Can You Motivate Children to Learn Math? Motivating a child to learn math is similar to motivating a child to learn any number of subjects. Praising the effort rather than the ability of the child learning, being patient and consistent, and finding ways to make learning more interactive can help.  Why Is Math So Difficult for Many Students? Traditional math instruction involves rote memorization, frequent testing, and using a multi-step approach to solving problems. All of these factors can make it harder for some students to learn than many other subjects. There are also societal and economic biases that play a role in math and math education that add to the difficulty level for some children. What Triggers Math Anxiety? Math is a difficult subject for many children, starting from the way it has been traditionally taught. When it's taught in a way that stresses memorization, testing, and the correct solving of problems above all else, it can create distress for students.  What Are Some Fun Ways to Learn Math? A math curriculum can become more enjoyable when it involves media and technology elements, including video, gaming, and other visual media. Any creative or lighter approach that gets students away from strict memorization and testing can also help with the fun element.  The Bottom Line Every individual has their own preferences, and some may simply not care to learn math. Whether it's challenging, boring, overwhelming, or appears pointless, there are many things to considering when trying to inspire others to learn math. Be mindful of how many different factors (interests, demographics, resource access) can play a factor.

https://www.investopedia.com/mortgage/insurance/

5 Types of Private Mortgage Insurance (PMI)

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> If you are making a down payment of less than 20% on a home, it's essential to understand your options for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/mortgage-guide/mortgage-insurance/">private mortgage insurance (PMI)</a>. Some people simply cannot afford a down payment in the amount of 20%. Others may elect to put down a smaller <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/down_payment.asp">down payment</a> in favor of having more cash on hand for repairs, remodeling, furnishings, and emergencies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <span class="heading-toc" id="toc-what-is-private-mortgage-insurance-pmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> What Is Private Mortgage Insurance (PMI)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Private mortgage insurance (PMI) is a type of insurance that a borrower might be required to buy as a condition of a conventional mortgage loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> When a borrower makes a down payment of less than 20% of the property's value, the mortgage's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loantovalue.asp">loan-to-value (LTV)</a> ratio is over 80% (the higher the LTV ratio, the higher the risk profile of the mortgage for the lender). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Unlike most types of insurance, the policy protects the lender's investment in the home, not the individual purchasing the insurance (the borrower). However, PMI makes it possible for some people to become homeowners sooner. For individuals who elect to put down between 5% to 19.99% of the residence's cost, PMI allows them the possibility of obtaining financing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> However, it comes with additional monthly costs. Borrowers must pay their PMI until they <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/will-home-equity-loan-affect-pmi-5323798">have accumulated enough equity</a> in the home that the lender no longer considers them high-risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> PMI costs can range from 0.5% to 2% of your loan balance per year, depending on the size of the down payment and mortgage, the loan term, and the borrower's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/081514/what-do-credit-score-ranges-mean.asp">credit score</a>.<span class="ql-inline-citation" data-cite="1"></span> The greater your risk factors, the higher the rate you'll pay. And because PMI is a percentage of the mortgage amount, the more you borrow, the more PMI you’ll pay. There are several major PMI companies in the United States. They charge similar rates, which are adjusted annually. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> While PMI is an added expense, so is continuing to spend money on rent and possibly missing out on market appreciation as you wait to save up a larger down payment. However, there's no guarantee you'll come out ahead buying a home later rather than sooner, so the value of paying PMI is worth considering. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Some potential homeowners may need to consider <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-housing-administration.asp">Federal Housing Administration (FHA)</a> mortgage insurance. However, that only applies if you qualify for a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fhaloan.asp">Federal Housing Administration loan (FHA loan)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>You will need private mortgage insurance (PMI) if you're purchasing a home with a down payment of less than 20% of the home's cost.</li><li>Be aware that PMI is intended to protect the lender, not the borrower, against potential losses.</li><li>There are four main types of mortgage insurance you can purchase: borrower-paid mortgage insurance, single-premium mortgage insurance, lender-paid mortgage insurance, and split-premium mortgage insurance.</li><li>If you obtain a Federal Housing Authority loan for your home purchase, there is an additional type of insurance you will need.</li></ul></div></div></div> <span class="heading-toc" id="toc-private-mortgage-insurance-pmi-coverage"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Private Mortgage Insurance (PMI) Coverage </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> First, you should understand how PMI works. For example, suppose you put down 10% and get a loan for the remaining 90% of the property’s value—$20,000 down and a $180,000 loan. With <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/110415/7-solutions-homeowners-struggling-their-mortgage.asp" rel="noopener noreferrer">mortgage insurance</a>, the lender's losses are limited if the lender has to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreclosure.asp" rel="noopener noreferrer">foreclose</a> on your mortgage. That could happen if you lose your job and can't make your payments for several months. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The mortgage insurance company covers a certain percentage of the lender’s loss. For our example, let’s say that percentage is 25%. So if you still owed 85% ($170,000) of your home’s $200,000 purchase price at the time you were foreclosed on, instead of losing the full $170,000, the lender would only lose 75% of $170,000, or $127,500 on the home’s principal. PMI would cover the other 25%, or $42,500. It would also cover 25% of the delinquent interest you had accrued and 25% of the lender’s foreclosure costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> If PMI protects the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/credit-loans-mortgages/090916/how-do-mortgage-lenders-get-paid-and-make-money.asp" rel="noopener noreferrer">lender</a>, you may be wondering why the borrower has to pay for it. Essentially, the borrower is compensating the lender for taking on the higher risk of lending to you—versus lending to someone willing to put down a larger down payment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <span class="heading-toc" id="toc-how-long-do-you-have-to-buy-private-mortgage-insurance-pmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> How Long Do You Have to Buy Private Mortgage Insurance (PMI)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Borrowers can request that monthly mortgage insurance payments be eliminated once the loan-to-value ratio drops below 80%. Once the mortgage's LTV ratio falls to 78%, the lender must automatically cancel PMI as long as you're current on your mortgage. That happens when your down payment, plus the loan principal you've paid off, equals 22% of the home's purchase price. This cancellation is a requirement of the federal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/homeowners-protection-act.asp">Homeowners Protection Act</a>, even if your home’s market value has gone down.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-types-of-private-mortgage-insurance-pmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Types of Private Mortgage Insurance (PMI) </span> </h2> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_31-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Types of Private Mortgage Insurance (PMI)" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/k6F0FP5D6KfKqTCjmIx2xn6rp0g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/k6F0FP5D6KfKqTCjmIx2xn6rp0g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg" data-srcset="https://www.investopedia.com/thmb/MmdQvVm9tdSdz8UMlfpG6RYRanw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Types of Private Mortgage Insurance (PMI)" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/k6F0FP5D6KfKqTCjmIx2xn6rp0g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg" srcset="https://www.investopedia.com/thmb/MmdQvVm9tdSdz8UMlfpG6RYRanw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Eliana Rodgers</p></span> </figcaption></figure> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> 1. Borrower-Paid Mortgage Insurance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The most common type of PMI is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/insurance/qualified-insurance-premium/">borrower-paid mortgage insurance (BPMI)</a>. BPMI comes in the form of an additional monthly fee that you pay with your mortgage payment. After your loan closes, you pay BPMI every month until you have 22% equity in your home (based on the original purchase price). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> At that point, the lender must automatically cancel BPMI, as long as you’re current on your mortgage payments. Accumulating enough <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/home_equity.asp">home equity</a> through regular monthly mortgage payments to get BPMI canceled generally takes about 15 years.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> You can also be proactive and ask the lender to cancel BPMI when you have 20% equity in your home. In order for your lender to cancel BPMI, your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/05/030905.asp">mortgage payments</a> must be current. You must also have a satisfactory payment history, and there must not be any additional liens on your property. In some cases, you may need a current <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/appraisal.asp">appraisal</a> to substantiate your home’s value.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loan_servicing.asp">loan servicers</a> may permit borrowers to cancel PMI sooner based on home value appreciation. Suppose the borrower accumulates 25% equity due to appreciation in years two through five, or 20% equity after year five. In that case, the investor who purchased the loan may allow PMI cancellation after the home's increased value is proven. That can be done with an appraisal, a broker's price opinion (BPO), or an automated valuation model (AVM). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> You also may be able to get rid of PMI early by refinancing. However, you'll have to weigh the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/123115/how-lower-refinance-closing-costs.asp">cost of refinancing</a> against the costs of continuing to pay mortgage insurance premiums. You may also be able to cancel your PMI early by prepaying your mortgage principal so that you have at least 20% equity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> It is worth considering if you're willing to pay PMI for up to 15 years to buy now. What will PMI cost you in the long run? What will waiting to purchase potentially cost you? While it's true that you might miss out on accumulating home equity while you're renting, you'll also be avoiding the many costs of homeownership. These costs include homeowner's insurance, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/propertytax.asp">property taxes</a>, maintenance, and repairs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> The other three types of PMI aren't nearly as common as borrower-paid mortgage insurance. You might still want to know how they work, in case one of them sounds more appealing, or your lender presents you with more than one mortgage insurance option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> 2. Single-Premium Mortgage Insurance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> With single-premium mortgage insurance (SPMI), also called single-payment mortgage insurance, you pay mortgage insurance upfront in a lump sum. That can be done either in full at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mortgages-real-estate/10/closing-home-process.asp" rel="noopener noreferrer">closing</a> or financed into the mortgage (in the latter case, it may be called single-financed mortgage insurance). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The benefit of SPMI is that your monthly payment will be lower compared to BPMI. That can help you qualify to borrow more to buy your home. Another advantage is that you don't have to worry about refinancing to get out of PMI. You also do not have to watch your loan-to-value ratio to see when you can get your PMI canceled. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> The risk is that if you refinance or sell within a few years, no portion of the single premium is refundable. Further, if you finance the single premium, you’ll pay interest on it for as long as you carry the mortgage. Also, if you don’t have enough money for a 20% down payment, you may not have the cash to pay a single premium upfront. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> However, the seller or, in the case of a new home, the builder can pay the borrower’s single-premium <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/05/020705.asp" rel="noopener noreferrer">mortgage</a> insurance. You can always try negotiating that as part of your purchase offer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> If you plan to stay in the home for three or more years, single-premium mortgage insurance may save you money. Ask your loan officer to see if this is indeed the case. Be aware that not all lenders offer single-premium mortgage insurance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-subheading__text"> 3. Lender-Paid Mortgage Insurance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> With lender-paid mortgage insurance (LPMI), your lender will technically pay the mortgage insurance premium. In fact, you will actually pay for it over the life of the loan in the form of a slightly higher interest rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> Unlike BPMI, you can't cancel LPMI when your equity reaches 78% because it is built into the loan. Refinancing will be the only way to lower your monthly payment. Your interest rate will not decrease once you have 20% or 22% equity. Lender-paid PMI is not refundable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> The benefit of lender-paid PMI, despite the higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/09/how-interest-rates-affect-markets.asp" rel="noopener noreferrer">interest rate</a>, is that your monthly payment could still be lower than making monthly PMI payments. That way, you could qualify to borrow more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-subheading__text"> 4. Split-Premium Mortgage Insurance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Split-premium mortgage insurance is the least common type. It’s a hybrid of the first two types we discussed: BPMI and SPMI. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Here’s how it works: You pay part of the mortgage insurance as a lump sum at closing and part monthly. You don’t have to come up with as much extra cash upfront as you would with SPMI, nor do you increase your monthly payment by as much as you would with BPMI. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> One reason to choose split-premium mortgage insurance is if you have a high debt-to-income ratio. When that's the case, increasing your monthly payment too much with BPMI would mean not qualifying to borrow enough to purchase the home you want. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> The upfront premium might range from 0.50% to 1.25% of the loan amount. The monthly premium will be based on the net loan-to-value ratio before any financed premium is factored in. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> As with SPMI, you can ask the builder or seller to pay the initial premium, or you can roll it into your mortgage. Split premiums may be partly refundable once mortgage insurance is canceled or terminated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_76-0"> <span class="mntl-sc-block-subheading__text"> 5. Federal Home Loan Mortgage Protection (MIP) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> There is an additional type of mortgage insurance. However, it is only used with loans underwritten by the Federal Housing Administration. These loans are better known as FHA loans or FHA mortgages. PMI through the FHA is known as MIP. It is a requirement for all FHA loans and with down payments of 10% or less.<span class="ql-inline-citation" data-cite="4"></span> Homes must meet specific criteria for livability to be eligible for MIP coverage; otherwise, they are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/uninsurable-property.asp">considered uninsurable</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> Furthermore, it cannot be removed without refinancing the home. MIP requires an upfront payment and monthly premiums (usually added to the monthly mortgage note). The buyer is still required to wait 11 years before they can remove the MIP from the loan if they had a down payment of more than 10%.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_80-0"></div> <span class="heading-toc" id="toc-cost-of-private-mortgage-insurance-pmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_81-0"> <span class="mntl-sc-block-heading__text"> Cost of Private Mortgage Insurance (PMI) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> The cost of your PMI premiums will depend on several factors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> <li>Which premium plan you choose</li><li>Whether your interest rate is fixed or adjustable</li><li>Your loan term (usually 15 or 30 years)</li><li>Your down payment or loan-to-value ratio (LTV) (a 5% down payment gives you a 95% LTV; 10% down makes your LTV 90%)</li><li>The amount of mortgage insurance coverage required by the lender or investor (it can range from 6% to 35%)</li><li>Whether the premium is refundable or not</li><li>Your credit score</li><li>Any additional risk factors, such as the loan being for a jumbo mortgage, investment property, cash-out refinance, or second home</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> In general, the riskier you look according to any of these factors (usually taken into account whenever you are taking out a loan), the higher your premiums will be. For example, the lower your credit score and the lower your down payment, the higher your premiums will be. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> According to data from Ginnie Mae and the Urban Institute, the average annual PMI typically ranges from .55% to 2.25% of the original loan amount each year.<span class="ql-inline-citation" data-cite="5"></span> Here are some scenarios: If you put down 15% on a 15-year fixed-rate mortgage and have a credit score of 760 or higher, for example, you'd pay 0.17% because you'd likely be considered a low-risk borrower. If you put down 3% on a 30-year adjustable-rate mortgage for which the introductory rate is fixed for only three years and you have a credit score of 630, your rate will be 2.81%. That happens because you'd be considered a high-risk borrower at most financial institutions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_90-0"> Once you know which percentage applies to your situation, multiply it by the amount you’re borrowing. Then divide that amount by 12 to see what you’ll pay each month. For example, a loan of $200,000 with an annual premium of 0.65% would cost $1,300 per year ($200,000 x .0065), or about $108 per month ($1,300 / 12). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <span class="heading-toc" id="toc-estimating-rates-for-private-mortgage-insurance-pmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_92-0"> <span class="mntl-sc-block-heading__text"> Estimating Rates for Private Mortgage Insurance (PMI) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_93-0"> Many companies offer mortgage insurance. Their rates may differ slightly, and your lender—not you—will select the insurer. Nevertheless, you can get an idea of what rate you will pay by studying the mortgage insurance rate card. MGIC, Radian, Essent, National MI, United Guaranty, and Genworth are major private mortgage insurance providers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Mortgage insurance rate cards can be confusing at first glance. Here’s how to use them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_97-0"> <li>Find the column that corresponds to your credit score.</li><li>Find the row that corresponds to your LTV ratio.</li><li>Identify the applicable coverage line. Search the web for Fannie Mae's Mortgage Insurance Coverage Requirements to identify how much coverage is required for your loan. Alternatively, you can ask your lender (and impress the pants off them with your knowledge of how PMI works).</li><li>Identify the PMI rate that corresponds with the intersection of your credit score, down payment, and coverage.</li><li>If applicable, add or subtract to that rate the amount from the adjustment chart (below the main rate chart) that corresponds with your credit score. For example, if you’re doing a cash-out refinance and your credit score is 720, you might add 0.20 to your rate.</li><li>As we showed in the previous section, multiply the total rate by the amount you’re borrowing; this is your annual mortgage insurance premium. Divide it by 12 to get your monthly mortgage insurance premium.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> Your rate will be the same every month, though some insurers will lower it after ten years. However, that's just before the point when you should be able to drop coverage, so any savings won't be that significant. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_100-0"></div> <span class="heading-toc" id="toc-federal-housing-administration-fha-mortgage-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_101-0"> <span class="mntl-sc-block-heading__text"> Federal Housing Administration (FHA) Mortgage Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_102-0"> Mortgage insurance works differently with FHA loans. For the majority of borrowers, it will end up being more expensive than PMI. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_103-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_104-0"> PMI doesn't require you to pay an upfront premium unless you choose single-premium or split-premium mortgage insurance. In the case of single-premium mortgage insurance, you will pay no monthly mortgage insurance premiums. In the case of split-premium mortgage insurance, you pay lower monthly mortgage insurance premiums because you've paid an upfront premium. However, everyone must pay an upfront premium with FHA mortgage insurance. What is more, that payment does nothing to reduce your monthly premiums. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_106-0"> As of 2021, the upfront mortgage insurance premium (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/up-front-mortgage-insurance-ufmi.asp">UFMIP</a>) is 1.75% of the loan amount.<span class="ql-inline-citation" data-cite="1"></span> You can pay this amount at closing or finance it as part of your mortgage. The UFMIP will cost you $1,750 for every $100,000 you borrow. If you finance it, you’ll pay interest on it, too, making it more expensive over time. The seller is permitted to pay your UFMIP as long as the seller’s total contribution toward your closing costs doesn’t exceed 6% of the purchase price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_108-0"> With an FHA mortgage, you'll also pay a monthly mortgage insurance premium (MIP) of 0.45% to 1.05% of the loan amount based on your down payment and loan term. As the FHA table below shows, if you have a 30-year loan for $200,000 and you're paying the FHA's minimum down payment of 3.5%, your MIP will be 0.85% for the life of the loan. Not being able to cancel your MIPs can be costly.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_109-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-low-res" id="mntl-sc-block_110-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:64.7%;"> <img class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/nXLqOBEiccR_n6janiNJzoeNW3w=/680x0/filters:no_upscale():max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/UMHAXUa0qs8r6gGkpOdpYVnS2o0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea" data-srcset="https://www.investopedia.com/thmb/2fflOY8knEZAlhAPMAYVLA2L1jQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea 750w" data-tracking-container="true" height="440" id="mntl-sc-block-image_2-0" width="680"/> <noscript> <img class="img--noscript universal-image__image" height="440" sizes="750px" src="https://www.investopedia.com/thmb/UMHAXUa0qs8r6gGkpOdpYVnS2o0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea" srcset="https://www.investopedia.com/thmb/2fflOY8knEZAlhAPMAYVLA2L1jQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea 750w" width="680"/> </noscript> </div> </div> </figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> <em>Source: U.S. Department of Housing and Urban Development.</em> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_113-0"> For FHA loans with a down payment of 10% or more, you can cancel your monthly MIPs after 15 years.<span class="ql-inline-citation" data-cite="3"></span> But if you have 10% to put down, why get an FHA loan at all? You'd only want to do this if your credit score is too low to qualify for a conventional loan. Another good reason: if your low credit score would give you a much higher interest rate or PMI expense with a traditional loan than with an FHA loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_114-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_115-0"> You can get an FHA loan with a credit score as low as 580 and possibly even lower (though lenders might require your score to be 620 or higher). And you might qualify for the same rate you would on a conventional loan despite having a lower credit score: 660 versus 740, for example.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_117-0"> Without putting down 10% or more on an FHA mortgage, the only way to stop paying FHA MIPs is to refinance into a conventional loan. This step will make the most sense after your credit score or LTV increases considerably. Refinancing means paying closing costs, however, and interest rates might be higher when you're ready to refinance. Higher interest rates plus closing costs could negate any savings from canceling FHA mortgage insurance. Furthermore, you can't refinance if you're unemployed or have too much debt relative to your income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_119-0"> In addition, FHA loans are more generous in allowing sellers to contribute to the buyer’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/mortgage-guide/closing-costs/">closing costs</a>: up to 6% of the loan amount versus 3% for conventional loans.<span class="ql-inline-citation" data-cite="7"></span> If you can't afford to buy a home without substantial closing cost assistance, an FHA loan might be your only option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_120-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_121-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_122-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/homeowners-insurance-vs-mortgage-insurance-5221665">Mortgage insurance</a> costs borrowers money, but it enables them to become homeowners sooner by reducing the risk to financial institutions of issuing mortgages to people with small down payments. You might find it worthwhile to pay mortgage insurance premiums if you want to own a home sooner rather than later for lifestyle or affordability reasons. Adding to the reasons for doing this: Premiums can be canceled once your home equity reaches 80% if you’re paying monthly PMI or split-premium mortgage insurance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_123-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_124-0"> However, you might think twice if you're in the category of borrowers who would have to pay FHA insurance premiums for the life of the loan. You might be able to refinance out of an FHA loan later to get rid of PMI. On the other hand, there's no guarantee that your employment situation or market interest rates will make a refinance possible or profitable. </p></div>

If you are making a down payment of less than 20% on a home, it's essential to understand your options for [private mortgage insurance (PMI)](https://www.investopedia.com/mortgage/mortgage-guide/mortgage-insurance/). Some people simply cannot afford a down payment in the amount of 20%. Others may elect to put down a smaller [down payment](https://www.investopedia.com/terms/d/down_payment.asp) in favor of having more cash on hand for repairs, remodeling, furnishings, and emergencies. ## What Is Private Mortgage Insurance (PMI)? Private mortgage insurance (PMI) is a type of insurance that a borrower might be required to buy as a condition of a conventional mortgage loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price. When a borrower makes a down payment of less than 20% of the property's value, the mortgage's [loan-to-value (LTV)](https://www.investopedia.com/terms/l/loantovalue.asp) ratio is over 80% (the higher the LTV ratio, the higher the risk profile of the mortgage for the lender). Unlike most types of insurance, the policy protects the lender's investment in the home, not the individual purchasing the insurance (the borrower). However, PMI makes it possible for some people to become homeowners sooner. For individuals who elect to put down between 5% to 19.99% of the residence's cost, PMI allows them the possibility of obtaining financing. However, it comes with additional monthly costs. Borrowers must pay their PMI until they [have accumulated enough equity](https://www.investopedia.com/will-home-equity-loan-affect-pmi-5323798) in the home that the lender no longer considers them high-risk. PMI costs can range from 0.5% to 2% of your loan balance per year, depending on the size of the down payment and mortgage, the loan term, and the borrower's [credit score](https://www.investopedia.com/articles/personal-finance/081514/what-do-credit-score-ranges-mean.asp). The greater your risk factors, the higher the rate you'll pay. And because PMI is a percentage of the mortgage amount, the more you borrow, the more PMI you’ll pay. There are several major PMI companies in the United States. They charge similar rates, which are adjusted annually. While PMI is an added expense, so is continuing to spend money on rent and possibly missing out on market appreciation as you wait to save up a larger down payment. However, there's no guarantee you'll come out ahead buying a home later rather than sooner, so the value of paying PMI is worth considering. Some potential homeowners may need to consider [Federal Housing Administration (FHA)](https://www.investopedia.com/terms/f/federal-housing-administration.asp) mortgage insurance. However, that only applies if you qualify for a [Federal Housing Administration loan (FHA loan)](https://www.investopedia.com/terms/f/fhaloan.asp). ### Key Takeaways * You will need private mortgage insurance (PMI) if you're purchasing a home with a down payment of less than 20% of the home's cost. * Be aware that PMI is intended to protect the lender, not the borrower, against potential losses. * There are four main types of mortgage insurance you can purchase: borrower-paid mortgage insurance, single-premium mortgage insurance, lender-paid mortgage insurance, and split-premium mortgage insurance. * If you obtain a Federal Housing Authority loan for your home purchase, there is an additional type of insurance you will need. ## Private Mortgage Insurance (PMI) Coverage First, you should understand how PMI works. For example, suppose you put down 10% and get a loan for the remaining 90% of the property’s value—$20,000 down and a $180,000 loan. With [mortgage insurance](https://www.investopedia.com/articles/personal-finance/110415/7-solutions-homeowners-struggling-their-mortgage.asp), the lender's losses are limited if the lender has to [foreclose](https://www.investopedia.com/terms/f/foreclosure.asp) on your mortgage. That could happen if you lose your job and can't make your payments for several months. The mortgage insurance company covers a certain percentage of the lender’s loss. For our example, let’s say that percentage is 25%. So if you still owed 85% ($170,000) of your home’s $200,000 purchase price at the time you were foreclosed on, instead of losing the full $170,000, the lender would only lose 75% of $170,000, or $127,500 on the home’s principal. PMI would cover the other 25%, or $42,500. It would also cover 25% of the delinquent interest you had accrued and 25% of the lender’s foreclosure costs. If PMI protects the [lender](https://www.investopedia.com/articles/credit-loans-mortgages/090916/how-do-mortgage-lenders-get-paid-and-make-money.asp), you may be wondering why the borrower has to pay for it. Essentially, the borrower is compensating the lender for taking on the higher risk of lending to you—versus lending to someone willing to put down a larger down payment. ## How Long Do You Have to Buy Private Mortgage Insurance (PMI)? Borrowers can request that monthly mortgage insurance payments be eliminated once the loan-to-value ratio drops below 80%. Once the mortgage's LTV ratio falls to 78%, the lender must automatically cancel PMI as long as you're current on your mortgage. That happens when your down payment, plus the loan principal you've paid off, equals 22% of the home's purchase price. This cancellation is a requirement of the federal [Homeowners Protection Act](https://www.investopedia.com/terms/h/homeowners-protection-act.asp), even if your home’s market value has gone down. ## Types of Private Mortgage Insurance (PMI) ![Types of Private Mortgage Insurance (PMI)]() :max_bytes(150000):strip_icc()/insurance_final-636cb6bc31de489f836f16f029289faf.jpg) Investopedia / Eliana Rodgers ### 1. Borrower-Paid Mortgage Insurance The most common type of PMI is [borrower-paid mortgage insurance (BPMI)](https://www.investopedia.com/mortgage/insurance/qualified-insurance-premium/). BPMI comes in the form of an additional monthly fee that you pay with your mortgage payment. After your loan closes, you pay BPMI every month until you have 22% equity in your home (based on the original purchase price). At that point, the lender must automatically cancel BPMI, as long as you’re current on your mortgage payments. Accumulating enough [home equity](https://www.investopedia.com/terms/h/home_equity.asp) through regular monthly mortgage payments to get BPMI canceled generally takes about 15 years. You can also be proactive and ask the lender to cancel BPMI when you have 20% equity in your home. In order for your lender to cancel BPMI, your [mortgage payments](https://www.investopedia.com/articles/pf/05/030905.asp) must be current. You must also have a satisfactory payment history, and there must not be any additional liens on your property. In some cases, you may need a current [appraisal](https://www.investopedia.com/terms/a/appraisal.asp) to substantiate your home’s value. Some [loan servicers](https://www.investopedia.com/terms/l/loan_servicing.asp) may permit borrowers to cancel PMI sooner based on home value appreciation. Suppose the borrower accumulates 25% equity due to appreciation in years two through five, or 20% equity after year five. In that case, the investor who purchased the loan may allow PMI cancellation after the home's increased value is proven. That can be done with an appraisal, a broker's price opinion (BPO), or an automated valuation model (AVM). You also may be able to get rid of PMI early by refinancing. However, you'll have to weigh the [cost of refinancing](https://www.investopedia.com/articles/personal-finance/123115/how-lower-refinance-closing-costs.asp) against the costs of continuing to pay mortgage insurance premiums. You may also be able to cancel your PMI early by prepaying your mortgage principal so that you have at least 20% equity. It is worth considering if you're willing to pay PMI for up to 15 years to buy now. What will PMI cost you in the long run? What will waiting to purchase potentially cost you? While it's true that you might miss out on accumulating home equity while you're renting, you'll also be avoiding the many costs of homeownership. These costs include homeowner's insurance, [property taxes](https://www.investopedia.com/terms/p/propertytax.asp), maintenance, and repairs. The other three types of PMI aren't nearly as common as borrower-paid mortgage insurance. You might still want to know how they work, in case one of them sounds more appealing, or your lender presents you with more than one mortgage insurance option. ### 2. Single-Premium Mortgage Insurance With single-premium mortgage insurance (SPMI), also called single-payment mortgage insurance, you pay mortgage insurance upfront in a lump sum. That can be done either in full at [closing](https://www.investopedia.com/articles/mortgages-real-estate/10/closing-home-process.asp) or financed into the mortgage (in the latter case, it may be called single-financed mortgage insurance). The benefit of SPMI is that your monthly payment will be lower compared to BPMI. That can help you qualify to borrow more to buy your home. Another advantage is that you don't have to worry about refinancing to get out of PMI. You also do not have to watch your loan-to-value ratio to see when you can get your PMI canceled. The risk is that if you refinance or sell within a few years, no portion of the single premium is refundable. Further, if you finance the single premium, you’ll pay interest on it for as long as you carry the mortgage. Also, if you don’t have enough money for a 20% down payment, you may not have the cash to pay a single premium upfront. However, the seller or, in the case of a new home, the builder can pay the borrower’s single-premium [mortgage](https://www.investopedia.com/articles/pf/05/020705.asp) insurance. You can always try negotiating that as part of your purchase offer. If you plan to stay in the home for three or more years, single-premium mortgage insurance may save you money. Ask your loan officer to see if this is indeed the case. Be aware that not all lenders offer single-premium mortgage insurance. ### 3. Lender-Paid Mortgage Insurance With lender-paid mortgage insurance (LPMI), your lender will technically pay the mortgage insurance premium. In fact, you will actually pay for it over the life of the loan in the form of a slightly higher interest rate. Unlike BPMI, you can't cancel LPMI when your equity reaches 78% because it is built into the loan. Refinancing will be the only way to lower your monthly payment. Your interest rate will not decrease once you have 20% or 22% equity. Lender-paid PMI is not refundable. The benefit of lender-paid PMI, despite the higher [interest rate](https://www.investopedia.com/articles/stocks/09/how-interest-rates-affect-markets.asp), is that your monthly payment could still be lower than making monthly PMI payments. That way, you could qualify to borrow more. ### 4. Split-Premium Mortgage Insurance Split-premium mortgage insurance is the least common type. It’s a hybrid of the first two types we discussed: BPMI and SPMI. Here’s how it works: You pay part of the mortgage insurance as a lump sum at closing and part monthly. You don’t have to come up with as much extra cash upfront as you would with SPMI, nor do you increase your monthly payment by as much as you would with BPMI. One reason to choose split-premium mortgage insurance is if you have a high debt-to-income ratio. When that's the case, increasing your monthly payment too much with BPMI would mean not qualifying to borrow enough to purchase the home you want. The upfront premium might range from 0.50% to 1.25% of the loan amount. The monthly premium will be based on the net loan-to-value ratio before any financed premium is factored in. As with SPMI, you can ask the builder or seller to pay the initial premium, or you can roll it into your mortgage. Split premiums may be partly refundable once mortgage insurance is canceled or terminated. ### 5. Federal Home Loan Mortgage Protection (MIP) There is an additional type of mortgage insurance. However, it is only used with loans underwritten by the Federal Housing Administration. These loans are better known as FHA loans or FHA mortgages. PMI through the FHA is known as MIP. It is a requirement for all FHA loans and with down payments of 10% or less. Homes must meet specific criteria for livability to be eligible for MIP coverage; otherwise, they are [considered uninsurable](https://www.investopedia.com/terms/u/uninsurable-property.asp). Furthermore, it cannot be removed without refinancing the home. MIP requires an upfront payment and monthly premiums (usually added to the monthly mortgage note). The buyer is still required to wait 11 years before they can remove the MIP from the loan if they had a down payment of more than 10%. ## Cost of Private Mortgage Insurance (PMI) The cost of your PMI premiums will depend on several factors. * Which premium plan you choose * Whether your interest rate is fixed or adjustable * Your loan term (usually 15 or 30 years) * Your down payment or loan-to-value ratio (LTV) (a 5% down payment gives you a 95% LTV; 10% down makes your LTV 90%) * The amount of mortgage insurance coverage required by the lender or investor (it can range from 6% to 35%) * Whether the premium is refundable or not * Your credit score * Any additional risk factors, such as the loan being for a jumbo mortgage, investment property, cash-out refinance, or second home In general, the riskier you look according to any of these factors (usually taken into account whenever you are taking out a loan), the higher your premiums will be. For example, the lower your credit score and the lower your down payment, the higher your premiums will be. According to data from Ginnie Mae and the Urban Institute, the average annual PMI typically ranges from .55% to 2.25% of the original loan amount each year. Here are some scenarios: If you put down 15% on a 15-year fixed-rate mortgage and have a credit score of 760 or higher, for example, you'd pay 0.17% because you'd likely be considered a low-risk borrower. If you put down 3% on a 30-year adjustable-rate mortgage for which the introductory rate is fixed for only three years and you have a credit score of 630, your rate will be 2.81%. That happens because you'd be considered a high-risk borrower at most financial institutions. Once you know which percentage applies to your situation, multiply it by the amount you’re borrowing. Then divide that amount by 12 to see what you’ll pay each month. For example, a loan of $200,000 with an annual premium of 0.65% would cost $1,300 per year ($200,000 x .0065), or about $108 per month ($1,300 / 12). ## Estimating Rates for Private Mortgage Insurance (PMI) Many companies offer mortgage insurance. Their rates may differ slightly, and your lender—not you—will select the insurer. Nevertheless, you can get an idea of what rate you will pay by studying the mortgage insurance rate card. MGIC, Radian, Essent, National MI, United Guaranty, and Genworth are major private mortgage insurance providers. Mortgage insurance rate cards can be confusing at first glance. Here’s how to use them. 1. Find the column that corresponds to your credit score. 2. Find the row that corresponds to your LTV ratio. 3. Identify the applicable coverage line. Search the web for Fannie Mae's Mortgage Insurance Coverage Requirements to identify how much coverage is required for your loan. Alternatively, you can ask your lender (and impress the pants off them with your knowledge of how PMI works). 4. Identify the PMI rate that corresponds with the intersection of your credit score, down payment, and coverage. 5. If applicable, add or subtract to that rate the amount from the adjustment chart (below the main rate chart) that corresponds with your credit score. For example, if you’re doing a cash-out refinance and your credit score is 720, you might add 0.20 to your rate. 6. As we showed in the previous section, multiply the total rate by the amount you’re borrowing; this is your annual mortgage insurance premium. Divide it by 12 to get your monthly mortgage insurance premium. Your rate will be the same every month, though some insurers will lower it after ten years. However, that's just before the point when you should be able to drop coverage, so any savings won't be that significant. ## Federal Housing Administration (FHA) Mortgage Insurance Mortgage insurance works differently with FHA loans. For the majority of borrowers, it will end up being more expensive than PMI. PMI doesn't require you to pay an upfront premium unless you choose single-premium or split-premium mortgage insurance. In the case of single-premium mortgage insurance, you will pay no monthly mortgage insurance premiums. In the case of split-premium mortgage insurance, you pay lower monthly mortgage insurance premiums because you've paid an upfront premium. However, everyone must pay an upfront premium with FHA mortgage insurance. What is more, that payment does nothing to reduce your monthly premiums. As of 2021, the upfront mortgage insurance premium ([UFMIP](https://www.investopedia.com/terms/u/up-front-mortgage-insurance-ufmi.asp)) is 1.75% of the loan amount. You can pay this amount at closing or finance it as part of your mortgage. The UFMIP will cost you $1,750 for every $100,000 you borrow. If you finance it, you’ll pay interest on it, too, making it more expensive over time. The seller is permitted to pay your UFMIP as long as the seller’s total contribution toward your closing costs doesn’t exceed 6% of the purchase price. With an FHA mortgage, you'll also pay a monthly mortgage insurance premium (MIP) of 0.45% to 1.05% of the loan amount based on your down payment and loan term. As the FHA table below shows, if you have a 30-year loan for $200,000 and you're paying the FHA's minimum down payment of 3.5%, your MIP will be 0.85% for the life of the loan. Not being able to cancel your MIPs can be costly. ![]() :max_bytes(150000):strip_icc()/cropped-5bfd8471c9e77c0058b570ea) *Source: U.S. Department of Housing and Urban Development.* For FHA loans with a down payment of 10% or more, you can cancel your monthly MIPs after 15 years. But if you have 10% to put down, why get an FHA loan at all? You'd only want to do this if your credit score is too low to qualify for a conventional loan. Another good reason: if your low credit score would give you a much higher interest rate or PMI expense with a traditional loan than with an FHA loan. You can get an FHA loan with a credit score as low as 580 and possibly even lower (though lenders might require your score to be 620 or higher). And you might qualify for the same rate you would on a conventional loan despite having a lower credit score: 660 versus 740, for example. Without putting down 10% or more on an FHA mortgage, the only way to stop paying FHA MIPs is to refinance into a conventional loan. This step will make the most sense after your credit score or LTV increases considerably. Refinancing means paying closing costs, however, and interest rates might be higher when you're ready to refinance. Higher interest rates plus closing costs could negate any savings from canceling FHA mortgage insurance. Furthermore, you can't refinance if you're unemployed or have too much debt relative to your income. In addition, FHA loans are more generous in allowing sellers to contribute to the buyer’s [closing costs](https://www.investopedia.com/mortgage/mortgage-guide/closing-costs/): up to 6% of the loan amount versus 3% for conventional loans. If you can't afford to buy a home without substantial closing cost assistance, an FHA loan might be your only option. ## The Bottom Line [Mortgage insurance](https://www.investopedia.com/homeowners-insurance-vs-mortgage-insurance-5221665) costs borrowers money, but it enables them to become homeowners sooner by reducing the risk to financial institutions of issuing mortgages to people with small down payments. You might find it worthwhile to pay mortgage insurance premiums if you want to own a home sooner rather than later for lifestyle or affordability reasons. Adding to the reasons for doing this: Premiums can be canceled once your home equity reaches 80% if you’re paying monthly PMI or split-premium mortgage insurance. However, you might think twice if you're in the category of borrowers who would have to pay FHA insurance premiums for the life of the loan. You might be able to refinance out of an FHA loan later to get rid of PMI. On the other hand, there's no guarantee that your employment situation or market interest rates will make a refinance possible or profitable.

If you are making a down payment of less than 20% on a home, it's essential to understand your options for private mortgage insurance (PMI). Some people simply cannot afford a down payment in the amount of 20%. Others may elect to put down a smaller down payment in favor of having more cash on hand for repairs, remodeling, furnishings, and emergencies. What Is Private Mortgage Insurance (PMI)? Private mortgage insurance (PMI) is a type of insurance that a borrower might be required to buy as a condition of a conventional mortgage loan. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home's purchase price. When a borrower makes a down payment of less than 20% of the property's value, the mortgage's loan-to-value (LTV) ratio is over 80% (the higher the LTV ratio, the higher the risk profile of the mortgage for the lender). Unlike most types of insurance, the policy protects the lender's investment in the home, not the individual purchasing the insurance (the borrower). However, PMI makes it possible for some people to become homeowners sooner. For individuals who elect to put down between 5% to 19.99% of the residence's cost, PMI allows them the possibility of obtaining financing. However, it comes with additional monthly costs. Borrowers must pay their PMI until they have accumulated enough equity in the home that the lender no longer considers them high-risk. PMI costs can range from 0.5% to 2% of your loan balance per year, depending on the size of the down payment and mortgage, the loan term, and the borrower's credit score. The greater your risk factors, the higher the rate you'll pay. And because PMI is a percentage of the mortgage amount, the more you borrow, the more PMI you’ll pay. There are several major PMI companies in the United States. They charge similar rates, which are adjusted annually. While PMI is an added expense, so is continuing to spend money on rent and possibly missing out on market appreciation as you wait to save up a larger down payment. However, there's no guarantee you'll come out ahead buying a home later rather than sooner, so the value of paying PMI is worth considering. Some potential homeowners may need to consider Federal Housing Administration (FHA) mortgage insurance. However, that only applies if you qualify for a Federal Housing Administration loan (FHA loan). Key Takeaways You will need private mortgage insurance (PMI) if you're purchasing a home with a down payment of less than 20% of the home's cost.Be aware that PMI is intended to protect the lender, not the borrower, against potential losses.There are four main types of mortgage insurance you can purchase: borrower-paid mortgage insurance, single-premium mortgage insurance, lender-paid mortgage insurance, and split-premium mortgage insurance.If you obtain a Federal Housing Authority loan for your home purchase, there is an additional type of insurance you will need. Private Mortgage Insurance (PMI) Coverage First, you should understand how PMI works. For example, suppose you put down 10% and get a loan for the remaining 90% of the property’s value—$20,000 down and a $180,000 loan. With mortgage insurance, the lender's losses are limited if the lender has to foreclose on your mortgage. That could happen if you lose your job and can't make your payments for several months. The mortgage insurance company covers a certain percentage of the lender’s loss. For our example, let’s say that percentage is 25%. So if you still owed 85% ($170,000) of your home’s $200,000 purchase price at the time you were foreclosed on, instead of losing the full $170,000, the lender would only lose 75% of $170,000, or $127,500 on the home’s principal. PMI would cover the other 25%, or $42,500. It would also cover 25% of the delinquent interest you had accrued and 25% of the lender’s foreclosure costs. If PMI protects the lender, you may be wondering why the borrower has to pay for it. Essentially, the borrower is compensating the lender for taking on the higher risk of lending to you—versus lending to someone willing to put down a larger down payment. How Long Do You Have to Buy Private Mortgage Insurance (PMI)? Borrowers can request that monthly mortgage insurance payments be eliminated once the loan-to-value ratio drops below 80%. Once the mortgage's LTV ratio falls to 78%, the lender must automatically cancel PMI as long as you're current on your mortgage. That happens when your down payment, plus the loan principal you've paid off, equals 22% of the home's purchase price. This cancellation is a requirement of the federal Homeowners Protection Act, even if your home’s market value has gone down. Types of Private Mortgage Insurance (PMI) Investopedia / Eliana Rodgers 1. Borrower-Paid Mortgage Insurance The most common type of PMI is borrower-paid mortgage insurance (BPMI). BPMI comes in the form of an additional monthly fee that you pay with your mortgage payment. After your loan closes, you pay BPMI every month until you have 22% equity in your home (based on the original purchase price). At that point, the lender must automatically cancel BPMI, as long as you’re current on your mortgage payments. Accumulating enough home equity through regular monthly mortgage payments to get BPMI canceled generally takes about 15 years. You can also be proactive and ask the lender to cancel BPMI when you have 20% equity in your home. In order for your lender to cancel BPMI, your mortgage payments must be current. You must also have a satisfactory payment history, and there must not be any additional liens on your property. In some cases, you may need a current appraisal to substantiate your home’s value. Some loan servicers may permit borrowers to cancel PMI sooner based on home value appreciation. Suppose the borrower accumulates 25% equity due to appreciation in years two through five, or 20% equity after year five. In that case, the investor who purchased the loan may allow PMI cancellation after the home's increased value is proven. That can be done with an appraisal, a broker's price opinion (BPO), or an automated valuation model (AVM). You also may be able to get rid of PMI early by refinancing. However, you'll have to weigh the cost of refinancing against the costs of continuing to pay mortgage insurance premiums. You may also be able to cancel your PMI early by prepaying your mortgage principal so that you have at least 20% equity. It is worth considering if you're willing to pay PMI for up to 15 years to buy now. What will PMI cost you in the long run? What will waiting to purchase potentially cost you? While it's true that you might miss out on accumulating home equity while you're renting, you'll also be avoiding the many costs of homeownership. These costs include homeowner's insurance, property taxes, maintenance, and repairs. The other three types of PMI aren't nearly as common as borrower-paid mortgage insurance. You might still want to know how they work, in case one of them sounds more appealing, or your lender presents you with more than one mortgage insurance option. 2. Single-Premium Mortgage Insurance With single-premium mortgage insurance (SPMI), also called single-payment mortgage insurance, you pay mortgage insurance upfront in a lump sum. That can be done either in full at closing or financed into the mortgage (in the latter case, it may be called single-financed mortgage insurance). The benefit of SPMI is that your monthly payment will be lower compared to BPMI. That can help you qualify to borrow more to buy your home. Another advantage is that you don't have to worry about refinancing to get out of PMI. You also do not have to watch your loan-to-value ratio to see when you can get your PMI canceled. The risk is that if you refinance or sell within a few years, no portion of the single premium is refundable. Further, if you finance the single premium, you’ll pay interest on it for as long as you carry the mortgage. Also, if you don’t have enough money for a 20% down payment, you may not have the cash to pay a single premium upfront. However, the seller or, in the case of a new home, the builder can pay the borrower’s single-premium mortgage insurance. You can always try negotiating that as part of your purchase offer. If you plan to stay in the home for three or more years, single-premium mortgage insurance may save you money. Ask your loan officer to see if this is indeed the case. Be aware that not all lenders offer single-premium mortgage insurance. 3. Lender-Paid Mortgage Insurance With lender-paid mortgage insurance (LPMI), your lender will technically pay the mortgage insurance premium. In fact, you will actually pay for it over the life of the loan in the form of a slightly higher interest rate. Unlike BPMI, you can't cancel LPMI when your equity reaches 78% because it is built into the loan. Refinancing will be the only way to lower your monthly payment. Your interest rate will not decrease once you have 20% or 22% equity. Lender-paid PMI is not refundable. The benefit of lender-paid PMI, despite the higher interest rate, is that your monthly payment could still be lower than making monthly PMI payments. That way, you could qualify to borrow more. 4. Split-Premium Mortgage Insurance Split-premium mortgage insurance is the least common type. It’s a hybrid of the first two types we discussed: BPMI and SPMI. Here’s how it works: You pay part of the mortgage insurance as a lump sum at closing and part monthly. You don’t have to come up with as much extra cash upfront as you would with SPMI, nor do you increase your monthly payment by as much as you would with BPMI. One reason to choose split-premium mortgage insurance is if you have a high debt-to-income ratio. When that's the case, increasing your monthly payment too much with BPMI would mean not qualifying to borrow enough to purchase the home you want. The upfront premium might range from 0.50% to 1.25% of the loan amount. The monthly premium will be based on the net loan-to-value ratio before any financed premium is factored in. As with SPMI, you can ask the builder or seller to pay the initial premium, or you can roll it into your mortgage. Split premiums may be partly refundable once mortgage insurance is canceled or terminated. 5. Federal Home Loan Mortgage Protection (MIP) There is an additional type of mortgage insurance. However, it is only used with loans underwritten by the Federal Housing Administration. These loans are better known as FHA loans or FHA mortgages. PMI through the FHA is known as MIP. It is a requirement for all FHA loans and with down payments of 10% or less. Homes must meet specific criteria for livability to be eligible for MIP coverage; otherwise, they are considered uninsurable. Furthermore, it cannot be removed without refinancing the home. MIP requires an upfront payment and monthly premiums (usually added to the monthly mortgage note). The buyer is still required to wait 11 years before they can remove the MIP from the loan if they had a down payment of more than 10%. Cost of Private Mortgage Insurance (PMI) The cost of your PMI premiums will depend on several factors. Which premium plan you chooseWhether your interest rate is fixed or adjustableYour loan term (usually 15 or 30 years)Your down payment or loan-to-value ratio (LTV) (a 5% down payment gives you a 95% LTV; 10% down makes your LTV 90%)The amount of mortgage insurance coverage required by the lender or investor (it can range from 6% to 35%)Whether the premium is refundable or notYour credit scoreAny additional risk factors, such as the loan being for a jumbo mortgage, investment property, cash-out refinance, or second home In general, the riskier you look according to any of these factors (usually taken into account whenever you are taking out a loan), the higher your premiums will be. For example, the lower your credit score and the lower your down payment, the higher your premiums will be. According to data from Ginnie Mae and the Urban Institute, the average annual PMI typically ranges from .55% to 2.25% of the original loan amount each year. Here are some scenarios: If you put down 15% on a 15-year fixed-rate mortgage and have a credit score of 760 or higher, for example, you'd pay 0.17% because you'd likely be considered a low-risk borrower. If you put down 3% on a 30-year adjustable-rate mortgage for which the introductory rate is fixed for only three years and you have a credit score of 630, your rate will be 2.81%. That happens because you'd be considered a high-risk borrower at most financial institutions. Once you know which percentage applies to your situation, multiply it by the amount you’re borrowing. Then divide that amount by 12 to see what you’ll pay each month. For example, a loan of $200,000 with an annual premium of 0.65% would cost $1,300 per year ($200,000 x .0065), or about $108 per month ($1,300 / 12). Estimating Rates for Private Mortgage Insurance (PMI) Many companies offer mortgage insurance. Their rates may differ slightly, and your lender—not you—will select the insurer. Nevertheless, you can get an idea of what rate you will pay by studying the mortgage insurance rate card. MGIC, Radian, Essent, National MI, United Guaranty, and Genworth are major private mortgage insurance providers. Mortgage insurance rate cards can be confusing at first glance. Here’s how to use them. Find the column that corresponds to your credit score.Find the row that corresponds to your LTV ratio.Identify the applicable coverage line. Search the web for Fannie Mae's Mortgage Insurance Coverage Requirements to identify how much coverage is required for your loan. Alternatively, you can ask your lender (and impress the pants off them with your knowledge of how PMI works).Identify the PMI rate that corresponds with the intersection of your credit score, down payment, and coverage.If applicable, add or subtract to that rate the amount from the adjustment chart (below the main rate chart) that corresponds with your credit score. For example, if you’re doing a cash-out refinance and your credit score is 720, you might add 0.20 to your rate.As we showed in the previous section, multiply the total rate by the amount you’re borrowing; this is your annual mortgage insurance premium. Divide it by 12 to get your monthly mortgage insurance premium. Your rate will be the same every month, though some insurers will lower it after ten years. However, that's just before the point when you should be able to drop coverage, so any savings won't be that significant. Federal Housing Administration (FHA) Mortgage Insurance Mortgage insurance works differently with FHA loans. For the majority of borrowers, it will end up being more expensive than PMI. PMI doesn't require you to pay an upfront premium unless you choose single-premium or split-premium mortgage insurance. In the case of single-premium mortgage insurance, you will pay no monthly mortgage insurance premiums. In the case of split-premium mortgage insurance, you pay lower monthly mortgage insurance premiums because you've paid an upfront premium. However, everyone must pay an upfront premium with FHA mortgage insurance. What is more, that payment does nothing to reduce your monthly premiums. As of 2021, the upfront mortgage insurance premium (UFMIP) is 1.75% of the loan amount. You can pay this amount at closing or finance it as part of your mortgage. The UFMIP will cost you $1,750 for every $100,000 you borrow. If you finance it, you’ll pay interest on it, too, making it more expensive over time. The seller is permitted to pay your UFMIP as long as the seller’s total contribution toward your closing costs doesn’t exceed 6% of the purchase price. With an FHA mortgage, you'll also pay a monthly mortgage insurance premium (MIP) of 0.45% to 1.05% of the loan amount based on your down payment and loan term. As the FHA table below shows, if you have a 30-year loan for $200,000 and you're paying the FHA's minimum down payment of 3.5%, your MIP will be 0.85% for the life of the loan. Not being able to cancel your MIPs can be costly. Source: U.S. Department of Housing and Urban Development. For FHA loans with a down payment of 10% or more, you can cancel your monthly MIPs after 15 years. But if you have 10% to put down, why get an FHA loan at all? You'd only want to do this if your credit score is too low to qualify for a conventional loan. Another good reason: if your low credit score would give you a much higher interest rate or PMI expense with a traditional loan than with an FHA loan. You can get an FHA loan with a credit score as low as 580 and possibly even lower (though lenders might require your score to be 620 or higher). And you might qualify for the same rate you would on a conventional loan despite having a lower credit score: 660 versus 740, for example. Without putting down 10% or more on an FHA mortgage, the only way to stop paying FHA MIPs is to refinance into a conventional loan. This step will make the most sense after your credit score or LTV increases considerably. Refinancing means paying closing costs, however, and interest rates might be higher when you're ready to refinance. Higher interest rates plus closing costs could negate any savings from canceling FHA mortgage insurance. Furthermore, you can't refinance if you're unemployed or have too much debt relative to your income. In addition, FHA loans are more generous in allowing sellers to contribute to the buyer’s closing costs: up to 6% of the loan amount versus 3% for conventional loans. If you can't afford to buy a home without substantial closing cost assistance, an FHA loan might be your only option. The Bottom Line Mortgage insurance costs borrowers money, but it enables them to become homeowners sooner by reducing the risk to financial institutions of issuing mortgages to people with small down payments. You might find it worthwhile to pay mortgage insurance premiums if you want to own a home sooner rather than later for lifestyle or affordability reasons. Adding to the reasons for doing this: Premiums can be canceled once your home equity reaches 80% if you’re paying monthly PMI or split-premium mortgage insurance. However, you might think twice if you're in the category of borrowers who would have to pay FHA insurance premiums for the life of the loan. You might be able to refinance out of an FHA loan later to get rid of PMI. On the other hand, there's no guarantee that your employment situation or market interest rates will make a refinance possible or profitable.

https://www.investopedia.com/terms/i/ishares.asp

What Is iShares? What Types of Funds It Holds and Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-ishares"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is iShares? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A global leader in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded funds</a> (ETFs), iShares has over $2 trillion invested in more than 800 different product offerings across a wide range of asset classes and investment strategies.<span class="ql-inline-citation" data-cite="8"></span> iShares is a subsidiary of BlackRock, the world's largest asset management company, and BlackRock is responsible for issuing and marketing iShares products.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Founded in the year 2000, the initial iShares listings were established on major exchanges such as the NYSE Euronext, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cboe.asp">Chicago Board Options Exchange</a>, Nasdaq, and NYSE Arca.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>iShares is one of the world's largest and well-known ETF providers, offering more than 800 products worldwide.<span class="ql-inline-citation" data-cite="8"></span></li><li>Founded in the year 2000, iShares now manages over $2 trillion among its exchange-traded funds.<span class="ql-inline-citation" data-cite="8"></span></li><li>iShares is a subsidiary of BlackRock.<span class="ql-inline-citation" data-cite="8"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-the-basics-of-ishares"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> The Basics of iShares </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> ETFs from iShares are a flexible, low-cost way for investors to gain exposure to various market segments, including fixed income, emerging markets and broad-based indexes. For example, the iShares Core S&amp;P 500 ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ivv">IVV</a>) tracks the S&amp;P 500 Index, whereas the iShares MSCI Emerging Market ETF (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=eem">EEM</a>) follows more than 800 large and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/midcapstock.asp">mid-cap</a> companies in developing countries.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> By combining low fees with tax efficiency in an asset that seeks to match an index, ETFs can build greater longer term savings compared with mutual funds. Beyond savings, most ETFs aim to match the performance of a benchmark index, which means turnover is less frequent and thus fees are lower. However, this doesn't come at the expense of performance. In fact, iShares Core ETFs outperformed more than 76% of their peers on average from 2015 to 2020.<span class="ql-inline-citation" data-cite="6"></span>    </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Almost all major global marketplaces list iShares funds, including the London Stock Exchange, the Hong Kong Stock Exchange, the Toronto Stock Exchange, among others. At any given time, iShares and Vanguard represent more than 50% of the total ETF market.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-examples-of-ishares-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Examples of iShares ETFs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For U.S. investors, iShares offers 394 ETFs focused on commodities, equities, fixed income, multi assets, and real estate. In addition, investors can choose to focus on developing, emerging or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/frontier-market.asp">frontier markets</a>; specific regions and individual countries; industry sectors; megatrends such as climate change, demographic change and technological breakthroughs; thematic investing such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp">Environmental, Social and Governance (ESG) criteria</a>; and other selection methodologies.<span class="ql-inline-citation" data-cite="4"></span> Below are some popular products under the iShares brand:  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li><strong>iShares Core S&amp;P 500 ETF</strong> (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ivv">IVV</a>): This ETF tracking the S&amp;P 500 Index held approximately $286 billion in assets as of June 2021. It has an expense ratio of 0.03% and has returned 7.27% annually since its inception in May 2000, compared with 7.33% for its benchmark.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>iShares MSCI EAFE ETF</strong> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=efa">EFA</a>): This ETF provides access to more than 900 stocks for companies in Europe, Australia Asia, and the Far East. The fund held about $56.8 billion in assets as of June 2021. It has an expense ratio of 0.32% and has returned 5.84% annually since its inception in August 2001.<span class="ql-inline-citation" data-cite="2"></span></li> <li><strong>iShares Core US Aggregate Bond ETF</strong> (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=agg">AGG</a>): This ETF provides broad exposure to investment-grade bonds in the U.S. The fund held approximately $88.8 billion in assets as of June 2021. It has an expense ratio of 0.04% and has returned 4.02% annually since its inception in September 2003.<span class="ql-inline-citation" data-cite="3"></span></li> </ul></div>

## What Is iShares? A global leader in [exchange-traded funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs), iShares has over $2 trillion invested in more than 800 different product offerings across a wide range of asset classes and investment strategies. iShares is a subsidiary of BlackRock, the world's largest asset management company, and BlackRock is responsible for issuing and marketing iShares products. Founded in the year 2000, the initial iShares listings were established on major exchanges such as the NYSE Euronext, [Chicago Board Options Exchange](https://www.investopedia.com/terms/c/cboe.asp), Nasdaq, and NYSE Arca. ### Key Takeaways * iShares is one of the world's largest and well-known ETF providers, offering more than 800 products worldwide. * Founded in the year 2000, iShares now manages over $2 trillion among its exchange-traded funds. * iShares is a subsidiary of BlackRock. ## The Basics of iShares ETFs from iShares are a flexible, low-cost way for investors to gain exposure to various market segments, including fixed income, emerging markets and broad-based indexes. For example, the iShares Core S&P 500 ETF ([IVV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ivv)) tracks the S&P 500 Index, whereas the iShares MSCI Emerging Market ETF ([EEM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=eem)) follows more than 800 large and [mid-cap](https://www.investopedia.com/terms/m/midcapstock.asp) companies in developing countries. By combining low fees with tax efficiency in an asset that seeks to match an index, ETFs can build greater longer term savings compared with mutual funds. Beyond savings, most ETFs aim to match the performance of a benchmark index, which means turnover is less frequent and thus fees are lower. However, this doesn't come at the expense of performance. In fact, iShares Core ETFs outperformed more than 76% of their peers on average from 2015 to 2020.    Almost all major global marketplaces list iShares funds, including the London Stock Exchange, the Hong Kong Stock Exchange, the Toronto Stock Exchange, among others. At any given time, iShares and Vanguard represent more than 50% of the total ETF market. ## Examples of iShares ETFs For U.S. investors, iShares offers 394 ETFs focused on commodities, equities, fixed income, multi assets, and real estate. In addition, investors can choose to focus on developing, emerging or [frontier markets](https://www.investopedia.com/terms/f/frontier-market.asp); specific regions and individual countries; industry sectors; megatrends such as climate change, demographic change and technological breakthroughs; thematic investing such as [Environmental, Social and Governance (ESG) criteria](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp); and other selection methodologies. Below are some popular products under the iShares brand:  * **iShares Core S&P 500 ETF** ([IVV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ivv)): This ETF tracking the S&P 500 Index held approximately $286 billion in assets as of June 2021. It has an expense ratio of 0.03% and has returned 7.27% annually since its inception in May 2000, compared with 7.33% for its benchmark. * **iShares MSCI EAFE ETF** ([EFA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=efa)): This ETF provides access to more than 900 stocks for companies in Europe, Australia Asia, and the Far East. The fund held about $56.8 billion in assets as of June 2021. It has an expense ratio of 0.32% and has returned 5.84% annually since its inception in August 2001. * **iShares Core US Aggregate Bond ETF** ([AGG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=agg)): This ETF provides broad exposure to investment-grade bonds in the U.S. The fund held approximately $88.8 billion in assets as of June 2021. It has an expense ratio of 0.04% and has returned 4.02% annually since its inception in September 2003.

What Is iShares? A global leader in exchange-traded funds (ETFs), iShares has over $2 trillion invested in more than 800 different product offerings across a wide range of asset classes and investment strategies. iShares is a subsidiary of BlackRock, the world's largest asset management company, and BlackRock is responsible for issuing and marketing iShares products. Founded in the year 2000, the initial iShares listings were established on major exchanges such as the NYSE Euronext, Chicago Board Options Exchange, Nasdaq, and NYSE Arca. Key Takeaways iShares is one of the world's largest and well-known ETF providers, offering more than 800 products worldwide.Founded in the year 2000, iShares now manages over $2 trillion among its exchange-traded funds.iShares is a subsidiary of BlackRock. The Basics of iShares ETFs from iShares are a flexible, low-cost way for investors to gain exposure to various market segments, including fixed income, emerging markets and broad-based indexes. For example, the iShares Core S&P 500 ETF (IVV) tracks the S&P 500 Index, whereas the iShares MSCI Emerging Market ETF (EEM) follows more than 800 large and mid-cap companies in developing countries. By combining low fees with tax efficiency in an asset that seeks to match an index, ETFs can build greater longer term savings compared with mutual funds. Beyond savings, most ETFs aim to match the performance of a benchmark index, which means turnover is less frequent and thus fees are lower. However, this doesn't come at the expense of performance. In fact, iShares Core ETFs outperformed more than 76% of their peers on average from 2015 to 2020.    Almost all major global marketplaces list iShares funds, including the London Stock Exchange, the Hong Kong Stock Exchange, the Toronto Stock Exchange, among others. At any given time, iShares and Vanguard represent more than 50% of the total ETF market. Examples of iShares ETFs For U.S. investors, iShares offers 394 ETFs focused on commodities, equities, fixed income, multi assets, and real estate. In addition, investors can choose to focus on developing, emerging or frontier markets; specific regions and individual countries; industry sectors; megatrends such as climate change, demographic change and technological breakthroughs; thematic investing such as Environmental, Social and Governance (ESG) criteria; and other selection methodologies. Below are some popular products under the iShares brand:  iShares Core S&P 500 ETF (IVV): This ETF tracking the S&P 500 Index held approximately $286 billion in assets as of June 2021. It has an expense ratio of 0.03% and has returned 7.27% annually since its inception in May 2000, compared with 7.33% for its benchmark. iShares MSCI EAFE ETF (EFA): This ETF provides access to more than 900 stocks for companies in Europe, Australia Asia, and the Far East. The fund held about $56.8 billion in assets as of June 2021. It has an expense ratio of 0.32% and has returned 5.84% annually since its inception in August 2001. iShares Core US Aggregate Bond ETF (AGG): This ETF provides broad exposure to investment-grade bonds in the U.S. The fund held approximately $88.8 billion in assets as of June 2021. It has an expense ratio of 0.04% and has returned 4.02% annually since its inception in September 2003.

https://www.investopedia.com/best-life-insurance-companies-4845858

11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="bio-icon--finance"><svg viewbox="0 0 34.4 34.4" xmlns="http://www.w3.org/2000/svg"><path d="M17.2 0a17.2 17.2 0 1 0 17.2 17.2A17.2 17.2 0 0 0 17.2 0zm-2.39 28a1.55 1.55 0 0 1-1.59-1.66 10.87 10.87 0 0 1 .43-2.56l1.83-7.41a4.39 4.39 0 0 0 .18-1.05c0-.66-.47-.64-1.57.15l-.64.44-.45-.56c1.69-1.74 3.52-3 5.15-3 1.07 0 1.45.73 1.45 1.66a14.56 14.56 0 0 1-.52 3.11l-1.78 7a4.45 4.45 0 0 0-.14 1c0 .7.52.7 1.54.06l.81-.5.44.56C18.48 26.63 16.7 28 14.81 28zm3.58-17.47a2 2 0 0 1-2.06-2 2.11 2.11 0 0 1 2.18-2.13 2 2 0 0 1 2.09 2 2.14 2.14 0 0 1-2.21 2.13z"></path></svg></symbol> <symbol id="star-icon"><svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg></symbol> <symbol id="litho-comparison-table__arrow-icon"><svg fill="none" height="48" width="48" xmlns="http://www.w3.org/2000/svg"><circle cx="24" cy="24" fill="var(--color-1, white)" opacity=".72" r="24"></circle><path d="M30.284 8.697c-.396-.385-1.038-.385-1.434 0L13.927 23.21c-.396.385-.396 1.009 0 1.394s1.038.385 1.434 0l14.923-14.512c.396-.385.396-1.009 0-1.394z" fill="var(--color-2, #333333)"></path><path d="M30.283 39.303c-.396.385-1.038.385-1.434 0L13.926 24.791c-.396-.385-.396-1.009 0-1.394s1.038-.385 1.434 0l14.924 14.512c.396.385.396 1.009 0 1.394z" fill="var(--color-3, #333333)"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> We found that the best life insurance company overall is Nationwide because of its generous no-exam policies, solid financial strength and customer satisfaction ratings, and three living benefit riders included with most plans at no extra cost. For our life insurance ratings, we evaluated 88 life insurance carriers on 55 criteria that cover policy types and features, financial stability, ease of application, customer satisfaction, and costs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> In the company information below, we mention NAIC complaint index scores. The NAIC complaint index is a tool in which the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nainsurancec.asp">National Association of Insurance Commissioners (NAIC)</a> shows whether a company has received more or fewer complaints than other insurers, after adjusting for market share.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://dotdash.covrtech.com?utm_carrier=Nationwide&amp;utm_journey=term" rel="nofollow noopener nocaes" target="_blank">Nationwide</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Term Life Insurance:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com?utm_carrier=Protective&amp;utm_journey=term" rel="nofollow noopener nocaes" target="_blank">Protective</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Convertible Term Life Insurance:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://dotdash.covrtech.com?utm_carrier=MassMutual&amp;utm_journey=term" rel="nofollow noopener nocaes" target="_blank">MassMutual</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Return-of-Premium Term:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&amp;utm_journey=term" rel="nofollow noopener nocaes" target="_blank">Mutual of Omaha</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Great Traditional Insurer:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=Guardian&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">Guardian</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Military:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=USAA&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">USAA</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Great for Dividends and No-Medical Exam Life Insurance:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=PennMutual&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">Penn Mutual</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Cheapest Term Premiums:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://dotdash.covrtech.com/?utm_carrier=Banner&amp;utm_journey=term" rel="nofollow noopener nocaes" target="_blank">Banner by Legal &amp; General</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Customer Satisfaction:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=StateFarm&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">State Farm Life Insurance</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Whole Life Insurance:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">New York Life</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Largest Life Insurance Company:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&amp;utm_journey=bridge" rel="nofollow noopener nocaes" target="_blank">Northwestern Mutual</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp product-roundup-expertise-block expertise-block" id="product-roundup-expertise-block_1-0"> <div class="expertise-block__header"> <span class="expertise-block__heading"> Why Trust Us </span> <div class="expertise-block__chevron"></div> </div> <div class="expertise-block__data-points"> <div class="expertise-block__data-point"> <span class="expertise-block__data-point-heading icon-companies-reviewed"> 91 </span> <div class="expertise-block__data-point-content"> Companies reviewed </div> </div> <div class="expertise-block__data-point"> <span class="expertise-block__data-point-heading icon-eat-features-considered"> 55 </span> <div class="expertise-block__data-point-content"> Features considered </div> </div> <div class="expertise-block__data-point"> <span class="expertise-block__data-point-heading icon-eat-analyzed"> 5,005 </span> <div class="expertise-block__data-point-content"> Data points analyzed </div> </div> </div> <span class="expertise-block__content"> We collected over 5,000 data points from 91 life insurance companies to measure financial stability, customer satisfaction, product and feature variety, and the overall buying experience. We then evaluated each company based on 55 metrics to develop unbiased, comprehensive reviews. <div class="expertise-block__section-link"> <a href="https://www.investopedia.com/life-insurance-review-methodology-5071427">Read our Full Methodology</a> </div> </span> </div><!-- end: comp product-roundup-expertise-block expertise-block --> <div class="comp post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p><a data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Compare life insurance quotes</a> with our partner Covr Financial from multiple providers before buying.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Nationwide" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Nationwide" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-nationwide" rel="nocaes"> <span class="link__wrapper">Nationwide</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Protective" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Protective" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-protective" rel="nocaes"> <span class="link__wrapper">Protective</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-MassMutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-MassMutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-massmutual" rel="nocaes"> <span class="link__wrapper">MassMutual</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Mutual of Omaha" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Mutual of Omaha" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-mutual-of-omaha" rel="nocaes"> <span class="link__wrapper">Mutual of Omaha</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Guardian" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Guardian" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-guardian" rel="nocaes"> <span class="link__wrapper">Guardian</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-USAA" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-USAA" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-usaa" rel="nocaes"> <span class="link__wrapper">USAA</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Penn Mutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-6"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Penn Mutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-penn-mutual" rel="nocaes"> <span class="link__wrapper">Penn Mutual</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Banner by Legal &amp; General" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-7"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Banner by Legal &amp; General" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-banner-by-legal--general" rel="nocaes"> <span class="link__wrapper">Banner by Legal &amp; General</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-State Farm Life Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-8"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-State Farm Life Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-state-farm-life-insurance" rel="nocaes"> <span class="link__wrapper">State Farm Life Insurance</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-New York Life" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-9"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-New York Life" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-new-york-life" rel="nocaes"> <span class="link__wrapper">New York Life</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Northwestern Mutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_1-0-10"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Northwestern Mutual" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-northwestern-mutual" rel="nocaes"> <span class="link__wrapper">Northwestern Mutual</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (8)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc-list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#comparison-table" rel="nocaes"> <span class="link__wrapper">Compare Providers</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp mntl-toc-list-item mntl-toc__list-item --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-The Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-the-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">The Bottom Line</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Types of Life Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-are-the-types-of-life-insurance" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Types of Life Insurance</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Which Type Is Right for You?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-which-type-of-life-insurance-is-right-for-you" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Which Type Is Right for You?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-the-best-life-insurance-company" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">How to Choose</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Cost of Life Insurance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-much-does-life-insurance-cost-on-average" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Cost of Life Insurance</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Life Insurance News" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-life-insurance-news" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Life Insurance News</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-3319b6f2-2369-4f45-9112-f4f2606be01e" id="mntl-toc__list-item-link_1-0-6" rel="nocaes"><span class="link__wrapper">FAQ</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-nationwide"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Nationwide</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 435px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res upscaleImg"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Nationwide" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/vK0LcsEiU7jmBkXsKOGzwRvSiPQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/nationwide-c7e044965321488fa128e15ecace9bea.png" height="750" width="1500"/> <noscript> <img alt="Nationwide" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/vK0LcsEiU7jmBkXsKOGzwRvSiPQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/nationwide-c7e044965321488fa128e15ecace9bea.png" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A+ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="https://dotdash.covrtech.com?utm_carrier=Nationwide&amp;utm_journey=term" id="mntl-commerce-btn_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> For the most personalized quote experience, call Nationwide directly at 844-457-7984. And if you're over 50 or in poor health, it's best to work with a licensed agent. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-3"> Three living benefits included with most policies, generous no-exam requirements, strong financials, and satisfied customers make Nationwide our top pick. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-5"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No-exam life insurance available to very healthy applicants</p></li> <li><p>Low NAIC complaint index</p></li> <li><p>Living benefits included on most policies</p></li> <li><p>Allows credit card payments</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No live chat available</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> Nationwide is a financially stable life insurance company that's been in business for nearly a century. It offers a wide range of life insurance policies that may be available without a medical exam and with fast approval. It's also our top pick for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">best whole life insurance companies</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737">best no-medical-exam life insurance companies</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-people-over-50-4846582">best life insurance companies for people over 50</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> The company garnered an A+ (Superior) financial stability rating from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/a-m-best.asp">AM Best</a> and had the number of complaints you'd expect for a company of its size in 2022 (the most recent year for which data is available), though the two prior years saw fewer complaints.<span class="ql-inline-citation" data-cite="36"></span> It boasts no-exam life insurance for healthy applicants, a wide range of policy types and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rider.asp">riders</a>, and, for most policies, three <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accelerated_death_benefit.asp">accelerated death benefit</a> riders at no upfront cost for chronic, critical, and terminal illnesses. This is a rare offering among the insurance companies we considered. Nationwide's host of exceptional features puts it squarely at the top of our list of best companies for life insurance.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-9"> Nationwide's life and annuity products are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. The company known today as Nationwide was founded in 1926 as Farm Bureau Mutual Automobile Insurance Company.<br> </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> Nationwide offers term policies as well as traditional whole life insurance, universal life insurance (UL), variable universal life insurance (VUL), and indexed universal life insurance (IUL). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> <li>Guaranteed Level Term</li><li>Whole Life 100 and 20Pay Whole Life</li><li>Simplified Whole Life</li><li>No-Lapse Guarantee UL II (universal life insurance)</li><li>VUL Accumulator (variable life insurance)</li><li>VUL Protector</li><li>VUL Protector II</li><li>Advisory VUL<br/></li><li>IUL Accumulator II 2020 (indexed universal life insurance)</li><li>IUL Protector II 2020</li><li>Survivorship IUL 2020<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-13"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Nationwide's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/insurance/09/indexed-universal-life-insurance.asp">indexed policies</a> let you participate in stock market gains, but without direct market exposure. Cash value growth is tied to the S&amp;P 500, NASDAQ-100, and/or the Dow Jones Industrial Average. Though not as risky as variable universal life insurance, these policies are complex and can still lose value when market gains aren’t enough to offset policy expenses. </p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> <strong>Term pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> Although plan prices and coverage differ depending on your ZIP code, we found on average that a healthy 40-year-old female would pay $26.25 per month for a $250,000 30-year term policy, which is in the middle of the pack compared to other insurers we researched. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> Depending on your policy, you may have access to the following: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> <li>Chronic illness accelerated death benefit rider</li><li>Critical illness accelerated death benefit rider</li><li>Terminal illness accelerated death benefit rider</li><li>Long-term care accelerated death benefit rider </li><li>Accidental death benefit rider</li><li>Children's term insurance rider</li><li>Guaranteed insurability benefit rider</li><li>Waiver of premium riders</li><li>Return of premium riders</li><li>Overloan lapse protection rider<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-18"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/nationwide-life-insurance-review-5112884" id="tabbed-sc-block--review-link_1-0-18" rel="noopener nocaes" target="_blank"><span class="">Nationwide Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-protective"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Term Life Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Protective</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Protective Life" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/SzFCGeSd7Fqlk2mXRhOyxC-T8oM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Protective_Logo-f9be9b07e58e49f5a7b730dd3de657db.jpg" height="750" width="1500"/> <noscript> <img alt="Protective Life" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/SzFCGeSd7Fqlk2mXRhOyxC-T8oM=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Protective_Logo-f9be9b07e58e49f5a7b730dd3de657db.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com?utm_carrier=Protective&amp;utm_journey=term" id="mntl-commerce-btn_1-0-1" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Protective is our choice for top term life insurance because its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/08/term-life-insurance.asp">term life insurance</a> policies are the most affordable of all insurers we reviewed (tied with Banner), and it offers terms of up to 40 years, which is uncommon. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-23"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Lowest pricing along with Banner among 91 companies</p></li> <li><p>Offers term coverage for up to 40 years</p></li> <li><p>Allows credit card payments</p></li> <li><p>Offers no-medical-exam coverage</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Ranked 18th out of 22 companies for customer satisfaction in J.D. Power's life insurance study</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> Protective has the cheapest term life coverage of all the companies we reviewed (along with Banner). Its competitive rates and policy options make it our pick for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-term-life-insurance-4845961">best term life insurance company</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/most-affordable-life-insurance-5092439">most affordable life insurance company</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-young-adults-4846337">best life insurance companies for young adults</a>.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> Protective offers longer-than-average term policies and it received fewer complaints than expected for a company of its size over the past three years.<span class="ql-inline-citation" data-cite="38"></span> The company also offers generous child riders on its policies, which makes it a good <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-children-5088586">life insurance company for children</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> However, Protective did not rank well in J.D. Power’s 2023 U.S. Individual Life Insurance Study, coming in at #18 out of 22 companies. This is an indication that you may have issues with Protective's customer service, as J.D. Power rankings are based on five factors: communication; interaction; price; product offerings; and statements.<span class="ql-inline-citation" data-cite="69"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> Founded in 1907, Protective Life is headquartered in Birmingham, Alabama, and has offices in the Greater Cincinnati area and St. Louis, Missouri. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Protective offers term, whole life, universal life, variable universal life, and indexed universal life insurance policies. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> <li>Protective Classic Choice Term</li><li>Non-Participating Whole Life</li><li>Custom Choice Universal Life (UL)</li><li>Advantage Choice UL</li><li>Lifetime Assurance UL</li><li>Executive UL</li><li>Strategic Objectives II VUL (variable universal life insurance)</li><li>Indexed Choice UL</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> A healthy 40-year-old female would pay $22.88 per month for a $250,000 30-year term policy. Your pricing and coverage will vary depending on your state, age, and the coverage you choose. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> <li>Accidental death benefit rider</li><li>Accelerated death benefit rider (for chronic, critcal, or terminal illnesses)</li><li>Disability income rider</li><li>Children’s term rider</li><li>Waiver of premium rider</li><li>Guaranteed insurability rider</li><li>Term insurance rider<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-35"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/protective-life-insurance-review-5078171" id="tabbed-sc-block--review-link_1-0-35" rel="noopener nocaes" target="_blank"><span class="">Protective Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-massmutual"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Convertible Term Life Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">MassMutual</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="MassMutual" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/Xsmbfh-qAP1-pXm3sjkriNUTf2c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MassMutual-5542d799adfc45ebb6a7ab9b116e9c7c.jpg" height="750" width="1500"/> <noscript> <img alt="MassMutual" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/Xsmbfh-qAP1-pXm3sjkriNUTf2c=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MassMutual-5542d799adfc45ebb6a7ab9b116e9c7c.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> No </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="https://dotdash.covrtech.com?utm_carrier=MassMutual&amp;utm_journey=term" id="mntl-commerce-btn_1-0-2" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> MassMutual stands out because unlike some competitors, many of its term policies can be converted to any type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/120814/life-insurance-smart-investment.asp">permanent policy</a>. The company is top-ranked for financial strength, has paid dividends every year since 1869, has few complaints, and has a wide selection of policies. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-40"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Rated A++ for financial stability</p></li> <li><p>Long history of paying dividends</p></li> <li><p>Few complaints relative to its size</p></li> <li><p>Liberal term conversion options</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Few accelerated benefit riders included at no cost</p></li> <li><p>Doesn’t accept credit card payments</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> <br/>MassMutual stands out for a number of reasons. It has an A++ (Superior) financial rating from AM Best. This is the highest rating a company can receive and indicates a “superior” ability to pay claims. MassMutual’s dividend-paying history also adds to its clout: Every year since 1869, eligible policyholders have received <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/011816/guide-dividendpaying-whole-life-insurance.asp">life insurance dividends</a>. In 2024, MassMutual plans to pay $2.2 billion in dividends, which is its largest payout ever. Plus, the company has received far fewer complaints than expected for a company of its size, according to the NAIC, and offers a wide range of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251">policy types</a>.<span class="ql-inline-citation" data-cite="41"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> It’s worth noting that many MassMutual term policies can convert to any of MassMutual’s permanent life policies. This is important because some companies limit the types of policies you can convert your term policy into. (Convertible term life insurance allows you to exchange some or all of your term coverage for permanent without having to re-qualify for life insurance.) </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-44"> MassMutual was founded in 1851 in Springfield, Massachusetts and has offices in Boston and New York City. In October 2023, it announced a pilot program in which new term life policyholders could earn cash incentives of up to 5% of their annual policy premiums by using an app to track their physical activity and sleep data.<br> </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> MassMutual offers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/term-life-vs-whole-life-5075430">term life insurance, whole life insurance</a>, universal life insurance, and variable universal life insurance. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> <li>MassMutual Term</li><li>Whole Life 100</li><li>Whole Life 65</li><li>Whole Life 10/15/20-Pay</li><li>Whole Life High Early Cash Value (HECV)</li><li>Survivorship Whole Life 100<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-48"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>MassMutual’s whole-life policyholders are eligible to receive annual dividends based on the company’s financial performance. Dividends can be used to increase the death benefit or cash value, or pay premiums. </p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> <li>Universal Life (UL) Guard </li><li>Survivorship Universal Life (SUL) Guard</li><li>Apex VUL (variable universal life insurance)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-50"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>Some universal life insurance policies can be structured like term coverage, where the coverage is designed to remain in effect for a fixed period of time.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-51"> <strong>Term pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> Our research shows on average across several ZIP codes, a healthy 40-year-old female would pay $27.26 per month for a $250,000 30-year MassMutual term policy.<strong><br/></strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> <li>Guaranteed insurability rider</li><li>Waiver of premium rider</li><li>Terminal illness accelerated death benefit rider</li><li>Long-term care accelerated death benefit rider</li><li>Chronic illness accelerated death benefit rider </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-54"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/massmutual-life-insurance-review-5076622" id="tabbed-sc-block--review-link_1-0-54" rel="noopener nocaes" target="_blank"><span class="">MassMutual Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-mutual-of-omaha"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Return-of-Premium Term</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Mutual of Omaha</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Mutual of Omaha" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/o-LWLjyuIfsIjQBl-q2YZ42NXv8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/mutual-of-omaha-deb0b074cad940d9a8ecfcbd961a6da4.png" height="750" width="1500"/> <noscript> <img alt="Mutual of Omaha" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/o-LWLjyuIfsIjQBl-q2YZ42NXv8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/mutual-of-omaha-deb0b074cad940d9a8ecfcbd961a6da4.png" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A+ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&amp;utm_journey=term" id="mntl-commerce-btn_1-0-3" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Mutual of Omaha is the top company we reviewed that offers return-of-premium (ROP) term life insurance. We like that it has a wide range of riders, and most policies include at least two living benefits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-59"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Many plans with living benefits</p></li> <li><p>Wide range of riders available</p></li> <li><p>Guaranteed issue options</p></li> <li><p>Return of premium term available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Online applications unavailable for term policies</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> At no upfront cost, Mutual of Omaha includes three accelerated benefit riders on its Term Life Express and IUL Express policies (for critical, chronic, and terminal illnesses), and most other policies include two of these benefits. Accelerated benefit riders add flexibility to a life insurance policy by letting you tap the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deathbenefit.asp">death benefit</a> early if you have a qualifying illness. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> Plus the company offers at least two uncommon features: a disability income rider and a return of premium benefit on select term policies (both for an extra cost). With <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-return-of-premium-life-insurance-5074165">return of premium (ROP) term life insurance</a>, you can receive up to 100% of premiums back if you outlive the term. Only 11 of the 91 life insurance companies we reviewed make this type of coverage available. Mutual of Omaha is also our top pick for the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-burial-insurance-4843161">best burial insurance companies</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-63"> The aptly named Mutual of Omaha is based in Omaha, Nebraska, and was founded in 1909. It has locations in 42 states. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-64"> <span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> In the News</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-4"> <p>Mutual of Omaha and two other members of its group entered a settlement with the Labor Department in September 2023 after an investigation into claim denials for employee-sponsored life insurance plans. The probe found that subsidiary United of Omaha, and that company's subsidiary, Companion Life Insurance, had accepted premiums for five years without getting proof that applicants were insurable. When participants died, United would often deny claims on the grounds that it had never received the insurability evidence. The company has reprocessed such claims dating back to February 2018 and changed this practice.<span class="ql-inline-citation" data-cite="70"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> <li>Term Life Answers</li><li>Term Life Express </li><li>AccumUL Answers (universal life insurance)</li><li>Income Advantage IUL (index universal life insurance)</li><li>Life Protection Advantage IUL</li><li>IUL Express</li><li>Children’s Whole Life Insurance</li><li>Guaranteed Whole Life Insurance<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-67"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> A healthy 40-year-old female would pay $28.38 per month for a $250,000 30-year term policy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> Chronic, critical, and terminal illness riders are included free of charge on Mutual of Omaha’s Term Life Express and IUL Express policies. Most other policies include chronic and terminal illness riders at no additional cost.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> <li>Critical illness accelerated death benefit rider</li><li>Terminal illness accelerated death benefit rider</li><li>Chronic illness accelerated death benefit rider</li><li>Accidental death benefit rider</li><li>Dependent children's rider</li><li>Guaranteed insurability benefit rider</li><li>Waiver of premium rider</li><li>Disability income rider</li><li>Long-term care rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-71"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/mutual-of-omaha-life-insurance-review-5077426" id="tabbed-sc-block--review-link_1-0-71" rel="noopener nocaes" target="_blank"><span class="">Mutual of Omaha Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-guardian"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Great Traditional Insurer</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Guardian</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Guardian Life Insurance" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/4EfG8a3dCuRY3XJxDPel1YR0inY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/guardian-direct-0e2cba3724c6431b8596de415fd325ad.jpg" height="750" width="1500"/> <noscript> <img alt="Guardian Life Insurance" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/4EfG8a3dCuRY3XJxDPel1YR0inY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/guardian-direct-0e2cba3724c6431b8596de415fd325ad.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=Guardian&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-4" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-74"> Guardian received an exceptionally low number of customer complaints, has an A++ (Superior) financial strength rating, and pays dividends to eligible policyholders. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-76"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Low NAIC complaint index</p></li> <li><p>Receives an A++ for financial stability</p></li> <li><p>Whole life policies are eligible for dividends</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Online application and claim filing not available</p></li> <li><p>Credit card payments not accepted</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78"> Along with MassMutual and New York Life, Guardian is one of only nine companies we reviewed to earn a top financial strength rating of A++ from AM Best, reflecting superior financial stability. Also like MassMutual and New York Life, Guardian offers dividends to eligible whole-life policyholders and announced its largest dividend payment ever for 2024. The payout totals $2.2 billion. For these reasons, it ranked highly among the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">best whole life insurance companies</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-people-over-50-4846582">best life insurance companies for people over 50</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-seniors-4845439">best senior life insurance companies</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79"> Guardian Life received an excellent NAIC index over the past three years, indicating it has fewer complaints with the NAIC than expected for a company of its size. Additionally, the company offers no-exam policies to eligible applicants.<span class="ql-inline-citation" data-cite="43"></span> But if you’re seeking a streamlined online experience, Guardian falls short. It doesn’t offer an online application process (without an agent), online claim filing, or credit card payments, and information on its individual product offerings is hard to find, making it difficult when comparing life insurance plans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-80"> Guardian was founded in 1860 in New York City, and its headquarters are still there. It has four main business hubs in Bethlehem, Pennsylvania; Holmdel, New Jersey; Hudson Yards in New York City, and Pittsfield, Massachusetts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> <li>Guardian Level Term</li><li>Guardian Level Premium Whole Life</li><li>Limited Pay Whole Life</li><li>Guaranteed Universal Life</li><li>Variable Universal Life Insurance</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-83"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84"> A healthy 40-year-old female would pay $27.47 per month for a $250,000 30-year term policy. Your pricing will depend on your ZIP code, age, and coverage, among other things. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-86"> <li>Waiver of premium rider</li><li>Accidental death benefit rider</li><li>Term conversion rider</li><li>Terminal illness accelerated death benefit rider</li><li>Long-term care accelerated death benefit rider</li><li>Chronic illness accelerated death benefit rider</li><li>Paid-up additions (PUA) rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-86"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/guardian-life-insurance-review-5078357" id="tabbed-sc-block--review-link_1-0-86" rel="noopener nocaes" target="_blank"><span class="">Guardian Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-usaa"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Military</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">USAA</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 209px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res upscaleImg"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="USAA" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/Ri9jqjOg8einRj-fgFzzD5yC3ho=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/usaa-844b2f434aec4a40a60fc0a41fb1805d.png" height="750" width="1500"/> <noscript> <img alt="USAA" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/Ri9jqjOg8einRj-fgFzzD5yC3ho=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/usaa-844b2f434aec4a40a60fc0a41fb1805d.png" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> No </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=USAA&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-5" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-89"> USAA offers military-specific benefits that pay out if you become injured in the line of duty and cover you during war. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-91"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Severe injury benefits</p></li> <li><p>Add to your term coverage without taking another exam</p></li> <li><p>Included term conversion rider</p></li> <li><p>A++ AM Best rating</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Doesn’t take credit card payments</p></li> <li><p>No-exam coverage options are limited</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-93"> What makes USAA a solid choice for military families are its military-specific riders. Level Term V policies include a severe injury rider that pays out $25,000 for specific injuries incurred during military service. USAA also offers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guaranteed-insurability-rider-5095038">guaranteed insurability riders</a> at no additional cost that give you the option to increase coverage after leaving the military (and without having to prove insurability) or if you experience certain life events, like having a child. Level Term policies also include a conversion option that allows you to convert to permanent coverage without a medical exam or questions after you've had your term policy for at least one year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-94"> The drawbacks are that USAA life insurance does not accept credit card payments and has limited no-medical-exam options. USAA sells Mutual of Omaha's guaranteed issue whole life policies that have a minimum age of 45 and a coverage maximum of just $25,000. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-95"> USAA's life insurance and annuities products are provided by USAA Life Insurance Company in San Antonio, Texas and in New York by USAA Life Insurance Company of New York, which is in Highland Falls, New York.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-96"> USAA was started in 1922 by 25 Army officers who began insuring each other's cars. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-98"> <li>Level Term </li><li>Essential Term</li><li>Simplified Whole Life</li><li>Guaranteed Issue Whole Life (via Mutual of Omaha)</li><li>Universal Life Insurance (via John Hancock)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-99"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-100"> A healthy 40-year-old female would pay $26.86 per month for a $250,000 30-year term policy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-102"> <li>Guaranteed insurability rider</li><li>Term life-event option rider</li><li>Life event option rider</li><li>Child rider</li><li>Waiver of premium rider</li><li>Terminal illness accelerated death benefit rider</li><li>Military Severe Injury Benefit Rider</li><li>Military Future Insurability Rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-102"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/usaa-life-insurance-review-5080414" id="tabbed-sc-block--review-link_1-0-102" rel="noopener nocaes" target="_blank"><span class="">USAA Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-6"> <span class="heading-toc" id="toc-penn-mutual"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-6"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Great for Dividends and No-Medical Exam Life Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Penn Mutual</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-6"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-6"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-6"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-3x2 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Penn Mutual" class="lazyload figure-3x2 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/OIAwGmSNfQBGZYEElBCvuV7myg0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Penn_Mutual-70902c2bb7a04b4087d9cc4970c53f87.jpg" height="1000" width="1500"/> <noscript> <img alt="Penn Mutual" class="img--noscript figure-3x2 universal-image__image" height="1000" src="https://www.investopedia.com/thmb/OIAwGmSNfQBGZYEElBCvuV7myg0=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Penn_Mutual-70902c2bb7a04b4087d9cc4970c53f87.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A+ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=PennMutual&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-6" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-105"> Penn Mutual has paid dividends for nearly 175 years and offers up to $7.5 million in coverage for no-medical-exam life insurance to eligible applicants—the highest limit we've seen. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-107"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Strong dividend-paying history</p></li> <li><p>High coverage no-medical-exam life insurance</p></li> <li><p>5th-lowest pricing among 91 companies</p></li> <li><p>Excellent NAIC customer complaint index</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Limited website information</p></li> <li><p>Quotes not available on the website</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-109"> Penn Mutual is a well-established insurer with superior financial strength and an impressive track record of customer satisfaction. It has the longest dividend-paying history of companies on this list and announced that it plans to pay eligible policyholders $200 million in dividends in 2024, which is a record payout. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-110"> Penn Mutual is also an excellent choice for those with high-coverage needs. The company offers $7.5 million in coverage to very healthy applicants up to age 65 without a medical exam. This is the highest no-exam limit we've seen, and the highest age limit we've seen for no-exam policies, which is why it's a top pick for: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-111"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737">Best no-medical-exam life insurance companies</a> (best for high coverage)</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">Best whole life insurance companies</a> (best for dividends)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-112"> But Penn Mutual doesn't just cater to those looking for high coverage or permanent policies. Its quotes for term coverage were the fourth most affordable of the 32 companies we collected quotes for. That said, the company does not make term quotes available on its website. For details and to apply for any type of coverage, you'll need to get in touch with an agent. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-113"> Penn Mutual was founded in 1847 in Philadelphia. Today, the Penn Mutual Life Insurance Company is based in Horsham, Pennsylvania. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-115"> <li>Guaranteed Convertible Term</li><li>Protection Non-Convertible Term</li><li>One-Year Term</li><li>Guaranteed Whole Life II</li><li>Protection Whole Life</li><li>Survivorship Whole Life</li><li>Guaranteed Protection UL (universal life insurance)</li><li>Protection UL</li><li>Diversified Advantage Variable Universal Life (VUL)</li><li>Protection VUL</li><li>Accumulation VUL</li><li>Survivorship Protection VUL</li><li>Accumulation Indexed Universal Life (IUL)</li><li>Survivorship IUL</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-116"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-117"> A healthy 40-year-old female would pay $23.92 per month for a $250,000 30-year term policy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-119"> <li>Guaranteed increase option (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guaranteed-insurability-rider-5095038">guaranteed insurability rider</a>) </li> <li>Additional insured term insurance rider</li> <li>Children's term rider</li> <li>Disability waiver of premium rider</li> <li>Disability completion benefit rider</li> <li>Terminal illness accelerated death benefit rider</li> <li>Chronic illness accelerated death benefit rider</li> <li>Accidental death benefit rider</li> <li>Overloan protection benefit rider</li> <li>Supplemental term insurance rider<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-119"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/penn-mutual-life-insurance-review-5181706" id="tabbed-sc-block--review-link_1-0-119" rel="noopener nocaes" target="_blank"><span class="">Penn Mutual Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-7"> <span class="heading-toc" id="toc-banner-by-legal--general"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-7"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Cheapest Term Premiums</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Banner by Legal &amp; General</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-7"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-7"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-7"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 300px"> <figure class="loc productrecord__logo figure-media figure-3x2 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res upscaleImg"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Legal &amp;amp; General" class="lazyload figure-3x2 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/1NCp3Nx3xoVEicNnG7MWY0uZSrM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Legal_General_edit-9d5942e58c884498bd2d016c38587f48.jpg" height="1000" width="1500"/> <noscript> <img alt="Legal &amp;amp; General" class="img--noscript figure-3x2 universal-image__image" height="1000" src="https://www.investopedia.com/thmb/1NCp3Nx3xoVEicNnG7MWY0uZSrM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Legal_General_edit-9d5942e58c884498bd2d016c38587f48.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A+ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> No </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="https://dotdash.covrtech.com/?utm_carrier=Banner&amp;utm_journey=term" id="mntl-commerce-btn_1-0-7" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-122"> Banner's term premiums were tied for the lowest with Protective, and Banner offers terms up to 40 years. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-124"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros </span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Tied with Protective for lowest pricing</p></li> <li><p>40-year terms available</p></li> <li><p>Generous term conversion period</p></li> <li><p>Online application available</p></li> <li><p>Excellent NAIC customer complaint index</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Few policy types available</p></li> <li><p>Limited riders</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-126"> Banner, along with Protective, is an excellent choice if you're looking for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-term-life-insurance-4845961">cheapest term life insurance</a>. Banner is also one of only two companies that offer 40-year term policies (Protective is the other). Additionally, Banner boasts generous term conversion options—you can convert your term policy through the end of the level-premium period or until you turn 70, whichever happens first. This is important because some companies limit the conversion period to the first 10 years of the policy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-127"> While there's a lot to like about Banner, it doesn't offer many policy options—just term and universal life policies. It also doesn't offer as many riders to customize policies as some of its competitors. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-128"> Banner was founded as GELICO in 1949 and has been part of Legal &amp; General Group since 1981. Banner Life Insurance Company is located in Frederick, Maryland. Legal &amp; General was founded in 1836 in London, where it is still headquartered. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-130"> <li>OPTerm</li><li>Life Step UL (universal life insurance)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-131"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-132"> While your pricing will depend on factors such as your age, state, and coverage amount, our research showed a healthy 40-year-old female would pay $22.89 per month for a $250,000 30-year term policy. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-134"> <li>Child rider </li><li>Term life riders (stackable coverage)</li><li>Terminal illness accelerated death benefit rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-134"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/banner-life-insurance-review-5079634" id="tabbed-sc-block--review-link_1-0-134" rel="noopener nocaes" target="_blank"><span class="">Banner Life Insurance Company Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-8"> <span class="heading-toc" id="toc-state-farm-life-insurance"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-8"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Customer Satisfaction</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">State Farm Life Insurance</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <div class="comp list-sc-item__rating product-rating" id="list-sc-item__rating_1-0"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="3.7 out of 5 stars" class="comp star-rating" id="star-rating_5-0"> <span class="star-rating__label">3.7</span> <div class="star-rating__stars" data-rating-caption=""> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-1 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-2 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__full-star star-rating__icon star-rating__star-3 star-rating_star-icon" style="fill: #333e8b;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> <div class="star-rating__wrapper"> <svg height="0" style="position: absolute;" width="0"> <defs> <lineargradient id="linear-star-rating_5-0" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="60%" stop-color="#333e8b"></stop> <stop offset="60%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-empty star-rating__icon star-rating__star-4 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0);"> <svg viewbox="0 0 12.5 12.1" xmlns="http://www.w3.org/2000/svg"><path d="M6.2 0 8.2 4 12.5 4.6 9.4 7.7 10.1 12.1 6.2 10 2.4 12.1 3.1 7.7 0 4.6 4.3 4z"></path></svg> </div> </div> <div class="star-rating__wrapper"> <div class="star-rating__empty-star star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: #d5d5d5;"> <svg class="icon star-icon"> <use xlink:href="#star-icon" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> </div> </div></div><!-- end: comp star-rating --> </div><!-- end: comp list-sc-item__rating product-rating --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-8"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-8"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-8"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="State Farm" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/oM1bK4ByA4vTZ6P1CBk1hbFLQ90=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/State_Farm-98683302afe941dc878f2a405d108fae.jpg" height="750" width="1500"/> <noscript> <img alt="State Farm" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/oM1bK4ByA4vTZ6P1CBk1hbFLQ90=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/State_Farm-98683302afe941dc878f2a405d108fae.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> Yes </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=StateFarm&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-8" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-137"> <br>State Farm has earned the #1 spot in J.D. Power's customer satisfaction rankings for life insurance for the past four years. </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-139"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Superior financial stability</p></li> <li><p>Scored first for customer service by J. D. Power<br/></p></li> <li><p>Whole life policies can earn dividends</p></li> <li><p>Bundling discounts may be available</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Fourth-worst for pricing</p></li> <li><p>Limited coverage for no-medical-exam life insurance</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-141"> State Farm is our pick for the best life insurance provider for customer satisfaction because it ranked #1 in J.D. Power's U.S. Individual Life Insurance studies for 2023, as well as 2022, 2021, and 2020.<span class="ql-inline-citation" data-cite="69"></span> The studies measured consumer experiences with the largest life insurance companies nationwide. Plus, State Farm boasts an A++ (Superior) rating for financial strength from AM Best, which is the highest rating possible.<span class="ql-inline-citation" data-cite="1"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-142"> The company is also one of our: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-143"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">best whole life insurance companies</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-burial-insurance-4843161">best burial life insurance companies</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-return-of-premium-life-insurance-5074165">best return-of-premium (ROP) term life insurance companies</a></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-144"> If you're looking for a whole life policy that pays dividends, State Farm offers one. Plus, you may be able to save on your premium by bundling life insurance coverage with another State Farm coverage, such as auto. However, the company's term policies are priced high compared to our review of 32 life insurance companies offering term quotes online. If you don't have the best medical history and are in the market for life insurance without a medical exam, you may want to look elsewhere. At present, the most coverage you can get with State Farm without a medical exam is $50,000. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-145"> State Farm is based in Bloomington, Illinois. The first State Farm Life policy was sold in 1929 to the company founder, George J. Mercherle, for $2,000. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-146"> <span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0-1"> Note</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-5"> <p>In November 2023, State Farm agreed to a $325 million settlement for a class action suit in which the plaintiffs said the company deducted too much for cost-of-insurance charges for flexible premium adjustable whole life and universal policies.<span class="ql-inline-citation" data-cite="72"></span> This followed an August 2023 $65 million settlement of a different class action lawsuit making similar allegations related to universal life insurance policies.<span class="ql-inline-citation" data-cite="71"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-148"> <li>Select Term Life</li><li>Return of Premium Life</li><li>Instant Answer Term</li><li>Limited Pay Whole Life</li><li>Single Premium Whole Life</li><li>Universal Life</li><li>Survivorship Universal Life</li><li>Joint Universal Life</li><li>Final Expense (called $10,000 Whole Life in New York State)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-149"> <strong>Term Pricing</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-150"> A healthy 40-year-old female would pay $35.24 per month for a $250,000 30-year term policy, which is one of the highest rates we've seen. Your coverage will depend on your ZIP code, age, health, gender, and coverage. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-152"> <li>Guaranteed insurability rider</li> <li>Family coverage rider</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/waiver_of_premium.asp">Waiver of premium rider</a></li> <li>Flexible care benefit rider (long-term care rider)</li> <li>Select term rider</li> <li>Level term rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-152"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/state-farm-life-insurance-review-5072604" id="tabbed-sc-block--review-link_1-0-152" rel="noopener nocaes" target="_blank"><span class="">State Farm Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-9"> <span class="heading-toc" id="toc-new-york-life"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-9"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Whole Life Insurance</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">New York Life</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-9"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-9"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-9"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 504px"> <figure class="loc productrecord__logo figure-media figure-3x2 figure-portrait mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="New York Life" class="lazyload figure-3x2 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/9dR6c7KduLH1nNwgXV3KLeS9u0k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/New_York_Life-fe244fbe4c0b4c3a842fa2c15f06f2c7.jpg" height="1000" width="1500"/> <noscript> <img alt="New York Life" class="img--noscript figure-3x2 universal-image__image" height="1000" src="https://www.investopedia.com/thmb/9dR6c7KduLH1nNwgXV3KLeS9u0k=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/New_York_Life-fe244fbe4c0b4c3a842fa2c15f06f2c7.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> No </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-9" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-155"> New York Life is the second-largest life insurance company, according to the latest available NAIC data, and has been paying dividends to eligible <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wholelife.asp">whole life</a> policyholders every year for the past 169 years.<span class="ql-inline-citation" data-cite="59"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-157"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>A++ (Superior) AM Best rating</p></li> <li><p>Long history of paying dividends</p></li> <li><p>Some policies available to applicants up to 90 years old</p></li> <li><p>Broad selection of riders</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Can’t get too many policy details online without contacting an agent</p></li> <li><p>Online quotes and applications not available</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-159"> New York Life earns an A++ (Superior) AM Best rating and receives very few customer complaints.<span class="ql-inline-citation" data-cite="49"></span> It also issues whole life policies to eligible 90-year-old applicants. Its stellar reputation and financial stability are two reasons it's top-ranked in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-life-insurance-for-seniors-4845439">best life insurance companies for seniors</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">best whole life insurance companies</a> reviews.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-160"> We also like that New York Life has paid dividends for 169 consecutive years. In 2024, it plans to pay $2.2 billion in dividends, which is the largest payout in company history. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-161"> The company offers term, whole life, and universal life policies, including variable universal life (VUL) insurance, plus a diverse mix of riders and options for life insurance plan customization. Among these are living benefits riders and a Spouse’s Paid-Up Purchase Option (SPPO). The SPPO is an uncommon offering that lets the spouse of the insured person use the death benefit to purchase a fully paid-up life insurance policy on their own life (without medical underwriting) upon their spouse's passing. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-162"> Unfortunately, it’s difficult to locate policy-specific information on the website. If you have questions or want a quote, you’ll need to provide your name and number and wait for an agent to contact you.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-163"> New York Life was founded in New York City and is still headquartered there. Founded in 1845, it is the oldest company on this list </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-165"> <li>Level Premium Term</li><li>Yearly Renewable Term</li><li>Whole Life Insurance</li><li>Custom Whole Life Insurance</li><li>Secure Wealth Plus (whole life)</li><li>Universal Life Insurance</li><li>Custom Guarantee Universal Life </li><li>Variable Universal Life Accumulator II</li><li>Market Wealth Plus (variable life)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-166"> No pricing information is available online. To get a quote, you'll need to request a call from an agent. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-168"> <li>Spouse’s paid-up insurance purchase option (SPPO) </li><li>Guaranteed insurability rider </li><li>Child term rider </li><li>Disability waiver of premium rider </li><li>Disability income rider </li><li>Accidental death benefit rider </li><li>Terminal illness accelerated death benefit rider </li><li>Long-term care accelerated death benefit rider </li><li>Chronic illness accelerated death benefit rider </li><li>Critical illness accelerated death benefit rider </li><li>Paid-up additions (PUA) rider </li><li>Money-back option rider</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-168"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/new-york-life-insurance-review-5074534" id="tabbed-sc-block--review-link_1-0-168" rel="noopener nocaes" target="_blank"><span class="">New York Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-10"> <span class="heading-toc" id="toc-northwestern-mutual"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-10"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Largest Life Insurance Company</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Northwestern Mutual</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-10"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-10"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-10"> <div class="tabbed-sc-block-intro"> <!-- basically identifies commerce, but "isRetailer" is more generic --> <!-- Leave support for 3x2 ratio, default to 2x1 aspect ratio--> <!-- Update the SASS variable used to scale up images smaller than 1500px--> <div class="prm-sc-block-productrecord__imageHolder" style="--imgWidth: 0px"> <figure class="loc productrecord__logo figure-media figure-2x1 figure-landscape mntl-sc-block mntl-sc-block-image figure-high-res"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Northwestern Mutual" class="lazyload figure-2x1 universal-image__image" data-expand="1500" data-src="https://www.investopedia.com/thmb/rcf7xkh7sTy5aj3XArpwkHGmuGQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Northwestern_Mutual_logo-f061b92905f449138c434da069418251.jpg" height="750" width="1500"/> <noscript> <img alt="Northwestern Mutual" class="img--noscript figure-2x1 universal-image__image" height="750" src="https://www.investopedia.com/thmb/rcf7xkh7sTy5aj3XArpwkHGmuGQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Northwestern_Mutual_logo-f061b92905f449138c434da069418251.jpg" width="1500"/> </noscript> </div> </figure> </div> <div class="prm-sc-block-productrecord__specs"> <!-- Product Attribute List --> <ul class="comp mntl-sc-block mntl-sc-block-html prm-sc-block-productrecord__attributes"> <li class="key-spec infocat-prop__aMBestRating"> <span class="key-spec__title has-tooltip"> <strong>AM Best Rating:</strong> <span class="key-spec__tooltip tooltip-trigger"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span> <span class="key-spec__tooltip-bubble tooltip-bubble">AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</span> </span> A++ </li> <li class="key-spec infocat-prop__acceptsCreditCards"> <span class="key-spec__title"> <strong>Accepts Credit Cards:</strong> </span> No </li> </ul> <!-- CTA Button (commerce button) --> <div class="loc cta productrecord__cta-button" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock - Button"> <a class="mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="false" href="http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&amp;utm_journey=bridge" id="mntl-commerce-btn_1-0-10" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-commerce-btn mntl-text-link mntl-sc-block-commerce__button --> </div> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-171"> Northwestern Mutual is the largest life insurance company in the country with 7.20% market share, according to the National Association of Insurance Commissioners (NAIC).<span class="ql-inline-citation" data-cite="67"></span> Established in 1857, it has stellar financial ratings across multiple rating agencies and offers a wide selection of life insurance plans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-173"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Highest financial strength ratings</p></li> <li><p>Long dividend-paying history</p></li> <li><p>One of the best NAIC complaint indexes</p></li> <li><p>Largest insurance company, nationwide</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Must work with a financial advisor to buy a policy</p></li> <li><p>Poor digital experience that lacks details about policies</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-175"> Northwestern Mutual ticks all the boxes for financial stability: it boasts the highest financial strength ratings from AM Best (A++), Moody's (Aaa), and Fitch (AAA), and it's stood the test of time. The company has been in business since 1857, weathering numerous financial storms, and has paid eligible policyholders dividends for over 150 years. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-176"> Northwestern Mutual is on track to pay $7.3 billion in dividends to eligible policyholders in 2024. Not only is this its largest payout ever, it's also the largest overall dividend payment of all companies on this list. Dividends are a key feature of some of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955#toc-northwestern-mutual">best whole life insurance companies</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-177"> Plus, Northwestern Mutual had the second-lowest NAIC complaint index among the 91 companies we analyzed, meaning the company has an incredibly low rate of complaints relative to its size. Unfortunately, there's not much you can do without an agent at Northwestern Mutual. Policy details are lacking online so you'll need to contact the company for specifics. It's primarily because of the company's lack of transparency and self-serve options that it didn't score higher in our review. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-178"> Northwestern Mutual is headquartered in Milwaukee, Wisconsin. Read the full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994">Northwestern Mutual life insurance review</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Plans &amp; Pricing</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-180"> <li>Term life</li><li>Whole life</li><li>Universal life<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-181"> Few details about plans or pricing are available online. To get more information or request a quote, you'll need to call the company. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Available Riders</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-183"> <li>Waiver of premium rider</li><li>Guaranteed insurability rider </li><li>Long-term care rider<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="loc post-content tabbed-sc-block__content tabbed-sc-block__post-content"> <div class="comp tabbed-sc-block--review-link infocat-review-link link" data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductRecordBlock" id="tabbed-sc-block--review-link_1-0-183"> Read the Full <a data-click-action="OffPageClick - Internal [FullProductReview]" data-tracking-container="false" data-tracking-id="PRM Roundup | ProductRecordBlock" href="https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994" id="tabbed-sc-block--review-link_1-0-183" rel="noopener nocaes" target="_blank"><span class="">Northwestern Mutual Life Insurance Review</span></a><!-- end: --></div><!-- end: comp tabbed-sc-block--review-link infocat-review-link link --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp js-table-scroll structured-content comparison-table prm-comparison-table--finance prm-comparison-table litho-comparison-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table" id="comparison-table_1-0"> <span class="heading-toc" id="comparison-table"></span> <h2 class="litho-comparison-table__header">Compare the 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024</h2> <table class="litho-comparison-table__table litho-comparison-table__table--pivot"> <thead class="loc tableHead"> <tr class="comp litho-comparison-table__header-row mntl-block" id="litho-comparison-table__header-row_1-0"> <th class="comp mntl-block" id="mntl-block_1-0"> <div class="comp js-table-action prm-comparison-table__collapse-btn mntl-text-block" data-action="toggle" data-class="litho-comparison-table__header-row--collapsed" data-click-action="Collapse" data-click-tracked="true" data-target=".litho-comparison-table__header-row" id="prm-comparison-table__collapse-btn_1-0"></div><!-- end: comp js-table-action prm-comparison-table__collapse-btn mntl-text-block --> </th><!-- end: comp mntl-block --> <th class="comp litho-comparison-table__head-text mntl-text-block" id="litho-comparison-table__head-text_1-0"> Best For</th><!-- end: comp litho-comparison-table__head-text mntl-text-block --> <th class="comp dynamic-properties-header litho-comparison-table__cell-block mntl-block" id="dynamic-properties-header_1-0"> <div class="comp comparison-table__heading-wrapper mntl-block" id="comparison-table__heading-wrapper_1-0"> <span class="comp comparison-table__heading-label mntl-text-block" id="comparison-table__heading-label_1-0"> AM Best Rating</span><!-- end: comp comparison-table__heading-label mntl-text-block --> <span class="comp tooltip-trigger comparison-table__tooltip mntl-block" id="comparison-table__tooltip_1-0"> <svg class="icon bio-icon--finance"> <use xlink:href="#bio-icon--finance" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </span><!-- end: comp tooltip-trigger comparison-table__tooltip mntl-block --> <div class="comp tooltip-bubble comparison-table__tooltip-bubble mntl-text-block" id="comparison-table__tooltip-bubble_1-0"> AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations.</div><!-- end: comp tooltip-bubble comparison-table__tooltip-bubble mntl-text-block --> </div><!-- end: comp comparison-table__heading-wrapper mntl-block --> </th><!-- end: comp dynamic-properties-header litho-comparison-table__cell-block mntl-block --> <th class="comp dynamic-properties-header litho-comparison-table__cell-block mntl-block" id="dynamic-properties-header_1-0-1"> <div class="comp comparison-table__heading-wrapper mntl-block" id="comparison-table__heading-wrapper_1-0-1"> <span class="comp comparison-table__heading-label mntl-text-block" id="comparison-table__heading-label_1-0-1"> Term Life Sample Cost</span><!-- end: comp comparison-table__heading-label mntl-text-block --> </div><!-- end: comp comparison-table__heading-wrapper mntl-block --> </th><!-- end: comp dynamic-properties-header litho-comparison-table__cell-block mntl-block --> <th class="comp dynamic-properties-header litho-comparison-table__cell-block mntl-block" id="dynamic-properties-header_1-0-2"> <div class="comp comparison-table__heading-wrapper mntl-block" id="comparison-table__heading-wrapper_1-0-2"> <span class="comp comparison-table__heading-label mntl-text-block" id="comparison-table__heading-label_1-0-2"> Policy Types</span><!-- end: comp comparison-table__heading-label mntl-text-block --> </div><!-- end: comp comparison-table__heading-wrapper mntl-block --> </th><!-- end: comp dynamic-properties-header litho-comparison-table__cell-block mntl-block --> <th class="comp dynamic-properties-header litho-comparison-table__cell-block mntl-block" id="dynamic-properties-header_1-0-3"> <div class="comp comparison-table__heading-wrapper mntl-block" id="comparison-table__heading-wrapper_1-0-3"> <span class="comp comparison-table__heading-label mntl-text-block" id="comparison-table__heading-label_1-0-3"> Accepts Credit Cards</span><!-- end: comp comparison-table__heading-label mntl-text-block --> </div><!-- end: comp comparison-table__heading-wrapper mntl-block --> </th><!-- end: comp dynamic-properties-header litho-comparison-table__cell-block mntl-block --> <th class="comp litho-comparison-table__head-text mntl-text-block" id="litho-comparison-table__head-text_2-0"></th><!-- end: comp litho-comparison-table__head-text mntl-text-block --> <th class="comp mntl-block" id="mntl-block_2-0"> <div class="comp js-table-action prm-comparison-table__reset-btn mntl-text-block" data-action="remove" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Reset All" data-click-tracked="true" data-target=".litho-comparison-table__product-row--hidden" id="prm-comparison-table__reset-btn_1-0"> Reset All</div><!-- end: comp js-table-action prm-comparison-table__reset-btn mntl-text-block --> </th><!-- end: comp mntl-block --> </tr><!-- end: comp litho-comparison-table__header-row mntl-block --> </thead> <tbody class="loc tableBody"> <tr class="comp js-table-hide-col litho-comparison-table__product-row--0 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0"> Nationwide</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0"> Best Overall</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0"> A+</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-1"> $26.25/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-2"> Final Expense, Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-3"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="https://dotdash.covrtech.com?utm_carrier=Nationwide&amp;utm_journey=term" id="mntl-sc-block-commerce__button_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Nationwide" data-click-tracked="true" data-target=".litho-comparison-table__product-row--0" id="prm-comparison-table__hide-btn_1-0"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--0 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--1 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-1"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-1"> Protective</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-1"> Best Term Life Insurance</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-4"> A</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-5"> $22.92/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-6"> Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-7"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-1"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com?utm_carrier=Protective&amp;utm_journey=term" id="mntl-sc-block-commerce__button_1-0-1" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-1"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Protective" data-click-tracked="true" data-target=".litho-comparison-table__product-row--1" id="prm-comparison-table__hide-btn_1-0-1"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--1 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--2 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-2"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-2"> MassMutual</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-2"> Best Convertible Term Life Insurance</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-8"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-9"> $26.97/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-10"> Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-11"> No</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-2"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="https://dotdash.covrtech.com?utm_carrier=MassMutual&amp;utm_journey=term" id="mntl-sc-block-commerce__button_1-0-2" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-2"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | MassMutual" data-click-tracked="true" data-target=".litho-comparison-table__product-row--2" id="prm-comparison-table__hide-btn_1-0-2"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--2 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--3 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-3"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-3"> Mutual of Omaha</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-3"> Best Return-of-Premium Term</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-12"> A+</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-13"> $28.38/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-14"> Final Expense, Indexed Universal (IUL), Term, Universal (UL)</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-15"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-3"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&amp;utm_journey=term" id="mntl-sc-block-commerce__button_1-0-3" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-3"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Mutual of Omaha" data-click-tracked="true" data-target=".litho-comparison-table__product-row--3" id="prm-comparison-table__hide-btn_1-0-3"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--3 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--4 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-4"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-4"> Guardian</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-4"> Great Traditional Insurer</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-16"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-17"> $27.47/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-18"> Term, Universal (UL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-19"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-4"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=Guardian&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-4" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-4"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Guardian" data-click-tracked="true" data-target=".litho-comparison-table__product-row--4" id="prm-comparison-table__hide-btn_1-0-4"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--4 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--5 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-5"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-5"> USAA</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-5"> Best for Military</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-20"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-21"> $26.86/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-22"> Term, Universal (UL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-23"> No</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-5"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=USAA&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-5" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-5"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | USAA" data-click-tracked="true" data-target=".litho-comparison-table__product-row--5" id="prm-comparison-table__hide-btn_1-0-5"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--5 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--6 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-6"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-6"> Penn Mutual</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-6"> Great for Dividends and No-Medical Exam Life Insurance</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-24"> A+</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-25"> $23.92/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-26"> Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-27"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-6"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=PennMutual&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-6" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-6"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Penn Mutual" data-click-tracked="true" data-target=".litho-comparison-table__product-row--6" id="prm-comparison-table__hide-btn_1-0-6"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--6 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--7 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-7"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-7"> Banner by Legal &amp; General</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-7"> Cheapest Term Premiums</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-28"> A+</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-29"> $22.92/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-30"> Term, Universal (UL)</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-31"> No</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-7"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="https://dotdash.covrtech.com/?utm_carrier=Banner&amp;utm_journey=term" id="mntl-sc-block-commerce__button_1-0-7" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-7"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Banner by Legal &amp; General" data-click-tracked="true" data-target=".litho-comparison-table__product-row--7" id="prm-comparison-table__hide-btn_1-0-7"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--7 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--8 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-8"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-8"> State Farm Life Insurance</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-8"> Best for Customer Satisfaction</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-32"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-33"> $35.24/month</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-34"> Final Expense, Term, Universal (UL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-35"> Yes</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-8"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=StateFarm&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-8" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-8"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | State Farm Life Insurance" data-click-tracked="true" data-target=".litho-comparison-table__product-row--8" id="prm-comparison-table__hide-btn_1-0-8"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--8 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--9 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-9"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-9"> New York Life</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-9"> Best Whole Life Insurance</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-36"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-37"> N/A</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-38"> Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-39"> No</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-9"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-9" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-9"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | New York Life" data-click-tracked="true" data-target=".litho-comparison-table__product-row--9" id="prm-comparison-table__hide-btn_1-0-9"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--9 litho-comparison-table__product-row mntl-block --> <tr class="comp js-table-hide-col litho-comparison-table__product-row--10 litho-comparison-table__product-row mntl-block" id="litho-comparison-table__product-row_1-0-10"> <td class="comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block" id="prm-comparison-table__header_1-0-10"> Northwestern Mutual</td><!-- end: comp prm-comparison-table__header litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-text mntl-text-block" id="litho-comparison-table__cell-text_1-0-10"> Largest Life Insurance Company</td><!-- end: comp litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-40"> A++</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-41"> N/A</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-42"> Term, Universal (UL), Variable Universal (VUL), Whole</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block" id="dynamic-properties-value_1-0-43"> No</td><!-- end: comp dynamic-properties-value litho-comparison-table__cell-text mntl-text-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_1-0-10"> <a class="mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="On Covr" data-tracking-container="true" data-tracking-id="PRM Roundup | Comparison Table - Button" href="http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&amp;utm_journey=bridge" id="mntl-sc-block-commerce__button_1-0-10" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Get A Quote</span></a><!-- end: mntl-sc-block-commerce__button mntl-commerce-button js-extended-commerce__button commerce-button --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> <td class="comp litho-comparison-table__cell-block mntl-block" id="litho-comparison-table__cell-block_2-0-10"> <div class="comp js-table-action prm-comparison-table__hide-btn mntl-text-block" data-action="add" data-class="litho-comparison-table__product-row--hidden" data-click-action="OnPageClick-Hide Record | Northwestern Mutual" data-click-tracked="true" data-target=".litho-comparison-table__product-row--10" id="prm-comparison-table__hide-btn_1-0-10"> Hide, not for me</div><!-- end: comp js-table-action prm-comparison-table__hide-btn mntl-text-block --> </td><!-- end: comp litho-comparison-table__cell-block mntl-block --> </tr><!-- end: comp js-table-hide-col litho-comparison-table__product-row--10 litho-comparison-table__product-row mntl-block --> </tbody> </table> </div><!-- end: comp js-table-scroll structured-content comparison-table prm-comparison-table--finance prm-comparison-table litho-comparison-table --> <div class="comp structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-the-bottom-line"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> You can't go wrong with Nationwide, which is a financially strong company with a wide range of policies that you may not need a medical exam for (though you'll score a better rate if you're healthy and get a medical exam). Most policies include three living benefit riders—a rare benefit—so if they appeal to you, Nationwide may be your best bet. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> If you're set on getting a term life insurance policy from one of the top-rated life insurance companies, check out Protective. It rises above most competitors—just be aware that its customer satisfaction ratings are low. Also consider MassMutual for convertible term policies and Mutual of Omaha for return-of-premium policies. Banner is another favorite, and its term pricing is on par with Protective's, but it comes with limited rider options. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> Shoppers for whole life insurance should pay attention to New York Life, our all-around favorite for that kind of policy, and Penn Mutual, which excels when it comes to dividends.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" id="mntl-sc-block_4-0-4" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.7%;"> <img alt="Best Life Insurance Companies" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/SPOnHCkT7krs6k4AfEc9j_otEXM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-580504707-f1e88e44d9bd4d3c9fe88b2535d5a353.jpg" data-srcset="https://www.investopedia.com/thmb/M5TL3GvAPIRoDrZwy5QdcGfIDHQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-580504707-f1e88e44d9bd4d3c9fe88b2535d5a353.jpg 750w" data-tracking-container="true" height="3419" id="mntl-sc-block-image_1-0-11" width="5123"/> <noscript> <img alt="Best Life Insurance Companies" class="img--noscript universal-image__image" height="3419" sizes="750px" src="https://www.investopedia.com/thmb/SPOnHCkT7krs6k4AfEc9j_otEXM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-580504707-f1e88e44d9bd4d3c9fe88b2535d5a353.jpg" srcset="https://www.investopedia.com/thmb/M5TL3GvAPIRoDrZwy5QdcGfIDHQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-580504707-f1e88e44d9bd4d3c9fe88b2535d5a353.jpg 750w" width="5123"/> </noscript> </div> </div> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <span class="heading-toc" id="toc-what-are-the-types-of-life-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-heading__text"> What Are the Types of Life Insurance? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> Life insurance can be divided into two main types: term and permanent, or cash value life insurance. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-term-life-insurance-4845961">Term life insurance</a> policies only provide coverage for a certain period of time, such as 30 years. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/permanentlife.asp">Permanent insurance</a> is designed to offer coverage for your entire life. Two common types of permanent life insurance include whole life and universal life. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> Term life insurance is often the easiest to buy: If you're healthy and under 50, you could get a 20-year term policy online in minutes. But if you need a permanent policy that will cover you for your entire life, you're 50 or older, or are in poor health, be prepared to speak to an agent and for a longer application process (which may include a medical exam). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-8"> <li><strong>Term life insurance:</strong> This is the most affordable type of life insurance coverage because it lasts for a limited period of time—usually 10 to 30 years. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-term-life-insurance-4845961">best term life insurance policies</a> allow you to convert your policy into permanent coverage before the term expires. Most term life policies also allow you to renew coverage annually once the term expires. But the premium will increase annually based on your current age; if you want coverage longer than the duration of your term policy, it's best to convert to whole life instead of renewing.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-9"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">Best Term Life Insurance Companies</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Protective</a></td> <td>Best Overall  </td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Banner by Legal &amp; General</a></td> <td>Best for Cheap Insurance</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Mutual of Omaha</a></td> <td>Best for Living Benefits</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">MassMutual</a></td> <td>Best for Financial Stability</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> <li><strong>Whole life insurance:</strong> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955">Whole life insurance</a> is more expensive than term life insurance and even universal life insurance (another form of permanent coverage) because it guarantees the death benefit and cash value for life, as long as you pay the premiums. This is why it's an ideal solution when you need rock-solid permanent coverage and can afford the premiums. Some whole life insurance policies offered by mutual companies also pay dividends.<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-advisorinsight mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-11"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-6"> <p>"After getting engaged in 2019, I decided to get life insurance so that my partner would be covered if anything ever happened to me. I chose a whole life policy after reviewing all of the types because I liked the idea of being fully covered until death and not just until a certain age (like you get with a term policy). The ability to access the cash value in the future, if I ever needed or wanted it, also appealed to me. Now, years later, I simply pay my premium every January and can live my life knowing my partner will be financially secure if something ever happens to me."<br><br/><em>—Hilarey Gould, Editorial Director for Financial Products and Services at Investopedia</em></br></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-advisorinsight mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-12"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">Best Whole Life Insurance Companies</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">New York Life</a></td> <td>Best Overall  </td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Nationwide</a></td> <td>Best for Living Benefits</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Guardian</a></td> <td>Best for High Issue Age</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">MassMutual</a></td> <td>Best Traditional Insurer</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Mutual of Omaha</a></td> <td>Best for Burial Insurance</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Penn Mutual</a></td> <td>Best for Dividends</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">State Farm</a></td> <td>Best for Customer Satisfaction</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Northwestern Mutual</a></td> <td>Best for Financial Stability</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> <li><strong>Universal life (UL) insurance</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-universal-life-insurance-4845846">Universal life</a> is similar to whole life insurance but it has flexible premiums, a flexible death benefit, and interest that is credited to the cash value based on current interest rates, which vary. So, unlike with whole life insurance, you don’t know in advance how much the cash value will be worth in the future.<br/><br/>UL is more affordable than whole life, but you may need to increase your premium payment in the future if the cash value doesn't perform as expected and/or you don't make sufficient premium payments.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-14"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-7"> <p>Most permanent policies have a surrender period, during which time you’ll pay a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/surrendercharge.asp">surrender charge</a> for withdrawing from the cash value or canceling the policy. Ask how long the surrender period is on any cash value life insurance you might buy.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-15"> <li><strong>Indexed universal life insurance (IUL):</strong> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/insurance/09/indexed-universal-life-insurance.asp">IUL</a> policies have a cash value account that can earn interest by tracking a stock market index selected by the insurer, such as the Nasdaq-100 or the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/090414/sp-500-index-you-need-know.asp">Standard &amp; Poor's 500</a>. You may also have a fixed-rate account and can choose how much you want to go into each account. Although the interest rate derived from the equity index account can fluctuate, the policy does offer an interest rate guarantee, which limits your losses. It also may cap your gains.<br/><br/>IUL policies can be attractive if you want the potential for stock market gains but want to avoid losses. Just be aware that if the index doesn’t perform well enough, interest credited could be insufficient to keep up with policy expenses and your premium could increase. </li> <li><strong>Variable life and variable universal life (VUL)</strong>: These are the riskiest types of coverage because you invest the cash value component directly in the stock market via subaccounts, which are very similar to mutual funds. The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/variable_universal.asp">difference between variable life and VUL</a> is that VUL has a flexible death benefit and flexible premiums, while those things are fixed in a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variableuniversallife.asp">variable universal life insurance</a> policy. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-16"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-8"> <p>While variable life products can be a tax-advantaged way to invest in the stock market, the cash value is not protected from market losses. This means if your investments underperform, you could be required to increase premium payments or the policy could lapse. What's more, variable policies that lapse may result in severe tax consequences.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-17"> <li><strong>Burial insurance (aka, final expense and guaranteed issue):</strong> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-burial-insurance-4843161">Burial insurance</a> policies are whole life policies designed for older applicants in poor health, and they don't require a medical exam. As a result, these policies are the most expensive, relative to the amount of coverage. But their death benefits can be quite low, such as $5,000-$10,000, which means the premiums may seem more affordable than those of policies with bigger benefits.<br/></li> <li><strong>No-medical-exam life insurance:</strong> <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737">No-exam insurance</a> refers to any life insurance policy you can apply for without taking a medical exam. Instead of an exam, you answer health questions or have a phone interview, and the insurance company checks your medical and other records. If you qualify, you can get a policy within a few days, or sometimes instantly online. But note that if you're healthy, you're probably better off getting a policy that requires an exam because the rate will be cheaper.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-18"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">Best No-Medical-Exam Life Insurance Companies</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Nationwide</a></td> <td>Best Overall  </td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Guardian</a></td> <td>Best for Financial Stability</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Penn Mutual</a></td> <td>Best for High Coverage</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="utm_source=${DOC_ID}&amp;utm_click=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dotdash.covrtech.com/" rel="nofollow">Pacific Life Insurance</a></td> <td>Fewest Complaints</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-which-type-of-life-insurance-is-right-for-you"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-19"> <span class="mntl-sc-block-heading__text"> Which Type of Life Insurance Is Right for You? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-20"> With so many <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251">kinds of life insurance</a>, it can be hard to figure out which one to choose. It helps to start by thinking about what you want the policy for and who you want to benefit. For example, do you want life insurance for a set period of time mainly to help replace your income for your family if you die during your earning years? Is it so you can create an inheritance for your heirs? Or do you just want to cover your funeral expenses? </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-21"> Other factors to consider: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-22"> <li><strong>What you're eligible for</strong>: Your age, lifestyle, and medical history could preclude you from some types of insurance.</li><li><strong>Your budget</strong>: Monthly premiums vary a lot depending on the type of coverage you choose, with term life being the most affordable.</li><li><strong>Whether you want to build cash value</strong>: If you want a tax-free investment component that you can withdraw or borrow from while you're alive, you'll want a permanent policy.</li><li><strong>How much control you want over your cash value's growth:</strong> Do you want a fixed rate of return you can count on? Then whole life is best. If you prefer that your cash value is pegged to market interest rates, universal may be your answer. And if you want to control the cash value growth with hands-on investing in a portfolio of subaccounts, variable life insurance could be best.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-choose-the-best-life-insurance-company"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-23"> <span class="mntl-sc-block-heading__text"> How to Choose the Best Life Insurance Company </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-24"> If you get group life insurance through your employer, you usually don't have a choice of providers. But if you want more coverage, or you don't have an employer-provided plan, you'll need to buy it on your own. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-25"> To <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-choose-life-insurance-7483886">choose the right life insurance company</a> for you, consider financial strength, customer complaints, customer satisfaction, available policy types, available and included riders, and ease of application. Then, collect quotes among your top picks and compare life insurance rates. Doing this homework will ensure that when you <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-life-insurance-4842095">buy life insurance</a>, you've chosen a company that offers the life insurance options that suit your needs and will be there when your family needs it. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ol class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-26"> <li><strong>Check out the company's financial strength</strong>: You want a company that will be in business long enough to pay out your death benefit. So, look at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ambest.com/home/default.aspx" rel="sponsored nofollow"> AM Best ratings</a> for financial stability. A++ and A+ ratings are considered “Superior,” while A and A- are considered “Excellent.” Other agencies also rate insurance companies, including Moody's, Fitch, Standard &amp; Poor's, and Demotech.</li> <li><strong>Look for a company with relatively few customer complaints</strong>: The National Association of Insurance Commissioners (NAIC) uses customer complaints to create the<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/cis_consumer_information.htm"> NAIC complaint index</a>, which indicates whether a company received more or fewer complaints than expected, based on its market share. An index lower than 1 indicates the company received fewer complaints than expected, while a number over 1 means it got more than expected. The higher the index, the more customers complain, and vice versa. </li> <li><strong>Investigate other measures of customer satisfaction</strong>: Not all companies are ranked for customer satisfaction, but check sources like <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.jdpower.com/business/press-releases/2023-us-individual-life-insurance-annuity-studies">J.D. Power’s 2023 U.S. Individual Life Insurance and Individual Annuities study</a> to see if companies you’re considering are. At a glance, you can see how a company ranks compared to others when it comes to customer satisfaction.</li> <li><strong>See if the company offers the kind of insurance you want</strong>: If you know which type of insurance you need, make sure each company you’re considering offers it. But note that a whole life policy with one company can be very different from a whole life policy with another. Though policies between companies might have the same name, each company tries to make its product stand out. Make sure their efforts suit your needs.</li> <li><strong>Don't forget to research available and included riders</strong>: This is a major way that same-named policies can differ. For example, a universal life policy with one company might include a generous accelerated death benefit rider at no cost, while a UL policy with another company may not. Or a term policy with one company may allow you to convert it to permanent coverage, while a term policy with another company may not. Research riders to know what you’re paying for.</li> <li><strong>Consider companies that make applying easy</strong>: Sometimes the biggest barrier to buying life insurance is the application process. And often, it’s better to get some coverage in place—especially if you have dependents—than it is to find the absolute best coverage you can. If you’re too busy for a medical exam, look for companies that don’t require one.<br/></li> </ol><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-27"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-9"> <p>If you’re healthy, choose a company that requires a medical exam or offers an accelerated underwriting process (meaning, the company will examine your medical history but won't require an exam). This means the insurance company will take your health conditions into consideration, which could significantly reduce your life insurance cost.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-how-much-does-life-insurance-cost-on-average"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-28"> <span class="mntl-sc-block-heading__text"> How Much Does Life Insurance Cost on Average? </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-29"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-term-life-insurance-4845961">Term life insurance</a> can cost as little as $13 per month, on average, for a $250,000 30-year policy for a healthy 25-year-old. Or, the same policy could cost around $400 for a 65-year-old smoker. The monthly cost of<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-whole-life-insurance-4845955"> whole life insurance</a> for the same amount of coverage is over $100 per month for a healthy 25-year-old and almost $1,000 for a 65-year-old smoker. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-30"> Life insurance companies determine how much you'll pay through the application process, during which they consider factors such as your age, health, occupation, and location. Older applicants and those in poor health pay the most for life insurance, which is why it often makes sense to apply while you're younger and healthier.<br> </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-31"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Average Life Insurance Cost Per Month ($250,000, 30-year term policy)</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> Company</td> <td>25 years old (average)</td> <td>40 years old (average)</td> <td>55 years old (average)</td> </tr> <tr> <td>Nationwide</td> <td>$20.89</td> <td>$28.88</td> <td>$99.97</td> </tr> <tr> <td>MassMutual</td> <td>$18.15</td> <td>$29.58</td> <td>$122.46</td> </tr> <tr> <td>Protective</td> <td>$16.06</td> <td>$25.66</td> <td>$107.12</td> </tr> <tr> <td>Banner</td> <td>$16.07</td> <td>$25.71</td> <td>$107.91</td> </tr> <tr> <td>Mutual of Omaha</td> <td>$19.68</td> <td>$31.39</td> <td>$137.39</td> </tr> <tr> <td>Guardian</td> <td>$19.53</td> <td>$31.65</td> <td>$110.49</td> </tr> <tr> <td>USAA</td> <td>$20.82</td> <td>$30.09</td> <td>N/A</td> </tr> <tr> <td>Lincoln Financial</td> <td>$17.25</td> <td>$26.36</td> <td>$114.05</td> </tr> <tr> <td>Penn Mutual</td> <td>$16.78</td> <td>$26.48</td> <td>$110.38</td> </tr> <tr> <td>Transamerica</td> <td>$16.99</td> <td>$35.70</td> <td>$128.68</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-32"> <strong>*<em>Life insurance quotes above are examples only and were collected for 30-year $250,000 term life insurance policies for non-smoking males and females ages 25, 40, and 55 in excellent health</em>.</strong> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-life-insurance-news"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-33"> <span class="mntl-sc-block-heading__text"> Life Insurance News </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-34"> <strong>Haven Life has stopped selling policies</strong>: As of Jan. 12, 2024, you can no longer buy a new policy from Haven. The company's parent, MassMutual, has always issued and managed Haven's policies, and that will continue once the Haven brand is discontinued this spring. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-35"> <strong>Only one-third of millennials have life insurance</strong>: Some members of this generation are turning 40, and have families and debts such as mortgages, student loans, and credit cards. Yet only 34% have bought life insurance, according to a Mutual of Omaha survey. The same study found that only 41% of baby boomers are insured.<span class="ql-inline-citation" data-cite="73"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-36"> <strong>Many Americans don't think they have enough life insurance</strong>: 42% of Americans say they need life insurance or they need more coverage, according to the 2024 Insurance Barometer Study by LIMRA, which stands for the Life Insurance Marketing and Research Association. The top reason cited for not having enough coverage was cost, but 78% of respondents overestimated the cost of basic term coverage. The largest groups saying they don't have enough coverage include Gen Z and Millenials, women, and Black and Hispanic people.<span class="ql-inline-citation" data-cite="68"></span><br> </br></p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-37"> <span class="heading-toc" id="toc-faq-3319b6f2-2369-4f45-9112-f4f2606be01e"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Is Life Insurance and How Does It Work?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lifeinsurance.asp">Life insurance</a> is a contract in which you agree to make payments to the insurance company while you are alive. In return the insurance company guarantees it will pay a sum of money to your beneficiaries when you die.</p><p><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/termlife.asp">Term life insurance</a> only lasts for a certain amount of time—for example, 20 years. If you don't die during that time, your beneficiaries get nothing.</p><p><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/permanentlife.asp">Permanent life insurance</a>, such as whole life or universal life, lasts your whole life—but the premiums are much higher than for term life. Permanent life insurance also has a cash value component, which is kind of like a savings account that you can withdraw from or take loans against while you're alive.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Does Life Insurance Cover?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Life insurance covers death from natural causes, illness, accidents, suicide, and homocide if you pass away while the policy is in force. The money is paid out tax-free, and beneficiaries can use it for whatever purpose they choose.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What Does Life Insurance Not Cover?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Insurers may deny a claim in certain circumstances—for instance, if a beneficiary is involved in the homicide of the insured. They also often exclude coverage for death by suicide if it happens within a certain period, such within the first two years of a policy. Some providers deny claims for deaths caused by risky activities such as skydiving as well.</p><p>Finally, beneficiaries may not get a payout if you lie or omit information on your application, or if you don't keep up with payments for the policy.<br><br/></br></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">Do I Need Life Insurance?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>Not everyone needs life insurance. If you have enough money to pay for your final expenses and you don't have dependents, you don't really need it.</p><p>But certain other groups of people can benefit from having life insurance. If you have a spouse or children, you may want life insurance so that they can continue to have the same quality of life once they no longer have your income stream. You may want it to ensure your children have money for college, too.</p><p>Homeowners should have enough insurance to pay off the mortgage. And business owners are advised to get life insurance to clear business debts and help any remaining owners ensure business continuity.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">What Is the Downside of Life Insurance?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>The main downside of life insurance is the cost. Your policy will charge you monthly premiums, which are another expense for your budget. The price depends on your age, health, lifestyle, and the amount of coverage you buy. If you stop paying, you lose your coverage.</p><p>Another downside of life insurance is that you might pay these costs without getting anything back. Temporary term life insurance policies have a set expiration date. If you live past the expiration date, your coverage ends. In other words, you’ve paid for life insurance without getting any payout for your heirs. Finally, you must qualify to buy life insurance. You will owe a larger premium if you have health issues or risky hobbies. If the insurance company decides these risks are too high, you might be denied the chance to buy a policy.<br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">How Can You Get Cheap Life Insurance?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/102914/7-factors-affect-your-life-insurance-quote.asp">Life insurance costs</a> are largely influenced by the type of coverage you get, and your age and health when you buy the policy. You can get a more <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/most-affordable-life-insurance-5092439">affordable life insurance</a> policy if you choose <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/term-life-vs-whole-life-5075430">term life insurance over permanent</a>. You'll only get coverage for a set amount of years, but that may be all you need. Buy the policy as soon as you need it instead of waiting, because rates are better for younger applicants. If you're healthy, you're better off getting a policy that requires a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/what-to-expect-insurance-application.asp">life insurance medical exam</a>, as those policies offer better rates for healthy applicants. And finally, skip add-on benefits known as <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/life_insurance_rider.asp">riders</a> that you don't need.<br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">What Happens if I Outlive My Term Life Insurance Policy?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>If you outlive your term life insurance policy, your coverage ends. Term life insurance is temporary life insurance. It only lasts a set period, such as five or 20 years. If you live past this point, you lose your coverage. However, you may have some options to stay covered past the end of the term.</p><p>First, some insurers allow you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/renewableterm.asp">renew and extend your term life insurance</a> without a medical exam. The price will be higher when you renew than when you first bought the term life insurance because you will be older. You may also be able to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/09/convertible-insurance-policy.asp">convert your temporary term life</a> insurance into a permanent policy with no expiration date. Finally, you could try applying for a brand-new policy. If you don’t use one of these three options, you will no longer have life insurance after outliving your term policy.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-7" tabindex="-1"> <h3 class="accordion__title">Companies We Reviewed</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-7"> <div class="faq-accordion__item-answer"> <p>We researched and reviewed 88 companies to find the best 12 companies you see above on this list. Below are the companies we researched, along with links to individual company reviews to help you learn more before making a decision. Those that didn't make our list may have had fewer policy types and features, worse financial stability ratings, lower customer experience ratings, fewer riders and living benefits, or higher rates.</p><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/aaa-life-insurance-review-5075643">AAA Life Insurance</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/aarp-life-insurance-review-5090157">AARP Life Insurance</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/aflac-life-insurance-review-5179517">Aflac Life Insurance</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/aig-life-insurance-review-5079549">AIG Life Insurance</a>, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/allianz-life-insurance-company-review-5184999">Allianz Life Insurance</a>, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/allstate-life-insurance-review-5095125">Allstate Life Insurance</a>, <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-amicable-life-insurance-review-5322859">American Amicable Life Insurance</a>, <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-fidelity-life-insurance-company-review-5194578">American Fidelity Life Insurance</a>, <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-heritage-life-insurance-review-5187805">American Heritage Life Insurance</a>, <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-income-life-insurance-review-5179407">American Income Life Insurance</a>, <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-national-life-insurance-review-5183789">American National Life Insurance</a>,<a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/americo-life-insurance-review-5189321">Americo Life Insurance</a>, <a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ameritas-life-insurance-review-5115823">Ameritas Life Insurance</a>, <a data-component="link" data-ordinal="14" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/assurity-life-insurance-review-5181772">Assurity Life Insurance</a>, <a data-component="link" data-ordinal="15" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bankers-life-insurance-review-5114317">Bankers Life Insurance</a>, <a data-component="link" data-ordinal="16" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/banner-life-insurance-review-5079634">Banner Life Insurance</a>, <a data-component="link" data-ordinal="17" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bestow-life-insurance-review-5113086">Bestow Life Insurance</a>, <a data-component="link" data-ordinal="18" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/boston-mutual-life-insurance-review-5186402">Boston Mutual Life Insurance</a>, <a data-component="link" data-ordinal="19" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/brighthouse-life-insurance-review-5075446">Brighthouse Life Insurance</a>, <a data-component="link" data-ordinal="20" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cincinnati-life-insurance-review-5188668">Cincinnati Life Insurance</a>, <a data-component="link" data-ordinal="21" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/trustage-life-insurance-review-5179511">TruStage Life Insurance</a>, <a data-component="link" data-ordinal="22" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/colonial-life-insurance-review-5322860">Colonial Life Insurance</a>, <a data-component="link" data-ordinal="23" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/colonial-penn-life-insurance-review-5075429">Colonial Penn Life Insurance</a>, <a data-component="link" data-ordinal="24" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/columbian-life-insurance-review-5188199">Columbian Financial Group Life Insurance</a>, <a data-component="link" data-ordinal="25" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/columbus-life-insurance-review-5524724">Columbus Life Insurance</a>, <a data-component="link" data-ordinal="26" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/combined-life-insurance-review-5187785">Combined Life Insurance</a>, <a data-component="link" data-ordinal="27" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/companion-life-insurance-review-5184520">Companion Life Insurance</a>, <a data-component="link" data-ordinal="28" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/equitable-life-insurance-review-5185541">Equitable Life Insurance</a>, <a data-component="link" data-ordinal="29" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/erie-insurance-life-insurance-review-5409239">Erie Life Insurance</a>, <a data-component="link" data-ordinal="30" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ethos-life-insurance-review-5113501">Ethos Life Insurance</a>, <a data-component="link" data-ordinal="31" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/farm-bureau-life-insurance-review-5322858">Farm Bureau Life Insurance</a>, <a data-component="link" data-ordinal="32" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/farmers-life-insurance-review-5181062">Farmers Life Insurance</a>, <a data-component="link" data-ordinal="33" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fidelity-life-insurance-review-5079550">Fidelity Life Insurance</a>, <a data-component="link" data-ordinal="34" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/foresters-life-insurance-review-5179868">Foresters Life Insurance</a>, <a data-component="link" data-ordinal="35" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/forethought-life-insurance-review-5189852">Forethought Life Insurance</a>, <a data-component="link" data-ordinal="36" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/freedom-life-insurance-review-5079548">Freedom Life Insurance</a>, <a data-component="link" data-ordinal="37" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/gerber-life-insurance-review-5077502">Gerber Life Insurance</a>, <a data-component="link" data-ordinal="38" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/globe-life-insurance-review-5076979">Globe Life Insurance</a>, <a data-component="link" data-ordinal="39" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guardian-life-insurance-review-5078357">Guardian Life Insurance</a>, <a data-component="link" data-ordinal="40" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/haven-life-insurance-review-5112454">Haven Life Insurance</a>, <a data-component="link" data-ordinal="41" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/john-hancock-life-insurance-review-5075864">John Hancock Life Insurance</a>, <a data-component="link" data-ordinal="42" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/kansas-city-life-insurance-company-review-5185631">Kansas City Life Insurance</a>, <a data-component="link" data-ordinal="43" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/kemper-life-insurance-review-5179406">Kemper Life Insurance</a>, <a data-component="link" data-ordinal="44" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ladder-life-insurance-review-5180125">Ladder Life Insurance</a>, <a data-component="link" data-ordinal="45" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lafayette-life-insurance-review-5186957">Lafayette Life Insurance</a>, <a data-component="link" data-ordinal="46" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/liberty-national-insurance-review-5097186">Liberty National Life Insurance</a>, <a data-component="link" data-ordinal="47" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lincoln-financial-life-insurance-review-5324587">Lincoln Financial Life Insurance</a>, <a data-component="link" data-ordinal="48" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lincoln-heritage-life-insurance-review-5114305">Lincoln Heritage Life Insurance</a>, <a data-component="link" data-ordinal="49" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lumico-life-insurance-review-5188791">Lumico Life Insurance</a>, <a data-component="link" data-ordinal="50" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/manhattan-life-insurance-review-5184541">ManhattanLife Insurance</a>, <a data-component="link" data-ordinal="51" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/massmutual-life-insurance-review-5076622">MassMutual Life Insurance</a>, <a data-component="link" data-ordinal="52" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/metlife-life-insurance-review-5076849">MetLife Insurance</a>, <a data-component="link" data-ordinal="53" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/midland-national-life-insurance-review-5115400">Midland National Life Insurance</a>, <a data-component="link" data-ordinal="54" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/minnesota-life-insurance-review-5181765">Minnesota Life Insurance</a>, <a data-component="link" data-ordinal="55" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mutual-of-omaha-life-insurance-review-5077426">Mutual of Omaha Life Insurance</a>, <a data-component="link" data-ordinal="56" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/national-life-group-insurance-review-5121205">National Life Insurance</a>, <a data-component="link" data-ordinal="57" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/nationwide-life-insurance-review-5112884">Nationwide Life Insurance</a>, <a data-component="link" data-ordinal="58" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-era-life-insurance-review-5184581">New Era Life Insurance</a>, <a data-component="link" data-ordinal="59" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-york-life-insurance-review-5074534">New York Life Insurance</a>, <a data-component="link" data-ordinal="60" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/north-american-life-insurance-review-5111320">North American Life Insurance</a>, <a data-component="link" data-ordinal="61" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994">Northwestern Mutual Life Insurance</a>, <a data-component="link" data-ordinal="62" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ohio-national-life-insurance-review-5186036">Ohio National Life Insurance</a>, <a data-component="link" data-ordinal="63" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/pacific-life-insurance-review-5184560">Pacific Life Insurance</a>, <a data-component="link" data-ordinal="64" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/pan-american-life-insurance-review-5187139">Pan American Life Insurance</a>, <a data-component="link" data-ordinal="65" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/penn-mutual-life-insurance-review-5181706">Penn Mutual Life Insurance</a>, <a data-component="link" data-ordinal="66" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/physicians-mutual-life-insurance-review-5201519">Physicians Mutual Life Insurance</a>, <a data-component="link" data-ordinal="67" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/primerica-life-insurance-review-5080087">Primerica Life Insurance</a>, <a data-component="link" data-ordinal="68" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/principal-life-insurance-review-5081263">Principal Life Insurance</a>, <a data-component="link" data-ordinal="69" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/protective-life-insurance-review-5078171">Protective Life Insurance</a>, <a data-component="link" data-ordinal="70" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/prudential-life-insurance-review-5077996">Prudential Life Insurance</a>, <a data-component="link" data-ordinal="71" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/reliance-standard-life-insurance-review-5184863">Reliance Standard Life Insurance</a>, <a data-component="link" data-ordinal="72" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sagicor-life-insurance-review-5205030">Sagicor Life Insurance</a>, <a data-component="link" data-ordinal="73" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sbli-life-insurance-review-5185629">SBLI Life Insurance</a>, <a data-component="link" data-ordinal="74" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/securian-life-insurance-review-5185628">Securian Life Insurance</a>, <a data-component="link" data-ordinal="75" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/senior-life-insurance-company-life-insurance-review-5409210">Senior Life Insurance</a>, <a data-component="link" data-ordinal="76" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/southern-farm-bureau-life-insurance-company-review-5201019">Southern Farm Bureau Life Insurance</a>, <a data-component="link" data-ordinal="77" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-standard-life-insurance-review-5186408">The Standard Life Insurance</a>, <a data-component="link" data-ordinal="78" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/state-farm-life-insurance-review-5072604">State Farm Life Insurance</a>, <a data-component="link" data-ordinal="79" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sun-life-insurance-review-5186111">Sun Life Insurance</a>, <a data-component="link" data-ordinal="80" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/symetra-life-insurance-review-5188608">Symetra Life Insurance</a>, <a data-component="link" data-ordinal="81" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/texas-life-insurance-review-5184573">Texas Life Insurance</a>, <a data-component="link" data-ordinal="82" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-hartford-life-insurance-review-5176204">The Hartford Life Insurance</a>, <a data-component="link" data-ordinal="83" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/thrivent-life-insurance-review-5197062">Thrivent Life Insurance</a>, <a data-component="link" data-ordinal="84" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/transamerica-life-insurance-review-5075447">Transamerica Life Insurance</a>, <a data-component="link" data-ordinal="85" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/united-life-insurance-review-5188307">United Life Insurance</a>, <a data-component="link" data-ordinal="86" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/unum-life-insurance-review-5100981">Unum Life Insurance</a>, <a data-component="link" data-ordinal="87" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/usaa-life-insurance-review-5080414">USAA Life Insurance</a>, <a data-component="link" data-ordinal="88" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/voya-financial-life-insurance-review-5089932">Voya Life Insurance</a>, <a data-component="link" data-ordinal="89" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/western-southern-life-insurance-review-5188202">Western &amp; Southern Life Insurance</a><br/><br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-why-you-should-trust-our-expert-insurance-reviewers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-38"> <span class="mntl-sc-block-heading__text"> Why You Should Trust Our Expert Insurance Reviewers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-39"> Investopedia launched in 1999, and has been helping readers find the best life insurance companies since 2020. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-40"> We are dedicated to helping you find the right life insurance provider for your needs. In order to compile our list of the best life insurance companies, we developed a comprehensive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/life-insurance-review-methodology-5071427">life insurance methodology</a>. We started off by researching what consumers want from life insurance companies, and for that, we looked to third-party consumer studies, including J.D. Power’s 2022 Individual Life Insurance and Annuities studies and the 2022 Insurance Barometer Study, by Life Happens and LIMRA.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-41"> With those findings in mind, we spent three months digging up information about more than 55 features on 88 life insurance companies, including ratings for financial strength by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/a-m-best.asp">AM Best</a>, customer satisfaction, and individual customer complaints reported to insurance state commissioners and recorded by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nainsurancec.asp">NAIC (National Association of Insurance Commissioners)</a>. We also considered years in business, cost, online tools, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insurance/accelerated-underwriting-easy-life-insurance/">no-medical-exam options</a>, policy types and features, and available riders.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-42"> NAIC Methodology: We considered each company's NAIC complaint index for its life insurance business by averaging those NAIC complaint index values over the three years (2021, 2020, and 2019). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-43"> Our review process gave preference to companies with superior financial stability, few customer complaints, and a robust suite of products and resources. In particular, we valued online quoting and application tools, transparent pricing, and no-exam policy options. Companies received ratings boosts if customer service was accessible via features like live chat. We ranked each company according to the following categories and weights: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-44"> <li>Policy types and features: 21%</li><li>Financial stability: 17% </li><li>Application process: 16%</li><li>Customer satisfaction ratings: 15%</li><li>Customer service: 14%</li><li>Riders and living benefits: 9%</li><li>Cost: 8%</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-45"> Costs were evaluated by collecting term life insurance quotes for 25-, 40-, and 55-year-old male and female non-smokers in excellent health for 30-year $250,000 term life policies. We used Compulife data available through Term4sale.com. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-46"> We compared individual offerings between companies by delving deeper into product specifics, including maximum coverage amounts, maximum issue ages, included riders (in particular, the number and type of living benefits available at no upfront cost) , and product-specific application processes. We used this research to determine the best companies for different products, consumer groups, and use cases.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-47"> Of the companies we considered, those with the greatest financial stability, fewest complaints, lowest cost, most generous benefits, easiest application process, most generous no-medical-exam options, and widest available features scored the highest across categories. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-guide-to-life-insurance"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-48"> <span class="mntl-sc-block-heading__text"> Guide to Life Insurance </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-49"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lifeinsurance.asp">What is life insurance?</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp">How does life insurance work?</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/120814/life-insurance-smart-investment.asp">Is life insurance worth it?</a></li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251">Types of life insurance</a></li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" 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mntl-block --> </div> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" 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These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-36"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=66869&amp;:refresh">Nationwide Life Ins Co National Complaint Index Report</a>."</p></li> <li class="mntl-sources__source" id="citation-38"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=68136&amp;:refresh">Protective Life Ins Co National Complaint Index Report</a>."</p></li> <li class="mntl-sources__source" id="citation-69"><p>J.D. Power. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.jdpower.com/business/press-releases/2023-us-individual-life-insurance-annuity-studies">Satisfaction with Life Insurance and Annuity Products Climbs as Customers Embrace Digital, J.D. Power Finds</a>.”</p></li> <li class="mntl-sources__source" id="citation-41"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=65935&amp;:refresh">Massachusetts Mut Life Ins Co National Complaint Index Report</a>."</p></li> <li class="mntl-sources__source" id="citation-70"><p>U.S. Department of Labor. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.dol.gov/newsroom/releases/ebsa/ebsa20230929">US Department of Labor Reaches Settlement With United of Omaha Life Insurance Co. to Reform Its Evidence of Insurability Practices</a>."</p></li> <li class="mntl-sources__source" id="citation-43"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=64246&amp;:refresh">Guardian Life Ins Co Of Amer National Complaint Index Report</a>."</p></li> <li class="mntl-sources__source" id="citation-1"><p>J.D. Power. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.jdpower.com/business/press-releases/2021-us-individual-life-insurance-study">Pandemic and Tax Code Change Spur Interest in Life Insurance, J.D. Power Finds</a>."</p></li> <li class="mntl-sources__source" id="citation-72"><p>Rogowski v. State Farm. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://nationalsfcoisettlement.com/">Welcome to the Rogowski v. State Farm Settlement Website</a>."</p></li> <li class="mntl-sources__source" id="citation-71"><p>Niewinski v. State Farm. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nationalsf86settlement.com/">Welcome to the Website for the Niewinski v. State Farm Litigation</a>."</p></li> <li class="mntl-sources__source" id="citation-59"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/sites/default/files/web_market_share_life_fraternal.pdf">Life and Fraternal Insurance Industry</a>."</p></li> <li class="mntl-sources__source" id="citation-49"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&amp;COCODE=66915&amp;:refresh">New York Life Ins Co National Complaint Index Report</a>."</p></li> <li class="mntl-sources__source" id="citation-67"><p>NAIC. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://content.naic.org/sites/default/files/research-actuarial-life-fraternal-market-share.pdf">Life Insurance Market Share</a>."</p></li> <li class="mntl-sources__source" id="citation-73"><p>Mutual of Omaha. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.mutualofomaha.com/about/newsroom/article/many-millennials-hitting-40-without-life-insurance" rel="nofollow sponsored">Many Millennials Hitting 40 Without Life Insurance</a>."</p></li> <li class="mntl-sources__source" id="citation-68"><p>LIMRA. 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rel="nocaes"><span class="link__wrapper">What Is Life Insurance With Living Benefits?</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_1-0">Life insurance living benefits can provide you with a financial lifeline throughout your life. 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Learn how it works and when it makes sense.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/what-is-limited-payment-life-insurance-8348603" id="related-terms__read-more_3-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_4-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_4-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/w/wholelife.asp" id="related-terms__title_4-0" rel="nocaes"><span class="link__wrapper">Whole Life Insurance Definition: How It Works, With Examples</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_4-0">Whole life insurance is permanent life insurance that pays a benefit upon the death of the insured and is characterized by level premiums and a savings component.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/w/wholelife.asp" id="related-terms__read-more_4-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_5-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_5-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/t/termlife.asp" id="related-terms__title_5-0" rel="nocaes"><span class="link__wrapper">Term Life Insurance: What It Is, Different Types, Pros and Cons</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_5-0">Term life insurance is a guaranteed life benefit paid to beneficiaries of the insured after death.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/t/termlife.asp" id="related-terms__read-more_5-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_6-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_6-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/mortgage/insurance/mortgage-life-insurance/" id="related-terms__title_6-0" rel="nocaes"><span class="link__wrapper">Understanding Mortgage Life Insurance and Its Advantages</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_6-0">Mortgage life insurance is designed specifically to repay mortgage debt in the event of the death of the borrower. </div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/mortgage/insurance/mortgage-life-insurance/" id="related-terms__read-more_6-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div></div></div> </div></div>

We found that the best life insurance company overall is Nationwide because of its generous no-exam policies, solid financial strength and customer satisfaction ratings, and three living benefit riders included with most plans at no extra cost. For our life insurance ratings, we evaluated 88 life insurance carriers on 55 criteria that cover policy types and features, financial stability, ease of application, customer satisfaction, and costs. In the company information below, we mention NAIC complaint index scores. The NAIC complaint index is a tool in which the [National Association of Insurance Commissioners (NAIC)](https://www.investopedia.com/terms/n/nainsurancec.asp) shows whether a company has received more or fewer complaints than other insurers, after adjusting for market share. ## 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 * **Best Overall:** [Nationwide](https://dotdash.covrtech.com?utm_carrier=Nationwide&utm_journey=term) * **Best Term Life Insurance:** [Protective](http://dotdash.covrtech.com?utm_carrier=Protective&utm_journey=term) * **Best Convertible Term Life Insurance:** [MassMutual](https://dotdash.covrtech.com?utm_carrier=MassMutual&utm_journey=term) * **Best Return-of-Premium Term:** [Mutual of Omaha](http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&utm_journey=term) * **Great Traditional Insurer:** [Guardian](http://dotdash.covrtech.com/?utm_carrier=Guardian&utm_journey=bridge) * **Best for Military:** [USAA](http://dotdash.covrtech.com/?utm_carrier=USAA&utm_journey=bridge) * **Great for Dividends and No-Medical Exam Life Insurance:** [Penn Mutual](http://dotdash.covrtech.com/?utm_carrier=PennMutual&utm_journey=bridge) * **Cheapest Term Premiums:** [Banner by Legal & General](https://dotdash.covrtech.com/?utm_carrier=Banner&utm_journey=term) * **Best for Customer Satisfaction:** [State Farm Life Insurance](http://dotdash.covrtech.com/?utm_carrier=StateFarm&utm_journey=bridge) * **Best Whole Life Insurance:** [New York Life](https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&utm_journey=bridge) * **Largest Life Insurance Company:** [Northwestern Mutual](http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&utm_journey=bridge) Why Trust Us 91 Companies reviewed 55 Features considered 5,005 Data points analyzed We collected over 5,000 data points from 91 life insurance companies to measure financial stability, customer satisfaction, product and feature variety, and the overall buying experience. We then evaluated each company based on 55 metrics to develop unbiased, comprehensive reviews. [Read our Full Methodology](https://www.investopedia.com/life-insurance-review-methodology-5071427) [Compare life insurance quotes](https://dotdash.covrtech.com/) with our partner Covr Financial from multiple providers before buying. 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 Expand 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 * [Our Top Picks](#summary-list) * [Nationwide](#toc-nationwide) * [Protective](#toc-protective) * [MassMutual](#toc-massmutual) * [Mutual of Omaha](#toc-mutual-of-omaha) * [Guardian](#toc-guardian) * [USAA](#toc-usaa) * [Penn Mutual](#toc-penn-mutual) * [Banner by Legal & General](#toc-banner-by-legal--general) * [State Farm Life Insurance](#toc-state-farm-life-insurance) * [New York Life](#toc-new-york-life) * [Northwestern Mutual](#toc-northwestern-mutual) * See More (8) * [Compare Providers](#comparison-table) * [The Bottom Line](#toc-the-bottom-line) * [Types of Life Insurance](#toc-what-are-the-types-of-life-insurance) * [Which Type Is Right for You?](#toc-which-type-of-life-insurance-is-right-for-you) * [How to Choose](#toc-how-to-choose-the-best-life-insurance-company) * [Cost of Life Insurance](#toc-how-much-does-life-insurance-cost-on-average) * [Life Insurance News](#toc-life-insurance-news) * [FAQ](#toc-faq-3319b6f2-2369-4f45-9112-f4f2606be01e) ### Best Overall : Nationwide --- ![Nationwide]() :fill(white):max_bytes(150000):strip_icc()/nationwide-c7e044965321488fa128e15ecace9bea.png) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ * **Accepts Credit Cards:** Yes [Get A Quote](https://dotdash.covrtech.com?utm_carrier=Nationwide&utm_journey=term) For the most personalized quote experience, call Nationwide directly at 844-457-7984. And if you're over 50 or in poor health, it's best to work with a licensed agent. Why We Chose It Three living benefits included with most policies, generous no-exam requirements, strong financials, and satisfied customers make Nationwide our top pick. Pros & Cons Pros * No-exam life insurance available to very healthy applicants * Low NAIC complaint index * Living benefits included on most policies * Allows credit card payments Cons * No live chat available Overview Nationwide is a financially stable life insurance company that's been in business for nearly a century. It offers a wide range of life insurance policies that may be available without a medical exam and with fast approval. It's also our top pick for [best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955), [best no-medical-exam life insurance companies](https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737), and [best life insurance companies for people over 50](https://www.investopedia.com/best-life-insurance-for-people-over-50-4846582). The company garnered an A+ (Superior) financial stability rating from [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp) and had the number of complaints you'd expect for a company of its size in 2022 (the most recent year for which data is available), though the two prior years saw fewer complaints. It boasts no-exam life insurance for healthy applicants, a wide range of policy types and [riders](https://www.investopedia.com/terms/r/rider.asp), and, for most policies, three [accelerated death benefit](https://www.investopedia.com/terms/a/accelerated_death_benefit.asp) riders at no upfront cost for chronic, critical, and terminal illnesses. This is a rare offering among the insurance companies we considered. Nationwide's host of exceptional features puts it squarely at the top of our list of best companies for life insurance.  Nationwide's life and annuity products are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. The company known today as Nationwide was founded in 1926 as Farm Bureau Mutual Automobile Insurance Company. Plans & Pricing Nationwide offers term policies as well as traditional whole life insurance, universal life insurance (UL), variable universal life insurance (VUL), and indexed universal life insurance (IUL). * Guaranteed Level Term * Whole Life 100 and 20Pay Whole Life * Simplified Whole Life * No-Lapse Guarantee UL II (universal life insurance) * VUL Accumulator (variable life insurance) * VUL Protector * VUL Protector II * Advisory VUL * IUL Accumulator II 2020 (indexed universal life insurance) * IUL Protector II 2020 * Survivorship IUL 2020 Nationwide's [indexed policies](https://www.investopedia.com/articles/insurance/09/indexed-universal-life-insurance.asp) let you participate in stock market gains, but without direct market exposure. Cash value growth is tied to the S&P 500, NASDAQ-100, and/or the Dow Jones Industrial Average. Though not as risky as variable universal life insurance, these policies are complex and can still lose value when market gains aren’t enough to offset policy expenses.  **Term pricing** Although plan prices and coverage differ depending on your ZIP code, we found on average that a healthy 40-year-old female would pay $26.25 per month for a $250,000 30-year term policy, which is in the middle of the pack compared to other insurers we researched. Available Riders Depending on your policy, you may have access to the following: * Chronic illness accelerated death benefit rider * Critical illness accelerated death benefit rider * Terminal illness accelerated death benefit rider * Long-term care accelerated death benefit rider * Accidental death benefit rider * Children's term insurance rider * Guaranteed insurability benefit rider * Waiver of premium riders * Return of premium riders * Overloan lapse protection rider Read the Full [Nationwide Life Insurance Review](https://www.investopedia.com/nationwide-life-insurance-review-5112884) ### Best Term Life Insurance : Protective --- ![Protective Life]() :fill(white):max_bytes(150000):strip_icc()/Protective_Logo-f9be9b07e58e49f5a7b730dd3de657db.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A * **Accepts Credit Cards:** Yes [Get A Quote](http://dotdash.covrtech.com?utm_carrier=Protective&utm_journey=term) Why We Chose It Protective is our choice for top term life insurance because its [term life insurance](https://www.investopedia.com/ask/answers/08/term-life-insurance.asp) policies are the most affordable of all insurers we reviewed (tied with Banner), and it offers terms of up to 40 years, which is uncommon. Pros & Cons Pros * Lowest pricing along with Banner among 91 companies * Offers term coverage for up to 40 years * Allows credit card payments * Offers no-medical-exam coverage Cons * Ranked 18th out of 22 companies for customer satisfaction in J.D. Power's life insurance study Overview Protective has the cheapest term life coverage of all the companies we reviewed (along with Banner). Its competitive rates and policy options make it our pick for [best term life insurance company](https://www.investopedia.com/best-term-life-insurance-4845961), [most affordable life insurance company](https://www.investopedia.com/most-affordable-life-insurance-5092439), and [best life insurance companies for young adults](https://www.investopedia.com/best-life-insurance-for-young-adults-4846337). Protective offers longer-than-average term policies and it received fewer complaints than expected for a company of its size over the past three years. The company also offers generous child riders on its policies, which makes it a good [life insurance company for children](https://www.investopedia.com/best-life-insurance-for-children-5088586). However, Protective did not rank well in J.D. Power’s 2023 U.S. Individual Life Insurance Study, coming in at #18 out of 22 companies. This is an indication that you may have issues with Protective's customer service, as J.D. Power rankings are based on five factors: communication; interaction; price; product offerings; and statements. Founded in 1907, Protective Life is headquartered in Birmingham, Alabama, and has offices in the Greater Cincinnati area and St. Louis, Missouri. Plans & Pricing Protective offers term, whole life, universal life, variable universal life, and indexed universal life insurance policies. * Protective Classic Choice Term * Non-Participating Whole Life * Custom Choice Universal Life (UL) * Advantage Choice UL * Lifetime Assurance UL * Executive UL * Strategic Objectives II VUL (variable universal life insurance) * Indexed Choice UL **Term Pricing** A healthy 40-year-old female would pay $22.88 per month for a $250,000 30-year term policy. Your pricing and coverage will vary depending on your state, age, and the coverage you choose. Available Riders * Accidental death benefit rider * Accelerated death benefit rider (for chronic, critcal, or terminal illnesses) * Disability income rider * Children’s term rider * Waiver of premium rider * Guaranteed insurability rider * Term insurance rider Read the Full [Protective Life Insurance Review](https://www.investopedia.com/protective-life-insurance-review-5078171) ### Best Convertible Term Life Insurance : MassMutual --- ![MassMutual]() :fill(white):max_bytes(150000):strip_icc()/MassMutual-5542d799adfc45ebb6a7ab9b116e9c7c.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** No [Get A Quote](https://dotdash.covrtech.com?utm_carrier=MassMutual&utm_journey=term) Why We Chose It MassMutual stands out because unlike some competitors, many of its term policies can be converted to any type of [permanent policy](https://www.investopedia.com/articles/active-trading/120814/life-insurance-smart-investment.asp). The company is top-ranked for financial strength, has paid dividends every year since 1869, has few complaints, and has a wide selection of policies. Pros & Cons Pros * Rated A++ for financial stability * Long history of paying dividends * Few complaints relative to its size * Liberal term conversion options Cons * Few accelerated benefit riders included at no cost * Doesn’t accept credit card payments Overview MassMutual stands out for a number of reasons. It has an A++ (Superior) financial rating from AM Best. This is the highest rating a company can receive and indicates a “superior” ability to pay claims. MassMutual’s dividend-paying history also adds to its clout: Every year since 1869, eligible policyholders have received [life insurance dividends](https://www.investopedia.com/articles/personal-finance/011816/guide-dividendpaying-whole-life-insurance.asp). In 2024, MassMutual plans to pay $2.2 billion in dividends, which is its largest payout ever. Plus, the company has received far fewer complaints than expected for a company of its size, according to the NAIC, and offers a wide range of [policy types](https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251). It’s worth noting that many MassMutual term policies can convert to any of MassMutual’s permanent life policies. This is important because some companies limit the types of policies you can convert your term policy into. (Convertible term life insurance allows you to exchange some or all of your term coverage for permanent without having to re-qualify for life insurance.) MassMutual was founded in 1851 in Springfield, Massachusetts and has offices in Boston and New York City. In October 2023, it announced a pilot program in which new term life policyholders could earn cash incentives of up to 5% of their annual policy premiums by using an app to track their physical activity and sleep data. Plans & Pricing MassMutual offers [term life insurance, whole life insurance](https://www.investopedia.com/term-life-vs-whole-life-5075430), universal life insurance, and variable universal life insurance. * MassMutual Term * Whole Life 100 * Whole Life 65 * Whole Life 10/15/20-Pay * Whole Life High Early Cash Value (HECV) * Survivorship Whole Life 100 MassMutual’s whole-life policyholders are eligible to receive annual dividends based on the company’s financial performance. Dividends can be used to increase the death benefit or cash value, or pay premiums.  * Universal Life (UL) Guard * Survivorship Universal Life (SUL) Guard * Apex VUL (variable universal life insurance) Some universal life insurance policies can be structured like term coverage, where the coverage is designed to remain in effect for a fixed period of time. **Term pricing** Our research shows on average across several ZIP codes, a healthy 40-year-old female would pay $27.26 per month for a $250,000 30-year MassMutual term policy. Available Riders * Guaranteed insurability rider * Waiver of premium rider * Terminal illness accelerated death benefit rider * Long-term care accelerated death benefit rider * Chronic illness accelerated death benefit rider Read the Full [MassMutual Life Insurance Review](https://www.investopedia.com/massmutual-life-insurance-review-5076622) ### Best Return-of-Premium Term : Mutual of Omaha --- ![Mutual of Omaha]() :fill(white):max_bytes(150000):strip_icc()/mutual-of-omaha-deb0b074cad940d9a8ecfcbd961a6da4.png) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ * **Accepts Credit Cards:** Yes [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&utm_journey=term) Why We Chose It Mutual of Omaha is the top company we reviewed that offers return-of-premium (ROP) term life insurance. We like that it has a wide range of riders, and most policies include at least two living benefits. Pros & Cons Pros * Many plans with living benefits * Wide range of riders available * Guaranteed issue options * Return of premium term available Cons * Online applications unavailable for term policies Overview At no upfront cost, Mutual of Omaha includes three accelerated benefit riders on its Term Life Express and IUL Express policies (for critical, chronic, and terminal illnesses), and most other policies include two of these benefits. Accelerated benefit riders add flexibility to a life insurance policy by letting you tap the [death benefit](https://www.investopedia.com/terms/d/deathbenefit.asp) early if you have a qualifying illness. Plus the company offers at least two uncommon features: a disability income rider and a return of premium benefit on select term policies (both for an extra cost). With [return of premium (ROP) term life insurance](https://www.investopedia.com/best-return-of-premium-life-insurance-5074165), you can receive up to 100% of premiums back if you outlive the term. Only 11 of the 91 life insurance companies we reviewed make this type of coverage available. Mutual of Omaha is also our top pick for the [best burial insurance companies](https://www.investopedia.com/best-burial-insurance-4843161). The aptly named Mutual of Omaha is based in Omaha, Nebraska, and was founded in 1909. It has locations in 42 states. In the News Mutual of Omaha and two other members of its group entered a settlement with the Labor Department in September 2023 after an investigation into claim denials for employee-sponsored life insurance plans. The probe found that subsidiary United of Omaha, and that company's subsidiary, Companion Life Insurance, had accepted premiums for five years without getting proof that applicants were insurable. When participants died, United would often deny claims on the grounds that it had never received the insurability evidence. The company has reprocessed such claims dating back to February 2018 and changed this practice. Plans & Pricing * Term Life Answers * Term Life Express * AccumUL Answers (universal life insurance) * Income Advantage IUL (index universal life insurance) * Life Protection Advantage IUL * IUL Express * Children’s Whole Life Insurance * Guaranteed Whole Life Insurance **Term Pricing** A healthy 40-year-old female would pay $28.38 per month for a $250,000 30-year term policy. Available Riders Chronic, critical, and terminal illness riders are included free of charge on Mutual of Omaha’s Term Life Express and IUL Express policies. Most other policies include chronic and terminal illness riders at no additional cost.  * Critical illness accelerated death benefit rider * Terminal illness accelerated death benefit rider * Chronic illness accelerated death benefit rider * Accidental death benefit rider * Dependent children's rider * Guaranteed insurability benefit rider * Waiver of premium rider * Disability income rider * Long-term care rider Read the Full [Mutual of Omaha Life Insurance Review](https://www.investopedia.com/mutual-of-omaha-life-insurance-review-5077426) ### Great Traditional Insurer : Guardian --- ![Guardian Life Insurance]() :fill(white):max_bytes(150000):strip_icc()/guardian-direct-0e2cba3724c6431b8596de415fd325ad.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** Yes [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=Guardian&utm_journey=bridge) Why We Chose It Guardian received an exceptionally low number of customer complaints, has an A++ (Superior) financial strength rating, and pays dividends to eligible policyholders. Pros & Cons Pros * Low NAIC complaint index * Receives an A++ for financial stability * Whole life policies are eligible for dividends Cons * Online application and claim filing not available * Credit card payments not accepted Overview Along with MassMutual and New York Life, Guardian is one of only nine companies we reviewed to earn a top financial strength rating of A++ from AM Best, reflecting superior financial stability. Also like MassMutual and New York Life, Guardian offers dividends to eligible whole-life policyholders and announced its largest dividend payment ever for 2024. The payout totals $2.2 billion. For these reasons, it ranked highly among the [best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955), [best life insurance companies for people over 50](https://www.investopedia.com/best-life-insurance-for-people-over-50-4846582), and [best senior life insurance companies](https://www.investopedia.com/best-life-insurance-for-seniors-4845439). Guardian Life received an excellent NAIC index over the past three years, indicating it has fewer complaints with the NAIC than expected for a company of its size. Additionally, the company offers no-exam policies to eligible applicants. But if you’re seeking a streamlined online experience, Guardian falls short. It doesn’t offer an online application process (without an agent), online claim filing, or credit card payments, and information on its individual product offerings is hard to find, making it difficult when comparing life insurance plans. Guardian was founded in 1860 in New York City, and its headquarters are still there. It has four main business hubs in Bethlehem, Pennsylvania; Holmdel, New Jersey; Hudson Yards in New York City, and Pittsfield, Massachusetts. Plans & Pricing * Guardian Level Term * Guardian Level Premium Whole Life * Limited Pay Whole Life * Guaranteed Universal Life * Variable Universal Life Insurance **Term Pricing** A healthy 40-year-old female would pay $27.47 per month for a $250,000 30-year term policy. Your pricing will depend on your ZIP code, age, and coverage, among other things. Available Riders * Waiver of premium rider * Accidental death benefit rider * Term conversion rider * Terminal illness accelerated death benefit rider * Long-term care accelerated death benefit rider * Chronic illness accelerated death benefit rider * Paid-up additions (PUA) rider Read the Full [Guardian Life Insurance Review](https://www.investopedia.com/guardian-life-insurance-review-5078357) ### Best for Military : USAA --- ![USAA]() :fill(white):max_bytes(150000):strip_icc()/usaa-844b2f434aec4a40a60fc0a41fb1805d.png) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** No [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=USAA&utm_journey=bridge) Why We Chose It USAA offers military-specific benefits that pay out if you become injured in the line of duty and cover you during war. Pros & Cons Pros * Severe injury benefits * Add to your term coverage without taking another exam * Included term conversion rider * A++ AM Best rating Cons * Doesn’t take credit card payments * No-exam coverage options are limited Overview What makes USAA a solid choice for military families are its military-specific riders. Level Term V policies include a severe injury rider that pays out $25,000 for specific injuries incurred during military service. USAA also offers [guaranteed insurability riders](https://www.investopedia.com/guaranteed-insurability-rider-5095038) at no additional cost that give you the option to increase coverage after leaving the military (and without having to prove insurability) or if you experience certain life events, like having a child. Level Term policies also include a conversion option that allows you to convert to permanent coverage without a medical exam or questions after you've had your term policy for at least one year. The drawbacks are that USAA life insurance does not accept credit card payments and has limited no-medical-exam options. USAA sells Mutual of Omaha's guaranteed issue whole life policies that have a minimum age of 45 and a coverage maximum of just $25,000. USAA's life insurance and annuities products are provided by USAA Life Insurance Company in San Antonio, Texas and in New York by USAA Life Insurance Company of New York, which is in Highland Falls, New York.  USAA was started in 1922 by 25 Army officers who began insuring each other's cars. Plans & Pricing * Level Term * Essential Term * Simplified Whole Life * Guaranteed Issue Whole Life (via Mutual of Omaha) * Universal Life Insurance (via John Hancock) **Term Pricing** A healthy 40-year-old female would pay $26.86 per month for a $250,000 30-year term policy. Available Riders * Guaranteed insurability rider * Term life-event option rider * Life event option rider * Child rider * Waiver of premium rider * Terminal illness accelerated death benefit rider * Military Severe Injury Benefit Rider * Military Future Insurability Rider Read the Full [USAA Life Insurance Review](https://www.investopedia.com/usaa-life-insurance-review-5080414) ### Great for Dividends and No-Medical Exam Life Insurance : Penn Mutual --- ![Penn Mutual]() :fill(white):max_bytes(150000):strip_icc()/Penn_Mutual-70902c2bb7a04b4087d9cc4970c53f87.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ * **Accepts Credit Cards:** Yes [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=PennMutual&utm_journey=bridge) Why We Chose It Penn Mutual has paid dividends for nearly 175 years and offers up to $7.5 million in coverage for no-medical-exam life insurance to eligible applicants—the highest limit we've seen. Pros & Cons Pros * Strong dividend-paying history * High coverage no-medical-exam life insurance * 5th-lowest pricing among 91 companies * Excellent NAIC customer complaint index Cons * Limited website information * Quotes not available on the website Overview Penn Mutual is a well-established insurer with superior financial strength and an impressive track record of customer satisfaction. It has the longest dividend-paying history of companies on this list and announced that it plans to pay eligible policyholders $200 million in dividends in 2024, which is a record payout. Penn Mutual is also an excellent choice for those with high-coverage needs. The company offers $7.5 million in coverage to very healthy applicants up to age 65 without a medical exam. This is the highest no-exam limit we've seen, and the highest age limit we've seen for no-exam policies, which is why it's a top pick for: * [Best no-medical-exam life insurance companies](https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737) (best for high coverage) * [Best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955) (best for dividends) But Penn Mutual doesn't just cater to those looking for high coverage or permanent policies. Its quotes for term coverage were the fourth most affordable of the 32 companies we collected quotes for. That said, the company does not make term quotes available on its website. For details and to apply for any type of coverage, you'll need to get in touch with an agent. Penn Mutual was founded in 1847 in Philadelphia. Today, the Penn Mutual Life Insurance Company is based in Horsham, Pennsylvania. Plans & Pricing * Guaranteed Convertible Term * Protection Non-Convertible Term * One-Year Term * Guaranteed Whole Life II * Protection Whole Life * Survivorship Whole Life * Guaranteed Protection UL (universal life insurance) * Protection UL * Diversified Advantage Variable Universal Life (VUL) * Protection VUL * Accumulation VUL * Survivorship Protection VUL * Accumulation Indexed Universal Life (IUL) * Survivorship IUL **Term Pricing** A healthy 40-year-old female would pay $23.92 per month for a $250,000 30-year term policy. Available Riders * Guaranteed increase option ([guaranteed insurability rider](https://www.investopedia.com/guaranteed-insurability-rider-5095038)) * Additional insured term insurance rider * Children's term rider * Disability waiver of premium rider * Disability completion benefit rider * Terminal illness accelerated death benefit rider * Chronic illness accelerated death benefit rider * Accidental death benefit rider * Overloan protection benefit rider * Supplemental term insurance rider Read the Full [Penn Mutual Life Insurance Review](https://www.investopedia.com/penn-mutual-life-insurance-review-5181706) ### Cheapest Term Premiums : Banner by Legal & General --- ![Legal &amp; General]() :fill(white):max_bytes(150000):strip_icc()/Legal_General_edit-9d5942e58c884498bd2d016c38587f48.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ * **Accepts Credit Cards:** No [Get A Quote](https://dotdash.covrtech.com/?utm_carrier=Banner&utm_journey=term) Why We Chose It Banner's term premiums were tied for the lowest with Protective, and Banner offers terms up to 40 years. Pros & Cons Pros * Tied with Protective for lowest pricing * 40-year terms available * Generous term conversion period * Online application available * Excellent NAIC customer complaint index Cons * Few policy types available * Limited riders Overview Banner, along with Protective, is an excellent choice if you're looking for the [cheapest term life insurance](https://www.investopedia.com/best-term-life-insurance-4845961). Banner is also one of only two companies that offer 40-year term policies (Protective is the other). Additionally, Banner boasts generous term conversion options—you can convert your term policy through the end of the level-premium period or until you turn 70, whichever happens first. This is important because some companies limit the conversion period to the first 10 years of the policy. While there's a lot to like about Banner, it doesn't offer many policy options—just term and universal life policies. It also doesn't offer as many riders to customize policies as some of its competitors. Banner was founded as GELICO in 1949 and has been part of Legal & General Group since 1981. Banner Life Insurance Company is located in Frederick, Maryland. Legal & General was founded in 1836 in London, where it is still headquartered. Plans & Pricing * OPTerm * Life Step UL (universal life insurance) **Term Pricing** While your pricing will depend on factors such as your age, state, and coverage amount, our research showed a healthy 40-year-old female would pay $22.89 per month for a $250,000 30-year term policy. Available Riders * Child rider * Term life riders (stackable coverage) * Terminal illness accelerated death benefit rider Read the Full [Banner Life Insurance Company Life Insurance Review](https://www.investopedia.com/banner-life-insurance-review-5079634) ### Best for Customer Satisfaction : State Farm Life Insurance Investopedia's Rating 3.7 --- ![State Farm]() :fill(white):max_bytes(150000):strip_icc()/State_Farm-98683302afe941dc878f2a405d108fae.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** Yes [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=StateFarm&utm_journey=bridge) Why We Chose It State Farm has earned the #1 spot in J.D. Power's customer satisfaction rankings for life insurance for the past four years. Pros & Cons Pros * Superior financial stability * Scored first for customer service by J. D. Power * Whole life policies can earn dividends * Bundling discounts may be available Cons * Fourth-worst for pricing * Limited coverage for no-medical-exam life insurance Overview State Farm is our pick for the best life insurance provider for customer satisfaction because it ranked #1 in J.D. Power's U.S. Individual Life Insurance studies for 2023, as well as 2022, 2021, and 2020. The studies measured consumer experiences with the largest life insurance companies nationwide. Plus, State Farm boasts an A++ (Superior) rating for financial strength from AM Best, which is the highest rating possible. The company is also one of our: * [best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955) * [best burial life insurance companies](https://www.investopedia.com/best-burial-insurance-4843161) * [best return-of-premium (ROP) term life insurance companies](https://www.investopedia.com/best-return-of-premium-life-insurance-5074165) If you're looking for a whole life policy that pays dividends, State Farm offers one. Plus, you may be able to save on your premium by bundling life insurance coverage with another State Farm coverage, such as auto. However, the company's term policies are priced high compared to our review of 32 life insurance companies offering term quotes online. If you don't have the best medical history and are in the market for life insurance without a medical exam, you may want to look elsewhere. At present, the most coverage you can get with State Farm without a medical exam is $50,000. State Farm is based in Bloomington, Illinois. The first State Farm Life policy was sold in 1929 to the company founder, George J. Mercherle, for $2,000. Note In November 2023, State Farm agreed to a $325 million settlement for a class action suit in which the plaintiffs said the company deducted too much for cost-of-insurance charges for flexible premium adjustable whole life and universal policies. This followed an August 2023 $65 million settlement of a different class action lawsuit making similar allegations related to universal life insurance policies. Plans & Pricing * Select Term Life * Return of Premium Life * Instant Answer Term * Limited Pay Whole Life * Single Premium Whole Life * Universal Life * Survivorship Universal Life * Joint Universal Life * Final Expense (called $10,000 Whole Life in New York State) **Term Pricing** A healthy 40-year-old female would pay $35.24 per month for a $250,000 30-year term policy, which is one of the highest rates we've seen. Your coverage will depend on your ZIP code, age, health, gender, and coverage. Available Riders * Guaranteed insurability rider * Family coverage rider * [Waiver of premium rider](https://www.investopedia.com/terms/w/waiver_of_premium.asp) * Flexible care benefit rider (long-term care rider) * Select term rider * Level term rider Read the Full [State Farm Life Insurance Review](https://www.investopedia.com/state-farm-life-insurance-review-5072604) ### Best Whole Life Insurance : New York Life --- ![New York Life]() :fill(white):max_bytes(150000):strip_icc()/New_York_Life-fe244fbe4c0b4c3a842fa2c15f06f2c7.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** No [Get A Quote](https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&utm_journey=bridge) Why We Chose It New York Life is the second-largest life insurance company, according to the latest available NAIC data, and has been paying dividends to eligible [whole life](https://www.investopedia.com/terms/w/wholelife.asp) policyholders every year for the past 169 years. Pros & Cons Pros * A++ (Superior) AM Best rating * Long history of paying dividends * Some policies available to applicants up to 90 years old * Broad selection of riders Cons * Can’t get too many policy details online without contacting an agent * Online quotes and applications not available Overview New York Life earns an A++ (Superior) AM Best rating and receives very few customer complaints. It also issues whole life policies to eligible 90-year-old applicants. Its stellar reputation and financial stability are two reasons it's top-ranked in our [best life insurance companies for seniors](https://www.investopedia.com/best-life-insurance-for-seniors-4845439) and [best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955) reviews. We also like that New York Life has paid dividends for 169 consecutive years. In 2024, it plans to pay $2.2 billion in dividends, which is the largest payout in company history. The company offers term, whole life, and universal life policies, including variable universal life (VUL) insurance, plus a diverse mix of riders and options for life insurance plan customization. Among these are living benefits riders and a Spouse’s Paid-Up Purchase Option (SPPO). The SPPO is an uncommon offering that lets the spouse of the insured person use the death benefit to purchase a fully paid-up life insurance policy on their own life (without medical underwriting) upon their spouse's passing. Unfortunately, it’s difficult to locate policy-specific information on the website. If you have questions or want a quote, you’ll need to provide your name and number and wait for an agent to contact you.  New York Life was founded in New York City and is still headquartered there. Founded in 1845, it is the oldest company on this list Plans & Pricing * Level Premium Term * Yearly Renewable Term * Whole Life Insurance * Custom Whole Life Insurance * Secure Wealth Plus (whole life) * Universal Life Insurance * Custom Guarantee Universal Life * Variable Universal Life Accumulator II * Market Wealth Plus (variable life) No pricing information is available online. To get a quote, you'll need to request a call from an agent. Available Riders * Spouse’s paid-up insurance purchase option (SPPO) * Guaranteed insurability rider * Child term rider * Disability waiver of premium rider * Disability income rider * Accidental death benefit rider * Terminal illness accelerated death benefit rider * Long-term care accelerated death benefit rider * Chronic illness accelerated death benefit rider * Critical illness accelerated death benefit rider * Paid-up additions (PUA) rider * Money-back option rider Read the Full [New York Life Insurance Review](https://www.investopedia.com/new-york-life-insurance-review-5074534) ### Largest Life Insurance Company : Northwestern Mutual --- ![Northwestern Mutual]() :fill(white):max_bytes(150000):strip_icc()/Northwestern_Mutual_logo-f061b92905f449138c434da069418251.jpg) * **AM Best Rating:** AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ * **Accepts Credit Cards:** No [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&utm_journey=bridge) Why We Chose It Northwestern Mutual is the largest life insurance company in the country with 7.20% market share, according to the National Association of Insurance Commissioners (NAIC). Established in 1857, it has stellar financial ratings across multiple rating agencies and offers a wide selection of life insurance plans. Pros & Cons Pros * Highest financial strength ratings * Long dividend-paying history * One of the best NAIC complaint indexes * Largest insurance company, nationwide Cons * Must work with a financial advisor to buy a policy * Poor digital experience that lacks details about policies Overview Northwestern Mutual ticks all the boxes for financial stability: it boasts the highest financial strength ratings from AM Best (A++), Moody's (Aaa), and Fitch (AAA), and it's stood the test of time. The company has been in business since 1857, weathering numerous financial storms, and has paid eligible policyholders dividends for over 150 years. Northwestern Mutual is on track to pay $7.3 billion in dividends to eligible policyholders in 2024. Not only is this its largest payout ever, it's also the largest overall dividend payment of all companies on this list. Dividends are a key feature of some of the [best whole life insurance companies](https://www.investopedia.com/best-whole-life-insurance-4845955#toc-northwestern-mutual). Plus, Northwestern Mutual had the second-lowest NAIC complaint index among the 91 companies we analyzed, meaning the company has an incredibly low rate of complaints relative to its size. Unfortunately, there's not much you can do without an agent at Northwestern Mutual. Policy details are lacking online so you'll need to contact the company for specifics. It's primarily because of the company's lack of transparency and self-serve options that it didn't score higher in our review. Northwestern Mutual is headquartered in Milwaukee, Wisconsin. Read the full [Northwestern Mutual life insurance review](https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994). Plans & Pricing * Term life * Whole life * Universal life Few details about plans or pricing are available online. To get more information or request a quote, you'll need to call the company. Available Riders * Waiver of premium rider * Guaranteed insurability rider * Long-term care rider Read the Full [Northwestern Mutual Life Insurance Review](https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994) ## Compare the 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 | | Best For | AM Best Rating AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. | Term Life Sample Cost | Policy Types | Accepts Credit Cards | | Reset All | | --- | --- | --- | --- | --- | --- | --- | --- | | Nationwide | Best Overall | A+ | $26.25/month | Final Expense, Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole | Yes | [Get A Quote](https://dotdash.covrtech.com?utm_carrier=Nationwide&utm_journey=term) | Hide, not for me | | Protective | Best Term Life Insurance | A | $22.92/month | Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole | Yes | [Get A Quote](http://dotdash.covrtech.com?utm_carrier=Protective&utm_journey=term) | Hide, not for me | | MassMutual | Best Convertible Term Life Insurance | A++ | $26.97/month | Term, Universal (UL), Variable Universal (VUL), Whole | No | [Get A Quote](https://dotdash.covrtech.com?utm_carrier=MassMutual&utm_journey=term) | Hide, not for me | | Mutual of Omaha | Best Return-of-Premium Term | A+ | $28.38/month | Final Expense, Indexed Universal (IUL), Term, Universal (UL) | Yes | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=MutualofOmaha&utm_journey=term) | Hide, not for me | | Guardian | Great Traditional Insurer | A++ | $27.47/month | Term, Universal (UL), Whole | Yes | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=Guardian&utm_journey=bridge) | Hide, not for me | | USAA | Best for Military | A++ | $26.86/month | Term, Universal (UL), Whole | No | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=USAA&utm_journey=bridge) | Hide, not for me | | Penn Mutual | Great for Dividends and No-Medical Exam Life Insurance | A+ | $23.92/month | Term, Universal (UL), Variable Universal (VUL), Whole | Yes | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=PennMutual&utm_journey=bridge) | Hide, not for me | | Banner by Legal & General | Cheapest Term Premiums | A+ | $22.92/month | Term, Universal (UL) | No | [Get A Quote](https://dotdash.covrtech.com/?utm_carrier=Banner&utm_journey=term) | Hide, not for me | | State Farm Life Insurance | Best for Customer Satisfaction | A++ | $35.24/month | Final Expense, Term, Universal (UL), Whole | Yes | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=StateFarm&utm_journey=bridge) | Hide, not for me | | New York Life | Best Whole Life Insurance | A++ | N/A | Term, Universal (UL), Variable Universal (VUL), Whole | No | [Get A Quote](https://dotdash.covrtech.com/?utm_carrier=NewYorkLife&utm_journey=bridge) | Hide, not for me | | Northwestern Mutual | Largest Life Insurance Company | A++ | N/A | Term, Universal (UL), Variable Universal (VUL), Whole | No | [Get A Quote](http://dotdash.covrtech.com/?utm_carrier=NorthwesternMutual&utm_journey=bridge) | Hide, not for me | ## The Bottom Line You can't go wrong with Nationwide, which is a financially strong company with a wide range of policies that you may not need a medical exam for (though you'll score a better rate if you're healthy and get a medical exam). Most policies include three living benefit riders—a rare benefit—so if they appeal to you, Nationwide may be your best bet. If you're set on getting a term life insurance policy from one of the top-rated life insurance companies, check out Protective. It rises above most competitors—just be aware that its customer satisfaction ratings are low. Also consider MassMutual for convertible term policies and Mutual of Omaha for return-of-premium policies. Banner is another favorite, and its term pricing is on par with Protective's, but it comes with limited rider options. Shoppers for whole life insurance should pay attention to New York Life, our all-around favorite for that kind of policy, and Penn Mutual, which excels when it comes to dividends. ![Best Life Insurance Companies]() :max_bytes(150000):strip_icc()/GettyImages-580504707-f1e88e44d9bd4d3c9fe88b2535d5a353.jpg) ## What Are the Types of Life Insurance? Life insurance can be divided into two main types: term and permanent, or cash value life insurance. [Term life insurance](https://www.investopedia.com/best-term-life-insurance-4845961) policies only provide coverage for a certain period of time, such as 30 years. [Permanent insurance](https://www.investopedia.com/terms/p/permanentlife.asp) is designed to offer coverage for your entire life. Two common types of permanent life insurance include whole life and universal life. Term life insurance is often the easiest to buy: If you're healthy and under 50, you could get a 20-year term policy online in minutes. But if you need a permanent policy that will cover you for your entire life, you're 50 or older, or are in poor health, be prepared to speak to an agent and for a longer application process (which may include a medical exam). * **Term life insurance:** This is the most affordable type of life insurance coverage because it lasts for a limited period of time—usually 10 to 30 years. The [best term life insurance policies](https://www.investopedia.com/best-term-life-insurance-4845961) allow you to convert your policy into permanent coverage before the term expires. Most term life policies also allow you to renew coverage annually once the term expires. But the premium will increase annually based on your current age; if you want coverage longer than the duration of your term policy, it's best to convert to whole life instead of renewing. | Best Term Life Insurance Companies | | | --- | --- | | [Protective](https://dotdash.covrtech.com/) | Best Overall | | [Banner by Legal & General](https://dotdash.covrtech.com/) | Best for Cheap Insurance | | [Mutual of Omaha](https://dotdash.covrtech.com/) | Best for Living Benefits | | [MassMutual](https://dotdash.covrtech.com/) | Best for Financial Stability | * **Whole life insurance:** [Whole life insurance](https://www.investopedia.com/best-whole-life-insurance-4845955) is more expensive than term life insurance and even universal life insurance (another form of permanent coverage) because it guarantees the death benefit and cash value for life, as long as you pay the premiums. This is why it's an ideal solution when you need rock-solid permanent coverage and can afford the premiums. Some whole life insurance policies offered by mutual companies also pay dividends. "After getting engaged in 2019, I decided to get life insurance so that my partner would be covered if anything ever happened to me. I chose a whole life policy after reviewing all of the types because I liked the idea of being fully covered until death and not just until a certain age (like you get with a term policy). The ability to access the cash value in the future, if I ever needed or wanted it, also appealed to me. Now, years later, I simply pay my premium every January and can live my life knowing my partner will be financially secure if something ever happens to me." | Best Whole Life Insurance Companies | | | --- | --- | | [New York Life](https://dotdash.covrtech.com/) | Best Overall | | [Nationwide](https://dotdash.covrtech.com/) | Best for Living Benefits | | [Guardian](https://dotdash.covrtech.com/) | Best for High Issue Age | | [MassMutual](https://dotdash.covrtech.com/) | Best Traditional Insurer | | [Mutual of Omaha](https://dotdash.covrtech.com/) | Best for Burial Insurance | | [Penn Mutual](https://dotdash.covrtech.com/) | Best for Dividends | | [State Farm](https://dotdash.covrtech.com/) | Best for Customer Satisfaction | | [Northwestern Mutual](https://dotdash.covrtech.com/) | Best for Financial Stability | * **Universal life (UL) insurance**: [Universal life](https://www.investopedia.com/best-universal-life-insurance-4845846) is similar to whole life insurance but it has flexible premiums, a flexible death benefit, and interest that is credited to the cash value based on current interest rates, which vary. So, unlike with whole life insurance, you don’t know in advance how much the cash value will be worth in the future. UL is more affordable than whole life, but you may need to increase your premium payment in the future if the cash value doesn't perform as expected and/or you don't make sufficient premium payments. Most permanent policies have a surrender period, during which time you’ll pay a [surrender charge](https://www.investopedia.com/terms/s/surrendercharge.asp) for withdrawing from the cash value or canceling the policy. Ask how long the surrender period is on any cash value life insurance you might buy. * **Indexed universal life insurance (IUL):** [IUL](https://www.investopedia.com/articles/insurance/09/indexed-universal-life-insurance.asp) policies have a cash value account that can earn interest by tracking a stock market index selected by the insurer, such as the Nasdaq-100 or the [Standard & Poor's 500](https://www.investopedia.com/articles/investing/090414/sp-500-index-you-need-know.asp). You may also have a fixed-rate account and can choose how much you want to go into each account. Although the interest rate derived from the equity index account can fluctuate, the policy does offer an interest rate guarantee, which limits your losses. It also may cap your gains. IUL policies can be attractive if you want the potential for stock market gains but want to avoid losses. Just be aware that if the index doesn’t perform well enough, interest credited could be insufficient to keep up with policy expenses and your premium could increase. * **Variable life and variable universal life (VUL)**: These are the riskiest types of coverage because you invest the cash value component directly in the stock market via subaccounts, which are very similar to mutual funds. The [difference between variable life and VUL](https://www.investopedia.com/articles/pf/07/variable_universal.asp) is that VUL has a flexible death benefit and flexible premiums, while those things are fixed in a [variable universal life insurance](https://www.investopedia.com/terms/v/variableuniversallife.asp) policy. While variable life products can be a tax-advantaged way to invest in the stock market, the cash value is not protected from market losses. This means if your investments underperform, you could be required to increase premium payments or the policy could lapse. What's more, variable policies that lapse may result in severe tax consequences. * **Burial insurance (aka, final expense and guaranteed issue):** [Burial insurance](https://www.investopedia.com/best-burial-insurance-4843161) policies are whole life policies designed for older applicants in poor health, and they don't require a medical exam. As a result, these policies are the most expensive, relative to the amount of coverage. But their death benefits can be quite low, such as $5,000-$10,000, which means the premiums may seem more affordable than those of policies with bigger benefits. * **No-medical-exam life insurance:** [No-exam insurance](https://www.investopedia.com/best-no-medical-exam-life-insurance-5078737) refers to any life insurance policy you can apply for without taking a medical exam. Instead of an exam, you answer health questions or have a phone interview, and the insurance company checks your medical and other records. If you qualify, you can get a policy within a few days, or sometimes instantly online. But note that if you're healthy, you're probably better off getting a policy that requires an exam because the rate will be cheaper. | Best No-Medical-Exam Life Insurance Companies | | | --- | --- | | [Nationwide](https://dotdash.covrtech.com/) | Best Overall | | [Guardian](https://dotdash.covrtech.com/) | Best for Financial Stability | | [Penn Mutual](https://dotdash.covrtech.com/) | Best for High Coverage | | [Pacific Life Insurance](https://dotdash.covrtech.com/) | Fewest Complaints | ## Which Type of Life Insurance Is Right for You? With so many [kinds of life insurance](https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251), it can be hard to figure out which one to choose. It helps to start by thinking about what you want the policy for and who you want to benefit. For example, do you want life insurance for a set period of time mainly to help replace your income for your family if you die during your earning years? Is it so you can create an inheritance for your heirs? Or do you just want to cover your funeral expenses? Other factors to consider: * **What you're eligible for**: Your age, lifestyle, and medical history could preclude you from some types of insurance. * **Your budget**: Monthly premiums vary a lot depending on the type of coverage you choose, with term life being the most affordable. * **Whether you want to build cash value**: If you want a tax-free investment component that you can withdraw or borrow from while you're alive, you'll want a permanent policy. * **How much control you want over your cash value's growth:** Do you want a fixed rate of return you can count on? Then whole life is best. If you prefer that your cash value is pegged to market interest rates, universal may be your answer. And if you want to control the cash value growth with hands-on investing in a portfolio of subaccounts, variable life insurance could be best. ## How to Choose the Best Life Insurance Company If you get group life insurance through your employer, you usually don't have a choice of providers. But if you want more coverage, or you don't have an employer-provided plan, you'll need to buy it on your own. To [choose the right life insurance company](https://www.investopedia.com/how-to-choose-life-insurance-7483886) for you, consider financial strength, customer complaints, customer satisfaction, available policy types, available and included riders, and ease of application. Then, collect quotes among your top picks and compare life insurance rates. Doing this homework will ensure that when you [buy life insurance](https://www.investopedia.com/how-to-get-life-insurance-4842095), you've chosen a company that offers the life insurance options that suit your needs and will be there when your family needs it. 1. **Check out the company's financial strength**: You want a company that will be in business long enough to pay out your death benefit. So, look at [AM Best ratings](https://www.ambest.com/home/default.aspx) for financial stability. A++ and A+ ratings are considered “Superior,” while A and A- are considered “Excellent.” Other agencies also rate insurance companies, including Moody's, Fitch, Standard & Poor's, and Demotech. 2. **Look for a company with relatively few customer complaints**: The National Association of Insurance Commissioners (NAIC) uses customer complaints to create the [NAIC complaint index](https://content.naic.org/cis_consumer_information.htm), which indicates whether a company received more or fewer complaints than expected, based on its market share. An index lower than 1 indicates the company received fewer complaints than expected, while a number over 1 means it got more than expected. The higher the index, the more customers complain, and vice versa. 3. **Investigate other measures of customer satisfaction**: Not all companies are ranked for customer satisfaction, but check sources like [J.D. Power’s 2023 U.S. Individual Life Insurance and Individual Annuities study](https://www.jdpower.com/business/press-releases/2023-us-individual-life-insurance-annuity-studies) to see if companies you’re considering are. At a glance, you can see how a company ranks compared to others when it comes to customer satisfaction. 4. **See if the company offers the kind of insurance you want**: If you know which type of insurance you need, make sure each company you’re considering offers it. But note that a whole life policy with one company can be very different from a whole life policy with another. Though policies between companies might have the same name, each company tries to make its product stand out. Make sure their efforts suit your needs. 5. **Don't forget to research available and included riders**: This is a major way that same-named policies can differ. For example, a universal life policy with one company might include a generous accelerated death benefit rider at no cost, while a UL policy with another company may not. Or a term policy with one company may allow you to convert it to permanent coverage, while a term policy with another company may not. Research riders to know what you’re paying for. 6. **Consider companies that make applying easy**: Sometimes the biggest barrier to buying life insurance is the application process. And often, it’s better to get some coverage in place—especially if you have dependents—than it is to find the absolute best coverage you can. If you’re too busy for a medical exam, look for companies that don’t require one. If you’re healthy, choose a company that requires a medical exam or offers an accelerated underwriting process (meaning, the company will examine your medical history but won't require an exam). This means the insurance company will take your health conditions into consideration, which could significantly reduce your life insurance cost. ## How Much Does Life Insurance Cost on Average? [Term life insurance](https://www.investopedia.com/best-term-life-insurance-4845961) can cost as little as $13 per month, on average, for a $250,000 30-year policy for a healthy 25-year-old. Or, the same policy could cost around $400 for a 65-year-old smoker. The monthly cost of [whole life insurance](https://www.investopedia.com/best-whole-life-insurance-4845955) for the same amount of coverage is over $100 per month for a healthy 25-year-old and almost $1,000 for a 65-year-old smoker. Life insurance companies determine how much you'll pay through the application process, during which they consider factors such as your age, health, occupation, and location. Older applicants and those in poor health pay the most for life insurance, which is why it often makes sense to apply while you're younger and healthier. | Average Life Insurance Cost Per Month ($250,000, 30-year term policy) | | | | | --- | --- | --- | --- | | Company | 25 years old (average) | 40 years old (average) | 55 years old (average) | | Nationwide | $20.89 | $28.88 | $99.97 | | MassMutual | $18.15 | $29.58 | $122.46 | | Protective | $16.06 | $25.66 | $107.12 | | Banner | $16.07 | $25.71 | $107.91 | | Mutual of Omaha | $19.68 | $31.39 | $137.39 | | Guardian | $19.53 | $31.65 | $110.49 | | USAA | $20.82 | $30.09 | N/A | | Lincoln Financial | $17.25 | $26.36 | $114.05 | | Penn Mutual | $16.78 | $26.48 | $110.38 | | Transamerica | $16.99 | $35.70 | $128.68 | **\**Life insurance quotes above are examples only and were collected for 30-year $250,000 term life insurance policies for non-smoking males and females ages 25, 40, and 55 in excellent health*.** ## Life Insurance News **Haven Life has stopped selling policies**: As of Jan. 12, 2024, you can no longer buy a new policy from Haven. The company's parent, MassMutual, has always issued and managed Haven's policies, and that will continue once the Haven brand is discontinued this spring. **Only one-third of millennials have life insurance**: Some members of this generation are turning 40, and have families and debts such as mortgages, student loans, and credit cards. Yet only 34% have bought life insurance, according to a Mutual of Omaha survey. The same study found that only 41% of baby boomers are insured. **Many Americans don't think they have enough life insurance**: 42% of Americans say they need life insurance or they need more coverage, according to the 2024 Insurance Barometer Study by LIMRA, which stands for the Life Insurance Marketing and Research Association. The top reason cited for not having enough coverage was cost, but 78% of respondents overestimated the cost of basic term coverage. The largest groups saying they don't have enough coverage include Gen Z and Millenials, women, and Black and Hispanic people. ## Frequently Asked Questions * ### What Is Life Insurance and How Does It Work? [Life insurance](https://www.investopedia.com/terms/l/lifeinsurance.asp) is a contract in which you agree to make payments to the insurance company while you are alive. In return the insurance company guarantees it will pay a sum of money to your beneficiaries when you die. [Term life insurance](https://www.investopedia.com/terms/t/termlife.asp) only lasts for a certain amount of time—for example, 20 years. If you don't die during that time, your beneficiaries get nothing. [Permanent life insurance](https://www.investopedia.com/terms/p/permanentlife.asp), such as whole life or universal life, lasts your whole life—but the premiums are much higher than for term life. Permanent life insurance also has a cash value component, which is kind of like a savings account that you can withdraw from or take loans against while you're alive. * ### What Does Life Insurance Cover? Life insurance covers death from natural causes, illness, accidents, suicide, and homocide if you pass away while the policy is in force. The money is paid out tax-free, and beneficiaries can use it for whatever purpose they choose. * ### What Does Life Insurance Not Cover? Insurers may deny a claim in certain circumstances—for instance, if a beneficiary is involved in the homicide of the insured. They also often exclude coverage for death by suicide if it happens within a certain period, such within the first two years of a policy. Some providers deny claims for deaths caused by risky activities such as skydiving as well. Finally, beneficiaries may not get a payout if you lie or omit information on your application, or if you don't keep up with payments for the policy. * ### Do I Need Life Insurance? Not everyone needs life insurance. If you have enough money to pay for your final expenses and you don't have dependents, you don't really need it. But certain other groups of people can benefit from having life insurance. If you have a spouse or children, you may want life insurance so that they can continue to have the same quality of life once they no longer have your income stream. You may want it to ensure your children have money for college, too. Homeowners should have enough insurance to pay off the mortgage. And business owners are advised to get life insurance to clear business debts and help any remaining owners ensure business continuity. * ### What Is the Downside of Life Insurance? The main downside of life insurance is the cost. Your policy will charge you monthly premiums, which are another expense for your budget. The price depends on your age, health, lifestyle, and the amount of coverage you buy. If you stop paying, you lose your coverage. Another downside of life insurance is that you might pay these costs without getting anything back. Temporary term life insurance policies have a set expiration date. If you live past the expiration date, your coverage ends. In other words, you’ve paid for life insurance without getting any payout for your heirs. Finally, you must qualify to buy life insurance. You will owe a larger premium if you have health issues or risky hobbies. If the insurance company decides these risks are too high, you might be denied the chance to buy a policy. * ### How Can You Get Cheap Life Insurance? [Life insurance costs](https://www.investopedia.com/articles/investing/102914/7-factors-affect-your-life-insurance-quote.asp) are largely influenced by the type of coverage you get, and your age and health when you buy the policy. You can get a more [affordable life insurance](https://www.investopedia.com/most-affordable-life-insurance-5092439) policy if you choose [term life insurance over permanent](https://www.investopedia.com/term-life-vs-whole-life-5075430). You'll only get coverage for a set amount of years, but that may be all you need. Buy the policy as soon as you need it instead of waiting, because rates are better for younger applicants. If you're healthy, you're better off getting a policy that requires a [life insurance medical exam](https://www.investopedia.com/articles/pf/08/what-to-expect-insurance-application.asp), as those policies offer better rates for healthy applicants. And finally, skip add-on benefits known as [riders](https://www.investopedia.com/articles/pf/07/life_insurance_rider.asp) that you don't need. * ### What Happens if I Outlive My Term Life Insurance Policy? If you outlive your term life insurance policy, your coverage ends. Term life insurance is temporary life insurance. It only lasts a set period, such as five or 20 years. If you live past this point, you lose your coverage. However, you may have some options to stay covered past the end of the term. First, some insurers allow you to [renew and extend your term life insurance](https://www.investopedia.com/terms/r/renewableterm.asp) without a medical exam. The price will be higher when you renew than when you first bought the term life insurance because you will be older. You may also be able to [convert your temporary term life](https://www.investopedia.com/ask/answers/09/convertible-insurance-policy.asp) insurance into a permanent policy with no expiration date. Finally, you could try applying for a brand-new policy. If you don’t use one of these three options, you will no longer have life insurance after outliving your term policy. * ### Companies We Reviewed We researched and reviewed 88 companies to find the best 12 companies you see above on this list. Below are the companies we researched, along with links to individual company reviews to help you learn more before making a decision. Those that didn't make our list may have had fewer policy types and features, worse financial stability ratings, lower customer experience ratings, fewer riders and living benefits, or higher rates. [AAA Life Insurance](https://www.investopedia.com/aaa-life-insurance-review-5075643), [AARP Life Insurance](https://www.investopedia.com/aarp-life-insurance-review-5090157), [Aflac Life Insurance](https://www.investopedia.com/aflac-life-insurance-review-5179517), [AIG Life Insurance](https://www.investopedia.com/aig-life-insurance-review-5079549), [Allianz Life Insurance](https://www.investopedia.com/allianz-life-insurance-company-review-5184999), [Allstate Life Insurance](https://www.investopedia.com/allstate-life-insurance-review-5095125), [American Amicable Life Insurance](https://www.investopedia.com/american-amicable-life-insurance-review-5322859), [American Fidelity Life Insurance](https://www.investopedia.com/american-fidelity-life-insurance-company-review-5194578), [American Heritage Life Insurance](https://www.investopedia.com/american-heritage-life-insurance-review-5187805), [American Income Life Insurance](https://www.investopedia.com/american-income-life-insurance-review-5179407), [American National Life Insurance](https://www.investopedia.com/american-national-life-insurance-review-5183789),[Americo Life Insurance](https://www.investopedia.com/americo-life-insurance-review-5189321), [Ameritas Life Insurance](https://www.investopedia.com/ameritas-life-insurance-review-5115823), [Assurity Life Insurance](https://www.investopedia.com/assurity-life-insurance-review-5181772), [Bankers Life Insurance](https://www.investopedia.com/bankers-life-insurance-review-5114317), [Banner Life Insurance](https://www.investopedia.com/banner-life-insurance-review-5079634), [Bestow Life Insurance](https://www.investopedia.com/bestow-life-insurance-review-5113086), [Boston Mutual Life Insurance](https://www.investopedia.com/boston-mutual-life-insurance-review-5186402), [Brighthouse Life Insurance](https://www.investopedia.com/brighthouse-life-insurance-review-5075446), [Cincinnati Life Insurance](https://www.investopedia.com/cincinnati-life-insurance-review-5188668), [TruStage Life Insurance](https://www.investopedia.com/trustage-life-insurance-review-5179511), [Colonial Life Insurance](https://www.investopedia.com/colonial-life-insurance-review-5322860), [Colonial Penn Life Insurance](https://www.investopedia.com/colonial-penn-life-insurance-review-5075429), [Columbian Financial Group Life Insurance](https://www.investopedia.com/columbian-life-insurance-review-5188199), [Columbus Life Insurance](https://www.investopedia.com/columbus-life-insurance-review-5524724), [Combined Life Insurance](https://www.investopedia.com/combined-life-insurance-review-5187785), [Companion Life Insurance](https://www.investopedia.com/companion-life-insurance-review-5184520), [Equitable Life Insurance](https://www.investopedia.com/equitable-life-insurance-review-5185541), [Erie Life Insurance](https://www.investopedia.com/erie-insurance-life-insurance-review-5409239), [Ethos Life Insurance](https://www.investopedia.com/ethos-life-insurance-review-5113501), [Farm Bureau Life Insurance](https://www.investopedia.com/farm-bureau-life-insurance-review-5322858), [Farmers Life Insurance](https://www.investopedia.com/farmers-life-insurance-review-5181062), [Fidelity Life Insurance](https://www.investopedia.com/fidelity-life-insurance-review-5079550), [Foresters Life Insurance](https://www.investopedia.com/foresters-life-insurance-review-5179868), [Forethought Life Insurance](https://www.investopedia.com/forethought-life-insurance-review-5189852), [Freedom Life Insurance](https://www.investopedia.com/freedom-life-insurance-review-5079548), [Gerber Life Insurance](https://www.investopedia.com/gerber-life-insurance-review-5077502), [Globe Life Insurance](https://www.investopedia.com/globe-life-insurance-review-5076979), [Guardian Life Insurance](https://www.investopedia.com/guardian-life-insurance-review-5078357), [Haven Life Insurance](https://www.investopedia.com/haven-life-insurance-review-5112454), [John Hancock Life Insurance](https://www.investopedia.com/john-hancock-life-insurance-review-5075864), [Kansas City Life Insurance](https://www.investopedia.com/kansas-city-life-insurance-company-review-5185631), [Kemper Life Insurance](https://www.investopedia.com/kemper-life-insurance-review-5179406), [Ladder Life Insurance](https://www.investopedia.com/ladder-life-insurance-review-5180125), [Lafayette Life Insurance](https://www.investopedia.com/lafayette-life-insurance-review-5186957), [Liberty National Life Insurance](https://www.investopedia.com/liberty-national-insurance-review-5097186), [Lincoln Financial Life Insurance](https://www.investopedia.com/lincoln-financial-life-insurance-review-5324587), [Lincoln Heritage Life Insurance](https://www.investopedia.com/lincoln-heritage-life-insurance-review-5114305), [Lumico Life Insurance](https://www.investopedia.com/lumico-life-insurance-review-5188791), [ManhattanLife Insurance](https://www.investopedia.com/manhattan-life-insurance-review-5184541), [MassMutual Life Insurance](https://www.investopedia.com/massmutual-life-insurance-review-5076622), [MetLife Insurance](https://www.investopedia.com/metlife-life-insurance-review-5076849), [Midland National Life Insurance](https://www.investopedia.com/midland-national-life-insurance-review-5115400), [Minnesota Life Insurance](https://www.investopedia.com/minnesota-life-insurance-review-5181765), [Mutual of Omaha Life Insurance](https://www.investopedia.com/mutual-of-omaha-life-insurance-review-5077426), [National Life Insurance](https://www.investopedia.com/national-life-group-insurance-review-5121205), [Nationwide Life Insurance](https://www.investopedia.com/nationwide-life-insurance-review-5112884), [New Era Life Insurance](https://www.investopedia.com/new-era-life-insurance-review-5184581), [New York Life Insurance](https://www.investopedia.com/new-york-life-insurance-review-5074534), [North American Life Insurance](https://www.investopedia.com/north-american-life-insurance-review-5111320), [Northwestern Mutual Life Insurance](https://www.investopedia.com/northwestern-mutual-life-insurance-review-5077994), [Ohio National Life Insurance](https://www.investopedia.com/ohio-national-life-insurance-review-5186036), [Pacific Life Insurance](https://www.investopedia.com/pacific-life-insurance-review-5184560), [Pan American Life Insurance](https://www.investopedia.com/pan-american-life-insurance-review-5187139), [Penn Mutual Life Insurance](https://www.investopedia.com/penn-mutual-life-insurance-review-5181706), [Physicians Mutual Life Insurance](https://www.investopedia.com/physicians-mutual-life-insurance-review-5201519), [Primerica Life Insurance](https://www.investopedia.com/primerica-life-insurance-review-5080087), [Principal Life Insurance](https://www.investopedia.com/principal-life-insurance-review-5081263), [Protective Life Insurance](https://www.investopedia.com/protective-life-insurance-review-5078171), [Prudential Life Insurance](https://www.investopedia.com/prudential-life-insurance-review-5077996), [Reliance Standard Life Insurance](https://www.investopedia.com/reliance-standard-life-insurance-review-5184863), [Sagicor Life Insurance](https://www.investopedia.com/sagicor-life-insurance-review-5205030), [SBLI Life Insurance](https://www.investopedia.com/sbli-life-insurance-review-5185629), [Securian Life Insurance](https://www.investopedia.com/securian-life-insurance-review-5185628), [Senior Life Insurance](https://www.investopedia.com/senior-life-insurance-company-life-insurance-review-5409210), [Southern Farm Bureau Life Insurance](https://www.investopedia.com/southern-farm-bureau-life-insurance-company-review-5201019), [The Standard Life Insurance](https://www.investopedia.com/the-standard-life-insurance-review-5186408), [State Farm Life Insurance](https://www.investopedia.com/state-farm-life-insurance-review-5072604), [Sun Life Insurance](https://www.investopedia.com/sun-life-insurance-review-5186111), [Symetra Life Insurance](https://www.investopedia.com/symetra-life-insurance-review-5188608), [Texas Life Insurance](https://www.investopedia.com/texas-life-insurance-review-5184573), [The Hartford Life Insurance](https://www.investopedia.com/the-hartford-life-insurance-review-5176204), [Thrivent Life Insurance](https://www.investopedia.com/thrivent-life-insurance-review-5197062), [Transamerica Life Insurance](https://www.investopedia.com/transamerica-life-insurance-review-5075447), [United Life Insurance](https://www.investopedia.com/united-life-insurance-review-5188307), [Unum Life Insurance](https://www.investopedia.com/unum-life-insurance-review-5100981), [USAA Life Insurance](https://www.investopedia.com/usaa-life-insurance-review-5080414), [Voya Life Insurance](https://www.investopedia.com/voya-financial-life-insurance-review-5089932), [Western & Southern Life Insurance](https://www.investopedia.com/western-southern-life-insurance-review-5188202) ## Why You Should Trust Our Expert Insurance Reviewers Investopedia launched in 1999, and has been helping readers find the best life insurance companies since 2020. We are dedicated to helping you find the right life insurance provider for your needs. In order to compile our list of the best life insurance companies, we developed a comprehensive [life insurance methodology](https://www.investopedia.com/life-insurance-review-methodology-5071427). We started off by researching what consumers want from life insurance companies, and for that, we looked to third-party consumer studies, including J.D. Power’s 2022 Individual Life Insurance and Annuities studies and the 2022 Insurance Barometer Study, by Life Happens and LIMRA.  With those findings in mind, we spent three months digging up information about more than 55 features on 88 life insurance companies, including ratings for financial strength by [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp), customer satisfaction, and individual customer complaints reported to insurance state commissioners and recorded by the [NAIC (National Association of Insurance Commissioners)](https://www.investopedia.com/terms/n/nainsurancec.asp). We also considered years in business, cost, online tools, [no-medical-exam options](https://www.investopedia.com/insurance/accelerated-underwriting-easy-life-insurance/), policy types and features, and available riders.  NAIC Methodology: We considered each company's NAIC complaint index for its life insurance business by averaging those NAIC complaint index values over the three years (2021, 2020, and 2019). Our review process gave preference to companies with superior financial stability, few customer complaints, and a robust suite of products and resources. In particular, we valued online quoting and application tools, transparent pricing, and no-exam policy options. Companies received ratings boosts if customer service was accessible via features like live chat. We ranked each company according to the following categories and weights: * Policy types and features: 21% * Financial stability: 17% * Application process: 16% * Customer satisfaction ratings: 15% * Customer service: 14% * Riders and living benefits: 9% * Cost: 8% Costs were evaluated by collecting term life insurance quotes for 25-, 40-, and 55-year-old male and female non-smokers in excellent health for 30-year $250,000 term life policies. We used Compulife data available through Term4sale.com. We compared individual offerings between companies by delving deeper into product specifics, including maximum coverage amounts, maximum issue ages, included riders (in particular, the number and type of living benefits available at no upfront cost) , and product-specific application processes. We used this research to determine the best companies for different products, consumer groups, and use cases.  Of the companies we considered, those with the greatest financial stability, fewest complaints, lowest cost, most generous benefits, easiest application process, most generous no-medical-exam options, and widest available features scored the highest across categories. ## Guide to Life Insurance * [What is life insurance?](https://www.investopedia.com/terms/l/lifeinsurance.asp) * [How does life insurance work?](https://www.investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp) * [Is life insurance worth it?](https://www.investopedia.com/articles/active-trading/120814/life-insurance-smart-investment.asp) * [Types of life insurance](https://www.investopedia.com/types-of-life-insurance-plans-and-how-to-decide-which-one-is-right-for-you-7482251) * [Term vs. whole life insurance](https://www.investopedia.com/term-life-vs-whole-life-5075430) * [How much life insurance do you need?](https://www.investopedia.com/articles/pf/06/insureneeds.asp) * [How to choose life insurance](https://www.investopedia.com/how-to-choose-life-insurance-7483886) * [How to buy life insurance](https://www.investopedia.com/how-to-get-life-insurance-4842095) * [Best Life Insurance for Seniors](https://www.investopedia.com/best-life-insurance-for-seniors-4845439) * [Best Life Insurance Companies for People Over 50](https://www.investopedia.com/best-life-insurance-for-people-over-50-4846582) * [Best Whole Life Insurance Companies](https://www.investopedia.com/best-whole-life-insurance-4845955) * [Best Universal Life Insurance Companies](https://www.investopedia.com/best-universal-life-insurance-4845846) * [Best Children’s Life Insurance Companies](https://www.investopedia.com/best-life-insurance-for-children-5088586) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. NAIC. "[Nationwide Life Ins Co National Complaint Index Report](https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=66869&:refresh)." 2. NAIC. "[Protective Life Ins Co National Complaint Index Report](https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=68136&:refresh)." 3. J.D. Power. “[Satisfaction with Life Insurance and Annuity Products Climbs as Customers Embrace Digital, J.D. Power Finds](https://www.jdpower.com/business/press-releases/2023-us-individual-life-insurance-annuity-studies).” 4. NAIC. "[Massachusetts Mut Life Ins Co National Complaint Index Report](https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=65935&:refresh)." 5. U.S. Department of Labor. "[US Department of Labor Reaches Settlement With United of Omaha Life Insurance Co. to Reform Its Evidence of Insurability Practices](https://www.dol.gov/newsroom/releases/ebsa/ebsa20230929)." 6. NAIC. "[Guardian Life Ins Co Of Amer National Complaint Index Report](https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=64246&:refresh)." 7. J.D. Power. "[Pandemic and Tax Code Change Spur Interest in Life Insurance, J.D. Power Finds](https://www.jdpower.com/business/press-releases/2021-us-individual-life-insurance-study)." 8. Rogowski v. State Farm. "[Welcome to the Rogowski v. State Farm Settlement Website](https://nationalsfcoisettlement.com/)." 9. Niewinski v. State Farm. "[Welcome to the Website for the Niewinski v. State Farm Litigation](https://www.nationalsf86settlement.com/)." 10. NAIC. "[Life and Fraternal Insurance Industry](https://content.naic.org/sites/default/files/web_market_share_life_fraternal.pdf)." 11. NAIC. "[New York Life Ins Co National Complaint Index Report](https://www.naic.org/cis_refined_results.htm?TABLEAU=CIS_COMPLAINTS&COCODE=66915&:refresh)." 12. NAIC. "[Life Insurance Market Share](https://content.naic.org/sites/default/files/research-actuarial-life-fraternal-market-share.pdf)." 13. Mutual of Omaha. "[Many Millennials Hitting 40 Without Life Insurance](https://www.mutualofomaha.com/about/newsroom/article/many-millennials-hitting-40-without-life-insurance)." 14. LIMRA. "[Securing the Future](https://www.limra.com/en/research/research-abstracts-public/2024/securing-the-future/)." 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We found that the best life insurance company overall is Nationwide because of its generous no-exam policies, solid financial strength and customer satisfaction ratings, and three living benefit riders included with most plans at no extra cost. For our life insurance ratings, we evaluated 88 life insurance carriers on 55 criteria that cover policy types and features, financial stability, ease of application, customer satisfaction, and costs. In the company information below, we mention NAIC complaint index scores. The NAIC complaint index is a tool in which the National Association of Insurance Commissioners (NAIC) shows whether a company has received more or fewer complaints than other insurers, after adjusting for market share. 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 Best Overall: Nationwide Best Term Life Insurance: Protective Best Convertible Term Life Insurance: MassMutual Best Return-of-Premium Term: Mutual of Omaha Great Traditional Insurer: Guardian Best for Military: USAA Great for Dividends and No-Medical Exam Life Insurance: Penn Mutual Cheapest Term Premiums: Banner by Legal & General Best for Customer Satisfaction: State Farm Life Insurance Best Whole Life Insurance: New York Life Largest Life Insurance Company: Northwestern Mutual Why Trust Us 91 Companies reviewed 55 Features considered 5,005 Data points analyzed We collected over 5,000 data points from 91 life insurance companies to measure financial stability, customer satisfaction, product and feature variety, and the overall buying experience. We then evaluated each company based on 55 metrics to develop unbiased, comprehensive reviews. Read our Full Methodology Compare life insurance quotes with our partner Covr Financial from multiple providers before buying. 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 Expand 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 Our Top Picks Nationwide Protective MassMutual Mutual of Omaha Guardian USAA Penn Mutual Banner by Legal & General State Farm Life Insurance New York Life Northwestern Mutual See More (8) Compare Providers The Bottom Line Types of Life Insurance Which Type Is Right for You? How to Choose Cost of Life Insurance Life Insurance News FAQ Best Overall : Nationwide AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ Accepts Credit Cards: Yes Get A Quote For the most personalized quote experience, call Nationwide directly at 844-457-7984. And if you're over 50 or in poor health, it's best to work with a licensed agent. Why We Chose It Three living benefits included with most policies, generous no-exam requirements, strong financials, and satisfied customers make Nationwide our top pick. Pros & Cons Pros No-exam life insurance available to very healthy applicants Low NAIC complaint index Living benefits included on most policies Allows credit card payments Cons No live chat available Overview Nationwide is a financially stable life insurance company that's been in business for nearly a century. It offers a wide range of life insurance policies that may be available without a medical exam and with fast approval. It's also our top pick for best whole life insurance companies, best no-medical-exam life insurance companies, and best life insurance companies for people over 50. The company garnered an A+ (Superior) financial stability rating from AM Best and had the number of complaints you'd expect for a company of its size in 2022 (the most recent year for which data is available), though the two prior years saw fewer complaints. It boasts no-exam life insurance for healthy applicants, a wide range of policy types and riders, and, for most policies, three accelerated death benefit riders at no upfront cost for chronic, critical, and terminal illnesses. This is a rare offering among the insurance companies we considered. Nationwide's host of exceptional features puts it squarely at the top of our list of best companies for life insurance.  Nationwide's life and annuity products are issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. The company known today as Nationwide was founded in 1926 as Farm Bureau Mutual Automobile Insurance Company. Plans & Pricing Nationwide offers term policies as well as traditional whole life insurance, universal life insurance (UL), variable universal life insurance (VUL), and indexed universal life insurance (IUL). Guaranteed Level TermWhole Life 100 and 20Pay Whole LifeSimplified Whole LifeNo-Lapse Guarantee UL II (universal life insurance)VUL Accumulator (variable life insurance)VUL ProtectorVUL Protector IIAdvisory VULIUL Accumulator II 2020 (indexed universal life insurance)IUL Protector II 2020Survivorship IUL 2020 Nationwide's indexed policies let you participate in stock market gains, but without direct market exposure. Cash value growth is tied to the S&P 500, NASDAQ-100, and/or the Dow Jones Industrial Average. Though not as risky as variable universal life insurance, these policies are complex and can still lose value when market gains aren’t enough to offset policy expenses.  Term pricing Although plan prices and coverage differ depending on your ZIP code, we found on average that a healthy 40-year-old female would pay $26.25 per month for a $250,000 30-year term policy, which is in the middle of the pack compared to other insurers we researched. Available Riders Depending on your policy, you may have access to the following: Chronic illness accelerated death benefit riderCritical illness accelerated death benefit riderTerminal illness accelerated death benefit riderLong-term care accelerated death benefit rider Accidental death benefit riderChildren's term insurance riderGuaranteed insurability benefit riderWaiver of premium ridersReturn of premium ridersOverloan lapse protection rider Read the Full Nationwide Life Insurance Review Best Term Life Insurance : Protective AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A Accepts Credit Cards: Yes Get A Quote Why We Chose It Protective is our choice for top term life insurance because its term life insurance policies are the most affordable of all insurers we reviewed (tied with Banner), and it offers terms of up to 40 years, which is uncommon. Pros & Cons Pros Lowest pricing along with Banner among 91 companies Offers term coverage for up to 40 years Allows credit card payments Offers no-medical-exam coverage Cons Ranked 18th out of 22 companies for customer satisfaction in J.D. Power's life insurance study Overview Protective has the cheapest term life coverage of all the companies we reviewed (along with Banner). Its competitive rates and policy options make it our pick for best term life insurance company, most affordable life insurance company, and best life insurance companies for young adults. Protective offers longer-than-average term policies and it received fewer complaints than expected for a company of its size over the past three years. The company also offers generous child riders on its policies, which makes it a good life insurance company for children. However, Protective did not rank well in J.D. Power’s 2023 U.S. Individual Life Insurance Study, coming in at #18 out of 22 companies. This is an indication that you may have issues with Protective's customer service, as J.D. Power rankings are based on five factors: communication; interaction; price; product offerings; and statements. Founded in 1907, Protective Life is headquartered in Birmingham, Alabama, and has offices in the Greater Cincinnati area and St. Louis, Missouri. Plans & Pricing Protective offers term, whole life, universal life, variable universal life, and indexed universal life insurance policies. Protective Classic Choice TermNon-Participating Whole LifeCustom Choice Universal Life (UL)Advantage Choice ULLifetime Assurance ULExecutive ULStrategic Objectives II VUL (variable universal life insurance)Indexed Choice UL Term Pricing A healthy 40-year-old female would pay $22.88 per month for a $250,000 30-year term policy. Your pricing and coverage will vary depending on your state, age, and the coverage you choose. Available Riders Accidental death benefit riderAccelerated death benefit rider (for chronic, critcal, or terminal illnesses)Disability income riderChildren’s term riderWaiver of premium riderGuaranteed insurability riderTerm insurance rider Read the Full Protective Life Insurance Review Best Convertible Term Life Insurance : MassMutual AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: No Get A Quote Why We Chose It MassMutual stands out because unlike some competitors, many of its term policies can be converted to any type of permanent policy. The company is top-ranked for financial strength, has paid dividends every year since 1869, has few complaints, and has a wide selection of policies. Pros & Cons Pros Rated A++ for financial stability Long history of paying dividends Few complaints relative to its size Liberal term conversion options Cons Few accelerated benefit riders included at no cost Doesn’t accept credit card payments Overview MassMutual stands out for a number of reasons. It has an A++ (Superior) financial rating from AM Best. This is the highest rating a company can receive and indicates a “superior” ability to pay claims. MassMutual’s dividend-paying history also adds to its clout: Every year since 1869, eligible policyholders have received life insurance dividends. In 2024, MassMutual plans to pay $2.2 billion in dividends, which is its largest payout ever. Plus, the company has received far fewer complaints than expected for a company of its size, according to the NAIC, and offers a wide range of policy types. It’s worth noting that many MassMutual term policies can convert to any of MassMutual’s permanent life policies. This is important because some companies limit the types of policies you can convert your term policy into. (Convertible term life insurance allows you to exchange some or all of your term coverage for permanent without having to re-qualify for life insurance.) MassMutual was founded in 1851 in Springfield, Massachusetts and has offices in Boston and New York City. In October 2023, it announced a pilot program in which new term life policyholders could earn cash incentives of up to 5% of their annual policy premiums by using an app to track their physical activity and sleep data. Plans & Pricing MassMutual offers term life insurance, whole life insurance, universal life insurance, and variable universal life insurance. MassMutual TermWhole Life 100Whole Life 65Whole Life 10/15/20-PayWhole Life High Early Cash Value (HECV)Survivorship Whole Life 100 MassMutual’s whole-life policyholders are eligible to receive annual dividends based on the company’s financial performance. Dividends can be used to increase the death benefit or cash value, or pay premiums.  Universal Life (UL) Guard Survivorship Universal Life (SUL) GuardApex VUL (variable universal life insurance) Some universal life insurance policies can be structured like term coverage, where the coverage is designed to remain in effect for a fixed period of time. Term pricing Our research shows on average across several ZIP codes, a healthy 40-year-old female would pay $27.26 per month for a $250,000 30-year MassMutual term policy. Available Riders Guaranteed insurability riderWaiver of premium riderTerminal illness accelerated death benefit riderLong-term care accelerated death benefit riderChronic illness accelerated death benefit rider  Read the Full MassMutual Life Insurance Review Best Return-of-Premium Term : Mutual of Omaha AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ Accepts Credit Cards: Yes Get A Quote Why We Chose It Mutual of Omaha is the top company we reviewed that offers return-of-premium (ROP) term life insurance. We like that it has a wide range of riders, and most policies include at least two living benefits. Pros & Cons Pros Many plans with living benefits Wide range of riders available Guaranteed issue options Return of premium term available Cons Online applications unavailable for term policies Overview At no upfront cost, Mutual of Omaha includes three accelerated benefit riders on its Term Life Express and IUL Express policies (for critical, chronic, and terminal illnesses), and most other policies include two of these benefits. Accelerated benefit riders add flexibility to a life insurance policy by letting you tap the death benefit early if you have a qualifying illness. Plus the company offers at least two uncommon features: a disability income rider and a return of premium benefit on select term policies (both for an extra cost). With return of premium (ROP) term life insurance, you can receive up to 100% of premiums back if you outlive the term. Only 11 of the 91 life insurance companies we reviewed make this type of coverage available. Mutual of Omaha is also our top pick for the best burial insurance companies. The aptly named Mutual of Omaha is based in Omaha, Nebraska, and was founded in 1909. It has locations in 42 states. In the News Mutual of Omaha and two other members of its group entered a settlement with the Labor Department in September 2023 after an investigation into claim denials for employee-sponsored life insurance plans. The probe found that subsidiary United of Omaha, and that company's subsidiary, Companion Life Insurance, had accepted premiums for five years without getting proof that applicants were insurable. When participants died, United would often deny claims on the grounds that it had never received the insurability evidence. The company has reprocessed such claims dating back to February 2018 and changed this practice. Plans & Pricing Term Life AnswersTerm Life Express AccumUL Answers (universal life insurance)Income Advantage IUL (index universal life insurance)Life Protection Advantage IULIUL ExpressChildren’s Whole Life InsuranceGuaranteed Whole Life Insurance Term Pricing A healthy 40-year-old female would pay $28.38 per month for a $250,000 30-year term policy. Available Riders Chronic, critical, and terminal illness riders are included free of charge on Mutual of Omaha’s Term Life Express and IUL Express policies. Most other policies include chronic and terminal illness riders at no additional cost.  Critical illness accelerated death benefit riderTerminal illness accelerated death benefit riderChronic illness accelerated death benefit riderAccidental death benefit riderDependent children's riderGuaranteed insurability benefit riderWaiver of premium riderDisability income riderLong-term care rider Read the Full Mutual of Omaha Life Insurance Review Great Traditional Insurer : Guardian AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: Yes Get A Quote Why We Chose It Guardian received an exceptionally low number of customer complaints, has an A++ (Superior) financial strength rating, and pays dividends to eligible policyholders. Pros & Cons Pros Low NAIC complaint index Receives an A++ for financial stability Whole life policies are eligible for dividends Cons Online application and claim filing not available Credit card payments not accepted Overview Along with MassMutual and New York Life, Guardian is one of only nine companies we reviewed to earn a top financial strength rating of A++ from AM Best, reflecting superior financial stability. Also like MassMutual and New York Life, Guardian offers dividends to eligible whole-life policyholders and announced its largest dividend payment ever for 2024. The payout totals $2.2 billion. For these reasons, it ranked highly among the best whole life insurance companies, best life insurance companies for people over 50, and best senior life insurance companies. Guardian Life received an excellent NAIC index over the past three years, indicating it has fewer complaints with the NAIC than expected for a company of its size. Additionally, the company offers no-exam policies to eligible applicants. But if you’re seeking a streamlined online experience, Guardian falls short. It doesn’t offer an online application process (without an agent), online claim filing, or credit card payments, and information on its individual product offerings is hard to find, making it difficult when comparing life insurance plans. Guardian was founded in 1860 in New York City, and its headquarters are still there. It has four main business hubs in Bethlehem, Pennsylvania; Holmdel, New Jersey; Hudson Yards in New York City, and Pittsfield, Massachusetts. Plans & Pricing Guardian Level TermGuardian Level Premium Whole LifeLimited Pay Whole LifeGuaranteed Universal LifeVariable Universal Life Insurance Term Pricing A healthy 40-year-old female would pay $27.47 per month for a $250,000 30-year term policy. Your pricing will depend on your ZIP code, age, and coverage, among other things. Available Riders Waiver of premium riderAccidental death benefit riderTerm conversion riderTerminal illness accelerated death benefit riderLong-term care accelerated death benefit riderChronic illness accelerated death benefit riderPaid-up additions (PUA) rider Read the Full Guardian Life Insurance Review Best for Military : USAA AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: No Get A Quote Why We Chose It USAA offers military-specific benefits that pay out if you become injured in the line of duty and cover you during war. Pros & Cons Pros Severe injury benefits Add to your term coverage without taking another exam Included term conversion rider A++ AM Best rating Cons Doesn’t take credit card payments No-exam coverage options are limited Overview What makes USAA a solid choice for military families are its military-specific riders. Level Term V policies include a severe injury rider that pays out $25,000 for specific injuries incurred during military service. USAA also offers guaranteed insurability riders at no additional cost that give you the option to increase coverage after leaving the military (and without having to prove insurability) or if you experience certain life events, like having a child. Level Term policies also include a conversion option that allows you to convert to permanent coverage without a medical exam or questions after you've had your term policy for at least one year. The drawbacks are that USAA life insurance does not accept credit card payments and has limited no-medical-exam options. USAA sells Mutual of Omaha's guaranteed issue whole life policies that have a minimum age of 45 and a coverage maximum of just $25,000. USAA's life insurance and annuities products are provided by USAA Life Insurance Company in San Antonio, Texas and in New York by USAA Life Insurance Company of New York, which is in Highland Falls, New York.  USAA was started in 1922 by 25 Army officers who began insuring each other's cars. Plans & Pricing Level Term Essential TermSimplified Whole LifeGuaranteed Issue Whole Life (via Mutual of Omaha)Universal Life Insurance (via John Hancock) Term Pricing A healthy 40-year-old female would pay $26.86 per month for a $250,000 30-year term policy. Available Riders Guaranteed insurability riderTerm life-event option riderLife event option riderChild riderWaiver of premium riderTerminal illness accelerated death benefit riderMilitary Severe Injury Benefit RiderMilitary Future Insurability Rider Read the Full USAA Life Insurance Review Great for Dividends and No-Medical Exam Life Insurance : Penn Mutual AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ Accepts Credit Cards: Yes Get A Quote Why We Chose It Penn Mutual has paid dividends for nearly 175 years and offers up to $7.5 million in coverage for no-medical-exam life insurance to eligible applicants—the highest limit we've seen. Pros & Cons Pros Strong dividend-paying history High coverage no-medical-exam life insurance 5th-lowest pricing among 91 companies Excellent NAIC customer complaint index Cons Limited website information Quotes not available on the website Overview Penn Mutual is a well-established insurer with superior financial strength and an impressive track record of customer satisfaction. It has the longest dividend-paying history of companies on this list and announced that it plans to pay eligible policyholders $200 million in dividends in 2024, which is a record payout. Penn Mutual is also an excellent choice for those with high-coverage needs. The company offers $7.5 million in coverage to very healthy applicants up to age 65 without a medical exam. This is the highest no-exam limit we've seen, and the highest age limit we've seen for no-exam policies, which is why it's a top pick for: Best no-medical-exam life insurance companies (best for high coverage) Best whole life insurance companies (best for dividends) But Penn Mutual doesn't just cater to those looking for high coverage or permanent policies. Its quotes for term coverage were the fourth most affordable of the 32 companies we collected quotes for. That said, the company does not make term quotes available on its website. For details and to apply for any type of coverage, you'll need to get in touch with an agent. Penn Mutual was founded in 1847 in Philadelphia. Today, the Penn Mutual Life Insurance Company is based in Horsham, Pennsylvania. Plans & Pricing Guaranteed Convertible TermProtection Non-Convertible TermOne-Year TermGuaranteed Whole Life IIProtection Whole LifeSurvivorship Whole LifeGuaranteed Protection UL (universal life insurance)Protection ULDiversified Advantage Variable Universal Life (VUL)Protection VULAccumulation VULSurvivorship Protection VULAccumulation Indexed Universal Life (IUL)Survivorship IUL Term Pricing A healthy 40-year-old female would pay $23.92 per month for a $250,000 30-year term policy. Available Riders Guaranteed increase option (guaranteed insurability rider)  Additional insured term insurance rider Children's term rider Disability waiver of premium rider Disability completion benefit rider Terminal illness accelerated death benefit rider Chronic illness accelerated death benefit rider Accidental death benefit rider Overloan protection benefit rider Supplemental term insurance rider Read the Full Penn Mutual Life Insurance Review Cheapest Term Premiums : Banner by Legal & General AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A+ Accepts Credit Cards: No Get A Quote Why We Chose It Banner's term premiums were tied for the lowest with Protective, and Banner offers terms up to 40 years. Pros & Cons Pros Tied with Protective for lowest pricing 40-year terms available Generous term conversion period Online application available Excellent NAIC customer complaint index Cons Few policy types available Limited riders Overview Banner, along with Protective, is an excellent choice if you're looking for the cheapest term life insurance. Banner is also one of only two companies that offer 40-year term policies (Protective is the other). Additionally, Banner boasts generous term conversion options—you can convert your term policy through the end of the level-premium period or until you turn 70, whichever happens first. This is important because some companies limit the conversion period to the first 10 years of the policy. While there's a lot to like about Banner, it doesn't offer many policy options—just term and universal life policies. It also doesn't offer as many riders to customize policies as some of its competitors. Banner was founded as GELICO in 1949 and has been part of Legal & General Group since 1981. Banner Life Insurance Company is located in Frederick, Maryland. Legal & General was founded in 1836 in London, where it is still headquartered. Plans & Pricing OPTermLife Step UL (universal life insurance) Term Pricing While your pricing will depend on factors such as your age, state, and coverage amount, our research showed a healthy 40-year-old female would pay $22.89 per month for a $250,000 30-year term policy. Available Riders Child rider Term life riders (stackable coverage)Terminal illness accelerated death benefit rider Read the Full Banner Life Insurance Company Life Insurance Review Best for Customer Satisfaction : State Farm Life Insurance Investopedia's Rating 3.7 AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: Yes Get A Quote Why We Chose It State Farm has earned the #1 spot in J.D. Power's customer satisfaction rankings for life insurance for the past four years. Pros & Cons Pros Superior financial stability Scored first for customer service by J. D. Power Whole life policies can earn dividends Bundling discounts may be available Cons Fourth-worst for pricing Limited coverage for no-medical-exam life insurance Overview State Farm is our pick for the best life insurance provider for customer satisfaction because it ranked #1 in J.D. Power's U.S. Individual Life Insurance studies for 2023, as well as 2022, 2021, and 2020. The studies measured consumer experiences with the largest life insurance companies nationwide. Plus, State Farm boasts an A++ (Superior) rating for financial strength from AM Best, which is the highest rating possible. The company is also one of our: best whole life insurance companies best burial life insurance companies best return-of-premium (ROP) term life insurance companies If you're looking for a whole life policy that pays dividends, State Farm offers one. Plus, you may be able to save on your premium by bundling life insurance coverage with another State Farm coverage, such as auto. However, the company's term policies are priced high compared to our review of 32 life insurance companies offering term quotes online. If you don't have the best medical history and are in the market for life insurance without a medical exam, you may want to look elsewhere. At present, the most coverage you can get with State Farm without a medical exam is $50,000. State Farm is based in Bloomington, Illinois. The first State Farm Life policy was sold in 1929 to the company founder, George J. Mercherle, for $2,000. Note In November 2023, State Farm agreed to a $325 million settlement for a class action suit in which the plaintiffs said the company deducted too much for cost-of-insurance charges for flexible premium adjustable whole life and universal policies. This followed an August 2023 $65 million settlement of a different class action lawsuit making similar allegations related to universal life insurance policies. Plans & Pricing Select Term LifeReturn of Premium LifeInstant Answer TermLimited Pay Whole LifeSingle Premium Whole LifeUniversal LifeSurvivorship Universal LifeJoint Universal LifeFinal Expense (called $10,000 Whole Life in New York State) Term Pricing A healthy 40-year-old female would pay $35.24 per month for a $250,000 30-year term policy, which is one of the highest rates we've seen. Your coverage will depend on your ZIP code, age, health, gender, and coverage. Available Riders Guaranteed insurability rider Family coverage rider Waiver of premium rider Flexible care benefit rider (long-term care rider) Select term rider Level term rider Read the Full State Farm Life Insurance Review Best Whole Life Insurance : New York Life AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: No Get A Quote Why We Chose It New York Life is the second-largest life insurance company, according to the latest available NAIC data, and has been paying dividends to eligible whole life policyholders every year for the past 169 years. Pros & Cons Pros A++ (Superior) AM Best rating Long history of paying dividends Some policies available to applicants up to 90 years old Broad selection of riders Cons Can’t get too many policy details online without contacting an agent Online quotes and applications not available Overview New York Life earns an A++ (Superior) AM Best rating and receives very few customer complaints. It also issues whole life policies to eligible 90-year-old applicants. Its stellar reputation and financial stability are two reasons it's top-ranked in our best life insurance companies for seniors and best whole life insurance companies reviews. We also like that New York Life has paid dividends for 169 consecutive years. In 2024, it plans to pay $2.2 billion in dividends, which is the largest payout in company history. The company offers term, whole life, and universal life policies, including variable universal life (VUL) insurance, plus a diverse mix of riders and options for life insurance plan customization. Among these are living benefits riders and a Spouse’s Paid-Up Purchase Option (SPPO). The SPPO is an uncommon offering that lets the spouse of the insured person use the death benefit to purchase a fully paid-up life insurance policy on their own life (without medical underwriting) upon their spouse's passing. Unfortunately, it’s difficult to locate policy-specific information on the website. If you have questions or want a quote, you’ll need to provide your name and number and wait for an agent to contact you.  New York Life was founded in New York City and is still headquartered there. Founded in 1845, it is the oldest company on this list Plans & Pricing Level Premium TermYearly Renewable TermWhole Life InsuranceCustom Whole Life InsuranceSecure Wealth Plus (whole life)Universal Life InsuranceCustom Guarantee Universal Life Variable Universal Life Accumulator IIMarket Wealth Plus (variable life) No pricing information is available online. To get a quote, you'll need to request a call from an agent. Available Riders Spouse’s paid-up insurance purchase option (SPPO) Guaranteed insurability rider Child term rider Disability waiver of premium rider Disability income rider Accidental death benefit rider Terminal illness accelerated death benefit rider Long-term care accelerated death benefit rider Chronic illness accelerated death benefit rider Critical illness accelerated death benefit rider Paid-up additions (PUA) rider Money-back option rider Read the Full New York Life Insurance Review Largest Life Insurance Company : Northwestern Mutual AM Best Rating: AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. A++ Accepts Credit Cards: No Get A Quote Why We Chose It Northwestern Mutual is the largest life insurance company in the country with 7.20% market share, according to the National Association of Insurance Commissioners (NAIC). Established in 1857, it has stellar financial ratings across multiple rating agencies and offers a wide selection of life insurance plans. Pros & Cons Pros Highest financial strength ratings Long dividend-paying history One of the best NAIC complaint indexes Largest insurance company, nationwide Cons Must work with a financial advisor to buy a policy Poor digital experience that lacks details about policies Overview Northwestern Mutual ticks all the boxes for financial stability: it boasts the highest financial strength ratings from AM Best (A++), Moody's (Aaa), and Fitch (AAA), and it's stood the test of time. The company has been in business since 1857, weathering numerous financial storms, and has paid eligible policyholders dividends for over 150 years. Northwestern Mutual is on track to pay $7.3 billion in dividends to eligible policyholders in 2024. Not only is this its largest payout ever, it's also the largest overall dividend payment of all companies on this list. Dividends are a key feature of some of the best whole life insurance companies. Plus, Northwestern Mutual had the second-lowest NAIC complaint index among the 91 companies we analyzed, meaning the company has an incredibly low rate of complaints relative to its size. Unfortunately, there's not much you can do without an agent at Northwestern Mutual. Policy details are lacking online so you'll need to contact the company for specifics. It's primarily because of the company's lack of transparency and self-serve options that it didn't score higher in our review. Northwestern Mutual is headquartered in Milwaukee, Wisconsin. Read the full Northwestern Mutual life insurance review. Plans & Pricing Term lifeWhole lifeUniversal life Few details about plans or pricing are available online. To get more information or request a quote, you'll need to call the company. Available Riders Waiver of premium riderGuaranteed insurability rider Long-term care rider Read the Full Northwestern Mutual Life Insurance Review Compare the 11 Best Term, Whole, and No-Exam Life Insurance Companies for May 2024 Best For AM Best Rating AM Best is a credit rating agency that assigns insurance companies a letter grade from “A++” to “D.” A company’s grade indicates its ability to pay its claims and honor its financial obligations. Term Life Sample Cost Policy Types Accepts Credit Cards Reset All Nationwide Best Overall A+ $26.25/month Final Expense, Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole Yes Get A Quote Hide, not for me Protective Best Term Life Insurance A $22.92/month Indexed Universal (IUL), Term, Universal (UL), Variable Universal (VUL), Whole Yes Get A Quote Hide, not for me MassMutual Best Convertible Term Life Insurance A++ $26.97/month Term, Universal (UL), Variable Universal (VUL), Whole No Get A Quote Hide, not for me Mutual of Omaha Best Return-of-Premium Term A+ $28.38/month Final Expense, Indexed Universal (IUL), Term, Universal (UL) Yes Get A Quote Hide, not for me Guardian Great Traditional Insurer A++ $27.47/month Term, Universal (UL), Whole Yes Get A Quote Hide, not for me USAA Best for Military A++ $26.86/month Term, Universal (UL), Whole No Get A Quote Hide, not for me Penn Mutual Great for Dividends and No-Medical Exam Life Insurance A+ $23.92/month Term, Universal (UL), Variable Universal (VUL), Whole Yes Get A Quote Hide, not for me Banner by Legal & General Cheapest Term Premiums A+ $22.92/month Term, Universal (UL) No Get A Quote Hide, not for me State Farm Life Insurance Best for Customer Satisfaction A++ $35.24/month Final Expense, Term, Universal (UL), Whole Yes Get A Quote Hide, not for me New York Life Best Whole Life Insurance A++ N/A Term, Universal (UL), Variable Universal (VUL), Whole No Get A Quote Hide, not for me Northwestern Mutual Largest Life Insurance Company A++ N/A Term, Universal (UL), Variable Universal (VUL), Whole No Get A Quote Hide, not for me The Bottom Line You can't go wrong with Nationwide, which is a financially strong company with a wide range of policies that you may not need a medical exam for (though you'll score a better rate if you're healthy and get a medical exam). Most policies include three living benefit riders—a rare benefit—so if they appeal to you, Nationwide may be your best bet. If you're set on getting a term life insurance policy from one of the top-rated life insurance companies, check out Protective. It rises above most competitors—just be aware that its customer satisfaction ratings are low. Also consider MassMutual for convertible term policies and Mutual of Omaha for return-of-premium policies. Banner is another favorite, and its term pricing is on par with Protective's, but it comes with limited rider options. Shoppers for whole life insurance should pay attention to New York Life, our all-around favorite for that kind of policy, and Penn Mutual, which excels when it comes to dividends. What Are the Types of Life Insurance? Life insurance can be divided into two main types: term and permanent, or cash value life insurance. Term life insurance policies only provide coverage for a certain period of time, such as 30 years. Permanent insurance is designed to offer coverage for your entire life. Two common types of permanent life insurance include whole life and universal life. Term life insurance is often the easiest to buy: If you're healthy and under 50, you could get a 20-year term policy online in minutes. But if you need a permanent policy that will cover you for your entire life, you're 50 or older, or are in poor health, be prepared to speak to an agent and for a longer application process (which may include a medical exam). Term life insurance: This is the most affordable type of life insurance coverage because it lasts for a limited period of time—usually 10 to 30 years. The best term life insurance policies allow you to convert your policy into permanent coverage before the term expires. Most term life policies also allow you to renew coverage annually once the term expires. But the premium will increase annually based on your current age; if you want coverage longer than the duration of your term policy, it's best to convert to whole life instead of renewing. Best Term Life Insurance Companies Protective Best Overall   Banner by Legal & General Best for Cheap Insurance Mutual of Omaha Best for Living Benefits MassMutual Best for Financial Stability Whole life insurance: Whole life insurance is more expensive than term life insurance and even universal life insurance (another form of permanent coverage) because it guarantees the death benefit and cash value for life, as long as you pay the premiums. This is why it's an ideal solution when you need rock-solid permanent coverage and can afford the premiums. Some whole life insurance policies offered by mutual companies also pay dividends. "After getting engaged in 2019, I decided to get life insurance so that my partner would be covered if anything ever happened to me. I chose a whole life policy after reviewing all of the types because I liked the idea of being fully covered until death and not just until a certain age (like you get with a term policy). The ability to access the cash value in the future, if I ever needed or wanted it, also appealed to me. Now, years later, I simply pay my premium every January and can live my life knowing my partner will be financially secure if something ever happens to me."—Hilarey Gould, Editorial Director for Financial Products and Services at Investopedia Best Whole Life Insurance Companies New York Life Best Overall   Nationwide Best for Living Benefits Guardian Best for High Issue Age MassMutual Best Traditional Insurer Mutual of Omaha Best for Burial Insurance Penn Mutual Best for Dividends State Farm Best for Customer Satisfaction Northwestern Mutual Best for Financial Stability Universal life (UL) insurance: Universal life is similar to whole life insurance but it has flexible premiums, a flexible death benefit, and interest that is credited to the cash value based on current interest rates, which vary. So, unlike with whole life insurance, you don’t know in advance how much the cash value will be worth in the future.UL is more affordable than whole life, but you may need to increase your premium payment in the future if the cash value doesn't perform as expected and/or you don't make sufficient premium payments. Most permanent policies have a surrender period, during which time you’ll pay a surrender charge for withdrawing from the cash value or canceling the policy. Ask how long the surrender period is on any cash value life insurance you might buy. Indexed universal life insurance (IUL): IUL policies have a cash value account that can earn interest by tracking a stock market index selected by the insurer, such as the Nasdaq-100 or the Standard & Poor's 500. You may also have a fixed-rate account and can choose how much you want to go into each account. Although the interest rate derived from the equity index account can fluctuate, the policy does offer an interest rate guarantee, which limits your losses. It also may cap your gains.IUL policies can be attractive if you want the potential for stock market gains but want to avoid losses. Just be aware that if the index doesn’t perform well enough, interest credited could be insufficient to keep up with policy expenses and your premium could increase.  Variable life and variable universal life (VUL): These are the riskiest types of coverage because you invest the cash value component directly in the stock market via subaccounts, which are very similar to mutual funds. The difference between variable life and VUL is that VUL has a flexible death benefit and flexible premiums, while those things are fixed in a variable universal life insurance policy. While variable life products can be a tax-advantaged way to invest in the stock market, the cash value is not protected from market losses. This means if your investments underperform, you could be required to increase premium payments or the policy could lapse. What's more, variable policies that lapse may result in severe tax consequences. Burial insurance (aka, final expense and guaranteed issue): Burial insurance policies are whole life policies designed for older applicants in poor health, and they don't require a medical exam. As a result, these policies are the most expensive, relative to the amount of coverage. But their death benefits can be quite low, such as $5,000-$10,000, which means the premiums may seem more affordable than those of policies with bigger benefits. No-medical-exam life insurance: No-exam insurance refers to any life insurance policy you can apply for without taking a medical exam. Instead of an exam, you answer health questions or have a phone interview, and the insurance company checks your medical and other records. If you qualify, you can get a policy within a few days, or sometimes instantly online. But note that if you're healthy, you're probably better off getting a policy that requires an exam because the rate will be cheaper. Best No-Medical-Exam Life Insurance Companies Nationwide Best Overall   Guardian Best for Financial Stability Penn Mutual Best for High Coverage Pacific Life Insurance Fewest Complaints Which Type of Life Insurance Is Right for You? With so many kinds of life insurance, it can be hard to figure out which one to choose. It helps to start by thinking about what you want the policy for and who you want to benefit. For example, do you want life insurance for a set period of time mainly to help replace your income for your family if you die during your earning years? Is it so you can create an inheritance for your heirs? Or do you just want to cover your funeral expenses? Other factors to consider: What you're eligible for: Your age, lifestyle, and medical history could preclude you from some types of insurance.Your budget: Monthly premiums vary a lot depending on the type of coverage you choose, with term life being the most affordable.Whether you want to build cash value: If you want a tax-free investment component that you can withdraw or borrow from while you're alive, you'll want a permanent policy.How much control you want over your cash value's growth: Do you want a fixed rate of return you can count on? Then whole life is best. If you prefer that your cash value is pegged to market interest rates, universal may be your answer. And if you want to control the cash value growth with hands-on investing in a portfolio of subaccounts, variable life insurance could be best. How to Choose the Best Life Insurance Company If you get group life insurance through your employer, you usually don't have a choice of providers. But if you want more coverage, or you don't have an employer-provided plan, you'll need to buy it on your own. To choose the right life insurance company for you, consider financial strength, customer complaints, customer satisfaction, available policy types, available and included riders, and ease of application. Then, collect quotes among your top picks and compare life insurance rates. Doing this homework will ensure that when you buy life insurance, you've chosen a company that offers the life insurance options that suit your needs and will be there when your family needs it. Check out the company's financial strength: You want a company that will be in business long enough to pay out your death benefit. So, look at AM Best ratings for financial stability. A++ and A+ ratings are considered “Superior,” while A and A- are considered “Excellent.” Other agencies also rate insurance companies, including Moody's, Fitch, Standard & Poor's, and Demotech. Look for a company with relatively few customer complaints: The National Association of Insurance Commissioners (NAIC) uses customer complaints to create the NAIC complaint index, which indicates whether a company received more or fewer complaints than expected, based on its market share. An index lower than 1 indicates the company received fewer complaints than expected, while a number over 1 means it got more than expected. The higher the index, the more customers complain, and vice versa.  Investigate other measures of customer satisfaction: Not all companies are ranked for customer satisfaction, but check sources like J.D. Power’s 2023 U.S. Individual Life Insurance and Individual Annuities study to see if companies you’re considering are. At a glance, you can see how a company ranks compared to others when it comes to customer satisfaction. See if the company offers the kind of insurance you want: If you know which type of insurance you need, make sure each company you’re considering offers it. But note that a whole life policy with one company can be very different from a whole life policy with another. Though policies between companies might have the same name, each company tries to make its product stand out. Make sure their efforts suit your needs. Don't forget to research available and included riders: This is a major way that same-named policies can differ. For example, a universal life policy with one company might include a generous accelerated death benefit rider at no cost, while a UL policy with another company may not. Or a term policy with one company may allow you to convert it to permanent coverage, while a term policy with another company may not. Research riders to know what you’re paying for. Consider companies that make applying easy: Sometimes the biggest barrier to buying life insurance is the application process. And often, it’s better to get some coverage in place—especially if you have dependents—than it is to find the absolute best coverage you can. If you’re too busy for a medical exam, look for companies that don’t require one. If you’re healthy, choose a company that requires a medical exam or offers an accelerated underwriting process (meaning, the company will examine your medical history but won't require an exam). This means the insurance company will take your health conditions into consideration, which could significantly reduce your life insurance cost. How Much Does Life Insurance Cost on Average? Term life insurance can cost as little as $13 per month, on average, for a $250,000 30-year policy for a healthy 25-year-old. Or, the same policy could cost around $400 for a 65-year-old smoker. The monthly cost of whole life insurance for the same amount of coverage is over $100 per month for a healthy 25-year-old and almost $1,000 for a 65-year-old smoker. Life insurance companies determine how much you'll pay through the application process, during which they consider factors such as your age, health, occupation, and location. Older applicants and those in poor health pay the most for life insurance, which is why it often makes sense to apply while you're younger and healthier. Average Life Insurance Cost Per Month ($250,000, 30-year term policy)  Company 25 years old (average) 40 years old (average) 55 years old (average) Nationwide $20.89 $28.88 $99.97 MassMutual $18.15 $29.58 $122.46 Protective $16.06 $25.66 $107.12 Banner $16.07 $25.71 $107.91 Mutual of Omaha $19.68 $31.39 $137.39 Guardian $19.53 $31.65 $110.49 USAA $20.82 $30.09 N/A Lincoln Financial $17.25 $26.36 $114.05 Penn Mutual $16.78 $26.48 $110.38 Transamerica $16.99 $35.70 $128.68 *Life insurance quotes above are examples only and were collected for 30-year $250,000 term life insurance policies for non-smoking males and females ages 25, 40, and 55 in excellent health. Life Insurance News Haven Life has stopped selling policies: As of Jan. 12, 2024, you can no longer buy a new policy from Haven. The company's parent, MassMutual, has always issued and managed Haven's policies, and that will continue once the Haven brand is discontinued this spring. Only one-third of millennials have life insurance: Some members of this generation are turning 40, and have families and debts such as mortgages, student loans, and credit cards. Yet only 34% have bought life insurance, according to a Mutual of Omaha survey. The same study found that only 41% of baby boomers are insured. Many Americans don't think they have enough life insurance: 42% of Americans say they need life insurance or they need more coverage, according to the 2024 Insurance Barometer Study by LIMRA, which stands for the Life Insurance Marketing and Research Association. The top reason cited for not having enough coverage was cost, but 78% of respondents overestimated the cost of basic term coverage. The largest groups saying they don't have enough coverage include Gen Z and Millenials, women, and Black and Hispanic people. Frequently Asked Questions What Is Life Insurance and How Does It Work? Life insurance is a contract in which you agree to make payments to the insurance company while you are alive. In return the insurance company guarantees it will pay a sum of money to your beneficiaries when you die.Term life insurance only lasts for a certain amount of time—for example, 20 years. If you don't die during that time, your beneficiaries get nothing.Permanent life insurance, such as whole life or universal life, lasts your whole life—but the premiums are much higher than for term life. Permanent life insurance also has a cash value component, which is kind of like a savings account that you can withdraw from or take loans against while you're alive. What Does Life Insurance Cover? Life insurance covers death from natural causes, illness, accidents, suicide, and homocide if you pass away while the policy is in force. The money is paid out tax-free, and beneficiaries can use it for whatever purpose they choose. What Does Life Insurance Not Cover? Insurers may deny a claim in certain circumstances—for instance, if a beneficiary is involved in the homicide of the insured. They also often exclude coverage for death by suicide if it happens within a certain period, such within the first two years of a policy. Some providers deny claims for deaths caused by risky activities such as skydiving as well.Finally, beneficiaries may not get a payout if you lie or omit information on your application, or if you don't keep up with payments for the policy. Do I Need Life Insurance? Not everyone needs life insurance. If you have enough money to pay for your final expenses and you don't have dependents, you don't really need it.But certain other groups of people can benefit from having life insurance. If you have a spouse or children, you may want life insurance so that they can continue to have the same quality of life once they no longer have your income stream. You may want it to ensure your children have money for college, too.Homeowners should have enough insurance to pay off the mortgage. And business owners are advised to get life insurance to clear business debts and help any remaining owners ensure business continuity. What Is the Downside of Life Insurance? The main downside of life insurance is the cost. Your policy will charge you monthly premiums, which are another expense for your budget. The price depends on your age, health, lifestyle, and the amount of coverage you buy. If you stop paying, you lose your coverage.Another downside of life insurance is that you might pay these costs without getting anything back. Temporary term life insurance policies have a set expiration date. If you live past the expiration date, your coverage ends. In other words, you’ve paid for life insurance without getting any payout for your heirs. Finally, you must qualify to buy life insurance. You will owe a larger premium if you have health issues or risky hobbies. If the insurance company decides these risks are too high, you might be denied the chance to buy a policy. How Can You Get Cheap Life Insurance? Life insurance costs are largely influenced by the type of coverage you get, and your age and health when you buy the policy. You can get a more affordable life insurance policy if you choose term life insurance over permanent. You'll only get coverage for a set amount of years, but that may be all you need. Buy the policy as soon as you need it instead of waiting, because rates are better for younger applicants. If you're healthy, you're better off getting a policy that requires a life insurance medical exam, as those policies offer better rates for healthy applicants. And finally, skip add-on benefits known as riders that you don't need. What Happens if I Outlive My Term Life Insurance Policy? If you outlive your term life insurance policy, your coverage ends. Term life insurance is temporary life insurance. It only lasts a set period, such as five or 20 years. If you live past this point, you lose your coverage. However, you may have some options to stay covered past the end of the term.First, some insurers allow you to renew and extend your term life insurance without a medical exam. The price will be higher when you renew than when you first bought the term life insurance because you will be older. You may also be able to convert your temporary term life insurance into a permanent policy with no expiration date. Finally, you could try applying for a brand-new policy. If you don’t use one of these three options, you will no longer have life insurance after outliving your term policy. Companies We Reviewed We researched and reviewed 88 companies to find the best 12 companies you see above on this list. Below are the companies we researched, along with links to individual company reviews to help you learn more before making a decision. Those that didn't make our list may have had fewer policy types and features, worse financial stability ratings, lower customer experience ratings, fewer riders and living benefits, or higher rates.AAA Life Insurance, AARP Life Insurance, Aflac Life Insurance, AIG Life Insurance, Allianz Life Insurance, Allstate Life Insurance, American Amicable Life Insurance, American Fidelity Life Insurance, American Heritage Life Insurance, American Income Life Insurance, American National Life Insurance,Americo Life Insurance, Ameritas Life Insurance, Assurity Life Insurance, Bankers Life Insurance, Banner Life Insurance, Bestow Life Insurance, Boston Mutual Life Insurance, Brighthouse Life Insurance, Cincinnati Life Insurance, TruStage Life Insurance, Colonial Life Insurance, Colonial Penn Life Insurance, Columbian Financial Group Life Insurance, Columbus Life Insurance, Combined Life Insurance, Companion Life Insurance, Equitable Life Insurance, Erie Life Insurance, Ethos Life Insurance, Farm Bureau Life Insurance, Farmers Life Insurance, Fidelity Life Insurance, Foresters Life Insurance, Forethought Life Insurance, Freedom Life Insurance, Gerber Life Insurance, Globe Life Insurance, Guardian Life Insurance, Haven Life Insurance, John Hancock Life Insurance, Kansas City Life Insurance, Kemper Life Insurance, Ladder Life Insurance, Lafayette Life Insurance, Liberty National Life Insurance, Lincoln Financial Life Insurance, Lincoln Heritage Life Insurance, Lumico Life Insurance, ManhattanLife Insurance, MassMutual Life Insurance, MetLife Insurance, Midland National Life Insurance, Minnesota Life Insurance, Mutual of Omaha Life Insurance, National Life Insurance, Nationwide Life Insurance, New Era Life Insurance, New York Life Insurance, North American Life Insurance, Northwestern Mutual Life Insurance, Ohio National Life Insurance, Pacific Life Insurance, Pan American Life Insurance, Penn Mutual Life Insurance, Physicians Mutual Life Insurance, Primerica Life Insurance, Principal Life Insurance, Protective Life Insurance, Prudential Life Insurance, Reliance Standard Life Insurance, Sagicor Life Insurance, SBLI Life Insurance, Securian Life Insurance, Senior Life Insurance, Southern Farm Bureau Life Insurance, The Standard Life Insurance, State Farm Life Insurance, Sun Life Insurance, Symetra Life Insurance, Texas Life Insurance, The Hartford Life Insurance, Thrivent Life Insurance, Transamerica Life Insurance, United Life Insurance, Unum Life Insurance, USAA Life Insurance, Voya Life Insurance, Western & Southern Life Insurance Why You Should Trust Our Expert Insurance Reviewers Investopedia launched in 1999, and has been helping readers find the best life insurance companies since 2020. We are dedicated to helping you find the right life insurance provider for your needs. In order to compile our list of the best life insurance companies, we developed a comprehensive life insurance methodology. We started off by researching what consumers want from life insurance companies, and for that, we looked to third-party consumer studies, including J.D. Power’s 2022 Individual Life Insurance and Annuities studies and the 2022 Insurance Barometer Study, by Life Happens and LIMRA.  With those findings in mind, we spent three months digging up information about more than 55 features on 88 life insurance companies, including ratings for financial strength by AM Best, customer satisfaction, and individual customer complaints reported to insurance state commissioners and recorded by the NAIC (National Association of Insurance Commissioners). We also considered years in business, cost, online tools, no-medical-exam options, policy types and features, and available riders.  NAIC Methodology: We considered each company's NAIC complaint index for its life insurance business by averaging those NAIC complaint index values over the three years (2021, 2020, and 2019). Our review process gave preference to companies with superior financial stability, few customer complaints, and a robust suite of products and resources. In particular, we valued online quoting and application tools, transparent pricing, and no-exam policy options. Companies received ratings boosts if customer service was accessible via features like live chat. We ranked each company according to the following categories and weights: Policy types and features: 21%Financial stability: 17% Application process: 16%Customer satisfaction ratings: 15%Customer service: 14%Riders and living benefits: 9%Cost: 8% Costs were evaluated by collecting term life insurance quotes for 25-, 40-, and 55-year-old male and female non-smokers in excellent health for 30-year $250,000 term life policies. We used Compulife data available through Term4sale.com. We compared individual offerings between companies by delving deeper into product specifics, including maximum coverage amounts, maximum issue ages, included riders (in particular, the number and type of living benefits available at no upfront cost) , and product-specific application processes. We used this research to determine the best companies for different products, consumer groups, and use cases.  Of the companies we considered, those with the greatest financial stability, fewest complaints, lowest cost, most generous benefits, easiest application process, most generous no-medical-exam options, and widest available features scored the highest across categories. Guide to Life Insurance What is life insurance? How does life insurance work? Is life insurance worth it? Types of life insurance Term vs. whole life insurance How much life insurance do you need? How to choose life insurance How to buy life insurance Best Life Insurance for Seniors Best Life Insurance Companies for People Over 50  Best Whole Life Insurance Companies Best Universal Life Insurance Companies  Best Children’s Life Insurance Companies Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. NAIC. "Nationwide Life Ins Co National Complaint Index Report." NAIC. "Protective Life Ins Co National Complaint Index Report." J.D. Power. “Satisfaction with Life Insurance and Annuity Products Climbs as Customers Embrace Digital, J.D. Power Finds.” NAIC. "Massachusetts Mut Life Ins Co National Complaint Index Report." U.S. Department of Labor. "US Department of Labor Reaches Settlement With United of Omaha Life Insurance Co. to Reform Its Evidence of Insurability Practices." NAIC. "Guardian Life Ins Co Of Amer National Complaint Index Report." J.D. Power. "Pandemic and Tax Code Change Spur Interest in Life Insurance, J.D. Power Finds." Rogowski v. State Farm. "Welcome to the Rogowski v. State Farm Settlement Website." Niewinski v. State Farm. "Welcome to the Website for the Niewinski v. State Farm Litigation." NAIC. "Life and Fraternal Insurance Industry." NAIC. "New York Life Ins Co National Complaint Index Report." NAIC. "Life Insurance Market Share." Mutual of Omaha. "Many Millennials Hitting 40 Without Life Insurance." LIMRA. "Securing the Future." Related Articles Best Whole Life Insurance Companies of 2024 Best Term Life Insurance Companies of 2024 Best Life Insurance Companies for Seniors of 2024 Best Life Insurance Companies for Young Adults Best Life Insurance for Parents of 2024 MassMutual Life Insurance Review Related Terms What Is Life Insurance With Living Benefits? Life insurance living benefits can provide you with a financial lifeline throughout your life. Learn what they are and how they work. more Life Insurance: What It Is, How It Works, and How To Buy a Policy Life insurance is a contract in which an insurer, in exchange for a premium, guarantees payment to an insured’s beneficiaries when the insured dies. more What Is Limited Payment Life Insurance? A limited payment life insurance policy allows you to pay for whole life coverage over a fixed period. Learn how it works and when it makes sense. more Whole Life Insurance Definition: How It Works, With Examples Whole life insurance is permanent life insurance that pays a benefit upon the death of the insured and is characterized by level premiums and a savings component. more Term Life Insurance: What It Is, Different Types, Pros and Cons Term life insurance is a guaranteed life benefit paid to beneficiaries of the insured after death. more Understanding Mortgage Life Insurance and Its Advantages Mortgage life insurance is designed specifically to repay mortgage debt in the event of the death of the borrower. more

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Suitable (Suitability): Meaning, Types, FAQs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-suitable-suitability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Suitable (Suitability)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients. Before making a recommendation, brokers, money managers, and other financial advisors have a duty to take steps that ensure the asset or product is suitable—that is, appropriate for—that investor's goals, needs, and risk tolerance. In the U.S., the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority (FINRA)</a> oversees and enforces this standard, outlining suitability requirements in its Rule 2111.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients.</li><li>An investment must meet the suitability requirements outlined in FINRA Rule 2111 prior to being recommended by a firm to an investor.<span class="ql-inline-citation" data-cite="6"></span></li><li>Suitability depends on the investor's situation based on the FINRA guidelines.</li><li>Suitability standards are not the same as fiduciary requirements.</li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-understanding-suitable-suitability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Suitable (Suitability) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Any financial firm or individual dealing with an investor must answer the question, "Is this investment appropriate for my client?" The firm, or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/associatedperson.asp">associated person</a>, must have a legally reasonable basis, or high degree of confidence, that the security they are offering to the investor is in line with that investor's objectives (such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a>) as stated in their investment profile.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-advisor.asp">financial advisors</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker-dealer.asp">broker-dealers</a> must fulfill a suitability obligation, which means making recommendations that are consistent with the best interests of the underlying customer. The Financial Industry Regulatory Authority (FINRA) regulates both types of financial entities under standards that require them to make appropriate recommendations to their clients. However, a broker, or broker-dealer, also works on behalf of the broker-dealer firm, which is why the concept of suitability needed to be defined to safeguard investors from predatory practices.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-finra-rule-2111"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> FINRA Rule 2111 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> FINRA Rule 2111 states the customer’s investment profile “includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentobjective.asp">investment objectives</a>, investment experience, investment <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timehorizon.asp">time horizon</a>, liquidity needs, [and] risk tolerance” among other information. An investment recommendation by a broker, or any other regulated entity, would automatically trigger this rule.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> No investment, other than outright scams, is inherently suitable or unsuitable for an investor. Instead, its suitability depends on the investor's situation and makeup. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For example, for a 95-year-old widow who is living on a fixed income, speculative investments, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/option.asp">options</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pennystock.asp">penny stocks</a>, etc., are extremely unsuitable. The widow has a low-risk tolerance for investments that may lose the principal. On the other hand, an executive with significant net worth and investing experience might be comfortable taking on those speculative investments as part of their portfolio. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-types-of-suitability-obligations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Types of Suitability Obligations </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li><strong>Reasonable-basis suitability </strong>requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy.</li> <li><strong>Customer-specific suitability</strong> requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination, including the client's age, risk tolerance, liquidity needs, and investment time horizon.</li> <li><strong>Quantitative suitability</strong> requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. This obligation is meant to cover abnormally high <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transactioncosts.asp">transaction costs</a> and excessive portfolio turnover, called <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/churning.asp">churning</a>, to generate commission fees.<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-suitability-vs-fiduciary-requirements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Suitability vs. Fiduciary Requirements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> People often confuse the terms suitability and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fiduciary.asp">fiduciary</a>. Both seek to protect the investor from foreseeable harm or excessive risk. However, suitability standards are not the same as fiduciary standards; the levels of advisor responsibility and investor care are different. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> An investment fiduciary is any person who has the legal responsibility for managing someone else's money. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentadvisor.asp">Investment advisors</a> and money managers, who are usually fee-based, are bound to fiduciary standards. Broker-dealers, customarily compensated by commission, generally have to fulfill only a suitability obligation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The SEC's Regulation BI is something of a replacement (a weak one, critics charge) for the Department of Labor's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/updates/dol-fiduciary-rule/">Fiduciary Rule</a> of 2017, which would have required that all financial professionals who work with retirement plans or provide retirement planning advice—advisors, broker-dealers, and insurance agents—be legally bound by the fiduciary standard. In 2018, the U.S. Fifth Circuit Court of Appeals <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/dols-fiduciary-rule-officially-shelved-0/">officially vacated the rule</a>, effectively killing it.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Financial advisors who are fiduciaries have the responsibility to recommend suitable investments while still adhering to the fiduciary requirements of putting their client's interests above their or their firm's interests. For example, the advisor cannot buy securities for their account before recommending or buying them for a client's account. Fiduciary standards also prohibit making trades that may result in the payment of higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commission.asp">commission</a> fees to the advisor or their investment firm. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> The advisor must use accurate and complete information and analysis when giving a client investment advice. To avoid any impropriety or appearance of impropriety, the fiduciary will disclose any potential <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conflict-of-interest.asp">conflicts of interest</a> to the client and then will place the client's interests before their own. Additionally, the advisor undertakes transactions under a "best execution" standard, in which they work to execute the trade or purchase at the lowest cost and with the highest efficiency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-suitable-suitability-vs-best-interest"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Suitable (Suitability) vs. Best Interest </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The mandate to act in the client's best interest, a key part of the fiduciary standard, is noticeably lacking in the suitability standard, though some might argue it's implied. As of 2022, the two have become more officially intertwined. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> In June 2020, FINRA adopted Regulation BI, technically "amending" its Rule 2111 to accommodate it, so that "a broker-dealer that meets the best interest standard would necessarily meet the suitability standard."<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> While the details of which rule applies when are a little unclear, the bottom line seems to be that a FINRA-registered broker is now required to comply with both Regulation Best Interest and Rule 2111 regarding recommendations to retail investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-can-a-customer-waive-their-rights-under-finra-2111"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can a Customer Waive Their Rights Under FINRA 2111?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No, investor clients can't waive their FINRA Rule 2111 rights. FINRA rules contain what is known as “anti-waiver” provisions. These provisions make void any agreements that purport to waive compliance with any FINRA Rules, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seact1934.asp">Securities and Exchange Act</a>, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/uniformsecuritiesact.asp">Uniform Securities Act</a>, and state <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blueskylaws.asp">blue sky laws</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-what-should-a-suitability-assessment-consider"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Should a Suitability Assessment Consider?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A broker's suitability assessment involves deciding if an investment is appropriate for a particular client before recommending it. To determine that, the broker needs to consider certain things about the investor, including the following:</p><ul><li>Age</li><li>Investment goals</li><li>Investment timeframe</li><li>Risk tolerance</li><li>Financial situation and obligations</li><li>Liquidity needs</li><li>Current investment portfolio and assets</li><li>Investment knowledge, sophistication, and experience</li><li>Tax status</li></ul><p><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-what-are-suitability-requirements"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Suitability Requirements?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>FINRA's Rule 2111 enumerates three specific kinds of suitability requirements:</p><p><br/></p><p><strong>Reasonable basis:</strong> The broker has to be reasonably confident that the investment could be suitable for at least some individual investors. Basically, this translates into doing sufficient due diligence on the investment to ensure it is legitimate, and to understand how it works, what its benefits are, and what its risks could be.</p><p><strong>Customer-specific:</strong> The broker has to be familiar with the client's age, mindset, financial picture and needs, and investment profile/objectives, in order to feel the investment is suitable for this specific investor.</p><p><strong>Quantitative:</strong> The broker has a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed individually, are not excessive and unsuitable for the customer. This requirement relates to churning an account—making a lot of trades or indulging in a trading pattern primarily to generate commissions.<span class="ql-inline-citation" data-cite="6"></span></p></div> </div></div>

## What Is Suitable (Suitability)? Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients. Before making a recommendation, brokers, money managers, and other financial advisors have a duty to take steps that ensure the asset or product is suitable—that is, appropriate for—that investor's goals, needs, and risk tolerance. In the U.S., the [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp) oversees and enforces this standard, outlining suitability requirements in its Rule 2111. ### Key Takeaways * Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients. * An investment must meet the suitability requirements outlined in FINRA Rule 2111 prior to being recommended by a firm to an investor. * Suitability depends on the investor's situation based on the FINRA guidelines. * Suitability standards are not the same as fiduciary requirements. ## Understanding Suitable (Suitability) Any financial firm or individual dealing with an investor must answer the question, "Is this investment appropriate for my client?" The firm, or [associated person](https://www.investopedia.com/terms/a/associatedperson.asp), must have a legally reasonable basis, or high degree of confidence, that the security they are offering to the investor is in line with that investor's objectives (such as [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp)) as stated in their investment profile. Both [financial advisors](https://www.investopedia.com/terms/f/financial-advisor.asp) and [broker-dealers](https://www.investopedia.com/terms/b/broker-dealer.asp) must fulfill a suitability obligation, which means making recommendations that are consistent with the best interests of the underlying customer. The Financial Industry Regulatory Authority (FINRA) regulates both types of financial entities under standards that require them to make appropriate recommendations to their clients. However, a broker, or broker-dealer, also works on behalf of the broker-dealer firm, which is why the concept of suitability needed to be defined to safeguard investors from predatory practices. ## FINRA Rule 2111 FINRA Rule 2111 states the customer’s investment profile “includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, [investment objectives](https://www.investopedia.com/terms/i/investmentobjective.asp), investment experience, investment [time horizon](https://www.investopedia.com/terms/t/timehorizon.asp), liquidity needs, [and] risk tolerance” among other information. An investment recommendation by a broker, or any other regulated entity, would automatically trigger this rule. No investment, other than outright scams, is inherently suitable or unsuitable for an investor. Instead, its suitability depends on the investor's situation and makeup. For example, for a 95-year-old widow who is living on a fixed income, speculative investments, such as [options](https://www.investopedia.com/terms/o/option.asp) and [futures](https://www.investopedia.com/terms/f/futures.asp), [penny stocks](https://www.investopedia.com/terms/p/pennystock.asp), etc., are extremely unsuitable. The widow has a low-risk tolerance for investments that may lose the principal. On the other hand, an executive with significant net worth and investing experience might be comfortable taking on those speculative investments as part of their portfolio. ## Types of Suitability Obligations * **Reasonable-basis suitability**requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy. * **Customer-specific suitability** requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination, including the client's age, risk tolerance, liquidity needs, and investment time horizon. * **Quantitative suitability** requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. This obligation is meant to cover abnormally high [transaction costs](https://www.investopedia.com/terms/t/transactioncosts.asp) and excessive portfolio turnover, called [churning](https://www.investopedia.com/terms/c/churning.asp), to generate commission fees. ## Suitability vs. Fiduciary Requirements People often confuse the terms suitability and [fiduciary](https://www.investopedia.com/terms/f/fiduciary.asp). Both seek to protect the investor from foreseeable harm or excessive risk. However, suitability standards are not the same as fiduciary standards; the levels of advisor responsibility and investor care are different. An investment fiduciary is any person who has the legal responsibility for managing someone else's money. [Investment advisors](https://www.investopedia.com/terms/i/investmentadvisor.asp) and money managers, who are usually fee-based, are bound to fiduciary standards. Broker-dealers, customarily compensated by commission, generally have to fulfill only a suitability obligation. ### The SEC's Regulation BI is something of a replacement (a weak one, critics charge) for the Department of Labor's [Fiduciary Rule](https://www.investopedia.com/updates/dol-fiduciary-rule/) of 2017, which would have required that all financial professionals who work with retirement plans or provide retirement planning advice—advisors, broker-dealers, and insurance agents—be legally bound by the fiduciary standard. In 2018, the U.S. Fifth Circuit Court of Appeals [officially vacated the rule](https://www.investopedia.com/news/dols-fiduciary-rule-officially-shelved-0/), effectively killing it. Financial advisors who are fiduciaries have the responsibility to recommend suitable investments while still adhering to the fiduciary requirements of putting their client's interests above their or their firm's interests. For example, the advisor cannot buy securities for their account before recommending or buying them for a client's account. Fiduciary standards also prohibit making trades that may result in the payment of higher [commission](https://www.investopedia.com/terms/c/commission.asp) fees to the advisor or their investment firm. The advisor must use accurate and complete information and analysis when giving a client investment advice. To avoid any impropriety or appearance of impropriety, the fiduciary will disclose any potential [conflicts of interest](https://www.investopedia.com/terms/c/conflict-of-interest.asp) to the client and then will place the client's interests before their own. Additionally, the advisor undertakes transactions under a "best execution" standard, in which they work to execute the trade or purchase at the lowest cost and with the highest efficiency. ## Suitable (Suitability) vs. Best Interest The mandate to act in the client's best interest, a key part of the fiduciary standard, is noticeably lacking in the suitability standard, though some might argue it's implied. As of 2022, the two have become more officially intertwined. In June 2020, FINRA adopted Regulation BI, technically "amending" its Rule 2111 to accommodate it, so that "a broker-dealer that meets the best interest standard would necessarily meet the suitability standard." While the details of which rule applies when are a little unclear, the bottom line seems to be that a FINRA-registered broker is now required to comply with both Regulation Best Interest and Rule 2111 regarding recommendations to retail investors. ## Can a Customer Waive Their Rights Under FINRA 2111? No, investor clients can't waive their FINRA Rule 2111 rights. FINRA rules contain what is known as “anti-waiver” provisions. These provisions make void any agreements that purport to waive compliance with any FINRA Rules, the [Securities and Exchange Act](https://www.investopedia.com/terms/s/seact1934.asp), the [Uniform Securities Act](https://www.investopedia.com/terms/u/uniformsecuritiesact.asp), and state [blue sky laws](https://www.investopedia.com/terms/b/blueskylaws.asp). ## What Should a Suitability Assessment Consider? A broker's suitability assessment involves deciding if an investment is appropriate for a particular client before recommending it. To determine that, the broker needs to consider certain things about the investor, including the following: * Age * Investment goals * Investment timeframe * Risk tolerance * Financial situation and obligations * Liquidity needs * Current investment portfolio and assets * Investment knowledge, sophistication, and experience * Tax status ## What Are Suitability Requirements? FINRA's Rule 2111 enumerates three specific kinds of suitability requirements: **Reasonable basis:** The broker has to be reasonably confident that the investment could be suitable for at least some individual investors. Basically, this translates into doing sufficient due diligence on the investment to ensure it is legitimate, and to understand how it works, what its benefits are, and what its risks could be. **Customer-specific:** The broker has to be familiar with the client's age, mindset, financial picture and needs, and investment profile/objectives, in order to feel the investment is suitable for this specific investor. **Quantitative:** The broker has a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed individually, are not excessive and unsuitable for the customer. This requirement relates to churning an account—making a lot of trades or indulging in a trading pattern primarily to generate commissions.

What Is Suitable (Suitability)? Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients. Before making a recommendation, brokers, money managers, and other financial advisors have a duty to take steps that ensure the asset or product is suitable—that is, appropriate for—that investor's goals, needs, and risk tolerance. In the U.S., the Financial Industry Regulatory Authority (FINRA) oversees and enforces this standard, outlining suitability requirements in its Rule 2111. Key Takeaways Suitability refers to an ethical, enforceable standard regarding investments that financial professionals are held to when dealing with clients.An investment must meet the suitability requirements outlined in FINRA Rule 2111 prior to being recommended by a firm to an investor.Suitability depends on the investor's situation based on the FINRA guidelines.Suitability standards are not the same as fiduciary requirements. Understanding Suitable (Suitability) Any financial firm or individual dealing with an investor must answer the question, "Is this investment appropriate for my client?" The firm, or associated person, must have a legally reasonable basis, or high degree of confidence, that the security they are offering to the investor is in line with that investor's objectives (such as risk tolerance) as stated in their investment profile. Both financial advisors and broker-dealers must fulfill a suitability obligation, which means making recommendations that are consistent with the best interests of the underlying customer. The Financial Industry Regulatory Authority (FINRA) regulates both types of financial entities under standards that require them to make appropriate recommendations to their clients. However, a broker, or broker-dealer, also works on behalf of the broker-dealer firm, which is why the concept of suitability needed to be defined to safeguard investors from predatory practices. FINRA Rule 2111 FINRA Rule 2111 states the customer’s investment profile “includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, [and] risk tolerance” among other information. An investment recommendation by a broker, or any other regulated entity, would automatically trigger this rule. No investment, other than outright scams, is inherently suitable or unsuitable for an investor. Instead, its suitability depends on the investor's situation and makeup. For example, for a 95-year-old widow who is living on a fixed income, speculative investments, such as options and futures, penny stocks, etc., are extremely unsuitable. The widow has a low-risk tolerance for investments that may lose the principal. On the other hand, an executive with significant net worth and investing experience might be comfortable taking on those speculative investments as part of their portfolio. Types of Suitability Obligations Reasonable-basis suitability requires a broker to have a reasonable basis to believe, based on reasonable diligence, that the recommendation is suitable for at least some investors. Reasonable diligence must provide the firm or associated person with an understanding of the potential risks and rewards of the recommended security or strategy. Customer-specific suitability requires that a broker, based on a particular customer’s investment profile, has a reasonable basis to believe that the recommendation is suitable for that customer. The broker must attempt to obtain and analyze a broad array of customer-specific factors to support this determination, including the client's age, risk tolerance, liquidity needs, and investment time horizon. Quantitative suitability requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. This obligation is meant to cover abnormally high transaction costs and excessive portfolio turnover, called churning, to generate commission fees. Suitability vs. Fiduciary Requirements People often confuse the terms suitability and fiduciary. Both seek to protect the investor from foreseeable harm or excessive risk. However, suitability standards are not the same as fiduciary standards; the levels of advisor responsibility and investor care are different. An investment fiduciary is any person who has the legal responsibility for managing someone else's money. Investment advisors and money managers, who are usually fee-based, are bound to fiduciary standards. Broker-dealers, customarily compensated by commission, generally have to fulfill only a suitability obligation. The SEC's Regulation BI is something of a replacement (a weak one, critics charge) for the Department of Labor's Fiduciary Rule of 2017, which would have required that all financial professionals who work with retirement plans or provide retirement planning advice—advisors, broker-dealers, and insurance agents—be legally bound by the fiduciary standard. In 2018, the U.S. Fifth Circuit Court of Appeals officially vacated the rule, effectively killing it. Financial advisors who are fiduciaries have the responsibility to recommend suitable investments while still adhering to the fiduciary requirements of putting their client's interests above their or their firm's interests. For example, the advisor cannot buy securities for their account before recommending or buying them for a client's account. Fiduciary standards also prohibit making trades that may result in the payment of higher commission fees to the advisor or their investment firm. The advisor must use accurate and complete information and analysis when giving a client investment advice. To avoid any impropriety or appearance of impropriety, the fiduciary will disclose any potential conflicts of interest to the client and then will place the client's interests before their own. Additionally, the advisor undertakes transactions under a "best execution" standard, in which they work to execute the trade or purchase at the lowest cost and with the highest efficiency. Suitable (Suitability) vs. Best Interest The mandate to act in the client's best interest, a key part of the fiduciary standard, is noticeably lacking in the suitability standard, though some might argue it's implied. As of 2022, the two have become more officially intertwined. In June 2020, FINRA adopted Regulation BI, technically "amending" its Rule 2111 to accommodate it, so that "a broker-dealer that meets the best interest standard would necessarily meet the suitability standard." While the details of which rule applies when are a little unclear, the bottom line seems to be that a FINRA-registered broker is now required to comply with both Regulation Best Interest and Rule 2111 regarding recommendations to retail investors. Can a Customer Waive Their Rights Under FINRA 2111? No, investor clients can't waive their FINRA Rule 2111 rights. FINRA rules contain what is known as “anti-waiver” provisions. These provisions make void any agreements that purport to waive compliance with any FINRA Rules, the Securities and Exchange Act, the Uniform Securities Act, and state blue sky laws. What Should a Suitability Assessment Consider? A broker's suitability assessment involves deciding if an investment is appropriate for a particular client before recommending it. To determine that, the broker needs to consider certain things about the investor, including the following:AgeInvestment goalsInvestment timeframeRisk toleranceFinancial situation and obligationsLiquidity needsCurrent investment portfolio and assetsInvestment knowledge, sophistication, and experienceTax status What Are Suitability Requirements? FINRA's Rule 2111 enumerates three specific kinds of suitability requirements:Reasonable basis: The broker has to be reasonably confident that the investment could be suitable for at least some individual investors. Basically, this translates into doing sufficient due diligence on the investment to ensure it is legitimate, and to understand how it works, what its benefits are, and what its risks could be.Customer-specific: The broker has to be familiar with the client's age, mindset, financial picture and needs, and investment profile/objectives, in order to feel the investment is suitable for this specific investor.Quantitative: The broker has a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed individually, are not excessive and unsuitable for the customer. This requirement relates to churning an account—making a lot of trades or indulging in a trading pattern primarily to generate commissions.

https://www.investopedia.com/ask/answers/070815/what-are-main-risks-associated-trading-derivatives.asp

What Are the Main Risks Associated With Trading Derivatives?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Derivatives are investment instruments that consist of a contract between parties whose value derives from and depends on the value of an underlying financial asset. However, like any investment instrument, there are varying levels of risk associated with derivatives. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Among the most common derivatives traded are futures, options, contracts for difference (CFDs), and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/swap.asp">swaps</a>. This article will cover derivatives risk at a glance, going through the primary risks associated with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a>: market risk, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/counterparty.asp">counterparty</a> risk, liquidity risk, and interconnection risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <span class="heading-toc" id="toc-market-risk"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Market Risk </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Market risk refers to the general risk of any investment. Investors make decisions and take positions based on assumptions, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a>, or other factors that lead them to certain conclusions about how an investment is likely to perform. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> While there is not a surefire way to protect against market risk, as all are vulnerable to changes in the market, knowing how much a derivative is impacted by market fluctuations will help investors choose wisely. In reality, an important part of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-analysis.asp">investment analysis</a> is determining the probability of an investment being profitable and assessing the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskrewardratio.asp">risk/reward ratio</a> of potential losses against potential gains. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <span class="heading-toc" id="toc-counterparty-risk"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Counterparty Risk </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/counterpartyrisk.asp">Counterparty risk</a>, or counterparty credit risk, arises if one of the parties involved in a derivatives trade, such as the buyer, seller, or dealer, defaults on the contract. This risk is higher in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/otc.asp">over-the-counter</a>, or OTC, markets, which are much less regulated than ordinary trading exchanges. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A regular trading exchange helps facilitate contract performance by requiring margin deposits that are adjusted daily through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marktomarket.asp">mark-to-market</a> process. The mark-to-market process makes pricing derivatives more likely to accurately reflect current value. Traders can manage counterparty risk by only using dealers they know and consider trustworthy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-liquidity-risk"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Liquidity Risk </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidityrisk.asp">Liquidity risk</a> applies to investors who plan to close out a derivative trade prior to maturity. Overall, liquidity risk refers to the ability of a company to pay off debts without big losses to its business. To measure liquidity risk, investors compare short-term <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability.asp">liabilities</a> and the company's liquid assets. Firms that have low liquidity risk are able to quickly turn their investments into cash to prevent a loss. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Liquidity risk is also important for investors interested in derivatives to consider. Such investors need to consider if it is difficult to close out the trade or if existing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bid-askspread.asp">bid-ask spreads</a> are so large as to represent a significant cost. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-interconnection-risk"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Interconnection Risk </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Interconnection risk refers to how the interconnections between various derivative instruments and dealers might affect an investor's particular derivative trade. Some analysts express concern over the possibility that problems with just one party in the derivatives market, such as a major bank that acts as a dealer, might lead to a chain reaction or snowball effect that threatens the stability of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-market.asp">financial markets</a> overall. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Like any other investment, derivatives' risk levels are calculated through a mixture of evaluation of the market risk that all investments are susceptible to, counterparty risk if a party involved in the trade defaults, liquidity risk of the actual companies being invested in, and interconnection risk between various derivatives. Whether <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/052615/how-can-derivatives-be-used-risk-management.asp">used for risk management</a> or to grow an investment, they are one of the most popular instruments in financial markets today.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-advisorinsight" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p>Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal.</p></div></div></div></div>

Derivatives are investment instruments that consist of a contract between parties whose value derives from and depends on the value of an underlying financial asset. However, like any investment instrument, there are varying levels of risk associated with derivatives. Among the most common derivatives traded are futures, options, contracts for difference (CFDs), and [swaps](https://www.investopedia.com/terms/s/swap.asp). This article will cover derivatives risk at a glance, going through the primary risks associated with [derivatives](https://www.investopedia.com/terms/d/derivative.asp): market risk, [counterparty](https://www.investopedia.com/terms/c/counterparty.asp) risk, liquidity risk, and interconnection risk. ## Market Risk Market risk refers to the general risk of any investment. Investors make decisions and take positions based on assumptions, [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp), or other factors that lead them to certain conclusions about how an investment is likely to perform. While there is not a surefire way to protect against market risk, as all are vulnerable to changes in the market, knowing how much a derivative is impacted by market fluctuations will help investors choose wisely. In reality, an important part of [investment analysis](https://www.investopedia.com/terms/i/investment-analysis.asp) is determining the probability of an investment being profitable and assessing the [risk/reward ratio](https://www.investopedia.com/terms/r/riskrewardratio.asp) of potential losses against potential gains. ## Counterparty Risk [Counterparty risk](https://www.investopedia.com/terms/c/counterpartyrisk.asp), or counterparty credit risk, arises if one of the parties involved in a derivatives trade, such as the buyer, seller, or dealer, defaults on the contract. This risk is higher in [over-the-counter](https://www.investopedia.com/terms/o/otc.asp), or OTC, markets, which are much less regulated than ordinary trading exchanges. A regular trading exchange helps facilitate contract performance by requiring margin deposits that are adjusted daily through the [mark-to-market](https://www.investopedia.com/terms/m/marktomarket.asp) process. The mark-to-market process makes pricing derivatives more likely to accurately reflect current value. Traders can manage counterparty risk by only using dealers they know and consider trustworthy. ## Liquidity Risk [Liquidity risk](https://www.investopedia.com/terms/l/liquidityrisk.asp) applies to investors who plan to close out a derivative trade prior to maturity. Overall, liquidity risk refers to the ability of a company to pay off debts without big losses to its business. To measure liquidity risk, investors compare short-term [liabilities](https://www.investopedia.com/terms/l/liability.asp) and the company's liquid assets. Firms that have low liquidity risk are able to quickly turn their investments into cash to prevent a loss. Liquidity risk is also important for investors interested in derivatives to consider. Such investors need to consider if it is difficult to close out the trade or if existing [bid-ask spreads](https://www.investopedia.com/terms/b/bid-askspread.asp) are so large as to represent a significant cost. ## Interconnection Risk Interconnection risk refers to how the interconnections between various derivative instruments and dealers might affect an investor's particular derivative trade. Some analysts express concern over the possibility that problems with just one party in the derivatives market, such as a major bank that acts as a dealer, might lead to a chain reaction or snowball effect that threatens the stability of [financial markets](https://www.investopedia.com/terms/f/financial-market.asp) overall. ## The Bottom Line Like any other investment, derivatives' risk levels are calculated through a mixture of evaluation of the market risk that all investments are susceptible to, counterparty risk if a party involved in the trade defaults, liquidity risk of the actual companies being invested in, and interconnection risk between various derivatives. Whether [used for risk management](https://www.investopedia.com/ask/answers/052615/how-can-derivatives-be-used-risk-management.asp) or to grow an investment, they are one of the most popular instruments in financial markets today. ### Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal.

Derivatives are investment instruments that consist of a contract between parties whose value derives from and depends on the value of an underlying financial asset. However, like any investment instrument, there are varying levels of risk associated with derivatives. Among the most common derivatives traded are futures, options, contracts for difference (CFDs), and swaps. This article will cover derivatives risk at a glance, going through the primary risks associated with derivatives: market risk, counterparty risk, liquidity risk, and interconnection risk. Market Risk Market risk refers to the general risk of any investment. Investors make decisions and take positions based on assumptions, technical analysis, or other factors that lead them to certain conclusions about how an investment is likely to perform. While there is not a surefire way to protect against market risk, as all are vulnerable to changes in the market, knowing how much a derivative is impacted by market fluctuations will help investors choose wisely. In reality, an important part of investment analysis is determining the probability of an investment being profitable and assessing the risk/reward ratio of potential losses against potential gains. Counterparty Risk Counterparty risk, or counterparty credit risk, arises if one of the parties involved in a derivatives trade, such as the buyer, seller, or dealer, defaults on the contract. This risk is higher in over-the-counter, or OTC, markets, which are much less regulated than ordinary trading exchanges. A regular trading exchange helps facilitate contract performance by requiring margin deposits that are adjusted daily through the mark-to-market process. The mark-to-market process makes pricing derivatives more likely to accurately reflect current value. Traders can manage counterparty risk by only using dealers they know and consider trustworthy. Liquidity Risk Liquidity risk applies to investors who plan to close out a derivative trade prior to maturity. Overall, liquidity risk refers to the ability of a company to pay off debts without big losses to its business. To measure liquidity risk, investors compare short-term liabilities and the company's liquid assets. Firms that have low liquidity risk are able to quickly turn their investments into cash to prevent a loss. Liquidity risk is also important for investors interested in derivatives to consider. Such investors need to consider if it is difficult to close out the trade or if existing bid-ask spreads are so large as to represent a significant cost. Interconnection Risk Interconnection risk refers to how the interconnections between various derivative instruments and dealers might affect an investor's particular derivative trade. Some analysts express concern over the possibility that problems with just one party in the derivatives market, such as a major bank that acts as a dealer, might lead to a chain reaction or snowball effect that threatens the stability of financial markets overall. The Bottom Line Like any other investment, derivatives' risk levels are calculated through a mixture of evaluation of the market risk that all investments are susceptible to, counterparty risk if a party involved in the trade defaults, liquidity risk of the actual companies being invested in, and interconnection risk between various derivatives. Whether used for risk management or to grow an investment, they are one of the most popular instruments in financial markets today. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal.

https://www.investopedia.com/terms/r/riskrewardratio.asp

Risk/Reward Ratio: What It Is, How Stock Investors Use It

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-riskreward-ratio"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Risk/Reward Ratio? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The risk/reward ratio—also known as the risk/return ratio—marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expectedreturn.asp">expected returns</a> of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Consider the following example: an investment with a risk-reward ratio of 1:7 suggests that an investor is willing to risk $1, for the prospect of earning $7. Alternatively, a risk/reward ratio of 1:3 signals that an investor should expect to invest $1, for the prospect of earning $3 on their investment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trader.asp">trader</a> expects to have made when the position is closed (the reward). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The risk/reward ratio is used by traders and investors to manage their capital and risk of loss.</li><li>The ratio helps assess the expected return and risk of a given trade.</li><li>In general, the greater the risk, the greater the expected return demanded.</li><li>An appropriate risk reward ratio tends to be anything greater than 1:3.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-the-riskreward-ratio-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> How the Risk/Reward Ratio Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> In many cases, market strategists find the ideal risk/reward ratio for their investments to be approximately 1:3, or three units of expected return for every one unit of additional risk. Investors can manage risk/reward more directly through the use of stop-loss orders and derivatives such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/putoption.asp">put options</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The risk/reward ratio is often used as a measure when trading individual stocks. The optimal risk/reward ratio differs widely among various trading strategies. Some trial-and-error methods are usually required to determine which ratio is best for a given trading strategy, and many investors have a pre-specified risk/reward ratio for their investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Note that the risk/return ratio can be computed as one's personal risk tolerance on an investment, or as the objective calculation of an investment's risk/return profile. In the latter case, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expectedreturn.asp">expected return</a> is often used in the denominator and potential loss in the numerator. Expected return can be computed in several ways, including projecting historical returns into the future, estimating the weighted probabilities of future outcomes, or using a model like the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capm.asp">capital asset pricing model</a> (CAPM). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> To estimate the potential loss, investors may use a variety of methods, such as analyzing historical price data with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a>, using the historical <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/021915/how-standard-deviation-used-determine-risk.asp">standard deviation</a> of price action, assessing company financial statements with <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentalanalysis.asp">fundamental analysis</a>, and models like <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/var.asp">value-at-risk</a> (VaR). These methods can help investors identify factors that could impact the investment's value and estimate the potential downside. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_19-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_20-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Estimating the expected return and potential loss is not an exact science, and the actual amount of risk and return may differ from your estimates. Investors should also consider their own risk tolerance when evaluating the potential risk of an investment, as the amount of risk they are willing to take on can vary depending on their personal circumstances and investment goals.</p></div></div></div> <span class="heading-toc" id="toc-what-does-the-riskreward-ratio-tell-you"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> What Does the Risk/Reward Ratio Tell You? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The risk/reward ratio helps investors manage their risk of losing money on trades. Even if a trader has some profitable trades, they will lose money over time if their win rate is below 50%. The risk/reward ratio measures the difference between a trade entry point to a stop-loss and a sell or take-profit order. Comparing these two provides the ratio of profit to loss, or reward to risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Investors often use stop-loss orders when trading individual stocks to help minimize losses and directly manage their investments with a risk/reward focus. A stop-loss order is a trading trigger placed on a stock that automates the selling of the stock from a portfolio if the stock reaches a specified low. Investors can automatically set stop-loss orders through brokerage accounts and typically do not require exorbitant additional trading costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>When the risk/return ratio is abnormally low, it could suggest that the potential gain is disproportionately large relative to the potential risk, which may indicate that the investment is riskier than it might appear. This is why some investors may approach investments with very low risk/return ratios with caution, as a low ratio alone does not guarantee a good investment.</p></div></div></div> <span class="heading-toc" id="toc-example-of-the-riskreward-ratio-in-use"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Example of the Risk/Reward Ratio in Use </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Consider this example: A trader purchases 100 shares of XYZ Company at $20 and places a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stop-lossorder.asp">stop-loss order</a> at $15 to ensure that losses will not exceed $500. Also, assume that this trader believes that the price of XYZ will reach $30 in the next few months. In this case, the trader is willing to risk $5 per share to make an expected return of $10 per share after closing the position. Since the trader stands to make double the amount that they have risked, they would be said to have a 1:2 risk/reward ratio on that particular trade. Derivatives contracts such as put contracts, which give their owners the right to sell the underlying asset at a specified price, can be used to similar effect. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> If an investor prefers to seek a 1:5 risk/reward ratio for a specified investment (five units of expected return for each additional unit of risk), then they can modify the stop-loss order and thus adjust the risk/reward ratio. But it is important to understand that by doing so the investor has changed the probability of success in their trade. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> In the trading example noted above, suppose an investor set a stop-loss order at $18, instead of $15, and they continued to target a $30 profit-taking exit. By doing so they would certainly reduce the size of the potential loss (assuming no change to the number of shares), but they will have increased the likelihood that the price action will trigger their stop loss order. That's because the stop order is proportionally much closer to the entry than the target price is. So although the investor may stand to make a proportionally larger gain (compared to the potential loss), they have a lower probability of receiving this outcome. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-how-do-you-calculate-the-riskreturn-ratio"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Calculate the Risk/Return Ratio?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To calculate the risk/return ratio (also known as the risk-reward ratio), you need to divide the amount you stand to lose if your investment does not perform as expected (the risk) by the amount you stand to gain if it does (the reward).</p><p>The formula for the risk/return ratio is:</p><p><em>Risk/Return Ratio = Potential Loss / Potential Gain</em></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-why-is-the-riskreturn-ratio-important"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is the Risk/Return Ratio Important?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The risk/return ratio helps investors assess whether a potential investment is worth making. A lower ratio means that the potential reward is greater than the potential risk, while a high ratio means the opposite. By understanding the risk/return ratio, investors can make more informed decisions about their investments and manage their risk more effectively.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-can-the-riskreturn-ratio-of-an-investment-change-over-time"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can the Risk/Return Ratio of an Investment Change Over Time?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, the risk/return ratio can change over time as the investment's price moves its potential risk changes. For example, if a stock's price goes up, the potential reward may become less than when it was initially purchased, while the potential risk may have also increased.</p><p>It's important to regularly monitor the risk/return ratio of your investments and adjust your portfolio accordingly to ensure that your investments align with your goals and risk tolerance.</p><p><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> The risk-reward ratio is a measure of potential profit to potential loss for a given investment or project. A lower risk-reward ratio is generally preferable because it offers the potential for a greater return on investment without undue risk-taking. A ratio that is too high indicates that an investment could be overly risky. However, a ratio that is too low should be met with suspicion. Investors should consider their risk tolerance and investment goals when determining the appropriate ratio for their portfolio. Diversifying investments, the use of protective put options, and using stop-loss orders can help optimize your risk-return profile. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <em><strong>Correction—March 21, 2024</strong>: </em>This article has been corrected to state that a lower ratio means the potential reward is greater than the potential risk, and a high ratio means the opposite. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> <em><br/></em> </p></div>

## What Is the Risk/Reward Ratio? The risk/reward ratio—also known as the risk/return ratio—marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the [expected returns](https://www.investopedia.com/terms/e/expectedreturn.asp) of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain. Consider the following example: an investment with a risk-reward ratio of 1:7 suggests that an investor is willing to risk $1, for the prospect of earning $7. Alternatively, a risk/reward ratio of 1:3 signals that an investor should expect to invest $1, for the prospect of earning $3 on their investment. Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the [trader](https://www.investopedia.com/terms/t/trader.asp) expects to have made when the position is closed (the reward). ### Key Takeaways * The risk/reward ratio is used by traders and investors to manage their capital and risk of loss. * The ratio helps assess the expected return and risk of a given trade. * In general, the greater the risk, the greater the expected return demanded. * An appropriate risk reward ratio tends to be anything greater than 1:3. ## How the Risk/Reward Ratio Works In many cases, market strategists find the ideal risk/reward ratio for their investments to be approximately 1:3, or three units of expected return for every one unit of additional risk. Investors can manage risk/reward more directly through the use of stop-loss orders and derivatives such as [put options](https://www.investopedia.com/terms/p/putoption.asp). The risk/reward ratio is often used as a measure when trading individual stocks. The optimal risk/reward ratio differs widely among various trading strategies. Some trial-and-error methods are usually required to determine which ratio is best for a given trading strategy, and many investors have a pre-specified risk/reward ratio for their investments. Note that the risk/return ratio can be computed as one's personal risk tolerance on an investment, or as the objective calculation of an investment's risk/return profile. In the latter case, [expected return](https://www.investopedia.com/terms/e/expectedreturn.asp) is often used in the denominator and potential loss in the numerator. Expected return can be computed in several ways, including projecting historical returns into the future, estimating the weighted probabilities of future outcomes, or using a model like the [capital asset pricing model](https://www.investopedia.com/terms/c/capm.asp) (CAPM). To estimate the potential loss, investors may use a variety of methods, such as analyzing historical price data with [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp), using the historical [standard deviation](https://www.investopedia.com/ask/answers/021915/how-standard-deviation-used-determine-risk.asp) of price action, assessing company financial statements with [fundamental analysis](https://www.investopedia.com/terms/f/fundamentalanalysis.asp), and models like [value-at-risk](https://www.investopedia.com/terms/v/var.asp) (VaR). These methods can help investors identify factors that could impact the investment's value and estimate the potential downside. ### Estimating the expected return and potential loss is not an exact science, and the actual amount of risk and return may differ from your estimates. Investors should also consider their own risk tolerance when evaluating the potential risk of an investment, as the amount of risk they are willing to take on can vary depending on their personal circumstances and investment goals. ## What Does the Risk/Reward Ratio Tell You? The risk/reward ratio helps investors manage their risk of losing money on trades. Even if a trader has some profitable trades, they will lose money over time if their win rate is below 50%. The risk/reward ratio measures the difference between a trade entry point to a stop-loss and a sell or take-profit order. Comparing these two provides the ratio of profit to loss, or reward to risk. Investors often use stop-loss orders when trading individual stocks to help minimize losses and directly manage their investments with a risk/reward focus. A stop-loss order is a trading trigger placed on a stock that automates the selling of the stock from a portfolio if the stock reaches a specified low. Investors can automatically set stop-loss orders through brokerage accounts and typically do not require exorbitant additional trading costs. ### When the risk/return ratio is abnormally low, it could suggest that the potential gain is disproportionately large relative to the potential risk, which may indicate that the investment is riskier than it might appear. This is why some investors may approach investments with very low risk/return ratios with caution, as a low ratio alone does not guarantee a good investment. ## Example of the Risk/Reward Ratio in Use Consider this example: A trader purchases 100 shares of XYZ Company at $20 and places a [stop-loss order](https://www.investopedia.com/terms/s/stop-lossorder.asp) at $15 to ensure that losses will not exceed $500. Also, assume that this trader believes that the price of XYZ will reach $30 in the next few months. In this case, the trader is willing to risk $5 per share to make an expected return of $10 per share after closing the position. Since the trader stands to make double the amount that they have risked, they would be said to have a 1:2 risk/reward ratio on that particular trade. Derivatives contracts such as put contracts, which give their owners the right to sell the underlying asset at a specified price, can be used to similar effect. If an investor prefers to seek a 1:5 risk/reward ratio for a specified investment (five units of expected return for each additional unit of risk), then they can modify the stop-loss order and thus adjust the risk/reward ratio. But it is important to understand that by doing so the investor has changed the probability of success in their trade. In the trading example noted above, suppose an investor set a stop-loss order at $18, instead of $15, and they continued to target a $30 profit-taking exit. By doing so they would certainly reduce the size of the potential loss (assuming no change to the number of shares), but they will have increased the likelihood that the price action will trigger their stop loss order. That's because the stop order is proportionally much closer to the entry than the target price is. So although the investor may stand to make a proportionally larger gain (compared to the potential loss), they have a lower probability of receiving this outcome. ## How Do You Calculate the Risk/Return Ratio? To calculate the risk/return ratio (also known as the risk-reward ratio), you need to divide the amount you stand to lose if your investment does not perform as expected (the risk) by the amount you stand to gain if it does (the reward). The formula for the risk/return ratio is: *Risk/Return Ratio = Potential Loss / Potential Gain* ## Why Is the Risk/Return Ratio Important? The risk/return ratio helps investors assess whether a potential investment is worth making. A lower ratio means that the potential reward is greater than the potential risk, while a high ratio means the opposite. By understanding the risk/return ratio, investors can make more informed decisions about their investments and manage their risk more effectively. ## Can the Risk/Return Ratio of an Investment Change Over Time? Yes, the risk/return ratio can change over time as the investment's price moves its potential risk changes. For example, if a stock's price goes up, the potential reward may become less than when it was initially purchased, while the potential risk may have also increased. It's important to regularly monitor the risk/return ratio of your investments and adjust your portfolio accordingly to ensure that your investments align with your goals and risk tolerance. ## The Bottom Line The risk-reward ratio is a measure of potential profit to potential loss for a given investment or project. A lower risk-reward ratio is generally preferable because it offers the potential for a greater return on investment without undue risk-taking. A ratio that is too high indicates that an investment could be overly risky. However, a ratio that is too low should be met with suspicion. Investors should consider their risk tolerance and investment goals when determining the appropriate ratio for their portfolio. Diversifying investments, the use of protective put options, and using stop-loss orders can help optimize your risk-return profile. ***Correction—March 21, 2024**:* This article has been corrected to state that a lower ratio means the potential reward is greater than the potential risk, and a high ratio means the opposite.

What Is the Risk/Reward Ratio? The risk/reward ratio—also known as the risk/return ratio—marks the prospective reward an investor can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare the expected returns of an investment with the amount of risk they must undertake to earn these returns. A lower risk/return ratio is often preferable as it signals less risk for an equivalent potential gain. Consider the following example: an investment with a risk-reward ratio of 1:7 suggests that an investor is willing to risk $1, for the prospect of earning $7. Alternatively, a risk/reward ratio of 1:3 signals that an investor should expect to invest $1, for the prospect of earning $3 on their investment. Traders often use this approach to plan which trades to take, and the ratio is calculated by dividing the amount a trader stands to lose if the price of an asset moves in an unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward). Key Takeaways The risk/reward ratio is used by traders and investors to manage their capital and risk of loss.The ratio helps assess the expected return and risk of a given trade.In general, the greater the risk, the greater the expected return demanded.An appropriate risk reward ratio tends to be anything greater than 1:3. How the Risk/Reward Ratio Works In many cases, market strategists find the ideal risk/reward ratio for their investments to be approximately 1:3, or three units of expected return for every one unit of additional risk. Investors can manage risk/reward more directly through the use of stop-loss orders and derivatives such as put options. The risk/reward ratio is often used as a measure when trading individual stocks. The optimal risk/reward ratio differs widely among various trading strategies. Some trial-and-error methods are usually required to determine which ratio is best for a given trading strategy, and many investors have a pre-specified risk/reward ratio for their investments. Note that the risk/return ratio can be computed as one's personal risk tolerance on an investment, or as the objective calculation of an investment's risk/return profile. In the latter case, expected return is often used in the denominator and potential loss in the numerator. Expected return can be computed in several ways, including projecting historical returns into the future, estimating the weighted probabilities of future outcomes, or using a model like the capital asset pricing model (CAPM). To estimate the potential loss, investors may use a variety of methods, such as analyzing historical price data with technical analysis, using the historical standard deviation of price action, assessing company financial statements with fundamental analysis, and models like value-at-risk (VaR). These methods can help investors identify factors that could impact the investment's value and estimate the potential downside. Estimating the expected return and potential loss is not an exact science, and the actual amount of risk and return may differ from your estimates. Investors should also consider their own risk tolerance when evaluating the potential risk of an investment, as the amount of risk they are willing to take on can vary depending on their personal circumstances and investment goals. What Does the Risk/Reward Ratio Tell You? The risk/reward ratio helps investors manage their risk of losing money on trades. Even if a trader has some profitable trades, they will lose money over time if their win rate is below 50%. The risk/reward ratio measures the difference between a trade entry point to a stop-loss and a sell or take-profit order. Comparing these two provides the ratio of profit to loss, or reward to risk. Investors often use stop-loss orders when trading individual stocks to help minimize losses and directly manage their investments with a risk/reward focus. A stop-loss order is a trading trigger placed on a stock that automates the selling of the stock from a portfolio if the stock reaches a specified low. Investors can automatically set stop-loss orders through brokerage accounts and typically do not require exorbitant additional trading costs. When the risk/return ratio is abnormally low, it could suggest that the potential gain is disproportionately large relative to the potential risk, which may indicate that the investment is riskier than it might appear. This is why some investors may approach investments with very low risk/return ratios with caution, as a low ratio alone does not guarantee a good investment. Example of the Risk/Reward Ratio in Use Consider this example: A trader purchases 100 shares of XYZ Company at $20 and places a stop-loss order at $15 to ensure that losses will not exceed $500. Also, assume that this trader believes that the price of XYZ will reach $30 in the next few months. In this case, the trader is willing to risk $5 per share to make an expected return of $10 per share after closing the position. Since the trader stands to make double the amount that they have risked, they would be said to have a 1:2 risk/reward ratio on that particular trade. Derivatives contracts such as put contracts, which give their owners the right to sell the underlying asset at a specified price, can be used to similar effect. If an investor prefers to seek a 1:5 risk/reward ratio for a specified investment (five units of expected return for each additional unit of risk), then they can modify the stop-loss order and thus adjust the risk/reward ratio. But it is important to understand that by doing so the investor has changed the probability of success in their trade. In the trading example noted above, suppose an investor set a stop-loss order at $18, instead of $15, and they continued to target a $30 profit-taking exit. By doing so they would certainly reduce the size of the potential loss (assuming no change to the number of shares), but they will have increased the likelihood that the price action will trigger their stop loss order. That's because the stop order is proportionally much closer to the entry than the target price is. So although the investor may stand to make a proportionally larger gain (compared to the potential loss), they have a lower probability of receiving this outcome. How Do You Calculate the Risk/Return Ratio? To calculate the risk/return ratio (also known as the risk-reward ratio), you need to divide the amount you stand to lose if your investment does not perform as expected (the risk) by the amount you stand to gain if it does (the reward).The formula for the risk/return ratio is:Risk/Return Ratio = Potential Loss / Potential Gain Why Is the Risk/Return Ratio Important? The risk/return ratio helps investors assess whether a potential investment is worth making. A lower ratio means that the potential reward is greater than the potential risk, while a high ratio means the opposite. By understanding the risk/return ratio, investors can make more informed decisions about their investments and manage their risk more effectively. Can the Risk/Return Ratio of an Investment Change Over Time? Yes, the risk/return ratio can change over time as the investment's price moves its potential risk changes. For example, if a stock's price goes up, the potential reward may become less than when it was initially purchased, while the potential risk may have also increased.It's important to regularly monitor the risk/return ratio of your investments and adjust your portfolio accordingly to ensure that your investments align with your goals and risk tolerance. The Bottom Line The risk-reward ratio is a measure of potential profit to potential loss for a given investment or project. A lower risk-reward ratio is generally preferable because it offers the potential for a greater return on investment without undue risk-taking. A ratio that is too high indicates that an investment could be overly risky. However, a ratio that is too low should be met with suspicion. Investors should consider their risk tolerance and investment goals when determining the appropriate ratio for their portfolio. Diversifying investments, the use of protective put options, and using stop-loss orders can help optimize your risk-return profile. Correction—March 21, 2024: This article has been corrected to state that a lower ratio means the potential reward is greater than the potential risk, and a high ratio means the opposite.

https://www.investopedia.com/the-express-podcast-episode-154-7970997

Jay Williams and Joe McLean on Investing in Sports and Building Brands Outside the Lines

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block megaphone" id="mntl-sc-block_1-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://playlist.megaphone.fm/?e=MERE1182952353" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Jay Williams and Joe McLean on Investing in Sports and Building Brands Outside the Lines"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> <strong>Subscribe Now</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197" rel="nofollow">Apple Podcasts</a> / <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9" rel="nofollow">Spotify</a> / <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver">Google Podcasts</a> / <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://player.fm/series/2836180">PlayerFM</a><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Live from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://futureproof.advisorcircle.com/" rel="nofollow">Future Proof Wealth Festival</a> in Huntington Beach, former NBA player, TV host, and college legend <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://twitter.com/realjaywilliams?lang=en">Jay Williams</a>, and MAI Capital's <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://mai.capital/team/joe-mclean/" rel="nofollow">Joe McLean</a> talk about how investing in sports is exploding as teams and athletes become securities, and the athlete is now the asset. Plus, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://grayscale.com/">Grayscale Investments</a> prepares for the SEC to greenlight its ETF. <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://www.etfstream.com/people/david-lavalle" rel="nofollow">Dave Lavalle</a>, Head of ETFs at Grayscale, tells us what to expect if and when that happens. And more and more investors are preparing for no landing as inflation ticks higher ahead of the Fed's decision this week. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

**Subscribe Now**: [Apple Podcasts](https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197) / [Spotify](https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9) / [Google Podcasts](https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver) / [PlayerFM](https://player.fm/series/2836180) Live from the [Future Proof Wealth Festival](https://futureproof.advisorcircle.com/) in Huntington Beach, former NBA player, TV host, and college legend [Jay Williams](https://twitter.com/realjaywilliams?lang=en), and MAI Capital's [Joe McLean](https://mai.capital/team/joe-mclean/) talk about how investing in sports is exploding as teams and athletes become securities, and the athlete is now the asset. Plus, [Grayscale Investments](https://grayscale.com/) prepares for the SEC to greenlight its ETF. [Dave Lavalle](https://www.etfstream.com/people/david-lavalle), Head of ETFs at Grayscale, tells us what to expect if and when that happens. And more and more investors are preparing for no landing as inflation ticks higher ahead of the Fed's decision this week. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Subscribe Now: Apple Podcasts / Spotify / Google Podcasts / PlayerFM Live from the Future Proof Wealth Festival in Huntington Beach, former NBA player, TV host, and college legend Jay Williams, and MAI Capital's Joe McLean talk about how investing in sports is exploding as teams and athletes become securities, and the athlete is now the asset. Plus, Grayscale Investments prepares for the SEC to greenlight its ETF. Dave Lavalle, Head of ETFs at Grayscale, tells us what to expect if and when that happens. And more and more investors are preparing for no landing as inflation ticks higher ahead of the Fed's decision this week. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/i/illiquid.asp

Illiquid Assets: Overview, Risk and Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-illiquid"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Illiquid? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Illiquid refers to the state of a stock, bond, or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value. Illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue, indicated by a lack of ready and willing investors or speculators to purchase or sell the asset. As a result, illiquid assets tend to have lower trading volume, wider <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bid-askspread.asp" rel="noopener noreferrer">bid-ask spreads,</a> and greater price volatility. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Illiquidity is the opposite of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp" rel="noopener noreferrer">liquidity</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Illiquidity occurs when a security or other asset that cannot easily and quickly be sold or exchanged for cash without a substantial loss in value.</li><li>Illiquid assets may be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset, whereas actively traded securities will tend to be more liquid.</li><li>Illiquid assets tend to have wider bid-ask spreads, greater volatility and, as a result, higher risk for investors.</li></ul></div></div></div> <span class="heading-toc" id="toc-illiquidity-explained"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Illiquidity Explained </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Regarding illiquid assets, the lack of ready buyers also leads to larger discrepancies between the asking price, set by the seller, and the bid price, submitted by the buyer. This difference leads to much larger <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bid-askspread.asp" rel="noopener noreferrer">bid-ask spreads</a> than would be found in an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/orderlymarket.asp" rel="noopener noreferrer">orderly market</a> with daily trading activity. The lack of depth of the market (DOM), or ready buyers, can cause holders of illiquid assets to experience losses, especially when the investor is looking to sell quickly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Illiquidity in the context of a business refers to a company that does not have the cash flows necessary to make its required debt payments, although it does not mean the company is without assets. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalasset.asp" rel="noopener noreferrer">Capital assets</a>, including real estate and production equipment, often have value but are not easily sold when cash is required. The sale of illiquid assets is not a company’s core business. They generally include any property owned by the company that is outside of the products produced for sale. In times of crisis, a company may need to liquidate these assets to avoid <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bankruptcy.asp" rel="noopener noreferrer">bankruptcy</a>, and if this happens quickly, it can dispose of assets at prices far below an orderly fair market price, sometimes known as a fire sale. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Additionally, a company may become illiquid if it is unable to obtain the cash necessary to meet debt obligations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-examples-of-illiquid-and-liquid-assets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Examples of Illiquid and Liquid Assets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Some examples of inherently illiquid assets include houses and other real estate, cars, antiques, private company interests and some types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debtinstrument.asp" rel="noopener noreferrer">debt instruments</a>. Certain collectibles and art pieces are often illiquid assets as well. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Stocks that trade on over-the-counter (OTC) markets are also often less liquid than those listed on robust exchanges. Though these assets may have inherent value, the marketplace in which they are sold often has few buyers in comparison to those interested in the purchase of more liquid assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, ETFs, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp" rel="noopener noreferrer">mutual funds</a>, bonds, and listed commodities, are very liquid and can be sold almost instantaneously during regular market hours at fair market price. Additionally, precious metals, such as gold and silver, are often fairly liquid. Trading after normal business hours can also result in illiquidity because many market participants are not active in the market at those times. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> An asset's liquidity may change over time, depending on outside market influences. This change in price is especially true for collectibles, as an item's popularity in the consumer market may fluctuate dramatically, leading to highly volatile pricing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-illiquidity-and-increased-risk"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Illiquidity and Increased Risk </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/illiquid_option.asp" rel="noopener noreferrer">Illiquid securities</a> carry higher risks than liquid ones, known as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidityrisk.asp" rel="noopener noreferrer">liquidity risk</a>, which becomes especially true during times of market turmoil when the ratio of buyers to sellers is thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Illiquid securities also may demand a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquiditypremium.asp" rel="noopener noreferrer">liquidity premium</a> added to their price to compensate for the fact that they may difficult to dispose of later on. During times of financial panic, markets and credit facilities may seize up, causing a liquidity crisis, when sellers of even marketable securities find it challenging to find eager buyers at fair prices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-real-world-example"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Real World Example </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Illiquidity can leave both companies and individuals unable to generate enough cash to pay their debts. For example, <em>The Economic Times </em>reported that Jet Airways had delayed repayment of overseas debt for the fourth time “in recent months” due to a corporate illiquidity crisis that left the company struggling to access liquid funds. As a result, Jet Airways not only had to ground more than 80 planes, but it also put together a resolution plan that called for the resignation of its chair, Naresh Goyal, and the board voting to allow <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">lenders</a> to take control of the airline.<span class="ql-inline-citation" data-cite="1"></span> </p></div>

## What Is Illiquid? Illiquid refers to the state of a stock, bond, or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value. Illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue, indicated by a lack of ready and willing investors or speculators to purchase or sell the asset. As a result, illiquid assets tend to have lower trading volume, wider [bid-ask spreads,](https://www.investopedia.com/terms/b/bid-askspread.asp) and greater price volatility. Illiquidity is the opposite of [liquidity](https://www.investopedia.com/terms/l/liquidity.asp). ### * Illiquidity occurs when a security or other asset that cannot easily and quickly be sold or exchanged for cash without a substantial loss in value. * Illiquid assets may be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset, whereas actively traded securities will tend to be more liquid. * Illiquid assets tend to have wider bid-ask spreads, greater volatility and, as a result, higher risk for investors. ## Illiquidity Explained Regarding illiquid assets, the lack of ready buyers also leads to larger discrepancies between the asking price, set by the seller, and the bid price, submitted by the buyer. This difference leads to much larger [bid-ask spreads](https://www.investopedia.com/terms/b/bid-askspread.asp) than would be found in an [orderly market](https://www.investopedia.com/terms/o/orderlymarket.asp) with daily trading activity. The lack of depth of the market (DOM), or ready buyers, can cause holders of illiquid assets to experience losses, especially when the investor is looking to sell quickly. Illiquidity in the context of a business refers to a company that does not have the cash flows necessary to make its required debt payments, although it does not mean the company is without assets. [Capital assets](https://www.investopedia.com/terms/c/capitalasset.asp), including real estate and production equipment, often have value but are not easily sold when cash is required. The sale of illiquid assets is not a company’s core business. They generally include any property owned by the company that is outside of the products produced for sale. In times of crisis, a company may need to liquidate these assets to avoid [bankruptcy](https://www.investopedia.com/terms/b/bankruptcy.asp), and if this happens quickly, it can dispose of assets at prices far below an orderly fair market price, sometimes known as a fire sale. Additionally, a company may become illiquid if it is unable to obtain the cash necessary to meet debt obligations. ## Examples of Illiquid and Liquid Assets Some examples of inherently illiquid assets include houses and other real estate, cars, antiques, private company interests and some types of [debt instruments](https://www.investopedia.com/terms/d/debtinstrument.asp). Certain collectibles and art pieces are often illiquid assets as well. Stocks that trade on over-the-counter (OTC) markets are also often less liquid than those listed on robust exchanges. Though these assets may have inherent value, the marketplace in which they are sold often has few buyers in comparison to those interested in the purchase of more liquid assets. On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, ETFs, [mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp), bonds, and listed commodities, are very liquid and can be sold almost instantaneously during regular market hours at fair market price. Additionally, precious metals, such as gold and silver, are often fairly liquid. Trading after normal business hours can also result in illiquidity because many market participants are not active in the market at those times. An asset's liquidity may change over time, depending on outside market influences. This change in price is especially true for collectibles, as an item's popularity in the consumer market may fluctuate dramatically, leading to highly volatile pricing. ## Illiquidity and Increased Risk [Illiquid securities](https://www.investopedia.com/terms/i/illiquid_option.asp) carry higher risks than liquid ones, known as [liquidity risk](https://www.investopedia.com/terms/l/liquidityrisk.asp), which becomes especially true during times of market turmoil when the ratio of buyers to sellers is thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing money. Illiquid securities also may demand a [liquidity premium](https://www.investopedia.com/terms/l/liquiditypremium.asp) added to their price to compensate for the fact that they may difficult to dispose of later on. During times of financial panic, markets and credit facilities may seize up, causing a liquidity crisis, when sellers of even marketable securities find it challenging to find eager buyers at fair prices. ## Real World Example Illiquidity can leave both companies and individuals unable to generate enough cash to pay their debts. For example, *The Economic Times* reported that Jet Airways had delayed repayment of overseas debt for the fourth time “in recent months” due to a corporate illiquidity crisis that left the company struggling to access liquid funds. As a result, Jet Airways not only had to ground more than 80 planes, but it also put together a resolution plan that called for the resignation of its chair, Naresh Goyal, and the board voting to allow [lenders](https://www.investopedia.com/terms/l/lender.asp) to take control of the airline.

What Is Illiquid? Illiquid refers to the state of a stock, bond, or other assets that cannot easily and readily be sold or exchanged for cash without a substantial loss in value. Illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue, indicated by a lack of ready and willing investors or speculators to purchase or sell the asset. As a result, illiquid assets tend to have lower trading volume, wider bid-ask spreads, and greater price volatility. Illiquidity is the opposite of liquidity. Illiquidity occurs when a security or other asset that cannot easily and quickly be sold or exchanged for cash without a substantial loss in value.Illiquid assets may be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset, whereas actively traded securities will tend to be more liquid.Illiquid assets tend to have wider bid-ask spreads, greater volatility and, as a result, higher risk for investors. Illiquidity Explained Regarding illiquid assets, the lack of ready buyers also leads to larger discrepancies between the asking price, set by the seller, and the bid price, submitted by the buyer. This difference leads to much larger bid-ask spreads than would be found in an orderly market with daily trading activity. The lack of depth of the market (DOM), or ready buyers, can cause holders of illiquid assets to experience losses, especially when the investor is looking to sell quickly. Illiquidity in the context of a business refers to a company that does not have the cash flows necessary to make its required debt payments, although it does not mean the company is without assets. Capital assets, including real estate and production equipment, often have value but are not easily sold when cash is required. The sale of illiquid assets is not a company’s core business. They generally include any property owned by the company that is outside of the products produced for sale. In times of crisis, a company may need to liquidate these assets to avoid bankruptcy, and if this happens quickly, it can dispose of assets at prices far below an orderly fair market price, sometimes known as a fire sale. Additionally, a company may become illiquid if it is unable to obtain the cash necessary to meet debt obligations. Examples of Illiquid and Liquid Assets Some examples of inherently illiquid assets include houses and other real estate, cars, antiques, private company interests and some types of debt instruments. Certain collectibles and art pieces are often illiquid assets as well. Stocks that trade on over-the-counter (OTC) markets are also often less liquid than those listed on robust exchanges. Though these assets may have inherent value, the marketplace in which they are sold often has few buyers in comparison to those interested in the purchase of more liquid assets. On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, ETFs, mutual funds, bonds, and listed commodities, are very liquid and can be sold almost instantaneously during regular market hours at fair market price. Additionally, precious metals, such as gold and silver, are often fairly liquid. Trading after normal business hours can also result in illiquidity because many market participants are not active in the market at those times. An asset's liquidity may change over time, depending on outside market influences. This change in price is especially true for collectibles, as an item's popularity in the consumer market may fluctuate dramatically, leading to highly volatile pricing. Illiquidity and Increased Risk Illiquid securities carry higher risks than liquid ones, known as liquidity risk, which becomes especially true during times of market turmoil when the ratio of buyers to sellers is thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing money. Illiquid securities also may demand a liquidity premium added to their price to compensate for the fact that they may difficult to dispose of later on. During times of financial panic, markets and credit facilities may seize up, causing a liquidity crisis, when sellers of even marketable securities find it challenging to find eager buyers at fair prices. Real World Example Illiquidity can leave both companies and individuals unable to generate enough cash to pay their debts. For example, The Economic Times reported that Jet Airways had delayed repayment of overseas debt for the fourth time “in recent months” due to a corporate illiquidity crisis that left the company struggling to access liquid funds. As a result, Jet Airways not only had to ground more than 80 planes, but it also put together a resolution plan that called for the resignation of its chair, Naresh Goyal, and the board voting to allow lenders to take control of the airline.

https://www.investopedia.com/14-cds-that-let-you-lock-your-high-rate-until-2026-or-even-longer-8645437

14 CDs That Let You Lock in a High Rate Until 2026—Or Even Longer

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>CD rates surged to a 20-year peak last fall, thanks to the Federal Reserve's aggressive battle against decades-high inflation.</li> <li>Though rates have come down slightly, you can still earn a historically high return by committing some of your savings to a CD.</li> <li>CD rates are largely influenced by the federal funds rate, which is set by the Fed.</li> <li>Since it's possible the Fed will start lowering rates in 2024, and perhaps continuing in 2025, it's a smart time to lock in one of today's stellar CD rates for a term of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-2-year-cd-rates-4801682">2 years or more</a>.</li> <li>Our daily rankings of the best CDs offers 14 great options for locking in your rate until at least 2026, and up to 2029.</li> </ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The full article continues below these offers from our partners. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block mntl-sc-block-tool mntl-block mntl-sc-block--ma-rate-table--finance-mma" id="mntl-sc-block_5-0"><span class="comp prm-external-component-tools mntl-external-component" id="prm-external-component-tools_1-0"><div class="comp ma-rate-table--finance-mma mntl-block" id="ma-rate-table--finance-mma_1-0"></div><!-- end: comp ma-rate-table--finance-mma mntl-block --> </span></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <span class="heading-toc" id="toc-todays-best-rates-on-medium-to-long-term-cds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Today's Best Rates on Medium- to Long-Term CDs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Our daily ranking of the best CD rates always provides you with a list of the highest nationally available offers in terms as short as 3 months. But for terms of 2 to 5 years, here's our roundup of today's hottest rates. These CDs will pay dividends until at least 2026. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_10-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Top CD Rates You Can Lock in Until 2026 to 2029</th> </tr> </thead> <tbody data-check="-1"> <tr> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <th>Best 2-Year CDs - Mature 2026</th> <th>APY</th> <th>Term (months)</th> <th>Minimum</th> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&amp;lender=Credit%20Human&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Credit Human</a></td> <td>5.30%</td> <td>18-23</td> <td>$500</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.cbtno.com/banking/certificates-of-deposit/&amp;lender=Crescent%20Bank&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Crescent Bank</a></td> <td>5.00%</td> <td>24</td> <td>$1,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.mysafra.com/Personal-Banking/MYSB-Direct&amp;lender=MYSB%20Direct&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">MYSB Direct</a></td> <td>4.90%</td> <td>24</td> <td>$500</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.docfcu.org/certificates-savings/&amp;lender=Department%20of%20Commerce%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Department of Commerce Federal Credit Union</a></td> <td>4.86%</td> <td>12-23</td> <td>$25,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.myebanc.com/online-products/online-time-deposits/&amp;lender=My%20eBanc&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">My eBanc</a></td> <td>4.85%</td> <td>24</td> <td>$5,000</td> </tr> <tr> <th><b>Best </b>3-Year CDs - Mature 2027</th> <th>APY</th> <th>Term (months)</th> <th><b>Minimum</b></th> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.wcu.com/rates&amp;lender=Workers%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Workers Credit Union</a></td> <td>5.00%</td> <td>36</td> <td>$500</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.dollarsavingsdirect.com/securebanking/cdInfo.do&amp;lender=DollarSavingsDirect&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">DollarSavingsDirect</a></td> <td>5.00%</td> <td>36</td> <td>$1,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://transfcu.org/share-certificate/&amp;lender=Transportation%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Transportation Federal Credit Union</a></td> <td>5.00%</td> <td>36</td> <td>$1,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.hughesfcu.org/products/detail/certificate-accounts&amp;lender=Hughes%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Hughes Federal Credit Union</a></td> <td>4.86%</td> <td>36</td> <td>$1,000</td> </tr> <tr> <td></td> <td></td> <td></td> <td></td> </tr> <tr> <th><b>Best 4-Year CDs - Mature 2028</b></th> <th>APY</th> <th>Term (months)</th> <th><b>Minimum</b></th> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.wellbyfinancial.com/savings/certificates/&amp;lender=Wellby%20Financial&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Wellby Financial</a></td> <td>4.86%</td> <td>48</td> <td>$1,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&amp;lender=Credit%20Human&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Credit Human</a></td> <td>4.70%</td> <td>36-59</td> <td>$500</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.docfcu.org/certificates-savings/&amp;lender=Department%20of%20Commerce%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Department of Commerce Federal Credit Union</a></td> <td>4.60%</td> <td>36-47</td> <td>$25,000</td> </tr> <tr> <th><b>Best 5-Year CDs - Mature 2029</b></th> <th><b>Rate</b></th> <th>Term (months)</th> <th><b>Minimum</b></th> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&amp;lender=Credit%20Human&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">Credit Human</a></td> <td>4.70%</td> <td>36-59</td> <td>$500</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.fnba.com/online-banking/online-cd-rates/&amp;lender=First%20National%20Bank%20and%20America&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">First National Bank of America</a></td> <td>4.55%</td> <td>60</td> <td>$1,000</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://alto.bmo.com/en-us/high-yield-cd/&amp;lender=BMO%20Alto&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="noopener noreferrer nofollow">BMO Alto</a></td> <td>4.50%</td> <td>60</td> <td>Any amount</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>All CDs listed above are available nationwide, even if offered by a credit union. And all are federally insured—covered by the Federal Deposit Insurance Corporation (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic-insured-account.asp">FDIC</a>) for banks or the National Credit Union Administration (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua-insured-institution.asp">NCUA</a>) for credit unions. That means even in the very unlikely case the institution fails, your deposits of up to $250,000 are protected.</p></div></div></div> <span class="heading-toc" id="toc-how-cd-rates-got-this-highand-where-theyre-headed-next"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> How CD Rates Got This High—And Where They're Headed Next </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> More than two years ago, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalreservebank.asp">Federal Reserve</a> embarked on an aggressive rate-hike campaign in a fight against decades-high inflation. With 11 increases to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalfundsrate.asp">federal funds rate</a> between March 2022 and July 2023, the Fed raised that benchmark rate by a cumulative 5.25%. That's the highest level for the fed funds rate since 2001.<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Bank and credit union deposit rates are directly influenced by the federal funds rate. As a result, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificate of deposit (CD)</a> rates surged in 2023. But since then, CD rates have softened a bit, after the Fed implemented multiple rate holds.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> While expectations earlier this year were that we'd see the central bank reduce the federal funds rate more than once this calendar year, rate cuts are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952">currently far less certain</a>. The reason is inflation. While the Fed had succeeded in tamping down inflation to about 3.0% in recent months, the March inflation reading <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">came in at 3.5%</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The Fed has repeatedly said it will not cut rates until it feels confident <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a> is coming down both sufficiently and sustainably toward the Fed's 2% target. As a result of the recent inflation uptick, it now looks far less sure whether the central bankers will get to that level of confidence in 2024. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> As a result, savings account and CD rates have roughly plateaued as banks and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit unions</a> wait for more certainty on how long the fed funds rate will stay put. What we do know is that once the Fed signals it's ready to begin lowering its rate, savings and CD returns will start to drift downwards as well. That means we could see lower deposit rates later this year—and possibly 2025 rates that are lower still. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> That Makes Now a Smart Time for Multi-Year CDs </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Given the possibility of falling savings account and CD rates, it's currently a good move to stash money you won't need for a while in a CD that will <em>secure</em> one of today's historically high rates. And the longer you can commit, the longer you'll enjoy that rate guarantee—no matter what happens with the Fed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Right now, the highest returns are available on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">shorter-term CDs</a>. But since odds are reasonable that interest rates could enter a two- to three-year slide, it could be smart to lock in a rate today that will be guaranteed for two years—or even longer if you feel confident you can live without access to the funds.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_30-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/x924S/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="CD rates in 2022 vs. Fall peak vs. Today"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-cant-commit-for-two-years-here-are-your-next-best-options"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Can't Commit for Two Years? Here Are Your Next-Best Options </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> If you don't have funds you're willing to lock up for a couple of years, that doesn't mean you can't still benefit from today's historically high rates. Instead, you could put money in a shorter-term CD, depending on your personal timeline: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-3-month-cd-rates-5272288">Today's Best 3-Month CD Rates</a> - Rates up to 5.65%</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-6-month-cd-rates-4783267">Today's Best 6-Month CD Rates</a> - Rates up to 5.55%</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-1-year-cd-rates-4796650">Today's Best 1-Year CD Rates</a> - Rates up to 5.40%</li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-18-month-cd-rates-5272348">Today's Best 18-Month CD Rates</a> - Rates up to 5.40%</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> As you can see, many of these CDs pay higher rates than you'll find for terms of two years or longer. That makes them near-term winners. But your rate guarantee will end sooner. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> For money you need to keep fully accessible and therefore can't commit at all, consider a high-yield savings account. Our daily ranking of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-savings-accounts-4770633">the best savings account rates</a> reaches up to 5.55% APY, with more than 10 additional offers paying 5.25% or more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_41-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_42-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Just remember: Savings account rates are variable, meaning they can change at any time. Right now, the top high-yield savings account rate is at a 20-year high. But once a Fed rate cut appears on the horizon, savings account rates will start to decline.</p></div></div></div> <div class="comp mntl-sc-block mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_44-0"><a class="mntl-sc-block-featuredlink__link mntl-text-link" data-tracking-container="true" data-tracking-id="featured-link" href="https://www.investopedia.com/best-jumbo-cd-rates-4797766" id="mntl-sc-block-featuredlink__link_1-0" rel="nocaes"><span class="link__wrapper">Best Jumbo CD Rates for May 2024</span></a></div> <div class="comp mntl-sc-block mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_46-0"><a class="mntl-sc-block-featuredlink__link mntl-text-link" data-tracking-container="true" data-tracking-id="featured-link" href="https://www.investopedia.com/best-money-market-accounts-5096917" id="mntl-sc-block-featuredlink__link_2-0" rel="nocaes"><span class="link__wrapper">Best Money Market Account Rates for May 2024—Up to 5.35%</span></a></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-how-we-find-the-best-savings-and-cd-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> How We Find the Best Savings and CD Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic-insured-account.asp">FDIC</a> for banks, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua-insured-institution.asp">NCUA</a> for credit unions), and the account's minimum initial deposit must not exceed $25,000. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816">read our full methodology</a>. </p></div>

### Key Takeaways * CD rates surged to a 20-year peak last fall, thanks to the Federal Reserve's aggressive battle against decades-high inflation. * Though rates have come down slightly, you can still earn a historically high return by committing some of your savings to a CD. * CD rates are largely influenced by the federal funds rate, which is set by the Fed. * Since it's possible the Fed will start lowering rates in 2024, and perhaps continuing in 2025, it's a smart time to lock in one of today's stellar CD rates for a term of [2 years or more](https://www.investopedia.com/best-2-year-cd-rates-4801682). * Our daily rankings of the best CDs offers 14 great options for locking in your rate until at least 2026, and up to 2029. The full article continues below these offers from our partners. ## Today's Best Rates on Medium- to Long-Term CDs Our daily ranking of the best CD rates always provides you with a list of the highest nationally available offers in terms as short as 3 months. But for terms of 2 to 5 years, here's our roundup of today's hottest rates. These CDs will pay dividends until at least 2026. | Top CD Rates You Can Lock in Until 2026 to 2029 | | | | | --- | --- | --- | --- | | | | | | | | | | | | Best 2-Year CDs - Mature 2026 | APY | Term (months) | Minimum | | [Credit Human](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&lender=Credit%20Human&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.30% | 18-23 | $500 | | [Crescent Bank](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.cbtno.com/banking/certificates-of-deposit/&lender=Crescent%20Bank&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.00% | 24 | $1,000 | | [MYSB Direct](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.mysafra.com/Personal-Banking/MYSB-Direct&lender=MYSB%20Direct&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.90% | 24 | $500 | | [Department of Commerce Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.docfcu.org/certificates-savings/&lender=Department%20of%20Commerce%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.86% | 12-23 | $25,000 | | [My eBanc](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.myebanc.com/online-products/online-time-deposits/&lender=My%20eBanc&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.85% | 24 | $5,000 | | **Best** 3-Year CDs - Mature 2027 | APY | Term (months) | **Minimum** | | [Workers Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.wcu.com/rates&lender=Workers%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.00% | 36 | $500 | | [DollarSavingsDirect](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.dollarsavingsdirect.com/securebanking/cdInfo.do&lender=DollarSavingsDirect&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.00% | 36 | $1,000 | | [Transportation Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://transfcu.org/share-certificate/&lender=Transportation%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.00% | 36 | $1,000 | | [Hughes Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.hughesfcu.org/products/detail/certificate-accounts&lender=Hughes%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.86% | 36 | $1,000 | | | | | | | **Best 4-Year CDs - Mature 2028** | APY | Term (months) | **Minimum** | | [Wellby Financial](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.wellbyfinancial.com/savings/certificates/&lender=Wellby%20Financial&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.86% | 48 | $1,000 | | [Credit Human](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&lender=Credit%20Human&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.70% | 36-59 | $500 | | [Department of Commerce Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.docfcu.org/certificates-savings/&lender=Department%20of%20Commerce%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.60% | 36-47 | $25,000 | | **Best 5-Year CDs - Mature 2029** | **Rate** | Term (months) | **Minimum** | | [Credit Human](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.credithuman.com/investments-planning/certificates-iras/share-certificate&lender=Credit%20Human&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.70% | 36-59 | $500 | | [First National Bank of America](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.fnba.com/online-banking/online-cd-rates/&lender=First%20National%20Bank%20and%20America&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.55% | 60 | $1,000 | | [BMO Alto](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://alto.bmo.com/en-us/high-yield-cd/&lender=BMO%20Alto&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.50% | 60 | Any amount | ### All CDs listed above are available nationwide, even if offered by a credit union. And all are federally insured—covered by the Federal Deposit Insurance Corporation ([FDIC](https://www.investopedia.com/terms/f/fdic-insured-account.asp)) for banks or the National Credit Union Administration ([NCUA](https://www.investopedia.com/terms/n/ncua-insured-institution.asp)) for credit unions. That means even in the very unlikely case the institution fails, your deposits of up to $250,000 are protected. ## How CD Rates Got This High—And Where They're Headed Next More than two years ago, the [Federal Reserve](https://www.investopedia.com/terms/f/federalreservebank.asp) embarked on an aggressive rate-hike campaign in a fight against decades-high inflation. With 11 increases to the [federal funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp) between March 2022 and July 2023, the Fed raised that benchmark rate by a cumulative 5.25%. That's the highest level for the fed funds rate since 2001. Bank and credit union deposit rates are directly influenced by the federal funds rate. As a result, [certificate of deposit (CD)](https://www.investopedia.com/terms/c/certificateofdeposit.asp) rates surged in 2023. But since then, CD rates have softened a bit, after the Fed implemented multiple rate holds. While expectations earlier this year were that we'd see the central bank reduce the federal funds rate more than once this calendar year, rate cuts are [currently far less certain](https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952). The reason is inflation. While the Fed had succeeded in tamping down inflation to about 3.0% in recent months, the March inflation reading [came in at 3.5%](https://www.investopedia.com/inflation-heated-up-in-march-8629363). The Fed has repeatedly said it will not cut rates until it feels confident [inflation](https://www.investopedia.com/terms/i/inflation.asp) is coming down both sufficiently and sustainably toward the Fed's 2% target. As a result of the recent inflation uptick, it now looks far less sure whether the central bankers will get to that level of confidence in 2024. As a result, savings account and CD rates have roughly plateaued as banks and [credit unions](https://www.investopedia.com/terms/c/creditunion.asp) wait for more certainty on how long the fed funds rate will stay put. What we do know is that once the Fed signals it's ready to begin lowering its rate, savings and CD returns will start to drift downwards as well. That means we could see lower deposit rates later this year—and possibly 2025 rates that are lower still. ### That Makes Now a Smart Time for Multi-Year CDs Given the possibility of falling savings account and CD rates, it's currently a good move to stash money you won't need for a while in a CD that will *secure* one of today's historically high rates. And the longer you can commit, the longer you'll enjoy that rate guarantee—no matter what happens with the Fed. Right now, the highest returns are available on [shorter-term CDs](https://www.investopedia.com/best-cd-rates-4770214). But since odds are reasonable that interest rates could enter a two- to three-year slide, it could be smart to lock in a rate today that will be guaranteed for two years—or even longer if you feel confident you can live without access to the funds. ## Can't Commit for Two Years? Here Are Your Next-Best Options If you don't have funds you're willing to lock up for a couple of years, that doesn't mean you can't still benefit from today's historically high rates. Instead, you could put money in a shorter-term CD, depending on your personal timeline: * [Today's Best 3-Month CD Rates](https://www.investopedia.com/best-3-month-cd-rates-5272288) - Rates up to 5.65% * [Today's Best 6-Month CD Rates](https://www.investopedia.com/best-6-month-cd-rates-4783267) - Rates up to 5.55% * [Today's Best 1-Year CD Rates](https://www.investopedia.com/best-1-year-cd-rates-4796650) - Rates up to 5.40% * [Today's Best 18-Month CD Rates](https://www.investopedia.com/best-18-month-cd-rates-5272348) - Rates up to 5.40% As you can see, many of these CDs pay higher rates than you'll find for terms of two years or longer. That makes them near-term winners. But your rate guarantee will end sooner. For money you need to keep fully accessible and therefore can't commit at all, consider a high-yield savings account. Our daily ranking of [the best savings account rates](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) reaches up to 5.55% APY, with more than 10 additional offers paying 5.25% or more. ### Just remember: Savings account rates are variable, meaning they can change at any time. Right now, the top high-yield savings account rate is at a 20-year high. But once a Fed rate cut appears on the horizon, savings account rates will start to decline. [Best Jumbo CD Rates for May 2024](https://www.investopedia.com/best-jumbo-cd-rates-4797766) [Best Money Market Account Rates for May 2024—Up to 5.35%](https://www.investopedia.com/best-money-market-accounts-5096917) ## How We Find the Best Savings and CD Rates Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured ([FDIC](https://www.investopedia.com/terms/f/fdic-insured-account.asp) for banks, [NCUA](https://www.investopedia.com/terms/n/ncua-insured-institution.asp) for credit unions), and the account's minimum initial deposit must not exceed $25,000. Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, [read our full methodology](https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816).

Key Takeaways CD rates surged to a 20-year peak last fall, thanks to the Federal Reserve's aggressive battle against decades-high inflation. Though rates have come down slightly, you can still earn a historically high return by committing some of your savings to a CD. CD rates are largely influenced by the federal funds rate, which is set by the Fed. Since it's possible the Fed will start lowering rates in 2024, and perhaps continuing in 2025, it's a smart time to lock in one of today's stellar CD rates for a term of 2 years or more. Our daily rankings of the best CDs offers 14 great options for locking in your rate until at least 2026, and up to 2029. The full article continues below these offers from our partners. Today's Best Rates on Medium- to Long-Term CDs Our daily ranking of the best CD rates always provides you with a list of the highest nationally available offers in terms as short as 3 months. But for terms of 2 to 5 years, here's our roundup of today's hottest rates. These CDs will pay dividends until at least 2026. Top CD Rates You Can Lock in Until 2026 to 2029 Best 2-Year CDs - Mature 2026 APY Term (months) Minimum Credit Human 5.30% 18-23 $500 Crescent Bank 5.00% 24 $1,000 MYSB Direct 4.90% 24 $500 Department of Commerce Federal Credit Union 4.86% 12-23 $25,000 My eBanc 4.85% 24 $5,000 Best 3-Year CDs - Mature 2027 APY Term (months) Minimum Workers Credit Union 5.00% 36 $500 DollarSavingsDirect 5.00% 36 $1,000 Transportation Federal Credit Union 5.00% 36 $1,000 Hughes Federal Credit Union 4.86% 36 $1,000 Best 4-Year CDs - Mature 2028 APY Term (months) Minimum Wellby Financial 4.86% 48 $1,000 Credit Human 4.70% 36-59 $500 Department of Commerce Federal Credit Union 4.60% 36-47 $25,000 Best 5-Year CDs - Mature 2029 Rate Term (months) Minimum Credit Human 4.70% 36-59 $500 First National Bank of America 4.55% 60 $1,000 BMO Alto 4.50% 60 Any amount All CDs listed above are available nationwide, even if offered by a credit union. And all are federally insured—covered by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Administration (NCUA) for credit unions. That means even in the very unlikely case the institution fails, your deposits of up to $250,000 are protected. How CD Rates Got This High—And Where They're Headed Next More than two years ago, the Federal Reserve embarked on an aggressive rate-hike campaign in a fight against decades-high inflation. With 11 increases to the federal funds rate between March 2022 and July 2023, the Fed raised that benchmark rate by a cumulative 5.25%. That's the highest level for the fed funds rate since 2001. Bank and credit union deposit rates are directly influenced by the federal funds rate. As a result, certificate of deposit (CD) rates surged in 2023. But since then, CD rates have softened a bit, after the Fed implemented multiple rate holds. While expectations earlier this year were that we'd see the central bank reduce the federal funds rate more than once this calendar year, rate cuts are currently far less certain. The reason is inflation. While the Fed had succeeded in tamping down inflation to about 3.0% in recent months, the March inflation reading came in at 3.5%. The Fed has repeatedly said it will not cut rates until it feels confident inflation is coming down both sufficiently and sustainably toward the Fed's 2% target. As a result of the recent inflation uptick, it now looks far less sure whether the central bankers will get to that level of confidence in 2024. As a result, savings account and CD rates have roughly plateaued as banks and credit unions wait for more certainty on how long the fed funds rate will stay put. What we do know is that once the Fed signals it's ready to begin lowering its rate, savings and CD returns will start to drift downwards as well. That means we could see lower deposit rates later this year—and possibly 2025 rates that are lower still. That Makes Now a Smart Time for Multi-Year CDs Given the possibility of falling savings account and CD rates, it's currently a good move to stash money you won't need for a while in a CD that will secure one of today's historically high rates. And the longer you can commit, the longer you'll enjoy that rate guarantee—no matter what happens with the Fed. Right now, the highest returns are available on shorter-term CDs. But since odds are reasonable that interest rates could enter a two- to three-year slide, it could be smart to lock in a rate today that will be guaranteed for two years—or even longer if you feel confident you can live without access to the funds. Can't Commit for Two Years? Here Are Your Next-Best Options If you don't have funds you're willing to lock up for a couple of years, that doesn't mean you can't still benefit from today's historically high rates. Instead, you could put money in a shorter-term CD, depending on your personal timeline: Today's Best 3-Month CD Rates - Rates up to 5.65% Today's Best 6-Month CD Rates - Rates up to 5.55% Today's Best 1-Year CD Rates - Rates up to 5.40% Today's Best 18-Month CD Rates - Rates up to 5.40% As you can see, many of these CDs pay higher rates than you'll find for terms of two years or longer. That makes them near-term winners. But your rate guarantee will end sooner. For money you need to keep fully accessible and therefore can't commit at all, consider a high-yield savings account. Our daily ranking of the best savings account rates reaches up to 5.55% APY, with more than 10 additional offers paying 5.25% or more. Just remember: Savings account rates are variable, meaning they can change at any time. Right now, the top high-yield savings account rate is at a 20-year high. But once a Fed rate cut appears on the horizon, savings account rates will start to decline. Best Jumbo CD Rates for May 2024 Best Money Market Account Rates for May 2024—Up to 5.35% How We Find the Best Savings and CD Rates Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000. Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

https://www.investopedia.com/the-us-is-investing-usd5b-in-chip-r-and-d-here-s-what-you-need-to-know-8575378

The US Is Investing $5B in Chip R&D—Here's What You Need to Know

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The White House announced Friday a $5 billion investment into semiconductor-focused research, development, and workforce needs as part of the CHIPS and Science Act.</li><li>The announcement is the latest phase of the CHIPS and Science Act of 2022, meant to support chip manufacturing in the U.S. and boost its competitiveness.</li><li>The move comes as demand for chips to power artificial intelligence (AI) systems booms.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> President Joe Biden's administration is investing more than $5 billion into <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/semiconductor.asp">semiconductor</a>-related development to strengthen America's chip industry as demand for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">artificial intelligence (AI)</a> tech hardware booms.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The administration said Friday the money will go toward the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/randd.asp">research and development (R&amp;D)</a> of semiconductors as well as developing workforce in the industry.<span class="ql-inline-citation" data-cite="1"></span> The announcement is the latest phase of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chips-and-science-act-6500333">CHIPS and Science Act of 2022</a>, which created the largest publicly funded R&amp;D program in American history to support chip manufacturing in the U.S. and reduce reliance on other countries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> "These investments advance U.S. leadership in semiconductor R&amp;D, cut down on the time and cost of commercializing new technologies, bolster U.S. national security, and connect and support workers in securing good semiconductor jobs," the White House said.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The White House announced its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/semiconductor-shares-rise-following-first-us-grant-under-chips-act-8414335">first grant</a> under the CHIPS and Science Act in December. Defense contractor BAE Systems (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=baesy">BAESY</a>) received $35 million to modernize an aging factory in Nashua, New Hampshire. The move sent shares of chipmakers like Intel (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=INTC">INTC</a>) and Advanced Micro Devices (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMD">AMD</a>) higher at the time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Last month, the Commerce Department also said it would <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/microchip-wins-usd162-million-in-chips-funding-to-expand-chip-factories-8422143">grant Microchip Technology</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP">MCHP</a>) $162 million in federal funding from the CHIPS Act to boost chip production. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Semiconductor stocks including Intel, AMD, Nvidia, and Broadcom (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AVGO">AVGO</a>) advanced Friday following the news. The <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soxx.asp">PHLX Semiconductor Index</a> has gained more than 50% over the past year. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * The White House announced Friday a $5 billion investment into semiconductor-focused research, development, and workforce needs as part of the CHIPS and Science Act. * The announcement is the latest phase of the CHIPS and Science Act of 2022, meant to support chip manufacturing in the U.S. and boost its competitiveness. * The move comes as demand for chips to power artificial intelligence (AI) systems booms. President Joe Biden's administration is investing more than $5 billion into [semiconductor](https://www.investopedia.com/terms/s/semiconductor.asp)-related development to strengthen America's chip industry as demand for [artificial intelligence (AI)](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) tech hardware booms. The administration said Friday the money will go toward the [research and development (R&D)](https://www.investopedia.com/terms/r/randd.asp) of semiconductors as well as developing workforce in the industry. The announcement is the latest phase of the [CHIPS and Science Act of 2022](https://www.investopedia.com/chips-and-science-act-6500333), which created the largest publicly funded R&D program in American history to support chip manufacturing in the U.S. and reduce reliance on other countries. "These investments advance U.S. leadership in semiconductor R&D, cut down on the time and cost of commercializing new technologies, bolster U.S. national security, and connect and support workers in securing good semiconductor jobs," the White House said. The White House announced its [first grant](https://www.investopedia.com/semiconductor-shares-rise-following-first-us-grant-under-chips-act-8414335) under the CHIPS and Science Act in December. Defense contractor BAE Systems ([BAESY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=baesy)) received $35 million to modernize an aging factory in Nashua, New Hampshire. The move sent shares of chipmakers like Intel ([INTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=INTC)) and Advanced Micro Devices ([AMD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMD)) higher at the time. Last month, the Commerce Department also said it would [grant Microchip Technology](https://www.investopedia.com/microchip-wins-usd162-million-in-chips-funding-to-expand-chip-factories-8422143) ([MCHP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP)) $162 million in federal funding from the CHIPS Act to boost chip production. Semiconductor stocks including Intel, AMD, Nvidia, and Broadcom ([AVGO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AVGO)) advanced Friday following the news. The [PHLX Semiconductor Index](https://www.investopedia.com/terms/s/soxx.asp) has gained more than 50% over the past year. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways The White House announced Friday a $5 billion investment into semiconductor-focused research, development, and workforce needs as part of the CHIPS and Science Act.The announcement is the latest phase of the CHIPS and Science Act of 2022, meant to support chip manufacturing in the U.S. and boost its competitiveness.The move comes as demand for chips to power artificial intelligence (AI) systems booms. President Joe Biden's administration is investing more than $5 billion into semiconductor-related development to strengthen America's chip industry as demand for artificial intelligence (AI) tech hardware booms. The administration said Friday the money will go toward the research and development (R&D) of semiconductors as well as developing workforce in the industry. The announcement is the latest phase of the CHIPS and Science Act of 2022, which created the largest publicly funded R&D program in American history to support chip manufacturing in the U.S. and reduce reliance on other countries. "These investments advance U.S. leadership in semiconductor R&D, cut down on the time and cost of commercializing new technologies, bolster U.S. national security, and connect and support workers in securing good semiconductor jobs," the White House said. The White House announced its first grant under the CHIPS and Science Act in December. Defense contractor BAE Systems (BAESY) received $35 million to modernize an aging factory in Nashua, New Hampshire. The move sent shares of chipmakers like Intel (INTC) and Advanced Micro Devices (AMD) higher at the time. Last month, the Commerce Department also said it would grant Microchip Technology (MCHP) $162 million in federal funding from the CHIPS Act to boost chip production. Semiconductor stocks including Intel, AMD, Nvidia, and Broadcom (AVGO) advanced Friday following the news. The PHLX Semiconductor Index has gained more than 50% over the past year. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/30-year-mortgage-rates-fall-to-6-territory-may-16-2024-8649614

Mortgage Rates Drop Again, to Lowest Level in 7 Weeks

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Rates on 30-year mortgages dropped for a second day Thursday, after sinking below the 7% threshold Wednesday. Now at 6.83%, the 30-year average is at its lowest level since March. Rates also dipped for many other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-rates-5094943">mortgage types</a>.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Editor's Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p>As of May 1, our daily mortgage rate averages have been provided via the Zillow Mortgage API. As this involves a different rate source as well as a new methodology, our current averages will not directly align with those we published prior to May 1, 2024. All the historical data and analysis in this article and future articles are also based on this new data source.</p></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_5-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:76.1%;"> <img alt="Line graph showing the last 90 days of the 30-year new purchase mortgage rate average - May 17, 2024" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/iSX505y8Tzn7GE2hFCNXN5xf2Fs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/iSX505y8Tzn7GE2hFCNXN5xf2Fs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png" data-srcset="https://www.investopedia.com/thmb/FliR1lupWIhrrBlTAqMxw8_vXuI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png 750w" data-tracking-container="true" height="1888" id="mntl-sc-block-image_1-0" width="2480"/> <noscript> <img alt="Line graph showing the last 90 days of the 30-year new purchase mortgage rate average - May 17, 2024" class="img--noscript universal-image__image" height="1888" sizes="750px" src="https://www.investopedia.com/thmb/iSX505y8Tzn7GE2hFCNXN5xf2Fs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png" srcset="https://www.investopedia.com/thmb/FliR1lupWIhrrBlTAqMxw8_vXuI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png 750w" width="2480"/> </noscript> </div> </div> </figure> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_6-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">National Rate Averages for Top 5 Mortgage Types</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Loan Type</b></td> <td><b>New Purchase</b></td> <td><b>Refinance</b></td> </tr> <tr> <td>30-Year Fixed</td> <td>6.83%</td> <td>7.23%</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>6.91%</td> <td>6.60%</td> </tr> <tr> <td>15-Year Fixed</td> <td>5.96%</td> <td>5.72%</td> </tr> <tr> <td>5/6 ARM</td> <td>7.71%</td> <td>7.71%</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>7.00%</td> <td>6.90%</td> </tr> <tr> <td>^{_{<em><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.zillow.com/" rel="noopener noreferrer sponsored nofollow">Provided via the Zillow Mortgage API</a></em>}}</td> <td></td> <td></td> </tr> </tbody> </table> <figcaption>National averages based on a minimum 20% down payment and an applicant credit score of 680 to 739.</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Because rates vary widely across lenders, it's always smart to shop around for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-rates-5094943">your best mortgage option</a> and compare rates regularly no matter the type of home loan you seek. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <div class="comp mntl-sc-block mntl-sc-block-tool mntl-block mntl-sc-block--credible-rate-table--mortgage" id="mntl-sc-block_10-0"><span class="comp prm-external-component-tools mntl-external-component" id="prm-external-component-tools_1-0"><div id="credible-block"></div> </span></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_13-0"><a class="mntl-sc-block-featuredlink__link mntl-text-link" data-tracking-container="true" data-tracking-id="featured-link" href="https://www.investopedia.com/mortgage-rates-5094943" id="mntl-sc-block-featuredlink__link_1-0" rel="nocaes"><span class="link__wrapper">Compare the Best Mortgage Rates Today - May 21, 2024</span></a></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-todays-mortgage-rate-averages-new-purchase"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Today's Mortgage Rate Averages: New Purchase </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> After sinking 16 basis points Wednesday, 30-year mortgage rates inched another basis point lower Thursday. That pushes the average down to 6.83%, its cheapest reading since March 29. After surging to a 5-month high of 7.37% in late April, 30-year mortgage rates have since shed more than a half percentage point. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Rates on 30-year mortgages still remain elevated vs. early February, when the average dipped as low as 6.36%. But 30-year rates are now more than a percentage point below the historic 23-year high of 8.01% we saw in October. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_20-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/kjNq7/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="30-Year Mortgage Rates Since June 2021"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> New purchase 15-year mortgage rates dipped 5 basis points Thursday to fall below the 6% threshold. Now averaging 5.96%, 15-year rates are also at their lowest mark in seven weeks. Additionally, today's 15-year rates are more than a percentage point under last fall's 7.08% peak —the highest level registered since 2000. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Thursday's jumbo 30-year rates fell a minor 2 basis points, landing at a flat 7.00% average. That compares to a recent high of 7.30%. Though daily historical jumbo rates were not published before 2009, it's estimated the 8.14% peak reached last fall was the most expensive jumbo 30-year average in 20-plus years. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Rate movement across most other new purchase loan types was also mildly down Thursday, though rates on FHA loans held steady. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_28-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">National Mortgage Rate Averages - New Purchase Loans</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Loan Type</b></td> <td><b>New Purchase Average</b></td> <td><b>Daily Change</b></td> </tr> <tr> <td>30-Year Fixed</td> <td>6.83%</td> <td>-0.01</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>6.91%</td> <td>No Change</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>6.22%</td> <td>-0.05</td> </tr> <tr> <td>20-Year Fixed</td> <td>6.44%</td> <td>-0.01</td> </tr> <tr> <td>15-Year Fixed</td> <td>5.96%</td> <td>-0.05</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>7.27%</td> <td>No Change</td> </tr> <tr> <td>10-Year Fixed</td> <td>5.75%</td> <td>-0.18</td> </tr> <tr> <td>7/6 ARM</td> <td>7.58%</td> <td>-0.06</td> </tr> <tr> <td>5/6 ARM</td> <td>7.71%</td> <td>-0.01</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>7.00%</td> <td>-0.02</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.98%</td> <td>-0.02</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>7.73%</td> <td>No Change</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>7.86%</td> <td>-0.01</td> </tr> <tr> <td>^{_{<em><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.zillow.com/" rel="noopener noreferrer sponsored nofollow">Provided via the Zillow Mortgage API</a></em>}}</td> <td></td> <td></td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_30-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/ZG7af/1/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="90-Day Ranges of Best Mortgage Rates"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-the-weekly-freddie-mac-average"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> The Weekly Freddie Mac Average </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Every Thursday, Freddie Mac publishes a weekly average of 30-year mortgage rates. Yesterday's reading fell 7 basis points to 7.02%, marking a second week of declines.<span class="ql-inline-citation" data-cite="4"></span> Back in October, however, Freddie Mac's average reached a historic 23-year peak of 7.79%. It later dropped significantly, registering a low point of 6.60% in mid-January. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Freddie Mac’s average differs from what we report for 30-year rates because Freddie Mac calculates a <em>weekly</em> average that blends five previous days of rates. In contrast, our Investopedia 30-year average is a daily reading, offering a more precise and timely indicator of rate movement. In addition, the criteria for included loans (e.g., amount of down payment, credit score, inclusion of discount points) varies between Freddie Mac's methodology and our own. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> Today's Mortgage Rate Averages: Refinancing </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Refinancing rates were more mixed than new purchase rates Thursday. The 30-year refi average fell 16 basis points, narrowing the gap between 30-year new purchase and refi rates to 40 basis points. The 15-year refi average meanwhile plunged 35 basis points, while jumbo 30-year refi rates edged down just 4 basis points. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_40-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">National Mortgage Rate Averages - Refinance Loans</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Loan Type</b></td> <td><b>Refinance Average</b></td> <td><b>Daily Change</b></td> </tr> <tr> <td>30-Year Fixed</td> <td>7.23%</td> <td>-0.16</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>6.60%</td> <td>No Change</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>6.07%</td> <td>-0.06</td> </tr> <tr> <td>20-Year Fixed</td> <td>6.46%</td> <td>-0.07</td> </tr> <tr> <td>15-Year Fixed</td> <td>5.72%</td> <td>-0.35*</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>6.33%</td> <td>No Change</td> </tr> <tr> <td>10-Year Fixed</td> <td>6.12%</td> <td>No Change</td> </tr> <tr> <td>7/6 ARM</td> <td>7.56%</td> <td>+0.01</td> </tr> <tr> <td>5/6 ARM</td> <td>7.71%</td> <td>+0.07</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.90%</td> <td>-0.04</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.33%</td> <td>-1.03*</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>8.03%</td> <td>No Change</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>7.81%</td> <td>-0.26</td> </tr> <tr> <td>^{_{<a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.zillow.com/" rel="noopener noreferrer sponsored nofollow">Provided via the Zillow Mortgage API</a>}}</td> <td></td> <td></td> </tr> </tbody> </table> <figcaption>*Occasionally some rate averages show a much larger than usual change from one day to the next. This can be due to some loan types being less popular among mortgage shoppers, resulting in the average being based on a small sample size of rate quotes.</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Calculate monthly payments for different loan scenarios with our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-calculator-5084794">Mortgage Calculator</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_44-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_45-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The rates you see here generally won’t compare directly with teaser rates you see advertised online, since those rates are cherry-picked as the most attractive, while these rates are averages. Teaser rates may involve paying points in advance, or they may be based on a hypothetical borrower with an ultra-high credit score or for a smaller-than-typical loan. The mortgage rate you ultimately secure will be based on factors like your credit score, income, and more, so it can vary from the averages you see here.</p></div></div></div> <div class="comp mntl-sc-block mntl-sc-block-tool mntl-block mntl-sc-block--mortgage-loan-calculator" id="mntl-sc-block_46-0"><div class="comp mortgage-loan-calculator mntl-block" data-defer="load" id="mortgage-loan-calculator_1-0"></div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-mortgage-rates-by-state"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> Mortgage Rates by State </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan type, and size, in addition to individual lenders' varying risk management strategies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> The states with the cheapest 30-year new purchase rates Thursday were New York, North Carolina, New Jersey, Colorado, Texas, Michigan, and Tennessee, while the states with the highest average rates were West Virginia, Alaska, Washington, D.C., Iowa, Maryland, New Mexico, and North Dakota. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_53-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/lJyBF/1/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="Mortgage Rates by State"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-what-causes-mortgage-rates-to-rise-or-fall"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> What Causes Mortgage Rates to Rise or Fall? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> <li>The level and direction of the bond market, especially 10-year Treasury yields</li> <li>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalreservebank.asp">Federal Reserve's</a> current monetary policy, especially as it relates to bond buying and funding government-backed mortgages</li> <li>Competition between <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-mortgage-lenders-5076852">mortgage lenders and across loan types</a></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Macroeconomic factors kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/060115/how-do-open-market-operations-omos-affect-bond-prices.asp">bond-buying policy</a> is a major influencer of mortgage rates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> But starting in November 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net zero in March 2022.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Between that time and July 2023, the Fed aggressively raised the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalfundsrate.asp">federal funds rate</a> to fight decades-high inflation. While the fed funds rate can influence mortgage rates, it does not directly do so. In fact, the fed funds rate and mortgage rates can move in opposite directions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> But given the historic speed and magnitude of the Fed's 2022 and 2023 rate increases—raising the benchmark rate 5.25 percentage points over 16 months—even the indirect influence of the fed funds rate has resulted in a dramatic upward impact on mortgage rates over the last two years. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> The Fed has been maintaining the federal funds rate at its current level since July, with a sixth consecutive rate hold announced on May 1.<span class="ql-inline-citation" data-cite="5"></span> Although inflation has come down considerably, it is still above the Fed's target level of 2%. Until the central bank feels confident inflation is falling sufficiently and sustainably, it has said it's hesitant to start cutting rates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> The Fed will hold five more meetings this year, with the next one scheduled to conclude June 12.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <span class="heading-toc" id="toc-how-we-track-mortgage-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_74-0"> <span class="mntl-sc-block-heading__text"> How We Track Mortgage Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loantovalue.asp">loan-to-value (LTV) ratio</a> of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use. </p></div>

Rates on 30-year mortgages dropped for a second day Thursday, after sinking below the 7% threshold Wednesday. Now at 6.83%, the 30-year average is at its lowest level since March. Rates also dipped for many other [mortgage types](https://www.investopedia.com/mortgage-rates-5094943). ### Editor's Note As of May 1, our daily mortgage rate averages have been provided via the Zillow Mortgage API. As this involves a different rate source as well as a new methodology, our current averages will not directly align with those we published prior to May 1, 2024. All the historical data and analysis in this article and future articles are also based on this new data source. ![Line graph showing the last 90 days of the 30-year new purchase mortgage rate average - May 17, 2024]() :max_bytes(150000):strip_icc()/5-17-8d4fe11f465d4565bf41b790655ac5fd.png) | National Rate Averages for Top 5 Mortgage Types | | | | --- | --- | --- | | **Loan Type** | **New Purchase** | **Refinance** | | 30-Year Fixed | 6.83% | 7.23% | | FHA 30-Year Fixed | 6.91% | 6.60% | | 15-Year Fixed | 5.96% | 5.72% | | 5/6 ARM | 7.71% | 7.71% | | Jumbo 30-Year Fixed | 7.00% | 6.90% | | *[Provided via the Zillow Mortgage API](https://www.zillow.com/)* | | | National averages based on a minimum 20% down payment and an applicant credit score of 680 to 739. Because rates vary widely across lenders, it's always smart to shop around for [your best mortgage option](https://www.investopedia.com/mortgage-rates-5094943) and compare rates regularly no matter the type of home loan you seek. [Compare the Best Mortgage Rates Today - May 21, 2024](https://www.investopedia.com/mortgage-rates-5094943) ## Today's Mortgage Rate Averages: New Purchase After sinking 16 basis points Wednesday, 30-year mortgage rates inched another basis point lower Thursday. That pushes the average down to 6.83%, its cheapest reading since March 29. After surging to a 5-month high of 7.37% in late April, 30-year mortgage rates have since shed more than a half percentage point. Rates on 30-year mortgages still remain elevated vs. early February, when the average dipped as low as 6.36%. But 30-year rates are now more than a percentage point below the historic 23-year high of 8.01% we saw in October. New purchase 15-year mortgage rates dipped 5 basis points Thursday to fall below the 6% threshold. Now averaging 5.96%, 15-year rates are also at their lowest mark in seven weeks. Additionally, today's 15-year rates are more than a percentage point under last fall's 7.08% peak —the highest level registered since 2000. Thursday's jumbo 30-year rates fell a minor 2 basis points, landing at a flat 7.00% average. That compares to a recent high of 7.30%. Though daily historical jumbo rates were not published before 2009, it's estimated the 8.14% peak reached last fall was the most expensive jumbo 30-year average in 20-plus years. Rate movement across most other new purchase loan types was also mildly down Thursday, though rates on FHA loans held steady. | National Mortgage Rate Averages - New Purchase Loans | | | | --- | --- | --- | | **Loan Type** | **New Purchase Average** | **Daily Change** | | 30-Year Fixed | 6.83% | -0.01 | | FHA 30-Year Fixed | 6.91% | No Change | | VA 30-Year Fixed | 6.22% | -0.05 | | 20-Year Fixed | 6.44% | -0.01 | | 15-Year Fixed | 5.96% | -0.05 | | FHA 15-Year Fixed | 7.27% | No Change | | 10-Year Fixed | 5.75% | -0.18 | | 7/6 ARM | 7.58% | -0.06 | | 5/6 ARM | 7.71% | -0.01 | | Jumbo 30-Year Fixed | 7.00% | -0.02 | | Jumbo 15-Year Fixed | 6.98% | -0.02 | | Jumbo 7/6 ARM | 7.73% | No Change | | Jumbo 5/6 ARM | 7.86% | -0.01 | | *[Provided via the Zillow Mortgage API](https://www.zillow.com/)* | | | ## The Weekly Freddie Mac Average Every Thursday, Freddie Mac publishes a weekly average of 30-year mortgage rates. Yesterday's reading fell 7 basis points to 7.02%, marking a second week of declines. Back in October, however, Freddie Mac's average reached a historic 23-year peak of 7.79%. It later dropped significantly, registering a low point of 6.60% in mid-January. Freddie Mac’s average differs from what we report for 30-year rates because Freddie Mac calculates a *weekly* average that blends five previous days of rates. In contrast, our Investopedia 30-year average is a daily reading, offering a more precise and timely indicator of rate movement. In addition, the criteria for included loans (e.g., amount of down payment, credit score, inclusion of discount points) varies between Freddie Mac's methodology and our own. ### Today's Mortgage Rate Averages: Refinancing Refinancing rates were more mixed than new purchase rates Thursday. The 30-year refi average fell 16 basis points, narrowing the gap between 30-year new purchase and refi rates to 40 basis points. The 15-year refi average meanwhile plunged 35 basis points, while jumbo 30-year refi rates edged down just 4 basis points. | National Mortgage Rate Averages - Refinance Loans | | | | --- | --- | --- | | **Loan Type** | **Refinance Average** | **Daily Change** | | 30-Year Fixed | 7.23% | -0.16 | | FHA 30-Year Fixed | 6.60% | No Change | | VA 30-Year Fixed | 6.07% | -0.06 | | 20-Year Fixed | 6.46% | -0.07 | | 15-Year Fixed | 5.72% | -0.35\* | | FHA 15-Year Fixed | 6.33% | No Change | | 10-Year Fixed | 6.12% | No Change | | 7/6 ARM | 7.56% | +0.01 | | 5/6 ARM | 7.71% | +0.07 | | Jumbo 30-Year Fixed | 6.90% | -0.04 | | Jumbo 15-Year Fixed | 6.33% | -1.03\* | | Jumbo 7/6 ARM | 8.03% | No Change | | Jumbo 5/6 ARM | 7.81% | -0.26 | | [Provided via the Zillow Mortgage API](https://www.zillow.com/) | | | \*Occasionally some rate averages show a much larger than usual change from one day to the next. This can be due to some loan types being less popular among mortgage shoppers, resulting in the average being based on a small sample size of rate quotes. Calculate monthly payments for different loan scenarios with our [Mortgage Calculator](https://www.investopedia.com/mortgage-calculator-5084794). ### The rates you see here generally won’t compare directly with teaser rates you see advertised online, since those rates are cherry-picked as the most attractive, while these rates are averages. Teaser rates may involve paying points in advance, or they may be based on a hypothetical borrower with an ultra-high credit score or for a smaller-than-typical loan. The mortgage rate you ultimately secure will be based on factors like your credit score, income, and more, so it can vary from the averages you see here. ## Mortgage Rates by State The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan type, and size, in addition to individual lenders' varying risk management strategies. The states with the cheapest 30-year new purchase rates Thursday were New York, North Carolina, New Jersey, Colorado, Texas, Michigan, and Tennessee, while the states with the highest average rates were West Virginia, Alaska, Washington, D.C., Iowa, Maryland, New Mexico, and North Dakota. ## What Causes Mortgage Rates to Rise or Fall? Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as: * The level and direction of the bond market, especially 10-year Treasury yields * The [Federal Reserve's](https://www.investopedia.com/terms/f/federalreservebank.asp) current monetary policy, especially as it relates to bond buying and funding government-backed mortgages * Competition between [mortgage lenders and across loan types](https://www.investopedia.com/best-mortgage-lenders-5076852) Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor. Macroeconomic factors kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This [bond-buying policy](https://www.investopedia.com/ask/answers/060115/how-do-open-market-operations-omos-affect-bond-prices.asp) is a major influencer of mortgage rates. But starting in November 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net zero in March 2022. Between that time and July 2023, the Fed aggressively raised the [federal funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp) to fight decades-high inflation. While the fed funds rate can influence mortgage rates, it does not directly do so. In fact, the fed funds rate and mortgage rates can move in opposite directions. But given the historic speed and magnitude of the Fed's 2022 and 2023 rate increases—raising the benchmark rate 5.25 percentage points over 16 months—even the indirect influence of the fed funds rate has resulted in a dramatic upward impact on mortgage rates over the last two years. The Fed has been maintaining the federal funds rate at its current level since July, with a sixth consecutive rate hold announced on May 1. Although inflation has come down considerably, it is still above the Fed's target level of 2%. Until the central bank feels confident inflation is falling sufficiently and sustainably, it has said it's hesitant to start cutting rates. The Fed will hold five more meetings this year, with the next one scheduled to conclude June 12. ## How We Track Mortgage Rates The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a [loan-to-value (LTV) ratio](https://www.investopedia.com/terms/l/loantovalue.asp) of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.

Rates on 30-year mortgages dropped for a second day Thursday, after sinking below the 7% threshold Wednesday. Now at 6.83%, the 30-year average is at its lowest level since March. Rates also dipped for many other mortgage types. Editor's Note As of May 1, our daily mortgage rate averages have been provided via the Zillow Mortgage API. As this involves a different rate source as well as a new methodology, our current averages will not directly align with those we published prior to May 1, 2024. All the historical data and analysis in this article and future articles are also based on this new data source. National Rate Averages for Top 5 Mortgage Types Loan Type New Purchase Refinance 30-Year Fixed 6.83% 7.23% FHA 30-Year Fixed 6.91% 6.60% 15-Year Fixed 5.96% 5.72% 5/6 ARM 7.71% 7.71% Jumbo 30-Year Fixed 7.00% 6.90% Provided via the Zillow Mortgage API National averages based on a minimum 20% down payment and an applicant credit score of 680 to 739. Because rates vary widely across lenders, it's always smart to shop around for your best mortgage option and compare rates regularly no matter the type of home loan you seek. Compare the Best Mortgage Rates Today - May 21, 2024 Today's Mortgage Rate Averages: New Purchase After sinking 16 basis points Wednesday, 30-year mortgage rates inched another basis point lower Thursday. That pushes the average down to 6.83%, its cheapest reading since March 29. After surging to a 5-month high of 7.37% in late April, 30-year mortgage rates have since shed more than a half percentage point. Rates on 30-year mortgages still remain elevated vs. early February, when the average dipped as low as 6.36%. But 30-year rates are now more than a percentage point below the historic 23-year high of 8.01% we saw in October. New purchase 15-year mortgage rates dipped 5 basis points Thursday to fall below the 6% threshold. Now averaging 5.96%, 15-year rates are also at their lowest mark in seven weeks. Additionally, today's 15-year rates are more than a percentage point under last fall's 7.08% peak —the highest level registered since 2000. Thursday's jumbo 30-year rates fell a minor 2 basis points, landing at a flat 7.00% average. That compares to a recent high of 7.30%. Though daily historical jumbo rates were not published before 2009, it's estimated the 8.14% peak reached last fall was the most expensive jumbo 30-year average in 20-plus years. Rate movement across most other new purchase loan types was also mildly down Thursday, though rates on FHA loans held steady. National Mortgage Rate Averages - New Purchase Loans Loan Type New Purchase Average Daily Change 30-Year Fixed 6.83% -0.01 FHA 30-Year Fixed 6.91% No Change VA 30-Year Fixed 6.22% -0.05 20-Year Fixed 6.44% -0.01 15-Year Fixed 5.96% -0.05 FHA 15-Year Fixed 7.27% No Change 10-Year Fixed 5.75% -0.18 7/6 ARM 7.58% -0.06 5/6 ARM 7.71% -0.01 Jumbo 30-Year Fixed 7.00% -0.02 Jumbo 15-Year Fixed 6.98% -0.02 Jumbo 7/6 ARM 7.73% No Change Jumbo 5/6 ARM 7.86% -0.01 Provided via the Zillow Mortgage API The Weekly Freddie Mac Average Every Thursday, Freddie Mac publishes a weekly average of 30-year mortgage rates. Yesterday's reading fell 7 basis points to 7.02%, marking a second week of declines. Back in October, however, Freddie Mac's average reached a historic 23-year peak of 7.79%. It later dropped significantly, registering a low point of 6.60% in mid-January. Freddie Mac’s average differs from what we report for 30-year rates because Freddie Mac calculates a weekly average that blends five previous days of rates. In contrast, our Investopedia 30-year average is a daily reading, offering a more precise and timely indicator of rate movement. In addition, the criteria for included loans (e.g., amount of down payment, credit score, inclusion of discount points) varies between Freddie Mac's methodology and our own. Today's Mortgage Rate Averages: Refinancing Refinancing rates were more mixed than new purchase rates Thursday. The 30-year refi average fell 16 basis points, narrowing the gap between 30-year new purchase and refi rates to 40 basis points. The 15-year refi average meanwhile plunged 35 basis points, while jumbo 30-year refi rates edged down just 4 basis points. National Mortgage Rate Averages - Refinance Loans Loan Type Refinance Average Daily Change 30-Year Fixed 7.23% -0.16 FHA 30-Year Fixed 6.60% No Change VA 30-Year Fixed 6.07% -0.06 20-Year Fixed 6.46% -0.07 15-Year Fixed 5.72% -0.35* FHA 15-Year Fixed 6.33% No Change 10-Year Fixed 6.12% No Change 7/6 ARM 7.56% +0.01 5/6 ARM 7.71% +0.07 Jumbo 30-Year Fixed 6.90% -0.04 Jumbo 15-Year Fixed 6.33% -1.03* Jumbo 7/6 ARM 8.03% No Change Jumbo 5/6 ARM 7.81% -0.26 Provided via the Zillow Mortgage API *Occasionally some rate averages show a much larger than usual change from one day to the next. This can be due to some loan types being less popular among mortgage shoppers, resulting in the average being based on a small sample size of rate quotes. Calculate monthly payments for different loan scenarios with our Mortgage Calculator. The rates you see here generally won’t compare directly with teaser rates you see advertised online, since those rates are cherry-picked as the most attractive, while these rates are averages. Teaser rates may involve paying points in advance, or they may be based on a hypothetical borrower with an ultra-high credit score or for a smaller-than-typical loan. The mortgage rate you ultimately secure will be based on factors like your credit score, income, and more, so it can vary from the averages you see here. Mortgage Rates by State The lowest mortgage rates available vary depending on the state where originations occur. Mortgage rates can be influenced by state-level variations in credit score, average mortgage loan type, and size, in addition to individual lenders' varying risk management strategies. The states with the cheapest 30-year new purchase rates Thursday were New York, North Carolina, New Jersey, Colorado, Texas, Michigan, and Tennessee, while the states with the highest average rates were West Virginia, Alaska, Washington, D.C., Iowa, Maryland, New Mexico, and North Dakota. What Causes Mortgage Rates to Rise or Fall? Mortgage rates are determined by a complex interaction of macroeconomic and industry factors, such as: The level and direction of the bond market, especially 10-year Treasury yields The Federal Reserve's current monetary policy, especially as it relates to bond buying and funding government-backed mortgages Competition between mortgage lenders and across loan types Because fluctuations can be caused by any number of these at once, it's generally difficult to attribute the change to any one factor. Macroeconomic factors kept the mortgage market relatively low for much of 2021. In particular, the Federal Reserve had been buying billions of dollars of bonds in response to the pandemic's economic pressures. This bond-buying policy is a major influencer of mortgage rates. But starting in November 2021, the Fed began tapering its bond purchases downward, making sizable reductions each month until reaching net zero in March 2022. Between that time and July 2023, the Fed aggressively raised the federal funds rate to fight decades-high inflation. While the fed funds rate can influence mortgage rates, it does not directly do so. In fact, the fed funds rate and mortgage rates can move in opposite directions. But given the historic speed and magnitude of the Fed's 2022 and 2023 rate increases—raising the benchmark rate 5.25 percentage points over 16 months—even the indirect influence of the fed funds rate has resulted in a dramatic upward impact on mortgage rates over the last two years. The Fed has been maintaining the federal funds rate at its current level since July, with a sixth consecutive rate hold announced on May 1. Although inflation has come down considerably, it is still above the Fed's target level of 2%. Until the central bank feels confident inflation is falling sufficiently and sustainably, it has said it's hesitant to start cutting rates. The Fed will hold five more meetings this year, with the next one scheduled to conclude June 12. How We Track Mortgage Rates The national and state averages cited above are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e., a down payment of at least 20%) and an applicant credit score in the 680–739 range. The resulting rates are representative of what customers should expect to see when receiving actual quotes from lenders based on their qualifications, which may vary from advertised teaser rates. © Zillow, Inc., 2024. Use is subject to the Zillow Terms of Use.

https://www.investopedia.com/dunning-kruger-effect-7368715

Dunning-Kruger Effect: Meaning and Examples in Finance

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-dunning-kruger-effect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Dunning-Kruger Effect? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Dunning-Kruger Effect is a cognitive bias first described by psychologists David Dunning and Justin Kruger in 1999. It occurs when people with low levels of knowledge, skill, or competence in a particular field overestimate their own ability and knowledge.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Put differently, people who don’t know what they’re talking about tend to (incorrectly) think they do know what they’re talking about. At the same time, experts in a field may underestimate their own knowledge and competence. This part of why Dunning and Kruger’s findings are similar to imposter syndrome, whereby high achievers begin to doubt their abilities.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> In finance and investing, people who overestimate their knowledge and ability because of the Dunning-Kruger Effect may make unwise or overly risky <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment.asp">investment</a> decisions that can result in significant losses. This can happen, for example, when people feel confident in their ability to predict <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp">market trends</a> or understand complex financial instruments, despite lacking the necessary expertise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Dunning-Kruger Effect is a psychological phenomenon in which people with low levels of skill or knowledge greatly overestimate their perceived skills of knowledge.</li><li>Those who score the worst on actual performance or knowledge are often the same ones who rate themselves most highly and confident in their (incorrect) claims.</li><li>At the same time, those individuals with actual skill or knowledge tend to underestimate their abilities in a phenomenon called imposter syndrome.</li><li>First described in a 1999 research paper, the Dunning-Kruger Effect has been replicated many times. It can affect many life aspects, including investing decisions.<span class="ql-inline-citation" data-cite="2"></span></li><li>Minimizing the Dunning-Kruger Effect can be achieved through education, training, accepting criticism and feedback, and taking in objective evaluations of knowledge or ability.</li></ul></div></div></div> <span class="heading-toc" id="toc-why-the-dunning-kruger-effect-happens"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Why the Dunning-Kruger Effect Happens </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The Dunning-Kruger Effect is thought to occur due to a combination of cognitive limitations and a lack of subjective self-awareness. Individuals with limited knowledge or expertise in a field are often unaware of their own limitations, which can result in an inflated sense of competence. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> In other words, when someone doesn’t know what they don’t know, they are prone to overestimate their knowledge. It has been described colloquially as “dumb people who do not realize they are dumb.”<span class="ql-inline-citation" data-cite="3"></span> At the same time, those with more expertise may come to underestimate their abilities as they become more aware of the complexities of their field. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The phenomenon was first described in a 1999 study titled “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments,” by social psychologists David Dunning and Justin Kruger.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Another reason for the effect could be a lack of insight or metacognition, which is the capacity to reflect honestly and objectively on one’s own skills or performance. If someone consistently overestimates their abilities, they may also be more likely to reject feedback, which can play a role in continued underperformance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> In addition, the effect may occur as people use their own subjective criteria for what it means to be good at something, rather than objective, standardized measures. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The authors discovered that people with low levels of competence in a particular domain were more likely to overestimate their abilities, while those with higher levels of competence were more likely to underestimate their abilities, forming an inverted U-shaped plot. Dunning and Kruger assessed participants’ actual and perceived abilities in a disparate range of fields including humor, logical reasoning, and English grammar. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The Dunning-Kruger Effect is a type of cognitive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bias.asp">bias</a>. Many similar psychological biases affect financial <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investors</a>, including representative bias, cognitive dissonance, confirmation bias, attachment bias, home-country bias, anchoring bias, and the endowment effect.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> In the grammar study, college students completed a test on American Standard Written English, then self-evaluated their perceived grammar ability and expected test performance. Those who scored the lowest on the test tended to drastically overestimate both their perceived grammar ability and expected test score, while those who scored highest tended to underestimate their ability and test score.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Comparing self-assessments (subjective ability) with actual performance (objective ability) remains the primary way to detect and measure the Dunning-Kruger Effect. A 2008 study replicated the original findings, showing that people in the lower quarter in terms of actual performance expected to see results of 60% when they scored only 38.4%.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> People in the middle half expected to score 72.6% but actually scored 61.7%. Meanwhile, those in the upper quarter expected to score 75.6% and actually scored higher, averaging 84.1%.<span class="ql-inline-citation" data-cite="7"></span> Several other studies have also replicated these general findings across various contexts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_32-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Dunning and Kruger’s findings show that as an individual’s actual competence increases, the disparity between self-assessment and actual performance decreases, eventually leading to a more accurate self-assessment.<span class="ql-inline-citation" data-cite="7"></span></p></div></div></div> <span class="heading-toc" id="toc-impact-of-the-dunning-kruger-effect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Impact of the Dunning-Kruger Effect </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> The Dunning-Kruger Effect affects individuals across various fields, including business, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finance.asp">finance</a>, medicine, and politics. It can often lead to poor decision making, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inefficientmarket.asp">inefficiency</a>, and other negative outcomes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> Dunning-Kruger Effect in the Workplace </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> The Dunning-Kruger Effect can manifest in the form of employees taking on tasks beyond their actual skill set or making decisions without fully understanding the ramifications or possible knock-on effects. Additionally, people who suffer from the effect may reject feedback or constructive criticism because they remain convinced of their own abilities and defend the choices that they have made. This can lead to a lack of growth and development, as well as difficulty working collaboratively with others. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> One potential pitfall is that hiring managers may erroneously hire bad <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/job-hunting-2021-5111878">candidates</a> who appear confident during the interview process but are actually victims of the Dunning-Kruger Effect. Similarly, promotions may be handed out to these types of employees for similar reasons. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-subheading__text"> Dunning-Kruger Effect in Business and Finance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> The Dunning-Kruger Effect can significantly affect financial decisions and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/10/creating-a-better-investment-strategy.asp">investment strategies</a>. Inexperienced investors may overestimate their abilities to pick stocks, analyze companies, or predict market trends, leading to poor investment choices and potential financial losses. This also includes a failure to recognize <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risks</a> that may be present but are not recognized. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> People who overestimate their abilities may ignore expert advice, such as from a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/managing-wealth/when-should-you-hire-financial-advisor/">financial advisor</a>, especially if that advice goes against their preconceived notions.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Dunning-Kruger Effect in Medicine </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> In medicine, this effect can lead to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insurance/why-do-healthcare-costs-keep-rising/">healthcare</a> professionals overestimating their knowledge and making incorrect diagnoses or treatment recommendations. This can take the form of missing a critical diagnosis or failing to order the appropriate tests, leading to delayed treatment or even a misdiagnosis. This, of course, can have serious consequences for patient care and health outcomes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-how-to-avoid-the-dunning-kruger-effect"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> How to Avoid the Dunning-Kruger Effect </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> To guard against the Dunning-Kruger Effect, it’s important to seek out diverse perspectives, recognize one’s own limitations, and be open to feedback and constructive criticism. Being both humble and realistic about one’s actual abilities and knowledge may be difficult, but it is critical for avoiding the pitfalls described above. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Engaging with colleagues, mentors, and subject matter experts can also help build a more accurate understanding of one’s knowledge and abilities and can help avoid costly mistakes. Don’t assume that you are superior or know more than those with expert training and credentials in a field. Indeed, education and training are the best way to gain the actual knowledge base needed to make expert claims. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Furthermore, healthcare organizations can establish clear guidelines and protocols for decision-making processes that individuals must follow regardless of what they think they know, and provide opportunities for professionals to collaborate and share their knowledge and expertise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_56-0"><span class="heading-toc" id="toc-what-is-the-double-curse-of-the-dunning-kruger-effect"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the ‘double curse’ of the Dunning-Kruger Effect?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The “double curse” of the Dunning-Kruger Effect arises when:</p><ul><li>Low-skilled people greatly overestimate their own skills or knowledge</li><li>High-skilled people tend to underestimate their own skills or knowledge</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-is-the-dunning-kruger-effect-real"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is the Dunning-Kruger Effect real?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Since the original study by Kruger and Dunning in 1999, several studies have replicated and supported the existence of their namesake effect across various domains.<span class="ql-inline-citation" data-cite="2"></span> However, some scholars have questioned the statistical modeling used in the original study and criticized the overapplication of the theory to a range of situations where it might not be relevant.<span class="ql-inline-citation" data-cite="3"></span> Despite these criticisms, the Dunning-Kruger Effect remains widely recognized as a genuine <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/051613/behavioral-bias-cognitive-vs-emotional-bias-investing.asp">cognitive bias</a> that can influence people’s perceptions of their own skills and knowledge.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-what-is-the-opposite-of-the-dunning-kruger-effect"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the opposite of the Dunning-Kruger Effect?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>While there is no exact opposite of the Dunning-Kruger Effect, imposter syndrome may be used to describe the fact that highly trained and skilled people may underestimate their own ability or worth. Imposter syndrome occurs when those who are competent and accomplished nevertheless feel like they are frauds or imposters who don’t deserve their success. This can lead to feelings of self-doubt, anxiety, and a fear of being exposed as a fraud.<span class="ql-inline-citation" data-cite="4"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_62-0"><span class="heading-toc" id="toc-who-is-most-susceptible-to-imposter-syndrome"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who is most susceptible to imposter syndrome?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Impostor syndrome can affect anyone, regardless of their profession, background, or level of achievement. However, it is commonly associated with high-achieving individuals, perfectionists, and/or those in competitive environments who may come to doubt their own abilities.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> First identified in 1999 by a pair of psychologists, the Dunning-Kruger Effect describes a ubiquitous phenomenon among people in which those with low skill or knowledge tend to greatly overestimate their skills and knowledge. Conversely, those with great skill or knowledge tend to underestimate themselves instead. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> The impact of the Dunning-Kruger Effect spans many domains and contexts, and in the world of business and investment can lead to poor hiring and promotion decisions, overconfidence, bad trading strategies, and excessive risk taking, among other detrimental effects. To minimize the Dunning-Kruger Effect, one can educate or train themselves to become an expert in a field, listen to knowledgeable advice and feedback, and be open to new ideas. </p></div>

## What Is the Dunning-Kruger Effect? The Dunning-Kruger Effect is a cognitive bias first described by psychologists David Dunning and Justin Kruger in 1999. It occurs when people with low levels of knowledge, skill, or competence in a particular field overestimate their own ability and knowledge. Put differently, people who don’t know what they’re talking about tend to (incorrectly) think they do know what they’re talking about. At the same time, experts in a field may underestimate their own knowledge and competence. This part of why Dunning and Kruger’s findings are similar to imposter syndrome, whereby high achievers begin to doubt their abilities. In finance and investing, people who overestimate their knowledge and ability because of the Dunning-Kruger Effect may make unwise or overly risky [investment](https://www.investopedia.com/terms/i/investment.asp) decisions that can result in significant losses. This can happen, for example, when people feel confident in their ability to predict [market trends](https://www.investopedia.com/articles/trading/09/what-factors-create-trends.asp) or understand complex financial instruments, despite lacking the necessary expertise. ### Key Takeaways * The Dunning-Kruger Effect is a psychological phenomenon in which people with low levels of skill or knowledge greatly overestimate their perceived skills of knowledge. * Those who score the worst on actual performance or knowledge are often the same ones who rate themselves most highly and confident in their (incorrect) claims. * At the same time, those individuals with actual skill or knowledge tend to underestimate their abilities in a phenomenon called imposter syndrome. * First described in a 1999 research paper, the Dunning-Kruger Effect has been replicated many times. It can affect many life aspects, including investing decisions. * Minimizing the Dunning-Kruger Effect can be achieved through education, training, accepting criticism and feedback, and taking in objective evaluations of knowledge or ability. ## Why the Dunning-Kruger Effect Happens The Dunning-Kruger Effect is thought to occur due to a combination of cognitive limitations and a lack of subjective self-awareness. Individuals with limited knowledge or expertise in a field are often unaware of their own limitations, which can result in an inflated sense of competence. In other words, when someone doesn’t know what they don’t know, they are prone to overestimate their knowledge. It has been described colloquially as “dumb people who do not realize they are dumb.” At the same time, those with more expertise may come to underestimate their abilities as they become more aware of the complexities of their field. ### The phenomenon was first described in a 1999 study titled “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments,” by social psychologists David Dunning and Justin Kruger. Another reason for the effect could be a lack of insight or metacognition, which is the capacity to reflect honestly and objectively on one’s own skills or performance. If someone consistently overestimates their abilities, they may also be more likely to reject feedback, which can play a role in continued underperformance. In addition, the effect may occur as people use their own subjective criteria for what it means to be good at something, rather than objective, standardized measures. The authors discovered that people with low levels of competence in a particular domain were more likely to overestimate their abilities, while those with higher levels of competence were more likely to underestimate their abilities, forming an inverted U-shaped plot. Dunning and Kruger assessed participants’ actual and perceived abilities in a disparate range of fields including humor, logical reasoning, and English grammar. ### The Dunning-Kruger Effect is a type of cognitive [bias](https://www.investopedia.com/terms/b/bias.asp). Many similar psychological biases affect financial [investors](https://www.investopedia.com/terms/i/investor.asp), including representative bias, cognitive dissonance, confirmation bias, attachment bias, home-country bias, anchoring bias, and the endowment effect. In the grammar study, college students completed a test on American Standard Written English, then self-evaluated their perceived grammar ability and expected test performance. Those who scored the lowest on the test tended to drastically overestimate both their perceived grammar ability and expected test score, while those who scored highest tended to underestimate their ability and test score. Comparing self-assessments (subjective ability) with actual performance (objective ability) remains the primary way to detect and measure the Dunning-Kruger Effect. A 2008 study replicated the original findings, showing that people in the lower quarter in terms of actual performance expected to see results of 60% when they scored only 38.4%. People in the middle half expected to score 72.6% but actually scored 61.7%. Meanwhile, those in the upper quarter expected to score 75.6% and actually scored higher, averaging 84.1%. Several other studies have also replicated these general findings across various contexts. ### Dunning and Kruger’s findings show that as an individual’s actual competence increases, the disparity between self-assessment and actual performance decreases, eventually leading to a more accurate self-assessment. ## Impact of the Dunning-Kruger Effect The Dunning-Kruger Effect affects individuals across various fields, including business, [finance](https://www.investopedia.com/terms/f/finance.asp), medicine, and politics. It can often lead to poor decision making, [inefficiency](https://www.investopedia.com/terms/i/inefficientmarket.asp), and other negative outcomes. ### Dunning-Kruger Effect in the Workplace The Dunning-Kruger Effect can manifest in the form of employees taking on tasks beyond their actual skill set or making decisions without fully understanding the ramifications or possible knock-on effects. Additionally, people who suffer from the effect may reject feedback or constructive criticism because they remain convinced of their own abilities and defend the choices that they have made. This can lead to a lack of growth and development, as well as difficulty working collaboratively with others. One potential pitfall is that hiring managers may erroneously hire bad [candidates](https://www.investopedia.com/job-hunting-2021-5111878) who appear confident during the interview process but are actually victims of the Dunning-Kruger Effect. Similarly, promotions may be handed out to these types of employees for similar reasons. ### Dunning-Kruger Effect in Business and Finance The Dunning-Kruger Effect can significantly affect financial decisions and [investment strategies](https://www.investopedia.com/articles/trading/10/creating-a-better-investment-strategy.asp). Inexperienced investors may overestimate their abilities to pick stocks, analyze companies, or predict market trends, leading to poor investment choices and potential financial losses. This also includes a failure to recognize [risks](https://www.investopedia.com/terms/r/risk.asp) that may be present but are not recognized. People who overestimate their abilities may ignore expert advice, such as from a [financial advisor](https://www.investopedia.com/managing-wealth/when-should-you-hire-financial-advisor/), especially if that advice goes against their preconceived notions. ### Dunning-Kruger Effect in Medicine In medicine, this effect can lead to [healthcare](https://www.investopedia.com/insurance/why-do-healthcare-costs-keep-rising/) professionals overestimating their knowledge and making incorrect diagnoses or treatment recommendations. This can take the form of missing a critical diagnosis or failing to order the appropriate tests, leading to delayed treatment or even a misdiagnosis. This, of course, can have serious consequences for patient care and health outcomes. ## How to Avoid the Dunning-Kruger Effect To guard against the Dunning-Kruger Effect, it’s important to seek out diverse perspectives, recognize one’s own limitations, and be open to feedback and constructive criticism. Being both humble and realistic about one’s actual abilities and knowledge may be difficult, but it is critical for avoiding the pitfalls described above. Engaging with colleagues, mentors, and subject matter experts can also help build a more accurate understanding of one’s knowledge and abilities and can help avoid costly mistakes. Don’t assume that you are superior or know more than those with expert training and credentials in a field. Indeed, education and training are the best way to gain the actual knowledge base needed to make expert claims. Furthermore, healthcare organizations can establish clear guidelines and protocols for decision-making processes that individuals must follow regardless of what they think they know, and provide opportunities for professionals to collaborate and share their knowledge and expertise. ## What is the ‘double curse’ of the Dunning-Kruger Effect? The “double curse” of the Dunning-Kruger Effect arises when: * Low-skilled people greatly overestimate their own skills or knowledge * High-skilled people tend to underestimate their own skills or knowledge ## Is the Dunning-Kruger Effect real? Since the original study by Kruger and Dunning in 1999, several studies have replicated and supported the existence of their namesake effect across various domains. However, some scholars have questioned the statistical modeling used in the original study and criticized the overapplication of the theory to a range of situations where it might not be relevant. Despite these criticisms, the Dunning-Kruger Effect remains widely recognized as a genuine [cognitive bias](https://www.investopedia.com/articles/investing/051613/behavioral-bias-cognitive-vs-emotional-bias-investing.asp) that can influence people’s perceptions of their own skills and knowledge. ## What is the opposite of the Dunning-Kruger Effect? While there is no exact opposite of the Dunning-Kruger Effect, imposter syndrome may be used to describe the fact that highly trained and skilled people may underestimate their own ability or worth. Imposter syndrome occurs when those who are competent and accomplished nevertheless feel like they are frauds or imposters who don’t deserve their success. This can lead to feelings of self-doubt, anxiety, and a fear of being exposed as a fraud. ## Who is most susceptible to imposter syndrome? Impostor syndrome can affect anyone, regardless of their profession, background, or level of achievement. However, it is commonly associated with high-achieving individuals, perfectionists, and/or those in competitive environments who may come to doubt their own abilities. ## The Bottom Line First identified in 1999 by a pair of psychologists, the Dunning-Kruger Effect describes a ubiquitous phenomenon among people in which those with low skill or knowledge tend to greatly overestimate their skills and knowledge. Conversely, those with great skill or knowledge tend to underestimate themselves instead. The impact of the Dunning-Kruger Effect spans many domains and contexts, and in the world of business and investment can lead to poor hiring and promotion decisions, overconfidence, bad trading strategies, and excessive risk taking, among other detrimental effects. To minimize the Dunning-Kruger Effect, one can educate or train themselves to become an expert in a field, listen to knowledgeable advice and feedback, and be open to new ideas.

What Is the Dunning-Kruger Effect? The Dunning-Kruger Effect is a cognitive bias first described by psychologists David Dunning and Justin Kruger in 1999. It occurs when people with low levels of knowledge, skill, or competence in a particular field overestimate their own ability and knowledge. Put differently, people who don’t know what they’re talking about tend to (incorrectly) think they do know what they’re talking about. At the same time, experts in a field may underestimate their own knowledge and competence. This part of why Dunning and Kruger’s findings are similar to imposter syndrome, whereby high achievers begin to doubt their abilities. In finance and investing, people who overestimate their knowledge and ability because of the Dunning-Kruger Effect may make unwise or overly risky investment decisions that can result in significant losses. This can happen, for example, when people feel confident in their ability to predict market trends or understand complex financial instruments, despite lacking the necessary expertise. Key Takeaways The Dunning-Kruger Effect is a psychological phenomenon in which people with low levels of skill or knowledge greatly overestimate their perceived skills of knowledge.Those who score the worst on actual performance or knowledge are often the same ones who rate themselves most highly and confident in their (incorrect) claims.At the same time, those individuals with actual skill or knowledge tend to underestimate their abilities in a phenomenon called imposter syndrome.First described in a 1999 research paper, the Dunning-Kruger Effect has been replicated many times. It can affect many life aspects, including investing decisions.Minimizing the Dunning-Kruger Effect can be achieved through education, training, accepting criticism and feedback, and taking in objective evaluations of knowledge or ability. Why the Dunning-Kruger Effect Happens The Dunning-Kruger Effect is thought to occur due to a combination of cognitive limitations and a lack of subjective self-awareness. Individuals with limited knowledge or expertise in a field are often unaware of their own limitations, which can result in an inflated sense of competence. In other words, when someone doesn’t know what they don’t know, they are prone to overestimate their knowledge. It has been described colloquially as “dumb people who do not realize they are dumb.” At the same time, those with more expertise may come to underestimate their abilities as they become more aware of the complexities of their field. The phenomenon was first described in a 1999 study titled “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments,” by social psychologists David Dunning and Justin Kruger. Another reason for the effect could be a lack of insight or metacognition, which is the capacity to reflect honestly and objectively on one’s own skills or performance. If someone consistently overestimates their abilities, they may also be more likely to reject feedback, which can play a role in continued underperformance. In addition, the effect may occur as people use their own subjective criteria for what it means to be good at something, rather than objective, standardized measures. The authors discovered that people with low levels of competence in a particular domain were more likely to overestimate their abilities, while those with higher levels of competence were more likely to underestimate their abilities, forming an inverted U-shaped plot. Dunning and Kruger assessed participants’ actual and perceived abilities in a disparate range of fields including humor, logical reasoning, and English grammar. The Dunning-Kruger Effect is a type of cognitive bias. Many similar psychological biases affect financial investors, including representative bias, cognitive dissonance, confirmation bias, attachment bias, home-country bias, anchoring bias, and the endowment effect. In the grammar study, college students completed a test on American Standard Written English, then self-evaluated their perceived grammar ability and expected test performance. Those who scored the lowest on the test tended to drastically overestimate both their perceived grammar ability and expected test score, while those who scored highest tended to underestimate their ability and test score. Comparing self-assessments (subjective ability) with actual performance (objective ability) remains the primary way to detect and measure the Dunning-Kruger Effect. A 2008 study replicated the original findings, showing that people in the lower quarter in terms of actual performance expected to see results of 60% when they scored only 38.4%. People in the middle half expected to score 72.6% but actually scored 61.7%. Meanwhile, those in the upper quarter expected to score 75.6% and actually scored higher, averaging 84.1%. Several other studies have also replicated these general findings across various contexts. Dunning and Kruger’s findings show that as an individual’s actual competence increases, the disparity between self-assessment and actual performance decreases, eventually leading to a more accurate self-assessment. Impact of the Dunning-Kruger Effect The Dunning-Kruger Effect affects individuals across various fields, including business, finance, medicine, and politics. It can often lead to poor decision making, inefficiency, and other negative outcomes. Dunning-Kruger Effect in the Workplace The Dunning-Kruger Effect can manifest in the form of employees taking on tasks beyond their actual skill set or making decisions without fully understanding the ramifications or possible knock-on effects. Additionally, people who suffer from the effect may reject feedback or constructive criticism because they remain convinced of their own abilities and defend the choices that they have made. This can lead to a lack of growth and development, as well as difficulty working collaboratively with others. One potential pitfall is that hiring managers may erroneously hire bad candidates who appear confident during the interview process but are actually victims of the Dunning-Kruger Effect. Similarly, promotions may be handed out to these types of employees for similar reasons. Dunning-Kruger Effect in Business and Finance The Dunning-Kruger Effect can significantly affect financial decisions and investment strategies. Inexperienced investors may overestimate their abilities to pick stocks, analyze companies, or predict market trends, leading to poor investment choices and potential financial losses. This also includes a failure to recognize risks that may be present but are not recognized. People who overestimate their abilities may ignore expert advice, such as from a financial advisor, especially if that advice goes against their preconceived notions. Dunning-Kruger Effect in Medicine In medicine, this effect can lead to healthcare professionals overestimating their knowledge and making incorrect diagnoses or treatment recommendations. This can take the form of missing a critical diagnosis or failing to order the appropriate tests, leading to delayed treatment or even a misdiagnosis. This, of course, can have serious consequences for patient care and health outcomes. How to Avoid the Dunning-Kruger Effect To guard against the Dunning-Kruger Effect, it’s important to seek out diverse perspectives, recognize one’s own limitations, and be open to feedback and constructive criticism. Being both humble and realistic about one’s actual abilities and knowledge may be difficult, but it is critical for avoiding the pitfalls described above. Engaging with colleagues, mentors, and subject matter experts can also help build a more accurate understanding of one’s knowledge and abilities and can help avoid costly mistakes. Don’t assume that you are superior or know more than those with expert training and credentials in a field. Indeed, education and training are the best way to gain the actual knowledge base needed to make expert claims. Furthermore, healthcare organizations can establish clear guidelines and protocols for decision-making processes that individuals must follow regardless of what they think they know, and provide opportunities for professionals to collaborate and share their knowledge and expertise. What is the ‘double curse’ of the Dunning-Kruger Effect? The “double curse” of the Dunning-Kruger Effect arises when:Low-skilled people greatly overestimate their own skills or knowledgeHigh-skilled people tend to underestimate their own skills or knowledge Is the Dunning-Kruger Effect real? Since the original study by Kruger and Dunning in 1999, several studies have replicated and supported the existence of their namesake effect across various domains. However, some scholars have questioned the statistical modeling used in the original study and criticized the overapplication of the theory to a range of situations where it might not be relevant. Despite these criticisms, the Dunning-Kruger Effect remains widely recognized as a genuine cognitive bias that can influence people’s perceptions of their own skills and knowledge. What is the opposite of the Dunning-Kruger Effect? While there is no exact opposite of the Dunning-Kruger Effect, imposter syndrome may be used to describe the fact that highly trained and skilled people may underestimate their own ability or worth. Imposter syndrome occurs when those who are competent and accomplished nevertheless feel like they are frauds or imposters who don’t deserve their success. This can lead to feelings of self-doubt, anxiety, and a fear of being exposed as a fraud. Who is most susceptible to imposter syndrome? Impostor syndrome can affect anyone, regardless of their profession, background, or level of achievement. However, it is commonly associated with high-achieving individuals, perfectionists, and/or those in competitive environments who may come to doubt their own abilities. The Bottom Line First identified in 1999 by a pair of psychologists, the Dunning-Kruger Effect describes a ubiquitous phenomenon among people in which those with low skill or knowledge tend to greatly overestimate their skills and knowledge. Conversely, those with great skill or knowledge tend to underestimate themselves instead. The impact of the Dunning-Kruger Effect spans many domains and contexts, and in the world of business and investment can lead to poor hiring and promotion decisions, overconfidence, bad trading strategies, and excessive risk taking, among other detrimental effects. To minimize the Dunning-Kruger Effect, one can educate or train themselves to become an expert in a field, listen to knowledgeable advice and feedback, and be open to new ideas.

https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124

US Economy News Today: Powell Says Recent Inflation Data Does Not Offer Confidence

<div class="loc article-content"><div class="comp article__primary-video-container--jw mntl-block" id="article__primary-video-container--jw_1-0"></div> <div class="comp liveblog mntl-block" id="liveblog_1-0"><div class="comp mntl-block article-content__description" id="mntl-block_12-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Today, Federal Reserve Chair Jerome Powell spoke amid a slew of his colleagues' speaking engagements. </p></div> <div class="comp liveblog__content mntl-sc-page mntl-block" data-bind-scroll-on-start="true" data-rail-bp="mntl-bp-md" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[1, 3, 6, 9, 12, 15, 18]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="liveblog__content_1-0"><div class="comp finance-liveblog-content mntl-liveblog-content mntl-block" id="finance-liveblog-content_1-0"><div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_1-0"><span class="heading-toc" id="toc-2024-04-16t192739925z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_1-0"><p><strong>Fed's Powell Confirms Higher For Longer Interest Rates</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_1-0">April 16, 2024 03:27 PM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124#toc-2024-04-16t192739925z" id="mntl-blogpost__copylink_1-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Federal Reserve Chair Jerome Powell confirmed what financial markets had already mostly guessed: the Fed is likely to respond to the recent spurt of inflation by keeping its benchmark interest rate higher for longer.<br/><br/>In his first public remarks in the wake of last week’s official reports on inflation showing consumer prices <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">falling more slowly than expected</a>, Powell said recent data on the economy has not given policymakers confidence that inflation is firmly on the way back down to the central bank’s goal of a 2% annual rate. That means the Fed will delay any cuts to its interest rate, which it has held at a 23-year high to combat inflation.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> However, Powell indicated he thought the rate was high enough at its current range of 5.25% to 5.5%, implying he does not support more rate hikes, as some Fed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-5-8625276">officials have suggested recently</a>.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> “The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence,” Powell said. “That said, we think policy is well positioned to handle the risks that we face.” </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> The remarks marked a change of tone for Powell, who earlier in the year had characterized two hotter-than-expected inflation reports as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-meeting-live-march-8611749">bumps in the road</a> rather than a reversal of the trend of consumer price increases cooling down.<br/><br/>“Fed Chair Powell moved more decidedly in a hawkish direction as he essentially underscored that the downward trajectory of inflation has essentially stalled,” Quincy Krosby, chief global strategist for LPL Financial, wrote in a commentary. </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="1" id="mntl-sc-block-adslot_1-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_2-0"><span class="heading-toc" id="toc-2024-04-16t171352636z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_2-0"><p><strong>Economists See Improved Manufacturing Sector in March</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_2-0">April 16, 2024 01:13 PM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124#toc-2024-04-16t171352636z" id="mntl-blogpost__copylink_2-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Industrial production moved higher in March in what economists said was signs of recovery in the U.S. factory sector. Measurements of industrial <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capacityutilizationrate.asp">capacity utilization</a> also inched higher in March, moving up to 78.4%, its third straight month moving higher.<span class="ql-inline-citation" data-cite="3"></span>  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> It’s the first time in more than a year that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ipi.asp">industrial production</a> moved higher for two consecutive months, wrote Wells Fargo economists led by Shannon Seery Grein.   </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> “After spending the better part of the past year in the doldrums, the factory sector is showing signs of life,” Wells Fargo wrote. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The report showed that high-tech production was higher again in March, part of a year-over-year jump in manufacturing that comes as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chips-and-science-act-6500333">U.S. programs like the CHIPS Act</a> fund increased domestic production efforts. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> “High-tech production is rapidly accelerating even as other non-energy manufacturing remains fairly consistent with 2017 levels. This is at least in part due to the recent boom in manufacturing construction activity and push to onshore key products,” Wells Fargo wrote.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Along with the increase in high-tech production, the upswing in single-family home construction and increased aircraft construction spurred by a travel boom are also factors that will press production higher, wrote Oxford Economics' Bernard Yaros.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> “This still is only a modest expansion, and despite the favorable trends listed above, elevated interest rates, past tightening in lending conditions, and uncertainty around the outcome of the 2024 election will prevent an even stronger performance compared to last year,” Yarros wrote.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <em>-Terry Lane</em> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="2" id="mntl-sc-block-adslot_2-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_3-0"><span class="heading-toc" id="toc-2024-04-16t140732473z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_3-0"><p><strong>Jefferson: Fed Data Points to March PCE Rise</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_3-0">April 16, 2024 10:07 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124#toc-2024-04-16t140732473z" id="mntl-blogpost__copylink_3-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Officials may be anticipating another increase in inflation when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pce.asp">Personal Consumption Expenditures (PCE)</a> price data is released later this month, according to comments from Federal Reserve Vice Chair Philip Jefferson. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> In prepared remarks at a Federal Reserve event Tuesday, Jefferson pointed to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">recent inflation</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/employers-hired-far-more-than-expected-in-march-8625280">jobs data</a> that has come in higher than expected, arguing the economy was in an “environment of heightened uncertainty.”<span class="ql-inline-citation" data-cite="2"></span> </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Jefferson said Federal Reserve staff estimates March PCE will come in at 2.7%, slightly higher than the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/feds-favorite-inflation-gauge-sent-mixed-signals-in-february-8622078">2.5% inflation rate reported for February</a>. Jefferson also said staff figured core PCE inflation, which excludes volatile food and energy prices, would be at 2.8%, unchanged from the prior month. Jefferson highlighted how these inflation levels were lower than a year ago.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> “While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done,” he said.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Despite the Fed’s inflation projection, Jefferson said he believed inflation would continue to decline while the Federal Reserve held its interest rates at their current 23-year high levels, potentially resulting in slower first-quarter economic growth.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> “Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer,” he said. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <em>-Terry Lane</em> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="3" id="mntl-sc-block-adslot_3-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_4-0"><span class="heading-toc" id="toc-2024-04-16t134421779z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_4-0"><p><strong>Housing Starts and Permits Nosedived in March</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_4-0">April 16, 2024 09:44 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124#toc-2024-04-16t134421779z" id="mntl-blogpost__copylink_4-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Homebuilders sharply pulled back on applying for building permits and breaking ground on new projects in March, data from the Census Bureau showed Tuesday. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> If builders continued starting homes at the rate they did in March, they’d break ground on 1.32 million in one year, the slowest rate since August. That was a 14.7% drop from a seasonally adjusted annual rate of 1.52 million in February, and below the 1.48 million that forecasters had expected according to a survey of economists by Dow Jones Newswires and the <em>Wall Street Journal.</em><span class="ql-inline-citation" data-cite="1"></span><br><br>Building permits, which indicate future activity, also slowed significantly, dropping to a seasonally adjusted annual rate of 1.46 million from 1.52 million in February, also falling short of expectations.  </br></br></p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The slowdown suggests builders could be running into logistical problems despite high demand for their product and an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-15-8631409">optimistic mood among homebuilders</a>. Mortgage rates <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/renters-lose-hope-of-buying-homes-as-prices-and-mortgage-rates-rise-8630590">running near their highest in decades</a> have had a complex effect on the housing market, making homes less affordable overall, but also making newly-built homes more appealing compared to existing ones as homeowners remain reluctant to sell and abandon low mortgage rates they secured years ago.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> “Builders continue to grapple with challenges stemming from the ‘5 Ls’: labor, lots, legal issues, lumber, and lending,” Odeta Kushi, deputy chief economist at First American, posted on X, the social media platform formerly called Twitter. “‘Higher-for-longer’ mortgage rates are also a major headwind for builders and potential home buyers alike.”<br> </br></p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="4" id="mntl-sc-block-adslot_4-0"></div></div></div></div> <div class="comp textnote-placeholder mntl-block" id="textnote-placeholder_1-0"></div> <div class="comp textnote mm-ads-gpt-adunit gpt textnote" id="textnote_1-0"> <div class="wrapper" id="textnote"></div> </div> </div>

Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. Today, Federal Reserve Chair Jerome Powell spoke amid a slew of his colleagues' speaking engagements. ## **Fed's Powell Confirms Higher For Longer Interest Rates** April 16, 2024 03:27 PM EDT Federal Reserve Chair Jerome Powell confirmed what financial markets had already mostly guessed: the Fed is likely to respond to the recent spurt of inflation by keeping its benchmark interest rate higher for longer. In his first public remarks in the wake of last week’s official reports on inflation showing consumer prices [falling more slowly than expected](https://www.investopedia.com/inflation-heated-up-in-march-8629363), Powell said recent data on the economy has not given policymakers confidence that inflation is firmly on the way back down to the central bank’s goal of a 2% annual rate. That means the Fed will delay any cuts to its interest rate, which it has held at a 23-year high to combat inflation.  However, Powell indicated he thought the rate was high enough at its current range of 5.25% to 5.5%, implying he does not support more rate hikes, as some Fed [officials have suggested recently](https://www.investopedia.com/us-economy-news-today-april-5-8625276).  “The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence,” Powell said. “That said, we think policy is well positioned to handle the risks that we face.” The remarks marked a change of tone for Powell, who earlier in the year had characterized two hotter-than-expected inflation reports as [bumps in the road](https://www.investopedia.com/fed-meeting-live-march-8611749) rather than a reversal of the trend of consumer price increases cooling down. “Fed Chair Powell moved more decidedly in a hawkish direction as he essentially underscored that the downward trajectory of inflation has essentially stalled,” Quincy Krosby, chief global strategist for LPL Financial, wrote in a commentary. ## **Economists See Improved Manufacturing Sector in March** April 16, 2024 01:13 PM EDT Industrial production moved higher in March in what economists said was signs of recovery in the U.S. factory sector. Measurements of industrial [capacity utilization](https://www.investopedia.com/terms/c/capacityutilizationrate.asp) also inched higher in March, moving up to 78.4%, its third straight month moving higher.  It’s the first time in more than a year that [industrial production](https://www.investopedia.com/terms/i/ipi.asp) moved higher for two consecutive months, wrote Wells Fargo economists led by Shannon Seery Grein.   “After spending the better part of the past year in the doldrums, the factory sector is showing signs of life,” Wells Fargo wrote. The report showed that high-tech production was higher again in March, part of a year-over-year jump in manufacturing that comes as [U.S. programs like the CHIPS Act](https://www.investopedia.com/chips-and-science-act-6500333) fund increased domestic production efforts. “High-tech production is rapidly accelerating even as other non-energy manufacturing remains fairly consistent with 2017 levels. This is at least in part due to the recent boom in manufacturing construction activity and push to onshore key products,” Wells Fargo wrote.  Along with the increase in high-tech production, the upswing in single-family home construction and increased aircraft construction spurred by a travel boom are also factors that will press production higher, wrote Oxford Economics' Bernard Yaros.  “This still is only a modest expansion, and despite the favorable trends listed above, elevated interest rates, past tightening in lending conditions, and uncertainty around the outcome of the 2024 election will prevent an even stronger performance compared to last year,” Yarros wrote.  *-Terry Lane* ## **Jefferson: Fed Data Points to March PCE Rise** April 16, 2024 10:07 AM EDT Officials may be anticipating another increase in inflation when the [Personal Consumption Expenditures (PCE)](https://www.investopedia.com/terms/p/pce.asp) price data is released later this month, according to comments from Federal Reserve Vice Chair Philip Jefferson. In prepared remarks at a Federal Reserve event Tuesday, Jefferson pointed to [recent inflation](https://www.investopedia.com/inflation-heated-up-in-march-8629363) and [jobs data](https://www.investopedia.com/employers-hired-far-more-than-expected-in-march-8625280) that has come in higher than expected, arguing the economy was in an “environment of heightened uncertainty.” Jefferson said Federal Reserve staff estimates March PCE will come in at 2.7%, slightly higher than the [2.5% inflation rate reported for February](https://www.investopedia.com/feds-favorite-inflation-gauge-sent-mixed-signals-in-february-8622078). Jefferson also said staff figured core PCE inflation, which excludes volatile food and energy prices, would be at 2.8%, unchanged from the prior month. Jefferson highlighted how these inflation levels were lower than a year ago.  “While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done,” he said.  Despite the Fed’s inflation projection, Jefferson said he believed inflation would continue to decline while the Federal Reserve held its interest rates at their current 23-year high levels, potentially resulting in slower first-quarter economic growth.  “Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer,” he said. *-Terry Lane* ## **Housing Starts and Permits Nosedived in March** April 16, 2024 09:44 AM EDT Homebuilders sharply pulled back on applying for building permits and breaking ground on new projects in March, data from the Census Bureau showed Tuesday. If builders continued starting homes at the rate they did in March, they’d break ground on 1.32 million in one year, the slowest rate since August. That was a 14.7% drop from a seasonally adjusted annual rate of 1.52 million in February, and below the 1.48 million that forecasters had expected according to a survey of economists by Dow Jones Newswires and the *Wall Street Journal.* Building permits, which indicate future activity, also slowed significantly, dropping to a seasonally adjusted annual rate of 1.46 million from 1.52 million in February, also falling short of expectations.  The slowdown suggests builders could be running into logistical problems despite high demand for their product and an [optimistic mood among homebuilders](https://www.investopedia.com/us-economy-news-today-april-15-8631409). Mortgage rates [running near their highest in decades](https://www.investopedia.com/renters-lose-hope-of-buying-homes-as-prices-and-mortgage-rates-rise-8630590) have had a complex effect on the housing market, making homes less affordable overall, but also making newly-built homes more appealing compared to existing ones as homeowners remain reluctant to sell and abandon low mortgage rates they secured years ago.  “Builders continue to grapple with challenges stemming from the ‘5 Ls’: labor, lots, legal issues, lumber, and lending,” Odeta Kushi, deputy chief economist at First American, posted on X, the social media platform formerly called Twitter. “‘Higher-for-longer’ mortgage rates are also a major headwind for builders and potential home buyers alike.”

Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. Today, Federal Reserve Chair Jerome Powell spoke amid a slew of his colleagues' speaking engagements. Fed's Powell Confirms Higher For Longer Interest Rates April 16, 2024 03:27 PM EDT Federal Reserve Chair Jerome Powell confirmed what financial markets had already mostly guessed: the Fed is likely to respond to the recent spurt of inflation by keeping its benchmark interest rate higher for longer.In his first public remarks in the wake of last week’s official reports on inflation showing consumer prices falling more slowly than expected, Powell said recent data on the economy has not given policymakers confidence that inflation is firmly on the way back down to the central bank’s goal of a 2% annual rate. That means the Fed will delay any cuts to its interest rate, which it has held at a 23-year high to combat inflation.  However, Powell indicated he thought the rate was high enough at its current range of 5.25% to 5.5%, implying he does not support more rate hikes, as some Fed officials have suggested recently.  “The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence,” Powell said. “That said, we think policy is well positioned to handle the risks that we face.” The remarks marked a change of tone for Powell, who earlier in the year had characterized two hotter-than-expected inflation reports as bumps in the road rather than a reversal of the trend of consumer price increases cooling down.“Fed Chair Powell moved more decidedly in a hawkish direction as he essentially underscored that the downward trajectory of inflation has essentially stalled,” Quincy Krosby, chief global strategist for LPL Financial, wrote in a commentary. Economists See Improved Manufacturing Sector in March April 16, 2024 01:13 PM EDT Industrial production moved higher in March in what economists said was signs of recovery in the U.S. factory sector. Measurements of industrial capacity utilization also inched higher in March, moving up to 78.4%, its third straight month moving higher.  It’s the first time in more than a year that industrial production moved higher for two consecutive months, wrote Wells Fargo economists led by Shannon Seery Grein.   “After spending the better part of the past year in the doldrums, the factory sector is showing signs of life,” Wells Fargo wrote. The report showed that high-tech production was higher again in March, part of a year-over-year jump in manufacturing that comes as U.S. programs like the CHIPS Act fund increased domestic production efforts. “High-tech production is rapidly accelerating even as other non-energy manufacturing remains fairly consistent with 2017 levels. This is at least in part due to the recent boom in manufacturing construction activity and push to onshore key products,” Wells Fargo wrote.  Along with the increase in high-tech production, the upswing in single-family home construction and increased aircraft construction spurred by a travel boom are also factors that will press production higher, wrote Oxford Economics' Bernard Yaros.  “This still is only a modest expansion, and despite the favorable trends listed above, elevated interest rates, past tightening in lending conditions, and uncertainty around the outcome of the 2024 election will prevent an even stronger performance compared to last year,” Yarros wrote.  -Terry Lane Jefferson: Fed Data Points to March PCE Rise April 16, 2024 10:07 AM EDT Officials may be anticipating another increase in inflation when the Personal Consumption Expenditures (PCE) price data is released later this month, according to comments from Federal Reserve Vice Chair Philip Jefferson. In prepared remarks at a Federal Reserve event Tuesday, Jefferson pointed to recent inflation and jobs data that has come in higher than expected, arguing the economy was in an “environment of heightened uncertainty.” Jefferson said Federal Reserve staff estimates March PCE will come in at 2.7%, slightly higher than the 2.5% inflation rate reported for February. Jefferson also said staff figured core PCE inflation, which excludes volatile food and energy prices, would be at 2.8%, unchanged from the prior month. Jefferson highlighted how these inflation levels were lower than a year ago.  “While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done,” he said.  Despite the Fed’s inflation projection, Jefferson said he believed inflation would continue to decline while the Federal Reserve held its interest rates at their current 23-year high levels, potentially resulting in slower first-quarter economic growth.  “Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer,” he said. -Terry Lane Housing Starts and Permits Nosedived in March April 16, 2024 09:44 AM EDT Homebuilders sharply pulled back on applying for building permits and breaking ground on new projects in March, data from the Census Bureau showed Tuesday. If builders continued starting homes at the rate they did in March, they’d break ground on 1.32 million in one year, the slowest rate since August. That was a 14.7% drop from a seasonally adjusted annual rate of 1.52 million in February, and below the 1.48 million that forecasters had expected according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.Building permits, which indicate future activity, also slowed significantly, dropping to a seasonally adjusted annual rate of 1.46 million from 1.52 million in February, also falling short of expectations.  The slowdown suggests builders could be running into logistical problems despite high demand for their product and an optimistic mood among homebuilders. Mortgage rates running near their highest in decades have had a complex effect on the housing market, making homes less affordable overall, but also making newly-built homes more appealing compared to existing ones as homeowners remain reluctant to sell and abandon low mortgage rates they secured years ago.  “Builders continue to grapple with challenges stemming from the ‘5 Ls’: labor, lots, legal issues, lumber, and lending,” Odeta Kushi, deputy chief economist at First American, posted on X, the social media platform formerly called Twitter. “‘Higher-for-longer’ mortgage rates are also a major headwind for builders and potential home buyers alike.”

https://www.investopedia.com/forgiven-student-loans-on-credit-reports-7371496

How Student Loan Forgiveness Affects a Credit Report

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> There are several student loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and the newly implemented Saving on a Valuable Education (SAVE) plan. Loan forgiveness does not remove accounts from a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp">credit report</a>. Instead, the loans will be paid in full, and a borrower's <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dti.asp">debt-to-income (DTI) ratio</a> will improve. If there is a default on federal loans, President Biden’s Fresh Start program can potentially remove the default from a credit report, and defaulted loans would show “in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a>.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>With student loan forgiveness, a borrower's debt history remains on their credit report.</li><li>Loan forgiveness programs include Save on a Valuable Education (SAVE), Public Service Loan Forgiveness (PSLF), and Teacher Loan Forgiveness.</li><li>Borrowers can remove inaccuracies from their credit reports related to student loans to improve their credit.</li></ul></div></div></div> <span class="heading-toc" id="toc-student-loan-forgiveness-programs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Student Loan Forgiveness Programs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Several types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/051214/debt-forgiveness-how-get-out-paying-your-student-loans.asp">student loan forgiveness</a> programs apply only to federal student loans and include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <li><strong>Public Service Loan Forgiveness (PSLF)</strong>:<strong> </strong>Under PSLF, federal loan borrowers can qualify for debt forgiveness if they work full-time for a nonprofit organization or government agency for at least ten years and make 120 qualifying monthly payments.<span class="ql-inline-citation" data-cite="4"></span></li> <li><strong>Teacher Loan Forgiveness</strong>:<strong> </strong>Those who teach in low-income schools or education service agencies for at least five consecutive academic years can qualify for up to $17,500 of federal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/student-loan-forgiveness-for-teachers-4772528">loan forgiveness</a>.<span class="ql-inline-citation" data-cite="5"></span></li> <li><strong>Income-Driven Repayment (IDR) Forgiveness</strong>: With IDR plans, borrowers may qualify for reduced payment based on their discretionary incomes. If the borrower still has a balance at the end of the repayment term, the remainder is then forgiven.<span class="ql-inline-citation" data-cite="6"></span> There are currently four IDR plans: the Pay As You Earn (PAYE) plan, the Income-Based Repayment (IBR) plan, the Income Contingent Repayment (ICR) plan, and the Saving on a Valuable Education (SAVE) plan.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> In August 2023, President Biden unveiled the SAVE Plan, which replaces the older REPAYE plan. SAVE is an income-driven repayment plan that calculates a monthly payment based on income and family size, eliminates the need for a spousal co-signer, and excludes compounding of unpaid interest as payments are made.<span class="ql-inline-citation" data-cite="22"></span> In addition, loans are eligible for forgiveness after 10, 20, or 25 years, depending on the original loan amount and time spent making payments.<span class="ql-inline-citation" data-cite="24"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>In June 2023, the Supreme Court struck down President Biden's plan to provide $20,000 in loan forgiveness to Pell Grant recipients and $10,000 in forgiveness to other federal student loan borrowers. The court ruled the forgiveness program overstepped the bounds of federal law and usurped the power of Congress to control government spending.<span class="ql-inline-citation" data-cite="25"></span><span class="ql-inline-citation" data-cite="23"></span></p></div></div></div> <span class="heading-toc" id="toc-student-loan-default"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Student Loan Default </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Not paying student loans can lead to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/default2.asp">default</a>. With private loans, default can begin after missing a payment for 90 days, and with federal loans, after 270 days. The consequences of default can be severe, particularly with federal <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/improve-credit-score-student-loan-debt-8553139">student loan debt</a>. Under normal circumstances, the federal government can garnish wages and seize tax refunds.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The default is reported to the credit bureaus, and the record of late payments will likely stay on a borrower's credit reports for up to seven years.<span class="ql-inline-citation" data-cite="3"></span> Borrowers who see inaccuracies related to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-student-loans-4775346">student loan</a> should investigate the errors to improve their credit.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Fresh Start Program </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Under President Biden’s Fresh Start program, borrowers with federal student loans in default could drastically improve their credit. Defaulted student loans would be removed from the credit report, and the loans would appear on a credit report as “in repayment.”<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Private student loans are not eligible for forgiveness. The only way to remove the default is to pay the accounts off in full. Borrowers can use a creditworthy co-signer to pay off the loans and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/refinance.asp">refinance</a> the loans with another lender. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Borrowers must contact their student loan servicers to apply for the Fresh Start program. Sign up online at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://myeddebt.ed.gov/">myeddebt.ed.gov</a> or call 1-800-621-3115.<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-how-student-loan-forgiveness-affects-a-credit-score"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> How Student Loan Forgiveness Affects a Credit Score </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li><strong>Defaulted loans</strong>:<strong> </strong>Under the terms of the Fresh Start program, defaulted student loans are removed from credit reports, and the loans are listed as “in repayment.”<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Credit mix</strong>:<strong> </strong>Those who qualify for loan forgiveness may see a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">score</a> drop by a few points if the loan was the only installment loan because a credit mix, which shows multiple forms of credit, accounts for 10% of a FICO Score.</li> <li><strong>Age of credit</strong>:<strong> </strong>The length of a borrower's credit history makes up 15% of a credit score. If the student loan is the oldest account, paying it off can cause a score to decrease.</li> <li><strong>Amounts Owed</strong>:<strong> </strong>When your student loan balance decreases, your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-utilization-rate.asp">credit utilization ratio</a> drops, helping your score. Credit utilization accounts for 30% of your credit score.<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-credit-report-disputes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Credit Report Disputes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Accurate information cannot be removed, but if there are errors on a credit report, borrowers can dispute those inaccuracies and have them removed and file a dispute with the major <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditbureau.asp">credit bureaus</a> online:<span class="ql-inline-citation" data-cite="26"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.equifax.com/personal/credit-report-services/credit-dispute/" rel="nofollow">Equifax</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.experian.com/disputes/main.html" rel="nofollow">Experian</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.transunion.com/credit-disputes/dispute-your-credit">TransUnion</a></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Borrowers can send a dispute letter to the loan servicer. The letter should include the name and account information of the loan with inaccuracies and details about why it should be removed. A sample letter is available from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/sample-letters-dispute-credit-report-information/">Consumer Financial Protection Bureau (CFPB)</a>.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_36-0"><span class="heading-toc" id="toc-does-a-statute-of-limitations-apply-to-student-loans"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does a Statute of Limitations Apply to Student Loans?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A creditor has a specific period to sue for money owed. After that period, the statute of limitations is met, and a borrower is no longer legally liable for the debt. Statutes of limitations are generally three to six years in length.<span class="ql-inline-citation" data-cite="11"></span> Student loans, however, are different. In 1991, Congress removed the statute of limitations for federal education loans, which previously was six years.<span class="ql-inline-citation" data-cite="27"></span> This means student loan servicers can pursue delinquent borrowers until a debt is brought into good standing or, in a rare case, discharged through bankruptcy.<span class="ql-inline-citation" data-cite="19"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-forgive-a-student-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does it Take to Forgive a Student Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To qualify for loan forgiveness, borrowers can apply through a program like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. Borrowers must meet the program criteria and complete the necessary service requirements, which can take several years.<span class="ql-inline-citation" data-cite="20"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-where-can-borrowers-view-their-student-loans"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Can Borrowers View Their Student Loans?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To determine student loan information and status, borrowers can go to the Federal Student Aid website and log in at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://studentaid.gov/">StudentAid.gov</a> to view their student aid dashboard and history. It’s also not uncommon for student loans to change service providers.</p><p>Borrowers can also contact the Federal Student Aid Information Center at 1-800-433-3243 or view their credit report at <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.annualcreditreport.com/index.action">AnnualCreditReport.com</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Although loan forgiveness can impact a credit score, the effect is often temporary. And for borrowers with federal student loans in default, the Fresh Start program could give them a clean slate, removing the default from their credit reports. </p></div>

There are several student loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and the newly implemented Saving on a Valuable Education (SAVE) plan. Loan forgiveness does not remove accounts from a [credit report](https://www.investopedia.com/terms/c/creditreport.asp). Instead, the loans will be paid in full, and a borrower's [debt-to-income (DTI) ratio](https://www.investopedia.com/terms/d/dti.asp) will improve. If there is a default on federal loans, President Biden’s Fresh Start program can potentially remove the default from a credit report, and defaulted loans would show “in [repayment](https://www.investopedia.com/terms/r/repayment.asp).” ### Key Takeaways * With student loan forgiveness, a borrower's debt history remains on their credit report. * Loan forgiveness programs include Save on a Valuable Education (SAVE), Public Service Loan Forgiveness (PSLF), and Teacher Loan Forgiveness. * Borrowers can remove inaccuracies from their credit reports related to student loans to improve their credit. ## Student Loan Forgiveness Programs Several types of [student loan forgiveness](https://www.investopedia.com/articles/personal-finance/051214/debt-forgiveness-how-get-out-paying-your-student-loans.asp) programs apply only to federal student loans and include: * **Public Service Loan Forgiveness (PSLF)**:Under PSLF, federal loan borrowers can qualify for debt forgiveness if they work full-time for a nonprofit organization or government agency for at least ten years and make 120 qualifying monthly payments. * **Teacher Loan Forgiveness**:Those who teach in low-income schools or education service agencies for at least five consecutive academic years can qualify for up to $17,500 of federal [loan forgiveness](https://www.investopedia.com/student-loan-forgiveness-for-teachers-4772528). * **Income-Driven Repayment (IDR) Forgiveness**: With IDR plans, borrowers may qualify for reduced payment based on their discretionary incomes. If the borrower still has a balance at the end of the repayment term, the remainder is then forgiven. There are currently four IDR plans: the Pay As You Earn (PAYE) plan, the Income-Based Repayment (IBR) plan, the Income Contingent Repayment (ICR) plan, and the Saving on a Valuable Education (SAVE) plan. In August 2023, President Biden unveiled the SAVE Plan, which replaces the older REPAYE plan. SAVE is an income-driven repayment plan that calculates a monthly payment based on income and family size, eliminates the need for a spousal co-signer, and excludes compounding of unpaid interest as payments are made. In addition, loans are eligible for forgiveness after 10, 20, or 25 years, depending on the original loan amount and time spent making payments. ### In June 2023, the Supreme Court struck down President Biden's plan to provide $20,000 in loan forgiveness to Pell Grant recipients and $10,000 in forgiveness to other federal student loan borrowers. The court ruled the forgiveness program overstepped the bounds of federal law and usurped the power of Congress to control government spending. ## Student Loan Default Not paying student loans can lead to [default](https://www.investopedia.com/terms/d/default2.asp). With private loans, default can begin after missing a payment for 90 days, and with federal loans, after 270 days. The consequences of default can be severe, particularly with federal [student loan debt](https://www.investopedia.com/improve-credit-score-student-loan-debt-8553139). Under normal circumstances, the federal government can garnish wages and seize tax refunds. The default is reported to the credit bureaus, and the record of late payments will likely stay on a borrower's credit reports for up to seven years. Borrowers who see inaccuracies related to a [student loan](https://www.investopedia.com/best-student-loans-4775346) should investigate the errors to improve their credit. ### Fresh Start Program Under President Biden’s Fresh Start program, borrowers with federal student loans in default could drastically improve their credit. Defaulted student loans would be removed from the credit report, and the loans would appear on a credit report as “in repayment.” Private student loans are not eligible for forgiveness. The only way to remove the default is to pay the accounts off in full. Borrowers can use a creditworthy co-signer to pay off the loans and [refinance](https://www.investopedia.com/terms/r/refinance.asp) the loans with another lender. ### Borrowers must contact their student loan servicers to apply for the Fresh Start program. Sign up online at [myeddebt.ed.gov](https://myeddebt.ed.gov/) or call 1-800-621-3115. ## How Student Loan Forgiveness Affects a Credit Score * **Defaulted loans**:Under the terms of the Fresh Start program, defaulted student loans are removed from credit reports, and the loans are listed as “in repayment.” * **Credit mix**:Those who qualify for loan forgiveness may see a [score](https://www.investopedia.com/terms/c/credit_score.asp) drop by a few points if the loan was the only installment loan because a credit mix, which shows multiple forms of credit, accounts for 10% of a FICO Score. * **Age of credit**:The length of a borrower's credit history makes up 15% of a credit score. If the student loan is the oldest account, paying it off can cause a score to decrease. * **Amounts Owed**:When your student loan balance decreases, your [credit utilization ratio](https://www.investopedia.com/terms/c/credit-utilization-rate.asp) drops, helping your score. Credit utilization accounts for 30% of your credit score. ## Credit Report Disputes Accurate information cannot be removed, but if there are errors on a credit report, borrowers can dispute those inaccuracies and have them removed and file a dispute with the major [credit bureaus](https://www.investopedia.com/terms/c/creditbureau.asp) online: * [Equifax](https://www.equifax.com/personal/credit-report-services/credit-dispute/) * [Experian](https://www.experian.com/disputes/main.html) * [TransUnion](https://www.transunion.com/credit-disputes/dispute-your-credit) Borrowers can send a dispute letter to the loan servicer. The letter should include the name and account information of the loan with inaccuracies and details about why it should be removed. A sample letter is available from the [Consumer Financial Protection Bureau (CFPB)](https://www.consumerfinance.gov/consumer-tools/credit-reports-and-scores/sample-letters-dispute-credit-report-information/). ## Does a Statute of Limitations Apply to Student Loans? A creditor has a specific period to sue for money owed. After that period, the statute of limitations is met, and a borrower is no longer legally liable for the debt. Statutes of limitations are generally three to six years in length. Student loans, however, are different. In 1991, Congress removed the statute of limitations for federal education loans, which previously was six years. This means student loan servicers can pursue delinquent borrowers until a debt is brought into good standing or, in a rare case, discharged through bankruptcy. ## How Long Does it Take to Forgive a Student Loan? To qualify for loan forgiveness, borrowers can apply through a program like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. Borrowers must meet the program criteria and complete the necessary service requirements, which can take several years. ## Where Can Borrowers View Their Student Loans? To determine student loan information and status, borrowers can go to the Federal Student Aid website and log in at [StudentAid.gov](https://studentaid.gov/) to view their student aid dashboard and history. It’s also not uncommon for student loans to change service providers. Borrowers can also contact the Federal Student Aid Information Center at 1-800-433-3243 or view their credit report at [AnnualCreditReport.com](https://www.annualcreditreport.com/index.action). ## The Bottom Line Although loan forgiveness can impact a credit score, the effect is often temporary. And for borrowers with federal student loans in default, the Fresh Start program could give them a clean slate, removing the default from their credit reports.

There are several student loan forgiveness programs, including Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and the newly implemented Saving on a Valuable Education (SAVE) plan. Loan forgiveness does not remove accounts from a credit report. Instead, the loans will be paid in full, and a borrower's debt-to-income (DTI) ratio will improve. If there is a default on federal loans, President Biden’s Fresh Start program can potentially remove the default from a credit report, and defaulted loans would show “in repayment.” Key Takeaways With student loan forgiveness, a borrower's debt history remains on their credit report.Loan forgiveness programs include Save on a Valuable Education (SAVE), Public Service Loan Forgiveness (PSLF), and Teacher Loan Forgiveness.Borrowers can remove inaccuracies from their credit reports related to student loans to improve their credit. Student Loan Forgiveness Programs Several types of student loan forgiveness programs apply only to federal student loans and include: Public Service Loan Forgiveness (PSLF): Under PSLF, federal loan borrowers can qualify for debt forgiveness if they work full-time for a nonprofit organization or government agency for at least ten years and make 120 qualifying monthly payments. Teacher Loan Forgiveness: Those who teach in low-income schools or education service agencies for at least five consecutive academic years can qualify for up to $17,500 of federal loan forgiveness. Income-Driven Repayment (IDR) Forgiveness: With IDR plans, borrowers may qualify for reduced payment based on their discretionary incomes. If the borrower still has a balance at the end of the repayment term, the remainder is then forgiven. There are currently four IDR plans: the Pay As You Earn (PAYE) plan, the Income-Based Repayment (IBR) plan, the Income Contingent Repayment (ICR) plan, and the Saving on a Valuable Education (SAVE) plan. In August 2023, President Biden unveiled the SAVE Plan, which replaces the older REPAYE plan. SAVE is an income-driven repayment plan that calculates a monthly payment based on income and family size, eliminates the need for a spousal co-signer, and excludes compounding of unpaid interest as payments are made. In addition, loans are eligible for forgiveness after 10, 20, or 25 years, depending on the original loan amount and time spent making payments. In June 2023, the Supreme Court struck down President Biden's plan to provide $20,000 in loan forgiveness to Pell Grant recipients and $10,000 in forgiveness to other federal student loan borrowers. The court ruled the forgiveness program overstepped the bounds of federal law and usurped the power of Congress to control government spending. Student Loan Default Not paying student loans can lead to default. With private loans, default can begin after missing a payment for 90 days, and with federal loans, after 270 days. The consequences of default can be severe, particularly with federal student loan debt. Under normal circumstances, the federal government can garnish wages and seize tax refunds. The default is reported to the credit bureaus, and the record of late payments will likely stay on a borrower's credit reports for up to seven years. Borrowers who see inaccuracies related to a student loan should investigate the errors to improve their credit. Fresh Start Program Under President Biden’s Fresh Start program, borrowers with federal student loans in default could drastically improve their credit. Defaulted student loans would be removed from the credit report, and the loans would appear on a credit report as “in repayment.” Private student loans are not eligible for forgiveness. The only way to remove the default is to pay the accounts off in full. Borrowers can use a creditworthy co-signer to pay off the loans and refinance the loans with another lender. Borrowers must contact their student loan servicers to apply for the Fresh Start program. Sign up online at myeddebt.ed.gov or call 1-800-621-3115. How Student Loan Forgiveness Affects a Credit Score Defaulted loans: Under the terms of the Fresh Start program, defaulted student loans are removed from credit reports, and the loans are listed as “in repayment.” Credit mix: Those who qualify for loan forgiveness may see a score drop by a few points if the loan was the only installment loan because a credit mix, which shows multiple forms of credit, accounts for 10% of a FICO Score. Age of credit: The length of a borrower's credit history makes up 15% of a credit score. If the student loan is the oldest account, paying it off can cause a score to decrease. Amounts Owed: When your student loan balance decreases, your credit utilization ratio drops, helping your score. Credit utilization accounts for 30% of your credit score. Credit Report Disputes Accurate information cannot be removed, but if there are errors on a credit report, borrowers can dispute those inaccuracies and have them removed and file a dispute with the major credit bureaus online: Equifax Experian TransUnion Borrowers can send a dispute letter to the loan servicer. The letter should include the name and account information of the loan with inaccuracies and details about why it should be removed. A sample letter is available from the Consumer Financial Protection Bureau (CFPB). Does a Statute of Limitations Apply to Student Loans? A creditor has a specific period to sue for money owed. After that period, the statute of limitations is met, and a borrower is no longer legally liable for the debt. Statutes of limitations are generally three to six years in length. Student loans, however, are different. In 1991, Congress removed the statute of limitations for federal education loans, which previously was six years. This means student loan servicers can pursue delinquent borrowers until a debt is brought into good standing or, in a rare case, discharged through bankruptcy. How Long Does it Take to Forgive a Student Loan? To qualify for loan forgiveness, borrowers can apply through a program like Public Service Loan Forgiveness (PSLF) or Teacher Loan Forgiveness. Borrowers must meet the program criteria and complete the necessary service requirements, which can take several years. Where Can Borrowers View Their Student Loans? To determine student loan information and status, borrowers can go to the Federal Student Aid website and log in at StudentAid.gov to view their student aid dashboard and history. It’s also not uncommon for student loans to change service providers.Borrowers can also contact the Federal Student Aid Information Center at 1-800-433-3243 or view their credit report at AnnualCreditReport.com. The Bottom Line Although loan forgiveness can impact a credit score, the effect is often temporary. And for borrowers with federal student loans in default, the Fresh Start program could give them a clean slate, removing the default from their credit reports.

https://www.investopedia.com/what-is-the-easiest-credit-card-to-get-approved-for-5077189

What Is the Easiest Credit Card to Get Approved For?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Credit cards are a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp">convenient way to make purchases</a>, pay bills, and book travel arrangements. As an added benefit, many credit cards offer cash back, points, or miles on your spending, which can save you money. A credit card can also help with establishing and building a good <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit score</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> But what is the easiest credit card to get when you have a limited credit history or poor credit? Here's a closer look at which cards may be within reach. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Credit card companies focus largely on credit scores when making approval decisions. </li><li>A credit card can be secured, meaning it requires a cash deposit, or unsecured, meaning you don't need to make a deposit. </li><li>It's possible to get approved for a credit card with no credit or poor credit, but you may pay a higher APR and/or fees. </li><li>Secured cards are a great way to build up a thin credit file, provided that you have enough cash for the deposit.</li><li>Unsecured credit cards typically offer better interest rates, rewards programs, and features compared with secured credit cards.</li></ul></div></div></div> <span class="heading-toc" id="toc-credit-card-approval-requirements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Credit Card Approval Requirements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Credit card issuers differ in terms of what it takes to be approved. But generally, these factors are considered when you apply for a card: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>Your credit score</li><li>Your income</li><li>Your employment</li><li>Your monthly rent or mortgage payment</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> These things give card issuers an idea of your ability and likelihood to pay back what you spend with a credit card. Credit card companies can also perform a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hard-inquiry.asp">hard inquiry</a> of your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp">credit report</a> to learn more about your credit history. That can trim a few points off your credit score.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Checking your own credit reports before applying for a credit card won't affect your credit score. </p></div></div></div> <span class="heading-toc" id="toc-what-is-the-easiest-credit-card-to-be-approved-for"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> What Is the Easiest Credit Card to Be Approved For? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The easiest credit card to get is different for everyone since it will depend on your credit score and the other factors listed above. The credit cards that are available to you may also depend on whether: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>You're a student</li> <li>You have no credit or a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/thin-file.asp" rel="noopener noreferrer">thin credit file</a></li> <li>You have bad or poor credit</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> If any of those apply to you, there are some specialized types of credit cards that will be easier to get than others. They include student credit cards, starter credit cards, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securedcard.asp" rel="noopener noreferrer">secured credit cards</a>.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Student Credit Cards </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Student credit cards are designed for college students who are just beginning to establish their credit history. These cards can offer rewards, and if they do, they're typically geared toward purchases students spend the most money on, such as dining out or gas.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> A student credit card can be easier to get than a regular one if you have no credit history at all or a limited one. The federal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-card-accountability-responsibility-and-disclosure-act-of-2009.asp">CARD Act</a> requires you to be at least 21 to get a student credit card in your name, although you can apply as young as 18 if you have sufficient income or a cosigner who is at least 21.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Starter Credit Cards </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Starter credit cards are also designed for people who are just starting out with credit but who aren't necessarily students. These types of cards are more likely to charge annual fees and carry a higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">annual percentage rate</a> (APR).  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Secured Credit Cards </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Secured credit cards work just like unsecured credit cards except that they require a cash deposit to open. This deposit typically doubles as your credit limit. The difference is that a standard secured credit card will usually require a hard check of your credit to get approved. Once you have had a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582" rel="noopener noreferrer">secured card </a>for a period of time, and demonstrated that you use credit responsibly, you may be eligible to graduate to a regular, unsecured card. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">Important</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Before you apply for a starter or secured card, make sure the credit card company reports your activity to at least one of the major credit bureaus. Otherwise, using the card won't help you to build credit. </p></div></div></div> <span class="heading-toc" id="toc-what-is-the-easiest-credit-card-to-get-with-no-credit-or-thin-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> What Is the Easiest Credit Card to Get With No Credit or Thin Credit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Having no credit means you don't have any credit history at all. A thin credit file means you have some credit history, but it's not enough to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-improve-your-credit-score-with-no-credit-history-5212482">generate a credit score</a>. In either case, you could be "invisible" to credit card companies when trying to apply for new credit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> In that case, the easiest credit card to get may be a starter card or secured credit card. Examples of cards you might qualify for include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> <li><strong><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/opensky-secured-visa-credit-card-review-5074704">OpenSky Secured Visa:</a> </strong>The OpenSky Secured Visa is a no credit check card that's also a secured credit card. You can set your credit limit by making a cash deposit of $200 to $3,000, and your account activity will be reported to all of the three major credit bureaus.<span class="ql-inline-citation" data-cite="5"></span></li> <li><strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.firstprogress.com/">First Progress Platinum Elite Secured Mastercard:</a> </strong>The First Progress Platinum Elite Secured Mastercard requires no credit history or minimum credit score for approval. Your security deposit is refundable, and the card is accepted nationwide.<span class="ql-inline-citation" data-cite="4"></span></li> <li><strong><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/deserve-edu-mastercard-for-students-review-4799611">Deserve EDU Mastercard for Students:</a> </strong>The Deserve EDU Mastercard for Students doesn't require a Social Security number to apply, so it could be good for international students.<span class="ql-inline-citation" data-cite="3"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-what-is-the-easiest-credit-card-to-get-with-fair-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> What Is the Easiest Credit Card to Get With Fair Credit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> If you have fair credit, rather than no credit or bad credit, then you might have a different range of credit card options to choose from. Fair credit on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ficoscore.asp">FICO credit scoring</a> scale generally means a score between 580 and 669.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Here are some of the easiest credit cards to get with fair credit: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> <li><strong><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/platinum-credit-card-from-capital-one-review-4798873">Capital One Platinum Mastercard:</a> </strong>The Capital One Platinum Mastercard is geared toward people with fair credit who are interested in improving their credit. This card has a $0 annual fee and includes access to CreditWise credit monitoring.<span class="ql-inline-citation" data-cite="7"></span></li> <li><strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/discover-it-secured-credit-card-review-4795882">Discover it Secured Card:</a> </strong>The Discover it Secured Card can help with building or rebuilding credit. A security deposit is required, but it's refundable. This card also has a cash-back rewards program.<span class="ql-inline-citation" data-cite="8"></span></li> <li><strong><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-one-platinum-premier-visa-review-4844671">Credit One Platinum Rewards Visa:</a> </strong>The Credit One Platinum Rewards Visa is designed for people with fair credit who are interested in earning rewards on purchases. Keep in mind this card does have an annual fee and a higher APR, which could make carrying a balance expensive.<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_50-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/GuX8B/3/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Capital One Announces Agreement to Acquire Discover Financial Services"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_52-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_53-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0">Tip</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>If you're considering a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582" rel="noopener noreferrer">credit card that offers rewards</a>, be sure to balance the rewards you're likely to earn against the card's annual fee (if any). </p></div></div></div> <span class="heading-toc" id="toc-what-is-the-easiest-unsecured-credit-card-to-get-approved-for"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> What Is the Easiest Unsecured Credit Card to Get Approved for? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Unsecured credit cards require no cash deposit to open. It's possible to get some unsecured cards if your credit is in the fair, or even bad, range.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> If you have poor credit or no credit, consider these unsecured card options: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <li><strong><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-one-platinum-visa-for-rebuilding-credit-review-4802375">Credit One Bank Platinum Visa:</a> </strong>The Credit One Bank Platinum Visa offers cash-back with no security deposit required. This card does have an annual fee, however.<span class="ql-inline-citation" data-cite="9"></span></li> <li><strong><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/total-visa-credit-card-review-5074740">Total Visa:</a> </strong>The Total Visa is an unsecured credit card designed for people who don't have perfect credit. The card reports to all three credit bureaus, which can help in building a better credit history. Note that there's an initial program fee for opening an account.<span class="ql-inline-citation" data-cite="11"></span></li> <li><strong><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/petal-visa-card-review-4802421">Petal 2 Visa:</a> </strong>The Petal 2 Visa is a cash-back rewards card that offers higher credit limits with no fees. There's no deposit required at sign-up, and you can use the card to build or rebuild credit.<span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_61-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-approve-a-credit-card"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Approve a Credit Card?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It is possible to get approved instantly, but most companies take a week or two to approve a credit card application. During this time, the credit card company will check your borrowing history to determine if you are creditworthy.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_63-0"><span class="heading-toc" id="toc-what-credit-score-do-i-need-to-get-approved-for-a-credit-card"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Credit Score Do I Need to Get Approved for a Credit Card?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A FICO credit score of 750 or higher will get you approved for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/applying-for-a-credit-card-your-odds-of-being-approved-4684901">almost any credit card</a> on the market. A "fair" credit score of 620 or higher may also get you approved with some cards, but you may face higher interest rates or a lower credit limit. For scores of 580 or below, your best bet is to get a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securedcard.asp">secured credit card</a>. These cards require you to provide a certain amount of collateral that may be forfeited if you fail to make the required payments.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-what-are-instant-approval-credit-cards"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Instant Approval Credit Cards?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An instant approval credit card is a credit card where applications are evaluated immediately. These usually consist of an online application with basic questions about the applicant's identity and income situation. Once submitted, the applicant immediately receives a decision of approval or denial.</p></div> </div></div>

Credit cards are a [convenient way to make purchases](https://www.investopedia.com/terms/c/creditcard.asp), pay bills, and book travel arrangements. As an added benefit, many credit cards offer cash back, points, or miles on your spending, which can save you money. A credit card can also help with establishing and building a good [credit score](https://www.investopedia.com/terms/c/credit_score.asp). But what is the easiest credit card to get when you have a limited credit history or poor credit? Here's a closer look at which cards may be within reach. ### Key Takeaways * Credit card companies focus largely on credit scores when making approval decisions. * A credit card can be secured, meaning it requires a cash deposit, or unsecured, meaning you don't need to make a deposit. * It's possible to get approved for a credit card with no credit or poor credit, but you may pay a higher APR and/or fees. * Secured cards are a great way to build up a thin credit file, provided that you have enough cash for the deposit. * Unsecured credit cards typically offer better interest rates, rewards programs, and features compared with secured credit cards. ## Credit Card Approval Requirements Credit card issuers differ in terms of what it takes to be approved. But generally, these factors are considered when you apply for a card: * Your credit score * Your income * Your employment * Your monthly rent or mortgage payment These things give card issuers an idea of your ability and likelihood to pay back what you spend with a credit card. Credit card companies can also perform a [hard inquiry](https://www.investopedia.com/terms/h/hard-inquiry.asp) of your [credit report](https://www.investopedia.com/terms/c/creditreport.asp) to learn more about your credit history. That can trim a few points off your credit score. ### Note Checking your own credit reports before applying for a credit card won't affect your credit score.  ## What Is the Easiest Credit Card to Be Approved For? The easiest credit card to get is different for everyone since it will depend on your credit score and the other factors listed above. The credit cards that are available to you may also depend on whether: * You're a student * You have no credit or a [thin credit file](https://www.investopedia.com/terms/t/thin-file.asp) * You have bad or poor credit If any of those apply to you, there are some specialized types of credit cards that will be easier to get than others. They include student credit cards, starter credit cards, and [secured credit cards](https://www.investopedia.com/terms/s/securedcard.asp).  ### Student Credit Cards Student credit cards are designed for college students who are just beginning to establish their credit history. These cards can offer rewards, and if they do, they're typically geared toward purchases students spend the most money on, such as dining out or gas.  A student credit card can be easier to get than a regular one if you have no credit history at all or a limited one. The federal [CARD Act](https://www.investopedia.com/terms/c/credit-card-accountability-responsibility-and-disclosure-act-of-2009.asp) requires you to be at least 21 to get a student credit card in your name, although you can apply as young as 18 if you have sufficient income or a cosigner who is at least 21. ### Starter Credit Cards Starter credit cards are also designed for people who are just starting out with credit but who aren't necessarily students. These types of cards are more likely to charge annual fees and carry a higher [annual percentage rate](https://www.investopedia.com/terms/a/apr.asp) (APR).  ### Secured Credit Cards Secured credit cards work just like unsecured credit cards except that they require a cash deposit to open. This deposit typically doubles as your credit limit. The difference is that a standard secured credit card will usually require a hard check of your credit to get approved. Once you have had a [secured card](https://www.investopedia.com/best-credit-cards-4801582) for a period of time, and demonstrated that you use credit responsibly, you may be eligible to graduate to a regular, unsecured card. ### Important Before you apply for a starter or secured card, make sure the credit card company reports your activity to at least one of the major credit bureaus. Otherwise, using the card won't help you to build credit.  ## What Is the Easiest Credit Card to Get With No Credit or Thin Credit? Having no credit means you don't have any credit history at all. A thin credit file means you have some credit history, but it's not enough to [generate a credit score](https://www.investopedia.com/how-to-improve-your-credit-score-with-no-credit-history-5212482). In either case, you could be "invisible" to credit card companies when trying to apply for new credit. In that case, the easiest credit card to get may be a starter card or secured credit card. Examples of cards you might qualify for include: * **[OpenSky Secured Visa:](https://www.investopedia.com/opensky-secured-visa-credit-card-review-5074704)** The OpenSky Secured Visa is a no credit check card that's also a secured credit card. You can set your credit limit by making a cash deposit of $200 to $3,000, and your account activity will be reported to all of the three major credit bureaus. * **[First Progress Platinum Elite Secured Mastercard:](https://www.firstprogress.com/)** The First Progress Platinum Elite Secured Mastercard requires no credit history or minimum credit score for approval. Your security deposit is refundable, and the card is accepted nationwide. * **[Deserve EDU Mastercard for Students:](https://www.investopedia.com/deserve-edu-mastercard-for-students-review-4799611)** The Deserve EDU Mastercard for Students doesn't require a Social Security number to apply, so it could be good for international students. ## What Is the Easiest Credit Card to Get With Fair Credit? If you have fair credit, rather than no credit or bad credit, then you might have a different range of credit card options to choose from. Fair credit on the [FICO credit scoring](https://www.investopedia.com/terms/f/ficoscore.asp) scale generally means a score between 580 and 669. Here are some of the easiest credit cards to get with fair credit: * **[Capital One Platinum Mastercard:](https://www.investopedia.com/platinum-credit-card-from-capital-one-review-4798873)** The Capital One Platinum Mastercard is geared toward people with fair credit who are interested in improving their credit. This card has a $0 annual fee and includes access to CreditWise credit monitoring. * **[Discover it Secured Card:](https://www.investopedia.com/discover-it-secured-credit-card-review-4795882)** The Discover it Secured Card can help with building or rebuilding credit. A security deposit is required, but it's refundable. This card also has a cash-back rewards program. * **[Credit One Platinum Rewards Visa:](https://www.investopedia.com/credit-one-platinum-premier-visa-review-4844671)** The Credit One Platinum Rewards Visa is designed for people with fair credit who are interested in earning rewards on purchases. Keep in mind this card does have an annual fee and a higher APR, which could make carrying a balance expensive. ### Tip If you're considering a [credit card that offers rewards](https://www.investopedia.com/best-credit-cards-4801582), be sure to balance the rewards you're likely to earn against the card's annual fee (if any).  ## What Is the Easiest Unsecured Credit Card to Get Approved for? Unsecured credit cards require no cash deposit to open. It's possible to get some unsecured cards if your credit is in the fair, or even bad, range.  If you have poor credit or no credit, consider these unsecured card options: * **[Credit One Bank Platinum Visa:](https://www.investopedia.com/credit-one-platinum-visa-for-rebuilding-credit-review-4802375)** The Credit One Bank Platinum Visa offers cash-back with no security deposit required. This card does have an annual fee, however. * **[Total Visa:](https://www.investopedia.com/total-visa-credit-card-review-5074740)** The Total Visa is an unsecured credit card designed for people who don't have perfect credit. The card reports to all three credit bureaus, which can help in building a better credit history. Note that there's an initial program fee for opening an account. * **[Petal 2 Visa:](https://www.investopedia.com/petal-visa-card-review-4802421)** The Petal 2 Visa is a cash-back rewards card that offers higher credit limits with no fees. There's no deposit required at sign-up, and you can use the card to build or rebuild credit. ## How Long Does It Take to Approve a Credit Card? It is possible to get approved instantly, but most companies take a week or two to approve a credit card application. During this time, the credit card company will check your borrowing history to determine if you are creditworthy. ## What Credit Score Do I Need to Get Approved for a Credit Card? A FICO credit score of 750 or higher will get you approved for [almost any credit card](https://www.investopedia.com/applying-for-a-credit-card-your-odds-of-being-approved-4684901) on the market. A "fair" credit score of 620 or higher may also get you approved with some cards, but you may face higher interest rates or a lower credit limit. For scores of 580 or below, your best bet is to get a [secured credit card](https://www.investopedia.com/terms/s/securedcard.asp). These cards require you to provide a certain amount of collateral that may be forfeited if you fail to make the required payments. ## What Are Instant Approval Credit Cards? An instant approval credit card is a credit card where applications are evaluated immediately. These usually consist of an online application with basic questions about the applicant's identity and income situation. Once submitted, the applicant immediately receives a decision of approval or denial.

Credit cards are a convenient way to make purchases, pay bills, and book travel arrangements. As an added benefit, many credit cards offer cash back, points, or miles on your spending, which can save you money. A credit card can also help with establishing and building a good credit score. But what is the easiest credit card to get when you have a limited credit history or poor credit? Here's a closer look at which cards may be within reach. Key Takeaways Credit card companies focus largely on credit scores when making approval decisions. A credit card can be secured, meaning it requires a cash deposit, or unsecured, meaning you don't need to make a deposit. It's possible to get approved for a credit card with no credit or poor credit, but you may pay a higher APR and/or fees. Secured cards are a great way to build up a thin credit file, provided that you have enough cash for the deposit.Unsecured credit cards typically offer better interest rates, rewards programs, and features compared with secured credit cards. Credit Card Approval Requirements Credit card issuers differ in terms of what it takes to be approved. But generally, these factors are considered when you apply for a card: Your credit scoreYour incomeYour employmentYour monthly rent or mortgage payment These things give card issuers an idea of your ability and likelihood to pay back what you spend with a credit card. Credit card companies can also perform a hard inquiry of your credit report to learn more about your credit history. That can trim a few points off your credit score. Note Checking your own credit reports before applying for a credit card won't affect your credit score.  What Is the Easiest Credit Card to Be Approved For? The easiest credit card to get is different for everyone since it will depend on your credit score and the other factors listed above. The credit cards that are available to you may also depend on whether: You're a student You have no credit or a thin credit file You have bad or poor credit If any of those apply to you, there are some specialized types of credit cards that will be easier to get than others. They include student credit cards, starter credit cards, and secured credit cards.  Student Credit Cards Student credit cards are designed for college students who are just beginning to establish their credit history. These cards can offer rewards, and if they do, they're typically geared toward purchases students spend the most money on, such as dining out or gas.  A student credit card can be easier to get than a regular one if you have no credit history at all or a limited one. The federal CARD Act requires you to be at least 21 to get a student credit card in your name, although you can apply as young as 18 if you have sufficient income or a cosigner who is at least 21. Starter Credit Cards Starter credit cards are also designed for people who are just starting out with credit but who aren't necessarily students. These types of cards are more likely to charge annual fees and carry a higher annual percentage rate (APR).  Secured Credit Cards Secured credit cards work just like unsecured credit cards except that they require a cash deposit to open. This deposit typically doubles as your credit limit. The difference is that a standard secured credit card will usually require a hard check of your credit to get approved. Once you have had a secured card for a period of time, and demonstrated that you use credit responsibly, you may be eligible to graduate to a regular, unsecured card. Important Before you apply for a starter or secured card, make sure the credit card company reports your activity to at least one of the major credit bureaus. Otherwise, using the card won't help you to build credit.  What Is the Easiest Credit Card to Get With No Credit or Thin Credit? Having no credit means you don't have any credit history at all. A thin credit file means you have some credit history, but it's not enough to generate a credit score. In either case, you could be "invisible" to credit card companies when trying to apply for new credit. In that case, the easiest credit card to get may be a starter card or secured credit card. Examples of cards you might qualify for include: OpenSky Secured Visa: The OpenSky Secured Visa is a no credit check card that's also a secured credit card. You can set your credit limit by making a cash deposit of $200 to $3,000, and your account activity will be reported to all of the three major credit bureaus. First Progress Platinum Elite Secured Mastercard: The First Progress Platinum Elite Secured Mastercard requires no credit history or minimum credit score for approval. Your security deposit is refundable, and the card is accepted nationwide. Deserve EDU Mastercard for Students: The Deserve EDU Mastercard for Students doesn't require a Social Security number to apply, so it could be good for international students. What Is the Easiest Credit Card to Get With Fair Credit? If you have fair credit, rather than no credit or bad credit, then you might have a different range of credit card options to choose from. Fair credit on the FICO credit scoring scale generally means a score between 580 and 669. Here are some of the easiest credit cards to get with fair credit: Capital One Platinum Mastercard: The Capital One Platinum Mastercard is geared toward people with fair credit who are interested in improving their credit. This card has a $0 annual fee and includes access to CreditWise credit monitoring. Discover it Secured Card: The Discover it Secured Card can help with building or rebuilding credit. A security deposit is required, but it's refundable. This card also has a cash-back rewards program. Credit One Platinum Rewards Visa: The Credit One Platinum Rewards Visa is designed for people with fair credit who are interested in earning rewards on purchases. Keep in mind this card does have an annual fee and a higher APR, which could make carrying a balance expensive. Tip If you're considering a credit card that offers rewards, be sure to balance the rewards you're likely to earn against the card's annual fee (if any).  What Is the Easiest Unsecured Credit Card to Get Approved for? Unsecured credit cards require no cash deposit to open. It's possible to get some unsecured cards if your credit is in the fair, or even bad, range.  If you have poor credit or no credit, consider these unsecured card options: Credit One Bank Platinum Visa: The Credit One Bank Platinum Visa offers cash-back with no security deposit required. This card does have an annual fee, however. Total Visa: The Total Visa is an unsecured credit card designed for people who don't have perfect credit. The card reports to all three credit bureaus, which can help in building a better credit history. Note that there's an initial program fee for opening an account. Petal 2 Visa: The Petal 2 Visa is a cash-back rewards card that offers higher credit limits with no fees. There's no deposit required at sign-up, and you can use the card to build or rebuild credit. How Long Does It Take to Approve a Credit Card? It is possible to get approved instantly, but most companies take a week or two to approve a credit card application. During this time, the credit card company will check your borrowing history to determine if you are creditworthy. What Credit Score Do I Need to Get Approved for a Credit Card? A FICO credit score of 750 or higher will get you approved for almost any credit card on the market. A "fair" credit score of 620 or higher may also get you approved with some cards, but you may face higher interest rates or a lower credit limit. For scores of 580 or below, your best bet is to get a secured credit card. These cards require you to provide a certain amount of collateral that may be forfeited if you fail to make the required payments. What Are Instant Approval Credit Cards? An instant approval credit card is a credit card where applications are evaluated immediately. These usually consist of an online application with basic questions about the applicant's identity and income situation. Once submitted, the applicant immediately receives a decision of approval or denial.

https://www.investopedia.com/terms/t/thirdmarketmaker.asp

Third Market Maker: What It is, How it Works, Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-third-market-maker"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Third Market Maker? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A third market maker is a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketmaker.asp">market maker</a> that deals in the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/thirdmarket.asp">third market</a>, which is a segment of the financial markets in which exchange-traded securities are exchanged <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/otc.asp">over-the-counter (OTC)</a> by <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/institutionalinvestor.asp">institutional investors</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The term can also be used in a more general sense to refer to any third-party securities dealer who is ready and willing to trade stocks listed on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchange.asp">exchanges</a> at <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/publiccompany.asp">publicly traded</a> prices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Third market makers are market makers operating in the third market of the financial world.</li><li>The third market consists of large investors who trade seasoned securities on an OTC basis as opposed to directly with an exchange.</li><li>Third market makers hold their own inventory of securities, and they aim to profit by reselling that inventory at a higher price. In doing so, they contribute to the overall liquidity of the marketplace.</li><li>Market makers are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security, thereby assuming some of the inventory risk of the marketplace.</li><li>Because third-market makers usually trade in large blocks of securities, trading is primarily limited to large investors, such as pension funds and hedge funds.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-third-market-maker"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding a Third Market Maker </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> As their name suggests, third market makers operate in the so-called third market. In this segment of the financial markets, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker-dealer.asp">broker-dealers</a> and institutional investors trade large <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blocktrade.asp">block orders</a> of stock with one another, often bypassing the need for brokerage <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commission.asp">commission fees</a>. Trading in this market is typically limited to large investors, such as <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing-strategy/090916/how-do-pension-funds-work.asp">pension funds</a>, hedge funds, and other financial institutions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The third market supports the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/primary-and-secondary-markets/">primary and secondary markets</a>. Whereas the primary market relates to the issuance of new securities through <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ipo.asp">initial public offerings (IPOs)</a>, the secondary market is where more established or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seasoned_security.asp">"seasoned" securities</a> are traded.<span class="ql-inline-citation" data-cite="3"></span> The third market can be seen as an ancillary to the secondary market, in that it involves OTC transactions of seasoned securities by institutional investors.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> When third-market trading began, it was a way for investors to achieve anonymity, shielding their purchases from public view, which they could not obtain from directly trading on the exchanges. Third-market trading also allowed financial institutions to negotiate fixed commissions; lower than the fixed commission charges on exchanges, making investing more cost-friendly, helping to improve trading profits.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Third Market Trading</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Third market trading was pioneered in the 1960s by firms such as Jefferies &amp; Company.<span class="ql-inline-citation" data-cite="1"></span> Today, however, there are a number of brokerage firms focused on third market trading. More recently, so-called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dark-pool.asp">dark pools</a> of liquidity have also become popular, particularly among <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/high-frequency-trading.asp">high-frequency trading (HFT)</a> firms.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> As with all market makers, the market makers that operate in the third market provide <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp" rel="noopener noreferrer">liquidity</a> to the marketplace by facilitating the purchase and sale of securities. They do so by purchasing an inventory of securities for their own account, which they hold and then resell to other market participants.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Market makers generate profit by buying low and selling high, and they are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security afterward. For this reason, market makers assume some of the inventory risk of the marketplace; if demand for their inventory diminishes before it can be resold, market makers may realize a loss upon the sale of that inventory. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-example-of-a-third-market-maker"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Example of a Third Market Maker </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Sean is a market operator operating in the third market. As such, he deals mainly with large institutional counterparties who wish to make OTC transactions in securities that typically trade in the secondary market. Because these large inventors trade directly with one another, they can often avoid paying any commission fees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> To profit from these transactions, Sean acts as a market maker, buying his own inventory of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp" rel="noopener noreferrer">securities</a> and then reselling them to institutional counterparties at a higher price. These transactions generally involve large blocks of shares that exchange hands.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Because Sean holds inventory in these <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shares.asp" rel="noopener noreferrer">shares</a>, it is possible for him to lose money if he fails to find a buyer within a reasonable timeframe. Therefore, having a keen knowledge of the institutional marketplace is essential for Sean's long-term success as a third market maker. </p></div>

## What Is a Third Market Maker? A third market maker is a type of [market maker](https://www.investopedia.com/terms/m/marketmaker.asp) that deals in the [third market](https://www.investopedia.com/terms/t/thirdmarket.asp), which is a segment of the financial markets in which exchange-traded securities are exchanged [over-the-counter (OTC)](https://www.investopedia.com/terms/o/otc.asp) by [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp). The term can also be used in a more general sense to refer to any third-party securities dealer who is ready and willing to trade stocks listed on [exchanges](https://www.investopedia.com/terms/e/exchange.asp) at [publicly traded](https://www.investopedia.com/terms/p/publiccompany.asp) prices. ### Key Takeaways * Third market makers are market makers operating in the third market of the financial world. * The third market consists of large investors who trade seasoned securities on an OTC basis as opposed to directly with an exchange. * Third market makers hold their own inventory of securities, and they aim to profit by reselling that inventory at a higher price. In doing so, they contribute to the overall liquidity of the marketplace. * Market makers are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security, thereby assuming some of the inventory risk of the marketplace. * Because third-market makers usually trade in large blocks of securities, trading is primarily limited to large investors, such as pension funds and hedge funds. ## Understanding a Third Market Maker As their name suggests, third market makers operate in the so-called third market. In this segment of the financial markets, [broker-dealers](https://www.investopedia.com/terms/b/broker-dealer.asp) and institutional investors trade large [block orders](https://www.investopedia.com/terms/b/blocktrade.asp) of stock with one another, often bypassing the need for brokerage [commission fees](https://www.investopedia.com/terms/c/commission.asp). Trading in this market is typically limited to large investors, such as [pension funds](https://www.investopedia.com/articles/investing-strategy/090916/how-do-pension-funds-work.asp), hedge funds, and other financial institutions. The third market supports the [primary and secondary markets](https://www.investopedia.com/investing/primary-and-secondary-markets/). Whereas the primary market relates to the issuance of new securities through [initial public offerings (IPOs)](https://www.investopedia.com/terms/i/ipo.asp), the secondary market is where more established or ["seasoned" securities](https://www.investopedia.com/terms/s/seasoned_security.asp) are traded. The third market can be seen as an ancillary to the secondary market, in that it involves OTC transactions of seasoned securities by institutional investors. When third-market trading began, it was a way for investors to achieve anonymity, shielding their purchases from public view, which they could not obtain from directly trading on the exchanges. Third-market trading also allowed financial institutions to negotiate fixed commissions; lower than the fixed commission charges on exchanges, making investing more cost-friendly, helping to improve trading profits. ### Third Market Trading Third market trading was pioneered in the 1960s by firms such as Jefferies & Company. Today, however, there are a number of brokerage firms focused on third market trading. More recently, so-called [dark pools](https://www.investopedia.com/terms/d/dark-pool.asp) of liquidity have also become popular, particularly among [high-frequency trading (HFT)](https://www.investopedia.com/terms/h/high-frequency-trading.asp) firms. As with all market makers, the market makers that operate in the third market provide [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) to the marketplace by facilitating the purchase and sale of securities. They do so by purchasing an inventory of securities for their own account, which they hold and then resell to other market participants.  Market makers generate profit by buying low and selling high, and they are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security afterward. For this reason, market makers assume some of the inventory risk of the marketplace; if demand for their inventory diminishes before it can be resold, market makers may realize a loss upon the sale of that inventory. ## Example of a Third Market Maker Sean is a market operator operating in the third market. As such, he deals mainly with large institutional counterparties who wish to make OTC transactions in securities that typically trade in the secondary market. Because these large inventors trade directly with one another, they can often avoid paying any commission fees. To profit from these transactions, Sean acts as a market maker, buying his own inventory of [securities](https://www.investopedia.com/terms/s/security.asp) and then reselling them to institutional counterparties at a higher price. These transactions generally involve large blocks of shares that exchange hands.  Because Sean holds inventory in these [shares](https://www.investopedia.com/terms/s/shares.asp), it is possible for him to lose money if he fails to find a buyer within a reasonable timeframe. Therefore, having a keen knowledge of the institutional marketplace is essential for Sean's long-term success as a third market maker.

What Is a Third Market Maker? A third market maker is a type of market maker that deals in the third market, which is a segment of the financial markets in which exchange-traded securities are exchanged over-the-counter (OTC) by institutional investors. The term can also be used in a more general sense to refer to any third-party securities dealer who is ready and willing to trade stocks listed on exchanges at publicly traded prices. Key Takeaways Third market makers are market makers operating in the third market of the financial world.The third market consists of large investors who trade seasoned securities on an OTC basis as opposed to directly with an exchange.Third market makers hold their own inventory of securities, and they aim to profit by reselling that inventory at a higher price. In doing so, they contribute to the overall liquidity of the marketplace.Market makers are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security, thereby assuming some of the inventory risk of the marketplace.Because third-market makers usually trade in large blocks of securities, trading is primarily limited to large investors, such as pension funds and hedge funds. Understanding a Third Market Maker As their name suggests, third market makers operate in the so-called third market. In this segment of the financial markets, broker-dealers and institutional investors trade large block orders of stock with one another, often bypassing the need for brokerage commission fees. Trading in this market is typically limited to large investors, such as pension funds, hedge funds, and other financial institutions. The third market supports the primary and secondary markets. Whereas the primary market relates to the issuance of new securities through initial public offerings (IPOs), the secondary market is where more established or "seasoned" securities are traded. The third market can be seen as an ancillary to the secondary market, in that it involves OTC transactions of seasoned securities by institutional investors. When third-market trading began, it was a way for investors to achieve anonymity, shielding their purchases from public view, which they could not obtain from directly trading on the exchanges. Third-market trading also allowed financial institutions to negotiate fixed commissions; lower than the fixed commission charges on exchanges, making investing more cost-friendly, helping to improve trading profits. Third Market Trading Third market trading was pioneered in the 1960s by firms such as Jefferies & Company. Today, however, there are a number of brokerage firms focused on third market trading. More recently, so-called dark pools of liquidity have also become popular, particularly among high-frequency trading (HFT) firms. As with all market makers, the market makers that operate in the third market provide liquidity to the marketplace by facilitating the purchase and sale of securities. They do so by purchasing an inventory of securities for their own account, which they hold and then resell to other market participants.  Market makers generate profit by buying low and selling high, and they are willing to purchase inventory if there is not an additional buyer or seller immediately available for that security afterward. For this reason, market makers assume some of the inventory risk of the marketplace; if demand for their inventory diminishes before it can be resold, market makers may realize a loss upon the sale of that inventory. Example of a Third Market Maker Sean is a market operator operating in the third market. As such, he deals mainly with large institutional counterparties who wish to make OTC transactions in securities that typically trade in the secondary market. Because these large inventors trade directly with one another, they can often avoid paying any commission fees. To profit from these transactions, Sean acts as a market maker, buying his own inventory of securities and then reselling them to institutional counterparties at a higher price. These transactions generally involve large blocks of shares that exchange hands.  Because Sean holds inventory in these shares, it is possible for him to lose money if he fails to find a buyer within a reasonable timeframe. Therefore, having a keen knowledge of the institutional marketplace is essential for Sean's long-term success as a third market maker.

https://www.investopedia.com/investors-take-their-foot-off-the-gas-as-expectations-dim-5196807

Investors Take Their Foot Off the Gas as Expectations Dim

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Following a 100% rally in the S&amp;P 500 from the lows of March 2020, individual investors are taking their feet off the accelerator as they anticipate muted returns for the rest of the year. In addition, many have pared back their risk appetites for stocks and cryptocurrencies. Their primary sources of concern, however, have more to do with fiscal and monetary policy than the recent spread of the delta variant of COVID-19, which is threatening to slow the economic recovery. Those were among the latest findings of the most recent survey of our 1.5 million daily newsletter readers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-subheading__text"> Muted Expectations </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> In a sign of slowing enthusiasm from earlier in the year, the majority of respondents believe that stock market gains will be more muted for the remainder of 2021. In March 2021, 48% of investors expected returns of 5% or more over the next 12 months. Yet as of August, only 30% continue to expect the same level of returns. Another 30% think the market will decline from here or remain flat. That’s a less bullish sentiment than any of the previous surveys we have conducted this year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_6-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/70mwT/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Tempered Expectations"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_1-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Given those tempered expectations, the majority of respondents say they don’t plan to increase the amount they will invest. While 54% say they don’t plan to make changes to their contributions, more than a third of respondents say they plan to invest less, and only 19% say they plan to invest more—a drop from 24% in May. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-subheading__text"> Investment Choices Have Changed </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> What our readers are choosing to invest more in has also changed along with their risk appetite.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_13-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/rWtQp/1/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="Changes in Reader Portfolios"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_2-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Monetary and Fiscal Policy Concerns </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> While investors are no more concerned about the stock market than they were in May and March, with around 43% saying they are “somewhat worried,” government spending and inflation emerged as their top concerns in August. Worries about the economic impacts of the resurgence of COVID-19 fell, despite the rise in new cases around the world and the return of mask mandates and travel restrictions. Concerns about cyber-attacks on businesses and governments also came ahead of COVID-19 with 39% believing it could impact the performance of their investments over the next 12 months, while worries that the Fed will taper its $120 billion in monthly bond purchases came in last. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_18-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/My4WX/1/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="Investor Concerns"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_3-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Where’s the Bubble? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Recent record highs for the major U.S. stock indexes and a surge in commodity prices are not catching the attention of our readers when they think about over-inflated asset prices. Instead, more readers believe the U.S. housing market could be in a bubble. While 60% say the stock market is overvalued, only 29% think it’s a bubble, versus 38% who think U.S. home prices are over-inflated.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Another 35% think Bitcoin is in a bubble. The price of Bitcoin has risen 54% so far this year, while the S&amp;P 500 is up 18% year-to-date. U.S. home prices have also risen 13.2% on average, according to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/national-association-of-realtors.asp">National Association of Realtors (NAR)</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_25-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/vnGKG/2/" frameborder="0" id="mntl-sc-block-iframe__uri_4-0" title="Where's the Bubble?"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_4-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Sticking with Stocks </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Our U.S. readers are mostly stock investors, and they have barely changed their tune in the past 16 months we’ve conducted our surveys. Large-cap technology stocks, dividend-paying blue chips and the occasional meme-stock remained the most popular. The results of our August survey reveal readers have largely stuck to their favorites, with Apple, Amazon and Microsoft remaining their top holdings. Tesla, which was among the most popular stocks held by our readers, fell out of the top 10 in August, along with Exxon-Mobil. Chipmaker Nvidia and Facebook, however, climbed into the top 10. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_30-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/WDxsl/1/" frameborder="0" id="mntl-sc-block-iframe__uri_5-0" title="Most popular stocks"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_5-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> While our readers’ risk appetites may have waned in the past two months, the majority of respondents said if they had an extra $10,000, they would put it into stocks or ETFs, ahead of savings, paying down debt or purchasing more cryptocurrencies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> So while they may be more cautious going forward, most still believe stocks represent the best possibility for earning returns on their investments.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_36-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/oIzWi/1/" frameborder="0" id="mntl-sc-block-iframe__uri_6-0" title="If you had an extra $10,000"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_6-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <em>Data by Amanda Morelli/Adrian Nesta.</em> </p></div>

Following a 100% rally in the S&P 500 from the lows of March 2020, individual investors are taking their feet off the accelerator as they anticipate muted returns for the rest of the year. In addition, many have pared back their risk appetites for stocks and cryptocurrencies. Their primary sources of concern, however, have more to do with fiscal and monetary policy than the recent spread of the delta variant of COVID-19, which is threatening to slow the economic recovery. Those were among the latest findings of the most recent survey of our 1.5 million daily newsletter readers. ### Muted Expectations In a sign of slowing enthusiasm from earlier in the year, the majority of respondents believe that stock market gains will be more muted for the remainder of 2021. In March 2021, 48% of investors expected returns of 5% or more over the next 12 months. Yet as of August, only 30% continue to expect the same level of returns. Another 30% think the market will decline from here or remain flat. That’s a less bullish sentiment than any of the previous surveys we have conducted this year. Given those tempered expectations, the majority of respondents say they don’t plan to increase the amount they will invest. While 54% say they don’t plan to make changes to their contributions, more than a third of respondents say they plan to invest less, and only 19% say they plan to invest more—a drop from 24% in May. ### Investment Choices Have Changed What our readers are choosing to invest more in has also changed along with their risk appetite.  ### Monetary and Fiscal Policy Concerns While investors are no more concerned about the stock market than they were in May and March, with around 43% saying they are “somewhat worried,” government spending and inflation emerged as their top concerns in August. Worries about the economic impacts of the resurgence of COVID-19 fell, despite the rise in new cases around the world and the return of mask mandates and travel restrictions. Concerns about cyber-attacks on businesses and governments also came ahead of COVID-19 with 39% believing it could impact the performance of their investments over the next 12 months, while worries that the Fed will taper its $120 billion in monthly bond purchases came in last. ### Where’s the Bubble? Recent record highs for the major U.S. stock indexes and a surge in commodity prices are not catching the attention of our readers when they think about over-inflated asset prices. Instead, more readers believe the U.S. housing market could be in a bubble. While 60% say the stock market is overvalued, only 29% think it’s a bubble, versus 38% who think U.S. home prices are over-inflated.  Another 35% think Bitcoin is in a bubble. The price of Bitcoin has risen 54% so far this year, while the S&P 500 is up 18% year-to-date. U.S. home prices have also risen 13.2% on average, according to the [National Association of Realtors (NAR)](https://www.investopedia.com/terms/n/national-association-of-realtors.asp). ### Sticking with Stocks Our U.S. readers are mostly stock investors, and they have barely changed their tune in the past 16 months we’ve conducted our surveys. Large-cap technology stocks, dividend-paying blue chips and the occasional meme-stock remained the most popular. The results of our August survey reveal readers have largely stuck to their favorites, with Apple, Amazon and Microsoft remaining their top holdings. Tesla, which was among the most popular stocks held by our readers, fell out of the top 10 in August, along with Exxon-Mobil. Chipmaker Nvidia and Facebook, however, climbed into the top 10. While our readers’ risk appetites may have waned in the past two months, the majority of respondents said if they had an extra $10,000, they would put it into stocks or ETFs, ahead of savings, paying down debt or purchasing more cryptocurrencies. So while they may be more cautious going forward, most still believe stocks represent the best possibility for earning returns on their investments.  *Data by Amanda Morelli/Adrian Nesta.*

Following a 100% rally in the S&P 500 from the lows of March 2020, individual investors are taking their feet off the accelerator as they anticipate muted returns for the rest of the year. In addition, many have pared back their risk appetites for stocks and cryptocurrencies. Their primary sources of concern, however, have more to do with fiscal and monetary policy than the recent spread of the delta variant of COVID-19, which is threatening to slow the economic recovery. Those were among the latest findings of the most recent survey of our 1.5 million daily newsletter readers. Muted Expectations In a sign of slowing enthusiasm from earlier in the year, the majority of respondents believe that stock market gains will be more muted for the remainder of 2021. In March 2021, 48% of investors expected returns of 5% or more over the next 12 months. Yet as of August, only 30% continue to expect the same level of returns. Another 30% think the market will decline from here or remain flat. That’s a less bullish sentiment than any of the previous surveys we have conducted this year. Given those tempered expectations, the majority of respondents say they don’t plan to increase the amount they will invest. While 54% say they don’t plan to make changes to their contributions, more than a third of respondents say they plan to invest less, and only 19% say they plan to invest more—a drop from 24% in May. Investment Choices Have Changed What our readers are choosing to invest more in has also changed along with their risk appetite.  Monetary and Fiscal Policy Concerns While investors are no more concerned about the stock market than they were in May and March, with around 43% saying they are “somewhat worried,” government spending and inflation emerged as their top concerns in August. Worries about the economic impacts of the resurgence of COVID-19 fell, despite the rise in new cases around the world and the return of mask mandates and travel restrictions. Concerns about cyber-attacks on businesses and governments also came ahead of COVID-19 with 39% believing it could impact the performance of their investments over the next 12 months, while worries that the Fed will taper its $120 billion in monthly bond purchases came in last. Where’s the Bubble? Recent record highs for the major U.S. stock indexes and a surge in commodity prices are not catching the attention of our readers when they think about over-inflated asset prices. Instead, more readers believe the U.S. housing market could be in a bubble. While 60% say the stock market is overvalued, only 29% think it’s a bubble, versus 38% who think U.S. home prices are over-inflated.  Another 35% think Bitcoin is in a bubble. The price of Bitcoin has risen 54% so far this year, while the S&P 500 is up 18% year-to-date. U.S. home prices have also risen 13.2% on average, according to the National Association of Realtors (NAR). Sticking with Stocks Our U.S. readers are mostly stock investors, and they have barely changed their tune in the past 16 months we’ve conducted our surveys. Large-cap technology stocks, dividend-paying blue chips and the occasional meme-stock remained the most popular. The results of our August survey reveal readers have largely stuck to their favorites, with Apple, Amazon and Microsoft remaining their top holdings. Tesla, which was among the most popular stocks held by our readers, fell out of the top 10 in August, along with Exxon-Mobil. Chipmaker Nvidia and Facebook, however, climbed into the top 10. While our readers’ risk appetites may have waned in the past two months, the majority of respondents said if they had an extra $10,000, they would put it into stocks or ETFs, ahead of savings, paying down debt or purchasing more cryptocurrencies. So while they may be more cautious going forward, most still believe stocks represent the best possibility for earning returns on their investments.  Data by Amanda Morelli/Adrian Nesta.

https://www.investopedia.com/how-to-open-a-checking-account-online-4797805

How to Open a Checking Account Online

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Opening a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/checkingaccount.asp">checking account</a> online is easy, quick, and painless for most people, but there are several things to consider before you begin the process. For starters, do you want to open a regular checking account using the online platform of a traditional <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brickandmortar.asp">brick-and-mortar</a> bank or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit union</a> or are you more interested in an electronic checking account at an <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/11/benefits-and-drawbacks-of-internet-banks.asp">online-only bank</a>? The application process is similar but the accounts differ, especially when it comes to features. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>You can open an account online at a traditional bank or credit union or an online-only entity.</li><li>Accounts opened online are under the same regulation as accounts at regular banks and are FDIC insured.</li><li>Account features vary by bank and by type of account. Research carefully.</li><li>There is a process to dispute denial of your application.</li><li>Once approved, use your new checking account just like one at a traditional bank.</li></ul></div></div></div> <span class="heading-toc" id="toc-regulation-and-fdic-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Regulation and FDIC Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Regulation is one area where both types of checking accounts are alike. Oversight of traditional and online-only banks and credit unions rests with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/office-comptroller-currency-occ.asp">Office of the Comptroller of the Currency (OCC)</a>, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corporation (FDIC)</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalreservebank.asp">Federal Reserve System (FRS)</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua.asp">National Credit Union Administration</a>, and state regulators in all 50 states. Traditional and online-only bank accounts are also FDIC insured, though it’s up to you to verify the bank’s FDIC status.<span class="ql-inline-citation" data-cite="19"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <span class="heading-toc" id="toc-features-by-bank-and-account-type"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Features by Bank and Account Type </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Checking accounts at traditional and online-only banks are deposit accounts that let you withdraw funds for any purpose. Most also allow <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">direct deposit</a>, offer debit cards, and feature <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/electronic-billpayment-presentment.asp">online billpay</a>, electronic funds transfer (EFT), <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mobile-banking.asp">mobile banking</a>, and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overdraft-protection.asp">overdraft protection</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The table below lists popular checking account features and the type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank.asp">bank</a> where that feature is most often found. When <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-choose-a-bank-5183999">choosing the bank</a> where you want to open your checking account, make sure it has the features you want and need </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_13-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Feature</th> <th>Traditional</th> <th>Online</th> </tr> </thead> <tbody data-check="0"> <tr> <td>Direct deposit</td> <td>X</td> <td>X</td> </tr> <tr> <td>Debit card</td> <td>X</td> <td>X</td> </tr> <tr> <td>Free in-network <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp">ATMs</a></td> <td>X</td> <td> </td> </tr> <tr> <td>Free out-of-network ATMs</td> <td> </td> <td>X</td> </tr> <tr> <td>Online bill pay</td> <td>X</td> <td>X</td> </tr> <tr> <td>Electronic funds transfer (EFT)</td> <td>X</td> <td>X</td> </tr> <tr> <td>Mobile banking</td> <td>X</td> <td>X</td> </tr> <tr> <td>Overdraft protection</td> <td>X</td> <td>X</td> </tr> <tr> <td>Ability to deposit cash</td> <td>X</td> <td> </td> </tr> <tr> <td>Paper <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/check.asp">checks</a></td> <td>X</td> <td> </td> </tr> <tr> <td>Face-to-face customer service</td> <td>X</td> <td> </td> </tr> <tr> <td>High-yield checking</td> <td> </td> <td>X</td> </tr> <tr> <td>High account <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank-fees.asp">maintenance fees</a></td> <td>X</td> <td> </td> </tr> <tr> <td>Low or no fees</td> <td> </td> <td>X</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Once you know the features you want, search online for banks that offer them. Be aware of the limitations of one type of account compared to another. If you can’t live without paper checks, for example, your best option will likely be a traditional bank. If you want high-yield checking, your best bet is an online-only bank. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-gather-up-information"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Gather Up Information </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Once you’ve chosen a bank, go to the bank’s website and make a list of information and documentation you will need. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> This will likely include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>Full name</li><li>Date of birth</li><li>Citizenship status</li><li>Current address</li><li>Previous address if you’ve been at your current address less than two years</li><li>Phone number</li><li>Email address</li><li>Social Security number</li><li>Government-issued ID such as a driver’s license or passport</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Finally, be prepared to provide information on how you plan to fund your account such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/063015/routing-number-vs-account-number-how-they-differ.asp">routing and account numbers</a> from your previous bank, a credit or debit card, or a check issued from your previous bank. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If you plan to open a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0312/should-you-open-a-joint-bank-account.aspx">joint account</a>, you’ll need the same information and documentation for both account owners.</p></div></div></div> <span class="heading-toc" id="toc-complete-the-application"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Complete the Application </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Fill out the online application using the information you have assembled. You may be required to scan or upload a photo of some items such as your driver’s license. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> When you are finished, click “submit.” You will probably receive an email or text message verifying receipt of your application and advising you about next steps within a few minutes. One of those next steps may be the need for a signature card, a document banks retain and use to verify your signature on checks and other transactions. If so, the bank will likely mail you a card, which you (and the account co-owner if applicable) sign and return. Most online banks don’t have this requirement and instead accept an electronic (digital) signature. If opening an account quickly is a priority, make sure the bank you choose doesn't have this requirement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-verification-process"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Verification Process </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> As part of the application process, the bank verifies your credit history and generates a consumer banking report. If you have a “thin” credit history due to not having much in your credit report, the bank may require additional information. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The consumer banking report will likely be conducted by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-to-know-and-do-if-you-re-listed-in-chexsystems-5179535">ChexSystems</a> or Early Warning Services. These agencies investigate whether you have a history of bouncing checks, refusing to pay late fees, or have had accounts closed due to mismanagement on your part.<span class="ql-inline-citation" data-cite="13"></span> According to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp">Fair Credit Reporting Act (FCRA)</a>, information about accounts closed for “cause” can remain on your consumer banking report for up to seven years.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <span class="heading-toc" id="toc-how-to-handle-a-denied-application"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-heading__text"> How to Handle a Denied Application </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> If your application is denied due to the consumer banking report, the bank must tell you who generated the report and how to contact them. Use this information to obtain a copy of your report. Under the FCRA, you are entitled to a free copy of your report any time you are denied an account based on your consumer banking report.<span class="ql-inline-citation" data-cite="18"></span><span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> If denied, here are three things you can do: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li><strong>Ask the bank to reconsider.</strong> Give your reasons and make your case. The bank is not bound by the report and may grant you an exception.</li><li><strong>File a formal dispute.</strong> If information in the report is not accurate and the bank won’t reconsider, you have a right to file a dispute with the reporting agency.</li><li><strong>Look into a “second chance” account.</strong> This type of account, offered by some banks, typically has higher fees and more restrictions but provides a pathway to rebuild your checking account reputation.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-fund-your-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> Fund Your Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Assuming all goes well and you are approved, the next step is to put money in your new account. Most banks have a required <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/minimum_deposit.asp">minimum deposit</a> which can range from a dollar to a hundred dollars or more. There are a variety of ways to do this, including writing a check, wiring money, using your debit card, or transferring money electronically from another account. If you transfer money from a separate account, you’ll need the account and routing numbers from that account. Cash is not an option when opening an account online. That requires a visit to a bank branch. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-debit-cardchecks-arrive"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> Debit Card/Checks Arrive </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> If the account you signed up for includes a debit/ATM card and/or checks, they will arrive in the mail after your application has been approved. The confirmation email should tell you how that will happen and how long it will take. For security reasons, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debitcard.asp">debit card</a>, PIN, and checks will probably all arrive separately. When your card arrives, sign it and activate it by phone or online. Your checks should be usable immediately. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-start-using-your-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> Start Using Your Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> If your account is with a traditional bank, you will have the option to conduct most or all of your business online or at a local bank branch. If it’s with an online-only bank, unless you are granted access to an ATM network, everything you do will be done online. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Follow any instructions you receive about setting up the Internet side of your new checking account. This may include downloading an app for your phone or tablet as well as bookmarking a website on your computer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> Move your direct deposits, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/electronic-funds-transfer-act.asp">EFTs</a>, and automatic withdrawals to your new account. From there on, it's a matter of getting used to the new system. Whether traditional or online, all banks and credit unions have a robust customer service system. Most let you contact them by phone, live online session, email, or text. If there are problems, make use of the system that works best for you. </p></div>

Opening a [checking account](https://www.investopedia.com/terms/c/checkingaccount.asp) online is easy, quick, and painless for most people, but there are several things to consider before you begin the process. For starters, do you want to open a regular checking account using the online platform of a traditional [brick-and-mortar](https://www.investopedia.com/terms/b/brickandmortar.asp) bank or [credit union](https://www.investopedia.com/terms/c/creditunion.asp) or are you more interested in an electronic checking account at an [online-only bank](https://www.investopedia.com/articles/pf/11/benefits-and-drawbacks-of-internet-banks.asp)? The application process is similar but the accounts differ, especially when it comes to features. ### Key Takeaways * You can open an account online at a traditional bank or credit union or an online-only entity. * Accounts opened online are under the same regulation as accounts at regular banks and are FDIC insured. * Account features vary by bank and by type of account. Research carefully. * There is a process to dispute denial of your application. * Once approved, use your new checking account just like one at a traditional bank. ## Regulation and FDIC Insurance Regulation is one area where both types of checking accounts are alike. Oversight of traditional and online-only banks and credit unions rests with the [Office of the Comptroller of the Currency (OCC)](https://www.investopedia.com/terms/o/office-comptroller-currency-occ.asp), the [Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/terms/f/fdic.asp), [Federal Reserve System (FRS)](https://www.investopedia.com/terms/f/federalreservebank.asp), [National Credit Union Administration](https://www.investopedia.com/terms/n/ncua.asp), and state regulators in all 50 states. Traditional and online-only bank accounts are also FDIC insured, though it’s up to you to verify the bank’s FDIC status. ## Features by Bank and Account Type Checking accounts at traditional and online-only banks are deposit accounts that let you withdraw funds for any purpose. Most also allow [direct deposit](https://www.investopedia.com/terms/d/directdeposit.asp), offer debit cards, and feature [online billpay](https://www.investopedia.com/terms/e/electronic-billpayment-presentment.asp), electronic funds transfer (EFT), [mobile banking](https://www.investopedia.com/terms/m/mobile-banking.asp), and [overdraft protection](https://www.investopedia.com/terms/o/overdraft-protection.asp). The table below lists popular checking account features and the type of [bank](https://www.investopedia.com/terms/b/bank.asp) where that feature is most often found. When [choosing the bank](https://www.investopedia.com/how-to-choose-a-bank-5183999) where you want to open your checking account, make sure it has the features you want and need | Feature | Traditional | Online | | --- | --- | --- | | Direct deposit | X | X | | Debit card | X | X | | Free in-network [ATMs](https://www.investopedia.com/terms/a/atm.asp) | X | | | Free out-of-network ATMs | | X | | Online bill pay | X | X | | Electronic funds transfer (EFT) | X | X | | Mobile banking | X | X | | Overdraft protection | X | X | | Ability to deposit cash | X | | | Paper [checks](https://www.investopedia.com/terms/c/check.asp) | X | | | Face-to-face customer service | X | | | High-yield checking | | X | | High account [maintenance fees](https://www.investopedia.com/terms/b/bank-fees.asp) | X | | | Low or no fees | | X | Once you know the features you want, search online for banks that offer them. Be aware of the limitations of one type of account compared to another. If you can’t live without paper checks, for example, your best option will likely be a traditional bank. If you want high-yield checking, your best bet is an online-only bank. ## Gather Up Information Once you’ve chosen a bank, go to the bank’s website and make a list of information and documentation you will need. This will likely include: * Full name * Date of birth * Citizenship status * Current address * Previous address if you’ve been at your current address less than two years * Phone number * Email address * Social Security number * Government-issued ID such as a driver’s license or passport Finally, be prepared to provide information on how you plan to fund your account such as [routing and account numbers](https://www.investopedia.com/articles/personal-finance/063015/routing-number-vs-account-number-how-they-differ.asp) from your previous bank, a credit or debit card, or a check issued from your previous bank. ### If you plan to open a [joint account](https://www.investopedia.com/financial-edge/0312/should-you-open-a-joint-bank-account.aspx), you’ll need the same information and documentation for both account owners. ## Complete the Application Fill out the online application using the information you have assembled. You may be required to scan or upload a photo of some items such as your driver’s license. When you are finished, click “submit.” You will probably receive an email or text message verifying receipt of your application and advising you about next steps within a few minutes. One of those next steps may be the need for a signature card, a document banks retain and use to verify your signature on checks and other transactions. If so, the bank will likely mail you a card, which you (and the account co-owner if applicable) sign and return. Most online banks don’t have this requirement and instead accept an electronic (digital) signature. If opening an account quickly is a priority, make sure the bank you choose doesn't have this requirement. ## Verification Process As part of the application process, the bank verifies your credit history and generates a consumer banking report. If you have a “thin” credit history due to not having much in your credit report, the bank may require additional information. The consumer banking report will likely be conducted by [ChexSystems](https://www.investopedia.com/what-to-know-and-do-if-you-re-listed-in-chexsystems-5179535) or Early Warning Services. These agencies investigate whether you have a history of bouncing checks, refusing to pay late fees, or have had accounts closed due to mismanagement on your part. According to the [Fair Credit Reporting Act (FCRA)](https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp), information about accounts closed for “cause” can remain on your consumer banking report for up to seven years. ## How to Handle a Denied Application If your application is denied due to the consumer banking report, the bank must tell you who generated the report and how to contact them. Use this information to obtain a copy of your report. Under the FCRA, you are entitled to a free copy of your report any time you are denied an account based on your consumer banking report. If denied, here are three things you can do: 1. **Ask the bank to reconsider.** Give your reasons and make your case. The bank is not bound by the report and may grant you an exception. 2. **File a formal dispute.** If information in the report is not accurate and the bank won’t reconsider, you have a right to file a dispute with the reporting agency. 3. **Look into a “second chance” account.** This type of account, offered by some banks, typically has higher fees and more restrictions but provides a pathway to rebuild your checking account reputation. ## Fund Your Account Assuming all goes well and you are approved, the next step is to put money in your new account. Most banks have a required [minimum deposit](https://www.investopedia.com/terms/m/minimum_deposit.asp) which can range from a dollar to a hundred dollars or more. There are a variety of ways to do this, including writing a check, wiring money, using your debit card, or transferring money electronically from another account. If you transfer money from a separate account, you’ll need the account and routing numbers from that account. Cash is not an option when opening an account online. That requires a visit to a bank branch. ## Debit Card/Checks Arrive If the account you signed up for includes a debit/ATM card and/or checks, they will arrive in the mail after your application has been approved. The confirmation email should tell you how that will happen and how long it will take. For security reasons, the [debit card](https://www.investopedia.com/terms/d/debitcard.asp), PIN, and checks will probably all arrive separately. When your card arrives, sign it and activate it by phone or online. Your checks should be usable immediately. ## Start Using Your Account If your account is with a traditional bank, you will have the option to conduct most or all of your business online or at a local bank branch. If it’s with an online-only bank, unless you are granted access to an ATM network, everything you do will be done online. Follow any instructions you receive about setting up the Internet side of your new checking account. This may include downloading an app for your phone or tablet as well as bookmarking a website on your computer. Move your direct deposits, [EFTs](https://www.investopedia.com/terms/e/electronic-funds-transfer-act.asp), and automatic withdrawals to your new account. From there on, it's a matter of getting used to the new system. Whether traditional or online, all banks and credit unions have a robust customer service system. Most let you contact them by phone, live online session, email, or text. If there are problems, make use of the system that works best for you.

Opening a checking account online is easy, quick, and painless for most people, but there are several things to consider before you begin the process. For starters, do you want to open a regular checking account using the online platform of a traditional brick-and-mortar bank or credit union or are you more interested in an electronic checking account at an online-only bank? The application process is similar but the accounts differ, especially when it comes to features. Key Takeaways You can open an account online at a traditional bank or credit union or an online-only entity.Accounts opened online are under the same regulation as accounts at regular banks and are FDIC insured.Account features vary by bank and by type of account. Research carefully.There is a process to dispute denial of your application.Once approved, use your new checking account just like one at a traditional bank. Regulation and FDIC Insurance Regulation is one area where both types of checking accounts are alike. Oversight of traditional and online-only banks and credit unions rests with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), Federal Reserve System (FRS), National Credit Union Administration, and state regulators in all 50 states. Traditional and online-only bank accounts are also FDIC insured, though it’s up to you to verify the bank’s FDIC status. Features by Bank and Account Type Checking accounts at traditional and online-only banks are deposit accounts that let you withdraw funds for any purpose. Most also allow direct deposit, offer debit cards, and feature online billpay, electronic funds transfer (EFT), mobile banking, and overdraft protection. The table below lists popular checking account features and the type of bank where that feature is most often found. When choosing the bank where you want to open your checking account, make sure it has the features you want and need Feature Traditional Online Direct deposit X X Debit card X X Free in-network ATMs X   Free out-of-network ATMs   X Online bill pay X X Electronic funds transfer (EFT) X X Mobile banking X X Overdraft protection X X Ability to deposit cash X   Paper checks X   Face-to-face customer service X   High-yield checking   X High account maintenance fees X   Low or no fees   X Once you know the features you want, search online for banks that offer them. Be aware of the limitations of one type of account compared to another. If you can’t live without paper checks, for example, your best option will likely be a traditional bank. If you want high-yield checking, your best bet is an online-only bank. Gather Up Information Once you’ve chosen a bank, go to the bank’s website and make a list of information and documentation you will need. This will likely include: Full nameDate of birthCitizenship statusCurrent addressPrevious address if you’ve been at your current address less than two yearsPhone numberEmail addressSocial Security numberGovernment-issued ID such as a driver’s license or passport Finally, be prepared to provide information on how you plan to fund your account such as routing and account numbers from your previous bank, a credit or debit card, or a check issued from your previous bank. If you plan to open a joint account, you’ll need the same information and documentation for both account owners. Complete the Application Fill out the online application using the information you have assembled. You may be required to scan or upload a photo of some items such as your driver’s license. When you are finished, click “submit.” You will probably receive an email or text message verifying receipt of your application and advising you about next steps within a few minutes. One of those next steps may be the need for a signature card, a document banks retain and use to verify your signature on checks and other transactions. If so, the bank will likely mail you a card, which you (and the account co-owner if applicable) sign and return. Most online banks don’t have this requirement and instead accept an electronic (digital) signature. If opening an account quickly is a priority, make sure the bank you choose doesn't have this requirement. Verification Process As part of the application process, the bank verifies your credit history and generates a consumer banking report. If you have a “thin” credit history due to not having much in your credit report, the bank may require additional information. The consumer banking report will likely be conducted by ChexSystems or Early Warning Services. These agencies investigate whether you have a history of bouncing checks, refusing to pay late fees, or have had accounts closed due to mismanagement on your part. According to the Fair Credit Reporting Act (FCRA), information about accounts closed for “cause” can remain on your consumer banking report for up to seven years. How to Handle a Denied Application If your application is denied due to the consumer banking report, the bank must tell you who generated the report and how to contact them. Use this information to obtain a copy of your report. Under the FCRA, you are entitled to a free copy of your report any time you are denied an account based on your consumer banking report. If denied, here are three things you can do: Ask the bank to reconsider. Give your reasons and make your case. The bank is not bound by the report and may grant you an exception.File a formal dispute. If information in the report is not accurate and the bank won’t reconsider, you have a right to file a dispute with the reporting agency.Look into a “second chance” account. This type of account, offered by some banks, typically has higher fees and more restrictions but provides a pathway to rebuild your checking account reputation. Fund Your Account Assuming all goes well and you are approved, the next step is to put money in your new account. Most banks have a required minimum deposit which can range from a dollar to a hundred dollars or more. There are a variety of ways to do this, including writing a check, wiring money, using your debit card, or transferring money electronically from another account. If you transfer money from a separate account, you’ll need the account and routing numbers from that account. Cash is not an option when opening an account online. That requires a visit to a bank branch. Debit Card/Checks Arrive If the account you signed up for includes a debit/ATM card and/or checks, they will arrive in the mail after your application has been approved. The confirmation email should tell you how that will happen and how long it will take. For security reasons, the debit card, PIN, and checks will probably all arrive separately. When your card arrives, sign it and activate it by phone or online. Your checks should be usable immediately. Start Using Your Account If your account is with a traditional bank, you will have the option to conduct most or all of your business online or at a local bank branch. If it’s with an online-only bank, unless you are granted access to an ATM network, everything you do will be done online. Follow any instructions you receive about setting up the Internet side of your new checking account. This may include downloading an app for your phone or tablet as well as bookmarking a website on your computer. Move your direct deposits, EFTs, and automatic withdrawals to your new account. From there on, it's a matter of getting used to the new system. Whether traditional or online, all banks and credit unions have a robust customer service system. Most let you contact them by phone, live online session, email, or text. If there are problems, make use of the system that works best for you.

https://www.investopedia.com/personal-finance/how-handle-lost-cashiers-check/

How to Handle a Lost Cashier’s Check

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Cashier’s checks can be a safe way to receive payments from businesses or individuals⁠—or to make payments to them. These official checks are purchased using money from a personal or business checking account, which is then deposited into the bank’s account. The bank then issues a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashierscheck.asp">cashier’s check</a> in its name, which makes these checks lower risk compared to personal checks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> But what happens if you purchase a cashier’s check—or you receive one⁠—and it ends up getting lost? Don’t panic; you do have some remedies when a lost cashier’s check throws a wrench in your financial plans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Canceling a cashier’s check is more complex than canceling a personal bank check.</li><li>If you lose a cashier’s check you must notify the bank, fill out a declaration of lost form, and wait; it can take 90 days (after you file) to recoup the money.</li><li>The bank will levy a fee when you cancel a cashier’s check.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_7-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="How to Handle a Lost Cashiers Check" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/VPj6xO-8w-sT6BK1T3TeMezTgqo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/VPj6xO-8w-sT6BK1T3TeMezTgqo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png" data-srcset="https://www.investopedia.com/thmb/qyCykzXB4VuTzYgVTytZstU5VIQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="How to Handle a Lost Cashiers Check" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/VPj6xO-8w-sT6BK1T3TeMezTgqo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png" srcset="https://www.investopedia.com/thmb/qyCykzXB4VuTzYgVTytZstU5VIQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Joules Garcia</p></span> </figcaption></figure> <span class="heading-toc" id="toc-how-to-handle-a-lost-cashiers-check"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How to Handle a Lost Cashier’s Check </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> If you purchase a cashier’s check and lose it, the first step is to report the loss to your bank. You may have to complete a declaration of loss statement, which basically says you verify that the check is lost and can’t be found. From there, the bank will most likely ask you to purchase an <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-guarantee.asp">indemnity</a> bond. This ensures that the bank isn’t liable if you lose the check again, or if it’s damaged or stolen. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> You can purchase an indemnity bond through an insurance company, but according to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/occ.asp">Office of the Comptroller of the Currency</a> (OCC), you may need an insurance broker’s help to do so. And, if you’re successful in buying an indemnity bond, the bank may require you to wait 30 to 90 days before issuing a replacement check.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> That could be problematic if you need the check for something like paying your rent, buying a home, or buying a car and you don’t have other funds to fall back on. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Some banks may limit the amount of a cashier’s check that can be canceled.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> But what if you lose a cashier’s check that was made out to you by someone else? In that case, the OCC says your first recourse is simply to ask the person who bought the check to buy another one<span class="ql-inline-citation" data-cite="1"></span>; however, that may not be realistic for them financially, or they may simply not be willing to comply. If they opt not to purchase a replacement check, you could bring an indemnity bond to the bank that issued the original check and ask them to honor it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-stopping-payment-on-a-lost-cashiers-check"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Stopping Payment on a Lost Cashier’s Check </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Can you simply stop payment on a lost cashier’s check? Generally, no, but banks may allow you to initiate a stop payment over the phone or online, but it’s a good idea to call your bank to find out what its policies are for cashier’s checks.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Be aware that the bank may still require you to purchase an indemnity bond if you’re stopping payment on a cashier’s check. Also, keep in mind that you’ll have to pay a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/bank_fees.asp">fee</a> for stopping payment on a cashier’s check. The amount will depend on the bank. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_24-0"><span class="heading-toc" id="toc-can-i-get-my-money-back-on-a-cashiers-check"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Get My Money Back on a Cashier's Check?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Not exactly. Since the check has been paid, you cannot just get your money back. You will need to file a claim with your bank or purchase an indemnity bond to get the money back. There may be fees associated with this and a waiting period.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_26-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-replace-a-cashiers-check"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Does It Take to Replace a Cashier's Check?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The amount of time it takes to replace a cashier's check will depend on the specific bank but the general waiting time is 30 to 90 days.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_28-0"><span class="heading-toc" id="toc-do-banks-keep-records-of-cashiers-checks"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Banks Keep Records of Cashier's Checks?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, banks keep records of cashier's checks and these checks are traceable. The bank will have a record on file and the recipient of the check will also be able to trace the check.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> It's clearly not ideal to lose a cashier’s check, but you do have options for dealing with it; however, if you’re worried about the possibility that you might lose a cashier’s check, whether you're the purchaser or the recipient, the best option may be to look for alternate ways to send or receive money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> You might consider using a money transfer company such as Western Union, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/112415/moneygram-vs-paypal-vs-xoom-who-has-lowest-fees.asp">PayPal, MoneyGram, or Xoom</a>, or electronic transfers from your checking account to be sure that your money won't get lost in the shuffle. </p></div>

Cashier’s checks can be a safe way to receive payments from businesses or individuals⁠—or to make payments to them. These official checks are purchased using money from a personal or business checking account, which is then deposited into the bank’s account. The bank then issues a [cashier’s check](https://www.investopedia.com/terms/c/cashierscheck.asp) in its name, which makes these checks lower risk compared to personal checks. But what happens if you purchase a cashier’s check—or you receive one⁠—and it ends up getting lost? Don’t panic; you do have some remedies when a lost cashier’s check throws a wrench in your financial plans. ### Key Takeaways * Canceling a cashier’s check is more complex than canceling a personal bank check. * If you lose a cashier’s check you must notify the bank, fill out a declaration of lost form, and wait; it can take 90 days (after you file) to recoup the money. * The bank will levy a fee when you cancel a cashier’s check. ![How to Handle a Lost Cashiers Check]() :max_bytes(150000):strip_icc()/how-handle-lost-cashiers-check-FINAL-4cb540f1905b441287d5b5283e1dff2d.png) Investopedia / Joules Garcia ## How to Handle a Lost Cashier’s Check If you purchase a cashier’s check and lose it, the first step is to report the loss to your bank. You may have to complete a declaration of loss statement, which basically says you verify that the check is lost and can’t be found. From there, the bank will most likely ask you to purchase an [indemnity](https://www.investopedia.com/terms/f/financial-guarantee.asp) bond. This ensures that the bank isn’t liable if you lose the check again, or if it’s damaged or stolen. You can purchase an indemnity bond through an insurance company, but according to the [Office of the Comptroller of the Currency](https://www.investopedia.com/terms/o/occ.asp) (OCC), you may need an insurance broker’s help to do so. And, if you’re successful in buying an indemnity bond, the bank may require you to wait 30 to 90 days before issuing a replacement check. That could be problematic if you need the check for something like paying your rent, buying a home, or buying a car and you don’t have other funds to fall back on. ### Some banks may limit the amount of a cashier’s check that can be canceled. But what if you lose a cashier’s check that was made out to you by someone else? In that case, the OCC says your first recourse is simply to ask the person who bought the check to buy another one; however, that may not be realistic for them financially, or they may simply not be willing to comply. If they opt not to purchase a replacement check, you could bring an indemnity bond to the bank that issued the original check and ask them to honor it. ## Stopping Payment on a Lost Cashier’s Check Can you simply stop payment on a lost cashier’s check? Generally, no, but banks may allow you to initiate a stop payment over the phone or online, but it’s a good idea to call your bank to find out what its policies are for cashier’s checks. Be aware that the bank may still require you to purchase an indemnity bond if you’re stopping payment on a cashier’s check. Also, keep in mind that you’ll have to pay a [fee](https://www.investopedia.com/articles/pf/07/bank_fees.asp) for stopping payment on a cashier’s check. The amount will depend on the bank. ## Can I Get My Money Back on a Cashier's Check? Not exactly. Since the check has been paid, you cannot just get your money back. You will need to file a claim with your bank or purchase an indemnity bond to get the money back. There may be fees associated with this and a waiting period. ## How Long Does It Take to Replace a Cashier's Check? The amount of time it takes to replace a cashier's check will depend on the specific bank but the general waiting time is 30 to 90 days. ## Do Banks Keep Records of Cashier's Checks? Yes, banks keep records of cashier's checks and these checks are traceable. The bank will have a record on file and the recipient of the check will also be able to trace the check. ## The Bottom Line It's clearly not ideal to lose a cashier’s check, but you do have options for dealing with it; however, if you’re worried about the possibility that you might lose a cashier’s check, whether you're the purchaser or the recipient, the best option may be to look for alternate ways to send or receive money. You might consider using a money transfer company such as Western Union, [PayPal, MoneyGram, or Xoom](https://www.investopedia.com/articles/personal-finance/112415/moneygram-vs-paypal-vs-xoom-who-has-lowest-fees.asp), or electronic transfers from your checking account to be sure that your money won't get lost in the shuffle.

Cashier’s checks can be a safe way to receive payments from businesses or individuals⁠—or to make payments to them. These official checks are purchased using money from a personal or business checking account, which is then deposited into the bank’s account. The bank then issues a cashier’s check in its name, which makes these checks lower risk compared to personal checks. But what happens if you purchase a cashier’s check—or you receive one⁠—and it ends up getting lost? Don’t panic; you do have some remedies when a lost cashier’s check throws a wrench in your financial plans. Key Takeaways Canceling a cashier’s check is more complex than canceling a personal bank check.If you lose a cashier’s check you must notify the bank, fill out a declaration of lost form, and wait; it can take 90 days (after you file) to recoup the money.The bank will levy a fee when you cancel a cashier’s check. Investopedia / Joules Garcia How to Handle a Lost Cashier’s Check If you purchase a cashier’s check and lose it, the first step is to report the loss to your bank. You may have to complete a declaration of loss statement, which basically says you verify that the check is lost and can’t be found. From there, the bank will most likely ask you to purchase an indemnity bond. This ensures that the bank isn’t liable if you lose the check again, or if it’s damaged or stolen. You can purchase an indemnity bond through an insurance company, but according to the Office of the Comptroller of the Currency (OCC), you may need an insurance broker’s help to do so. And, if you’re successful in buying an indemnity bond, the bank may require you to wait 30 to 90 days before issuing a replacement check. That could be problematic if you need the check for something like paying your rent, buying a home, or buying a car and you don’t have other funds to fall back on. Some banks may limit the amount of a cashier’s check that can be canceled. But what if you lose a cashier’s check that was made out to you by someone else? In that case, the OCC says your first recourse is simply to ask the person who bought the check to buy another one; however, that may not be realistic for them financially, or they may simply not be willing to comply. If they opt not to purchase a replacement check, you could bring an indemnity bond to the bank that issued the original check and ask them to honor it. Stopping Payment on a Lost Cashier’s Check Can you simply stop payment on a lost cashier’s check? Generally, no, but banks may allow you to initiate a stop payment over the phone or online, but it’s a good idea to call your bank to find out what its policies are for cashier’s checks. Be aware that the bank may still require you to purchase an indemnity bond if you’re stopping payment on a cashier’s check. Also, keep in mind that you’ll have to pay a fee for stopping payment on a cashier’s check. The amount will depend on the bank. Can I Get My Money Back on a Cashier's Check? Not exactly. Since the check has been paid, you cannot just get your money back. You will need to file a claim with your bank or purchase an indemnity bond to get the money back. There may be fees associated with this and a waiting period. How Long Does It Take to Replace a Cashier's Check? The amount of time it takes to replace a cashier's check will depend on the specific bank but the general waiting time is 30 to 90 days. Do Banks Keep Records of Cashier's Checks? Yes, banks keep records of cashier's checks and these checks are traceable. The bank will have a record on file and the recipient of the check will also be able to trace the check. The Bottom Line It's clearly not ideal to lose a cashier’s check, but you do have options for dealing with it; however, if you’re worried about the possibility that you might lose a cashier’s check, whether you're the purchaser or the recipient, the best option may be to look for alternate ways to send or receive money. You might consider using a money transfer company such as Western Union, PayPal, MoneyGram, or Xoom, or electronic transfers from your checking account to be sure that your money won't get lost in the shuffle.

https://www.investopedia.com/top-spiking-technical-analysis-articles-this-week-4844416

Top Spiking Technical Analysis Articles This Week

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Equity markets were up overall this past week, and the S&amp;P 500 notably crossed above its 200-day moving average for the first time since March. Still, ongoing market <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> has remained, producing wide price swings that have continued to spook investors. This volatile market environment has prevailed on and off for more than three months as the economic effects of the global coronavirus pandemic continue to reverberate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> While longer-term investors may have a strong aversion to the exaggerated market moves that have been the rule of late, shorter-term traders tend to prefer them. Larger price moves provide more potential opportunities for short-term profits (as well as for losses). In fact, we've seen trading volumes soar during the current economic crisis as experienced traders become even more active and new traders open brokerage accounts in droves. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> For such shorter-term traders, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a> remains the overwhelmingly preferred trading strategy. Technical analysis is a comprehensive body of knowledge and set of tools meant to identify trading opportunities through the analysis of price movement, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volume.asp">trading volume</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pattern.asp">chart patterns</a>, and mathematical <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalindicator.asp">indicators</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Here at Investopedia, we've seen reader interest in technical analysis topics spike sharply throughout the past several weeks and months. This past week, readers were especially interested in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/candlestick.asp">candlestick charts</a> and patterns—the Japanese style of charting that has become the preferred method of visual price interpretation for traders and investors around the world. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Here are some of the top spiking technical analysis articles this week: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_11-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/nb5OY/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Technical Analysis Articles Spiking This Week"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-understanding-a-candlestick-chart"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/trading/candlestick-charting-what-is-it/" rel="nocaes">Understanding a Candlestick Chart</a> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Candlestick charts originated in Japan over 100 years before the West developed the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/barchart.asp">bar</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pointandfigurechart.asp">point-and-figure</a> charts. Candlesticks visually represent price moves with different colors and structural elements. Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Here's an example of one candlestick pattern—the bullish engulfing pattern—seen recently on a current daily chart of Tesla Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA">TSLA</a>): </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_18-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.4%;"> <img alt="TSLA Bullish Engulfing" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/SduX8-GZyWgtd4RcKL1BuzeEHuc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/SduX8-GZyWgtd4RcKL1BuzeEHuc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png" data-srcset="https://www.investopedia.com/thmb/vN9PB9OQbZF71S0Pz3e24GmzLuo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png 750w" data-tracking-container="true" height="741" id="mntl-sc-block-image_1-0" width="1528"/> <noscript> <img alt="TSLA Bullish Engulfing" class="img--noscript universal-image__image" height="741" sizes="750px" src="https://www.investopedia.com/thmb/SduX8-GZyWgtd4RcKL1BuzeEHuc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png" srcset="https://www.investopedia.com/thmb/vN9PB9OQbZF71S0Pz3e24GmzLuo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png 750w" width="1528"/> </noscript> </div> </div> </figure> <span class="heading-toc" id="toc-the-5-most-powerful-candlestick-patterns"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp" rel="nocaes">The 5 Most Powerful Candlestick Patterns</a> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Many traders can identify dozens of candlestick patterns and formations, which have colorful names like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/darkcloud.asp">bearish dark cloud cover</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eveningstar.asp">evening star</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/three_black_crows.asp">three black crows</a>. In addition, single bar patterns including the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/doji.asp">doji</a> and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hammer.asp">hammer</a> have been incorporated into dozens of long- and short-side <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading-strategy.asp">trading strategies</a>. Five of the most powerful candlestick patterns can be found <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp">here</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Below is a current example of a three black crows pattern seen on a daily chart of Netflix Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NFLX">NFLX</a>): </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_24-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.6%;"> <img alt="NFLX Three Black Crows" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/k6bccx8D4visDTNKPY0o94NEgFI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/k6bccx8D4visDTNKPY0o94NEgFI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png" data-srcset="https://www.investopedia.com/thmb/yX0gHiNx5C6AwsLatQGVRZn2VLk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png 750w" data-tracking-container="true" height="743" id="mntl-sc-block-image_2-0" width="1528"/> <noscript> <img alt="NFLX Three Black Crows" class="img--noscript universal-image__image" height="743" sizes="750px" src="https://www.investopedia.com/thmb/k6bccx8D4visDTNKPY0o94NEgFI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png" srcset="https://www.investopedia.com/thmb/yX0gHiNx5C6AwsLatQGVRZn2VLk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png 750w" width="1528"/> </noscript> </div> </div> </figure> <span class="heading-toc" id="toc-using-bullish-candlestick-patterns-to-buy-stocks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/articles/active-trading/062315/using-bullish-candlestick-patterns-buy-stocks.asp" rel="nocaes">Using Bullish Candlestick Patterns To Buy Stocks</a> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Bullish <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reversal.asp">reversal</a> patterns should form within a downtrend. Otherwise, it’s not a bullish pattern, but a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/continuationpattern.asp">continuation pattern</a>. Most bullish reversal patterns require bullish confirmation<strong>.<em> </em></strong>In other words, they must be followed by an upside price move. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Below is a current daily chart of Apple Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>) showing one of these bullish candlestick patterns—the hammer: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_30-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.6%;"> <img alt="AAPL Hammer" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/QM0Rz-bGFrcLyIT2iWrhQblTtH8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/QM0Rz-bGFrcLyIT2iWrhQblTtH8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png" data-srcset="https://www.investopedia.com/thmb/9ukJWeVScEOtdro6_RmGyAcsMsQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png 750w" data-tracking-container="true" height="742" id="mntl-sc-block-image_3-0" width="1525"/> <noscript> <img alt="AAPL Hammer" class="img--noscript universal-image__image" height="742" sizes="750px" src="https://www.investopedia.com/thmb/QM0Rz-bGFrcLyIT2iWrhQblTtH8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png" srcset="https://www.investopedia.com/thmb/9ukJWeVScEOtdro6_RmGyAcsMsQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png 750w" width="1525"/> </noscript> </div> </div> </figure> <span class="heading-toc" id="toc-understanding-the-hanging-man-candlestick-pattern"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/articles/active-trading/040914/understanding-hanging-man-optimistic-candlestick-pattern.asp" rel="nocaes">Understanding the 'Hanging Man' Candlestick Pattern</a> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The term "hanging man" refers to the candle's shape, as well as what the appearance of this pattern infers. The hanging man represents a potential downside <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reversal.asp">reversal</a> in an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/uptrend.asp">uptrend</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Here's a current daily chart of Apple Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>) with an example of a hanging man reversal pattern: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_36-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.0%;"> <img alt="AAPL Hanging Man" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/SIRNmPXvQtLo_eqrlfLIpeRjkLw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/SIRNmPXvQtLo_eqrlfLIpeRjkLw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png" data-srcset="https://www.investopedia.com/thmb/nCmuSID9MyDyaRXZaDIAZD0rQPU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png 750w" data-tracking-container="true" height="736" id="mntl-sc-block-image_4-0" width="1531"/> <noscript> <img alt="AAPL Hanging Man" class="img--noscript universal-image__image" height="736" sizes="750px" src="https://www.investopedia.com/thmb/SIRNmPXvQtLo_eqrlfLIpeRjkLw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png" srcset="https://www.investopedia.com/thmb/nCmuSID9MyDyaRXZaDIAZD0rQPU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png 750w" width="1531"/> </noscript> </div> </div> </figure> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

Equity markets were up overall this past week, and the S&P 500 notably crossed above its 200-day moving average for the first time since March. Still, ongoing market [volatility](https://www.investopedia.com/terms/v/volatility.asp) has remained, producing wide price swings that have continued to spook investors. This volatile market environment has prevailed on and off for more than three months as the economic effects of the global coronavirus pandemic continue to reverberate. While longer-term investors may have a strong aversion to the exaggerated market moves that have been the rule of late, shorter-term traders tend to prefer them. Larger price moves provide more potential opportunities for short-term profits (as well as for losses). In fact, we've seen trading volumes soar during the current economic crisis as experienced traders become even more active and new traders open brokerage accounts in droves. For such shorter-term traders, [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) remains the overwhelmingly preferred trading strategy. Technical analysis is a comprehensive body of knowledge and set of tools meant to identify trading opportunities through the analysis of price movement, [trading volume](https://www.investopedia.com/terms/v/volume.asp), [chart patterns](https://www.investopedia.com/terms/p/pattern.asp), and mathematical [indicators](https://www.investopedia.com/terms/t/technicalindicator.asp). Here at Investopedia, we've seen reader interest in technical analysis topics spike sharply throughout the past several weeks and months. This past week, readers were especially interested in [candlestick charts](https://www.investopedia.com/terms/c/candlestick.asp) and patterns—the Japanese style of charting that has become the preferred method of visual price interpretation for traders and investors around the world. Here are some of the top spiking technical analysis articles this week: ## [Understanding a Candlestick Chart](https://www.investopedia.com/trading/candlestick-charting-what-is-it/) Candlestick charts originated in Japan over 100 years before the West developed the [bar](https://www.investopedia.com/terms/b/barchart.asp) and [point-and-figure](https://www.investopedia.com/terms/p/pointandfigurechart.asp) charts. Candlesticks visually represent price moves with different colors and structural elements. Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price. Here's an example of one candlestick pattern—the bullish engulfing pattern—seen recently on a current daily chart of Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)): ![TSLA Bullish Engulfing]() :max_bytes(150000):strip_icc()/2020-05-29-BullishEngulfing-346faa6b65fb44bebfdb608ec3564aaa.png) ## [The 5 Most Powerful Candlestick Patterns](https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp) Many traders can identify dozens of candlestick patterns and formations, which have colorful names like [bearish dark cloud cover](https://www.investopedia.com/terms/d/darkcloud.asp), [evening star](https://www.investopedia.com/terms/e/eveningstar.asp) and [three black crows](https://www.investopedia.com/terms/t/three_black_crows.asp). In addition, single bar patterns including the [doji](https://www.investopedia.com/terms/d/doji.asp) and [hammer](https://www.investopedia.com/terms/h/hammer.asp) have been incorporated into dozens of long- and short-side [trading strategies](https://www.investopedia.com/terms/t/trading-strategy.asp). Five of the most powerful candlestick patterns can be found [here](https://www.investopedia.com/articles/active-trading/092315/5-most-powerful-candlestick-patterns.asp). Below is a current example of a three black crows pattern seen on a daily chart of Netflix Inc. ([NFLX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NFLX)): ![NFLX Three Black Crows]() :max_bytes(150000):strip_icc()/2020-05-29-ThreeBlackCrows-ec5b4fc4a783493d9735ff78e6d0b432.png) ## [Using Bullish Candlestick Patterns To Buy Stocks](https://www.investopedia.com/articles/active-trading/062315/using-bullish-candlestick-patterns-buy-stocks.asp) Bullish [reversal](https://www.investopedia.com/terms/r/reversal.asp) patterns should form within a downtrend. Otherwise, it’s not a bullish pattern, but a [continuation pattern](https://www.investopedia.com/terms/c/continuationpattern.asp). Most bullish reversal patterns require bullish confirmation**.**In other words, they must be followed by an upside price move. Below is a current daily chart of Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) showing one of these bullish candlestick patterns—the hammer: ![AAPL Hammer]() :max_bytes(150000):strip_icc()/2020-05-29-Hammer-1d42a88b8f8647d29dfdbdb70eb211f8.png) ## [Understanding the 'Hanging Man' Candlestick Pattern](https://www.investopedia.com/articles/active-trading/040914/understanding-hanging-man-optimistic-candlestick-pattern.asp) The term "hanging man" refers to the candle's shape, as well as what the appearance of this pattern infers. The hanging man represents a potential downside [reversal](https://www.investopedia.com/terms/r/reversal.asp) in an [uptrend](https://www.investopedia.com/terms/u/uptrend.asp). Here's a current daily chart of Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) with an example of a hanging man reversal pattern: ![AAPL Hanging Man]() :max_bytes(150000):strip_icc()/2020-05-29-HangingMan-85920d82c6c448ebb44d151702ef65ef.png) Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Equity markets were up overall this past week, and the S&P 500 notably crossed above its 200-day moving average for the first time since March. Still, ongoing market volatility has remained, producing wide price swings that have continued to spook investors. This volatile market environment has prevailed on and off for more than three months as the economic effects of the global coronavirus pandemic continue to reverberate. While longer-term investors may have a strong aversion to the exaggerated market moves that have been the rule of late, shorter-term traders tend to prefer them. Larger price moves provide more potential opportunities for short-term profits (as well as for losses). In fact, we've seen trading volumes soar during the current economic crisis as experienced traders become even more active and new traders open brokerage accounts in droves. For such shorter-term traders, technical analysis remains the overwhelmingly preferred trading strategy. Technical analysis is a comprehensive body of knowledge and set of tools meant to identify trading opportunities through the analysis of price movement, trading volume, chart patterns, and mathematical indicators. Here at Investopedia, we've seen reader interest in technical analysis topics spike sharply throughout the past several weeks and months. This past week, readers were especially interested in candlestick charts and patterns—the Japanese style of charting that has become the preferred method of visual price interpretation for traders and investors around the world. Here are some of the top spiking technical analysis articles this week: Understanding a Candlestick Chart Candlestick charts originated in Japan over 100 years before the West developed the bar and point-and-figure charts. Candlesticks visually represent price moves with different colors and structural elements. Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price. Here's an example of one candlestick pattern—the bullish engulfing pattern—seen recently on a current daily chart of Tesla Inc. (TSLA): The 5 Most Powerful Candlestick Patterns Many traders can identify dozens of candlestick patterns and formations, which have colorful names like bearish dark cloud cover, evening star and three black crows. In addition, single bar patterns including the doji and hammer have been incorporated into dozens of long- and short-side trading strategies. Five of the most powerful candlestick patterns can be found here. Below is a current example of a three black crows pattern seen on a daily chart of Netflix Inc. (NFLX): Using Bullish Candlestick Patterns To Buy Stocks Bullish reversal patterns should form within a downtrend. Otherwise, it’s not a bullish pattern, but a continuation pattern. Most bullish reversal patterns require bullish confirmation. In other words, they must be followed by an upside price move. Below is a current daily chart of Apple Inc. (AAPL) showing one of these bullish candlestick patterns—the hammer: Understanding the 'Hanging Man' Candlestick Pattern The term "hanging man" refers to the candle's shape, as well as what the appearance of this pattern infers. The hanging man represents a potential downside reversal in an uptrend. Here's a current daily chart of Apple Inc. (AAPL) with an example of a hanging man reversal pattern: Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/m/modified-pass-through-certificate.asp

Modified Pass-Through Certificate

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-modified-pass-through-certificate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Modified Pass-Through Certificate? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A modified pass-through certificate is a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedincome.asp" rel="noopener noreferrer">fixed-income security</a> that provides investors with income generated from a pool of underlying assets or loans. They are commonly issued by U.S. federal agencies such as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/ginniemae.asp" rel="noopener noreferrer">Government National Mortgage Association (GNMA)</a>.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A modified pass-through certificate is a type of fixed-income security sold by U.S. federal agencies.</li><li>The most common example of such instruments is the mortgage-backed securities sold by the GNMA.</li><li>These instruments can be attractive to investors because they substantially reduce the default risk associated with mortgage lending, while also providing added diversification.<span class="ql-inline-citation" data-cite="2"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-how-modified-pass-through-certificates-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How Modified Pass-Through Certificates Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Modified pass-through certificates offer investors income through a pool of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underlying.asp">underlying securities</a>, typically mortgages. The agencies that hold the loans guarantee interest payments to investors and make those payments regularly, whether the agency receives interest payments via the underlying note or not. The agencies pass principal payments along to investors as they come in, or by a specified date, whichever is sooner. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Under this arrangement, the agency issuing the modified pass-through certificate takes on the risk of defaults in the underlying portfolio. However, investors in modified pass-through certificates are not protected against <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prepaymentrisk.asp">prepayment risk</a>, since any early payments of principal would be passed along to the certificates’ investors. Because prepayments reduce the amount of principal outstanding, they therefore also reduce the amount of interest received in the future. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> From the perspective of investors, modified pass-through certificates can be an attractive way to reduce the risks associated with real estate lending. By receiving a government-backed guarantee of future interest and principal payments, investors in modified pass-through certificates can essentially eliminate the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrisk.asp">default risk</a> associated with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mbs.asp">mortgage-backed securities</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Moreover, since these securities group hundreds or even thousands of mortgages together in one instrument, they offer investors far greater <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> than would be possible if lending to individual homeowners. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Important</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Investors who wish to further reduce their risks can invest in fully modified pass-through certificates, which mitigate prepayment risk by fully guaranteeing both the amount and timing of interest and principal payments.</p></div></div></div> <span class="heading-toc" id="toc-real-world-example-of-a-modified-pass-through-certificate"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Real-World Example of a Modified Pass-Through Certificate </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> To illustrate, suppose an investor purchases a modified pass-through certificate from the GNMA, known as Ginnie Mae, consisting of a pool of mortgages. If several homeowners default on their loans and fail to make interest payments in a given period, the investor still receives scheduled payments of mortgage and principal from Ginnie Mae. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> On the other hand, if several homeowners pay off part or all of their mortgages, the investor will receive more in principal payments than scheduled for the month, but will also see a decrease in the value of planned interest payments for subsequent months. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> In other words, the modified pass-through certificate structure will protect this investor against default risk, but it will not protect them against prepayment risk.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.</p></div></div></div></div>

## What Is a Modified Pass-Through Certificate? A modified pass-through certificate is a type of [fixed-income security](https://www.investopedia.com/terms/f/fixedincome.asp) that provides investors with income generated from a pool of underlying assets or loans. They are commonly issued by U.S. federal agencies such as the [Government National Mortgage Association (GNMA)](https://www.investopedia.com/terms/g/ginniemae.asp). ### Key Takeaways * A modified pass-through certificate is a type of fixed-income security sold by U.S. federal agencies. * The most common example of such instruments is the mortgage-backed securities sold by the GNMA. * These instruments can be attractive to investors because they substantially reduce the default risk associated with mortgage lending, while also providing added diversification. ## How Modified Pass-Through Certificates Work Modified pass-through certificates offer investors income through a pool of [underlying securities](https://www.investopedia.com/terms/u/underlying.asp), typically mortgages. The agencies that hold the loans guarantee interest payments to investors and make those payments regularly, whether the agency receives interest payments via the underlying note or not. The agencies pass principal payments along to investors as they come in, or by a specified date, whichever is sooner. Under this arrangement, the agency issuing the modified pass-through certificate takes on the risk of defaults in the underlying portfolio. However, investors in modified pass-through certificates are not protected against [prepayment risk](https://www.investopedia.com/terms/p/prepaymentrisk.asp), since any early payments of principal would be passed along to the certificates’ investors. Because prepayments reduce the amount of principal outstanding, they therefore also reduce the amount of interest received in the future. From the perspective of investors, modified pass-through certificates can be an attractive way to reduce the risks associated with real estate lending. By receiving a government-backed guarantee of future interest and principal payments, investors in modified pass-through certificates can essentially eliminate the [default risk](https://www.investopedia.com/terms/c/creditrisk.asp) associated with [mortgage-backed securities](https://www.investopedia.com/terms/m/mbs.asp). Moreover, since these securities group hundreds or even thousands of mortgages together in one instrument, they offer investors far greater [diversification](https://www.investopedia.com/terms/d/diversification.asp) than would be possible if lending to individual homeowners. ### Important Investors who wish to further reduce their risks can invest in fully modified pass-through certificates, which mitigate prepayment risk by fully guaranteeing both the amount and timing of interest and principal payments. ## Real-World Example of a Modified Pass-Through Certificate To illustrate, suppose an investor purchases a modified pass-through certificate from the GNMA, known as Ginnie Mae, consisting of a pool of mortgages. If several homeowners default on their loans and fail to make interest payments in a given period, the investor still receives scheduled payments of mortgage and principal from Ginnie Mae. On the other hand, if several homeowners pay off part or all of their mortgages, the investor will receive more in principal payments than scheduled for the month, but will also see a decrease in the value of planned interest payments for subsequent months. In other words, the modified pass-through certificate structure will protect this investor against default risk, but it will not protect them against prepayment risk. ### Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.

What Is a Modified Pass-Through Certificate? A modified pass-through certificate is a type of fixed-income security that provides investors with income generated from a pool of underlying assets or loans. They are commonly issued by U.S. federal agencies such as the Government National Mortgage Association (GNMA). Key Takeaways A modified pass-through certificate is a type of fixed-income security sold by U.S. federal agencies.The most common example of such instruments is the mortgage-backed securities sold by the GNMA.These instruments can be attractive to investors because they substantially reduce the default risk associated with mortgage lending, while also providing added diversification. How Modified Pass-Through Certificates Work Modified pass-through certificates offer investors income through a pool of underlying securities, typically mortgages. The agencies that hold the loans guarantee interest payments to investors and make those payments regularly, whether the agency receives interest payments via the underlying note or not. The agencies pass principal payments along to investors as they come in, or by a specified date, whichever is sooner. Under this arrangement, the agency issuing the modified pass-through certificate takes on the risk of defaults in the underlying portfolio. However, investors in modified pass-through certificates are not protected against prepayment risk, since any early payments of principal would be passed along to the certificates’ investors. Because prepayments reduce the amount of principal outstanding, they therefore also reduce the amount of interest received in the future. From the perspective of investors, modified pass-through certificates can be an attractive way to reduce the risks associated with real estate lending. By receiving a government-backed guarantee of future interest and principal payments, investors in modified pass-through certificates can essentially eliminate the default risk associated with mortgage-backed securities. Moreover, since these securities group hundreds or even thousands of mortgages together in one instrument, they offer investors far greater diversification than would be possible if lending to individual homeowners. Important Investors who wish to further reduce their risks can invest in fully modified pass-through certificates, which mitigate prepayment risk by fully guaranteeing both the amount and timing of interest and principal payments. Real-World Example of a Modified Pass-Through Certificate To illustrate, suppose an investor purchases a modified pass-through certificate from the GNMA, known as Ginnie Mae, consisting of a pool of mortgages. If several homeowners default on their loans and fail to make interest payments in a given period, the investor still receives scheduled payments of mortgage and principal from Ginnie Mae. On the other hand, if several homeowners pay off part or all of their mortgages, the investor will receive more in principal payments than scheduled for the month, but will also see a decrease in the value of planned interest payments for subsequent months. In other words, the modified pass-through certificate structure will protect this investor against default risk, but it will not protect them against prepayment risk. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.

https://www.investopedia.com/avoid-these-credit-repair-mistakes-4769722

Avoid These Credit Repair Mistakes

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Credit repair involves removing or correcting inaccurate information from your credit report to provide a fair and complete picture of your finances, taking steps to boost your credit score, and resolving to avoid credit problems in the future. You can do this yourself or hire a company that specializes in credit repair to do it for you. Either path can present opportunities for error. Be sure you know your rights and avoid the 16 mistakes listed below. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. </li><li>In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws.</li><li>You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing; and avoid disreputable credit repair companies.</li></ul></div></div></div> <span class="heading-toc" id="toc-know-your-rights"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Know Your Rights </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Several laws protect consumers when it comes to credit. These include the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-repair-organizations-act-croa.asp">Credit Repair Organizations Act</a> (CROA); the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp">Fair Credit Reporting Act</a> (FCRA); the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/facta.asp">Fair and Accurate Credit Transactions Act</a> (FACTA) of 2003; and the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fair-debt-collection-practices-act-fdcpa.asp">Fair Debt Collections Practices Act</a> (FDCPA) of 2010. Among other things, these laws stipulate that: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <li>You must have free access to your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp">credit reports</a> once a year.</li> <li>You may dispute errors on your credit reports, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-agency.asp">credit agencies</a> must correct them if proved.</li> <li>You must be informed when your credit report has been used to, for example, deny you a loan.</li> <li>You must give permission for your credit information to be provided to someone else.</li> <li>The amount of time negative information remains on your reports is regulated.<strong> </strong></li> <li>Creditors must follow rules when it comes to contacting you about debt, including staying within certain hours and not making threats or informing family members about your debt.</li> <li>Credit repair agencies cannot lie to your creditors or encourage you to lie, alter your identity, or misrepresent their services.<span class="ql-inline-citation" data-cite="1"></span></li> <li>They also must provide you with a contract and a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coolingoffrule.asp">three-day cooling-off</a> period. If a firm doesn't adhere to any of these standards, then there's a chance you're dealing with a scammer, instead of one of the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-repair-companies-4843898">best credit repair companies</a>.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Knowing your rights is only part of the picture. You must also avoid making mistakes along the way. Here is what to watch for. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-mistake-1-failing-to-check-credit-reports"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Mistake #1: Failing to Check Credit Reports </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Step one in repairing your credit involves knowing what your credit reports say. If you have never requested your reports, or it has been at least 12 months since you last looked them over, you can check your reports by going to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ftc.asp">Federal Trade Commission</a> (FTC) <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="http://consumer.ftc.gov/articles/free-credit-reports">Free Credit Reports</a> page and following directions. Other websites sell access to credit reports and a few even offer select reports for free, but the FTC gateway ensures you get the reports guaranteed by the FCRA. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/consumer-credit-report/">Read all three reports carefully</a>, looking for information you believe to be false or inaccurate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-mistake-2-procrastinating"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Mistake #2: Procrastinating </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Don’t put off credit repair. If you discover negative information on any of your credit reports and believe it to be wrong, you should try to correct the record as soon as possible. Although most negative information comes off after seven years, that’s a long time to live with an inaccurate credit report. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-mistake-3-avoiding-credit-education"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Mistake #3: Avoiding Credit Education </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Whether you are attempting to remove or correct bad information on your credit reports or simply trying to reduce debt and forge a new financial path forward, the more you know, the better. This includes knowing how to dispute wrong information in your credit report as well as knowing you probably need to pay down high-interest credit card debt before <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/072316/how-installment-loans-work.asp" rel="noopener noreferrer">installment loans</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-mistake-4-not-keeping-documentation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Mistake #4: Not Keeping Documentation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Complete and accurate documentation regarding all debt is essential to disputing wrong information, protecting your rights, and keeping spending within parameters that make sense for you. You should know the penalties for missing a payment as well as the optimum conditions for requesting a credit increase. Be able to show payments were made on time and always be prepared to back up your claims with paperwork. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">235,000</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The approximate number of "credit report" complaints reported to the Consumer Finance Protection Bureau in 2020.</p></div></div></div> <span class="heading-toc" id="toc-mistake-5-disputing-too-much"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Mistake #5: Disputing Too Much </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Obviously, you should only dispute things you honestly believe are inaccurate. Some credit repair companies like to dispute everything in the hope that one or two things “stick.” The problem is that credit bureaus are not likely to take such an approach seriously. Even if they do, you could end up removing positive information that helps your credit score. It’s also important to take your dispute to the right entity. In most cases that will be the credit agency, not the creditor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-mistake-6-disputing-online"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Mistake #6: Disputing Online </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> All three credit agencies provide online dispute systems, but critics say using those systems may rob you of some of your rights under FCRA. The online systems allow credit agencies to avoid doing things—for example, forwarding your information to creditors, providing you with written responses to your disputes, and providing you with the “method of verification” of the item you disputed.<strong> </strong>Instead, you should file your dispute using paper “hard copies” and certified snail mail, critics say. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-mistake-7-disputing-with-boilerplate-language"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Mistake #7: Disputing with Boilerplate Language </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Along with not disputing “everything” it’s also wise to individualize the language in your dispute filing to avoid having the credit agency “red flag” your paperwork for being repetitive. Instead, use the template as a guide and make sure the words are your own. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-mistake-8-sending-uncertified-mail"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Mistake #8: Sending Uncertified Mail </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Any paperwork you send to a credit agency, collection agency, or creditor, should be sent certified mail with the return receipt requested. This provides you with the documentation mentioned above as well as proof the agency received your letter. The same “proof” rule applies to any communication to you from any of the above entities. Do not verbally agree to anything unless it is also in writing. That way you will know what the agency has agreed to and, more importantly, will have written proof. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>All communication should be in writing; you shouldn't verbally agree to anything unless it is also in writing.</p></div></div></div> <span class="heading-toc" id="toc-mistake-9-falsifying-documents"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-heading__text"> Mistake #9: Falsifying Documents </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Offering false and misleading statements or written communication isn’t just illegal for creditors and credit agencies. If you lie, chances are you will be prosecuted. Any documentation you provide as part of a dispute or question about an issue of credit must be accurate. You need not elaborate, but what you say must be true. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-mistake-10-transferring-credit-card-balances"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Mistake #10: Transferring Credit Card Balances </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-cards/balance-transfer-credit-card/">Transferring a balance</a> from one credit card to another is not a good credit repair tactic. You will still owe the same amount and in most cases, the balance transfer fees will outweigh whatever interest advantage you may get. The same applies to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debtconsolidation.asp">consolidating debt</a> onto a single credit card, especially if you close the other cards, thereby losing any available credit they would show. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-mistake-11-missing-payments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Mistake #11: Missing Payments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Another credit repair mistake some people make happens when they miss payments on some accounts to make payments—or larger payments—on others. The only exception might be if the account in question has either already been <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/chargeoff.asp">charged off</a> or gone to collections. If choosing between paying a collection account and one that is current, always pay the current account to keep it that way. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-mistake-12-canceling-credit-card-accounts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Mistake #12: Canceling Credit Card Accounts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Since 35% of your credit score is based on your credit history, it’s seldom a good idea to close a credit account. It may be much better to keep a small balance and pay it off monthly instead of canceling the account or cutting up the card. It will take discipline to keep from going into debt, but your credit score will be higher for the effort. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <span class="heading-toc" id="toc-mistake-13-applying-for-new-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-heading__text"> Mistake #13: Applying for New Credit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> If you’re trying to repair your credit, the chances of being approved for additional credit, especially <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecured.asp">unsecured</a> credit, are not great. You could be wasting a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hard-inquiry.asp">hard inquiry</a> that ends up lowering your credit score right at the time you’re trying to raise it. It’s best to save applying for new credit for later—after your credit has been repaired. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-mistake-14-paying-debt-collectors"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> Mistake #14: Paying Debt Collectors </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> It may sound counterintuitive, but paying a debt collector can cause unforeseen damage. If, for example, you have old debt that has outlived the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/statute-of-limitations.asp">statute of limitations</a>, making a payment on that debt could update the debt. If you are unsure about the validity or status of the debt, it’s important not to pay until and unless the debt collector proves the debt is legit and current. It’s important to remember that debt collectors are experts at trying to frighten you into paying up. Don’t pay based on anything verbal. Written communication is the only acceptable form of communication. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <span class="heading-toc" id="toc-mistake-15-hiring-a-shady-credit-repair-company"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Mistake #15: Hiring a Shady Credit Repair Company </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Some people don’t feel they have the time or expertise to do their own credit repair. For those people, hiring a credit repair company can be beneficial and convenient although the convenience comes at a price. According to Credit Karma, the cost of professional credit repair services could include a flat fee or “per deletion” charge of $35 or more. The total cost could go up to $750 or more. Some companies charge a monthly fee ranging from $50 to $130 or more. Only you can decide if the cost of paying someone else to repair your credit is worth it. It’s worth noting that credit repair companies, in general, don’t have a great reputation, so review your rights above and as spelled out in the CROA. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <span class="heading-toc" id="toc-mistake-16-filing-for-bankruptcy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-heading__text"> Mistake #16: Filing for Bankruptcy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Some people think they need a fresh start and decide to “repair” their credit by filing for bankruptcy. Unfortunately, bankruptcy will not improve your credit rating, it will remain on your credit report for up to 10 years, and even when it’s gone, many lenders will ask if you’ve ever filed for bankruptcy as part of the loan application process and use that as a reason for not approving a loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_64-0"><span class="heading-toc" id="toc-what-should-you-not-do-to-improve-your-credit"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Should You Not Do to Improve Your Credit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most common mistake people make when looking to improve their credit is to hire a disreputable credit repair company. A professional can't do anything to improve your credit score that you can't do yourself, so consider carefully before hiring help.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_66-0"><span class="heading-toc" id="toc-can-errors-on-a-credit-report-be-fixed"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Errors on a Credit Report Be Fixed?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. If you notice an error on your credit report, you should start by disputing that information with the credit reporting company. They have a legal obligation to investigate errors and to fix them once they are confirmed.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_68-0"><span class="heading-toc" id="toc-can-credit-bureaus-make-mistakes"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Credit Bureaus Make Mistakes?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. According to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ftc.gov/news-events/news/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports-could-result-less-favorable-terms">study</a> conducted by the Federal Trade Commission, five percent of people have an error on at least one of their credit reports.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing, and avoid disreputable credit repair companies. </p></div>

Credit repair involves removing or correcting inaccurate information from your credit report to provide a fair and complete picture of your finances, taking steps to boost your credit score, and resolving to avoid credit problems in the future. You can do this yourself or hire a company that specializes in credit repair to do it for you. Either path can present opportunities for error. Be sure you know your rights and avoid the 16 mistakes listed below. ### Key Takeaways * It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. * In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws. * You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing; and avoid disreputable credit repair companies. ## Know Your Rights Several laws protect consumers when it comes to credit. These include the [Credit Repair Organizations Act](https://www.investopedia.com/terms/c/credit-repair-organizations-act-croa.asp) (CROA); the [Fair Credit Reporting Act](https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp) (FCRA); the [Fair and Accurate Credit Transactions Act](https://www.investopedia.com/terms/f/facta.asp) (FACTA) of 2003; and the [Fair Debt Collections Practices Act](https://www.investopedia.com/terms/f/fair-debt-collection-practices-act-fdcpa.asp) (FDCPA) of 2010. Among other things, these laws stipulate that: * You must have free access to your [credit reports](https://www.investopedia.com/terms/c/creditreport.asp) once a year. * You may dispute errors on your credit reports, and [credit agencies](https://www.investopedia.com/terms/c/credit-agency.asp) must correct them if proved. * You must be informed when your credit report has been used to, for example, deny you a loan. * You must give permission for your credit information to be provided to someone else. * The amount of time negative information remains on your reports is regulated. * Creditors must follow rules when it comes to contacting you about debt, including staying within certain hours and not making threats or informing family members about your debt. * Credit repair agencies cannot lie to your creditors or encourage you to lie, alter your identity, or misrepresent their services. * They also must provide you with a contract and a [three-day cooling-off](https://www.investopedia.com/terms/c/coolingoffrule.asp) period. If a firm doesn't adhere to any of these standards, then there's a chance you're dealing with a scammer, instead of one of the [best credit repair companies](https://www.investopedia.com/best-credit-repair-companies-4843898). Knowing your rights is only part of the picture. You must also avoid making mistakes along the way. Here is what to watch for. ## Mistake #1: Failing to Check Credit Reports Step one in repairing your credit involves knowing what your credit reports say. If you have never requested your reports, or it has been at least 12 months since you last looked them over, you can check your reports by going to the [Federal Trade Commission](https://www.investopedia.com/terms/f/ftc.asp) (FTC) [Free Credit Reports](http://consumer.ftc.gov/articles/free-credit-reports) page and following directions. Other websites sell access to credit reports and a few even offer select reports for free, but the FTC gateway ensures you get the reports guaranteed by the FCRA. [Read all three reports carefully](https://www.investopedia.com/personal-finance/consumer-credit-report/), looking for information you believe to be false or inaccurate. ## Mistake #2: Procrastinating Don’t put off credit repair. If you discover negative information on any of your credit reports and believe it to be wrong, you should try to correct the record as soon as possible. Although most negative information comes off after seven years, that’s a long time to live with an inaccurate credit report. ## Mistake #3: Avoiding Credit Education Whether you are attempting to remove or correct bad information on your credit reports or simply trying to reduce debt and forge a new financial path forward, the more you know, the better. This includes knowing how to dispute wrong information in your credit report as well as knowing you probably need to pay down high-interest credit card debt before [installment loans](https://www.investopedia.com/articles/personal-finance/072316/how-installment-loans-work.asp). ## Mistake #4: Not Keeping Documentation Complete and accurate documentation regarding all debt is essential to disputing wrong information, protecting your rights, and keeping spending within parameters that make sense for you. You should know the penalties for missing a payment as well as the optimum conditions for requesting a credit increase. Be able to show payments were made on time and always be prepared to back up your claims with paperwork. ### 235,000 The approximate number of "credit report" complaints reported to the Consumer Finance Protection Bureau in 2020. ## Mistake #5: Disputing Too Much Obviously, you should only dispute things you honestly believe are inaccurate. Some credit repair companies like to dispute everything in the hope that one or two things “stick.” The problem is that credit bureaus are not likely to take such an approach seriously. Even if they do, you could end up removing positive information that helps your credit score. It’s also important to take your dispute to the right entity. In most cases that will be the credit agency, not the creditor. ## Mistake #6: Disputing Online All three credit agencies provide online dispute systems, but critics say using those systems may rob you of some of your rights under FCRA. The online systems allow credit agencies to avoid doing things—for example, forwarding your information to creditors, providing you with written responses to your disputes, and providing you with the “method of verification” of the item you disputed.Instead, you should file your dispute using paper “hard copies” and certified snail mail, critics say. ## Mistake #7: Disputing with Boilerplate Language Along with not disputing “everything” it’s also wise to individualize the language in your dispute filing to avoid having the credit agency “red flag” your paperwork for being repetitive. Instead, use the template as a guide and make sure the words are your own. ## Mistake #8: Sending Uncertified Mail Any paperwork you send to a credit agency, collection agency, or creditor, should be sent certified mail with the return receipt requested. This provides you with the documentation mentioned above as well as proof the agency received your letter. The same “proof” rule applies to any communication to you from any of the above entities. Do not verbally agree to anything unless it is also in writing. That way you will know what the agency has agreed to and, more importantly, will have written proof. ### All communication should be in writing; you shouldn't verbally agree to anything unless it is also in writing. ## Mistake #9: Falsifying Documents Offering false and misleading statements or written communication isn’t just illegal for creditors and credit agencies. If you lie, chances are you will be prosecuted. Any documentation you provide as part of a dispute or question about an issue of credit must be accurate. You need not elaborate, but what you say must be true. ## Mistake #10: Transferring Credit Card Balances [Transferring a balance](https://www.investopedia.com/credit-cards/balance-transfer-credit-card/) from one credit card to another is not a good credit repair tactic. You will still owe the same amount and in most cases, the balance transfer fees will outweigh whatever interest advantage you may get. The same applies to [consolidating debt](https://www.investopedia.com/terms/d/debtconsolidation.asp) onto a single credit card, especially if you close the other cards, thereby losing any available credit they would show. ## Mistake #11: Missing Payments Another credit repair mistake some people make happens when they miss payments on some accounts to make payments—or larger payments—on others. The only exception might be if the account in question has either already been [charged off](https://www.investopedia.com/terms/c/chargeoff.asp) or gone to collections. If choosing between paying a collection account and one that is current, always pay the current account to keep it that way. ## Mistake #12: Canceling Credit Card Accounts Since 35% of your credit score is based on your credit history, it’s seldom a good idea to close a credit account. It may be much better to keep a small balance and pay it off monthly instead of canceling the account or cutting up the card. It will take discipline to keep from going into debt, but your credit score will be higher for the effort. ## Mistake #13: Applying for New Credit If you’re trying to repair your credit, the chances of being approved for additional credit, especially [unsecured](https://www.investopedia.com/terms/u/unsecured.asp) credit, are not great. You could be wasting a [hard inquiry](https://www.investopedia.com/terms/h/hard-inquiry.asp) that ends up lowering your credit score right at the time you’re trying to raise it. It’s best to save applying for new credit for later—after your credit has been repaired. ## Mistake #14: Paying Debt Collectors It may sound counterintuitive, but paying a debt collector can cause unforeseen damage. If, for example, you have old debt that has outlived the [statute of limitations](https://www.investopedia.com/terms/s/statute-of-limitations.asp), making a payment on that debt could update the debt. If you are unsure about the validity or status of the debt, it’s important not to pay until and unless the debt collector proves the debt is legit and current. It’s important to remember that debt collectors are experts at trying to frighten you into paying up. Don’t pay based on anything verbal. Written communication is the only acceptable form of communication. ## Mistake #15: Hiring a Shady Credit Repair Company Some people don’t feel they have the time or expertise to do their own credit repair. For those people, hiring a credit repair company can be beneficial and convenient although the convenience comes at a price. According to Credit Karma, the cost of professional credit repair services could include a flat fee or “per deletion” charge of $35 or more. The total cost could go up to $750 or more. Some companies charge a monthly fee ranging from $50 to $130 or more. Only you can decide if the cost of paying someone else to repair your credit is worth it. It’s worth noting that credit repair companies, in general, don’t have a great reputation, so review your rights above and as spelled out in the CROA. ## Mistake #16: Filing for Bankruptcy Some people think they need a fresh start and decide to “repair” their credit by filing for bankruptcy. Unfortunately, bankruptcy will not improve your credit rating, it will remain on your credit report for up to 10 years, and even when it’s gone, many lenders will ask if you’ve ever filed for bankruptcy as part of the loan application process and use that as a reason for not approving a loan. ## What Should You Not Do to Improve Your Credit? The most common mistake people make when looking to improve their credit is to hire a disreputable credit repair company. A professional can't do anything to improve your credit score that you can't do yourself, so consider carefully before hiring help. ## Can Errors on a Credit Report Be Fixed? Yes. If you notice an error on your credit report, you should start by disputing that information with the credit reporting company. They have a legal obligation to investigate errors and to fix them once they are confirmed. ## Can Credit Bureaus Make Mistakes? Yes. According to a [study](https://www.ftc.gov/news-events/news/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports-could-result-less-favorable-terms) conducted by the Federal Trade Commission, five percent of people have an error on at least one of their credit reports. ## The Bottom Line It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws. You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing, and avoid disreputable credit repair companies.

Credit repair involves removing or correcting inaccurate information from your credit report to provide a fair and complete picture of your finances, taking steps to boost your credit score, and resolving to avoid credit problems in the future. You can do this yourself or hire a company that specializes in credit repair to do it for you. Either path can present opportunities for error. Be sure you know your rights and avoid the 16 mistakes listed below. Key Takeaways It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws.You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing; and avoid disreputable credit repair companies. Know Your Rights Several laws protect consumers when it comes to credit. These include the Credit Repair Organizations Act (CROA); the Fair Credit Reporting Act (FCRA); the Fair and Accurate Credit Transactions Act (FACTA) of 2003; and the Fair Debt Collections Practices Act (FDCPA) of 2010. Among other things, these laws stipulate that: You must have free access to your credit reports once a year. You may dispute errors on your credit reports, and credit agencies must correct them if proved. You must be informed when your credit report has been used to, for example, deny you a loan. You must give permission for your credit information to be provided to someone else. The amount of time negative information remains on your reports is regulated. Creditors must follow rules when it comes to contacting you about debt, including staying within certain hours and not making threats or informing family members about your debt. Credit repair agencies cannot lie to your creditors or encourage you to lie, alter your identity, or misrepresent their services. They also must provide you with a contract and a three-day cooling-off period. If a firm doesn't adhere to any of these standards, then there's a chance you're dealing with a scammer, instead of one of the best credit repair companies. Knowing your rights is only part of the picture. You must also avoid making mistakes along the way. Here is what to watch for. Mistake #1: Failing to Check Credit Reports Step one in repairing your credit involves knowing what your credit reports say. If you have never requested your reports, or it has been at least 12 months since you last looked them over, you can check your reports by going to the Federal Trade Commission (FTC) Free Credit Reports page and following directions. Other websites sell access to credit reports and a few even offer select reports for free, but the FTC gateway ensures you get the reports guaranteed by the FCRA. Read all three reports carefully, looking for information you believe to be false or inaccurate. Mistake #2: Procrastinating Don’t put off credit repair. If you discover negative information on any of your credit reports and believe it to be wrong, you should try to correct the record as soon as possible. Although most negative information comes off after seven years, that’s a long time to live with an inaccurate credit report. Mistake #3: Avoiding Credit Education Whether you are attempting to remove or correct bad information on your credit reports or simply trying to reduce debt and forge a new financial path forward, the more you know, the better. This includes knowing how to dispute wrong information in your credit report as well as knowing you probably need to pay down high-interest credit card debt before installment loans. Mistake #4: Not Keeping Documentation Complete and accurate documentation regarding all debt is essential to disputing wrong information, protecting your rights, and keeping spending within parameters that make sense for you. You should know the penalties for missing a payment as well as the optimum conditions for requesting a credit increase. Be able to show payments were made on time and always be prepared to back up your claims with paperwork. 235,000 The approximate number of "credit report" complaints reported to the Consumer Finance Protection Bureau in 2020. Mistake #5: Disputing Too Much Obviously, you should only dispute things you honestly believe are inaccurate. Some credit repair companies like to dispute everything in the hope that one or two things “stick.” The problem is that credit bureaus are not likely to take such an approach seriously. Even if they do, you could end up removing positive information that helps your credit score. It’s also important to take your dispute to the right entity. In most cases that will be the credit agency, not the creditor. Mistake #6: Disputing Online All three credit agencies provide online dispute systems, but critics say using those systems may rob you of some of your rights under FCRA. The online systems allow credit agencies to avoid doing things—for example, forwarding your information to creditors, providing you with written responses to your disputes, and providing you with the “method of verification” of the item you disputed. Instead, you should file your dispute using paper “hard copies” and certified snail mail, critics say. Mistake #7: Disputing with Boilerplate Language Along with not disputing “everything” it’s also wise to individualize the language in your dispute filing to avoid having the credit agency “red flag” your paperwork for being repetitive. Instead, use the template as a guide and make sure the words are your own. Mistake #8: Sending Uncertified Mail Any paperwork you send to a credit agency, collection agency, or creditor, should be sent certified mail with the return receipt requested. This provides you with the documentation mentioned above as well as proof the agency received your letter. The same “proof” rule applies to any communication to you from any of the above entities. Do not verbally agree to anything unless it is also in writing. That way you will know what the agency has agreed to and, more importantly, will have written proof. All communication should be in writing; you shouldn't verbally agree to anything unless it is also in writing. Mistake #9: Falsifying Documents Offering false and misleading statements or written communication isn’t just illegal for creditors and credit agencies. If you lie, chances are you will be prosecuted. Any documentation you provide as part of a dispute or question about an issue of credit must be accurate. You need not elaborate, but what you say must be true. Mistake #10: Transferring Credit Card Balances Transferring a balance from one credit card to another is not a good credit repair tactic. You will still owe the same amount and in most cases, the balance transfer fees will outweigh whatever interest advantage you may get. The same applies to consolidating debt onto a single credit card, especially if you close the other cards, thereby losing any available credit they would show. Mistake #11: Missing Payments Another credit repair mistake some people make happens when they miss payments on some accounts to make payments—or larger payments—on others. The only exception might be if the account in question has either already been charged off or gone to collections. If choosing between paying a collection account and one that is current, always pay the current account to keep it that way. Mistake #12: Canceling Credit Card Accounts Since 35% of your credit score is based on your credit history, it’s seldom a good idea to close a credit account. It may be much better to keep a small balance and pay it off monthly instead of canceling the account or cutting up the card. It will take discipline to keep from going into debt, but your credit score will be higher for the effort. Mistake #13: Applying for New Credit If you’re trying to repair your credit, the chances of being approved for additional credit, especially unsecured credit, are not great. You could be wasting a hard inquiry that ends up lowering your credit score right at the time you’re trying to raise it. It’s best to save applying for new credit for later—after your credit has been repaired. Mistake #14: Paying Debt Collectors It may sound counterintuitive, but paying a debt collector can cause unforeseen damage. If, for example, you have old debt that has outlived the statute of limitations, making a payment on that debt could update the debt. If you are unsure about the validity or status of the debt, it’s important not to pay until and unless the debt collector proves the debt is legit and current. It’s important to remember that debt collectors are experts at trying to frighten you into paying up. Don’t pay based on anything verbal. Written communication is the only acceptable form of communication. Mistake #15: Hiring a Shady Credit Repair Company Some people don’t feel they have the time or expertise to do their own credit repair. For those people, hiring a credit repair company can be beneficial and convenient although the convenience comes at a price. According to Credit Karma, the cost of professional credit repair services could include a flat fee or “per deletion” charge of $35 or more. The total cost could go up to $750 or more. Some companies charge a monthly fee ranging from $50 to $130 or more. Only you can decide if the cost of paying someone else to repair your credit is worth it. It’s worth noting that credit repair companies, in general, don’t have a great reputation, so review your rights above and as spelled out in the CROA. Mistake #16: Filing for Bankruptcy Some people think they need a fresh start and decide to “repair” their credit by filing for bankruptcy. Unfortunately, bankruptcy will not improve your credit rating, it will remain on your credit report for up to 10 years, and even when it’s gone, many lenders will ask if you’ve ever filed for bankruptcy as part of the loan application process and use that as a reason for not approving a loan. What Should You Not Do to Improve Your Credit? The most common mistake people make when looking to improve their credit is to hire a disreputable credit repair company. A professional can't do anything to improve your credit score that you can't do yourself, so consider carefully before hiring help. Can Errors on a Credit Report Be Fixed? Yes. If you notice an error on your credit report, you should start by disputing that information with the credit reporting company. They have a legal obligation to investigate errors and to fix them once they are confirmed. Can Credit Bureaus Make Mistakes? Yes. According to a study conducted by the Federal Trade Commission, five percent of people have an error on at least one of their credit reports. The Bottom Line It's possible to make mistakes when you try to improve your credit score, and accidentally make it worse. In order to avoid these mistakes, you should make sure you know your rights under applicable credit laws. You should also obtain and read your credit reports once a year and look for errors; only dispute information that you believe is wrong; keep records of everything and get everything in writing, and avoid disreputable credit repair companies.

https://www.investopedia.com/articles/personal-finance/081216/zero-interest-loans-why-you-should-beware.asp

Zero-Interest Loans: Why You Should Beware

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Companies that offer zero-interest loans tout these vehicles as no-lose opportunities for borrowers. A major purchase that might otherwise require a lump-sum payment can be spread out over 12 months to several years, with 0% interest, thereby creating a more palatable cash flow situation. But such loans present pitfalls, including the temptation to make <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/buy-sell-online.asp">impulse purchases</a>, the tendency to overspend, and exposure to exorbitant penalties for violating a loan's terms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Zero-interest loans, where only the principal balance must be repaid, often lure buyers into impulsively buying cars, appliances, and other luxury goods.</li><li>These loans saddle borrowers with rigid monthly payment schedules and lock them into hard deadlines by which the entire balance must be repaid. </li><li>Borrows who fail to honor the loan terms are subject to stiff penalties. </li><li>These loans are typically only available to prospective buyers with FICO scores of 740 or higher.<span class="ql-inline-citation" data-cite="3"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-zero-interest-loan-basics"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Zero-Interest Loan Basics </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> As its name suggests, a zero-interest loan is one where only the principal balance must be repaid, provided that the borrower honors the rigid deadline by which the entire balance must be satisfied. Failure to comply with the deadline carries hefty penalties. Most notably, the lender may rescind the 0% clause and apply backdated interest to the loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A staple at car dealerships and electronics retailers, zero-interest loans are facilitated through third-party lenders, any not by the stores themselves. To qualify for these loans, borrowers generally must exhibit <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ficoscore.asp">FICO scores</a> of at least 740. In most cases, the zero-interest option tend to be for long-term loans of 72 and up to 84 months.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <span class="heading-toc" id="toc-zero-interest-loans-and-impulse-buying"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Zero-Interest Loans and Impulse Buying </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Car dealerships routinely inundate the local radio airwaves with ads touting zero-interest loan promotions. Prospective buyers should only take the bait if they desperately need a new car, and they are financially positioned to purchase one. Unfortunately, such ads often tempt buyers into making impulsive buys, when it is impractical for them to do so. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> It is not surprising that salespeople exploit zero-interest loan promotions to push customers toward more expensive purchases, in a concerted effort to boost their commission income. Some dealers use zero-interest deals as leverage during price negotiations. With such great financing offers, salespeople are often disinclined to come down on purchase price. Buyers should avoid overpaying just because of low-interest deals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Zero-interest loans promotions may attract buyers who fail to qualify for such programs. In many cases, opportunistic salesmen steer such individuals towards loans that do, in fact, carry interest. After espying a shiny <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/neworusedcar.asp">new car</a> or a slick flat-screen TV, many customers agree to such loans, even if the terms are unfavorable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-zero-interest-loans-and-overspending"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Zero-Interest Loans and Overspending </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Zero-interest loans entice buyers to overspend their hard-earned dollars on fancy new cars and other luxury items. Rather than buying a sensibly-priced used car for $20,000, a buyer may recklessly choose a new vehicle with a $30,000 price tag, reasoning that they would be paying $10,000 in interest anyway, were they not receiving such excellent loan terms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-zero-interest-loan-penalties-and-fees"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Zero-Interest Loan Penalties and Fees </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Although they may seem like a dream, zero-interest loans can become nightmares for borrowers who don't fully grasp the loan terms. Lenders are quick to cancel zero-interest provisions for customers who fall delinquent on just a single payment. This holds true for revolving debt, such as 0% <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">annual percentage rate (APR)</a> credit cards, and installment debt, such as a car loan. Borrowers who opt for such deals should be mindful of the penalties for paying late or for exceeding the loan's stated terms.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Consumers may elevate their FICO scores by paying their utility and cell phone bills on time, and by keeping their credit card balances low.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_25-0"><span class="heading-toc" id="toc-what-credit-score-do-i-need-to-qualify-for-a-zero-interest-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Credit Score Do I Need to Qualify for a Zero-Interest Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Most zero-interest loans are only available to people with a good credit score of 740 or better.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_27-0"><span class="heading-toc" id="toc-can-i-pay-off-a-zero-interest-loan-early"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Pay Off a Zero-Interest Loan Early?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Early payoff penalties can be applied to any loan but are not obligatory. Read the fine print of your loan agreement to ensure there are no prepayment penalties before signing anything.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-what-happens-if-im-late-on-my-zero-interest-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens if I'm Late on My Zero-interest Loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Every loan is different, but many zero-interest loans will end the promotional rate in the event of even one late payment. Be sure to read the fine print about delinquent penalties and the conditions of the promotional rate.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_31-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="What to Know About Zero-Interest Loans" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/FKnwNK_yTx3uSjYcgGEkZglv_Ew=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/FKnwNK_yTx3uSjYcgGEkZglv_Ew=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg" data-srcset="https://www.investopedia.com/thmb/LWxLqsftd9cB6xvV6H_AL_8ggRE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="What to Know About Zero-Interest Loans" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/FKnwNK_yTx3uSjYcgGEkZglv_Ew=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg" srcset="https://www.investopedia.com/thmb/LWxLqsftd9cB6xvV6H_AL_8ggRE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Yurle Villegas</p></span> </figcaption></figure> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Avoiding interest is always a good goal, but zero-interest loans can lead buyers to overspend and come with a lot of strings attached. Carefully evaluate your purchase—is this what you intended to buy, and will you realistically pay off the loan within the given time? Proceed with caution.<br/> </p></div>

Companies that offer zero-interest loans tout these vehicles as no-lose opportunities for borrowers. A major purchase that might otherwise require a lump-sum payment can be spread out over 12 months to several years, with 0% interest, thereby creating a more palatable cash flow situation. But such loans present pitfalls, including the temptation to make [impulse purchases](https://www.investopedia.com/articles/pf/08/buy-sell-online.asp), the tendency to overspend, and exposure to exorbitant penalties for violating a loan's terms. ### Key Takeaways * Zero-interest loans, where only the principal balance must be repaid, often lure buyers into impulsively buying cars, appliances, and other luxury goods. * These loans saddle borrowers with rigid monthly payment schedules and lock them into hard deadlines by which the entire balance must be repaid. * Borrows who fail to honor the loan terms are subject to stiff penalties. * These loans are typically only available to prospective buyers with FICO scores of 740 or higher. ## Zero-Interest Loan Basics As its name suggests, a zero-interest loan is one where only the principal balance must be repaid, provided that the borrower honors the rigid deadline by which the entire balance must be satisfied. Failure to comply with the deadline carries hefty penalties. Most notably, the lender may rescind the 0% clause and apply backdated interest to the loan. A staple at car dealerships and electronics retailers, zero-interest loans are facilitated through third-party lenders, any not by the stores themselves. To qualify for these loans, borrowers generally must exhibit [FICO scores](https://www.investopedia.com/terms/f/ficoscore.asp) of at least 740. In most cases, the zero-interest option tend to be for long-term loans of 72 and up to 84 months. ## Zero-Interest Loans and Impulse Buying Car dealerships routinely inundate the local radio airwaves with ads touting zero-interest loan promotions. Prospective buyers should only take the bait if they desperately need a new car, and they are financially positioned to purchase one. Unfortunately, such ads often tempt buyers into making impulsive buys, when it is impractical for them to do so. It is not surprising that salespeople exploit zero-interest loan promotions to push customers toward more expensive purchases, in a concerted effort to boost their commission income. Some dealers use zero-interest deals as leverage during price negotiations. With such great financing offers, salespeople are often disinclined to come down on purchase price. Buyers should avoid overpaying just because of low-interest deals. Zero-interest loans promotions may attract buyers who fail to qualify for such programs. In many cases, opportunistic salesmen steer such individuals towards loans that do, in fact, carry interest. After espying a shiny [new car](https://www.investopedia.com/articles/pf/07/neworusedcar.asp) or a slick flat-screen TV, many customers agree to such loans, even if the terms are unfavorable. ## Zero-Interest Loans and Overspending Zero-interest loans entice buyers to overspend their hard-earned dollars on fancy new cars and other luxury items. Rather than buying a sensibly-priced used car for $20,000, a buyer may recklessly choose a new vehicle with a $30,000 price tag, reasoning that they would be paying $10,000 in interest anyway, were they not receiving such excellent loan terms. ## Zero-Interest Loan Penalties and Fees Although they may seem like a dream, zero-interest loans can become nightmares for borrowers who don't fully grasp the loan terms. Lenders are quick to cancel zero-interest provisions for customers who fall delinquent on just a single payment. This holds true for revolving debt, such as 0% [annual percentage rate (APR)](https://www.investopedia.com/terms/a/apr.asp) credit cards, and installment debt, such as a car loan. Borrowers who opt for such deals should be mindful of the penalties for paying late or for exceeding the loan's stated terms. ### Consumers may elevate their FICO scores by paying their utility and cell phone bills on time, and by keeping their credit card balances low. ## What Credit Score Do I Need to Qualify for a Zero-Interest Loan? Most zero-interest loans are only available to people with a good credit score of 740 or better. ## Can I Pay Off a Zero-Interest Loan Early? Early payoff penalties can be applied to any loan but are not obligatory. Read the fine print of your loan agreement to ensure there are no prepayment penalties before signing anything. ## What Happens if I'm Late on My Zero-interest Loan? Every loan is different, but many zero-interest loans will end the promotional rate in the event of even one late payment. Be sure to read the fine print about delinquent penalties and the conditions of the promotional rate. ![What to Know About Zero-Interest Loans]() :max_bytes(150000):strip_icc()/zero-interest-loans-why-you-should-beware.asp-Final-0731d97aed7b45129db9181892853e0c.jpg) Investopedia / Yurle Villegas ## The Bottom Line Avoiding interest is always a good goal, but zero-interest loans can lead buyers to overspend and come with a lot of strings attached. Carefully evaluate your purchase—is this what you intended to buy, and will you realistically pay off the loan within the given time? Proceed with caution.

Companies that offer zero-interest loans tout these vehicles as no-lose opportunities for borrowers. A major purchase that might otherwise require a lump-sum payment can be spread out over 12 months to several years, with 0% interest, thereby creating a more palatable cash flow situation. But such loans present pitfalls, including the temptation to make impulse purchases, the tendency to overspend, and exposure to exorbitant penalties for violating a loan's terms. Key Takeaways Zero-interest loans, where only the principal balance must be repaid, often lure buyers into impulsively buying cars, appliances, and other luxury goods.These loans saddle borrowers with rigid monthly payment schedules and lock them into hard deadlines by which the entire balance must be repaid. Borrows who fail to honor the loan terms are subject to stiff penalties. These loans are typically only available to prospective buyers with FICO scores of 740 or higher. Zero-Interest Loan Basics As its name suggests, a zero-interest loan is one where only the principal balance must be repaid, provided that the borrower honors the rigid deadline by which the entire balance must be satisfied. Failure to comply with the deadline carries hefty penalties. Most notably, the lender may rescind the 0% clause and apply backdated interest to the loan. A staple at car dealerships and electronics retailers, zero-interest loans are facilitated through third-party lenders, any not by the stores themselves. To qualify for these loans, borrowers generally must exhibit FICO scores of at least 740. In most cases, the zero-interest option tend to be for long-term loans of 72 and up to 84 months. Zero-Interest Loans and Impulse Buying Car dealerships routinely inundate the local radio airwaves with ads touting zero-interest loan promotions. Prospective buyers should only take the bait if they desperately need a new car, and they are financially positioned to purchase one. Unfortunately, such ads often tempt buyers into making impulsive buys, when it is impractical for them to do so. It is not surprising that salespeople exploit zero-interest loan promotions to push customers toward more expensive purchases, in a concerted effort to boost their commission income. Some dealers use zero-interest deals as leverage during price negotiations. With such great financing offers, salespeople are often disinclined to come down on purchase price. Buyers should avoid overpaying just because of low-interest deals. Zero-interest loans promotions may attract buyers who fail to qualify for such programs. In many cases, opportunistic salesmen steer such individuals towards loans that do, in fact, carry interest. After espying a shiny new car or a slick flat-screen TV, many customers agree to such loans, even if the terms are unfavorable. Zero-Interest Loans and Overspending Zero-interest loans entice buyers to overspend their hard-earned dollars on fancy new cars and other luxury items. Rather than buying a sensibly-priced used car for $20,000, a buyer may recklessly choose a new vehicle with a $30,000 price tag, reasoning that they would be paying $10,000 in interest anyway, were they not receiving such excellent loan terms. Zero-Interest Loan Penalties and Fees Although they may seem like a dream, zero-interest loans can become nightmares for borrowers who don't fully grasp the loan terms. Lenders are quick to cancel zero-interest provisions for customers who fall delinquent on just a single payment. This holds true for revolving debt, such as 0% annual percentage rate (APR) credit cards, and installment debt, such as a car loan. Borrowers who opt for such deals should be mindful of the penalties for paying late or for exceeding the loan's stated terms. Consumers may elevate their FICO scores by paying their utility and cell phone bills on time, and by keeping their credit card balances low. What Credit Score Do I Need to Qualify for a Zero-Interest Loan? Most zero-interest loans are only available to people with a good credit score of 740 or better. Can I Pay Off a Zero-Interest Loan Early? Early payoff penalties can be applied to any loan but are not obligatory. Read the fine print of your loan agreement to ensure there are no prepayment penalties before signing anything. What Happens if I'm Late on My Zero-interest Loan? Every loan is different, but many zero-interest loans will end the promotional rate in the event of even one late payment. Be sure to read the fine print about delinquent penalties and the conditions of the promotional rate. Investopedia / Yurle Villegas The Bottom Line Avoiding interest is always a good goal, but zero-interest loans can lead buyers to overspend and come with a lot of strings attached. Carefully evaluate your purchase—is this what you intended to buy, and will you realistically pay off the loan within the given time? Proceed with caution.

https://www.investopedia.com/terms/b/budget.asp

What Is a Budget? Plus 11 Budgeting Myths Holding You Back

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-budget"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Budget? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A budget refers to an estimation of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expense.asp">expenses</a> that's made for a specified future period of time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated regularly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/budgeting-calculator-5101411">Budgets</a> can be made for any entity that <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/difference-between-needs-and-wants-8612333">needs or wants to spend money</a>, including governments and businesses, people, and households of any income level. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals of any income level.</li><li>A budget is a financial plan for a defined period that can greatly enhance the success of any financial undertaking.</li><li>Corporate budgets are essential for operating at peak efficiency.</li><li>Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning contingencies.</li><li>Personal budgets are extremely useful in helping individuals and families manage their finances.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Budget" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/MNYF-Lox_TmdT98p8U_fKmitvZs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/MNYF-Lox_TmdT98p8U_fKmitvZs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png" data-srcset="https://www.investopedia.com/thmb/prgz8-5PiMDKvpBBTNfjvWACU1E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Budget" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/MNYF-Lox_TmdT98p8U_fKmitvZs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png" srcset="https://www.investopedia.com/thmb/prgz8-5PiMDKvpBBTNfjvWACU1E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Julie Bang</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-budgeting"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding Budgeting </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> A budget is a microeconomic concept that reveals the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/budget-surplus.asp">surplus budget</a> means profits are anticipated, a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/balanced-budget.asp">balanced budget</a> means revenues are expected to equal expenses, and a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/budget-deficit.asp">deficit budget</a> means expenses will exceed revenues. These principles hold true whether the budget is intended for an individual, a family, or a company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> First, let's take a quick look at the budgeting process for a corporation, and then personal budgeting.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-corporate-budgets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Corporate Budgets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Budgets are an integral part of running any business efficiently and effectively. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> Budget Development Process </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Corporate budgeting begins by establishing assumptions for the upcoming budget period. These assumptions are related to projected sales trends, cost trends, and the overall economic outlook of the market, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/industry.asp">industry,</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sector.asp">sector</a>. Specific factors affecting potential expenses are addressed and monitored. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The budget is published in a packet that outlines the standards and procedures used to develop it, including the assumptions about the markets, key relationships with vendors that provide discounts, and explanations of how certain calculations were made. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The sales budget is often the first to be developed, as subsequent expense budgets cannot be established without knowing future <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashflow.asp">cash flows</a>. Budgets are developed for all the different subsidiaries, divisions, and departments within an organization. For a manufacturer, a separate budget is often developed for direct materials, labor, and overhead. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> All budgets get rolled up into the master budget, which also includes budgeted <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-statements.asp">financial statements</a>, forecasts of cash inflows and outflows, and an overall financing plan. At a corporation, the top management reviews the budget and submits it for approval to the board of directors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Static vs. Flexible Budgets </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> There are two major types of budgets: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/staticbudget.asp" rel="noopener noreferrer">static budgets</a> and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels, or other external economic factors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Both types of budgets are useful for management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_33-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-advisorinsight" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_34-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Advisor Insight</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/derek-notman-4692555">Derek Notman, CFP®, ChFC, CLU</a><br/>Intrepid Wealth Partners, LLC, Madison, WI</p> <p>The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not).</p> <p>Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time to know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation.</p></div></div></div> <span class="heading-toc" id="toc-personal-budgets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Personal Budgets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Individuals and families can have budgets, too. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-maintenance-budget-8608913">Creating and using a budget</a> is not just for those who need to closely monitor their cash flows from month to month because money is tight. Almost everyone can benefit from budgeting—even people with large paychecks and plenty of money in the bank may find it difficult to cover the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-maintenance-budget-8608913">expense of an unexpected home repair</a>.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> To manage your monthly expenses, prepare for life's unpredictable events, and afford big-ticket items without going into debt, budgeting is essential. Keeping track of how much you earn doesn't require you to be a math whiz and doesn't mean you can't buy the things you want. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> What it does mean is that you can maintain control over where your money goes and enjoy greater financial confidence and success.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> How to Create a Budget </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The specifics of budgeting will depend on your personal financial situation and goals. In most cases, though, the approach is the same no matter where you stand financially. Follow these seven steps to create your budget and adjust it as needed to reach specific financial goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> <li><strong>Add up all your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/income.asp">income</a></strong>. This should include all income sources, such as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wage-expense.asp">wages</a>, salaries, tips, Social Security payments, disability, alimony, and investment income.</li> <li><strong>Calculate your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expense.asp">expenses</a></strong>. These are expenses you must pay each month, such as your <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage</a> or rent, food, transportation costs including gas, insurance premiums, taxes, childcare, internet service, your cell phone bill, and other utility payments.</li> <li><strong>Identify debt payments</strong>. Be sure to include your debt, such as <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loan.asp">loans</a> and credit card payments. Determine the minimum payment for each debt. Subtract that from your income as well.</li> <li><strong>Review your spending</strong>. Keep track of every dollar you spend, whether you pay with a credit card or cash, to determine what your real expenses are. Keep your receipts and note down additional spending that you hadn't budgeted for.</li> <li><strong>Create a spending plan</strong>. The amount of income you have left is what you can spend on discretionary expenses. These can include additional debt payments or rainy day savings. Your plan should also include things like entertainment or surprise expenses. Give every dollar a job, based on your goals and what you discovered when you tracked your spending.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>Set financial goals</strong>. Do you want to save money? Pay off debt? Stop spending more than you have? Decide on realistic goals. Remember, you can adjust these over time. Work on the most pressing goals first, such as paying off debt or creating an emergency fund.</li> <li><strong>Adjust each month</strong>. Each month, look at your spending and whether you progressed toward or achieved goals, Reevaluate and adjust where you assign your discretionary spending. A flexible budget will help you avoid overspending.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Once you've created a budget, you may have to do some juggling, especially in the first few months. This means adjusting spending here and there so that you stay within your planned budget for income and expenses. And be sure to put it in writing: If you see it and commit to it, you'll have more incentive to stick to it.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-11-budgeting-myths-that-can-block-your-success"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> 11 Budgeting Myths That Can Block Your Success </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Budgeting is a wonderful tool for managing your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finance.asp">finances</a>, but many people think it's not for them. It's important to become aware of budgeting myths—the erroneous logic that stops people from keeping track of their money and allocating it in ways that benefit them most. Then, you can create a budget that can help you live within your means, reach important goals, and build lasting wealth. Here are 11 budgeting myths. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-subheading__text"> 1. I Don't Need to Budget </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Getting and keeping a handle on your monthly income and expenses allows you to make sure that your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment.asp">investments</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> If one's monthly expenses typically consume the lion's share of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netincome.asp">net income</a>, any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, the budget can be crucial to identifying expenses that could be reduced or cut, and minimizing any wasteful <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> being paid on credit cards or other debt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-subheading__text"> 2. I'm Not Great at Math </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Generally speaking, you don't need to be great at math to make and follow a budget. First of all, understanding general concepts relating to your income, spending, debt, saving, and allocating your funds are important. Then, the basic ability to add and subtract is most of what's called for. That's especially true if you're budgeting manually, with pencil and paper. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> And now, thanks to budgeting software programs, math barely enters into it. You simply have to be able to follow instructions. Many of these programs are free and legitimate. Or, if you know how to use spreadsheet software, you can make your own ledger. It's as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> 3. My Job Is Secure </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> No one's job is truly safe. If you work for a corporation, being laid off due to a difficult economy, downsizing, or a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/takeover.asp">takeover</a> always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> You should always be prepared for a job loss by having at least three months' worth of living expenses in the bank. It's easier to accumulate this financial cushion if you know the amount you're bringing in and spending each month, which can be monitored with a budget. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-subheading__text"> 4. Unemployment Insurance Will Tide Me Over </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unemployment-compensation.asp">Unemployment compensation</a> is not a sure thing. Let's say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/constructive-discharge-claim.asp">constructive discharge</a> (that is, that you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you're used to: in even the highest paying states, the average is less than $500 per week.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-subheading__text"> 5. I Don't Want To Deprive Myself </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you're able to spend on what's needed and save a little each month, ideally at least 10% of your income. At the very least, budgeting can make sure that you aren't spending more than you earn. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Unless you're on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month. It just shows you where that money is going and allows you to make decisions about changing your spending habits. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_75-0"> <span class="mntl-sc-block-subheading__text"> 6. I Don't Want Anything Big </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> If you don't have any major savings goals (e.g., upsizing your living situation, starting your own business), it's hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> Let's say that you and your partner <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/090115/living-new-york-city-coops-vs-condos.asp">live in New York City</a> in a small one-bedroom apartment and things are going fine for both of you until your family dynamic changes. For instance, you may have a child or an in-law who comes to stay with you indefinitely. This may mean you'll need (and want) more room to accommodate the new addition. If you don't save up for anything big, you may not be able to afford this change in your living situation down the road. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-subheading__text"> 7. I Won't Qualify for Student Financial Aid </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Yes, the catch-22 of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/061814/5-ways-get-maximum-student-financial-aid.asp">student financial aid</a> is that the more money you have, the less aid you'll be eligible for. That's enough to make anyone wonder if it isn't better to spend it all and have no savings in order to qualify for the maximum amount of grants and loans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> But that catch mainly applies to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnedincome.asp">earned income</a>. Whether you are an adult student going back to school or the parent of a student headed to college, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp">Free Application for Federal Student Aid (FAFSA)</a> form (used for <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stafford-loan.asp">Stafford Loans</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/perkins-loan.asp">Perkins Loans</a>, or <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pell-grant.asp">Pell Grants</a>), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_84-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_85-0"> So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage</a>, or contribute more money to your retirement accounts. The savings that you put into these assets can still be accessed if you face an emergency, but you won't be penalized for it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_86-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won't always qualify for as much aid as you need. So it's not a bad idea to have your own source of funds to make up for any shortfall. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_88-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_89-0"> <span class="mntl-sc-block-subheading__text"> 8. I'm Debt-Free </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_90-0"> Good for you! But being debt-free without any savings won't pay your bills in an emergency. A zero balance can quickly become a negative balance if you don't have a safety net. Budgeting can help you create one. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_92-0"> <span class="mntl-sc-block-subheading__text"> 9. I Always Get a Raise or Tax Refund </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_93-0"> It's never a good idea to count on unpredictable sources of income. This may be the year that your company is unable to give you a raise (or as much of a raise as you hope for). The same is true of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bonus.asp">bonus</a> money. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-refund.asp">Tax refunds</a> are more reliable, but this depends in part on how good you are at calculating your own tax liability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Some people know how to figure how much they'll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/withholding.asp">withholding</a> throughout the year. However, changes in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-deduction.asp">tax deductions</a>, IRS regulations, or other life events can mean a nasty surprise when you prepare your tax return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_97-0"> <span class="mntl-sc-block-subheading__text"> 10. I Just Don't Have the Discipline </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_98-0"> If you're still not convinced that budgeting is for you, here's a way to protect yourself from your own spending habits. Set up an automatic transfer from your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/checkingaccount.asp">checking account</a> to a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savingsaccount.asp">savings account</a> that you don't see regularly (i.e., at a different bank). Schedule the transfer to happen right after you get paid. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_100-0"> If you are saving for retirement, you may have the option of contributing a set amount regularly to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/401kplan.asp">401(k) </a>or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and know that you can meet your savings goal.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_101-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_102-0"> <span class="mntl-sc-block-subheading__text"> 11. It's a Luxury When I Barely Have Enough for the Essentials </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_103-0"> Sometimes budgeting just isn't a priority because you have too much on your plate. But there are certain government programs that can help you manage your household expenses. For instance, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/supplemental-nutrition-assistance-program-snap-5187718">Supplemental Nutrition Assistance Program (SNAP)</a> helps recipients of all income levels work with their food budgets to make their benefits go further.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_104-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_105-0"> At the very least, set up that budget so you get a feel for spending limits, any change in how you originally planned to allocate your funds, whether you're paying all you can to get rid of debt, or whether your slipping too far into debt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_106-0"></div> <span class="heading-toc" id="toc-budgeting-concepts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_107-0"> <span class="mntl-sc-block-heading__text"> Budgeting Concepts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_108-0"> In general, traditional budgeting starts with tracking expenses, eliminating debt, and, once the budget is balanced, building an emergency fund. But to speed up the process, you could start by building a partial emergency fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_109-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_110-0"> <span class="mntl-sc-block-subheading__text"> Emergency Fund </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> This emergency fund acts as a buffer as the rest of the budget is put in place and should replace the use of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp">credit cards</a> for emergency situations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_113-0"> The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it, and if possible, putting in whatever you can spare on top. This will get you to think about your spending, too. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_114-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_115-0"> You should only use your emergency fund for true emergencies. For instance, if you lose your job and need to pay for expenses, you could tap into your rainy day fund until you join the workforce again. You can also use this money if you have an unexpected medical emergency that arises. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_117-0"> You would save money if you used your emergency fund to eliminate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-card-debt.asp">credit card debt</a>, but the purpose of the fund is to prevent you from having to use your credit card for paying for unexpected expenses. With a proper emergency fund, you will not need your credit card to keep you afloat when something goes wrong. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_119-0"> <span class="mntl-sc-block-subheading__text"> Downsize and Substitute </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_120-0"> Once you have a buffer between you and high-interest debt, you can start the process of downsizing. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_121-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_122-0"> This can be a process of substitution as much as elimination. For example, cancel any recurring subscriptions that you don't regularly use or need. Use half of the money you save to invest for a goal or to pay off outstanding debts. Save the other half to bulk up your emergency fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_123-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_124-0"> Although <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cost-cutting.asp">eliminating expenses</a> entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. So consider: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_125-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_126-0"> <li>Shopping with friends and family so you can split the cost, especially if you buy in bulk</li><li>Carpooling or taking public transportation to cut down on car-related costs</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_127-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_128-0"> People can sometimes cut too many expenses so that they end up with a budget that they can't stick to. Substitution, in contrast, keeps the basics while trimming costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_129-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_130-0"> <span class="mntl-sc-block-subheading__text"> Find New Sources of Income </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_131-0"> Once you have your budget in place and have more money coming in than going out, you can start investing to create more income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_132-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_133-0"> It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp">higher-risk, high-return</a> securities like stocks can outweigh most low-interest debt over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_134-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_135-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_136-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Keep your receipts so that you know exactly how much you spend each month. This can help you determine how much to budget for any expenses that may change from month to month.</p></div></div></div> <span class="heading-toc" id="toc-sticking-to-a-budget"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_137-0"> <span class="mntl-sc-block-heading__text"> Sticking to a Budget </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_138-0"> You've got your budget set up. Now you've got to stick to it. But that credit card still calls your name, your clothes budget seems awfully small, and you feel deprived. At such moments, it helps to revisit the whole reason for a budget—to help you manage your finances, achieve financial goals, and lead a life free from fear of financial pitfalls. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_139-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_140-0"> <span class="mntl-sc-block-subheading__text"> Remember the Big Picture </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_141-0"> Your budget can keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less. So think about the future you want and remember that keeping to your budget will help you get there. Adding to your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt-load.asp">debt load</a>, on the other hand, will mean that your financial future could be less bright. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_142-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_143-0"> <span class="mntl-sc-block-subheading__text"> Review Your Spending </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_144-0"> Every time you enter your spending in your software or budget notebook, review everything that's been spent to date and compare it to income received. This will keep you abreast of where things stand and encourage you to keep at it, especially if you are reining in your spending as intended. This daily or weekly activity can give you an enormous sense of accomplishment and keep you on track. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_145-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_146-0"> <span class="mntl-sc-block-subheading__text"> Remove the Options That Allow You to Cheat </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_147-0"> Make it more difficult to make impulse purchases. In other words, set up barriers that give you time to think: "Is this purchase necessary?" Opt out of retailer email lists. Remove your stored payment information on your favorite online shops so you can't just click to order. Adjust your phone settings to block tracking and advertising as much as possible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_148-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_149-0"> <span class="mntl-sc-block-subheading__text"> Find Some Support </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_150-0"> If you feel like you're the only one in your group who is on a budget, search for some like-minded folks. You could find an online forum, a monthly meeting, or even a couple of friends who will listen to your concerns and share their budgeting experiences. Set up accountability calls with your frugal buddies to talk things over and keep temptation at bay. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_151-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_152-0"> Just know that you're not the only person setting sensible financial limits for yourself. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_153-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_154-0"> <span class="mntl-sc-block-subheading__text"> Go Old School </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_155-0"> There's something powerful about handing over a stack of $20 bills for a purchase. You have to confront the money you're about to spend and accept that the spending is worth it. Swiping a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debitcard.asp">debit card</a>, on the other hand, may not feel nearly as real.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_156-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_157-0"> Similarly, paying bills by writing checks and promptly entering the sums in your register keeps you up-to-date on how your account is affected in a way that autopay doesn't. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_158-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_159-0"> You don't have to use cash exclusively or completely forgo online payments. But handling transactions in hands-on ways can make you realize how much you're spending and enhance the power of self-regulation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_160-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_161-0"> <span class="mntl-sc-block-subheading__text"> Reward Yourself </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_162-0"> If you constantly look at what you have to give up, the very act of budgeting becomes distasteful. A mixture of long- and short-term gifts to yourself will help keep you motivated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_163-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_164-0"> When you've been faithful to your budget for a month, give yourself a reward. Even small ones such as a night out with friends, a concert, or a little extra cash for spending can help. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_165-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_166-0"> Keep visual reminders of these rewards or the things you're saving up for. Start building associations in your brain that make sticking to your budget an enjoyable activity with happy results. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_167-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_168-0"> <span class="mntl-sc-block-subheading__text"> Schedule a Periodic Budget Evaluation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_169-0"> It's difficult to predict correctly how much money you'll need in every category of your budget. For instance, a new job may necessitate a wardrobe change and your existing clothing budget may not cut it. That's why it's important to conduct a regular check on how well your budget is working. It may need tweaking. This is to be expected. Just make sure that you always keep your long-term financial goals in the picture. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_170-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_171-0"> <span class="mntl-sc-block-subheading__text"> Educate Yourself </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_172-0"> Learn all you can about finances, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymanagement.asp">money management</a>, and how you can best invest in yourself. Talk to your financially savvy friends and seek out real-world tips and advice from people who are doing well with their money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_173-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_174-0"> The more you learn about handling money wisely and the rewards that can result from such an effort, the more concrete and acceptable the reasons for budgeting will be. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_175-0"></div> <span class="heading-toc" id="toc-8-ways-to-budget-when-youre-broke"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_176-0"> <span class="mntl-sc-block-heading__text"> 8 Ways to Budget When You're Broke </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_177-0"> Budgeting is smart, but if you're suffering from mounting bills and a lack of funds, it may not be where your focus is. In such circumstances, consider some additional steps that you can take to gain control of your finances. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_178-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_179-0"> <span class="mntl-sc-block-subheading__text"> 1. Avoid Immediate Disaster </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_180-0"> Don't be afraid to request bill extensions or payment plans from creditors. Skipping or delaying payments only worsens your debt. And late fees ding your credit score.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_181-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_182-0"> <span class="mntl-sc-block-subheading__text"> 2. Prioritize Bills </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_183-0"> Go over all your bills to see what can and should be paid first, prioritize those that are late, and then set up a payment schedule based on your paydays. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_184-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_185-0"> Call the bill companies to see how much you can pay now to get back on track toward a positive status. Explain that you are taking strict measures to catch up. Be forthright about the amount you can afford to pay now. Don't just promise to pay the full amount later. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_186-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_187-0"> <span class="mntl-sc-block-subheading__text"> 3. Ignore the 10% Savings Rule </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_188-0"> Stashing 10% of your income into your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savingsaccount.asp">savings account</a> is daunting or impossible when you're living paycheck to paycheck. It doesn't make sense to have $100 in a savings plan if you are fending off <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt-collector.asp">debt collectors</a>. Your savings can wait until you can reclaim financial stability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_189-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_190-0"> <span class="mntl-sc-block-subheading__text"> 4. Face Your Spending </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_191-0"> To fix your finances, you need to get a handle on your outlay first. Online banking and online budgeting software can help you categorize spending so you can make adjustments. Many people find that just by looking at aggregate figures for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discretionary-expense.asp">discretionary expenses</a>, they are spurred to reduce excessive spending. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_192-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_193-0"> <span class="mntl-sc-block-subheading__text"> 5. Eliminate Unnecessary Expenses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_194-0"> Hopefully, your budget has given you a sense of where your money goes. Now it's time to tighten up. Start cutting back on items that you wouldn't miss. Change habits that are costing you, like letting food spoil before you can eat it. Prepare meals at home instead of going to restaurants or getting takeout. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_195-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_196-0"> You may be able to reduce some expenses that you shouldn't drop. For example, you might be able to lower your auto insurance premium by switching carriers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_197-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_198-0"> <span class="mntl-sc-block-subheading__text"> 6. Negotiate Credit Card Interest Rates </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_199-0"> Those ultra-high interest rates on your credit cards aren't fixed in stone. Call the card company and ask for a reduction in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">annual percentage rates (APR)</a>. If you have a good payment record, your request might be approved. This won't lower your outstanding balance, but it will keep it from mushrooming as fast. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_200-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_201-0"> <span class="mntl-sc-block-subheading__text"> 7. Track Your Spending </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_202-0"> Once you've gone through these steps, monitor your progress for a few months. You can do this by writing everything you spend in a notebook, with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-budgeting-apps-5085405">budgeting apps</a> on your phone, or with the software you may already use for your budget. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_203-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_204-0"> Ensure that every cent is accounted for. Fine-tune and adjust your spending as needed after each month. This not only can help get you out of financial trouble. It also can put the spotlight back on the importance of your budget. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_205-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_206-0"> <span class="mntl-sc-block-subheading__text"> 8. Seek New Income </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_207-0"> For the time being, saving and investing is out. But consider ways to increase your earnings: working overtime, getting a second job, or picking up some freelance work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_208-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_209-0"><span class="heading-toc" id="toc-how-do-you-create-a-budget"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Create a Budget?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Creating a budget takes some work. You'll need to calculate every type of income you receive each month. Next, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/common-budgeting-challenges-overcome/">track your spending</a> and tabulate all your monthly expenses, including your rent or mortgage, utility payments, debt, transportation costs, food, miscellaneous spending, and more. You may have to make some adjustments initially to stay within your budget. But once you've gone through the first few months, it should become easier to stick to it.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_210-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_211-0"><span class="heading-toc" id="toc-what-is-the-50-20-30-budget-rule"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the 50-20-30 Budget Rule?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The 50-20-30 budget rule was popularized by Sen. Elizabeth Warren (D-Mass.) in her book <em>All Your Worth: The Ultimate Lifetime Money Plan. </em>The plan entails dividing all of your after-tax income into 50% for your actual needs, 30% for anything you want, and 20% for savings.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_212-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_213-0"><span class="heading-toc" id="toc-how-does-budgeting-help-a-business"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Budgeting Help a Business?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Just like budgets help people, corporate budgeting helps <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/administrative-budget.asp">businesses stay on top</a> of their finances. It also helps business leaders make very important investment decisions, manage and meet goals and objectives, and identify any financial hurdles that come their way.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_214-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_215-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_216-0"> A budget often conjures up images of complicated financial documents. But in reality, it's a money management tool that can be used by various entities, including governments, businesses, and individuals/households of every income level. Budgets can help prepare you to make better decisions about your money so that you can secure a brighter financial future. </p></div>

## What Is a Budget? A budget refers to an estimation of [revenue](https://www.investopedia.com/terms/r/revenue.asp) and [expenses](https://www.investopedia.com/terms/e/expense.asp) that's made for a specified future period of time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated regularly. [Budgets](https://www.investopedia.com/budgeting-calculator-5101411) can be made for any entity that [needs or wants to spend money](https://www.investopedia.com/difference-between-needs-and-wants-8612333), including governments and businesses, people, and households of any income level. ### Key Takeaways * A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals of any income level. * A budget is a financial plan for a defined period that can greatly enhance the success of any financial undertaking. * Corporate budgets are essential for operating at peak efficiency. * Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning contingencies. * Personal budgets are extremely useful in helping individuals and families manage their finances. ![Budget]() :max_bytes(150000):strip_icc()/budget-c859a4e77f744197b0340b1250fc48d0.png) Investopedia / Julie Bang ## Understanding Budgeting A budget is a microeconomic concept that reveals the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a [surplus budget](https://www.investopedia.com/terms/b/budget-surplus.asp) means profits are anticipated, a [balanced budget](https://www.investopedia.com/terms/b/balanced-budget.asp) means revenues are expected to equal expenses, and a [deficit budget](https://www.investopedia.com/terms/b/budget-deficit.asp) means expenses will exceed revenues. These principles hold true whether the budget is intended for an individual, a family, or a company. First, let's take a quick look at the budgeting process for a corporation, and then personal budgeting. ## Corporate Budgets Budgets are an integral part of running any business efficiently and effectively. ### Budget Development Process Corporate budgeting begins by establishing assumptions for the upcoming budget period. These assumptions are related to projected sales trends, cost trends, and the overall economic outlook of the market, [industry,](https://www.investopedia.com/terms/i/industry.asp) or [sector](https://www.investopedia.com/terms/s/sector.asp). Specific factors affecting potential expenses are addressed and monitored. The budget is published in a packet that outlines the standards and procedures used to develop it, including the assumptions about the markets, key relationships with vendors that provide discounts, and explanations of how certain calculations were made. The sales budget is often the first to be developed, as subsequent expense budgets cannot be established without knowing future [cash flows](https://www.investopedia.com/terms/c/cashflow.asp). Budgets are developed for all the different subsidiaries, divisions, and departments within an organization. For a manufacturer, a separate budget is often developed for direct materials, labor, and overhead. All budgets get rolled up into the master budget, which also includes budgeted [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp), forecasts of cash inflows and outflows, and an overall financing plan. At a corporation, the top management reviews the budget and submits it for approval to the board of directors. ### Static vs. Flexible Budgets There are two major types of budgets: [static budgets](https://www.investopedia.com/terms/s/staticbudget.asp) and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same. A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels, or other external economic factors. Both types of budgets are useful for management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations. ### Advisor Insight [Derek Notman, CFP®, ChFC, CLU](https://www.investopedia.com/derek-notman-4692555) Intrepid Wealth Partners, LLC, Madison, WI The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not). Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time to know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation. ## Personal Budgets Individuals and families can have budgets, too. [Creating and using a budget](https://www.investopedia.com/home-maintenance-budget-8608913) is not just for those who need to closely monitor their cash flows from month to month because money is tight. Almost everyone can benefit from budgeting—even people with large paychecks and plenty of money in the bank may find it difficult to cover the [expense of an unexpected home repair](https://www.investopedia.com/home-maintenance-budget-8608913). To manage your monthly expenses, prepare for life's unpredictable events, and afford big-ticket items without going into debt, budgeting is essential. Keeping track of how much you earn doesn't require you to be a math whiz and doesn't mean you can't buy the things you want. What it does mean is that you can maintain control over where your money goes and enjoy greater financial confidence and success. ### How to Create a Budget The specifics of budgeting will depend on your personal financial situation and goals. In most cases, though, the approach is the same no matter where you stand financially. Follow these seven steps to create your budget and adjust it as needed to reach specific financial goals. 1. **Add up all your [income](https://www.investopedia.com/terms/i/income.asp)**. This should include all income sources, such as a [wages](https://www.investopedia.com/terms/w/wage-expense.asp), salaries, tips, Social Security payments, disability, alimony, and investment income. 2. **Calculate your [expenses](https://www.investopedia.com/terms/e/expense.asp)**. These are expenses you must pay each month, such as your [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) or rent, food, transportation costs including gas, insurance premiums, taxes, childcare, internet service, your cell phone bill, and other utility payments. 3. **Identify debt payments**. Be sure to include your debt, such as [loans](https://www.investopedia.com/terms/l/loan.asp) and credit card payments. Determine the minimum payment for each debt. Subtract that from your income as well. 4. **Review your spending**. Keep track of every dollar you spend, whether you pay with a credit card or cash, to determine what your real expenses are. Keep your receipts and note down additional spending that you hadn't budgeted for. 5. **Create a spending plan**. The amount of income you have left is what you can spend on discretionary expenses. These can include additional debt payments or rainy day savings. Your plan should also include things like entertainment or surprise expenses. Give every dollar a job, based on your goals and what you discovered when you tracked your spending. 7. **Set financial goals**. Do you want to save money? Pay off debt? Stop spending more than you have? Decide on realistic goals. Remember, you can adjust these over time. Work on the most pressing goals first, such as paying off debt or creating an emergency fund. 8. **Adjust each month**. Each month, look at your spending and whether you progressed toward or achieved goals, Reevaluate and adjust where you assign your discretionary spending. A flexible budget will help you avoid overspending. Once you've created a budget, you may have to do some juggling, especially in the first few months. This means adjusting spending here and there so that you stay within your planned budget for income and expenses. And be sure to put it in writing: If you see it and commit to it, you'll have more incentive to stick to it. ## 11 Budgeting Myths That Can Block Your Success Budgeting is a wonderful tool for managing your [finances](https://www.investopedia.com/terms/f/finance.asp), but many people think it's not for them. It's important to become aware of budgeting myths—the erroneous logic that stops people from keeping track of their money and allocating it in ways that benefit them most. Then, you can create a budget that can help you live within your means, reach important goals, and build lasting wealth. Here are 11 budgeting myths. ### 1. I Don't Need to Budget Getting and keeping a handle on your monthly income and expenses allows you to make sure that your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and [investments](https://www.investopedia.com/terms/i/investment.asp). If one's monthly expenses typically consume the lion's share of [net income](https://www.investopedia.com/terms/n/netincome.asp), any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, the budget can be crucial to identifying expenses that could be reduced or cut, and minimizing any wasteful [interest](https://www.investopedia.com/terms/i/interest.asp) being paid on credit cards or other debt. ### 2. I'm Not Great at Math Generally speaking, you don't need to be great at math to make and follow a budget. First of all, understanding general concepts relating to your income, spending, debt, saving, and allocating your funds are important. Then, the basic ability to add and subtract is most of what's called for. That's especially true if you're budgeting manually, with pencil and paper. And now, thanks to budgeting software programs, math barely enters into it. You simply have to be able to follow instructions. Many of these programs are free and legitimate. Or, if you know how to use spreadsheet software, you can make your own ledger. It's as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two. ### 3. My Job Is Secure No one's job is truly safe. If you work for a corporation, being laid off due to a difficult economy, downsizing, or a [takeover](https://www.investopedia.com/terms/t/takeover.asp) always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold. You should always be prepared for a job loss by having at least three months' worth of living expenses in the bank. It's easier to accumulate this financial cushion if you know the amount you're bringing in and spending each month, which can be monitored with a budget. ### 4. Unemployment Insurance Will Tide Me Over [Unemployment compensation](https://www.investopedia.com/terms/u/unemployment-compensation.asp) is not a sure thing. Let's say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove [constructive discharge](https://www.investopedia.com/terms/c/constructive-discharge-claim.asp) (that is, that you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you're used to: in even the highest paying states, the average is less than $500 per week. ### 5. I Don't Want To Deprive Myself Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you're able to spend on what's needed and save a little each month, ideally at least 10% of your income. At the very least, budgeting can make sure that you aren't spending more than you earn. Unless you're on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month. It just shows you where that money is going and allows you to make decisions about changing your spending habits. ### 6. I Don't Want Anything Big If you don't have any major savings goals (e.g., upsizing your living situation, starting your own business), it's hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time. Let's say that you and your partner [live in New York City](https://www.investopedia.com/articles/personal-finance/090115/living-new-york-city-coops-vs-condos.asp) in a small one-bedroom apartment and things are going fine for both of you until your family dynamic changes. For instance, you may have a child or an in-law who comes to stay with you indefinitely. This may mean you'll need (and want) more room to accommodate the new addition. If you don't save up for anything big, you may not be able to afford this change in your living situation down the road. ### 7. I Won't Qualify for Student Financial Aid Yes, the catch-22 of [student financial aid](https://www.investopedia.com/articles/personal-finance/061814/5-ways-get-maximum-student-financial-aid.asp) is that the more money you have, the less aid you'll be eligible for. That's enough to make anyone wonder if it isn't better to spend it all and have no savings in order to qualify for the maximum amount of grants and loans. But that catch mainly applies to [earned income](https://www.investopedia.com/terms/e/earnedincome.asp). Whether you are an adult student going back to school or the parent of a student headed to college, the [Free Application for Federal Student Aid (FAFSA)](https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp) form (used for [Stafford Loans](https://www.investopedia.com/terms/s/stafford-loan.asp), [Perkins Loans](https://www.investopedia.com/terms/p/perkins-loan.asp), or [Pell Grants](https://www.investopedia.com/terms/p/pell-grant.asp)), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts. So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your [mortgage](https://www.investopedia.com/terms/m/mortgage.asp), or contribute more money to your retirement accounts. The savings that you put into these assets can still be accessed if you face an emergency, but you won't be penalized for it. Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won't always qualify for as much aid as you need. So it's not a bad idea to have your own source of funds to make up for any shortfall. ### 8. I'm Debt-Free Good for you! But being debt-free without any savings won't pay your bills in an emergency. A zero balance can quickly become a negative balance if you don't have a safety net. Budgeting can help you create one. ### 9. I Always Get a Raise or Tax Refund It's never a good idea to count on unpredictable sources of income. This may be the year that your company is unable to give you a raise (or as much of a raise as you hope for). The same is true of [bonus](https://www.investopedia.com/terms/b/bonus.asp) money. [Tax refunds](https://www.investopedia.com/terms/t/tax-refund.asp) are more reliable, but this depends in part on how good you are at calculating your own tax liability. Some people know how to figure how much they'll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll [withholding](https://www.investopedia.com/terms/w/withholding.asp) throughout the year. However, changes in [tax deductions](https://www.investopedia.com/terms/t/tax-deduction.asp), IRS regulations, or other life events can mean a nasty surprise when you prepare your tax return. ### 10. I Just Don't Have the Discipline If you're still not convinced that budgeting is for you, here's a way to protect yourself from your own spending habits. Set up an automatic transfer from your [checking account](https://www.investopedia.com/terms/c/checkingaccount.asp) to a [savings account](https://www.investopedia.com/terms/s/savingsaccount.asp) that you don't see regularly (i.e., at a different bank). Schedule the transfer to happen right after you get paid. If you are saving for retirement, you may have the option of contributing a set amount regularly to a [401(k)](https://www.investopedia.com/terms/1/401kplan.asp) or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and know that you can meet your savings goal.  ### 11. It's a Luxury When I Barely Have Enough for the Essentials Sometimes budgeting just isn't a priority because you have too much on your plate. But there are certain government programs that can help you manage your household expenses. For instance, the [Supplemental Nutrition Assistance Program (SNAP)](https://www.investopedia.com/supplemental-nutrition-assistance-program-snap-5187718) helps recipients of all income levels work with their food budgets to make their benefits go further. At the very least, set up that budget so you get a feel for spending limits, any change in how you originally planned to allocate your funds, whether you're paying all you can to get rid of debt, or whether your slipping too far into debt. ## Budgeting Concepts In general, traditional budgeting starts with tracking expenses, eliminating debt, and, once the budget is balanced, building an emergency fund. But to speed up the process, you could start by building a partial emergency fund. ### Emergency Fund This emergency fund acts as a buffer as the rest of the budget is put in place and should replace the use of [credit cards](https://www.investopedia.com/terms/c/creditcard.asp) for emergency situations. The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it, and if possible, putting in whatever you can spare on top. This will get you to think about your spending, too. You should only use your emergency fund for true emergencies. For instance, if you lose your job and need to pay for expenses, you could tap into your rainy day fund until you join the workforce again. You can also use this money if you have an unexpected medical emergency that arises. You would save money if you used your emergency fund to eliminate [credit card debt](https://www.investopedia.com/terms/c/credit-card-debt.asp), but the purpose of the fund is to prevent you from having to use your credit card for paying for unexpected expenses. With a proper emergency fund, you will not need your credit card to keep you afloat when something goes wrong. ### Downsize and Substitute Once you have a buffer between you and high-interest debt, you can start the process of downsizing. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest. This can be a process of substitution as much as elimination. For example, cancel any recurring subscriptions that you don't regularly use or need. Use half of the money you save to invest for a goal or to pay off outstanding debts. Save the other half to bulk up your emergency fund. Although [eliminating expenses](https://www.investopedia.com/terms/c/cost-cutting.asp) entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. So consider: * Shopping with friends and family so you can split the cost, especially if you buy in bulk * Carpooling or taking public transportation to cut down on car-related costs People can sometimes cut too many expenses so that they end up with a budget that they can't stick to. Substitution, in contrast, keeps the basics while trimming costs. ### Find New Sources of Income Once you have your budget in place and have more money coming in than going out, you can start investing to create more income. It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in [higher-risk, high-return](https://www.investopedia.com/terms/m/mutualfund.asp) securities like stocks can outweigh most low-interest debt over time. ### Keep your receipts so that you know exactly how much you spend each month. This can help you determine how much to budget for any expenses that may change from month to month. ## Sticking to a Budget You've got your budget set up. Now you've got to stick to it. But that credit card still calls your name, your clothes budget seems awfully small, and you feel deprived. At such moments, it helps to revisit the whole reason for a budget—to help you manage your finances, achieve financial goals, and lead a life free from fear of financial pitfalls. ### Remember the Big Picture Your budget can keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less. So think about the future you want and remember that keeping to your budget will help you get there. Adding to your [debt load](https://www.investopedia.com/terms/d/debt-load.asp), on the other hand, will mean that your financial future could be less bright. ### Review Your Spending Every time you enter your spending in your software or budget notebook, review everything that's been spent to date and compare it to income received. This will keep you abreast of where things stand and encourage you to keep at it, especially if you are reining in your spending as intended. This daily or weekly activity can give you an enormous sense of accomplishment and keep you on track. ### Remove the Options That Allow You to Cheat Make it more difficult to make impulse purchases. In other words, set up barriers that give you time to think: "Is this purchase necessary?" Opt out of retailer email lists. Remove your stored payment information on your favorite online shops so you can't just click to order. Adjust your phone settings to block tracking and advertising as much as possible. ### Find Some Support If you feel like you're the only one in your group who is on a budget, search for some like-minded folks. You could find an online forum, a monthly meeting, or even a couple of friends who will listen to your concerns and share their budgeting experiences. Set up accountability calls with your frugal buddies to talk things over and keep temptation at bay. Just know that you're not the only person setting sensible financial limits for yourself. ### Go Old School There's something powerful about handing over a stack of $20 bills for a purchase. You have to confront the money you're about to spend and accept that the spending is worth it. Swiping a [debit card](https://www.investopedia.com/terms/d/debitcard.asp), on the other hand, may not feel nearly as real.  Similarly, paying bills by writing checks and promptly entering the sums in your register keeps you up-to-date on how your account is affected in a way that autopay doesn't. You don't have to use cash exclusively or completely forgo online payments. But handling transactions in hands-on ways can make you realize how much you're spending and enhance the power of self-regulation. ### Reward Yourself If you constantly look at what you have to give up, the very act of budgeting becomes distasteful. A mixture of long- and short-term gifts to yourself will help keep you motivated. When you've been faithful to your budget for a month, give yourself a reward. Even small ones such as a night out with friends, a concert, or a little extra cash for spending can help. Keep visual reminders of these rewards or the things you're saving up for. Start building associations in your brain that make sticking to your budget an enjoyable activity with happy results. ### Schedule a Periodic Budget Evaluation It's difficult to predict correctly how much money you'll need in every category of your budget. For instance, a new job may necessitate a wardrobe change and your existing clothing budget may not cut it. That's why it's important to conduct a regular check on how well your budget is working. It may need tweaking. This is to be expected. Just make sure that you always keep your long-term financial goals in the picture. ### Educate Yourself Learn all you can about finances, [money management](https://www.investopedia.com/terms/m/moneymanagement.asp), and how you can best invest in yourself. Talk to your financially savvy friends and seek out real-world tips and advice from people who are doing well with their money. The more you learn about handling money wisely and the rewards that can result from such an effort, the more concrete and acceptable the reasons for budgeting will be. ## 8 Ways to Budget When You're Broke Budgeting is smart, but if you're suffering from mounting bills and a lack of funds, it may not be where your focus is. In such circumstances, consider some additional steps that you can take to gain control of your finances. ### 1. Avoid Immediate Disaster Don't be afraid to request bill extensions or payment plans from creditors. Skipping or delaying payments only worsens your debt. And late fees ding your credit score.  ### 2. Prioritize Bills Go over all your bills to see what can and should be paid first, prioritize those that are late, and then set up a payment schedule based on your paydays. Call the bill companies to see how much you can pay now to get back on track toward a positive status. Explain that you are taking strict measures to catch up. Be forthright about the amount you can afford to pay now. Don't just promise to pay the full amount later. ### 3. Ignore the 10% Savings Rule Stashing 10% of your income into your [savings account](https://www.investopedia.com/terms/s/savingsaccount.asp) is daunting or impossible when you're living paycheck to paycheck. It doesn't make sense to have $100 in a savings plan if you are fending off [debt collectors](https://www.investopedia.com/terms/d/debt-collector.asp). Your savings can wait until you can reclaim financial stability. ### 4. Face Your Spending To fix your finances, you need to get a handle on your outlay first. Online banking and online budgeting software can help you categorize spending so you can make adjustments. Many people find that just by looking at aggregate figures for [discretionary expenses](https://www.investopedia.com/terms/d/discretionary-expense.asp), they are spurred to reduce excessive spending. ### 5. Eliminate Unnecessary Expenses Hopefully, your budget has given you a sense of where your money goes. Now it's time to tighten up. Start cutting back on items that you wouldn't miss. Change habits that are costing you, like letting food spoil before you can eat it. Prepare meals at home instead of going to restaurants or getting takeout. You may be able to reduce some expenses that you shouldn't drop. For example, you might be able to lower your auto insurance premium by switching carriers. ### 6. Negotiate Credit Card Interest Rates Those ultra-high interest rates on your credit cards aren't fixed in stone. Call the card company and ask for a reduction in the [annual percentage rates (APR)](https://www.investopedia.com/terms/a/apr.asp). If you have a good payment record, your request might be approved. This won't lower your outstanding balance, but it will keep it from mushrooming as fast. ### 7. Track Your Spending Once you've gone through these steps, monitor your progress for a few months. You can do this by writing everything you spend in a notebook, with [budgeting apps](https://www.investopedia.com/best-budgeting-apps-5085405) on your phone, or with the software you may already use for your budget. Ensure that every cent is accounted for. Fine-tune and adjust your spending as needed after each month. This not only can help get you out of financial trouble. It also can put the spotlight back on the importance of your budget. ### 8. Seek New Income For the time being, saving and investing is out. But consider ways to increase your earnings: working overtime, getting a second job, or picking up some freelance work. ## How Do You Create a Budget? Creating a budget takes some work. You'll need to calculate every type of income you receive each month. Next, [track your spending](https://www.investopedia.com/personal-finance/common-budgeting-challenges-overcome/) and tabulate all your monthly expenses, including your rent or mortgage, utility payments, debt, transportation costs, food, miscellaneous spending, and more. You may have to make some adjustments initially to stay within your budget. But once you've gone through the first few months, it should become easier to stick to it. ## What Is the 50-20-30 Budget Rule? The 50-20-30 budget rule was popularized by Sen. Elizabeth Warren (D-Mass.) in her book *All Your Worth: The Ultimate Lifetime Money Plan.* The plan entails dividing all of your after-tax income into 50% for your actual needs, 30% for anything you want, and 20% for savings. ## How Does Budgeting Help a Business? Just like budgets help people, corporate budgeting helps [businesses stay on top](https://www.investopedia.com/terms/a/administrative-budget.asp) of their finances. It also helps business leaders make very important investment decisions, manage and meet goals and objectives, and identify any financial hurdles that come their way. ## The Bottom Line A budget often conjures up images of complicated financial documents. But in reality, it's a money management tool that can be used by various entities, including governments, businesses, and individuals/households of every income level. Budgets can help prepare you to make better decisions about your money so that you can secure a brighter financial future.

What Is a Budget? A budget refers to an estimation of revenue and expenses that's made for a specified future period of time. Budgeting usually occurs on an ongoing basis, with individual budgets being re-evaluated regularly. Budgets can be made for any entity that needs or wants to spend money, including governments and businesses, people, and households of any income level. Key Takeaways A budget is an estimation of revenue and expenses utilized by governments, businesses, and individuals of any income level.A budget is a financial plan for a defined period that can greatly enhance the success of any financial undertaking.Corporate budgets are essential for operating at peak efficiency.Aside from earmarking resources, a budget can also aid in setting goals, measuring outcomes, and planning contingencies.Personal budgets are extremely useful in helping individuals and families manage their finances. Investopedia / Julie Bang Understanding Budgeting A budget is a microeconomic concept that reveals the trade-off made when one good is exchanged for another. In terms of the bottom line—or the end result of this trade-off—a surplus budget means profits are anticipated, a balanced budget means revenues are expected to equal expenses, and a deficit budget means expenses will exceed revenues. These principles hold true whether the budget is intended for an individual, a family, or a company. First, let's take a quick look at the budgeting process for a corporation, and then personal budgeting. Corporate Budgets Budgets are an integral part of running any business efficiently and effectively. Budget Development Process Corporate budgeting begins by establishing assumptions for the upcoming budget period. These assumptions are related to projected sales trends, cost trends, and the overall economic outlook of the market, industry, or sector. Specific factors affecting potential expenses are addressed and monitored. The budget is published in a packet that outlines the standards and procedures used to develop it, including the assumptions about the markets, key relationships with vendors that provide discounts, and explanations of how certain calculations were made. The sales budget is often the first to be developed, as subsequent expense budgets cannot be established without knowing future cash flows. Budgets are developed for all the different subsidiaries, divisions, and departments within an organization. For a manufacturer, a separate budget is often developed for direct materials, labor, and overhead. All budgets get rolled up into the master budget, which also includes budgeted financial statements, forecasts of cash inflows and outflows, and an overall financing plan. At a corporation, the top management reviews the budget and submits it for approval to the board of directors. Static vs. Flexible Budgets There are two major types of budgets: static budgets and flexible budgets. A static budget remains unchanged over the life of the budget. Regardless of changes that occur during the budgeting period, all accounts and figures originally calculated remain the same. A flexible budget has a relational value to certain variables. The dollar amounts listed on a flexible budget change based on sales levels, production levels, or other external economic factors. Both types of budgets are useful for management. A static budget evaluates the effectiveness of the original budgeting process, while a flexible budget provides deeper insight into business operations. Advisor Insight Derek Notman, CFP®, ChFC, CLUIntrepid Wealth Partners, LLC, Madison, WI The importance of budgeting cannot be understated. A budget, also known as cash flow, is arguably more important than the actual cash that you have in your bank and investment accounts. Your cash flow is what allows you to pay for everything (or not). Without knowing your cash flow, you could be putting yourself into a bad financial situation and not even know it. You can only get by without knowing your cash flow for so long before you get into financial trouble, so make the time to know the flow of your cash. Budgeting should be something that everyone does, regardless of their financial situation. Personal Budgets Individuals and families can have budgets, too. Creating and using a budget is not just for those who need to closely monitor their cash flows from month to month because money is tight. Almost everyone can benefit from budgeting—even people with large paychecks and plenty of money in the bank may find it difficult to cover the expense of an unexpected home repair. To manage your monthly expenses, prepare for life's unpredictable events, and afford big-ticket items without going into debt, budgeting is essential. Keeping track of how much you earn doesn't require you to be a math whiz and doesn't mean you can't buy the things you want. What it does mean is that you can maintain control over where your money goes and enjoy greater financial confidence and success. How to Create a Budget The specifics of budgeting will depend on your personal financial situation and goals. In most cases, though, the approach is the same no matter where you stand financially. Follow these seven steps to create your budget and adjust it as needed to reach specific financial goals. Add up all your income. This should include all income sources, such as a wages, salaries, tips, Social Security payments, disability, alimony, and investment income. Calculate your expenses. These are expenses you must pay each month, such as your mortgage or rent, food, transportation costs including gas, insurance premiums, taxes, childcare, internet service, your cell phone bill, and other utility payments. Identify debt payments. Be sure to include your debt, such as loans and credit card payments. Determine the minimum payment for each debt. Subtract that from your income as well. Review your spending. Keep track of every dollar you spend, whether you pay with a credit card or cash, to determine what your real expenses are. Keep your receipts and note down additional spending that you hadn't budgeted for. Create a spending plan. The amount of income you have left is what you can spend on discretionary expenses. These can include additional debt payments or rainy day savings. Your plan should also include things like entertainment or surprise expenses. Give every dollar a job, based on your goals and what you discovered when you tracked your spending. Set financial goals. Do you want to save money? Pay off debt? Stop spending more than you have? Decide on realistic goals. Remember, you can adjust these over time. Work on the most pressing goals first, such as paying off debt or creating an emergency fund. Adjust each month. Each month, look at your spending and whether you progressed toward or achieved goals, Reevaluate and adjust where you assign your discretionary spending. A flexible budget will help you avoid overspending. Once you've created a budget, you may have to do some juggling, especially in the first few months. This means adjusting spending here and there so that you stay within your planned budget for income and expenses. And be sure to put it in writing: If you see it and commit to it, you'll have more incentive to stick to it. 11 Budgeting Myths That Can Block Your Success Budgeting is a wonderful tool for managing your finances, but many people think it's not for them. It's important to become aware of budgeting myths—the erroneous logic that stops people from keeping track of their money and allocating it in ways that benefit them most. Then, you can create a budget that can help you live within your means, reach important goals, and build lasting wealth. Here are 11 budgeting myths. 1. I Don't Need to Budget Getting and keeping a handle on your monthly income and expenses allows you to make sure that your hard-earned money is being put to its highest and best purpose. For those who enjoy an income that covers all bills with money left over, a budget can help maximize savings and investments. If one's monthly expenses typically consume the lion's share of net income, any budget should focus on identifying and classifying all the expenses that occur during the month, quarter, and year. And for people whose cash flow is tight, the budget can be crucial to identifying expenses that could be reduced or cut, and minimizing any wasteful interest being paid on credit cards or other debt. 2. I'm Not Great at Math Generally speaking, you don't need to be great at math to make and follow a budget. First of all, understanding general concepts relating to your income, spending, debt, saving, and allocating your funds are important. Then, the basic ability to add and subtract is most of what's called for. That's especially true if you're budgeting manually, with pencil and paper. And now, thanks to budgeting software programs, math barely enters into it. You simply have to be able to follow instructions. Many of these programs are free and legitimate. Or, if you know how to use spreadsheet software, you can make your own ledger. It's as simple as creating one column for your income, another column for your expenses, and then keeping a running tab on the difference between the two. 3. My Job Is Secure No one's job is truly safe. If you work for a corporation, being laid off due to a difficult economy, downsizing, or a takeover always is a possibility. If you work for a small company, it could die with its owner, be bought out, or just fold. You should always be prepared for a job loss by having at least three months' worth of living expenses in the bank. It's easier to accumulate this financial cushion if you know the amount you're bringing in and spending each month, which can be monitored with a budget. 4. Unemployment Insurance Will Tide Me Over Unemployment compensation is not a sure thing. Let's say a bad situation at work leaves you with no choice but to quit your job. Unless you can prove constructive discharge (that is, that you were virtually forced to resign), your departure will be considered voluntary, making you ineligible for unemployment insurance. Besides, the benefits may fall well short of the wages you're used to: in even the highest paying states, the average is less than $500 per week. 5. I Don't Want To Deprive Myself Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The aim of budgeting is to make sure you're able to spend on what's needed and save a little each month, ideally at least 10% of your income. At the very least, budgeting can make sure that you aren't spending more than you earn. Unless you're on a very tight budget, you should be able to buy baseball tickets and go out to eat. Tracking your expenses does not change the amount of money you have available to spend every month. It just shows you where that money is going and allows you to make decisions about changing your spending habits. 6. I Don't Want Anything Big If you don't have any major savings goals (e.g., upsizing your living situation, starting your own business), it's hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes likely will change over time. Let's say that you and your partner live in New York City in a small one-bedroom apartment and things are going fine for both of you until your family dynamic changes. For instance, you may have a child or an in-law who comes to stay with you indefinitely. This may mean you'll need (and want) more room to accommodate the new addition. If you don't save up for anything big, you may not be able to afford this change in your living situation down the road. 7. I Won't Qualify for Student Financial Aid Yes, the catch-22 of student financial aid is that the more money you have, the less aid you'll be eligible for. That's enough to make anyone wonder if it isn't better to spend it all and have no savings in order to qualify for the maximum amount of grants and loans. But that catch mainly applies to earned income. Whether you are an adult student going back to school or the parent of a student headed to college, the Free Application for Federal Student Aid (FAFSA) form (used for Stafford Loans, Perkins Loans, or Pell Grants), does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts. So if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage, or contribute more money to your retirement accounts. The savings that you put into these assets can still be accessed if you face an emergency, but you won't be penalized for it. Even if you employ all the available legal strategies to maximize your financial aid eligibility, you still won't always qualify for as much aid as you need. So it's not a bad idea to have your own source of funds to make up for any shortfall. 8. I'm Debt-Free Good for you! But being debt-free without any savings won't pay your bills in an emergency. A zero balance can quickly become a negative balance if you don't have a safety net. Budgeting can help you create one. 9. I Always Get a Raise or Tax Refund It's never a good idea to count on unpredictable sources of income. This may be the year that your company is unable to give you a raise (or as much of a raise as you hope for). The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability. Some people know how to figure how much they'll get in a refund (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. However, changes in tax deductions, IRS regulations, or other life events can mean a nasty surprise when you prepare your tax return. 10. I Just Don't Have the Discipline If you're still not convinced that budgeting is for you, here's a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account that you don't see regularly (i.e., at a different bank). Schedule the transfer to happen right after you get paid. If you are saving for retirement, you may have the option of contributing a set amount regularly to a 401(k) or other retirement savings plan. This way, you can pay yourself first, have enough money for the transfer, and know that you can meet your savings goal.  11. It's a Luxury When I Barely Have Enough for the Essentials Sometimes budgeting just isn't a priority because you have too much on your plate. But there are certain government programs that can help you manage your household expenses. For instance, the Supplemental Nutrition Assistance Program (SNAP) helps recipients of all income levels work with their food budgets to make their benefits go further. At the very least, set up that budget so you get a feel for spending limits, any change in how you originally planned to allocate your funds, whether you're paying all you can to get rid of debt, or whether your slipping too far into debt. Budgeting Concepts In general, traditional budgeting starts with tracking expenses, eliminating debt, and, once the budget is balanced, building an emergency fund. But to speed up the process, you could start by building a partial emergency fund. Emergency Fund This emergency fund acts as a buffer as the rest of the budget is put in place and should replace the use of credit cards for emergency situations. The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it, and if possible, putting in whatever you can spare on top. This will get you to think about your spending, too. You should only use your emergency fund for true emergencies. For instance, if you lose your job and need to pay for expenses, you could tap into your rainy day fund until you join the workforce again. You can also use this money if you have an unexpected medical emergency that arises. You would save money if you used your emergency fund to eliminate credit card debt, but the purpose of the fund is to prevent you from having to use your credit card for paying for unexpected expenses. With a proper emergency fund, you will not need your credit card to keep you afloat when something goes wrong. Downsize and Substitute Once you have a buffer between you and high-interest debt, you can start the process of downsizing. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest. This can be a process of substitution as much as elimination. For example, cancel any recurring subscriptions that you don't regularly use or need. Use half of the money you save to invest for a goal or to pay off outstanding debts. Save the other half to bulk up your emergency fund. Although eliminating expenses entirely is the fastest way to a solid budget, substitution tends to have more lasting effects. So consider: Shopping with friends and family so you can split the cost, especially if you buy in bulkCarpooling or taking public transportation to cut down on car-related costs People can sometimes cut too many expenses so that they end up with a budget that they can't stick to. Substitution, in contrast, keeps the basics while trimming costs. Find New Sources of Income Once you have your budget in place and have more money coming in than going out, you can start investing to create more income. It is better to have no debt before you begin investing. If you are young, however, the rewards of investing in higher-risk, high-return securities like stocks can outweigh most low-interest debt over time. Keep your receipts so that you know exactly how much you spend each month. This can help you determine how much to budget for any expenses that may change from month to month. Sticking to a Budget You've got your budget set up. Now you've got to stick to it. But that credit card still calls your name, your clothes budget seems awfully small, and you feel deprived. At such moments, it helps to revisit the whole reason for a budget—to help you manage your finances, achieve financial goals, and lead a life free from fear of financial pitfalls. Remember the Big Picture Your budget can keep you out of overwhelming debt and help you build a financial future that will give you more freedom, not less. So think about the future you want and remember that keeping to your budget will help you get there. Adding to your debt load, on the other hand, will mean that your financial future could be less bright. Review Your Spending Every time you enter your spending in your software or budget notebook, review everything that's been spent to date and compare it to income received. This will keep you abreast of where things stand and encourage you to keep at it, especially if you are reining in your spending as intended. This daily or weekly activity can give you an enormous sense of accomplishment and keep you on track. Remove the Options That Allow You to Cheat Make it more difficult to make impulse purchases. In other words, set up barriers that give you time to think: "Is this purchase necessary?" Opt out of retailer email lists. Remove your stored payment information on your favorite online shops so you can't just click to order. Adjust your phone settings to block tracking and advertising as much as possible. Find Some Support If you feel like you're the only one in your group who is on a budget, search for some like-minded folks. You could find an online forum, a monthly meeting, or even a couple of friends who will listen to your concerns and share their budgeting experiences. Set up accountability calls with your frugal buddies to talk things over and keep temptation at bay. Just know that you're not the only person setting sensible financial limits for yourself. Go Old School There's something powerful about handing over a stack of $20 bills for a purchase. You have to confront the money you're about to spend and accept that the spending is worth it. Swiping a debit card, on the other hand, may not feel nearly as real.  Similarly, paying bills by writing checks and promptly entering the sums in your register keeps you up-to-date on how your account is affected in a way that autopay doesn't. You don't have to use cash exclusively or completely forgo online payments. But handling transactions in hands-on ways can make you realize how much you're spending and enhance the power of self-regulation. Reward Yourself If you constantly look at what you have to give up, the very act of budgeting becomes distasteful. A mixture of long- and short-term gifts to yourself will help keep you motivated. When you've been faithful to your budget for a month, give yourself a reward. Even small ones such as a night out with friends, a concert, or a little extra cash for spending can help. Keep visual reminders of these rewards or the things you're saving up for. Start building associations in your brain that make sticking to your budget an enjoyable activity with happy results. Schedule a Periodic Budget Evaluation It's difficult to predict correctly how much money you'll need in every category of your budget. For instance, a new job may necessitate a wardrobe change and your existing clothing budget may not cut it. That's why it's important to conduct a regular check on how well your budget is working. It may need tweaking. This is to be expected. Just make sure that you always keep your long-term financial goals in the picture. Educate Yourself Learn all you can about finances, money management, and how you can best invest in yourself. Talk to your financially savvy friends and seek out real-world tips and advice from people who are doing well with their money. The more you learn about handling money wisely and the rewards that can result from such an effort, the more concrete and acceptable the reasons for budgeting will be. 8 Ways to Budget When You're Broke Budgeting is smart, but if you're suffering from mounting bills and a lack of funds, it may not be where your focus is. In such circumstances, consider some additional steps that you can take to gain control of your finances. 1. Avoid Immediate Disaster Don't be afraid to request bill extensions or payment plans from creditors. Skipping or delaying payments only worsens your debt. And late fees ding your credit score.  2. Prioritize Bills Go over all your bills to see what can and should be paid first, prioritize those that are late, and then set up a payment schedule based on your paydays. Call the bill companies to see how much you can pay now to get back on track toward a positive status. Explain that you are taking strict measures to catch up. Be forthright about the amount you can afford to pay now. Don't just promise to pay the full amount later. 3. Ignore the 10% Savings Rule Stashing 10% of your income into your savings account is daunting or impossible when you're living paycheck to paycheck. It doesn't make sense to have $100 in a savings plan if you are fending off debt collectors. Your savings can wait until you can reclaim financial stability. 4. Face Your Spending To fix your finances, you need to get a handle on your outlay first. Online banking and online budgeting software can help you categorize spending so you can make adjustments. Many people find that just by looking at aggregate figures for discretionary expenses, they are spurred to reduce excessive spending. 5. Eliminate Unnecessary Expenses Hopefully, your budget has given you a sense of where your money goes. Now it's time to tighten up. Start cutting back on items that you wouldn't miss. Change habits that are costing you, like letting food spoil before you can eat it. Prepare meals at home instead of going to restaurants or getting takeout. You may be able to reduce some expenses that you shouldn't drop. For example, you might be able to lower your auto insurance premium by switching carriers. 6. Negotiate Credit Card Interest Rates Those ultra-high interest rates on your credit cards aren't fixed in stone. Call the card company and ask for a reduction in the annual percentage rates (APR). If you have a good payment record, your request might be approved. This won't lower your outstanding balance, but it will keep it from mushrooming as fast. 7. Track Your Spending Once you've gone through these steps, monitor your progress for a few months. You can do this by writing everything you spend in a notebook, with budgeting apps on your phone, or with the software you may already use for your budget. Ensure that every cent is accounted for. Fine-tune and adjust your spending as needed after each month. This not only can help get you out of financial trouble. It also can put the spotlight back on the importance of your budget. 8. Seek New Income For the time being, saving and investing is out. But consider ways to increase your earnings: working overtime, getting a second job, or picking up some freelance work. How Do You Create a Budget? Creating a budget takes some work. You'll need to calculate every type of income you receive each month. Next, track your spending and tabulate all your monthly expenses, including your rent or mortgage, utility payments, debt, transportation costs, food, miscellaneous spending, and more. You may have to make some adjustments initially to stay within your budget. But once you've gone through the first few months, it should become easier to stick to it. What Is the 50-20-30 Budget Rule? The 50-20-30 budget rule was popularized by Sen. Elizabeth Warren (D-Mass.) in her book All Your Worth: The Ultimate Lifetime Money Plan. The plan entails dividing all of your after-tax income into 50% for your actual needs, 30% for anything you want, and 20% for savings. How Does Budgeting Help a Business? Just like budgets help people, corporate budgeting helps businesses stay on top of their finances. It also helps business leaders make very important investment decisions, manage and meet goals and objectives, and identify any financial hurdles that come their way. The Bottom Line A budget often conjures up images of complicated financial documents. But in reality, it's a money management tool that can be used by various entities, including governments, businesses, and individuals/households of every income level. Budgets can help prepare you to make better decisions about your money so that you can secure a brighter financial future.

https://www.investopedia.com/terms/s/sp-world.asp

S&P Global Broad Market Index (BMI): What It is, How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-sp-global-broad-market-index-bmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the S&amp;P Global Broad Market Index (BMI)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> S&amp;P Global Broad Market Index (BMI) is a market <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalizationweightedindex.asp">capitalization-weighted index</a> maintained by <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp.asp">Standard and Poor's (S&amp;P)</a> providing a broad measure of global equities markets. The index includes approximately 11,000 companies in more than 50 countries covering both developed and emerging markets, including U.S. stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The index encompasses both the S&amp;P Developed BMI and the S&amp;P Emerging BMI. The S&amp;P Global Broad Market Index, which is sometimes simply referred to as the "BMI," should not be confused with either the Body Mass Index (BMI) weight calculation or Broadcast Music, Inc (BMI), the music licensing agency, or the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bitcoin-misery-index.asp">Bitcoin Misery Index</a> (BMI). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The S&amp;P Global BMI (Broad Market Index) comprises the S&amp;P Developed BMI and S&amp;P Emerging BMI.</li><li>It is a comprehensive, rules-based index measuring stock market performance globally.</li><li>With approximately 11,000 stocks, the index is quoted simultaneously in U.S. dollars, euros, as well as in CAD, GBP, JPY, LCL, NZD, SAR, and AUD.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-sp-global-broad-market-index-bmi"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding the S&amp;P Global Broad Market Index (BMI) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> S&amp;P Global Broad Market Index (BMI) is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broad-basedindex.asp">broad-based</a> index of global <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity.asp">equities</a> maintained by Standard and Poor’s (S&amp;P). The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://us.spindices.com/documents/methodologies/methodology-sp-global-bmi-sp-ifci-indices.pdf">index contains</a> “all publicly listed equities with float-adjusted market values of U.S. $ 100 million or more” that also meet a set of minimum median daily trading rules, currently that it has a minimum of U.S. $50 million value traded over the past 12 months.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The index was launched on December 31, 1992, with its first value date on December 29, 1994. It is a weighted fund, by float-adjusted market capitalization and is rebalanced every September with IPO updates and share changes in March, June, and December. More than half the constituent companies are from the United States, with the next largest number of constituent companies from Japan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A country will be eligible for inclusion in the index if it has a float-adjusted market capitalization of U.S. $1 billion or more and its market capitalization weight is at least 40 basis points in either the emerging market or developed world indexes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-eligibility-criteria"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Eligibility Criteria </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> In addition to the financial eligibility criteria, the S&amp;P Dow Jones Indices determine which countries are eligible or ineligible for inclusion in the fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The company eligibility criteria of market capitalization of U.S. $100 million or more and liquidity of a 12-month median value traded ratio (MVTR) along with a 6-month MVTR, which are different for companies from emerging countries and developed countries, also applies to IPOs, which can be added every quarter. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> IPOs may be added after they have three months of trading data, and trading value is annualized to determine if the volume renders them eligible for inclusion in the fund. All publicly-traded share classes may be included, with each share class float-adjusted. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The following types of securities are not eligible for the fund: fixed-dividend shares, investment trusts, unit trusts, mutual fund shares, business development companies, closed-end funds, convertible bonds, equity warrants, Limited Partnerships, and preferred stock that provides a guaranteed fixed return. </p></div>

## What Is the S&P Global Broad Market Index (BMI)? S&P Global Broad Market Index (BMI) is a market [capitalization-weighted index](https://www.investopedia.com/terms/c/capitalizationweightedindex.asp) maintained by [Standard and Poor's (S&P)](https://www.investopedia.com/terms/s/sp.asp) providing a broad measure of global equities markets. The index includes approximately 11,000 companies in more than 50 countries covering both developed and emerging markets, including U.S. stocks. The index encompasses both the S&P Developed BMI and the S&P Emerging BMI. The S&P Global Broad Market Index, which is sometimes simply referred to as the "BMI," should not be confused with either the Body Mass Index (BMI) weight calculation or Broadcast Music, Inc (BMI), the music licensing agency, or the [Bitcoin Misery Index](https://www.investopedia.com/terms/b/bitcoin-misery-index.asp) (BMI). ### Key Takeaways * The S&P Global BMI (Broad Market Index) comprises the S&P Developed BMI and S&P Emerging BMI. * It is a comprehensive, rules-based index measuring stock market performance globally. * With approximately 11,000 stocks, the index is quoted simultaneously in U.S. dollars, euros, as well as in CAD, GBP, JPY, LCL, NZD, SAR, and AUD. ## Understanding the S&P Global Broad Market Index (BMI) S&P Global Broad Market Index (BMI) is a [broad-based](https://www.investopedia.com/terms/b/broad-basedindex.asp) index of global [equities](https://www.investopedia.com/terms/e/equity.asp) maintained by Standard and Poor’s (S&P). The [index contains](https://us.spindices.com/documents/methodologies/methodology-sp-global-bmi-sp-ifci-indices.pdf) “all publicly listed equities with float-adjusted market values of U.S. $ 100 million or more” that also meet a set of minimum median daily trading rules, currently that it has a minimum of U.S. $50 million value traded over the past 12 months. The index was launched on December 31, 1992, with its first value date on December 29, 1994. It is a weighted fund, by float-adjusted market capitalization and is rebalanced every September with IPO updates and share changes in March, June, and December. More than half the constituent companies are from the United States, with the next largest number of constituent companies from Japan. A country will be eligible for inclusion in the index if it has a float-adjusted market capitalization of U.S. $1 billion or more and its market capitalization weight is at least 40 basis points in either the emerging market or developed world indexes. ## Eligibility Criteria In addition to the financial eligibility criteria, the S&P Dow Jones Indices determine which countries are eligible or ineligible for inclusion in the fund. The company eligibility criteria of market capitalization of U.S. $100 million or more and liquidity of a 12-month median value traded ratio (MVTR) along with a 6-month MVTR, which are different for companies from emerging countries and developed countries, also applies to IPOs, which can be added every quarter. IPOs may be added after they have three months of trading data, and trading value is annualized to determine if the volume renders them eligible for inclusion in the fund. All publicly-traded share classes may be included, with each share class float-adjusted. The following types of securities are not eligible for the fund: fixed-dividend shares, investment trusts, unit trusts, mutual fund shares, business development companies, closed-end funds, convertible bonds, equity warrants, Limited Partnerships, and preferred stock that provides a guaranteed fixed return.

What Is the S&P Global Broad Market Index (BMI)? S&P Global Broad Market Index (BMI) is a market capitalization-weighted index maintained by Standard and Poor's (S&P) providing a broad measure of global equities markets. The index includes approximately 11,000 companies in more than 50 countries covering both developed and emerging markets, including U.S. stocks. The index encompasses both the S&P Developed BMI and the S&P Emerging BMI. The S&P Global Broad Market Index, which is sometimes simply referred to as the "BMI," should not be confused with either the Body Mass Index (BMI) weight calculation or Broadcast Music, Inc (BMI), the music licensing agency, or the Bitcoin Misery Index (BMI). Key Takeaways The S&P Global BMI (Broad Market Index) comprises the S&P Developed BMI and S&P Emerging BMI.It is a comprehensive, rules-based index measuring stock market performance globally.With approximately 11,000 stocks, the index is quoted simultaneously in U.S. dollars, euros, as well as in CAD, GBP, JPY, LCL, NZD, SAR, and AUD. Understanding the S&P Global Broad Market Index (BMI) S&P Global Broad Market Index (BMI) is a broad-based index of global equities maintained by Standard and Poor’s (S&P). The index contains “all publicly listed equities with float-adjusted market values of U.S. $ 100 million or more” that also meet a set of minimum median daily trading rules, currently that it has a minimum of U.S. $50 million value traded over the past 12 months. The index was launched on December 31, 1992, with its first value date on December 29, 1994. It is a weighted fund, by float-adjusted market capitalization and is rebalanced every September with IPO updates and share changes in March, June, and December. More than half the constituent companies are from the United States, with the next largest number of constituent companies from Japan. A country will be eligible for inclusion in the index if it has a float-adjusted market capitalization of U.S. $1 billion or more and its market capitalization weight is at least 40 basis points in either the emerging market or developed world indexes. Eligibility Criteria In addition to the financial eligibility criteria, the S&P Dow Jones Indices determine which countries are eligible or ineligible for inclusion in the fund. The company eligibility criteria of market capitalization of U.S. $100 million or more and liquidity of a 12-month median value traded ratio (MVTR) along with a 6-month MVTR, which are different for companies from emerging countries and developed countries, also applies to IPOs, which can be added every quarter. IPOs may be added after they have three months of trading data, and trading value is annualized to determine if the volume renders them eligible for inclusion in the fund. All publicly-traded share classes may be included, with each share class float-adjusted. The following types of securities are not eligible for the fund: fixed-dividend shares, investment trusts, unit trusts, mutual fund shares, business development companies, closed-end funds, convertible bonds, equity warrants, Limited Partnerships, and preferred stock that provides a guaranteed fixed return.

https://www.investopedia.com/cvs-to-acquire-oak-street-7107169

CVS Purchase of Oak Street Among Biggest M&A Deals This Year After Slow 2022

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>CVS will buy Oak Street Health for an enterprise value of $10.6 billion, one of the largest acquisitions of 2023 so far.</li><li>At least two other multi-billion-dollar acquisitions have been discussed this year after a slow 2022.</li><li>Investment banks stand to benefit from a pickup in M&amp;A activity after a turbulent 2022 that led many firms to announce widespread job cuts.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> CVS Health Corp. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CVS">CVS</a>) will purchase Oak Street Health Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=OSH">OSH</a>) in a $10.6 billion deal, among the largest acquisitions so far this year following a lackluster 2022.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The drugstore company will pay $39 per share for Oak Street, for an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/111414/what-difference-between-enterprise-value-and-equity-value.asp">equity value</a> of about $9.5 billion, with the deal expected to close later this year. Oak Street operates a network of clinics and employs hundreds of physicians and nurse practitioners, adding to CVS's new focus on primary care offerings.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> This is the second major acquisition for CVS in several months. The company announced in September that it would pay about $8 billion to buy health risk assessment company Signify Health.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <span class="heading-toc" id="toc-ma-activity-picking-up-in-2023"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> M&amp;A Activity Picking Up in 2023 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The Signify deal was one of only a few large acquisitions in 2022. Just over a month into 2023, though, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mergersandacquisitions.asp">M&amp;A</a> activity is accelerating. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> CVS' purchase of Oak Street is at least the third multibillion-dollar deal discussed in recent weeks. In January, industrial engineering firm Emerson Electric Co. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=EMR">EMR</a>) reported it would propose the acquisition of National Instruments Corp. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NATI">NATI</a>) for $7.6 billion.<span class="ql-inline-citation" data-cite="4"></span> Just this week, gold mining company Newmont Corp. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NEM">NEM</a>) proposed a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/newmont-takeover-bid-7106201">$17 billion all-stock buyout</a> of Australian rival Newcrest Mining in what could be the largest deal of the year so far.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-new-business-for-banks"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> New Business for Banks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Investment banks are poised to benefit from revitalized M&amp;A deal flow. Last year, as the pace of transactions slowed, Wall Street firms that had been aggressive in hiring early in the pandemic reversed course and prepared to announce layoffs.<span class="ql-inline-citation" data-cite="6"></span> Goldman Sachs Group (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GS">GS</a>), for instance, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/goldman-to-axe-3-200-7092841">said in January</a> it would make its deepest headcount cuts in years.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Market volatility and high interest rates hindered M&amp;A last year, but companies have adopted new strategies allowing them to minimize costs and risks in the process. To the extent that these deals still employ big banks, those financial firms could see a boost in business.<span class="ql-inline-citation" data-cite="8"></span> </p></div>

### * CVS will buy Oak Street Health for an enterprise value of $10.6 billion, one of the largest acquisitions of 2023 so far. * At least two other multi-billion-dollar acquisitions have been discussed this year after a slow 2022. * Investment banks stand to benefit from a pickup in M&A activity after a turbulent 2022 that led many firms to announce widespread job cuts. CVS Health Corp. ([CVS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CVS)) will purchase Oak Street Health Inc. ([OSH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=OSH)) in a $10.6 billion deal, among the largest acquisitions so far this year following a lackluster 2022. The drugstore company will pay $39 per share for Oak Street, for an [equity value](https://www.investopedia.com/ask/answers/111414/what-difference-between-enterprise-value-and-equity-value.asp) of about $9.5 billion, with the deal expected to close later this year. Oak Street operates a network of clinics and employs hundreds of physicians and nurse practitioners, adding to CVS's new focus on primary care offerings. This is the second major acquisition for CVS in several months. The company announced in September that it would pay about $8 billion to buy health risk assessment company Signify Health. ## M&A Activity Picking Up in 2023 The Signify deal was one of only a few large acquisitions in 2022. Just over a month into 2023, though, [M&A](https://www.investopedia.com/terms/m/mergersandacquisitions.asp) activity is accelerating. CVS' purchase of Oak Street is at least the third multibillion-dollar deal discussed in recent weeks. In January, industrial engineering firm Emerson Electric Co. ([EMR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=EMR)) reported it would propose the acquisition of National Instruments Corp. ([NATI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NATI)) for $7.6 billion. Just this week, gold mining company Newmont Corp. ([NEM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NEM)) proposed a [$17 billion all-stock buyout](https://www.investopedia.com/newmont-takeover-bid-7106201) of Australian rival Newcrest Mining in what could be the largest deal of the year so far. ## New Business for Banks Investment banks are poised to benefit from revitalized M&A deal flow. Last year, as the pace of transactions slowed, Wall Street firms that had been aggressive in hiring early in the pandemic reversed course and prepared to announce layoffs. Goldman Sachs Group ([GS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GS)), for instance, [said in January](https://www.investopedia.com/goldman-to-axe-3-200-7092841) it would make its deepest headcount cuts in years. Market volatility and high interest rates hindered M&A last year, but companies have adopted new strategies allowing them to minimize costs and risks in the process. To the extent that these deals still employ big banks, those financial firms could see a boost in business.

CVS will buy Oak Street Health for an enterprise value of $10.6 billion, one of the largest acquisitions of 2023 so far.At least two other multi-billion-dollar acquisitions have been discussed this year after a slow 2022.Investment banks stand to benefit from a pickup in M&A activity after a turbulent 2022 that led many firms to announce widespread job cuts. CVS Health Corp. (CVS) will purchase Oak Street Health Inc. (OSH) in a $10.6 billion deal, among the largest acquisitions so far this year following a lackluster 2022. The drugstore company will pay $39 per share for Oak Street, for an equity value of about $9.5 billion, with the deal expected to close later this year. Oak Street operates a network of clinics and employs hundreds of physicians and nurse practitioners, adding to CVS's new focus on primary care offerings. This is the second major acquisition for CVS in several months. The company announced in September that it would pay about $8 billion to buy health risk assessment company Signify Health. M&A Activity Picking Up in 2023 The Signify deal was one of only a few large acquisitions in 2022. Just over a month into 2023, though, M&A activity is accelerating. CVS' purchase of Oak Street is at least the third multibillion-dollar deal discussed in recent weeks. In January, industrial engineering firm Emerson Electric Co. (EMR) reported it would propose the acquisition of National Instruments Corp. (NATI) for $7.6 billion. Just this week, gold mining company Newmont Corp. (NEM) proposed a $17 billion all-stock buyout of Australian rival Newcrest Mining in what could be the largest deal of the year so far. New Business for Banks Investment banks are poised to benefit from revitalized M&A deal flow. Last year, as the pace of transactions slowed, Wall Street firms that had been aggressive in hiring early in the pandemic reversed course and prepared to announce layoffs. Goldman Sachs Group (GS), for instance, said in January it would make its deepest headcount cuts in years. Market volatility and high interest rates hindered M&A last year, but companies have adopted new strategies allowing them to minimize costs and risks in the process. To the extent that these deals still employ big banks, those financial firms could see a boost in business.

https://www.investopedia.com/terms/b/bookvalue.asp

Book Value: Definition, Meaning, Formula, and Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-book-value"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Book Value? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> For value investors, book value is the sum of the amounts of all the line items in the shareholders' equity section on a company's balance sheet. You can also calculate book value by subtracting a business's total liabilities from its total assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> There is also a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/010815/what-difference-between-book-value-and-salvage-value.asp">book value used by accountants</a> to valuate assets owned by a company. This differs from book value for investors because it is used internally for managerial accounting purposes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A company's book value is the sum of all the line items in the shareholders' equity section of a balance sheet.</li><li>Book value is often different than a company's market value.</li><li>Book value per share (BVPS) and price-to-book (P/B) ratio are utilized in fundamental analysis.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-book-value"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Book Value </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Shareholders' equity is a section on a company's balance sheet that explains where their money is. The image below is Amazon's consolidated balance sheet for its 2022 fiscal year. Pay attention to the Liabilities and Stockholders' Equity (in the red box, also called shareholders' equity) section.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-square figure-high-res" id="mntl-sc-block_11-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:97.8%;"> <img alt="Amazon shareholders' equity section" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/mbjY8VyPNH7A0qKHzsJXU4eUFtM=/778x0/filters:no_upscale():max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/x92mZNQ6fuqsTeGHRXyu88ZlBYw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg" data-srcset="https://www.investopedia.com/thmb/Oh7Tiwn0_n172bDZR7LBXxfrd9Y=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg 750w" data-tracking-container="true" height="761" id="mntl-sc-block-image_1-0" width="778"/> <noscript> <img alt="Amazon shareholders' equity section" class="img--noscript universal-image__image" height="761" sizes="750px" src="https://www.investopedia.com/thmb/x92mZNQ6fuqsTeGHRXyu88ZlBYw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg" srcset="https://www.investopedia.com/thmb/Oh7Tiwn0_n172bDZR7LBXxfrd9Y=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg 750w" width="778"/> </noscript> </div> </div> </figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> On the balance sheet, you see "Total Stockholders' Equity" with a value of $138.2 billion. This figure is calculated by adding the values of preferred stock, common stock, Treasuries, paid-in capital, additional comprehensive income, and retained earnings. Some companies include unrealized gains or losses, capital surplus or cumulative adjustments, and many other line items, depending on the industry the company operates in and its internal accounting procedures. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The following image shows that Coca-Cola has an "Equity Attributable to Shareowners" line. In this case, this would be the book value for an investor valuating Coca-Cola.<span class="ql-inline-citation" data-cite="2"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_16-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:45.3%;"> <img alt="Coca Cola Shareholders' Equity" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/kczvluVb_v1-5oP1t9zRRr10iqo=/796x0/filters:no_upscale():max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/wXOYsxG7NlHlMKqoZmQf1neYQTU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg" data-srcset="https://www.investopedia.com/thmb/JZFjmcsihBZSLHNeHdBoIAdARVk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg 750w" data-tracking-container="true" height="361" id="mntl-sc-block-image_2-0" width="796"/> <noscript> <img alt="Coca Cola Shareholders' Equity" class="img--noscript universal-image__image" height="361" sizes="750px" src="https://www.investopedia.com/thmb/wXOYsxG7NlHlMKqoZmQf1neYQTU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg" srcset="https://www.investopedia.com/thmb/JZFjmcsihBZSLHNeHdBoIAdARVk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg 750w" width="796"/> </noscript> </div> </div> </figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Since a company’s book value represents the shareholding worth, comparing book value with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketvalue.asp">market value</a> of the shares can serve as an effective <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuation.asp">valuation</a> technique when trying to decide whether shares are fairly priced. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Book Value Uses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Book value has two main investor uses: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>It is used in other financial ratios to help investors valuate a company</li> <li>As a comparison to the company's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketvalue.asp">market value</a>, book value can indicate whether a stock is underpriced or overpriced.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Book value is also included in some financial ratios that help investors learn more about a company's financial situation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-book-value-per-share-bvps"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Book Value per Share (BVPS) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bookvaluepercommon.asp">Book value per share (BVPS)</a> is a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/050715/how-can-you-calculate-book-value-equity-share-bvps-excel.asp">quick calculation used to determine the per-share value</a> of a company based on the amount of common shareholders' equity in the company. To get BVPS, you divide total shareholders' equity by the total number of outstanding common shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> So, if a company had $21 million in shareholders' equity and two million outstanding common shares, its book value per share would be $10.50. Keep in mind this calculation doesn't include any of the other line items that might be in the shareholders' equity section, only common shares outstanding. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_32-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>There is a difference between <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outstandingshares.asp">outstanding</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/issuedshares.asp">issued</a> shares, but some companies might call outstanding common shares "issued" shares in their reports.</p></div></div></div> <span class="heading-toc" id="toc-price-to-book-pb-ratio"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Price-to-Book (P/B) Ratio </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-to-bookratio.asp">Price-to-book (P/B) ratio</a> as a valuation multiple is useful for comparing value between similar companies within the same industry when they follow a uniform accounting method for asset valuation. The ratio may not serve as a valid valuation basis when comparing companies from different sectors and industries because companies record their assets differently. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> As a result, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/010915/does-high-price-book-ratio-correspond-high-roe.asp">high P/B ratio</a> would not necessarily be a premium valuation, and conversely, a low P/B ratio would not automatically be a discount valuation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> The price-to-book ratio is simple to calculate—you divide the market price per share by the book value per share. In the previous example, the book value per share was $10.50. So, if the company's shares had a current market value of $13.17, its price-to-book ratio would be 1.25 ($13.17 ÷ $10.50). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-why-is-it-called-book-value"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is It Called ‘Book Value’?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Book value gets its name from accounting lingo, where the accounting journal and ledger are known as a company’s “books.” In fact, another name for accounting is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp">bookkeeping</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-does-a-price-to-book-pb-ratio-of-10-mean"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does a Price-to-Book (P/B) Ratio of 1.0 Mean?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A P/B ratio of 1.0 indicates that the market price of a company’s shares is exactly equal to its book value. For value investors, this may signal a good buy since the market price of a company generally carries some premium over book value.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-why-is-market-value-often-higher-than-book-value"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is Market Value Often Higher Than Book Value?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Book value only uses a company's total shareholder equity. It may not include intangible assets such as patents, intellectual property, brand value, and goodwill. It also may not fully account for workers' skills, human capital, and future <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/profit.asp">profits</a> and growth. Therefore, the market value — which is determined by the market (sellers and buyers) and is how much investors are willing to pay by accounting for all of these factors — will generally be higher.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Book value is the value of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/05/bookvintrinsic.asp">company's total assets minus its total liabilities</a>. In other words, it is equal to total shareholders' equity. A company's market value will usually be greater than its book value since the market price incorporates investor's thoughts and calculations about intangible assets such as intellectual property, human capital, and future growth prospects. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valueinvesting.asp">Value investors</a> look for companies with relatively low book values (using <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/metrics.asp">metrics</a> like P/B ratio or BVPS) but otherwise strong fundamentals as potentially underpriced stocks in which to invest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> <em>Correction—Aug. 24, 2023: </em>This article was corrected from a previous version that combined managerial accounting book value with value investing book value, which are two different concepts. As the article now states correctly, investing book value is the line item "Total Shareholders' Equity" or an equivalent entry from a company's balance sheet. </p></div>

## What Is Book Value? For value investors, book value is the sum of the amounts of all the line items in the shareholders' equity section on a company's balance sheet. You can also calculate book value by subtracting a business's total liabilities from its total assets. There is also a [book value used by accountants](https://www.investopedia.com/ask/answers/010815/what-difference-between-book-value-and-salvage-value.asp) to valuate assets owned by a company. This differs from book value for investors because it is used internally for managerial accounting purposes. ### Key Takeaways * A company's book value is the sum of all the line items in the shareholders' equity section of a balance sheet. * Book value is often different than a company's market value. * Book value per share (BVPS) and price-to-book (P/B) ratio are utilized in fundamental analysis. ## Understanding Book Value Shareholders' equity is a section on a company's balance sheet that explains where their money is. The image below is Amazon's consolidated balance sheet for its 2022 fiscal year. Pay attention to the Liabilities and Stockholders' Equity (in the red box, also called shareholders' equity) section. ![Amazon shareholders' equity section]() :max_bytes(150000):strip_icc()/AmazonConsolidateBalanceSheet2022-76035865fbcf4cac8453ff958374a207.jpg) On the balance sheet, you see "Total Stockholders' Equity" with a value of $138.2 billion. This figure is calculated by adding the values of preferred stock, common stock, Treasuries, paid-in capital, additional comprehensive income, and retained earnings. Some companies include unrealized gains or losses, capital surplus or cumulative adjustments, and many other line items, depending on the industry the company operates in and its internal accounting procedures. The following image shows that Coca-Cola has an "Equity Attributable to Shareowners" line. In this case, this would be the book value for an investor valuating Coca-Cola. ![Coca Cola Shareholders' Equity]() :max_bytes(150000):strip_icc()/CocaColaCosolidatedBalanceSheetEquitysection-3273a93cd44844e5b578a8fd2f76d115.jpg) Since a company’s book value represents the shareholding worth, comparing book value with the [market value](https://www.investopedia.com/terms/m/marketvalue.asp) of the shares can serve as an effective [valuation](https://www.investopedia.com/terms/v/valuation.asp) technique when trying to decide whether shares are fairly priced. ### Book Value Uses Book value has two main investor uses: * It is used in other financial ratios to help investors valuate a company * As a comparison to the company's [market value](https://www.investopedia.com/terms/m/marketvalue.asp), book value can indicate whether a stock is underpriced or overpriced. Book value is also included in some financial ratios that help investors learn more about a company's financial situation. ## Book Value per Share (BVPS) [Book value per share (BVPS)](https://www.investopedia.com/terms/b/bookvaluepercommon.asp) is a [quick calculation used to determine the per-share value](https://www.investopedia.com/ask/answers/050715/how-can-you-calculate-book-value-equity-share-bvps-excel.asp) of a company based on the amount of common shareholders' equity in the company. To get BVPS, you divide total shareholders' equity by the total number of outstanding common shares. So, if a company had $21 million in shareholders' equity and two million outstanding common shares, its book value per share would be $10.50. Keep in mind this calculation doesn't include any of the other line items that might be in the shareholders' equity section, only common shares outstanding. ### There is a difference between [outstanding](https://www.investopedia.com/terms/o/outstandingshares.asp) and [issued](https://www.investopedia.com/terms/i/issuedshares.asp) shares, but some companies might call outstanding common shares "issued" shares in their reports. ## Price-to-Book (P/B) Ratio [Price-to-book (P/B) ratio](https://www.investopedia.com/terms/p/price-to-bookratio.asp) as a valuation multiple is useful for comparing value between similar companies within the same industry when they follow a uniform accounting method for asset valuation. The ratio may not serve as a valid valuation basis when comparing companies from different sectors and industries because companies record their assets differently. As a result, a [high P/B ratio](https://www.investopedia.com/ask/answers/010915/does-high-price-book-ratio-correspond-high-roe.asp) would not necessarily be a premium valuation, and conversely, a low P/B ratio would not automatically be a discount valuation. The price-to-book ratio is simple to calculate—you divide the market price per share by the book value per share. In the previous example, the book value per share was $10.50. So, if the company's shares had a current market value of $13.17, its price-to-book ratio would be 1.25 ($13.17 ÷ $10.50). ## Why Is It Called ‘Book Value’? Book value gets its name from accounting lingo, where the accounting journal and ledger are known as a company’s “books.” In fact, another name for accounting is [bookkeeping](https://www.investopedia.com/articles/professionals/091715/career-advice-accounting-vs-bookkeeping.asp). ## What Does a Price-to-Book (P/B) Ratio of 1.0 Mean? A P/B ratio of 1.0 indicates that the market price of a company’s shares is exactly equal to its book value. For value investors, this may signal a good buy since the market price of a company generally carries some premium over book value. ## Why Is Market Value Often Higher Than Book Value? Book value only uses a company's total shareholder equity. It may not include intangible assets such as patents, intellectual property, brand value, and goodwill. It also may not fully account for workers' skills, human capital, and future [profits](https://www.investopedia.com/terms/p/profit.asp) and growth. Therefore, the market value — which is determined by the market (sellers and buyers) and is how much investors are willing to pay by accounting for all of these factors — will generally be higher. ## The Bottom Line Book value is the value of a [company's total assets minus its total liabilities](https://www.investopedia.com/ask/answers/05/bookvintrinsic.asp). In other words, it is equal to total shareholders' equity. A company's market value will usually be greater than its book value since the market price incorporates investor's thoughts and calculations about intangible assets such as intellectual property, human capital, and future growth prospects. [Value investors](https://www.investopedia.com/terms/v/valueinvesting.asp) look for companies with relatively low book values (using [metrics](https://www.investopedia.com/terms/m/metrics.asp) like P/B ratio or BVPS) but otherwise strong fundamentals as potentially underpriced stocks in which to invest. *Correction—Aug. 24, 2023:* This article was corrected from a previous version that combined managerial accounting book value with value investing book value, which are two different concepts. As the article now states correctly, investing book value is the line item "Total Shareholders' Equity" or an equivalent entry from a company's balance sheet.

What Is Book Value? For value investors, book value is the sum of the amounts of all the line items in the shareholders' equity section on a company's balance sheet. You can also calculate book value by subtracting a business's total liabilities from its total assets. There is also a book value used by accountants to valuate assets owned by a company. This differs from book value for investors because it is used internally for managerial accounting purposes. Key Takeaways A company's book value is the sum of all the line items in the shareholders' equity section of a balance sheet.Book value is often different than a company's market value.Book value per share (BVPS) and price-to-book (P/B) ratio are utilized in fundamental analysis. Understanding Book Value Shareholders' equity is a section on a company's balance sheet that explains where their money is. The image below is Amazon's consolidated balance sheet for its 2022 fiscal year. Pay attention to the Liabilities and Stockholders' Equity (in the red box, also called shareholders' equity) section. On the balance sheet, you see "Total Stockholders' Equity" with a value of $138.2 billion. This figure is calculated by adding the values of preferred stock, common stock, Treasuries, paid-in capital, additional comprehensive income, and retained earnings. Some companies include unrealized gains or losses, capital surplus or cumulative adjustments, and many other line items, depending on the industry the company operates in and its internal accounting procedures. The following image shows that Coca-Cola has an "Equity Attributable to Shareowners" line. In this case, this would be the book value for an investor valuating Coca-Cola. Since a company’s book value represents the shareholding worth, comparing book value with the market value of the shares can serve as an effective valuation technique when trying to decide whether shares are fairly priced. Book Value Uses Book value has two main investor uses: It is used in other financial ratios to help investors valuate a company As a comparison to the company's market value, book value can indicate whether a stock is underpriced or overpriced. Book value is also included in some financial ratios that help investors learn more about a company's financial situation. Book Value per Share (BVPS) Book value per share (BVPS) is a quick calculation used to determine the per-share value of a company based on the amount of common shareholders' equity in the company. To get BVPS, you divide total shareholders' equity by the total number of outstanding common shares. So, if a company had $21 million in shareholders' equity and two million outstanding common shares, its book value per share would be $10.50. Keep in mind this calculation doesn't include any of the other line items that might be in the shareholders' equity section, only common shares outstanding. There is a difference between outstanding and issued shares, but some companies might call outstanding common shares "issued" shares in their reports. Price-to-Book (P/B) Ratio Price-to-book (P/B) ratio as a valuation multiple is useful for comparing value between similar companies within the same industry when they follow a uniform accounting method for asset valuation. The ratio may not serve as a valid valuation basis when comparing companies from different sectors and industries because companies record their assets differently. As a result, a high P/B ratio would not necessarily be a premium valuation, and conversely, a low P/B ratio would not automatically be a discount valuation. The price-to-book ratio is simple to calculate—you divide the market price per share by the book value per share. In the previous example, the book value per share was $10.50. So, if the company's shares had a current market value of $13.17, its price-to-book ratio would be 1.25 ($13.17 ÷ $10.50). Why Is It Called ‘Book Value’? Book value gets its name from accounting lingo, where the accounting journal and ledger are known as a company’s “books.” In fact, another name for accounting is bookkeeping. What Does a Price-to-Book (P/B) Ratio of 1.0 Mean? A P/B ratio of 1.0 indicates that the market price of a company’s shares is exactly equal to its book value. For value investors, this may signal a good buy since the market price of a company generally carries some premium over book value. Why Is Market Value Often Higher Than Book Value? Book value only uses a company's total shareholder equity. It may not include intangible assets such as patents, intellectual property, brand value, and goodwill. It also may not fully account for workers' skills, human capital, and future profits and growth. Therefore, the market value — which is determined by the market (sellers and buyers) and is how much investors are willing to pay by accounting for all of these factors — will generally be higher. The Bottom Line Book value is the value of a company's total assets minus its total liabilities. In other words, it is equal to total shareholders' equity. A company's market value will usually be greater than its book value since the market price incorporates investor's thoughts and calculations about intangible assets such as intellectual property, human capital, and future growth prospects. Value investors look for companies with relatively low book values (using metrics like P/B ratio or BVPS) but otherwise strong fundamentals as potentially underpriced stocks in which to invest. Correction—Aug. 24, 2023: This article was corrected from a previous version that combined managerial accounting book value with value investing book value, which are two different concepts. As the article now states correctly, investing book value is the line item "Total Shareholders' Equity" or an equivalent entry from a company's balance sheet.

https://www.investopedia.com/terms/s/sustainability.asp

What is Sustainability? How Sustainabilities Work, Benefits, and Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-sustainability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Sustainability? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Sustainability is ability to maintain or support a process over time. </li><li>Sustainability is often broken into three core concepts: economic, environmental, and social.</li><li>Many businesses and governments have committed to sustainable goals, such as reducing their environmental footprints and conserving resources.</li><li>Some investors are actively embracing sustainability investments, known as "green investments." </li><li>Skeptics have accused some companies of "greenwashing," the practice of misleading the public to make a business seem more environmentally friendly than it is.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-how-sustainability-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How Sustainability Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Accordingly, sustainable policies emphasize the future effect of any given policy or business practice on humans, ecosystems, and the wider economy. The concept often corresponds to the belief that without major changes to the way the planet is run, it will suffer irreparable damage. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> As concerns about anthropogenic climate change, biodiversity loss, and pollution have become more widespread, the world has shifted to embrace sustainable practices and policies, primarily through the implementation of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100515/three-pillars-corporate-sustainability.asp">sustainable business practices</a> and increased investments in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/green_tech.asp">green technology</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-subheading__text"> 3 Pillars of Sustainability </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The idea of sustainability is often broken down into three pillars: economic, environmental, and social—also known informally as profits, planet, and people. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> In that breakdown, the concept of "economic sustainability" focuses on conserving the natural resources that provide physical inputs for economic production, including both renewable and exhaustible inputs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The concept of "environmental sustainability" adds greater emphasis on the life support systems, such as the atmosphere or soil, that must be maintained for economic production or human life to even occur. In contrast, social sustainability focuses on the human effects of economic systems, and the category includes attempts to eradicate poverty and hunger, as well as to combat inequality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In 1983, the United Nations created the World Commission on Environment and Development to study the connection between ecological health, economic development, and social equity. The commission, then run by former Norwegian prime minister Gro Harlem Brundtland, published a report in 1987 that has become the standard in defining sustainable development. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> That report describes sustainable development, or the blueprint for attaining sustainability, as "meeting the needs of the present without compromising the ability of future generations to meet their own needs."<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-corporate-sustainability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Corporate Sustainability </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> In business contexts, sustainability refers to more than just environmentalism. Harvard Business School lists two ways to measure sustainable business practices: the effect a business has on the environment, and the effect a business has on society, with the goal of sustainable practice being to have a positive impact on at least one of those areas.<span class="ql-inline-citation" data-cite="26"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Corporate sustainability emerged as a component of corporate ethics in response to public concerns of long-term damage caused by a focus on short-term profits.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> This view of responsibility encourages businesses to balance long-term benefits with immediate returns, and the goal of pursuing inclusive and environmentally sound objectives. This covers a broad array of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing-for-sustainability-impact-5210477">possible practices</a>. Cutting emissions, lowering energy usage, sourcing products from fair-trade organizations, and ensuring their physical waste is disposed of properly and with a smaller carbon footprint would qualify as moves toward sustainability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Companies have also set <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/040915/investing-green-technologythe-future-now.asp">sustainability goals</a> such as a commitment to zero-waste packaging by a certain year, or to reduce overall emissions by a certain percentage. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Many corporations have made such sustainability promises in recent years. For example, Walmart Stores, Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt">WMT</a>) has pledged to reach zero emissions by 2040.<span class="ql-inline-citation" data-cite="12"></span> Morgan Stanley has pledged net-zero "financed emissions" by 2050.<span class="ql-inline-citation" data-cite="15"></span> Google has pledged to operate carbon-free by 2030.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The push for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/triple-bottom-line.asp">sustainability</a> is evident in areas such as energy generation as well, where the focus has been on finding new deposits to outpace the drawdown on existing reserves. Some electricity companies, for example, now publicly state goals for energy generation from sustainable sources such as wind, hydropower, and solar. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Because these policies tend to generate public goodwill, some companies have been accused of "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/greenwashing.asp">greenwashing</a>," the practice of providing a false impression that makes a business seem more environmentally friendly than it is. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> Cost Cutting </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Moreover, many companies have been criticized for cost-cutting measures that make it harder to evaluate their sustainability. For example, many companies might move some parts of their business to less-regulated markets, such as by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/offshore.asp">offshoring</a> production to obtain cheaper labor. This can make it harder to assess the costs of production on workers and the environment.<span class="ql-inline-citation" data-cite="24"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Sustainability practices "significantly affect" the offshoring activities of multinational corporations, according to an examination of data from 1,080 multinational corporations.<span class="ql-inline-citation" data-cite="23"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <span class="heading-toc" id="toc-challenges-surrounding-business-sustainability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-heading__text"> Challenges Surrounding Business Sustainability </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The switch to sustainability can be difficult. The Santa Fe Institute outlines three major impediments for firms seeking to improve their environmental impacts: First, it is hard to actually understand the impact of any individual firm. Second, it is difficult to rank the environmental impact of some activities, and finally, it is difficult to predict how economic agents respond to changing incentives.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Sustainable investing surveys over the past couple of years have suggested that half (or in some cases, more than half) of investors say that sustainability is "fundamental" to investing strategy.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Not everyone concerned with investments shares the enthusiasm. In July 2021, for instance, Securities and Exchange Commission (SEC) Commissioner Hester Peirce argued that not only would <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp">environmental, social, and governance</a> (ESG) disclosure mandates violate the agency's authority, but it may also "undermine financial and economic stability." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> According to Peirce, the "inherently political" sustainability metrics were "unabashedly" created to direct capital toward certain businesses. In response to public comments and regulatory pressure to look into such mandates, Peirce said that it would be a violation of the SEC's "historically agnostic approach" to regulations.<span class="ql-inline-citation" data-cite="32"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Eiji Hirano, a former chairman of the board of visitors for Japan’s Government Pension Investment Fund, has said that there's a bubble in ESG investing and that the fund needs to rethink its ESG investments, according to interviews with <em>Bloomberg News</em>.<span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <span class="heading-toc" id="toc-benefits-of-business-sustainability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> Benefits of Business Sustainability </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> In addition to the social benefits of improving the environment and elevating human needs, there are also financial benefits for companies that successfully implement sustainability strategies. Using resources sustainability can improve the long-term viability of a business concern, just as cutting waste and pollution can also help a company save money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> For example, using more efficient lighting and plumbing fixtures can help a company save on utility bills, as well as improve its public image. There may also be government tax incentives for companies that adopt certain sustainability practices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Sustainability can also make a company more attractive to investors. A 2019 HEC Paris Research paper showed that shareholders value the ethical dimensions of a firm so much that they are willing to pay $.70 more to purchase a share in a firm that gives a dollar or more per share to charities. The study also revealed a loss in valuation for firms perceived as exercising a negative social impact.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Based on interviews with senior executives across 43 global investing firms, <em>Harvard Business Review</em> has argued that the perception among some business leaders that environmental, social, and governance issues are not mainstream in the investment community is outdated.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> The "sea change" in investor attitudes described by <em>Harvard Business Review</em> draws on the increased commitments of investors. The Principles for Responsible Investment, a United Nations-supported effort to bring these issues into investing, had 63 investment companies with $6.5 trillion in assets under management that committed when it launched in 2006. In 2018, it had 1,715 companies with $81.7 trillion in assets.<span class="ql-inline-citation" data-cite="25"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_64-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-warning" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_65-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>While it's tempting to support companies that seem environmentally friendly, some companies are less sustainable than they seem. This use of misleading advertisements or branding to create a false impression of sustainability is sometimes called "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/greenwashing.asp">greenwashing</a>."</p></div></div></div> <span class="heading-toc" id="toc-creating-a-sustainable-business-strategy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-heading__text"> Creating a Sustainable Business Strategy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Many corporations are seeking to integrate sustainability practices into their core business models. Companies can adopt sustainability strategies in the same way that they develop their other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0612/the-importance-of-strategic-planning.aspx">strategic plans</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> The first step to integrating sustainability practices is to identify a specific weakness shortcoming. For example, a company might determine that it generates <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets-economy/090716/5-countries-produce-most-waste.asp">too much waste</a>, or that its hiring practices are causing harm to the surrounding communities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Next, the company should determine its goals, and identify the metrics it will use to measure its achievements. A company might set an ambitious target for reducing its carbon footprint, or set a specific percentage goal for diversity hiring. This will allow the company to determine objectively if its goals have been met. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> The final step is to implement the strategy and assess its results. This requires continuous re-evaluation, as a company's goals may change as the company grows.<span class="ql-inline-citation" data-cite="26"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> There are some common pitfalls for companies aiming for sustainability. One of them is the knowledge-action gap: even though many executives set sustainability as one of their core business values, few of them take concrete actions to accomplish sustainability objectives. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Another is known as the compliance-competitiveness gap. While improving sustainability metrics can make a company more competitive in the market, these goals should not be confused with the mandatory compliance requirements that a company must adhere to. While sustainability is desirable, compliance is mandatory.<span class="ql-inline-citation" data-cite="37"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <span class="heading-toc" id="toc-real-world-example"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-heading__text"> Real-World Example </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> An interesting example of a successful sustainability strategy is Unilever, the parent company of Dove soaps, Axe body spray, Ben &amp; Jerry's Ice Cream, Hellmann's mayonnaise, and many other familiar brands. In 2010, the company implemented the Unilever Sustainable Living Plan, a ten-year blueprint for reducing the environmental impact of its brands while providing a more fair workplace. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_82-0"> By the end of Unilever Sustainable Living Plan, the company was able to announce major achievements in improving its environmental footprint as well as the company's bottom line. By working to conserve water and energy, the company was able to save more than 1 billion euros between 2008 and 2018. Moreover, by creating more opportunities for women, Unilever also become the preferred consumer goods employer for graduate students in 50 countries.<span class="ql-inline-citation" data-cite="38"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-are-the-3-principles-of-sustainability"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the 3 Principles of Sustainability?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The principles of sustainability refer to the three core concepts of environmental, social, and economic sustainability–sometimes broken down as "people, planet, and profits." This means that in order to be considered sustainable, a business must be able to conserve natural resources, support a healthy community and workforce, and earn enough revenue to remain financially viable for the long-term.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_86-0"><span class="heading-toc" id="toc-what-activities-promote-sustainability"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Activities Promote Sustainability?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Many sustainable businesses seek to reduce their environmental footprint by using renewable energy or by reducing waste. Companies may also be more sustainable by promoting diversity and fairness in their workforce, or enacting policies that benefit the local community.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-what-is-economic-sustainability"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Economic Sustainability?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Economic sustainability refers to a company's ability to continue its operations over a long-term horizon. In order to be economically sustainable, a company must be able to ensure that it will have adequate resources, workers, and consumers for its products into the distant future.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-what-are-the-most-sustainable-companies"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Most Sustainable Companies?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are many different ways to measure and compare sustainable companies. Canadian research firm Corporate Knights publishes a list of the 100 most sustainable companies. The list is topped by the Danish companies Vestas Wind Systems and Chr Hansen Holding, Autodesk Inc., in the United States, Schneider Electric in France, and City Developments in Singapore.<span class="ql-inline-citation" data-cite="39"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_92-0"><span class="heading-toc" id="toc-what-products-are-not-sustainable"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Products Are Not Sustainable?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Non-sustainable products uses resources that cannot be replaced or replenished at the same speed that they are consumed. Products that rely on fossil fuels cannot be sustainable, because the resources used to make them can never be replaced. Other resources such as as rainforest timber, fishery stocks, sea corals, and other wildlife can be sustainable, if they are only harvested be limits that allow existing stocks to be replenished.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_94-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> As consumers become more environmentally conscious, more companies and businesses are finding ways to reduce their impacts upon the planet and their community. Sustainability practices allow companies to highlight their social benefits while continuing to attract customers. </p></div>

## What Is Sustainability? In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term. ### Key Takeaways * Sustainability is ability to maintain or support a process over time. * Sustainability is often broken into three core concepts: economic, environmental, and social. * Many businesses and governments have committed to sustainable goals, such as reducing their environmental footprints and conserving resources. * Some investors are actively embracing sustainability investments, known as "green investments." * Skeptics have accused some companies of "greenwashing," the practice of misleading the public to make a business seem more environmentally friendly than it is. ## How Sustainability Works Accordingly, sustainable policies emphasize the future effect of any given policy or business practice on humans, ecosystems, and the wider economy. The concept often corresponds to the belief that without major changes to the way the planet is run, it will suffer irreparable damage. As concerns about anthropogenic climate change, biodiversity loss, and pollution have become more widespread, the world has shifted to embrace sustainable practices and policies, primarily through the implementation of [sustainable business practices](https://www.investopedia.com/articles/investing/100515/three-pillars-corporate-sustainability.asp) and increased investments in [green technology](https://www.investopedia.com/terms/g/green_tech.asp). ### 3 Pillars of Sustainability The idea of sustainability is often broken down into three pillars: economic, environmental, and social—also known informally as profits, planet, and people. In that breakdown, the concept of "economic sustainability" focuses on conserving the natural resources that provide physical inputs for economic production, including both renewable and exhaustible inputs. The concept of "environmental sustainability" adds greater emphasis on the life support systems, such as the atmosphere or soil, that must be maintained for economic production or human life to even occur. In contrast, social sustainability focuses on the human effects of economic systems, and the category includes attempts to eradicate poverty and hunger, as well as to combat inequality. In 1983, the United Nations created the World Commission on Environment and Development to study the connection between ecological health, economic development, and social equity. The commission, then run by former Norwegian prime minister Gro Harlem Brundtland, published a report in 1987 that has become the standard in defining sustainable development. That report describes sustainable development, or the blueprint for attaining sustainability, as "meeting the needs of the present without compromising the ability of future generations to meet their own needs." ## Corporate Sustainability In business contexts, sustainability refers to more than just environmentalism. Harvard Business School lists two ways to measure sustainable business practices: the effect a business has on the environment, and the effect a business has on society, with the goal of sustainable practice being to have a positive impact on at least one of those areas. ### Corporate sustainability emerged as a component of corporate ethics in response to public concerns of long-term damage caused by a focus on short-term profits. This view of responsibility encourages businesses to balance long-term benefits with immediate returns, and the goal of pursuing inclusive and environmentally sound objectives. This covers a broad array of [possible practices](https://www.investopedia.com/investing-for-sustainability-impact-5210477). Cutting emissions, lowering energy usage, sourcing products from fair-trade organizations, and ensuring their physical waste is disposed of properly and with a smaller carbon footprint would qualify as moves toward sustainability. Companies have also set [sustainability goals](https://www.investopedia.com/articles/investing/040915/investing-green-technologythe-future-now.asp) such as a commitment to zero-waste packaging by a certain year, or to reduce overall emissions by a certain percentage. Many corporations have made such sustainability promises in recent years. For example, Walmart Stores, Inc. ([WMT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt)) has pledged to reach zero emissions by 2040. Morgan Stanley has pledged net-zero "financed emissions" by 2050. Google has pledged to operate carbon-free by 2030. The push for [sustainability](https://www.investopedia.com/terms/t/triple-bottom-line.asp) is evident in areas such as energy generation as well, where the focus has been on finding new deposits to outpace the drawdown on existing reserves. Some electricity companies, for example, now publicly state goals for energy generation from sustainable sources such as wind, hydropower, and solar. Because these policies tend to generate public goodwill, some companies have been accused of "[greenwashing](https://www.investopedia.com/terms/g/greenwashing.asp)," the practice of providing a false impression that makes a business seem more environmentally friendly than it is. ### Cost Cutting Moreover, many companies have been criticized for cost-cutting measures that make it harder to evaluate their sustainability. For example, many companies might move some parts of their business to less-regulated markets, such as by [offshoring](https://www.investopedia.com/terms/o/offshore.asp) production to obtain cheaper labor. This can make it harder to assess the costs of production on workers and the environment. Sustainability practices "significantly affect" the offshoring activities of multinational corporations, according to an examination of data from 1,080 multinational corporations. ## Challenges Surrounding Business Sustainability The switch to sustainability can be difficult. The Santa Fe Institute outlines three major impediments for firms seeking to improve their environmental impacts: First, it is hard to actually understand the impact of any individual firm. Second, it is difficult to rank the environmental impact of some activities, and finally, it is difficult to predict how economic agents respond to changing incentives. Sustainable investing surveys over the past couple of years have suggested that half (or in some cases, more than half) of investors say that sustainability is "fundamental" to investing strategy. Not everyone concerned with investments shares the enthusiasm. In July 2021, for instance, Securities and Exchange Commission (SEC) Commissioner Hester Peirce argued that not only would [environmental, social, and governance](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) (ESG) disclosure mandates violate the agency's authority, but it may also "undermine financial and economic stability." According to Peirce, the "inherently political" sustainability metrics were "unabashedly" created to direct capital toward certain businesses. In response to public comments and regulatory pressure to look into such mandates, Peirce said that it would be a violation of the SEC's "historically agnostic approach" to regulations. Eiji Hirano, a former chairman of the board of visitors for Japan’s Government Pension Investment Fund, has said that there's a bubble in ESG investing and that the fund needs to rethink its ESG investments, according to interviews with *Bloomberg News*. ## Benefits of Business Sustainability In addition to the social benefits of improving the environment and elevating human needs, there are also financial benefits for companies that successfully implement sustainability strategies. Using resources sustainability can improve the long-term viability of a business concern, just as cutting waste and pollution can also help a company save money. For example, using more efficient lighting and plumbing fixtures can help a company save on utility bills, as well as improve its public image. There may also be government tax incentives for companies that adopt certain sustainability practices. Sustainability can also make a company more attractive to investors. A 2019 HEC Paris Research paper showed that shareholders value the ethical dimensions of a firm so much that they are willing to pay $.70 more to purchase a share in a firm that gives a dollar or more per share to charities. The study also revealed a loss in valuation for firms perceived as exercising a negative social impact. Based on interviews with senior executives across 43 global investing firms, *Harvard Business Review* has argued that the perception among some business leaders that environmental, social, and governance issues are not mainstream in the investment community is outdated. The "sea change" in investor attitudes described by *Harvard Business Review* draws on the increased commitments of investors. The Principles for Responsible Investment, a United Nations-supported effort to bring these issues into investing, had 63 investment companies with $6.5 trillion in assets under management that committed when it launched in 2006. In 2018, it had 1,715 companies with $81.7 trillion in assets. ### While it's tempting to support companies that seem environmentally friendly, some companies are less sustainable than they seem. This use of misleading advertisements or branding to create a false impression of sustainability is sometimes called "[greenwashing](https://www.investopedia.com/terms/g/greenwashing.asp)." ## Creating a Sustainable Business Strategy Many corporations are seeking to integrate sustainability practices into their core business models. Companies can adopt sustainability strategies in the same way that they develop their other [strategic plans](https://www.investopedia.com/financial-edge/0612/the-importance-of-strategic-planning.aspx). The first step to integrating sustainability practices is to identify a specific weakness shortcoming. For example, a company might determine that it generates [too much waste](https://www.investopedia.com/articles/markets-economy/090716/5-countries-produce-most-waste.asp), or that its hiring practices are causing harm to the surrounding communities. Next, the company should determine its goals, and identify the metrics it will use to measure its achievements. A company might set an ambitious target for reducing its carbon footprint, or set a specific percentage goal for diversity hiring. This will allow the company to determine objectively if its goals have been met. The final step is to implement the strategy and assess its results. This requires continuous re-evaluation, as a company's goals may change as the company grows. There are some common pitfalls for companies aiming for sustainability. One of them is the knowledge-action gap: even though many executives set sustainability as one of their core business values, few of them take concrete actions to accomplish sustainability objectives. Another is known as the compliance-competitiveness gap. While improving sustainability metrics can make a company more competitive in the market, these goals should not be confused with the mandatory compliance requirements that a company must adhere to. While sustainability is desirable, compliance is mandatory. ## Real-World Example An interesting example of a successful sustainability strategy is Unilever, the parent company of Dove soaps, Axe body spray, Ben & Jerry's Ice Cream, Hellmann's mayonnaise, and many other familiar brands. In 2010, the company implemented the Unilever Sustainable Living Plan, a ten-year blueprint for reducing the environmental impact of its brands while providing a more fair workplace. By the end of Unilever Sustainable Living Plan, the company was able to announce major achievements in improving its environmental footprint as well as the company's bottom line. By working to conserve water and energy, the company was able to save more than 1 billion euros between 2008 and 2018. Moreover, by creating more opportunities for women, Unilever also become the preferred consumer goods employer for graduate students in 50 countries. ## What Are the 3 Principles of Sustainability? The principles of sustainability refer to the three core concepts of environmental, social, and economic sustainability–sometimes broken down as "people, planet, and profits." This means that in order to be considered sustainable, a business must be able to conserve natural resources, support a healthy community and workforce, and earn enough revenue to remain financially viable for the long-term. ## What Activities Promote Sustainability? Many sustainable businesses seek to reduce their environmental footprint by using renewable energy or by reducing waste. Companies may also be more sustainable by promoting diversity and fairness in their workforce, or enacting policies that benefit the local community. ## What Is Economic Sustainability? Economic sustainability refers to a company's ability to continue its operations over a long-term horizon. In order to be economically sustainable, a company must be able to ensure that it will have adequate resources, workers, and consumers for its products into the distant future. ## What Are the Most Sustainable Companies? There are many different ways to measure and compare sustainable companies. Canadian research firm Corporate Knights publishes a list of the 100 most sustainable companies. The list is topped by the Danish companies Vestas Wind Systems and Chr Hansen Holding, Autodesk Inc., in the United States, Schneider Electric in France, and City Developments in Singapore. ## What Products Are Not Sustainable? Non-sustainable products uses resources that cannot be replaced or replenished at the same speed that they are consumed. Products that rely on fossil fuels cannot be sustainable, because the resources used to make them can never be replaced. Other resources such as as rainforest timber, fishery stocks, sea corals, and other wildlife can be sustainable, if they are only harvested be limits that allow existing stocks to be replenished. ## The Bottom Line As consumers become more environmentally conscious, more companies and businesses are finding ways to reduce their impacts upon the planet and their community. Sustainability practices allow companies to highlight their social benefits while continuing to attract customers.

What Is Sustainability? In the broadest sense, sustainability refers to the ability to maintain or support a process continuously over time. In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term. Key Takeaways Sustainability is ability to maintain or support a process over time. Sustainability is often broken into three core concepts: economic, environmental, and social.Many businesses and governments have committed to sustainable goals, such as reducing their environmental footprints and conserving resources.Some investors are actively embracing sustainability investments, known as "green investments." Skeptics have accused some companies of "greenwashing," the practice of misleading the public to make a business seem more environmentally friendly than it is. How Sustainability Works Accordingly, sustainable policies emphasize the future effect of any given policy or business practice on humans, ecosystems, and the wider economy. The concept often corresponds to the belief that without major changes to the way the planet is run, it will suffer irreparable damage. As concerns about anthropogenic climate change, biodiversity loss, and pollution have become more widespread, the world has shifted to embrace sustainable practices and policies, primarily through the implementation of sustainable business practices and increased investments in green technology. 3 Pillars of Sustainability The idea of sustainability is often broken down into three pillars: economic, environmental, and social—also known informally as profits, planet, and people. In that breakdown, the concept of "economic sustainability" focuses on conserving the natural resources that provide physical inputs for economic production, including both renewable and exhaustible inputs. The concept of "environmental sustainability" adds greater emphasis on the life support systems, such as the atmosphere or soil, that must be maintained for economic production or human life to even occur. In contrast, social sustainability focuses on the human effects of economic systems, and the category includes attempts to eradicate poverty and hunger, as well as to combat inequality. In 1983, the United Nations created the World Commission on Environment and Development to study the connection between ecological health, economic development, and social equity. The commission, then run by former Norwegian prime minister Gro Harlem Brundtland, published a report in 1987 that has become the standard in defining sustainable development. That report describes sustainable development, or the blueprint for attaining sustainability, as "meeting the needs of the present without compromising the ability of future generations to meet their own needs." Corporate Sustainability In business contexts, sustainability refers to more than just environmentalism. Harvard Business School lists two ways to measure sustainable business practices: the effect a business has on the environment, and the effect a business has on society, with the goal of sustainable practice being to have a positive impact on at least one of those areas. Corporate sustainability emerged as a component of corporate ethics in response to public concerns of long-term damage caused by a focus on short-term profits. This view of responsibility encourages businesses to balance long-term benefits with immediate returns, and the goal of pursuing inclusive and environmentally sound objectives. This covers a broad array of possible practices. Cutting emissions, lowering energy usage, sourcing products from fair-trade organizations, and ensuring their physical waste is disposed of properly and with a smaller carbon footprint would qualify as moves toward sustainability. Companies have also set sustainability goals such as a commitment to zero-waste packaging by a certain year, or to reduce overall emissions by a certain percentage. Many corporations have made such sustainability promises in recent years. For example, Walmart Stores, Inc. (WMT) has pledged to reach zero emissions by 2040. Morgan Stanley has pledged net-zero "financed emissions" by 2050. Google has pledged to operate carbon-free by 2030. The push for sustainability is evident in areas such as energy generation as well, where the focus has been on finding new deposits to outpace the drawdown on existing reserves. Some electricity companies, for example, now publicly state goals for energy generation from sustainable sources such as wind, hydropower, and solar. Because these policies tend to generate public goodwill, some companies have been accused of "greenwashing," the practice of providing a false impression that makes a business seem more environmentally friendly than it is. Cost Cutting Moreover, many companies have been criticized for cost-cutting measures that make it harder to evaluate their sustainability. For example, many companies might move some parts of their business to less-regulated markets, such as by offshoring production to obtain cheaper labor. This can make it harder to assess the costs of production on workers and the environment. Sustainability practices "significantly affect" the offshoring activities of multinational corporations, according to an examination of data from 1,080 multinational corporations. Challenges Surrounding Business Sustainability The switch to sustainability can be difficult. The Santa Fe Institute outlines three major impediments for firms seeking to improve their environmental impacts: First, it is hard to actually understand the impact of any individual firm. Second, it is difficult to rank the environmental impact of some activities, and finally, it is difficult to predict how economic agents respond to changing incentives. Sustainable investing surveys over the past couple of years have suggested that half (or in some cases, more than half) of investors say that sustainability is "fundamental" to investing strategy. Not everyone concerned with investments shares the enthusiasm. In July 2021, for instance, Securities and Exchange Commission (SEC) Commissioner Hester Peirce argued that not only would environmental, social, and governance (ESG) disclosure mandates violate the agency's authority, but it may also "undermine financial and economic stability." According to Peirce, the "inherently political" sustainability metrics were "unabashedly" created to direct capital toward certain businesses. In response to public comments and regulatory pressure to look into such mandates, Peirce said that it would be a violation of the SEC's "historically agnostic approach" to regulations. Eiji Hirano, a former chairman of the board of visitors for Japan’s Government Pension Investment Fund, has said that there's a bubble in ESG investing and that the fund needs to rethink its ESG investments, according to interviews with Bloomberg News. Benefits of Business Sustainability In addition to the social benefits of improving the environment and elevating human needs, there are also financial benefits for companies that successfully implement sustainability strategies. Using resources sustainability can improve the long-term viability of a business concern, just as cutting waste and pollution can also help a company save money. For example, using more efficient lighting and plumbing fixtures can help a company save on utility bills, as well as improve its public image. There may also be government tax incentives for companies that adopt certain sustainability practices. Sustainability can also make a company more attractive to investors. A 2019 HEC Paris Research paper showed that shareholders value the ethical dimensions of a firm so much that they are willing to pay $.70 more to purchase a share in a firm that gives a dollar or more per share to charities. The study also revealed a loss in valuation for firms perceived as exercising a negative social impact. Based on interviews with senior executives across 43 global investing firms, Harvard Business Review has argued that the perception among some business leaders that environmental, social, and governance issues are not mainstream in the investment community is outdated. The "sea change" in investor attitudes described by Harvard Business Review draws on the increased commitments of investors. The Principles for Responsible Investment, a United Nations-supported effort to bring these issues into investing, had 63 investment companies with $6.5 trillion in assets under management that committed when it launched in 2006. In 2018, it had 1,715 companies with $81.7 trillion in assets. While it's tempting to support companies that seem environmentally friendly, some companies are less sustainable than they seem. This use of misleading advertisements or branding to create a false impression of sustainability is sometimes called "greenwashing." Creating a Sustainable Business Strategy Many corporations are seeking to integrate sustainability practices into their core business models. Companies can adopt sustainability strategies in the same way that they develop their other strategic plans. The first step to integrating sustainability practices is to identify a specific weakness shortcoming. For example, a company might determine that it generates too much waste, or that its hiring practices are causing harm to the surrounding communities. Next, the company should determine its goals, and identify the metrics it will use to measure its achievements. A company might set an ambitious target for reducing its carbon footprint, or set a specific percentage goal for diversity hiring. This will allow the company to determine objectively if its goals have been met. The final step is to implement the strategy and assess its results. This requires continuous re-evaluation, as a company's goals may change as the company grows. There are some common pitfalls for companies aiming for sustainability. One of them is the knowledge-action gap: even though many executives set sustainability as one of their core business values, few of them take concrete actions to accomplish sustainability objectives. Another is known as the compliance-competitiveness gap. While improving sustainability metrics can make a company more competitive in the market, these goals should not be confused with the mandatory compliance requirements that a company must adhere to. While sustainability is desirable, compliance is mandatory. Real-World Example An interesting example of a successful sustainability strategy is Unilever, the parent company of Dove soaps, Axe body spray, Ben & Jerry's Ice Cream, Hellmann's mayonnaise, and many other familiar brands. In 2010, the company implemented the Unilever Sustainable Living Plan, a ten-year blueprint for reducing the environmental impact of its brands while providing a more fair workplace. By the end of Unilever Sustainable Living Plan, the company was able to announce major achievements in improving its environmental footprint as well as the company's bottom line. By working to conserve water and energy, the company was able to save more than 1 billion euros between 2008 and 2018. Moreover, by creating more opportunities for women, Unilever also become the preferred consumer goods employer for graduate students in 50 countries. What Are the 3 Principles of Sustainability? The principles of sustainability refer to the three core concepts of environmental, social, and economic sustainability–sometimes broken down as "people, planet, and profits." This means that in order to be considered sustainable, a business must be able to conserve natural resources, support a healthy community and workforce, and earn enough revenue to remain financially viable for the long-term. What Activities Promote Sustainability? Many sustainable businesses seek to reduce their environmental footprint by using renewable energy or by reducing waste. Companies may also be more sustainable by promoting diversity and fairness in their workforce, or enacting policies that benefit the local community. What Is Economic Sustainability? Economic sustainability refers to a company's ability to continue its operations over a long-term horizon. In order to be economically sustainable, a company must be able to ensure that it will have adequate resources, workers, and consumers for its products into the distant future. What Are the Most Sustainable Companies? There are many different ways to measure and compare sustainable companies. Canadian research firm Corporate Knights publishes a list of the 100 most sustainable companies. The list is topped by the Danish companies Vestas Wind Systems and Chr Hansen Holding, Autodesk Inc., in the United States, Schneider Electric in France, and City Developments in Singapore. What Products Are Not Sustainable? Non-sustainable products uses resources that cannot be replaced or replenished at the same speed that they are consumed. Products that rely on fossil fuels cannot be sustainable, because the resources used to make them can never be replaced. Other resources such as as rainforest timber, fishery stocks, sea corals, and other wildlife can be sustainable, if they are only harvested be limits that allow existing stocks to be replenished. The Bottom Line As consumers become more environmentally conscious, more companies and businesses are finding ways to reduce their impacts upon the planet and their community. Sustainability practices allow companies to highlight their social benefits while continuing to attract customers.

https://www.investopedia.com/why-a-home-inventory-is-more-important-today-5182459

Why a Home Inventory Is More Important Today

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> In the midst of a near-record home buying and home improvement spree, many new and existing homeowners are missing an important tool for filing an insurance claim: an up-to-date home inventory. Only four in 10 homeowners currently have a home inventory, a recent Insurance Information Institute (III) survey shows. Fortunately, new ways of creating an inventory can make the task easier. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A home inventory can document the value of a your home's contents in case you ever need to file an insurance claim.</li><li>If you made home improvements or major purchases during the pandemic, now is a good time to create or update a home inventory.</li><li>New apps and other tools make the job of creating a home inventory easier.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-home-inventory-can-help"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> How a Home Inventory Can Help </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Not only does an up-to-date home inventory help speed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loss-settlement-amount.asp">insurance-claims loss settlements</a>, it also documents for tax purposes losses that insurance doesn't reimburse and can help ensure you have adequate insurance coverage for what you own, says Loretta Worters, the III's vice president of media relations. III data shows that about one in 20 insured homes has a claim each year.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> "Like a lot of things we need to do, people are procrastinators by nature—whether it's because of fear or perfectionism or just being overwhelmed with the task," Worters says. "People know it's a good idea, they understand that it will make their lives easier if they have to file a claim, yet they don’t find the time to do it." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Indeed, in the III’s latest Triple-I Consumer Poll, only 43% of homeowners said they have an inventory to help document losses for their insurer, such as a written list, photos, or video accessible by a smartphone or other device.<span class="ql-inline-citation" data-cite="1"></span> That percentage is well below the high of 61% reported in 2012 according to the III. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-pandemic-trends-highlight-need-for-up-to-date-information"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Pandemic Trends Highlight Need for Up-to-Date Information </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Moreover, a pair of pandemic-driven housing trends make an accurate inventory more essential today, experts suggest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Due in part to the pandemic, the ranks of U.S. homeowners grew by 2.1 million by the end of 2020 (matched only by the pace of home buying during the housing boom of 2003-2004), according to a recent Pew Research Center analysis of U.S. Census Bureau Housing Inventory Estimates.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> At the same time, spending on home improvements surged to nearly $420 billion in 2020, as Americans modified their living spaces for remote work, learning, and leisure in response to the stay-at-home trend, according to the Joint Center for Housing Studies of Harvard University.<span class="ql-inline-citation" data-cite="4"></span> This uptick in home remodeling is expected to continue throughout this year and into 2022, says Chris Herbert, the center’s managing director. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> "With a financial boost from recent federal stimulus payments and strong house price appreciation," he says, "homeowners are continuing to invest in the upkeep and improvement of their homes." That could mean "even greater investments in their homes this year," he adds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> All that spending is a good reason to create or update a home inventory, says III’s Worters. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> "Particularly during this time, people have been redoing their homes, buying office furniture and computers," she says. "There's more 'stuff,' so you need to make sure those new things are included." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-how-to-make-your-own-home-inventory"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> How to Make Your Own Home Inventory </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> A home inventory is basically a list of your personal possessions along with their estimated financial value. The III offers advice on how to start <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.iii.org/article/how-create-home-inventory">creating a home inventory</a>, and you can opt for a low-tech method (making a written list and filing receipts) or a higher-tech approach (using an app to record your items and their worth). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> You can also check the website of your homeowners insurance carrier, as it may offer a home inventory worksheet or app for your use. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Whatever method you choose, here are some tips: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li><strong>Take it room by room.</strong> Focusing on one room at a time can make the task less overwhelming and also help direct your attention to specific items of value. (Don’t forget to include outdoor items, too, like patio furniture.)</li> <li><strong>Take photos or videos.</strong> And include model and serial numbers where possible. Visual records will help refresh your memory and can be useful back-up when filing a claim.</li> <li><strong>Try an app.</strong> The National Association of Insurance Commissioners launched a new home inventory app in April that can group belongings by category, scan barcodes, and upload photos, among other features. It can be found at the<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://apps.apple.com/us/app/naic-home-inventory/id1562207329" rel="nofollow"><strong> </strong>App Store</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://play.google.com/store/apps/details?id=org.naic&amp;hl=en_CA">Google Play</a>.<span class="ql-inline-citation" data-cite="5"></span></li> <li><strong>Keep receipts and proof of ownership.</strong> That's especially important for big-ticket items.</li> <li><strong>Review and update your inventory.</strong> Try to do it either annually or whenever you make a significant purchase or home improvement.</li> <li><strong>Keep it in a safe place.</strong> In case of a serious fire or other disaster, it's best to keep a copy of your inventory outside your home. A backup external drive in the safekeeping of a relative, a secured storage site online, or a safe deposit box at your bank are good options. </li> </ul></div>

In the midst of a near-record home buying and home improvement spree, many new and existing homeowners are missing an important tool for filing an insurance claim: an up-to-date home inventory. Only four in 10 homeowners currently have a home inventory, a recent Insurance Information Institute (III) survey shows. Fortunately, new ways of creating an inventory can make the task easier. ### Key Takeaways * A home inventory can document the value of a your home's contents in case you ever need to file an insurance claim. * If you made home improvements or major purchases during the pandemic, now is a good time to create or update a home inventory. * New apps and other tools make the job of creating a home inventory easier. ## How a Home Inventory Can Help Not only does an up-to-date home inventory help speed [insurance-claims loss settlements](https://www.investopedia.com/terms/l/loss-settlement-amount.asp), it also documents for tax purposes losses that insurance doesn't reimburse and can help ensure you have adequate insurance coverage for what you own, says Loretta Worters, the III's vice president of media relations. III data shows that about one in 20 insured homes has a claim each year. "Like a lot of things we need to do, people are procrastinators by nature—whether it's because of fear or perfectionism or just being overwhelmed with the task," Worters says. "People know it's a good idea, they understand that it will make their lives easier if they have to file a claim, yet they don’t find the time to do it." Indeed, in the III’s latest Triple-I Consumer Poll, only 43% of homeowners said they have an inventory to help document losses for their insurer, such as a written list, photos, or video accessible by a smartphone or other device. That percentage is well below the high of 61% reported in 2012 according to the III. ## Pandemic Trends Highlight Need for Up-to-Date Information Moreover, a pair of pandemic-driven housing trends make an accurate inventory more essential today, experts suggest. Due in part to the pandemic, the ranks of U.S. homeowners grew by 2.1 million by the end of 2020 (matched only by the pace of home buying during the housing boom of 2003-2004), according to a recent Pew Research Center analysis of U.S. Census Bureau Housing Inventory Estimates. At the same time, spending on home improvements surged to nearly $420 billion in 2020, as Americans modified their living spaces for remote work, learning, and leisure in response to the stay-at-home trend, according to the Joint Center for Housing Studies of Harvard University. This uptick in home remodeling is expected to continue throughout this year and into 2022, says Chris Herbert, the center’s managing director. "With a financial boost from recent federal stimulus payments and strong house price appreciation," he says, "homeowners are continuing to invest in the upkeep and improvement of their homes." That could mean "even greater investments in their homes this year," he adds. All that spending is a good reason to create or update a home inventory, says III’s Worters. "Particularly during this time, people have been redoing their homes, buying office furniture and computers," she says. "There's more 'stuff,' so you need to make sure those new things are included." ## How to Make Your Own Home Inventory A home inventory is basically a list of your personal possessions along with their estimated financial value. The III offers advice on how to start [creating a home inventory](https://www.iii.org/article/how-create-home-inventory), and you can opt for a low-tech method (making a written list and filing receipts) or a higher-tech approach (using an app to record your items and their worth). You can also check the website of your homeowners insurance carrier, as it may offer a home inventory worksheet or app for your use. Whatever method you choose, here are some tips: * **Take it room by room.** Focusing on one room at a time can make the task less overwhelming and also help direct your attention to specific items of value. (Don’t forget to include outdoor items, too, like patio furniture.) * **Take photos or videos.** And include model and serial numbers where possible. Visual records will help refresh your memory and can be useful back-up when filing a claim. * **Try an app.** The National Association of Insurance Commissioners launched a new home inventory app in April that can group belongings by category, scan barcodes, and upload photos, among other features. It can be found at the[App Store](https://apps.apple.com/us/app/naic-home-inventory/id1562207329) and [Google Play](https://play.google.com/store/apps/details?id=org.naic&hl=en_CA). * **Keep receipts and proof of ownership.** That's especially important for big-ticket items. * **Review and update your inventory.** Try to do it either annually or whenever you make a significant purchase or home improvement. * **Keep it in a safe place.** In case of a serious fire or other disaster, it's best to keep a copy of your inventory outside your home. A backup external drive in the safekeeping of a relative, a secured storage site online, or a safe deposit box at your bank are good options.

In the midst of a near-record home buying and home improvement spree, many new and existing homeowners are missing an important tool for filing an insurance claim: an up-to-date home inventory. Only four in 10 homeowners currently have a home inventory, a recent Insurance Information Institute (III) survey shows. Fortunately, new ways of creating an inventory can make the task easier. Key Takeaways A home inventory can document the value of a your home's contents in case you ever need to file an insurance claim.If you made home improvements or major purchases during the pandemic, now is a good time to create or update a home inventory.New apps and other tools make the job of creating a home inventory easier. How a Home Inventory Can Help Not only does an up-to-date home inventory help speed insurance-claims loss settlements, it also documents for tax purposes losses that insurance doesn't reimburse and can help ensure you have adequate insurance coverage for what you own, says Loretta Worters, the III's vice president of media relations. III data shows that about one in 20 insured homes has a claim each year. "Like a lot of things we need to do, people are procrastinators by nature—whether it's because of fear or perfectionism or just being overwhelmed with the task," Worters says. "People know it's a good idea, they understand that it will make their lives easier if they have to file a claim, yet they don’t find the time to do it." Indeed, in the III’s latest Triple-I Consumer Poll, only 43% of homeowners said they have an inventory to help document losses for their insurer, such as a written list, photos, or video accessible by a smartphone or other device. That percentage is well below the high of 61% reported in 2012 according to the III. Pandemic Trends Highlight Need for Up-to-Date Information Moreover, a pair of pandemic-driven housing trends make an accurate inventory more essential today, experts suggest. Due in part to the pandemic, the ranks of U.S. homeowners grew by 2.1 million by the end of 2020 (matched only by the pace of home buying during the housing boom of 2003-2004), according to a recent Pew Research Center analysis of U.S. Census Bureau Housing Inventory Estimates. At the same time, spending on home improvements surged to nearly $420 billion in 2020, as Americans modified their living spaces for remote work, learning, and leisure in response to the stay-at-home trend, according to the Joint Center for Housing Studies of Harvard University. This uptick in home remodeling is expected to continue throughout this year and into 2022, says Chris Herbert, the center’s managing director. "With a financial boost from recent federal stimulus payments and strong house price appreciation," he says, "homeowners are continuing to invest in the upkeep and improvement of their homes." That could mean "even greater investments in their homes this year," he adds. All that spending is a good reason to create or update a home inventory, says III’s Worters. "Particularly during this time, people have been redoing their homes, buying office furniture and computers," she says. "There's more 'stuff,' so you need to make sure those new things are included." How to Make Your Own Home Inventory A home inventory is basically a list of your personal possessions along with their estimated financial value. The III offers advice on how to start creating a home inventory, and you can opt for a low-tech method (making a written list and filing receipts) or a higher-tech approach (using an app to record your items and their worth). You can also check the website of your homeowners insurance carrier, as it may offer a home inventory worksheet or app for your use. Whatever method you choose, here are some tips: Take it room by room. Focusing on one room at a time can make the task less overwhelming and also help direct your attention to specific items of value. (Don’t forget to include outdoor items, too, like patio furniture.) Take photos or videos. And include model and serial numbers where possible. Visual records will help refresh your memory and can be useful back-up when filing a claim. Try an app. The National Association of Insurance Commissioners launched a new home inventory app in April that can group belongings by category, scan barcodes, and upload photos, among other features. It can be found at the App Store and Google Play. Keep receipts and proof of ownership. That's especially important for big-ticket items. Review and update your inventory. Try to do it either annually or whenever you make a significant purchase or home improvement. Keep it in a safe place. In case of a serious fire or other disaster, it's best to keep a copy of your inventory outside your home. A backup external drive in the safekeeping of a relative, a secured storage site online, or a safe deposit box at your bank are good options. 

https://www.investopedia.com/articles/pf/11/using-credit-cards-in-other-countries.asp

4 Tips for Using Credit Cards Overseas

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> While you’ll always need some cash, using a credit card for your spending needs can significantly simplify overseas travel. You won’t really have to deal with converting currency and, armed with the right credit card, you won’t pay unnecessary<em> </em><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreign-transaction-fee.asp">foreign transaction fees</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> In addition, pickpockets will be less of a threat, not only because credit cards are easier to conceal and keep safe but also because even if your card is stolen, you won’t actually lose money. Just <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/09/stolen-credit-card.asp">report your card missing</a>, and you’ll be off the hook for any unauthorized purchases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Still, the act of simply using a credit card does not in itself make overseas spending cheaper. By following these four tips before you leave and while traveling, you can make that goal a reality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Credit cards simplify spending while traveling, as cash can be clunky, conversion rates tricky, and cash is prone to loss or theft.</li><li>If a credit card is stolen, it can be suspended and replaced in short order.</li><li>Make sure you understand your card’s international fees and restrictions.</li><li>Use a card that does not charge foreign transaction fees.</li><li>Tell your card issuer of your travel plans in advance so they don’t assume that your card has been stolen and used without your consent.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-use-a-credit-card-with-no-foreign-transaction-fee"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> 1. Use a Credit Card With No Foreign Transaction Fee </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Many, but not all, credit card issuers charge fees for purchases made overseas with a foreign merchant. These fees typically range from 1% to 3% of each purchase and can result in you paying significantly more than the listed price of anything that you purchase overseas.<span class="ql-inline-citation" data-cite="1"></span> This can really add up throughout a trip. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Before you depart, check your credit and debit card agreements to see if they include such fees. If they do, then apply for a credit card with no foreign transaction fee, as well as for a debit card that does not charge extra for ATM withdrawals in other countries. Make sure to apply far enough in advance to allow for approval, account setup, and receiving your new card in the mail. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Foreign transaction fees can also apply to purchases made online from your home country where the vendor is foreign and processes the transaction in its local currency.<span class="ql-inline-citation" data-cite="1"></span> Keep this in mind when you book hotels and day trips before departing.</p></div></div></div> <span class="heading-toc" id="toc-2-call-your-credit-card-issuer-before-leaving"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> 2. Call Your Credit Card Issuer Before Leaving </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Once you have the requisite cards, alert the issuer of your travel plans and ask for the number that you can call collect for assistance while overseas. This not only will ensure that your cards do not get suspended because of suspicious activity, but also will give you a way to contact your issuer free of charge if something comes up. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Some card issuers no longer need cardholders to alert them to upcoming travel. For example, American Express uses fraud technology to help recognize when cardholders are traveling. Amex does recommend that you keep your contact information updated in case it needs to contact you while you’re away.<span class="ql-inline-citation" data-cite="6"></span> Be sure to check with your credit card company <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/1212/3-banking-moves-you-should-make-before-traveling.aspx">before you leave</a> to see if notifying them is necessary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-3-avoid-dynamic-currency-conversion"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> 3. Avoid Dynamic Currency Conversion </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Make sure to avoid <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/dynamic-currency-conversion-dcc-term-4769305">dynamic currency conversion</a>, a credit card feature that allows you to make a credit card purchase in a foreign country by using the currency of your home country. Some of us tend to have trouble relating foreign currency to the U.S. dollar, at least off the top of our heads while shopping. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Foreign merchants take advantage of this fact at the checkout counter by offering to quote the final price in U.S. dollars and, unbeknownst to tourists, making that conversion at an uncompetitive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchangerate.asp">exchange rate</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Avoiding these unnecessary costs is quite simple. All you need to do is refuse to sign any check or receipt not expressed in the local currency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>If you’re worried about deciphering the cost of meals and goods during your trip, just brush up on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conversion-rate.asp">conversion rates</a> before leaving or download a mobile app to your phone that will make the calculations for you.</p></div></div></div> <span class="heading-toc" id="toc-4-memorize-your-pin"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> 4. Memorize Your PIN </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> With the institution of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/chip-card.asp">chip-and-PIN technology</a>, some credit card terminals—particularly those in Europe—require the cardholder to enter a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personal-identification-number.asp">personal identification number</a> (PIN).<span class="ql-inline-citation" data-cite="7"></span> Make sure you have one set up and memorized before you leave town. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Merchants in some countries still use the less sophisticated magnetic stripe system. As a result, merchants in these markets may not accept your credit card if you don’t have proper identification.<span class="ql-inline-citation" data-cite="8"></span> As long as you carry your passport, you should be fine. Merchants simply want to be able to verify that the person using a credit card is actually the one authorized to do so. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_35-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_36-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Chip cards, also known as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emv.asp">EMV</a> cards, were designed to enable secure payments and were first introduced in Europe in the 1990s. The United States only started fully rolling out chip cards in the last several years.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-do-credit-cards-charge-a-fee-when-used-overseas"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Credit Cards Charge a Fee When Used Overseas?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It depends on the credit card. Some credit cards will charge a fee overseas, while other cards will not. Confirm with your credit card company what kind of fees, if any, will be charged if the card is used abroad. Also, understand that some retailers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/111015/does-walmart-take-international-credit-cards.asp">will not take an international credit card</a> unless it is an American Express, Visa, Capital One, Mastercard, or Discover card.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-do-credit-cards-automatically-convert-currency"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Credit Cards Automatically Convert Currency?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, credit card companies automatically convert foreign currencies to the domestic currency using their exchange rate. When you look at your card statement, the amount charged will be in the domestic currency.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-do-i-need-to-tell-my-credit-card-company-i-am-going-abroad"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do I Need to Tell My Credit Card Company I Am Going Abroad?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You do not necessarily have to tell your credit card company that you are going abroad in order to use your card internationally. Your card will usually work but there are chances that transactions may be blocked, particularly for large amounts. It is always prudent to let your card company know you will be abroad and when to ensure your charges will not be blocked.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> While overseas travel can be both confusing and expensive, there are ways to minimize the cost and hassle of spending abroad. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> As long as you have a credit card with no foreign transaction fees, notify your credit card company of your travel plans, and only pay for purchases expressed in terms of the local currency, you should be able to avoid post-trip credit statement surprises. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> In the end, a trip overseas shouldn’t be characterized by worries over conversion rates and handling foreign money. So get the right cards before leaving and allow your focus to shift to its rightful place: having a good time, or getting down to business. </p></div>

While you’ll always need some cash, using a credit card for your spending needs can significantly simplify overseas travel. You won’t really have to deal with converting currency and, armed with the right credit card, you won’t pay unnecessary[foreign transaction fees](https://www.investopedia.com/terms/f/foreign-transaction-fee.asp). In addition, pickpockets will be less of a threat, not only because credit cards are easier to conceal and keep safe but also because even if your card is stolen, you won’t actually lose money. Just [report your card missing](https://www.investopedia.com/ask/answers/09/stolen-credit-card.asp), and you’ll be off the hook for any unauthorized purchases. Still, the act of simply using a credit card does not in itself make overseas spending cheaper. By following these four tips before you leave and while traveling, you can make that goal a reality. ### Key Takeaways * Credit cards simplify spending while traveling, as cash can be clunky, conversion rates tricky, and cash is prone to loss or theft. * If a credit card is stolen, it can be suspended and replaced in short order. * Make sure you understand your card’s international fees and restrictions. * Use a card that does not charge foreign transaction fees. * Tell your card issuer of your travel plans in advance so they don’t assume that your card has been stolen and used without your consent. ## 1. Use a Credit Card With No Foreign Transaction Fee Many, but not all, credit card issuers charge fees for purchases made overseas with a foreign merchant. These fees typically range from 1% to 3% of each purchase and can result in you paying significantly more than the listed price of anything that you purchase overseas. This can really add up throughout a trip. Before you depart, check your credit and debit card agreements to see if they include such fees. If they do, then apply for a credit card with no foreign transaction fee, as well as for a debit card that does not charge extra for ATM withdrawals in other countries. Make sure to apply far enough in advance to allow for approval, account setup, and receiving your new card in the mail. ### Foreign transaction fees can also apply to purchases made online from your home country where the vendor is foreign and processes the transaction in its local currency. Keep this in mind when you book hotels and day trips before departing. ## 2. Call Your Credit Card Issuer Before Leaving Once you have the requisite cards, alert the issuer of your travel plans and ask for the number that you can call collect for assistance while overseas. This not only will ensure that your cards do not get suspended because of suspicious activity, but also will give you a way to contact your issuer free of charge if something comes up. Some card issuers no longer need cardholders to alert them to upcoming travel. For example, American Express uses fraud technology to help recognize when cardholders are traveling. Amex does recommend that you keep your contact information updated in case it needs to contact you while you’re away. Be sure to check with your credit card company [before you leave](https://www.investopedia.com/financial-edge/1212/3-banking-moves-you-should-make-before-traveling.aspx) to see if notifying them is necessary. ## 3. Avoid Dynamic Currency Conversion Make sure to avoid [dynamic currency conversion](https://www.investopedia.com/dynamic-currency-conversion-dcc-term-4769305), a credit card feature that allows you to make a credit card purchase in a foreign country by using the currency of your home country. Some of us tend to have trouble relating foreign currency to the U.S. dollar, at least off the top of our heads while shopping. Foreign merchants take advantage of this fact at the checkout counter by offering to quote the final price in U.S. dollars and, unbeknownst to tourists, making that conversion at an uncompetitive [exchange rate](https://www.investopedia.com/terms/e/exchangerate.asp). Avoiding these unnecessary costs is quite simple. All you need to do is refuse to sign any check or receipt not expressed in the local currency. ### If you’re worried about deciphering the cost of meals and goods during your trip, just brush up on [conversion rates](https://www.investopedia.com/terms/c/conversion-rate.asp) before leaving or download a mobile app to your phone that will make the calculations for you. ## 4. Memorize Your PIN With the institution of [chip-and-PIN technology](https://www.investopedia.com/terms/c/chip-card.asp), some credit card terminals—particularly those in Europe—require the cardholder to enter a [personal identification number](https://www.investopedia.com/terms/p/personal-identification-number.asp) (PIN). Make sure you have one set up and memorized before you leave town. Merchants in some countries still use the less sophisticated magnetic stripe system. As a result, merchants in these markets may not accept your credit card if you don’t have proper identification. As long as you carry your passport, you should be fine. Merchants simply want to be able to verify that the person using a credit card is actually the one authorized to do so. ### Chip cards, also known as [EMV](https://www.investopedia.com/terms/e/emv.asp) cards, were designed to enable secure payments and were first introduced in Europe in the 1990s. The United States only started fully rolling out chip cards in the last several years. ## Do Credit Cards Charge a Fee When Used Overseas? It depends on the credit card. Some credit cards will charge a fee overseas, while other cards will not. Confirm with your credit card company what kind of fees, if any, will be charged if the card is used abroad. Also, understand that some retailers [will not take an international credit card](https://www.investopedia.com/ask/answers/111015/does-walmart-take-international-credit-cards.asp) unless it is an American Express, Visa, Capital One, Mastercard, or Discover card. ## Do Credit Cards Automatically Convert Currency? Yes, credit card companies automatically convert foreign currencies to the domestic currency using their exchange rate. When you look at your card statement, the amount charged will be in the domestic currency. ## Do I Need to Tell My Credit Card Company I Am Going Abroad? You do not necessarily have to tell your credit card company that you are going abroad in order to use your card internationally. Your card will usually work but there are chances that transactions may be blocked, particularly for large amounts. It is always prudent to let your card company know you will be abroad and when to ensure your charges will not be blocked. ## The Bottom Line While overseas travel can be both confusing and expensive, there are ways to minimize the cost and hassle of spending abroad. As long as you have a credit card with no foreign transaction fees, notify your credit card company of your travel plans, and only pay for purchases expressed in terms of the local currency, you should be able to avoid post-trip credit statement surprises. In the end, a trip overseas shouldn’t be characterized by worries over conversion rates and handling foreign money. So get the right cards before leaving and allow your focus to shift to its rightful place: having a good time, or getting down to business.

While you’ll always need some cash, using a credit card for your spending needs can significantly simplify overseas travel. You won’t really have to deal with converting currency and, armed with the right credit card, you won’t pay unnecessary foreign transaction fees. In addition, pickpockets will be less of a threat, not only because credit cards are easier to conceal and keep safe but also because even if your card is stolen, you won’t actually lose money. Just report your card missing, and you’ll be off the hook for any unauthorized purchases. Still, the act of simply using a credit card does not in itself make overseas spending cheaper. By following these four tips before you leave and while traveling, you can make that goal a reality. Key Takeaways Credit cards simplify spending while traveling, as cash can be clunky, conversion rates tricky, and cash is prone to loss or theft.If a credit card is stolen, it can be suspended and replaced in short order.Make sure you understand your card’s international fees and restrictions.Use a card that does not charge foreign transaction fees.Tell your card issuer of your travel plans in advance so they don’t assume that your card has been stolen and used without your consent. 1. Use a Credit Card With No Foreign Transaction Fee Many, but not all, credit card issuers charge fees for purchases made overseas with a foreign merchant. These fees typically range from 1% to 3% of each purchase and can result in you paying significantly more than the listed price of anything that you purchase overseas. This can really add up throughout a trip. Before you depart, check your credit and debit card agreements to see if they include such fees. If they do, then apply for a credit card with no foreign transaction fee, as well as for a debit card that does not charge extra for ATM withdrawals in other countries. Make sure to apply far enough in advance to allow for approval, account setup, and receiving your new card in the mail. Foreign transaction fees can also apply to purchases made online from your home country where the vendor is foreign and processes the transaction in its local currency. Keep this in mind when you book hotels and day trips before departing. 2. Call Your Credit Card Issuer Before Leaving Once you have the requisite cards, alert the issuer of your travel plans and ask for the number that you can call collect for assistance while overseas. This not only will ensure that your cards do not get suspended because of suspicious activity, but also will give you a way to contact your issuer free of charge if something comes up. Some card issuers no longer need cardholders to alert them to upcoming travel. For example, American Express uses fraud technology to help recognize when cardholders are traveling. Amex does recommend that you keep your contact information updated in case it needs to contact you while you’re away. Be sure to check with your credit card company before you leave to see if notifying them is necessary. 3. Avoid Dynamic Currency Conversion Make sure to avoid dynamic currency conversion, a credit card feature that allows you to make a credit card purchase in a foreign country by using the currency of your home country. Some of us tend to have trouble relating foreign currency to the U.S. dollar, at least off the top of our heads while shopping. Foreign merchants take advantage of this fact at the checkout counter by offering to quote the final price in U.S. dollars and, unbeknownst to tourists, making that conversion at an uncompetitive exchange rate. Avoiding these unnecessary costs is quite simple. All you need to do is refuse to sign any check or receipt not expressed in the local currency. If you’re worried about deciphering the cost of meals and goods during your trip, just brush up on conversion rates before leaving or download a mobile app to your phone that will make the calculations for you. 4. Memorize Your PIN With the institution of chip-and-PIN technology, some credit card terminals—particularly those in Europe—require the cardholder to enter a personal identification number (PIN). Make sure you have one set up and memorized before you leave town. Merchants in some countries still use the less sophisticated magnetic stripe system. As a result, merchants in these markets may not accept your credit card if you don’t have proper identification. As long as you carry your passport, you should be fine. Merchants simply want to be able to verify that the person using a credit card is actually the one authorized to do so. Chip cards, also known as EMV cards, were designed to enable secure payments and were first introduced in Europe in the 1990s. The United States only started fully rolling out chip cards in the last several years. Do Credit Cards Charge a Fee When Used Overseas? It depends on the credit card. Some credit cards will charge a fee overseas, while other cards will not. Confirm with your credit card company what kind of fees, if any, will be charged if the card is used abroad. Also, understand that some retailers will not take an international credit card unless it is an American Express, Visa, Capital One, Mastercard, or Discover card. Do Credit Cards Automatically Convert Currency? Yes, credit card companies automatically convert foreign currencies to the domestic currency using their exchange rate. When you look at your card statement, the amount charged will be in the domestic currency. Do I Need to Tell My Credit Card Company I Am Going Abroad? You do not necessarily have to tell your credit card company that you are going abroad in order to use your card internationally. Your card will usually work but there are chances that transactions may be blocked, particularly for large amounts. It is always prudent to let your card company know you will be abroad and when to ensure your charges will not be blocked. The Bottom Line While overseas travel can be both confusing and expensive, there are ways to minimize the cost and hassle of spending abroad. As long as you have a credit card with no foreign transaction fees, notify your credit card company of your travel plans, and only pay for purchases expressed in terms of the local currency, you should be able to avoid post-trip credit statement surprises. In the end, a trip overseas shouldn’t be characterized by worries over conversion rates and handling foreign money. So get the right cards before leaving and allow your focus to shift to its rightful place: having a good time, or getting down to business.

https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169

Add-On CDs: Meaning, Pros and Cons, Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-an-add-on-cd"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is an Add-On CD? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An add-on CD is a special type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificate of deposit (CD)</a> that allows you to continue adding funds to your account. This differs from standard CDs, which limit you to an initial deposit. Both types of CDs involve earning a guaranteed interest rate on your funds for a set time period—usually 3 months to 5 years. But add-on CDs often pay a slightly lower interest rate in exchange for the flexibility to make more than one deposit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Add-on certificates of deposit (CDs) allow savers to make additional deposits into a CD account throughout the maturity term.</li><li>You may earn a lower interest rate with an add-on CD compared with a traditional CD, which only allows you to deposit money at the beginning of the maturity term.</li><li>Like standard CDs, add-on CDs will charge early withdrawal penalty if you take money out of the account before maturity.</li><li>Creating a CD ladder can help with minimizing penalties while maximizing interest rates.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-an-add-on-cd-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How an Add-On CD Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> When you open a CD account, you’re agreeing to keep your savings in place for a set time period. This is the CD’s maturity term, and, depending on the CD, it can be as short as 30 days or as long as 10 years. In exchange, the bank or credit union agrees to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-invest-with-cds-4795661">pay you interest on the money that you deposit</a>.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Ordinarily, you would not be allowed to add more money to the CD once you’ve made your initial deposit. With an add-on CD, however, you can continue adding money to your account through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity date</a> of the CD. For example, you may be able to schedule automatic deposits on a monthly or biweekly basis, depending on how often you’re paid. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> In terms of how to add money to a CD, this can depend on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank.asp">bank</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit union</a> that holds it. For example, you may be able to schedule automatic transfers from a linked checking account or savings account, or you may be able to deposit cash or a check with a teller in person or at the drive-thru window. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The bank or credit union may limit the number of additional deposits that you’re allowed to make or may cap the total amount of money that can be deposited into an add-on CD.</p></div></div></div> <span class="heading-toc" id="toc-add-on-cd-vs-traditional-cd"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Add-On CD vs. Traditional CD </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The biggest difference between add-on CDs and traditional CDs is the way that they’re funded. Again, a traditional CD only allows you to deposit money once, when you open the account. Add-on CDs give you the option to add more through the maturity term. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Aside from that, however, other things can distinguish add-on CDs from other CDs, including: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li>Minimum deposit requirements</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">Interest rate</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apy.asp">Annual percentage yield (APY)</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earlywithdrawal.asp">Early withdrawal</a> penalties</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> You may be able to open an add-on CD with a smaller amount of money than you would by opening a traditional CD. For example, you may be able to open an add-on CD with just $100, compared with $1,000 for a regular CD. That’s a plus if you’re just getting started with saving. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Still, there may be a tradeoff when it comes to interest rates. Banks and credit unions may offer a higher rate to savers who choose regular CDs over add-on CDs, so it’s important to consider what matters more to you: earning a higher rate, or being able to add money to your CD over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>If you would like to avoid an early withdrawal fee, consider a no-penalty CD instead. This allows you to withdraw funds prior to maturity without sacrificing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> earned.</p></div></div></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-add-on-cds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Add-On CDs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Add-on CDs may be more appealing to certain types of savers than others, particularly if you’re just getting started with saving. That said, there are some potential drawbacks to consider before opening this type of CD account. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_31-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_32-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Low minimum deposit. </strong>While regular CDs may require you to deposit $500, $1,000, or more initially, it may be possible to open an add-on CD with as little as $100.</p></li> <li><p><strong>Guaranteed return.</strong> Just like traditional CDs, add-on CDs can offer a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedinterestrate.asp">fixed interest rate</a> for the entire maturity term, guaranteeing you a set amount of return. </p></li> <li><p><strong>Flexibility. </strong>Add-on CDs allow you to grow your savings over time at a pace that works for your budget.</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p><strong>Lower rates. </strong>Compared with traditional CDs, the interest rate that you earn with an add-on CD may be lower.</p></li> <li><p><strong>Guaranteed return. </strong>If your add-on CD has a fixed rate, you wouldn’t benefit from any interest rate increases that occur during the maturity term as you would with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variableinterestrate.asp">variable interest rate</a>, potentially earning you more money.</p></li> <li><p><strong>Early withdrawal penalties. </strong>Even though you have the option to add money to an add-on CD over the course of the maturity term, you may not be able to take out money prior to maturity without a penalty.</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Opening a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cd-ladder.asp">CD ladder</a> that includes multiple add-on CDs can help you minimize the odds of triggering an early withdrawal penalty while taking advantage of changing interest rates over time.</p></div></div></div> <span class="heading-toc" id="toc-example-of-an-add-on-cd"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Example of an Add-On CD </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Say you open an add-on CD with a 24-month term. Your initial deposit is $100, and you plan to deposit an additional $500 per month into your CD. The CD earns a 0.50% APY. After two years, you would have saved $12,100 (your $100 initial deposit plus your $500 monthly contributions for 24 months). Assuming a 0.50% APY, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/compounding.asp">compounded</a> monthly, you would have earned $58.68 in interest. But how does that compare with a regular CD? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Say that you take the entire $12,100 and deposit it into a traditional two-year CD earning the same 0.50% APY. In that scenario, your CD’s value would grow to $12,221.58. You would earn $62.90 more by depositing the entire $12,100 up front. However, that may not be realistic if you don’t have a lot of money to save, in which case the add-on CD could be the better savings option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_41-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_42-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>Add-on CDs, like other CDs, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savingsaccount.asp">savings accounts</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymarketaccount.asp">money market accounts</a>, are eligible for <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corp. (FDIC)</a> protection, up to the allowed limits per depositor, per account ownership type, per financial institution.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="4"></span></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_43-0"><span class="heading-toc" id="toc-what-are-the-advantages-of-an-add-on-certificate-of-deposit-cd"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are the advantages of an add-on certificate of deposit (CD)?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Add-on certificates of deposit (CDs) are a great option for investors who want security and flexibility. You can start with a low initial deposit and add funds as your budget allows. All of the money that you invest in an add-on CD is insured by the Federal Deposit Insurance Corp. (FDIC).</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_45-0"><span class="heading-toc" id="toc-can-you-add-to-a-cd-after-opening"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can you add to a CD after opening?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Most CDs do not allow you to contribute funds after the initial investment. For a lower interest rate, add-on CDs do allow you to deposit more throughout the term. Increasing your CD account can improve your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rateofreturn.asp">rate of return</a> in the end.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-what-are-the-disadvantages-of-an-add-on-cd"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are the disadvantages of an add-on CD?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are disadvantages to add-on CDs, starting with a lower—and sometimes fixed—interest rate. Additionally, if you need to access your money before the maturity date, there will be penalties. Make sure to consider these disadvantages as you invest.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Opening an add-on CD account could make sense if you want to earn a competitive interest rate with a CD account while being able to add money at other times. Remember to compare rates, minimum deposit requirements, and rules regarding additional CD deposits when deciding which one to open. Also, keep early withdrawal penalties in mind when searching for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">best CD rates</a>. A steep penalty could negate any interest earned if you have to withdraw money from your CD before the maturity date. </p></div>

## What Is an Add-On CD? An add-on CD is a special type of [certificate of deposit (CD)](https://www.investopedia.com/terms/c/certificateofdeposit.asp) that allows you to continue adding funds to your account. This differs from standard CDs, which limit you to an initial deposit. Both types of CDs involve earning a guaranteed interest rate on your funds for a set time period—usually 3 months to 5 years. But add-on CDs often pay a slightly lower interest rate in exchange for the flexibility to make more than one deposit. ### Key Takeaways * Add-on certificates of deposit (CDs) allow savers to make additional deposits into a CD account throughout the maturity term. * You may earn a lower interest rate with an add-on CD compared with a traditional CD, which only allows you to deposit money at the beginning of the maturity term. * Like standard CDs, add-on CDs will charge early withdrawal penalty if you take money out of the account before maturity. * Creating a CD ladder can help with minimizing penalties while maximizing interest rates. ## How an Add-On CD Works When you open a CD account, you’re agreeing to keep your savings in place for a set time period. This is the CD’s maturity term, and, depending on the CD, it can be as short as 30 days or as long as 10 years. In exchange, the bank or credit union agrees to [pay you interest on the money that you deposit](https://www.investopedia.com/how-to-invest-with-cds-4795661). Ordinarily, you would not be allowed to add more money to the CD once you’ve made your initial deposit. With an add-on CD, however, you can continue adding money to your account through the [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp) of the CD. For example, you may be able to schedule automatic deposits on a monthly or biweekly basis, depending on how often you’re paid. In terms of how to add money to a CD, this can depend on the [bank](https://www.investopedia.com/terms/b/bank.asp) or [credit union](https://www.investopedia.com/terms/c/creditunion.asp) that holds it. For example, you may be able to schedule automatic transfers from a linked checking account or savings account, or you may be able to deposit cash or a check with a teller in person or at the drive-thru window. ### The bank or credit union may limit the number of additional deposits that you’re allowed to make or may cap the total amount of money that can be deposited into an add-on CD. ## Add-On CD vs. Traditional CD The biggest difference between add-on CDs and traditional CDs is the way that they’re funded. Again, a traditional CD only allows you to deposit money once, when you open the account. Add-on CDs give you the option to add more through the maturity term. Aside from that, however, other things can distinguish add-on CDs from other CDs, including: * Minimum deposit requirements * [Interest rate](https://www.investopedia.com/terms/i/interestrate.asp) * [Annual percentage yield (APY)](https://www.investopedia.com/terms/a/apy.asp) * [Early withdrawal](https://www.investopedia.com/terms/e/earlywithdrawal.asp) penalties You may be able to open an add-on CD with a smaller amount of money than you would by opening a traditional CD. For example, you may be able to open an add-on CD with just $100, compared with $1,000 for a regular CD. That’s a plus if you’re just getting started with saving. Still, there may be a tradeoff when it comes to interest rates. Banks and credit unions may offer a higher rate to savers who choose regular CDs over add-on CDs, so it’s important to consider what matters more to you: earning a higher rate, or being able to add money to your CD over time. ### If you would like to avoid an early withdrawal fee, consider a no-penalty CD instead. This allows you to withdraw funds prior to maturity without sacrificing [interest](https://www.investopedia.com/terms/i/interest.asp) earned. ## Advantages and Disadvantages of Add-On CDs Add-on CDs may be more appealing to certain types of savers than others, particularly if you’re just getting started with saving. That said, there are some potential drawbacks to consider before opening this type of CD account. Pros * **Low minimum deposit.** While regular CDs may require you to deposit $500, $1,000, or more initially, it may be possible to open an add-on CD with as little as $100. * **Guaranteed return.** Just like traditional CDs, add-on CDs can offer a [fixed interest rate](https://www.investopedia.com/terms/f/fixedinterestrate.asp) for the entire maturity term, guaranteeing you a set amount of return. * **Flexibility.** Add-on CDs allow you to grow your savings over time at a pace that works for your budget. Cons * **Lower rates.** Compared with traditional CDs, the interest rate that you earn with an add-on CD may be lower. * **Guaranteed return.** If your add-on CD has a fixed rate, you wouldn’t benefit from any interest rate increases that occur during the maturity term as you would with a [variable interest rate](https://www.investopedia.com/terms/v/variableinterestrate.asp), potentially earning you more money. * **Early withdrawal penalties.** Even though you have the option to add money to an add-on CD over the course of the maturity term, you may not be able to take out money prior to maturity without a penalty. ### Opening a [CD ladder](https://www.investopedia.com/terms/c/cd-ladder.asp) that includes multiple add-on CDs can help you minimize the odds of triggering an early withdrawal penalty while taking advantage of changing interest rates over time. ## Example of an Add-On CD Say you open an add-on CD with a 24-month term. Your initial deposit is $100, and you plan to deposit an additional $500 per month into your CD. The CD earns a 0.50% APY. After two years, you would have saved $12,100 (your $100 initial deposit plus your $500 monthly contributions for 24 months). Assuming a 0.50% APY, [compounded](https://www.investopedia.com/terms/c/compounding.asp) monthly, you would have earned $58.68 in interest. But how does that compare with a regular CD? Say that you take the entire $12,100 and deposit it into a traditional two-year CD earning the same 0.50% APY. In that scenario, your CD’s value would grow to $12,221.58. You would earn $62.90 more by depositing the entire $12,100 up front. However, that may not be realistic if you don’t have a lot of money to save, in which case the add-on CD could be the better savings option. ### Add-on CDs, like other CDs, [savings accounts](https://www.investopedia.com/terms/s/savingsaccount.asp), and [money market accounts](https://www.investopedia.com/terms/m/moneymarketaccount.asp), are eligible for [Federal Deposit Insurance Corp. (FDIC)](https://www.investopedia.com/terms/f/fdic.asp) protection, up to the allowed limits per depositor, per account ownership type, per financial institution. ## What are the advantages of an add-on certificate of deposit (CD)? Add-on certificates of deposit (CDs) are a great option for investors who want security and flexibility. You can start with a low initial deposit and add funds as your budget allows. All of the money that you invest in an add-on CD is insured by the Federal Deposit Insurance Corp. (FDIC). ## Can you add to a CD after opening? Most CDs do not allow you to contribute funds after the initial investment. For a lower interest rate, add-on CDs do allow you to deposit more throughout the term. Increasing your CD account can improve your [rate of return](https://www.investopedia.com/terms/r/rateofreturn.asp) in the end. ## What are the disadvantages of an add-on CD? There are disadvantages to add-on CDs, starting with a lower—and sometimes fixed—interest rate. Additionally, if you need to access your money before the maturity date, there will be penalties. Make sure to consider these disadvantages as you invest. ## The Bottom Line Opening an add-on CD account could make sense if you want to earn a competitive interest rate with a CD account while being able to add money at other times. Remember to compare rates, minimum deposit requirements, and rules regarding additional CD deposits when deciding which one to open. Also, keep early withdrawal penalties in mind when searching for the [best CD rates](https://www.investopedia.com/best-cd-rates-4770214). A steep penalty could negate any interest earned if you have to withdraw money from your CD before the maturity date.

What Is an Add-On CD? An add-on CD is a special type of certificate of deposit (CD) that allows you to continue adding funds to your account. This differs from standard CDs, which limit you to an initial deposit. Both types of CDs involve earning a guaranteed interest rate on your funds for a set time period—usually 3 months to 5 years. But add-on CDs often pay a slightly lower interest rate in exchange for the flexibility to make more than one deposit. Key Takeaways Add-on certificates of deposit (CDs) allow savers to make additional deposits into a CD account throughout the maturity term.You may earn a lower interest rate with an add-on CD compared with a traditional CD, which only allows you to deposit money at the beginning of the maturity term.Like standard CDs, add-on CDs will charge early withdrawal penalty if you take money out of the account before maturity.Creating a CD ladder can help with minimizing penalties while maximizing interest rates. How an Add-On CD Works When you open a CD account, you’re agreeing to keep your savings in place for a set time period. This is the CD’s maturity term, and, depending on the CD, it can be as short as 30 days or as long as 10 years. In exchange, the bank or credit union agrees to pay you interest on the money that you deposit. Ordinarily, you would not be allowed to add more money to the CD once you’ve made your initial deposit. With an add-on CD, however, you can continue adding money to your account through the maturity date of the CD. For example, you may be able to schedule automatic deposits on a monthly or biweekly basis, depending on how often you’re paid. In terms of how to add money to a CD, this can depend on the bank or credit union that holds it. For example, you may be able to schedule automatic transfers from a linked checking account or savings account, or you may be able to deposit cash or a check with a teller in person or at the drive-thru window. The bank or credit union may limit the number of additional deposits that you’re allowed to make or may cap the total amount of money that can be deposited into an add-on CD. Add-On CD vs. Traditional CD The biggest difference between add-on CDs and traditional CDs is the way that they’re funded. Again, a traditional CD only allows you to deposit money once, when you open the account. Add-on CDs give you the option to add more through the maturity term. Aside from that, however, other things can distinguish add-on CDs from other CDs, including: Minimum deposit requirements Interest rate Annual percentage yield (APY) Early withdrawal penalties You may be able to open an add-on CD with a smaller amount of money than you would by opening a traditional CD. For example, you may be able to open an add-on CD with just $100, compared with $1,000 for a regular CD. That’s a plus if you’re just getting started with saving. Still, there may be a tradeoff when it comes to interest rates. Banks and credit unions may offer a higher rate to savers who choose regular CDs over add-on CDs, so it’s important to consider what matters more to you: earning a higher rate, or being able to add money to your CD over time. If you would like to avoid an early withdrawal fee, consider a no-penalty CD instead. This allows you to withdraw funds prior to maturity without sacrificing interest earned. Advantages and Disadvantages of Add-On CDs Add-on CDs may be more appealing to certain types of savers than others, particularly if you’re just getting started with saving. That said, there are some potential drawbacks to consider before opening this type of CD account. Pros Low minimum deposit. While regular CDs may require you to deposit $500, $1,000, or more initially, it may be possible to open an add-on CD with as little as $100. Guaranteed return. Just like traditional CDs, add-on CDs can offer a fixed interest rate for the entire maturity term, guaranteeing you a set amount of return.  Flexibility. Add-on CDs allow you to grow your savings over time at a pace that works for your budget. Cons Lower rates. Compared with traditional CDs, the interest rate that you earn with an add-on CD may be lower. Guaranteed return. If your add-on CD has a fixed rate, you wouldn’t benefit from any interest rate increases that occur during the maturity term as you would with a variable interest rate, potentially earning you more money. Early withdrawal penalties. Even though you have the option to add money to an add-on CD over the course of the maturity term, you may not be able to take out money prior to maturity without a penalty. Opening a CD ladder that includes multiple add-on CDs can help you minimize the odds of triggering an early withdrawal penalty while taking advantage of changing interest rates over time. Example of an Add-On CD Say you open an add-on CD with a 24-month term. Your initial deposit is $100, and you plan to deposit an additional $500 per month into your CD. The CD earns a 0.50% APY. After two years, you would have saved $12,100 (your $100 initial deposit plus your $500 monthly contributions for 24 months). Assuming a 0.50% APY, compounded monthly, you would have earned $58.68 in interest. But how does that compare with a regular CD? Say that you take the entire $12,100 and deposit it into a traditional two-year CD earning the same 0.50% APY. In that scenario, your CD’s value would grow to $12,221.58. You would earn $62.90 more by depositing the entire $12,100 up front. However, that may not be realistic if you don’t have a lot of money to save, in which case the add-on CD could be the better savings option. Add-on CDs, like other CDs, savings accounts, and money market accounts, are eligible for Federal Deposit Insurance Corp. (FDIC) protection, up to the allowed limits per depositor, per account ownership type, per financial institution. What are the advantages of an add-on certificate of deposit (CD)? Add-on certificates of deposit (CDs) are a great option for investors who want security and flexibility. You can start with a low initial deposit and add funds as your budget allows. All of the money that you invest in an add-on CD is insured by the Federal Deposit Insurance Corp. (FDIC). Can you add to a CD after opening? Most CDs do not allow you to contribute funds after the initial investment. For a lower interest rate, add-on CDs do allow you to deposit more throughout the term. Increasing your CD account can improve your rate of return in the end. What are the disadvantages of an add-on CD? There are disadvantages to add-on CDs, starting with a lower—and sometimes fixed—interest rate. Additionally, if you need to access your money before the maturity date, there will be penalties. Make sure to consider these disadvantages as you invest. The Bottom Line Opening an add-on CD account could make sense if you want to earn a competitive interest rate with a CD account while being able to add money at other times. Remember to compare rates, minimum deposit requirements, and rules regarding additional CD deposits when deciding which one to open. Also, keep early withdrawal penalties in mind when searching for the best CD rates. A steep penalty could negate any interest earned if you have to withdraw money from your CD before the maturity date.

https://www.investopedia.com/articles/investing/100615/top-3-commodities-mutual-funds.asp

Top 3 Commodities Mutual Funds

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Investing in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodity</a> mutual funds is one of the best means of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedging</a> a portfolio that is otherwise dominated by stocks against unexpected financial or political crises or ordinary economic downturns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> For example, in the wake of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/great-recession.asp">Great Recession</a>, during the late 2000s into the early 2010s, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/09/why-gold-matters.asp">gold</a> prices advanced from a little over $1,000 an ounce in 2008 to over $2,000 an ounce in 2011. There is a historical tendency for an inverse relationship between stocks and commodities; when the overall stock market is in a bear market, commodities tend to experience a bull market.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Mutual funds provide investors with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/101515/top-5-natural-resources-mutual-funds.asp">easy exposure to the commodities markets</a> while avoiding the complications and additional risks of directly trading highly leveraged commodity <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a>. Commodity mutual funds typically invest in both the stocks of companies involved in commodities, such as mining companies, and in commodities proper. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> One advantage of this approach to commodity investing is that commodity mutual funds may perform well even when commodity prices overall are not. Mining company stocks may rise even during a period when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spotprice.asp">spot price</a> of the mined commodity is falling. Other factors in addition to commodity prices that impact the stock prices of companies in commodities-related businesses include the companies' debt and cash flow situations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_9-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_10-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Investing in commodity mutual funds is a great way to diversify a portfolio of stocks and bonds.</li><li>Commodity mutual funds can also act as a hedge against inflation depending on the specific commodity.</li><li>Mutual funds are a great way to gain exposure to commodities without actually having to purchase a physical commodity or other complicated instruments, such as futures or options.</li><li>Commodity mutual funds can still perform well even if some of the underlying commodities are not.</li><li>Three commodity mutual funds for consideration include Gabelli Gold Fund Class A (GLDAX), Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX), and BlackRock Commodity Strategies (BICSX).</li></ul></div></div></div> <span class="heading-toc" id="toc-1-gabelli-gold-fund-class-a-gldax"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> 1. Gabelli Gold Fund Class A (GLDAX) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The Gabelli Gold Fund Class A is a good mutual fund for investors specifically seeking exposure to the gold and precious metals markets. Launched by Gabelli Funds in 1994, its primary investment aim is long-term capital growth.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Under ordinary circumstances, at least 80% of the fund's assets are invested, along with borrowed capital for investment, in both U.S. domestic stocks and foreign stocks of companies principally engaged in gold-related business operations.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The fund manager looks for gold-related stocks that are currently undervalued and that have above-average growth potential. A substantial portion of assets may be dedicated to foreign stocks since many of the major gold-mining companies are headquartered outside the United States. Any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/033015/there-difference-between-capital-gains-and-dividend-income.asp">dividends or capital gains</a> are distributed annually.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> As of Dec. 31, 2021, the top holdings are metals and mining companies, such as Newmont Corp. (9.2% of holdings), Franco-Nevada (7.2%), Wheaton Precious Metals (5.7%), and Barrick Gold (5.6%). Investments are concentrated in North America, making up 71.2% of the portfolio.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> As of March 14, 2022, the fund has assets of $422 million, an expense ratio of 1.48%, a one-year return of 16.69%, a five-year return of 10.13%, and a 10-year return of -0.41%.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The fund appeals to those investors seeking long-term goals, like retirement, and if the risk appetite is higher, with the understanding that the payoff is in long-term returns.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-2-invesco-balanced-risk-commodity-strategy-fund-class-a-brcax"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> 2. Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The Invesco Balanced-Risk Commodity Strategy Fund Class A offers investors a broader basket exposure to the total commodities market. This fund launched in 2010 and has an investment goal of maximum <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/returnoninvestment.asp">return on investment</a> (ROI).<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The fund's assets are typically invested in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> and other commodity-based investment instruments that are expected to reflect the overall performance of the underlying commodities and that provide exposure to four of the major commodity market segments.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Those segments are precious and industrial metals, energy, and agriculture. Such investments commonly include futures and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/optioninvestor/07/swaps.asp">swap</a> agreements. The fund also invests in U.S. Treasury securities and debt securities of other countries. The fund may also make use of investments in commodity-based <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange traded funds</a> (ETFs) or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etn.asp">exchange traded notes</a> (ETNs). Capital gains or dividends are distributed annually.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Top holdings include gold 2.5x index Citi 01 (7.97% of holdings), soybean futures (7.58%), XB gasoline RBOB future (6.52%), WRI roll yield BARC ER swap (6.05%), and aluminum MACQ Dynamic ER swap (5.30%).<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> As of Feb. 28, 2022, the fund has assets of $1.24 billion. It has an expense ratio of 1.40%, a one-year return of 19.85%, a five-year return of 5.43%, and a 10-year return of -1.71%.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="6"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-3-blackrock-commodity-strategies-fund-bicsx"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> 3. BlackRock Commodity Strategies Fund (BICSX) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The BlackRock Commodity Strategies Fund, launched by BlackRock in 2011, offers investors exposure to four principal commodity groups: energy, precious metals, industrial metals, and agriculture.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> The fund's investment aim is long-term capital appreciation. The fund implements two basic strategies to achieve the fund's stated investment goal of capital appreciation. These strategies are (1) commodity-linked derivatives and (2) equity investments in commodity-related companies including mining, energy, and agricultural companies. The fund is invested in U.S. domestic and foreign stocks.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_40-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_41-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>BlackRock is the largest asset manager in the world in terms of assets managed.<span class="ql-inline-citation" data-cite="8"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Top holdings include Chevron (2.8% of holdings), Shell (2.27%), Total Energies (1.77%), ConocoPhillips (1.48%), and Exxon (1.35%).<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> As of March 14, 2022, the fund has assets of $2.2 billion, an expense ratio of 0.72%, a one-year return of 26.54%, a five-year return of 8.08%, and a 10-year return of 0.21%.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-what-are-commodity-mutual-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Commodity Mutual Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Commodity mutual funds are investment funds that seek exposure to commodities. These funds typically invest in a basket of commodities, with exposure to energy, agriculture, and metals. The investment strategy for each commodity mutual fund differs, with funds seeking to hold the physical commodities, some investing in futures, and others investing in commodity-related companies.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_48-0"><span class="heading-toc" id="toc-are-commodities-high-risk"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Commodities High Risk?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Investing in commodities is typically higher risk than investing in stocks and bonds. The commodities markets are typically volatile, complex, and require experience in understanding and trading. Much of commodity trading is speculative, therefore best suited for investors with a high risk tolerance. Commodity mutual funds or exchange traded funds can provide investors with exposure to commodities on a lower-risk basis.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_50-0"><span class="heading-toc" id="toc-should-i-invest-in-commodities"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should I Invest in Commodities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Investing in commodities can be a great way to diversify your portfolio, especially if it is concentrated in equities and bonds. Commodities have a low correlation to stocks and bonds and, therefore, can act as a hedge to downturns in the market. That being said, commodities can be riskier, and less experienced investors may be better off gaining exposure to commodities through mutual funds or exchange traded funds.</p></div> </div></div>

Investing in [commodity](https://www.investopedia.com/terms/c/commodity.asp) mutual funds is one of the best means of [hedging](https://www.investopedia.com/terms/h/hedge.asp) a portfolio that is otherwise dominated by stocks against unexpected financial or political crises or ordinary economic downturns. For example, in the wake of the [Great Recession](https://www.investopedia.com/terms/g/great-recession.asp), during the late 2000s into the early 2010s, [gold](https://www.investopedia.com/articles/economics/09/why-gold-matters.asp) prices advanced from a little over $1,000 an ounce in 2008 to over $2,000 an ounce in 2011. There is a historical tendency for an inverse relationship between stocks and commodities; when the overall stock market is in a bear market, commodities tend to experience a bull market. Mutual funds provide investors with [easy exposure to the commodities markets](https://www.investopedia.com/articles/investing/101515/top-5-natural-resources-mutual-funds.asp) while avoiding the complications and additional risks of directly trading highly leveraged commodity [futures](https://www.investopedia.com/terms/f/futures.asp). Commodity mutual funds typically invest in both the stocks of companies involved in commodities, such as mining companies, and in commodities proper. One advantage of this approach to commodity investing is that commodity mutual funds may perform well even when commodity prices overall are not. Mining company stocks may rise even during a period when the [spot price](https://www.investopedia.com/terms/s/spotprice.asp) of the mined commodity is falling. Other factors in addition to commodity prices that impact the stock prices of companies in commodities-related businesses include the companies' debt and cash flow situations. ### Key Takeaways * Investing in commodity mutual funds is a great way to diversify a portfolio of stocks and bonds. * Commodity mutual funds can also act as a hedge against inflation depending on the specific commodity. * Mutual funds are a great way to gain exposure to commodities without actually having to purchase a physical commodity or other complicated instruments, such as futures or options. * Commodity mutual funds can still perform well even if some of the underlying commodities are not. * Three commodity mutual funds for consideration include Gabelli Gold Fund Class A (GLDAX), Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX), and BlackRock Commodity Strategies (BICSX). ## 1. Gabelli Gold Fund Class A (GLDAX) The Gabelli Gold Fund Class A is a good mutual fund for investors specifically seeking exposure to the gold and precious metals markets. Launched by Gabelli Funds in 1994, its primary investment aim is long-term capital growth. Under ordinary circumstances, at least 80% of the fund's assets are invested, along with borrowed capital for investment, in both U.S. domestic stocks and foreign stocks of companies principally engaged in gold-related business operations. The fund manager looks for gold-related stocks that are currently undervalued and that have above-average growth potential. A substantial portion of assets may be dedicated to foreign stocks since many of the major gold-mining companies are headquartered outside the United States. Any [dividends or capital gains](https://www.investopedia.com/ask/answers/033015/there-difference-between-capital-gains-and-dividend-income.asp) are distributed annually. As of Dec. 31, 2021, the top holdings are metals and mining companies, such as Newmont Corp. (9.2% of holdings), Franco-Nevada (7.2%), Wheaton Precious Metals (5.7%), and Barrick Gold (5.6%). Investments are concentrated in North America, making up 71.2% of the portfolio. As of March 14, 2022, the fund has assets of $422 million, an expense ratio of 1.48%, a one-year return of 16.69%, a five-year return of 10.13%, and a 10-year return of -0.41%. The fund appeals to those investors seeking long-term goals, like retirement, and if the risk appetite is higher, with the understanding that the payoff is in long-term returns.  ## 2. Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX) The Invesco Balanced-Risk Commodity Strategy Fund Class A offers investors a broader basket exposure to the total commodities market. This fund launched in 2010 and has an investment goal of maximum [return on investment](https://www.investopedia.com/terms/r/returnoninvestment.asp) (ROI). The fund's assets are typically invested in [derivatives](https://www.investopedia.com/terms/d/derivative.asp) and other commodity-based investment instruments that are expected to reflect the overall performance of the underlying commodities and that provide exposure to four of the major commodity market segments. Those segments are precious and industrial metals, energy, and agriculture. Such investments commonly include futures and [swap](https://www.investopedia.com/articles/optioninvestor/07/swaps.asp) agreements. The fund also invests in U.S. Treasury securities and debt securities of other countries. The fund may also make use of investments in commodity-based [exchange traded funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs) or [exchange traded notes](https://www.investopedia.com/terms/e/etn.asp) (ETNs). Capital gains or dividends are distributed annually. Top holdings include gold 2.5x index Citi 01 (7.97% of holdings), soybean futures (7.58%), XB gasoline RBOB future (6.52%), WRI roll yield BARC ER swap (6.05%), and aluminum MACQ Dynamic ER swap (5.30%). As of Feb. 28, 2022, the fund has assets of $1.24 billion. It has an expense ratio of 1.40%, a one-year return of 19.85%, a five-year return of 5.43%, and a 10-year return of -1.71%. ## 3. BlackRock Commodity Strategies Fund (BICSX) The BlackRock Commodity Strategies Fund, launched by BlackRock in 2011, offers investors exposure to four principal commodity groups: energy, precious metals, industrial metals, and agriculture. The fund's investment aim is long-term capital appreciation. The fund implements two basic strategies to achieve the fund's stated investment goal of capital appreciation. These strategies are (1) commodity-linked derivatives and (2) equity investments in commodity-related companies including mining, energy, and agricultural companies. The fund is invested in U.S. domestic and foreign stocks. ### BlackRock is the largest asset manager in the world in terms of assets managed. Top holdings include Chevron (2.8% of holdings), Shell (2.27%), Total Energies (1.77%), ConocoPhillips (1.48%), and Exxon (1.35%). As of March 14, 2022, the fund has assets of $2.2 billion, an expense ratio of 0.72%, a one-year return of 26.54%, a five-year return of 8.08%, and a 10-year return of 0.21%. ## What Are Commodity Mutual Funds? Commodity mutual funds are investment funds that seek exposure to commodities. These funds typically invest in a basket of commodities, with exposure to energy, agriculture, and metals. The investment strategy for each commodity mutual fund differs, with funds seeking to hold the physical commodities, some investing in futures, and others investing in commodity-related companies. ## Are Commodities High Risk? Investing in commodities is typically higher risk than investing in stocks and bonds. The commodities markets are typically volatile, complex, and require experience in understanding and trading. Much of commodity trading is speculative, therefore best suited for investors with a high risk tolerance. Commodity mutual funds or exchange traded funds can provide investors with exposure to commodities on a lower-risk basis. ## Should I Invest in Commodities? Investing in commodities can be a great way to diversify your portfolio, especially if it is concentrated in equities and bonds. Commodities have a low correlation to stocks and bonds and, therefore, can act as a hedge to downturns in the market. That being said, commodities can be riskier, and less experienced investors may be better off gaining exposure to commodities through mutual funds or exchange traded funds.

Investing in commodity mutual funds is one of the best means of hedging a portfolio that is otherwise dominated by stocks against unexpected financial or political crises or ordinary economic downturns. For example, in the wake of the Great Recession, during the late 2000s into the early 2010s, gold prices advanced from a little over $1,000 an ounce in 2008 to over $2,000 an ounce in 2011. There is a historical tendency for an inverse relationship between stocks and commodities; when the overall stock market is in a bear market, commodities tend to experience a bull market. Mutual funds provide investors with easy exposure to the commodities markets while avoiding the complications and additional risks of directly trading highly leveraged commodity futures. Commodity mutual funds typically invest in both the stocks of companies involved in commodities, such as mining companies, and in commodities proper. One advantage of this approach to commodity investing is that commodity mutual funds may perform well even when commodity prices overall are not. Mining company stocks may rise even during a period when the spot price of the mined commodity is falling. Other factors in addition to commodity prices that impact the stock prices of companies in commodities-related businesses include the companies' debt and cash flow situations. Key Takeaways Investing in commodity mutual funds is a great way to diversify a portfolio of stocks and bonds.Commodity mutual funds can also act as a hedge against inflation depending on the specific commodity.Mutual funds are a great way to gain exposure to commodities without actually having to purchase a physical commodity or other complicated instruments, such as futures or options.Commodity mutual funds can still perform well even if some of the underlying commodities are not.Three commodity mutual funds for consideration include Gabelli Gold Fund Class A (GLDAX), Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX), and BlackRock Commodity Strategies (BICSX). 1. Gabelli Gold Fund Class A (GLDAX) The Gabelli Gold Fund Class A is a good mutual fund for investors specifically seeking exposure to the gold and precious metals markets. Launched by Gabelli Funds in 1994, its primary investment aim is long-term capital growth. Under ordinary circumstances, at least 80% of the fund's assets are invested, along with borrowed capital for investment, in both U.S. domestic stocks and foreign stocks of companies principally engaged in gold-related business operations. The fund manager looks for gold-related stocks that are currently undervalued and that have above-average growth potential. A substantial portion of assets may be dedicated to foreign stocks since many of the major gold-mining companies are headquartered outside the United States. Any dividends or capital gains are distributed annually. As of Dec. 31, 2021, the top holdings are metals and mining companies, such as Newmont Corp. (9.2% of holdings), Franco-Nevada (7.2%), Wheaton Precious Metals (5.7%), and Barrick Gold (5.6%). Investments are concentrated in North America, making up 71.2% of the portfolio. As of March 14, 2022, the fund has assets of $422 million, an expense ratio of 1.48%, a one-year return of 16.69%, a five-year return of 10.13%, and a 10-year return of -0.41%. The fund appeals to those investors seeking long-term goals, like retirement, and if the risk appetite is higher, with the understanding that the payoff is in long-term returns.  2. Invesco Balanced-Risk Commodity Strategy Fund Class A (BRCAX) The Invesco Balanced-Risk Commodity Strategy Fund Class A offers investors a broader basket exposure to the total commodities market. This fund launched in 2010 and has an investment goal of maximum return on investment (ROI). The fund's assets are typically invested in derivatives and other commodity-based investment instruments that are expected to reflect the overall performance of the underlying commodities and that provide exposure to four of the major commodity market segments. Those segments are precious and industrial metals, energy, and agriculture. Such investments commonly include futures and swap agreements. The fund also invests in U.S. Treasury securities and debt securities of other countries. The fund may also make use of investments in commodity-based exchange traded funds (ETFs) or exchange traded notes (ETNs). Capital gains or dividends are distributed annually. Top holdings include gold 2.5x index Citi 01 (7.97% of holdings), soybean futures (7.58%), XB gasoline RBOB future (6.52%), WRI roll yield BARC ER swap (6.05%), and aluminum MACQ Dynamic ER swap (5.30%). As of Feb. 28, 2022, the fund has assets of $1.24 billion. It has an expense ratio of 1.40%, a one-year return of 19.85%, a five-year return of 5.43%, and a 10-year return of -1.71%. 3. BlackRock Commodity Strategies Fund (BICSX) The BlackRock Commodity Strategies Fund, launched by BlackRock in 2011, offers investors exposure to four principal commodity groups: energy, precious metals, industrial metals, and agriculture. The fund's investment aim is long-term capital appreciation. The fund implements two basic strategies to achieve the fund's stated investment goal of capital appreciation. These strategies are (1) commodity-linked derivatives and (2) equity investments in commodity-related companies including mining, energy, and agricultural companies. The fund is invested in U.S. domestic and foreign stocks. BlackRock is the largest asset manager in the world in terms of assets managed. Top holdings include Chevron (2.8% of holdings), Shell (2.27%), Total Energies (1.77%), ConocoPhillips (1.48%), and Exxon (1.35%). As of March 14, 2022, the fund has assets of $2.2 billion, an expense ratio of 0.72%, a one-year return of 26.54%, a five-year return of 8.08%, and a 10-year return of 0.21%. What Are Commodity Mutual Funds? Commodity mutual funds are investment funds that seek exposure to commodities. These funds typically invest in a basket of commodities, with exposure to energy, agriculture, and metals. The investment strategy for each commodity mutual fund differs, with funds seeking to hold the physical commodities, some investing in futures, and others investing in commodity-related companies. Are Commodities High Risk? Investing in commodities is typically higher risk than investing in stocks and bonds. The commodities markets are typically volatile, complex, and require experience in understanding and trading. Much of commodity trading is speculative, therefore best suited for investors with a high risk tolerance. Commodity mutual funds or exchange traded funds can provide investors with exposure to commodities on a lower-risk basis. Should I Invest in Commodities? Investing in commodities can be a great way to diversify your portfolio, especially if it is concentrated in equities and bonds. Commodities have a low correlation to stocks and bonds and, therefore, can act as a hedge to downturns in the market. That being said, commodities can be riskier, and less experienced investors may be better off gaining exposure to commodities through mutual funds or exchange traded funds.

https://www.investopedia.com/best-auto-loans-for-fair-credit-7486579

Best Auto Loans for Fair Credit of 2024

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Car prices are still sky-high so the majority of borrowers will need to use an auto loan to purchase a new or used vehicle. If you have fair credit, meaning a credit score of 580 to 669, you may find that financing a vehicle is especially expensive.<span class="ql-inline-citation" data-cite="1"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> However, you may be able to find lower rates and better terms by shopping around and requesting quotes from multiple lenders. To help you find the right loan, we reviewed 25 popular lenders based on their rates, fees, loan amounts, borrower/vehicle qualifications (including credit requirements), and more. See the best auto loans for fair credit below. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Auto Loans for Fair Credit of 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Most Borrowers:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> AUTOPAY</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Fast Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://fiona.com/partner/investopedialoans/loans" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> LightStream</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Credit Union:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ftfcu&amp;bwid_id=6385e804ca097c71ee1e23c1" rel="nofollow noskim noopener nocaes" target="_blank"> First Tech FCU</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Focus on Used Car Loans:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=carmax&amp;bwid_id=6385e804ca097c71ee1e23c1" rel="nofollow noskim noopener nocaes" target="_blank"> CarMax</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for High Loan-to-Value Ratio:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.openroadlending.com/applyone/?aid=899&amp;opt_1=best-auto-loan-rates-4173489" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> OpenRoad Lending</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Full Car Buying Experience:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&amp;subid2=n9c8ce6e1b0b84329a1aec356f39b772c18" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Carvana</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Car loan companies consider applicants with fair credit to be nonprime or subprime borrowers. Those distinctions mean you’ll pay much higher interest rates than those with very good or excellent credit. Average rates for those with fair credit can be in the double digits for new and used car loans.<span class="ql-inline-citation" data-cite="2"></span> If you’re having trouble qualifying, consider the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-car-loans-for-bad-credit-7372351">best bad credit auto loans</a> for more options.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_1-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_1-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_1-0"> Best Auto Loans for Fair Credit of 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_1-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="Expand" id="mntl-toc-toggle__btn_1-0"> Expand</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Auto Loans for Fair Credit of 2024" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Auto Loans for Fair Credit of 2024</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-AUTOPAY" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-AUTOPAY" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-most-borrowers-autopay" rel="nocaes"> <span class="link__wrapper">AUTOPAY</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-LightStream" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-LightStream" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-fast-loans-lightstream" rel="nocaes"> <span class="link__wrapper">LightStream</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-First Tech FCU" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-First Tech FCU" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-credit-union-first-tech-fcu" rel="nocaes"> <span class="link__wrapper">First Tech FCU</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-CarMax" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-CarMax" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-focus-on-used-car-loans-carmax" rel="nocaes"> <span class="link__wrapper">CarMax</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-OpenRoad Lending" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-OpenRoad Lending" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-high-loan-to-value-ratio-openroad-lending" rel="nocaes"> <span class="link__wrapper">OpenRoad Lending</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Carvana" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Carvana" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-full-car-buying-experience-carvana" rel="nocaes"> <span class="link__wrapper">Carvana</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (3)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-guide-to-choosing-the-best-auto-loan-for-fair-credit" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">How to Choose</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Alternatives" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternatives-to-fair-credit-car-loans" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Alternatives</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Auto Loan Rates by Credit Score" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-auto-loan-rates-by-credit-score" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Auto Loan Rates by Credit Score</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faqs-e6ba5102-db60-4642-a9f0-0e86baf82b46" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">FAQs</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-for-most-borrowers-autopay"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Most Borrowers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> AUTOPAY</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 92px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="AutoPay" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/52p5kikdi2NHO5WyCy8OmTt0Nzo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Autopay-ec4375470de24d2f8aca313b8f153804.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="AutoPay" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/52p5kikdi2NHO5WyCy8OmTt0Nzo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Autopay-ec4375470de24d2f8aca313b8f153804.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p> AutoPay</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-1"> <li><strong>Used APR Range:</strong> As low as 5.69%<span class="ql-inline-citation" data-cite="12"></span></li><li><strong>Used Loan Amounts:</strong> $2,500–$100,000<span class="ql-inline-citation" data-cite="13"></span></li><li><strong>Used Loan Terms</strong>: 2–8 years<span class="ql-inline-citation" data-cite="14"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-4"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Minimum recommended credit score of 500, according to customer support</p></li> <li><p>Offers financing for new and used cars</p></li> <li><p>Allows borrowers to refinance existing loans</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Some partner lenders charge origination fees</p></li> <li><p>Limited information about rates and fees online</p></li> <li><p>Unclear eligibility requirements</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> Whether you’re buying a new car at a dealership or looking to refinance an existing loan, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/autopay-auto-loans-review-7643912">AUTOPAY</a> has some of the best auto loans for fair credit. AUTOPAY connects borrowers with partner lenders that offer loans for new and used car purchases and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-time-to-refinance-car-loan-7373577">auto loan refinancing</a>.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> The company works with a wide range of credit levels, but its site has limited information about its partners and rates online, and it doesn’t disclose all of its eligibility requirements. However, AUTOPAY does have pre-qualification options for purchase loans, so you can see what rates are available without affecting your credit. <br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-8"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Use our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/car-loan-calculator-5084761">auto loan payment and interest calculator</a> to estimate your monthly loan payments and overall repayment cost with different rates and terms.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> <li>Recommened credit score of 500 or higher</li><li>Available in all U.S. states and Washington, D.C.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> <li><strong>Maximum accepted vehicle age: </strong>Not disclosed</li><li><strong>Maximum accepted mileage:</strong> Not disclosed</li><li><strong>Maximum loan-to-value ratio:</strong> Not disclosed</li><li><strong>Allows private-party vehicle purchases:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-fast-loans-lightstream"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Fast Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> LightStream</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-13" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="LightStream" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/7SpNqTXYYg0vvZrK_BPrtbpK_HA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Light_Stream_Loans-c579669985824613a0b8a011f6bf5436.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="LightStream" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/7SpNqTXYYg0vvZrK_BPrtbpK_HA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Light_Stream_Loans-c579669985824613a0b8a011f6bf5436.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>LightStream</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> <li><strong>Used APR Range:</strong> 7.24%–15.44%* with AutoPay</li><li><strong>Used Loan Amounts:</strong> $5,000–$100,000</li><li><strong>Used Loan Terms</strong>: 24–144 months<span class="ql-inline-citation" data-cite="15"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-15"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://fiona.com/partner/investopedialoans/loans" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-17"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Same-day loan funding</p></li> <li><p>No origination or late fees</p></li> <li><p>Unsecured loan</p></li> <li><p>No vehicle restrictions</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Relatively high credit score minimum</p></li> <li><p>Higher than average rates</p></li> <li><p>No pre-qualification tool</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-19"> For those who need money fast to buy a new or used car, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lightstream-auto-loans-review-7853022">LightStream</a> could be a good choice. The lender allows you to borrow up to $100,000, and you can receive the loan funds as soon as the same day you apply.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> LightStream disburses the loan funds directly to your bank account, so you can buy your chosen vehicle in cash without having to work with a dealer’s financing department or going through any other hurdles.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Unlike the other lenders on our list, LightStream provides <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsecuredloan.asp">unsecured loans</a>, so the rates are higher than you typically see for car loans. But the tradeoffs are that you don’t have to put up your car as collateral, and LightStream has no restrictions on vehicles; you can buy any car you want, regardless of how old it is or how many miles are on the odometer.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> LightStream doesn’t have a pre-qualification tool, and it generally requires good to excellent credit. However, it does allow borrowers to apply with co-applicants, so you can add a joint applicant to improve your chances of qualifying for a loan.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> <li>Minimum recommended credit score of 680<span class="ql-inline-citation" data-cite="16"></span></li> <li>Must be the age of majority in your state</li> <li>Must have a verifiable source of income</li> <li>LightStream also takes into consideration your credit history, assets, and debt-to-income ratio (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081214/whats-considered-be-good-debttoincome-dti-ratio.asp">DTI</a>)<span class="ql-inline-citation" data-cite="3"></span> </li> <li>Available in all 50 states and Washington, D.C.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> <li><strong>Maximum accepted vehicle age: </strong>No maximum</li><li><strong>Maximum accepted mileage:</strong> No maximum</li><li><strong>Maximum loan-to-value ratio:</strong> No maximum</li><li><strong>Allows private-party vehicle purchases:</strong> Yes</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-credit-union-first-tech-fcu"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Credit Union</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> First Tech FCU</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-27" style="--imgWidth: 558px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="First Tech Federal Credit Union" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/s12dHrT2MxNWk4EHwGbgKghwJic=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/first-tech-federal-credit-union-e4e68750b1e340658a72a5c0861ccacc.png" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="First Tech Federal Credit Union" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/s12dHrT2MxNWk4EHwGbgKghwJic=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/first-tech-federal-credit-union-e4e68750b1e340658a72a5c0861ccacc.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p>First Tech Federal Credit Union</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-28"> <li><strong>Used APR Range:</strong> Changes daily, depending on location</li><li><strong>Used Loan Amounts:</strong> $1,000–$300,000<span class="ql-inline-citation" data-cite="18"></span></li><li><strong>Used Loan Terms</strong>: 12–84 months<span class="ql-inline-citation" data-cite="17"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-29"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ftfcu&amp;bwid_id=6385e804ca097c71ee1e23c1" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-31"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No origination fees</p></li> <li><p>Financing for new and used cars </p></li> <li><p>Financing for other vehicles available, like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-motorcycle-loans-5080905">motorcycles</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-rv-loan-rates-5082108">RVs</a></p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No pre-qualification for longer loan terms</p></li> <li><p>Higher rates for used vehicles</p></li> <li><p>Credit union membership required</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-unions-vs-banks-4590218">Credit unions</a> are non-profit organizations that often offer lower rates and fees than other lenders. And when it comes to car loans, First Tech Federal Credit Union (FCU) stands out due to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/first-tech-fcu-auto-loans-review-7965780">its loan options</a>. The credit union has options for financing new and used cars, along with auto loan refinancing.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-34"> With First Tech FCU, you can finance up to $300,000 and take up to 84 months to repay your loan.<span class="ql-inline-citation" data-cite="18"></span> Unlike many other lenders, First Tech FCU doesn’t charge origination fees, and it also offers financing for motorcycles, recreational vehicles, campers, scooters, boats, and more. First Tech provides car-buying services for its members that make it easier to buy and sell vehicles and can save you time at the dealership.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-35"> As a credit union, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/first-tech-fcu-auto-loans-review-7965780">First Tech FCU’s auto loans</a> are only available to members. However, its membership criteria aren’t strict; you can join by becoming a member of the Computer History Museum or the Financial Fitness Association for a small fee.<span class="ql-inline-citation" data-cite="4"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> <li>Available in all 50 states and Washington, D.C.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> <li><strong>Maximum accepted vehicle age: </strong>10 years<span class="ql-inline-citation" data-cite="17"></span></li><li><strong>Maximum accepted mileage:</strong> Not disclosed</li><li><strong>Maximum loan-to-value ratio:</strong> Not disclosed</li><li><strong>Allows private-party vehicle purchases:</strong> Not disclosed</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-focus-on-used-car-loans-carmax"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Focus on Used Car Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> CarMax</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-40" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="CarMax logo" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/XBDIDaJboTvyjbg3o_ZyjWfjM3M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Carmex-logo-b7b8c559ed564fe8906b5d4558438eca.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="CarMax logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/XBDIDaJboTvyjbg3o_ZyjWfjM3M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Carmex-logo-b7b8c559ed564fe8906b5d4558438eca.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>CarMax</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> <li><strong>Used APR Range:</strong> Not disclosed</li><li><strong>Used Loan Amounts:</strong> Not disclosed</li><li><strong>Used Loan Terms</strong>: 36–72 months<span class="ql-inline-citation" data-cite="19"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-42"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=carmax&amp;bwid_id=6385e804ca097c71ee1e23c1" id="button_1-0-3" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-44"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Will work with most credit profiles</p></li> <li><p>Allows co-buyers</p></li> <li><p>Three-day payoff option</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Can only be used for cars bought through CarMax</p></li> <li><p>Vehicles may be more expensive</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> CarMax is the nation’s largest retailer of used vehicles.<span class="ql-inline-citation" data-cite="31"></span> Through CarMax you can buy used vehicles that have passed the company’s inspection and are backed by a 90-day/4,000-mile limited warranty.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/carmax-auto-loan-review-7642717">CarMax Auto Finance</a> is the company’s own financing program. It can only be used to finance cars purchased through CarMax, but the company says it works with borrowers at every credit level. Even if you have poor to fair credit, you can likely qualify for a loan.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-48"> Average CarMax vehicles may be more expensive than you’d expect for used cars; the average sales price of CarMax vehicles was over $28,000 as of 2023.<span class="ql-inline-citation" data-cite="20"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-49"> Though the company will work with borrowers with less-than-stellar credit, those with poor to fair credit should expect to pay higher rates; using the company’s calculator tool, we found that rates for borrowers with fair credit were in the double digits.<span class="ql-inline-citation" data-cite="6"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-50"> However, if you buy a car and later find a better auto loan offer elsewhere, CarMax has a three-day payoff option. You have three days after purchasing your vehicle to return the funds and replace the loan with a new one at no cost.<span class="ql-inline-citation" data-cite="21"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-52"> <li>Can lend to most credit profiles</li><li>Vehicles and loans are available in 41 states, excluding Alaska, Arkansas, Hawaii, Montana, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming.<span class="ql-inline-citation" data-cite="22"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> <li><strong>Maximum loan-to-value ratio:</strong> Not disclosed</li><li><strong>Maximum accepted mileage:</strong> None (Any vehicle CarMax sells)</li><li><strong>Maximum accepted age of the vehicle:</strong> None (vehicle must be purchased through CarMax)</li><li><strong>Private-party vehicle purchases:</strong> No</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="5"> <span class="tabbed-sc-block__text">Customer Reviews</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="5"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> <li>“I've been satisfied with the products that I've gotten there. I've bought, and my family has bought more than one car from them, and I've got friends who have, so I think it's pretty well-run. And I've been happy with the warranties on the repairs two cars ago.”</li><li>“...Over the years I started buying from CarMax, maybe about 15 years ago, and had used the same salesman, usually. But this time it was during COVID when I got the car and they were trying to do everything that they could online. They would have even brought the car to me. If I picked it online they would have driven it to me and had me fill [out] the paperwork in my house. But because I was in a different state, they didn't do that.”</li><li>“If I was going to do something differently, I'd probably check and see if [my] credit union had lower interest rates. … But that's the only thing I would do differently, is … go for something with a lower interest rate.”</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-high-loan-to-value-ratio-openroad-lending"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for High Loan-to-Value Ratio</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> OpenRoad Lending</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-57" style="--imgWidth: 844px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="OpenRoad Lending" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/mY3JtoavOKV1_P-1mpdWu50Gm7M=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Open_Road_Lending-37f22388fed54364bf8922b784cee9b9.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="OpenRoad Lending" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/mY3JtoavOKV1_P-1mpdWu50Gm7M=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Open_Road_Lending-37f22388fed54364bf8922b784cee9b9.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> OpenRoad Lending</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-low-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-58"> <li><strong>Refinance APR Range:</strong> Starting at 1.99%<span class="ql-inline-citation" data-cite="23"></span></li><li><strong>Refinance Loan Amounts:</strong> $7,500–$100,000<span class="ql-inline-citation" data-cite="24"></span></li><li><strong>Refinance Loan Terms</strong>: Up to 24–72 months<span class="ql-inline-citation" data-cite="23"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-59"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.openroadlending.com/applyone/?aid=899&amp;opt_1=best-auto-loan-rates-4173489" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-61"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>LTV up to 175%</p></li> <li><p>Low potential rates</p></li> <li><p>Low income requirement</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Does not offer purchase loans</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-63"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/openroad-lending-auto-loan-review-7642719">OpenRoad Lending</a> doesn’t offer loans for purchasing new or used cars; instead, it specializes in auto loan refinancing.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-64"> Generally, the company’s maximum <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loantovalue.asp">loan-to-value ratio (LTV)</a> is 120%. But if you have good to excellent credit, you may qualify for an LTV as high as 175%—far higher than other lenders allow.<span class="ql-inline-citation" data-cite="24"></span> With a higher LTV, you can refinance your existing loan by taking out a new loan for more than you owe. The lender will give you the difference to use as you see fit. For example, you could use the extra funds to consolidate debt.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-65"> OpenRoad Lending boasts low potential rates, and you can have as long as 72 months to repay your loan.<span class="ql-inline-citation" data-cite="23"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-66"> However, not all vehicles and borrowers are eligible. OpenRoad Lending doesn’t operate nationwide, and those who are self-employed cannot qualify for a loan.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-68"> <li>Must be at least 18 years old</li><li>Available to residents in 39 U.S. states<span class="ql-inline-citation" data-cite="25"></span></li><li>You must have a minimum gross monthly income of at least $1,500 (income from Uber or similar Taxi services does not qualify)<span class="ql-inline-citation" data-cite="26"></span></li><li>Can only refinance auto loans issued by NCUA- or FDIC-insured lenders such as credit unions and banks</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> <li><strong>Maximum accepted vehicle age: </strong>Eight model years old</li><li><strong>Maximum accepted mileage:</strong> 140,000 miles<span class="ql-inline-citation" data-cite="26"></span></li><li><strong>Maximum loan-to-value ratio:</strong> 175%</li><li><strong>Allows private-party vehicle purchases:</strong> No</li><li><strong>Vehicles excluded: </strong>Commercial vehicles, motorcycles, recreational vehicles, trucks or vehicles larger than 3/4 ton, vehicles that are no longer being manufactured, brands such as Oldsmobile, Daewoo, Smart Cars, and Isuzu.<span class="ql-inline-citation" data-cite="26"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-full-car-buying-experience-carvana"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Full Car Buying Experience</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Carvana</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-71" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Carvana" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/0JHlYzUFrOmbNXUovnkdW_zFIJA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Carvana-0034e95a1b8e404ca78217f1119b0026.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Carvana" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/0JHlYzUFrOmbNXUovnkdW_zFIJA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Carvana-0034e95a1b8e404ca78217f1119b0026.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Carvana</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> <li><strong>APR Range:</strong> Not disclosed</li><li><strong>Loan Amounts:</strong> Not disclosed</li><li><strong>Loan Terms</strong>: 36-72 months<span class="ql-inline-citation" data-cite="27"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-73"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&amp;subid2=n9c8ce6e1b0b84329a1aec356f39b772c18" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Apply Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> </div> <div class="tabbed-sc-block tabbed-sc-block--no-tabs tabbed-sc-block--full-accordion" data-click-action="OnPageClick-Product Tab Click" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard"> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-75"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Accepts borrowers with poor credit </p></li> <li><p>Pre-approvals valid for 30 days</p></li> <li><p>Buy vehicles entirely online</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Financing can only be used at Carvana</p></li> <li><p>Rates are not advertised</p></li> <li><p>Co-signers are not allowed in some states</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Why We Chose It</span> </div> <div class="tabbed-sc-block__content js-tabbed-content is-active is-initial-load" data-tab-index="2"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-77"> If you’re looking for a used car and are overwhelmed by the idea of visiting multiple dealerships to find the right vehicle, Carvana may be a useful alternative. It’s a used car retailer that allows you to buy cars entirely through its website. You can opt to pick up your new vehicle at a Carvana location near you, but Carvana will also deliver vehicles right to your door (you can test-drive vehicles from a Carvana vending machine, too, if there’s one nearby).  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-78"> Carvana also <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/carvana-auto-loans-review-7965774">offers financing</a> for its vehicles. You can qualify for a loan even if you have poor credit, and the company has a pre-qualification tool you can use to check your eligibility and view loan options without affecting your credit score.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-79"> Carvana has very limited information about its loan rates and terms on its site. And if you intend to apply with another person, be aware that co-signers are only permitted in some states. <br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-80"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>Whether you’re shopping for an inexpensive, reliable vehicle for a teen or that classic muscle car you always dreamed of—1970 Chevelle SS, anyone?—using the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-used-car-sites-5094153">best used car websites</a> can help you find the perfect vehicle.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="3"> <span class="tabbed-sc-block__text">Borrower Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="3"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-82"> <li>Must be at least 18 years old</li><li>Minimum annual income of $5,100<span class="ql-inline-citation" data-cite="28"></span></li><li>Must not have any active bankruptcies </li><li>Available to residents in the 48 contiguous U.S. states<span class="ql-inline-citation" data-cite="29"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="4"> <span class="tabbed-sc-block__text">Vehicle Qualifications</span> </div> <div class="tabbed-sc-block__content js-tabbed-content" data-tab-index="4"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-84"> <li><strong>Maximum accepted vehicle age: </strong>Varies</li><li><strong>Maximum accepted mileage:</strong> Varies</li><li><strong>Maximum loan-to-value ratio:</strong> Not disclosed</li><li><strong>Allows private-party vehicle purchases:</strong> No; only for used cars bought through the Carvana platform</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> If your credit score is in the “fair” range, finding a car loan with competitive rates can be challenging. But lenders like AUTOPAY and First Tech FCU offer loans for new and used vehicles with low potential APRs and multiple loan term options.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> If you need funding quickly, LightStream may be a better choice. It disburses funds as soon as the same day you apply, and you can borrow up to $100,000 without any vehicle restrictions.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> Regardless of whether you want to buy a new vehicle or a used car, or you’re refinancing an existing loan, shop around and compare rates from several lenders to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-car-loan-7368513">find the best auto loans</a> for fair credit.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-guide-to-choosing-the-best-auto-loan-for-fair-credit"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-4"> <span class="mntl-sc-block-heading__text"> Guide to Choosing the Best Auto Loan for Fair Credit </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-5"> <span class="mntl-sc-block-subheading__text"> How to Compare Fair Credit Car Loans </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> There are many different lenders that cater to borrowers with fair credit. When shopping for a loan, consider the following factors:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> <li><strong>Source: </strong>Auto loans for fair credit can come from banks, credit unions, and certain car retailers, such as <a data-affiliate-link-rewriter="pub_param_1=${DOC_ID}&amp;pub_param_2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=carmax&amp;bwid_id=6385e804ca097c71ee1e23c1" rel="nofollow">CarMax</a> or <a data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&amp;subid2=n9c8ce6e1b0b84329a1aec356f39b772c18" rel="sponsored nofollow">Carvana</a>. Auto retailers may be the most convenient, since they allow you to finance through their platforms once you find the right car. But you may find lower rates elsewhere or by using a loan marketplace that allows you to get quotes from several lenders at once. </li> <li><strong><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">Annual percentage rate (APR)</a>:</strong> The APR is how much you’ll pay in interest and fees in a year expressed as a percentage, and it’s one of the most important factors when considering overall cost. The lower the APR, the less you’ll repay over the life of your loan. </li> <li><strong>Fees: </strong>Some lenders charge added fees, such as origination fees and prepayment penalties, that add to the overall cost of your loan. </li> <li><strong>Vehicle requirements: </strong>Auto loans often have some vehicle restrictions. For example, lenders may only allow you to buy a car with less than 100,000 miles, or that is less than 10 years old. </li> <li><strong>Loan terms: </strong>With car loans, typical repayment terms range from two to eight years. A longer term will give you a smaller monthly payment, but lenders usually charge higher APRs on longer terms, meaning you’ll pay more overall. </li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-8"> <span class="mntl-sc-block-subheading__text"> How to Qualify for an Auto Loan </span> </h3><!-- end: comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> Although borrower requirements vary by lender, you generally need to meet the following criteria:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> <li><strong>Credit: </strong>There are loans specifically for those with poor credit or limited credit histories, but lenders generally look for credit scores that are fair to excellent. If your score is at the lower end of the fair range—580 to 669—taking a few months to improve your credit can boost your chances of getting a loan with a relatively low rate. </li><li><strong>Income: </strong>Lenders usually require applicants to submit proof of income. You can satisfy that requirement by providing pay stubs or recent tax returns. </li><li><strong>DTI: </strong>Lenders consider your DTI to ensure you can afford the new loan payments. In many cases, the maximum DTI you can have and qualify for a loan is 40%. However, the lower the DTI, the better. </li><li><strong>Co-signer/co-borrower: </strong>If you have fair credit, adding a co-signer or co-borrower to your application can help you qualify for a loan and get a better rate than if you applied alone. Not all lenders allow co-signers, so be sure to check during the rate-shopping process.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-alternatives-to-fair-credit-car-loans"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> Alternatives to Fair Credit Car Loans </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-12"> If you’re not happy with the loan term you were quoted with a fair credit score, these alternatives may help you:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> <li><strong>Delay buying a car: </strong>Although delaying your planned purchase may not be ideal, it can be worth it over the long run. It gives you time to improve your credit by paying down debt and making your other payments on time, increasing your chances of qualifying for a loan with a lower rate later. </li> <li><strong>Larger down payment: </strong>Some lenders will offer better terms if you have a larger <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-much-down-payment-is-needed-for-a-car-5184453">down payment</a>. A down payment of 10% or 20% of the car’s purchase price may allow you to secure a lower rate. </li> <li><strong>Co-signed loan: </strong>If you have a parent, relative, or friend with a stable income and good credit, adding them as a co-signer could allow you to qualify for a loan with a lower APR. </li> <li><strong>Personal loans: </strong>Another alternative is to take out a personal loan to buy a car. Personal loans are typically unsecured, so they don’t use collateral, but they often have much higher rates than car loans.<span class="ql-inline-citation" data-cite="9"></span> See our picks for the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-personal-loans-for-bad-credit-4774349">best personal loans for bad credit</a> to review the leading options.<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-warning mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0-14"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>Beware of “no credit check” and “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buy-here-pay-here.asp">buy here, pay here</a>” dealers. They charge much higher rates—often, the rates are well into the double digits—and they also charge higher prices than the vehicle is worth.<span class="ql-inline-citation" data-cite="10"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-warning mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-auto-loan-rates-by-credit-score"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-15"> <span class="mntl-sc-block-heading__text"> Auto Loan Rates by Credit Score </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-16"> Car loan lenders assign risk distinctions to borrowers based on their credit and other factors. Generally, lenders use the following categories:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-17"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Category</b></th> <th><b>Credit Score Range</b></th> <th><b>Average APR for New Cars</b></th> <th><b>Average APR for Used Cars</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td>Super Prime</td> <td>781–850</td> <td>4.75%</td> <td>5.99%</td> </tr> <tr> <td>Prime</td> <td>661–780</td> <td>5.82%</td> <td>7.83%</td> </tr> <tr> <td>Nonprime</td> <td>601–660</td> <td>8.12%</td> <td>12.08%</td> </tr> <tr> <td>Subprime</td> <td>501–600</td> <td>10.79%</td> <td>17.46%</td> </tr> <tr> <td>Deep Subprime</td> <td>300–600</td> <td>13.42%</td> <td>20.62%</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-18"> <em>Source: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.experian.com/automotive/auto-credit-webinar-form" rel="sponsored nofollow">Experian</a> (subscription is required to access the report)</em> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-19"> Borrowers with fair credit, meaning a score between 580 and 669, would be in the subprime to prime categories.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0-20"> <span class="heading-toc" id="toc-faqs-e6ba5102-db60-4642-a9f0-0e86baf82b46"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">Can You Qualify for an Auto Loan With Fair Credit?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>Although it is easier to qualify for a car loan if you have good to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/800-plus-credit-score-how-to-make-the-most-of-it-4685008">excellent credit</a>, there are many lenders that will accept applicants with fair credit. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0" rel="sponsored nofollow">AUTOPAY</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.lightstream.com/?fact=19969&amp;subid=4846394" rel="sponsored nofollow">LightStream</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&amp;ts=investopedia&amp;p=ftfcu&amp;bwid_id=6385e804ca097c71ee1e23c1" rel="nofollow">First Tech FCU</a>, and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&amp;subid2=n9c8ce6e1b0b84329a1aec356f39b772c18" rel="sponsored nofollow">Carvana</a> are a few of the lenders that made it on our list.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Where Can You Get a Fair Credit Car Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Fair credit auto loans are available through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit unions</a>, banks, and online lenders. Some car retailers also offer their own financing programs and work with borrowers with less-than-perfect credit. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">Can You Get Cash-Out Refinancing With Fair Credit?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>You may be able to qualify for cash-out <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-auto-refinance-loans-5069118">auto refinancing</a> if you have fair credit. Lenders have different maximum loan-to-value ratios, with many offering up to 125% and some quite a bit higher—up to 175% for OpenRoad Lending. If you qualify for a cash-out refinance loan, you may be offered a lower loan amount and/or higher fees.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Is Considered Fair Credit for a Car Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>Fair credit for an auto loan usually means a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fico-credit-scores-explained-5072985">FICO credit score</a> of 580 to 669; depending on where you are in that range, you may be considered to have subprime, nonprime, or prime credit.<span class="ql-inline-citation" data-cite="30"></span><span class="ql-inline-citation" data-cite="1"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-21"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-22"> Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate providers, we collected hundreds of data points across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements, to ensure that our reviews help users make informed decisions for their borrowing needs. We also conducted a survey of 1,016 auto loan borrowers for attitudes and opinions about lenders and the loan process. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Mother and son examining new car in dealership" class="primary-image__image mntl-primary-image--blurry" height="2667" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/d1D5wfgUAA1dZ3xaBCU7G2NY3wA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg" srcset="https://www.investopedia.com/thmb/ZEF0vR_FA0X_AfVbv0q8aFr0YD8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPUAAAoHCwMIFhQSGQIKMikoJTAtLjgyLjU1NTI0OgAgSRIoXTo8QBlHdH9eNU9MT1tdV1lZWWtscWt2flCDk5mTkp2nn7+XrqakqquxvLS1sMS3qNbVwNrW0eXg1ebi2evn3unp3uXk4uXl4+bl4eTk5Obm5Ofn5ejo5unr5u/r5vHv6/Dv7PXw5/Ty7vLy8PXz8fX28ff18fn38/339Pr49Pv59f749fz6+AoHCwoHCwoHCwoHCwoHCwoHCwoHCwoHCywAAAAACgAHAEUITgBv3ODQwYSIEyViqDhQgEAKEygyJGDBAEYNBzVs2MCgwQYNjRFIXHgAYYEABAI3GNDYQEaIFhQ+jLDg4kWFATZmfPDgAcQKCRMUBAAQEAA7')" width="4000"/> <noscript> <img alt="Mother and son examining new car in dealership" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="2667" sizes="750px" src="https://www.investopedia.com/thmb/d1D5wfgUAA1dZ3xaBCU7G2NY3wA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg" srcset="https://www.investopedia.com/thmb/ZEF0vR_FA0X_AfVbv0q8aFr0YD8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg 750w" width="4000"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Maskot / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp product-roundup-content--finance product-roundup--base product-roundup--base --> </div> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-1"><p>MyFICO. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.myfico.com/credit-education/what-is-a-fico-score" rel="nofollow sponsored">What Is a FICO® Score?</a>"</p></li> <li class="mntl-sources__source" id="citation-2"><p>Experian. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.experian.com/automotive/auto-credit-webinar-form" rel="nofollow sponsored">Experian's State of the Automotive Finance Market Report: Q4 2023</a>." Subscription is required to access the report.</p></li> <li class="mntl-sources__source" id="citation-12"><p>AutoPay. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.autopay.com/purchase/">Vehicle Purchase</a>."</p></li> <li class="mntl-sources__source" id="citation-13"><p>AutoPay. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.autopay.com/faq/">Auto Loan FAQ</a>." Click "What Are Your Minimum and Maximum Loan Amounts?"</p></li> <li class="mntl-sources__source" id="citation-14"><p>AutoPay. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.autopay.com/faq/">Auto Loan FAQ</a>." Click "What Are Your Minimum and Maximum Loan Terms (Months)?"</p></li> <li class="mntl-sources__source" id="citation-15"><p>LightStream. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.lightstream.com/auto-loans" rel="nofollow sponsored">Drive the Car You Want</a>."</p></li> <li class="mntl-sources__source" id="citation-16"><p>LightStream. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.lightstream.com/" rel="nofollow sponsored">Lending Uncomplicated</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>Lightstream. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.lightstream.com/faq" rel="nofollow sponsored">Frequently Asked Questions</a>." </p></li> <li class="mntl-sources__source" id="citation-18"><p>First Tech Federal Credit Union. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.firsttechfed.com/rates/loans" rel="nofollow sponsored">Rates &amp; Fees</a>."</p></li> <li class="mntl-sources__source" id="citation-17"><p>First Tech Federal Credit Union. "<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.firsttechfed.com/borrow/vehicle-loans/used-auto-loans" rel="nofollow sponsored">Auto Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-4"><p>First Tech Federal Credit Union. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.firsttechfed.com/discover/become-a-member" rel="nofollow sponsored">Become a Member</a>." </p></li> <li class="mntl-sources__source" id="citation-19"><p>CarMax. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.carmax.com/car-financing/car-payment-calculator">Car Payment Calculator</a>."</p></li> <li class="mntl-sources__source" id="citation-31"><p>IBISWorld. 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Car prices are still sky-high so the majority of borrowers will need to use an auto loan to purchase a new or used vehicle. If you have fair credit, meaning a credit score of 580 to 669, you may find that financing a vehicle is especially expensive.  However, you may be able to find lower rates and better terms by shopping around and requesting quotes from multiple lenders. To help you find the right loan, we reviewed 25 popular lenders based on their rates, fees, loan amounts, borrower/vehicle qualifications (including credit requirements), and more. See the best auto loans for fair credit below. ## Best Auto Loans for Fair Credit of 2024 * **Best for Most Borrowers:** [AUTOPAY](https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0) * **Best for Fast Loans:** [LightStream](https://fiona.com/partner/investopedialoans/loans) * **Best Credit Union:** [First Tech FCU](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ftfcu&bwid_id=6385e804ca097c71ee1e23c1) * **Best for Focus on Used Car Loans:** [CarMax](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=carmax&bwid_id=6385e804ca097c71ee1e23c1) * **Best for High Loan-to-Value Ratio:** [OpenRoad Lending](https://www.openroadlending.com/applyone/?aid=899&opt_1=best-auto-loan-rates-4173489) * **Best for Full Car Buying Experience:** [Carvana](https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&subid2=n9c8ce6e1b0b84329a1aec356f39b772c18) Car loan companies consider applicants with fair credit to be nonprime or subprime borrowers. Those distinctions mean you’ll pay much higher interest rates than those with very good or excellent credit. Average rates for those with fair credit can be in the double digits for new and used car loans. If you’re having trouble qualifying, consider the [best bad credit auto loans](https://www.investopedia.com/best-car-loans-for-bad-credit-7372351) for more options. Best Auto Loans for Fair Credit of 2024 Expand Best Auto Loans for Fair Credit of 2024 * [Our Top Picks](#summary-list) * [AUTOPAY](#toc-best-for-most-borrowers-autopay) * [LightStream](#toc-best-for-fast-loans-lightstream) * [First Tech FCU](#toc-best-credit-union-first-tech-fcu) * [CarMax](#toc-best-for-focus-on-used-car-loans-carmax) * [OpenRoad Lending](#toc-best-for-high-loan-to-value-ratio-openroad-lending) * [Carvana](#toc-best-for-full-car-buying-experience-carvana) * See More (3) * [Final Verdict](#toc-final-verdict) * [How to Choose](#toc-guide-to-choosing-the-best-auto-loan-for-fair-credit) * [Alternatives](#toc-alternatives-to-fair-credit-car-loans) * [Auto Loan Rates by Credit Score](#toc-auto-loan-rates-by-credit-score) * [FAQs](#toc-faqs-e6ba5102-db60-4642-a9f0-0e86baf82b46) * [Methodology](#toc-methodology) ### Best for Most Borrowers : AUTOPAY --- ![AutoPay]() :fill(white):max_bytes(150000):strip_icc()/Autopay-ec4375470de24d2f8aca313b8f153804.jpg)  AutoPay * **Used APR Range:** As low as 5.69% * **Used Loan Amounts:** $2,500–$100,000 * **Used Loan Terms**: 2–8 years [Apply Now](https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0) Pros & Cons Pros * Minimum recommended credit score of 500, according to customer support * Offers financing for new and used cars * Allows borrowers to refinance existing loans Cons * Some partner lenders charge origination fees * Limited information about rates and fees online * Unclear eligibility requirements Why We Chose It Whether you’re buying a new car at a dealership or looking to refinance an existing loan, [AUTOPAY](https://www.investopedia.com/autopay-auto-loans-review-7643912) has some of the best auto loans for fair credit. AUTOPAY connects borrowers with partner lenders that offer loans for new and used car purchases and [auto loan refinancing](https://www.investopedia.com/best-time-to-refinance-car-loan-7373577).  The company works with a wide range of credit levels, but its site has limited information about its partners and rates online, and it doesn’t disclose all of its eligibility requirements. However, AUTOPAY does have pre-qualification options for purchase loans, so you can see what rates are available without affecting your credit.  Use our [auto loan payment and interest calculator](https://www.investopedia.com/car-loan-calculator-5084761) to estimate your monthly loan payments and overall repayment cost with different rates and terms. Borrower Qualifications * Recommened credit score of 500 or higher * Available in all U.S. states and Washington, D.C. Vehicle Qualifications * **Maximum accepted vehicle age:** Not disclosed * **Maximum accepted mileage:** Not disclosed * **Maximum loan-to-value ratio:** Not disclosed * **Allows private-party vehicle purchases:** Yes ### Best for Fast Loans : LightStream --- ![LightStream]() :fill(white):max_bytes(150000):strip_icc()/Light_Stream_Loans-c579669985824613a0b8a011f6bf5436.jpg) LightStream * **Used APR Range:** 7.24%–15.44%\* with AutoPay * **Used Loan Amounts:** $5,000–$100,000 * **Used Loan Terms**: 24–144 months [Apply Now](https://fiona.com/partner/investopedialoans/loans) Pros & Cons Pros * Same-day loan funding * No origination or late fees * Unsecured loan * No vehicle restrictions Cons * Relatively high credit score minimum * Higher than average rates * No pre-qualification tool Why We Chose It For those who need money fast to buy a new or used car, [LightStream](https://www.investopedia.com/lightstream-auto-loans-review-7853022) could be a good choice. The lender allows you to borrow up to $100,000, and you can receive the loan funds as soon as the same day you apply.  LightStream disburses the loan funds directly to your bank account, so you can buy your chosen vehicle in cash without having to work with a dealer’s financing department or going through any other hurdles.  Unlike the other lenders on our list, LightStream provides [unsecured loans](https://www.investopedia.com/terms/u/unsecuredloan.asp), so the rates are higher than you typically see for car loans. But the tradeoffs are that you don’t have to put up your car as collateral, and LightStream has no restrictions on vehicles; you can buy any car you want, regardless of how old it is or how many miles are on the odometer.  LightStream doesn’t have a pre-qualification tool, and it generally requires good to excellent credit. However, it does allow borrowers to apply with co-applicants, so you can add a joint applicant to improve your chances of qualifying for a loan.  Borrower Qualifications * Minimum recommended credit score of 680 * Must be the age of majority in your state * Must have a verifiable source of income * LightStream also takes into consideration your credit history, assets, and debt-to-income ratio ([DTI](https://www.investopedia.com/ask/answers/081214/whats-considered-be-good-debttoincome-dti-ratio.asp)) * Available in all 50 states and Washington, D.C. Vehicle Qualifications * **Maximum accepted vehicle age:** No maximum * **Maximum accepted mileage:** No maximum * **Maximum loan-to-value ratio:** No maximum * **Allows private-party vehicle purchases:** Yes ### Best Credit Union : First Tech FCU --- ![First Tech Federal Credit Union]() :fill(white):max_bytes(150000):strip_icc()/first-tech-federal-credit-union-e4e68750b1e340658a72a5c0861ccacc.png) First Tech Federal Credit Union * **Used APR Range:** Changes daily, depending on location * **Used Loan Amounts:** $1,000–$300,000 * **Used Loan Terms**: 12–84 months [Apply Now](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ftfcu&bwid_id=6385e804ca097c71ee1e23c1) Pros & Cons Pros * No origination fees * Financing for new and used cars * Financing for other vehicles available, like [motorcycles](https://www.investopedia.com/best-motorcycle-loans-5080905) and [RVs](https://www.investopedia.com/best-rv-loan-rates-5082108) Cons * No pre-qualification for longer loan terms * Higher rates for used vehicles * Credit union membership required Why We Chose It [Credit unions](https://www.investopedia.com/credit-unions-vs-banks-4590218) are non-profit organizations that often offer lower rates and fees than other lenders. And when it comes to car loans, First Tech Federal Credit Union (FCU) stands out due to [its loan options](https://www.investopedia.com/first-tech-fcu-auto-loans-review-7965780). The credit union has options for financing new and used cars, along with auto loan refinancing.  With First Tech FCU, you can finance up to $300,000 and take up to 84 months to repay your loan. Unlike many other lenders, First Tech FCU doesn’t charge origination fees, and it also offers financing for motorcycles, recreational vehicles, campers, scooters, boats, and more. First Tech provides car-buying services for its members that make it easier to buy and sell vehicles and can save you time at the dealership.  As a credit union, [First Tech FCU’s auto loans](https://www.investopedia.com/first-tech-fcu-auto-loans-review-7965780) are only available to members. However, its membership criteria aren’t strict; you can join by becoming a member of the Computer History Museum or the Financial Fitness Association for a small fee.  Borrower Qualifications * Available in all 50 states and Washington, D.C. Vehicle Qualifications * **Maximum accepted vehicle age:** 10 years * **Maximum accepted mileage:** Not disclosed * **Maximum loan-to-value ratio:** Not disclosed * **Allows private-party vehicle purchases:** Not disclosed ### Best for Focus on Used Car Loans : CarMax --- ![CarMax logo]() :fill(white):max_bytes(150000):strip_icc()/Carmex-logo-b7b8c559ed564fe8906b5d4558438eca.jpg) CarMax * **Used APR Range:** Not disclosed * **Used Loan Amounts:** Not disclosed * **Used Loan Terms**: 36–72 months [Apply Now](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=carmax&bwid_id=6385e804ca097c71ee1e23c1) Pros & Cons Pros * Will work with most credit profiles * Allows co-buyers * Three-day payoff option Cons * Can only be used for cars bought through CarMax * Vehicles may be more expensive Why We Chose It CarMax is the nation’s largest retailer of used vehicles. Through CarMax you can buy used vehicles that have passed the company’s inspection and are backed by a 90-day/4,000-mile limited warranty.  [CarMax Auto Finance](https://www.investopedia.com/carmax-auto-loan-review-7642717) is the company’s own financing program. It can only be used to finance cars purchased through CarMax, but the company says it works with borrowers at every credit level. Even if you have poor to fair credit, you can likely qualify for a loan.  Average CarMax vehicles may be more expensive than you’d expect for used cars; the average sales price of CarMax vehicles was over $28,000 as of 2023.  Though the company will work with borrowers with less-than-stellar credit, those with poor to fair credit should expect to pay higher rates; using the company’s calculator tool, we found that rates for borrowers with fair credit were in the double digits. However, if you buy a car and later find a better auto loan offer elsewhere, CarMax has a three-day payoff option. You have three days after purchasing your vehicle to return the funds and replace the loan with a new one at no cost.  Borrower Qualifications * Can lend to most credit profiles * Vehicles and loans are available in 41 states, excluding Alaska, Arkansas, Hawaii, Montana, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming. Vehicle Qualifications * **Maximum loan-to-value ratio:** Not disclosed * **Maximum accepted mileage:** None (Any vehicle CarMax sells) * **Maximum accepted age of the vehicle:** None (vehicle must be purchased through CarMax) * **Private-party vehicle purchases:** No Customer Reviews * “I've been satisfied with the products that I've gotten there. I've bought, and my family has bought more than one car from them, and I've got friends who have, so I think it's pretty well-run. And I've been happy with the warranties on the repairs two cars ago.” * “...Over the years I started buying from CarMax, maybe about 15 years ago, and had used the same salesman, usually. But this time it was during COVID when I got the car and they were trying to do everything that they could online. They would have even brought the car to me. If I picked it online they would have driven it to me and had me fill [out] the paperwork in my house. But because I was in a different state, they didn't do that.” * “If I was going to do something differently, I'd probably check and see if [my] credit union had lower interest rates. … But that's the only thing I would do differently, is … go for something with a lower interest rate.” ### Best for High Loan-to-Value Ratio : OpenRoad Lending --- ![OpenRoad Lending]() :fill(white):max_bytes(150000):strip_icc()/Open_Road_Lending-37f22388fed54364bf8922b784cee9b9.jpg)  OpenRoad Lending * **Refinance APR Range:** Starting at 1.99% * **Refinance Loan Amounts:** $7,500–$100,000 * **Refinance Loan Terms**: Up to 24–72 months [Apply Now](https://www.openroadlending.com/applyone/?aid=899&opt_1=best-auto-loan-rates-4173489) Pros & Cons Pros * LTV up to 175% * Low potential rates * Low income requirement Cons * Does not offer purchase loans Why We Chose It [OpenRoad Lending](https://www.investopedia.com/openroad-lending-auto-loan-review-7642719) doesn’t offer loans for purchasing new or used cars; instead, it specializes in auto loan refinancing.  Generally, the company’s maximum [loan-to-value ratio (LTV)](https://www.investopedia.com/terms/l/loantovalue.asp) is 120%. But if you have good to excellent credit, you may qualify for an LTV as high as 175%—far higher than other lenders allow. With a higher LTV, you can refinance your existing loan by taking out a new loan for more than you owe. The lender will give you the difference to use as you see fit. For example, you could use the extra funds to consolidate debt.  OpenRoad Lending boasts low potential rates, and you can have as long as 72 months to repay your loan. However, not all vehicles and borrowers are eligible. OpenRoad Lending doesn’t operate nationwide, and those who are self-employed cannot qualify for a loan.  Borrower Qualifications * Must be at least 18 years old * Available to residents in 39 U.S. states * You must have a minimum gross monthly income of at least $1,500 (income from Uber or similar Taxi services does not qualify) * Can only refinance auto loans issued by NCUA- or FDIC-insured lenders such as credit unions and banks Vehicle Qualifications * **Maximum accepted vehicle age:** Eight model years old * **Maximum accepted mileage:** 140,000 miles * **Maximum loan-to-value ratio:** 175% * **Allows private-party vehicle purchases:** No * **Vehicles excluded:** Commercial vehicles, motorcycles, recreational vehicles, trucks or vehicles larger than 3/4 ton, vehicles that are no longer being manufactured, brands such as Oldsmobile, Daewoo, Smart Cars, and Isuzu. ### Best for Full Car Buying Experience : Carvana --- ![Carvana]() :fill(white):max_bytes(150000):strip_icc()/Carvana-0034e95a1b8e404ca78217f1119b0026.jpg)  Carvana * **APR Range:** Not disclosed * **Loan Amounts:** Not disclosed * **Loan Terms**: 36-72 months [Apply Now](https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&subid2=n9c8ce6e1b0b84329a1aec356f39b772c18) Pros & Cons Pros * Accepts borrowers with poor credit * Pre-approvals valid for 30 days * Buy vehicles entirely online Cons * Financing can only be used at Carvana * Rates are not advertised * Co-signers are not allowed in some states Why We Chose It If you’re looking for a used car and are overwhelmed by the idea of visiting multiple dealerships to find the right vehicle, Carvana may be a useful alternative. It’s a used car retailer that allows you to buy cars entirely through its website. You can opt to pick up your new vehicle at a Carvana location near you, but Carvana will also deliver vehicles right to your door (you can test-drive vehicles from a Carvana vending machine, too, if there’s one nearby).  Carvana also [offers financing](https://www.investopedia.com/carvana-auto-loans-review-7965774) for its vehicles. You can qualify for a loan even if you have poor credit, and the company has a pre-qualification tool you can use to check your eligibility and view loan options without affecting your credit score.  Carvana has very limited information about its loan rates and terms on its site. And if you intend to apply with another person, be aware that co-signers are only permitted in some states.  Whether you’re shopping for an inexpensive, reliable vehicle for a teen or that classic muscle car you always dreamed of—1970 Chevelle SS, anyone?—using the [best used car websites](https://www.investopedia.com/best-used-car-sites-5094153) can help you find the perfect vehicle. Borrower Qualifications * Must be at least 18 years old * Minimum annual income of $5,100 * Must not have any active bankruptcies * Available to residents in the 48 contiguous U.S. states Vehicle Qualifications * **Maximum accepted vehicle age:** Varies * **Maximum accepted mileage:** Varies * **Maximum loan-to-value ratio:** Not disclosed * **Allows private-party vehicle purchases:** No; only for used cars bought through the Carvana platform ## Final Verdict If your credit score is in the “fair” range, finding a car loan with competitive rates can be challenging. But lenders like AUTOPAY and First Tech FCU offer loans for new and used vehicles with low potential APRs and multiple loan term options.  If you need funding quickly, LightStream may be a better choice. It disburses funds as soon as the same day you apply, and you can borrow up to $100,000 without any vehicle restrictions.  Regardless of whether you want to buy a new vehicle or a used car, or you’re refinancing an existing loan, shop around and compare rates from several lenders to [find the best auto loans](https://www.investopedia.com/how-to-get-a-car-loan-7368513) for fair credit.  ## Guide to Choosing the Best Auto Loan for Fair Credit ### How to Compare Fair Credit Car Loans There are many different lenders that cater to borrowers with fair credit. When shopping for a loan, consider the following factors:  * **Source:** Auto loans for fair credit can come from banks, credit unions, and certain car retailers, such as [CarMax](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=carmax&bwid_id=6385e804ca097c71ee1e23c1) or [Carvana](https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&subid2=n9c8ce6e1b0b84329a1aec356f39b772c18). Auto retailers may be the most convenient, since they allow you to finance through their platforms once you find the right car. But you may find lower rates elsewhere or by using a loan marketplace that allows you to get quotes from several lenders at once. * **[Annual percentage rate (APR)](https://www.investopedia.com/terms/a/apr.asp):** The APR is how much you’ll pay in interest and fees in a year expressed as a percentage, and it’s one of the most important factors when considering overall cost. The lower the APR, the less you’ll repay over the life of your loan. * **Fees:** Some lenders charge added fees, such as origination fees and prepayment penalties, that add to the overall cost of your loan. * **Vehicle requirements:** Auto loans often have some vehicle restrictions. For example, lenders may only allow you to buy a car with less than 100,000 miles, or that is less than 10 years old. * **Loan terms:** With car loans, typical repayment terms range from two to eight years. A longer term will give you a smaller monthly payment, but lenders usually charge higher APRs on longer terms, meaning you’ll pay more overall. ### How to Qualify for an Auto Loan Although borrower requirements vary by lender, you generally need to meet the following criteria:  * **Credit:** There are loans specifically for those with poor credit or limited credit histories, but lenders generally look for credit scores that are fair to excellent. If your score is at the lower end of the fair range—580 to 669—taking a few months to improve your credit can boost your chances of getting a loan with a relatively low rate. * **Income:** Lenders usually require applicants to submit proof of income. You can satisfy that requirement by providing pay stubs or recent tax returns. * **DTI:** Lenders consider your DTI to ensure you can afford the new loan payments. In many cases, the maximum DTI you can have and qualify for a loan is 40%. However, the lower the DTI, the better. * **Co-signer/co-borrower:** If you have fair credit, adding a co-signer or co-borrower to your application can help you qualify for a loan and get a better rate than if you applied alone. Not all lenders allow co-signers, so be sure to check during the rate-shopping process. ## Alternatives to Fair Credit Car Loans If you’re not happy with the loan term you were quoted with a fair credit score, these alternatives may help you:  * **Delay buying a car:** Although delaying your planned purchase may not be ideal, it can be worth it over the long run. It gives you time to improve your credit by paying down debt and making your other payments on time, increasing your chances of qualifying for a loan with a lower rate later. * **Larger down payment:** Some lenders will offer better terms if you have a larger [down payment](https://www.investopedia.com/how-much-down-payment-is-needed-for-a-car-5184453). A down payment of 10% or 20% of the car’s purchase price may allow you to secure a lower rate. * **Co-signed loan:** If you have a parent, relative, or friend with a stable income and good credit, adding them as a co-signer could allow you to qualify for a loan with a lower APR. * **Personal loans:** Another alternative is to take out a personal loan to buy a car. Personal loans are typically unsecured, so they don’t use collateral, but they often have much higher rates than car loans. See our picks for the [best personal loans for bad credit](https://www.investopedia.com/best-personal-loans-for-bad-credit-4774349) to review the leading options. Beware of “no credit check” and “[buy here, pay here](https://www.investopedia.com/terms/b/buy-here-pay-here.asp)” dealers. They charge much higher rates—often, the rates are well into the double digits—and they also charge higher prices than the vehicle is worth. ## Auto Loan Rates by Credit Score Car loan lenders assign risk distinctions to borrowers based on their credit and other factors. Generally, lenders use the following categories:  | **Category** | **Credit Score Range** | **Average APR for New Cars** | **Average APR for Used Cars** | | --- | --- | --- | --- | | Super Prime | 781–850 | 4.75% | 5.99% | | Prime | 661–780 | 5.82% | 7.83% | | Nonprime | 601–660 | 8.12% | 12.08% | | Subprime | 501–600 | 10.79% | 17.46% | | Deep Subprime | 300–600 | 13.42% | 20.62% | *Source: [Experian](https://www.experian.com/automotive/auto-credit-webinar-form) (subscription is required to access the report)* Borrowers with fair credit, meaning a score between 580 and 669, would be in the subprime to prime categories.  ## Frequently Asked Questions * ### Can You Qualify for an Auto Loan With Fair Credit? Although it is easier to qualify for a car loan if you have good to [excellent credit](https://www.investopedia.com/800-plus-credit-score-how-to-make-the-most-of-it-4685008), there are many lenders that will accept applicants with fair credit. [AUTOPAY](https://og.services.apex.prod.autopay.com/api/2.0/lead/inbound/organization/DOTDASH/channel/DOTDASH_A/event/LEAD_REFERRED_FOR_REDIRECT/version/1.0.0), [LightStream](https://www.lightstream.com/?fact=19969&subid=4846394), [First Tech FCU](https://www.bestmoney.com/car-loans/investopedia?utm_source=investopedia&ts=investopedia&p=ftfcu&bwid_id=6385e804ca097c71ee1e23c1), and [Carvana](https://carvana.sjv.io/c/2104074/908951/12225?subid1=4846394&subid2=n9c8ce6e1b0b84329a1aec356f39b772c18) are a few of the lenders that made it on our list. * ### Where Can You Get a Fair Credit Car Loan? Fair credit auto loans are available through [credit unions](https://www.investopedia.com/terms/c/creditunion.asp), banks, and online lenders. Some car retailers also offer their own financing programs and work with borrowers with less-than-perfect credit. * ### Can You Get Cash-Out Refinancing With Fair Credit? You may be able to qualify for cash-out [auto refinancing](https://www.investopedia.com/best-auto-refinance-loans-5069118) if you have fair credit. Lenders have different maximum loan-to-value ratios, with many offering up to 125% and some quite a bit higher—up to 175% for OpenRoad Lending. If you qualify for a cash-out refinance loan, you may be offered a lower loan amount and/or higher fees. * ### What Is Considered Fair Credit for a Car Loan? Fair credit for an auto loan usually means a [FICO credit score](https://www.investopedia.com/fico-credit-scores-explained-5072985) of 580 to 669; depending on where you are in that range, you may be considered to have subprime, nonprime, or prime credit. ## Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate providers, we collected hundreds of data points across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements, to ensure that our reviews help users make informed decisions for their borrowing needs. We also conducted a survey of 1,016 auto loan borrowers for attitudes and opinions about lenders and the loan process. :max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-auto-loans-for-fair-credit-of-2023-7486579-1cd0386e642a41a083a27049a2646f5b.jpg) Maskot / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. MyFICO. "[What Is a FICO® Score?](https://www.myfico.com/credit-education/what-is-a-fico-score)" 2. Experian. "[Experian's State of the Automotive Finance Market Report: Q4 2023](https://www.experian.com/automotive/auto-credit-webinar-form)." Subscription is required to access the report. 3. AutoPay. "[Vehicle Purchase](https://www.autopay.com/purchase/)." 4. AutoPay. "[Auto Loan FAQ](https://www.autopay.com/faq/)." Click "What Are Your Minimum and Maximum Loan Amounts?" 5. AutoPay. "[Auto Loan FAQ](https://www.autopay.com/faq/)." Click "What Are Your Minimum and Maximum Loan Terms (Months)?" 6. LightStream. "[Drive the Car You Want](https://www.lightstream.com/auto-loans)." 7. LightStream. "[Lending Uncomplicated](https://www.lightstream.com/)." 8. Lightstream. "[Frequently Asked Questions](https://www.lightstream.com/faq)." 9. First Tech Federal Credit Union. "[Rates & Fees](https://www.firsttechfed.com/rates/loans)." 10. First Tech Federal Credit Union. "[Auto Loans](https://www.firsttechfed.com/borrow/vehicle-loans/used-auto-loans)." 11. First Tech Federal Credit Union. "[Become a Member](https://www.firsttechfed.com/discover/become-a-member)." 12. CarMax. "[Car Payment Calculator](https://www.carmax.com/car-financing/car-payment-calculator)." 13. IBISWorld. "[Used Car Dealers in the US - Market Size, Industry Analysis, Trends and Forecasts (2024-2029)](https://www.ibisworld.com/united-states/market-research-reports/used-car-dealers-industry/#IndustryStatisticsAndTrends)." 14. CarMax. "[Annual Report Fiscal Year 2023](https://s27.q4cdn.com/743947716/files/doc_financials/2023/ar/FY23-Annual-Report-FINAL-WEBSITE-version.pdf)." Page 30. 15. CarMax. "[Car Payment Calculator](https://www.carmax.com/car-financing/car-payment-calculator)." 16. CarMax. "[Questions? We've Got Answers](https://www.carmax.com/faq/financing)." Click "If I Find Better Financing After I Buy the Car, Can I Replace My Financing With Another Provider?" 17. CarMax. "[CarMax Store Locations by States](https://www.carmax.com/transportation/locations)." 18. OpenRoad Lending. "[Auto Refinance and Car Loan Rates](https://www.openroadlending.com/auto-refinance-car-loan-rates/)." 19. OpenRoad Lending. "[Refinance Your Vehicle](https://www.openroadlending.com/products/refinance-vehicle/)." 20. OpenRoad Lending. “[OpenRoad Lending Once Again Named as a Best and Brightest Company to Work for](https://www.openroadlending.com/openroad-lending-once-again-named-as-a-best-and-brightest-company-to-work-for-2/).” 21. OpenRoad Lending. "[Auto Refinance Questions | FAQs](https://www.openroadlending.com/questions/auto-refinance-questions/).” 22. Carvana. "[Car Payment Calculator](https://www.carvana.com/auto-loan-calculator)." 23. Carvana. "[If I Have Bad Credit, Can I Still Finance My Purchase Through Carvana?](https://www.carvana.com/help/payment-and-financing/can-i-finance-with-carvana-if-i-have-bad-credit)" 24. Carvana. "[Do You Service Alaska & Hawaii?](https://www.carvana.com/help/purchasing-a-car/do-you-service-alaska-and-hawaii)" 25. Federal Reserve. "[Consumer Credit - G.19](https://www.federalreserve.gov/releases/g19/current/)." 26. Consumer Financial Protection Bureau. "[What Is a 'No Credit Check' or 'Buy Here, Pay Here' Auto Loan?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-no-credit-check-or-buy-here-pay-here-auto-loan-en-887/)" 27. Experian. "[The Automotive Finance Market Shows Signs of Optimism in Q3 2023](https://www.experian.com/blogs/insights/the-automotive-finance-market-shows-signs-of-optimism-in-q3-2023/)." Related Articles [![Compare Best Auto Loan Rates, Lenders, & Financing for April 2024 - Rates From 1.99%]() :max_bytes(150000):strip_icc()/Best-auto-loan-rates-4846394_final-b7456e74b9574f56b09258598d31164e.png) Compare Best Auto Loan Rates, Lenders, & Financing for May 2024 - Rates From 1.99%](https://www.investopedia.com/best-auto-loan-rates-4846394) [![Happy young woman dancing with friends in car]() :max_bytes(150000):strip_icc()/Primary-Image-best-auto-refinance-loans-of-2023-5069118-d825bdb159404e5a90af4ef92135405e.jpg) Best Auto Refinance Loans for May 2024](https://www.investopedia.com/best-auto-refinance-loans-5069118) [![Private party auto sale]() :max_bytes(150000):strip_icc()/GettyImages-1321856816-84ec23c02e21414aa8d82d81bc233970.jpg) Private Party Auto Loan: What It Is, How It Works, How to Get One](https://www.investopedia.com/what-is-a-private-party-auto-loan-financing-your-car-purchase-from-individuals-8599916) [![Couple Motorcycling Along Rural Road]() :max_bytes(150000):strip_icc()/Primary-Image-best-motorcycle-loans-of-june-2023-5080905-fcdbe26975e34a1dab69e3f93a157fb3.jpg) Best Motorcycle Loans of 2024](https://www.investopedia.com/best-motorcycle-loans-5080905) [![Friends Sitting In Car]() :max_bytes(150000):strip_icc()/Primary-Image-best-used-car-loans-of-2023-7373705-7a29f527417847138b92cecb34c33586.jpg) Best Used Car Loans for 2024](https://www.investopedia.com/best-used-car-loans-7373705) [![Couple applying for a car loan]() :max_bytes(150000):strip_icc()/GettyImages-1731245059-bdc548776e5e46ba9545540b5323e0c2.jpg) What Is an Auto Loan? A Comprehensive Guide to Vehicle Financing](https://www.investopedia.com/what-is-an-auto-loan-8598793) Related Terms [Private Party Auto Loan: What It Is, How It Works, How to Get One](https://www.investopedia.com/what-is-a-private-party-auto-loan-financing-your-car-purchase-from-individuals-8599916) A private party auto loan is a type of loan that you can use to finance the purchase of a car from an individual. Many financial institutions offer these loans, including banks, credit unions, and online lenders. [more](https://www.investopedia.com/what-is-a-private-party-auto-loan-financing-your-car-purchase-from-individuals-8599916) [What Is a Business Auto Loan? How to Finance Company Vehicles](https://www.investopedia.com/what-is-a-business-auto-loan-how-to-finance-company-vehicles-8600491) A business auto loan is a type of secured loan that companies or individual owners can use to purchase vehicles for business purposes. It can be less expensive than an unsecured loan, and its interest costs may be tax-deductible. [more](https://www.investopedia.com/what-is-a-business-auto-loan-how-to-finance-company-vehicles-8600491) [Subprime Auto Loan: How It Works and Rates](https://www.investopedia.com/terms/s/subprime_auto_loans.asp) A subprime auto loan is a type of loan used to finance a car purchase offered to people with low credit scores or limited credit histories. [more](https://www.investopedia.com/terms/s/subprime_auto_loans.asp) [Buy Here, Pay Here (BHPH) Car Dealership: Meaning, How It Works](https://www.investopedia.com/terms/b/buy-here-pay-here.asp) The term “Buy Here, Pay Here (BHPH)” refers to auto dealerships in which the financing for the vehicles purchased is done in-house. 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Car prices are still sky-high so the majority of borrowers will need to use an auto loan to purchase a new or used vehicle. If you have fair credit, meaning a credit score of 580 to 669, you may find that financing a vehicle is especially expensive.  However, you may be able to find lower rates and better terms by shopping around and requesting quotes from multiple lenders. To help you find the right loan, we reviewed 25 popular lenders based on their rates, fees, loan amounts, borrower/vehicle qualifications (including credit requirements), and more. See the best auto loans for fair credit below. Best Auto Loans for Fair Credit of 2024 Best for Most Borrowers: AUTOPAY Best for Fast Loans: LightStream Best Credit Union: First Tech FCU Best for Focus on Used Car Loans: CarMax Best for High Loan-to-Value Ratio: OpenRoad Lending Best for Full Car Buying Experience: Carvana Car loan companies consider applicants with fair credit to be nonprime or subprime borrowers. Those distinctions mean you’ll pay much higher interest rates than those with very good or excellent credit. Average rates for those with fair credit can be in the double digits for new and used car loans. If you’re having trouble qualifying, consider the best bad credit auto loans for more options. Best Auto Loans for Fair Credit of 2024 Expand Best Auto Loans for Fair Credit of 2024 Our Top Picks AUTOPAY LightStream First Tech FCU CarMax OpenRoad Lending Carvana See More (3) Final Verdict How to Choose Alternatives Auto Loan Rates by Credit Score FAQs Methodology Best for Most Borrowers : AUTOPAY  AutoPay Used APR Range: As low as 5.69%Used Loan Amounts: $2,500–$100,000Used Loan Terms: 2–8 years Apply Now Pros & Cons Pros Minimum recommended credit score of 500, according to customer support Offers financing for new and used cars Allows borrowers to refinance existing loans Cons Some partner lenders charge origination fees Limited information about rates and fees online Unclear eligibility requirements Why We Chose It Whether you’re buying a new car at a dealership or looking to refinance an existing loan, AUTOPAY has some of the best auto loans for fair credit. AUTOPAY connects borrowers with partner lenders that offer loans for new and used car purchases and auto loan refinancing.  The company works with a wide range of credit levels, but its site has limited information about its partners and rates online, and it doesn’t disclose all of its eligibility requirements. However, AUTOPAY does have pre-qualification options for purchase loans, so you can see what rates are available without affecting your credit.  Use our auto loan payment and interest calculator to estimate your monthly loan payments and overall repayment cost with different rates and terms. Borrower Qualifications Recommened credit score of 500 or higherAvailable in all U.S. states and Washington, D.C. Vehicle Qualifications Maximum accepted vehicle age: Not disclosedMaximum accepted mileage: Not disclosedMaximum loan-to-value ratio: Not disclosedAllows private-party vehicle purchases: Yes Best for Fast Loans : LightStream LightStream Used APR Range: 7.24%–15.44%* with AutoPayUsed Loan Amounts: $5,000–$100,000Used Loan Terms: 24–144 months Apply Now Pros & Cons Pros Same-day loan funding No origination or late fees Unsecured loan No vehicle restrictions Cons Relatively high credit score minimum Higher than average rates No pre-qualification tool Why We Chose It For those who need money fast to buy a new or used car, LightStream could be a good choice. The lender allows you to borrow up to $100,000, and you can receive the loan funds as soon as the same day you apply.  LightStream disburses the loan funds directly to your bank account, so you can buy your chosen vehicle in cash without having to work with a dealer’s financing department or going through any other hurdles.  Unlike the other lenders on our list, LightStream provides unsecured loans, so the rates are higher than you typically see for car loans. But the tradeoffs are that you don’t have to put up your car as collateral, and LightStream has no restrictions on vehicles; you can buy any car you want, regardless of how old it is or how many miles are on the odometer.  LightStream doesn’t have a pre-qualification tool, and it generally requires good to excellent credit. However, it does allow borrowers to apply with co-applicants, so you can add a joint applicant to improve your chances of qualifying for a loan.  Borrower Qualifications Minimum recommended credit score of 680 Must be the age of majority in your state Must have a verifiable source of income LightStream also takes into consideration your credit history, assets, and debt-to-income ratio (DTI)  Available in all 50 states and Washington, D.C. Vehicle Qualifications Maximum accepted vehicle age: No maximumMaximum accepted mileage: No maximumMaximum loan-to-value ratio: No maximumAllows private-party vehicle purchases: Yes Best Credit Union : First Tech FCU First Tech Federal Credit Union Used APR Range: Changes daily, depending on locationUsed Loan Amounts: $1,000–$300,000Used Loan Terms: 12–84 months Apply Now Pros & Cons Pros No origination fees Financing for new and used cars  Financing for other vehicles available, like motorcycles and RVs Cons No pre-qualification for longer loan terms Higher rates for used vehicles Credit union membership required Why We Chose It Credit unions are non-profit organizations that often offer lower rates and fees than other lenders. And when it comes to car loans, First Tech Federal Credit Union (FCU) stands out due to its loan options. The credit union has options for financing new and used cars, along with auto loan refinancing.  With First Tech FCU, you can finance up to $300,000 and take up to 84 months to repay your loan. Unlike many other lenders, First Tech FCU doesn’t charge origination fees, and it also offers financing for motorcycles, recreational vehicles, campers, scooters, boats, and more. First Tech provides car-buying services for its members that make it easier to buy and sell vehicles and can save you time at the dealership.  As a credit union, First Tech FCU’s auto loans are only available to members. However, its membership criteria aren’t strict; you can join by becoming a member of the Computer History Museum or the Financial Fitness Association for a small fee.  Borrower Qualifications Available in all 50 states and Washington, D.C. Vehicle Qualifications Maximum accepted vehicle age: 10 yearsMaximum accepted mileage: Not disclosedMaximum loan-to-value ratio: Not disclosedAllows private-party vehicle purchases: Not disclosed Best for Focus on Used Car Loans : CarMax CarMax Used APR Range: Not disclosedUsed Loan Amounts: Not disclosedUsed Loan Terms: 36–72 months Apply Now Pros & Cons Pros Will work with most credit profiles Allows co-buyers Three-day payoff option Cons Can only be used for cars bought through CarMax Vehicles may be more expensive Why We Chose It CarMax is the nation’s largest retailer of used vehicles. Through CarMax you can buy used vehicles that have passed the company’s inspection and are backed by a 90-day/4,000-mile limited warranty.  CarMax Auto Finance is the company’s own financing program. It can only be used to finance cars purchased through CarMax, but the company says it works with borrowers at every credit level. Even if you have poor to fair credit, you can likely qualify for a loan.  Average CarMax vehicles may be more expensive than you’d expect for used cars; the average sales price of CarMax vehicles was over $28,000 as of 2023.  Though the company will work with borrowers with less-than-stellar credit, those with poor to fair credit should expect to pay higher rates; using the company’s calculator tool, we found that rates for borrowers with fair credit were in the double digits. However, if you buy a car and later find a better auto loan offer elsewhere, CarMax has a three-day payoff option. You have three days after purchasing your vehicle to return the funds and replace the loan with a new one at no cost.  Borrower Qualifications Can lend to most credit profilesVehicles and loans are available in 41 states, excluding Alaska, Arkansas, Hawaii, Montana, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming. Vehicle Qualifications Maximum loan-to-value ratio: Not disclosedMaximum accepted mileage: None (Any vehicle CarMax sells)Maximum accepted age of the vehicle: None (vehicle must be purchased through CarMax)Private-party vehicle purchases: No Customer Reviews “I've been satisfied with the products that I've gotten there. I've bought, and my family has bought more than one car from them, and I've got friends who have, so I think it's pretty well-run. And I've been happy with the warranties on the repairs two cars ago.”“...Over the years I started buying from CarMax, maybe about 15 years ago, and had used the same salesman, usually. But this time it was during COVID when I got the car and they were trying to do everything that they could online. They would have even brought the car to me. If I picked it online they would have driven it to me and had me fill [out] the paperwork in my house. But because I was in a different state, they didn't do that.”“If I was going to do something differently, I'd probably check and see if [my] credit union had lower interest rates. … But that's the only thing I would do differently, is … go for something with a lower interest rate.” Best for High Loan-to-Value Ratio : OpenRoad Lending  OpenRoad Lending Refinance APR Range: Starting at 1.99%Refinance Loan Amounts: $7,500–$100,000Refinance Loan Terms: Up to 24–72 months Apply Now Pros & Cons Pros LTV up to 175% Low potential rates Low income requirement Cons Does not offer purchase loans Why We Chose It OpenRoad Lending doesn’t offer loans for purchasing new or used cars; instead, it specializes in auto loan refinancing.  Generally, the company’s maximum loan-to-value ratio (LTV) is 120%. But if you have good to excellent credit, you may qualify for an LTV as high as 175%—far higher than other lenders allow. With a higher LTV, you can refinance your existing loan by taking out a new loan for more than you owe. The lender will give you the difference to use as you see fit. For example, you could use the extra funds to consolidate debt.  OpenRoad Lending boasts low potential rates, and you can have as long as 72 months to repay your loan. However, not all vehicles and borrowers are eligible. OpenRoad Lending doesn’t operate nationwide, and those who are self-employed cannot qualify for a loan.  Borrower Qualifications Must be at least 18 years oldAvailable to residents in 39 U.S. statesYou must have a minimum gross monthly income of at least $1,500 (income from Uber or similar Taxi services does not qualify)Can only refinance auto loans issued by NCUA- or FDIC-insured lenders such as credit unions and banks Vehicle Qualifications Maximum accepted vehicle age: Eight model years oldMaximum accepted mileage: 140,000 milesMaximum loan-to-value ratio: 175%Allows private-party vehicle purchases: NoVehicles excluded: Commercial vehicles, motorcycles, recreational vehicles, trucks or vehicles larger than 3/4 ton, vehicles that are no longer being manufactured, brands such as Oldsmobile, Daewoo, Smart Cars, and Isuzu. Best for Full Car Buying Experience : Carvana  Carvana APR Range: Not disclosedLoan Amounts: Not disclosedLoan Terms: 36-72 months Apply Now Pros & Cons Pros Accepts borrowers with poor credit  Pre-approvals valid for 30 days Buy vehicles entirely online Cons Financing can only be used at Carvana Rates are not advertised Co-signers are not allowed in some states Why We Chose It If you’re looking for a used car and are overwhelmed by the idea of visiting multiple dealerships to find the right vehicle, Carvana may be a useful alternative. It’s a used car retailer that allows you to buy cars entirely through its website. You can opt to pick up your new vehicle at a Carvana location near you, but Carvana will also deliver vehicles right to your door (you can test-drive vehicles from a Carvana vending machine, too, if there’s one nearby).  Carvana also offers financing for its vehicles. You can qualify for a loan even if you have poor credit, and the company has a pre-qualification tool you can use to check your eligibility and view loan options without affecting your credit score.  Carvana has very limited information about its loan rates and terms on its site. And if you intend to apply with another person, be aware that co-signers are only permitted in some states.  Whether you’re shopping for an inexpensive, reliable vehicle for a teen or that classic muscle car you always dreamed of—1970 Chevelle SS, anyone?—using the best used car websites can help you find the perfect vehicle. Borrower Qualifications Must be at least 18 years oldMinimum annual income of $5,100Must not have any active bankruptcies Available to residents in the 48 contiguous U.S. states Vehicle Qualifications Maximum accepted vehicle age: VariesMaximum accepted mileage: VariesMaximum loan-to-value ratio: Not disclosedAllows private-party vehicle purchases: No; only for used cars bought through the Carvana platform Final Verdict If your credit score is in the “fair” range, finding a car loan with competitive rates can be challenging. But lenders like AUTOPAY and First Tech FCU offer loans for new and used vehicles with low potential APRs and multiple loan term options.  If you need funding quickly, LightStream may be a better choice. It disburses funds as soon as the same day you apply, and you can borrow up to $100,000 without any vehicle restrictions.  Regardless of whether you want to buy a new vehicle or a used car, or you’re refinancing an existing loan, shop around and compare rates from several lenders to find the best auto loans for fair credit.  Guide to Choosing the Best Auto Loan for Fair Credit How to Compare Fair Credit Car Loans There are many different lenders that cater to borrowers with fair credit. When shopping for a loan, consider the following factors:  Source: Auto loans for fair credit can come from banks, credit unions, and certain car retailers, such as CarMax or Carvana. Auto retailers may be the most convenient, since they allow you to finance through their platforms once you find the right car. But you may find lower rates elsewhere or by using a loan marketplace that allows you to get quotes from several lenders at once.  Annual percentage rate (APR): The APR is how much you’ll pay in interest and fees in a year expressed as a percentage, and it’s one of the most important factors when considering overall cost. The lower the APR, the less you’ll repay over the life of your loan.  Fees: Some lenders charge added fees, such as origination fees and prepayment penalties, that add to the overall cost of your loan.  Vehicle requirements: Auto loans often have some vehicle restrictions. For example, lenders may only allow you to buy a car with less than 100,000 miles, or that is less than 10 years old.  Loan terms: With car loans, typical repayment terms range from two to eight years. A longer term will give you a smaller monthly payment, but lenders usually charge higher APRs on longer terms, meaning you’ll pay more overall.  How to Qualify for an Auto Loan Although borrower requirements vary by lender, you generally need to meet the following criteria:  Credit: There are loans specifically for those with poor credit or limited credit histories, but lenders generally look for credit scores that are fair to excellent. If your score is at the lower end of the fair range—580 to 669—taking a few months to improve your credit can boost your chances of getting a loan with a relatively low rate. Income: Lenders usually require applicants to submit proof of income. You can satisfy that requirement by providing pay stubs or recent tax returns. DTI: Lenders consider your DTI to ensure you can afford the new loan payments. In many cases, the maximum DTI you can have and qualify for a loan is 40%. However, the lower the DTI, the better. Co-signer/co-borrower: If you have fair credit, adding a co-signer or co-borrower to your application can help you qualify for a loan and get a better rate than if you applied alone. Not all lenders allow co-signers, so be sure to check during the rate-shopping process. Alternatives to Fair Credit Car Loans If you’re not happy with the loan term you were quoted with a fair credit score, these alternatives may help you:  Delay buying a car: Although delaying your planned purchase may not be ideal, it can be worth it over the long run. It gives you time to improve your credit by paying down debt and making your other payments on time, increasing your chances of qualifying for a loan with a lower rate later.  Larger down payment: Some lenders will offer better terms if you have a larger down payment. A down payment of 10% or 20% of the car’s purchase price may allow you to secure a lower rate.  Co-signed loan: If you have a parent, relative, or friend with a stable income and good credit, adding them as a co-signer could allow you to qualify for a loan with a lower APR.  Personal loans: Another alternative is to take out a personal loan to buy a car. Personal loans are typically unsecured, so they don’t use collateral, but they often have much higher rates than car loans. See our picks for the best personal loans for bad credit to review the leading options. Beware of “no credit check” and “buy here, pay here” dealers. They charge much higher rates—often, the rates are well into the double digits—and they also charge higher prices than the vehicle is worth. Auto Loan Rates by Credit Score Car loan lenders assign risk distinctions to borrowers based on their credit and other factors. Generally, lenders use the following categories:  Category Credit Score Range Average APR for New Cars Average APR for Used Cars Super Prime 781–850 4.75% 5.99% Prime 661–780 5.82% 7.83% Nonprime 601–660 8.12% 12.08% Subprime 501–600 10.79% 17.46% Deep Subprime 300–600 13.42% 20.62% Source: Experian (subscription is required to access the report) Borrowers with fair credit, meaning a score between 580 and 669, would be in the subprime to prime categories.  Frequently Asked Questions Can You Qualify for an Auto Loan With Fair Credit? Although it is easier to qualify for a car loan if you have good to excellent credit, there are many lenders that will accept applicants with fair credit. AUTOPAY, LightStream, First Tech FCU, and Carvana are a few of the lenders that made it on our list. Where Can You Get a Fair Credit Car Loan? Fair credit auto loans are available through credit unions, banks, and online lenders. Some car retailers also offer their own financing programs and work with borrowers with less-than-perfect credit.  Can You Get Cash-Out Refinancing With Fair Credit? You may be able to qualify for cash-out auto refinancing if you have fair credit. Lenders have different maximum loan-to-value ratios, with many offering up to 125% and some quite a bit higher—up to 175% for OpenRoad Lending. If you qualify for a cash-out refinance loan, you may be offered a lower loan amount and/or higher fees. What Is Considered Fair Credit for a Car Loan? Fair credit for an auto loan usually means a FICO credit score of 580 to 669; depending on where you are in that range, you may be considered to have subprime, nonprime, or prime credit. Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of auto loan lenders. To rate providers, we collected hundreds of data points across more than 20 auto loan lenders, including interest rates, fees, loan amounts, borrower requirements, and vehicle requirements, to ensure that our reviews help users make informed decisions for their borrowing needs. We also conducted a survey of 1,016 auto loan borrowers for attitudes and opinions about lenders and the loan process. Maskot / Getty Images Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. MyFICO. "What Is a FICO® Score?" Experian. "Experian's State of the Automotive Finance Market Report: Q4 2023." Subscription is required to access the report. AutoPay. "Vehicle Purchase." AutoPay. "Auto Loan FAQ." Click "What Are Your Minimum and Maximum Loan Amounts?" AutoPay. "Auto Loan FAQ." Click "What Are Your Minimum and Maximum Loan Terms (Months)?" LightStream. "Drive the Car You Want." LightStream. "Lending Uncomplicated." Lightstream. "Frequently Asked Questions."  First Tech Federal Credit Union. "Rates & Fees." First Tech Federal Credit Union. "Auto Loans." First Tech Federal Credit Union. "Become a Member."  CarMax. "Car Payment Calculator." IBISWorld. "Used Car Dealers in the US - Market Size, Industry Analysis, Trends and Forecasts (2024-2029)." CarMax. "Annual Report Fiscal Year 2023." Page 30. CarMax. "Car Payment Calculator."  CarMax. "Questions? We've Got Answers." Click "If I Find Better Financing After I Buy the Car, Can I Replace My Financing With Another Provider?" CarMax. "CarMax Store Locations by States." OpenRoad Lending. "Auto Refinance and Car Loan Rates." OpenRoad Lending. "Refinance Your Vehicle." OpenRoad Lending. “OpenRoad Lending Once Again Named as a Best and Brightest Company to Work for.” OpenRoad Lending. "Auto Refinance Questions | FAQs.” Carvana. "Car Payment Calculator." Carvana. "If I Have Bad Credit, Can I Still Finance My Purchase Through Carvana?" Carvana. "Do You Service Alaska & Hawaii?" Federal Reserve. "Consumer Credit - G.19."  Consumer Financial Protection Bureau. "What Is a 'No Credit Check' or 'Buy Here, Pay Here' Auto Loan?"  Experian. "The Automotive Finance Market Shows Signs of Optimism in Q3 2023." Related Articles Compare Best Auto Loan Rates, Lenders, & Financing for May 2024 - Rates From 1.99% Best Auto Refinance Loans for May 2024 Private Party Auto Loan: What It Is, How It Works, How to Get One Best Motorcycle Loans of 2024 Best Used Car Loans for 2024 What Is an Auto Loan? A Comprehensive Guide to Vehicle Financing Related Terms Private Party Auto Loan: What It Is, How It Works, How to Get One A private party auto loan is a type of loan that you can use to finance the purchase of a car from an individual. Many financial institutions offer these loans, including banks, credit unions, and online lenders. more What Is a Business Auto Loan? How to Finance Company Vehicles A business auto loan is a type of secured loan that companies or individual owners can use to purchase vehicles for business purposes. It can be less expensive than an unsecured loan, and its interest costs may be tax-deductible. more Subprime Auto Loan: How It Works and Rates A subprime auto loan is a type of loan used to finance a car purchase offered to people with low credit scores or limited credit histories. more Buy Here, Pay Here (BHPH) Car Dealership: Meaning, How It Works The term “Buy Here, Pay Here (BHPH)” refers to auto dealerships in which the financing for the vehicles purchased is done in-house. more Emergency Loan: Types, Eligibility, Pros and Cons Emergency loans are a type of personal loan that provides fast access to cash. Learn how emergency loans work and about their pros and cons. more Private Student Loans: What They Are, How They Work Private student loans are offered through third-party lenders, and they don't come with the protections afforded to federal student loan borrowers. more

https://www.investopedia.com/articles/fundamental-analysis/09/market-investor-axioms.asp

10 Timeless Rules for Investors

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Bob Farrell spent decades as the head of research at Merrill Lynch, establishing himself as one of the leading market analysts on Wall Street. His insights on <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a> and general market tendencies were canonized as "10 Market Rules to Remember" and have been distributed widely ever since. Here, we review these timeless axioms and how they can help you achieve better returns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Investors should keep in mind that prices never stay the same and corrections are inevitable. </li><li>Excesses are never permanent and try using stops to take the emotion out of trading.</li><li>Don't go with the herd, but remember that fear and greed need to take a backseat to discipline. </li><li>Consider alternative indexes to watch the health of the market.</li><li>Take expert advice and forecasts with a grain of salt.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-markets-return-to-the-mean-over-time"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> 1. Markets Return to the Mean Over Time </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Whether they face extreme optimism or pessimism, markets eventually revert to saner, long-term valuation levels. According to this theory, returns and prices will go back to whence they came—<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/meanreversion.asp">reversion</a> generally puts the market back to a previous state. So when it comes to individual investors, the lesson is clear: Make a plan and stick to it. Try to weigh out the importance of everything else that's going on around you and use your best judgment. Don't get thrown by the daily chatter and turmoil of the marketplace.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <span class="heading-toc" id="toc-2-excess-leads-to-an-opposite-excess"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> 2. Excess Leads to an Opposite Excess </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Like a swerving automobile driven by an inexperienced youth, we can expect overcorrection when markets overshoot. Remember, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correction.asp">correction</a> is represented by a move of more than 10% of an asset's peak price, so an overcorrection can mean bigger movements. During a market crash, investors are presented with really great buying opportunities. But they tend overcorrect in either direction—upward or downward—and trading can happen at unbelievable levels. Tuned-in investors will be wary of this and will possess the patience and know-how to take measured action to safeguard their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a>.<strong> </strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-3-excesses-are-never-permanent"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> 3. Excesses Are Never Permanent </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The tendency among even the most successful investors is to believe that when things are moving in their favor, profits are limitless. That's just not true, and nothing lasts forever—especially in the financial world. Whether you're riding market lows which represent buying opportunities, or soaring at highs so they can make money by selling, don't count your chickens before they've all hatched. After all, you may have to make a move at some point, because as the first two rules indicate, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market.asp">markets </a>revert to the mean. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Markets always revert to the mean.</p></div></div></div> <span class="heading-toc" id="toc-4-market-corrections-dont-go-sideways"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> 4. Market Corrections Don't Go Sideways </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Sharply moving markets tend to correct sharply, which can prevent investors from contemplating their next move in tranquility. The lesson here is to be decisive in trading fast-moving markets and to place stops on your trades to avoid emotional responses.<strong> </strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stoporder.asp">Stop orders</a> help traders in two ways when asset prices move beyond a particular point. By determining a specific entry or exit point, they can help investors limit the amount of money they lose, or help them lock in a profit when prices swing in either direction. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-5-public-buys-most-at-the-top-and-least-at-the-bottom"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> 5. Public Buys Most at the Top and Least at the Bottom </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The typical investor reads the latest news on their mobile phone, watches market programs, and believes what they're told. Unfortunately, by the time the financial press gets around to reporting a given price move, that move is already complete and a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/meanreversion.asp">reversion</a> is usually in progress. This is precisely the moment when John Q decides to buy at the top or sell at the bottom. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The need to be a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/contrarian.asp">contrarian</a> is underlined by this rule. Independent thinking always outperforms the herd mentality. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Read about Investopedia's <a data-component="amazon" data-ordinal="1" data-source="affiliate" data-type="externalLink" href="https://www.amazon.com/Investopedia-10-Rules-Investing/dp/B0CP7T6TQM/" rel="sponsored nofollow">10 Rules of Investing</a> by picking up a copy of our special issue print edition.</p></div></div></div> <span class="heading-toc" id="toc-6-fear-and-greed-stronger-than-long-term-resolve"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> 6. Fear and Greed: Stronger Than Long-Term Resolve </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Basic human emotion is perhaps the greatest enemy of successful investing. But whether you're a long-term investor or a day trader, a disciplined approach to trading is key to profits. You must have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading-plan.asp">trading plan</a> with every trade. You must know exactly at what level you are a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seller.asp">seller</a> of your stock—on the upside and the down. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Knowing when to get out of a trade is far more difficult than knowing when to get in. Knowing when to take a profit or cut a loss is very easy to figure in the abstract, but when you're holding a security that's on a quick move, fear and greed act quickly to separate you from reality and your money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-7-markets-strong-when-broad-weak-when-narrow"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> 7. Markets: Strong When Broad, Weak When Narrow </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> While there's much to be gained from a focus on popular index averages, the strength of a market move is determined by the underlying strength of the market as a whole. So <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broad-basedindex.asp">broader averages</a> offer a better take on the strength of the market. That's why it can pay off to follow different indexes—at least those that are beyond the usual suspects like the S&amp;P 500. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Consider watching the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wilshire5000equityindex.asp">Wilshire 5000</a> index or some of the Russell indexes to get a better appreciation of the health of any market move. The Wilshire 5000 index is composed of nearly 4,000 U.S-based companies that are traded on an American exchange and whose pricing is available to the public.<span class="ql-inline-citation" data-cite="2"></span> Russell indexes like the Russell 1000 and Russell 3000 are weighted by market cap and also give investors exposure to the U.S. stock market.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <span class="heading-toc" id="toc-8-bear-markets-have-three-stages"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-heading__text"> 8. Bear Markets Have Three Stages </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Market technicians find common patterns in both bull and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bearmarket.asp">bear market</a> action. The typical bear pattern, as described here, first involves a sharp <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sell-off.asp">sell-off</a>. During a bear market, prices tend to drop 20% or more. In most cases, bear markets involve whole indexes. This kind of market is generally caused by weak or slowing economic activity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> This is followed by what's called a sucker's rally. Investors can be drawn into the market by prices that jump quickly before making a sharp correction to the downside again. These <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rally.asp">rallies</a>, which can be a result of speculation and hype, don't last very long. But who are the suckers? The investors, of course. They're called suckers because they may buy on the temporary highs, but end up losing money when asset prices drop. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The final stage of the bear market is the torturous grind down to levels where <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuation.asp">valuations</a> are more reasonable and a general state of depression prevails regarding investments overall. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <span class="heading-toc" id="toc-9-be-mindful-of-experts-and-forecasts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-heading__text"> 9. Be Mindful of Experts and Forecasts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> This is not magic. When everyone who wants to buy has bought, there are no more buyers. At this point, the market must turn lower. Similarly, when everyone who wants to sell has sold, no more sellers remain. So when market experts and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forecasting.asp">forecasts</a> are telling you to sell, sell, sell—or buy, buy, buy—be sure to know that everyone is jumping on that bandwagon, so much so that there's nothing left to sell or buy. By the point you jump in, something else is likely to happen. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-10-bull-markets-are-more-fun-than-bear-markets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> 10. Bull Markets Are More Fun Than Bear Markets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> This is true for most investors since prices continue to rise during these periods. Who doesn't love seeing their profits rise? Well, unless you're a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shortselling.asp">short seller</a>. A short sale is when you sell an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">asset</a> that you don't own yourself. Traders who use this strategy sell borrowed securities hoping the price will drop. The seller must then return an equal amount of shares in the future. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> No one said investing was easy. There's a lot at stake, and so much to take in. Whether you're a novice trader or someone who's been watching the markets for a great deal of time, it's easy to get caught up in the swings of market news, emotions, and the free-for-all of the market. But if you follow Bob Ferrell's time-tested secrets, you may just come out a winner in the end. </p></div>

Bob Farrell spent decades as the head of research at Merrill Lynch, establishing himself as one of the leading market analysts on Wall Street. His insights on [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) and general market tendencies were canonized as "10 Market Rules to Remember" and have been distributed widely ever since. Here, we review these timeless axioms and how they can help you achieve better returns. ### Key Takeaways * Investors should keep in mind that prices never stay the same and corrections are inevitable. * Excesses are never permanent and try using stops to take the emotion out of trading. * Don't go with the herd, but remember that fear and greed need to take a backseat to discipline. * Consider alternative indexes to watch the health of the market. * Take expert advice and forecasts with a grain of salt. ## 1. Markets Return to the Mean Over Time Whether they face extreme optimism or pessimism, markets eventually revert to saner, long-term valuation levels. According to this theory, returns and prices will go back to whence they came—[reversion](https://www.investopedia.com/terms/m/meanreversion.asp) generally puts the market back to a previous state. So when it comes to individual investors, the lesson is clear: Make a plan and stick to it. Try to weigh out the importance of everything else that's going on around you and use your best judgment. Don't get thrown by the daily chatter and turmoil of the marketplace.  ## 2. Excess Leads to an Opposite Excess Like a swerving automobile driven by an inexperienced youth, we can expect overcorrection when markets overshoot. Remember, a [correction](https://www.investopedia.com/terms/c/correction.asp) is represented by a move of more than 10% of an asset's peak price, so an overcorrection can mean bigger movements. During a market crash, investors are presented with really great buying opportunities. But they tend overcorrect in either direction—upward or downward—and trading can happen at unbelievable levels. Tuned-in investors will be wary of this and will possess the patience and know-how to take measured action to safeguard their [capital](https://www.investopedia.com/terms/c/capital.asp). ## 3. Excesses Are Never Permanent The tendency among even the most successful investors is to believe that when things are moving in their favor, profits are limitless. That's just not true, and nothing lasts forever—especially in the financial world. Whether you're riding market lows which represent buying opportunities, or soaring at highs so they can make money by selling, don't count your chickens before they've all hatched. After all, you may have to make a move at some point, because as the first two rules indicate, [markets](https://www.investopedia.com/terms/m/market.asp) revert to the mean. ### Markets always revert to the mean. ## 4. Market Corrections Don't Go Sideways Sharply moving markets tend to correct sharply, which can prevent investors from contemplating their next move in tranquility. The lesson here is to be decisive in trading fast-moving markets and to place stops on your trades to avoid emotional responses. [Stop orders](https://www.investopedia.com/terms/s/stoporder.asp) help traders in two ways when asset prices move beyond a particular point. By determining a specific entry or exit point, they can help investors limit the amount of money they lose, or help them lock in a profit when prices swing in either direction. ## 5. Public Buys Most at the Top and Least at the Bottom The typical investor reads the latest news on their mobile phone, watches market programs, and believes what they're told. Unfortunately, by the time the financial press gets around to reporting a given price move, that move is already complete and a [reversion](https://www.investopedia.com/terms/m/meanreversion.asp) is usually in progress. This is precisely the moment when John Q decides to buy at the top or sell at the bottom. The need to be a [contrarian](https://www.investopedia.com/terms/c/contrarian.asp) is underlined by this rule. Independent thinking always outperforms the herd mentality. ### Read about Investopedia's [10 Rules of Investing](https://www.amazon.com/Investopedia-10-Rules-Investing/dp/B0CP7T6TQM/) by picking up a copy of our special issue print edition. ## 6. Fear and Greed: Stronger Than Long-Term Resolve Basic human emotion is perhaps the greatest enemy of successful investing. But whether you're a long-term investor or a day trader, a disciplined approach to trading is key to profits. You must have a [trading plan](https://www.investopedia.com/terms/t/trading-plan.asp) with every trade. You must know exactly at what level you are a [seller](https://www.investopedia.com/terms/s/seller.asp) of your stock—on the upside and the down. Knowing when to get out of a trade is far more difficult than knowing when to get in. Knowing when to take a profit or cut a loss is very easy to figure in the abstract, but when you're holding a security that's on a quick move, fear and greed act quickly to separate you from reality and your money. ## 7. Markets: Strong When Broad, Weak When Narrow While there's much to be gained from a focus on popular index averages, the strength of a market move is determined by the underlying strength of the market as a whole. So [broader averages](https://www.investopedia.com/terms/b/broad-basedindex.asp) offer a better take on the strength of the market. That's why it can pay off to follow different indexes—at least those that are beyond the usual suspects like the S&P 500. Consider watching the [Wilshire 5000](https://www.investopedia.com/terms/w/wilshire5000equityindex.asp) index or some of the Russell indexes to get a better appreciation of the health of any market move. The Wilshire 5000 index is composed of nearly 4,000 U.S-based companies that are traded on an American exchange and whose pricing is available to the public. Russell indexes like the Russell 1000 and Russell 3000 are weighted by market cap and also give investors exposure to the U.S. stock market. ## 8. Bear Markets Have Three Stages Market technicians find common patterns in both bull and [bear market](https://www.investopedia.com/terms/b/bearmarket.asp) action. The typical bear pattern, as described here, first involves a sharp [sell-off](https://www.investopedia.com/terms/s/sell-off.asp). During a bear market, prices tend to drop 20% or more. In most cases, bear markets involve whole indexes. This kind of market is generally caused by weak or slowing economic activity. This is followed by what's called a sucker's rally. Investors can be drawn into the market by prices that jump quickly before making a sharp correction to the downside again. These [rallies](https://www.investopedia.com/terms/r/rally.asp), which can be a result of speculation and hype, don't last very long. But who are the suckers? The investors, of course. They're called suckers because they may buy on the temporary highs, but end up losing money when asset prices drop. The final stage of the bear market is the torturous grind down to levels where [valuations](https://www.investopedia.com/terms/v/valuation.asp) are more reasonable and a general state of depression prevails regarding investments overall. ## 9. Be Mindful of Experts and Forecasts This is not magic. When everyone who wants to buy has bought, there are no more buyers. At this point, the market must turn lower. Similarly, when everyone who wants to sell has sold, no more sellers remain. So when market experts and the [forecasts](https://www.investopedia.com/terms/f/forecasting.asp) are telling you to sell, sell, sell—or buy, buy, buy—be sure to know that everyone is jumping on that bandwagon, so much so that there's nothing left to sell or buy. By the point you jump in, something else is likely to happen. ## 10. Bull Markets Are More Fun Than Bear Markets This is true for most investors since prices continue to rise during these periods. Who doesn't love seeing their profits rise? Well, unless you're a [short seller](https://www.investopedia.com/terms/s/shortselling.asp). A short sale is when you sell an [asset](https://www.investopedia.com/terms/a/asset.asp) that you don't own yourself. Traders who use this strategy sell borrowed securities hoping the price will drop. The seller must then return an equal amount of shares in the future. ## The Bottom Line No one said investing was easy. There's a lot at stake, and so much to take in. Whether you're a novice trader or someone who's been watching the markets for a great deal of time, it's easy to get caught up in the swings of market news, emotions, and the free-for-all of the market. But if you follow Bob Ferrell's time-tested secrets, you may just come out a winner in the end.

Bob Farrell spent decades as the head of research at Merrill Lynch, establishing himself as one of the leading market analysts on Wall Street. His insights on technical analysis and general market tendencies were canonized as "10 Market Rules to Remember" and have been distributed widely ever since. Here, we review these timeless axioms and how they can help you achieve better returns. Key Takeaways Investors should keep in mind that prices never stay the same and corrections are inevitable. Excesses are never permanent and try using stops to take the emotion out of trading.Don't go with the herd, but remember that fear and greed need to take a backseat to discipline. Consider alternative indexes to watch the health of the market.Take expert advice and forecasts with a grain of salt. 1. Markets Return to the Mean Over Time Whether they face extreme optimism or pessimism, markets eventually revert to saner, long-term valuation levels. According to this theory, returns and prices will go back to whence they came—reversion generally puts the market back to a previous state. So when it comes to individual investors, the lesson is clear: Make a plan and stick to it. Try to weigh out the importance of everything else that's going on around you and use your best judgment. Don't get thrown by the daily chatter and turmoil of the marketplace.  2. Excess Leads to an Opposite Excess Like a swerving automobile driven by an inexperienced youth, we can expect overcorrection when markets overshoot. Remember, a correction is represented by a move of more than 10% of an asset's peak price, so an overcorrection can mean bigger movements. During a market crash, investors are presented with really great buying opportunities. But they tend overcorrect in either direction—upward or downward—and trading can happen at unbelievable levels. Tuned-in investors will be wary of this and will possess the patience and know-how to take measured action to safeguard their capital. 3. Excesses Are Never Permanent The tendency among even the most successful investors is to believe that when things are moving in their favor, profits are limitless. That's just not true, and nothing lasts forever—especially in the financial world. Whether you're riding market lows which represent buying opportunities, or soaring at highs so they can make money by selling, don't count your chickens before they've all hatched. After all, you may have to make a move at some point, because as the first two rules indicate, markets revert to the mean. Markets always revert to the mean. 4. Market Corrections Don't Go Sideways Sharply moving markets tend to correct sharply, which can prevent investors from contemplating their next move in tranquility. The lesson here is to be decisive in trading fast-moving markets and to place stops on your trades to avoid emotional responses. Stop orders help traders in two ways when asset prices move beyond a particular point. By determining a specific entry or exit point, they can help investors limit the amount of money they lose, or help them lock in a profit when prices swing in either direction. 5. Public Buys Most at the Top and Least at the Bottom The typical investor reads the latest news on their mobile phone, watches market programs, and believes what they're told. Unfortunately, by the time the financial press gets around to reporting a given price move, that move is already complete and a reversion is usually in progress. This is precisely the moment when John Q decides to buy at the top or sell at the bottom. The need to be a contrarian is underlined by this rule. Independent thinking always outperforms the herd mentality. Read about Investopedia's 10 Rules of Investing by picking up a copy of our special issue print edition. 6. Fear and Greed: Stronger Than Long-Term Resolve Basic human emotion is perhaps the greatest enemy of successful investing. But whether you're a long-term investor or a day trader, a disciplined approach to trading is key to profits. You must have a trading plan with every trade. You must know exactly at what level you are a seller of your stock—on the upside and the down. Knowing when to get out of a trade is far more difficult than knowing when to get in. Knowing when to take a profit or cut a loss is very easy to figure in the abstract, but when you're holding a security that's on a quick move, fear and greed act quickly to separate you from reality and your money. 7. Markets: Strong When Broad, Weak When Narrow While there's much to be gained from a focus on popular index averages, the strength of a market move is determined by the underlying strength of the market as a whole. So broader averages offer a better take on the strength of the market. That's why it can pay off to follow different indexes—at least those that are beyond the usual suspects like the S&P 500. Consider watching the Wilshire 5000 index or some of the Russell indexes to get a better appreciation of the health of any market move. The Wilshire 5000 index is composed of nearly 4,000 U.S-based companies that are traded on an American exchange and whose pricing is available to the public. Russell indexes like the Russell 1000 and Russell 3000 are weighted by market cap and also give investors exposure to the U.S. stock market. 8. Bear Markets Have Three Stages Market technicians find common patterns in both bull and bear market action. The typical bear pattern, as described here, first involves a sharp sell-off. During a bear market, prices tend to drop 20% or more. In most cases, bear markets involve whole indexes. This kind of market is generally caused by weak or slowing economic activity. This is followed by what's called a sucker's rally. Investors can be drawn into the market by prices that jump quickly before making a sharp correction to the downside again. These rallies, which can be a result of speculation and hype, don't last very long. But who are the suckers? The investors, of course. They're called suckers because they may buy on the temporary highs, but end up losing money when asset prices drop. The final stage of the bear market is the torturous grind down to levels where valuations are more reasonable and a general state of depression prevails regarding investments overall. 9. Be Mindful of Experts and Forecasts This is not magic. When everyone who wants to buy has bought, there are no more buyers. At this point, the market must turn lower. Similarly, when everyone who wants to sell has sold, no more sellers remain. So when market experts and the forecasts are telling you to sell, sell, sell—or buy, buy, buy—be sure to know that everyone is jumping on that bandwagon, so much so that there's nothing left to sell or buy. By the point you jump in, something else is likely to happen. 10. Bull Markets Are More Fun Than Bear Markets This is true for most investors since prices continue to rise during these periods. Who doesn't love seeing their profits rise? Well, unless you're a short seller. A short sale is when you sell an asset that you don't own yourself. Traders who use this strategy sell borrowed securities hoping the price will drop. The seller must then return an equal amount of shares in the future. The Bottom Line No one said investing was easy. There's a lot at stake, and so much to take in. Whether you're a novice trader or someone who's been watching the markets for a great deal of time, it's easy to get caught up in the swings of market news, emotions, and the free-for-all of the market. But if you follow Bob Ferrell's time-tested secrets, you may just come out a winner in the end.

https://www.investopedia.com/terms/f/footsie.asp

Footsie (FTSE): What it Means and How it Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-footsie"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Footsie? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> "Footsie" is slang for the Financial Times-Stock Exchange 100 Share Index (FTSE 100). The index tracks the 100 largest public companies by market capitalization that trade on the London Stock Exchange (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lse.asp">LSE</a>). "FTSE" is an acronym for the Financial Times and the LSE, its original parent companies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>"Footsie" is a slang term referring to the Financial Times-Stock Exchange 100 Share Index (FTSE 100).</li><li>The index tracks the 100 largest public companies by market cap on the London Stock Exchange.</li><li>The index functions similarly to the Dow Jones Industrial Average (DJIA) and the S&amp;P 500 in the U.S. and serves as an indicator of the broader market.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-footsie"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the Footsie </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The FTSE is now owned and maintained by the London Stock Exchange Group. It has similar importance in London to the U.S. Dow Jones Industrial Average and S&amp;P 500 and is a major indicator of the performance of the broader market.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The level of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ftse.asp">FTSE</a> 100 is calculated using the total <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">market capitalization</a> of the constituent companies and the index value. Total market capitalization changes with individual share prices of the indexed companies throughout the trading day, so the index value also changes.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> When the FTSE 100 is quoted up or down, it is measured against the previous day’s market close. It is calculated continuously on every trading day from 8:00 AM at the market opening until the 4:30 p.m. LSE close. A FTSE 100 decline means that the value of the largest U.K. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/listed.asp">listed</a> companies decreased. The FTSE hitting a new high means that the total worth of all the indexed companies increased.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-ftse-composition"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> FTSE Composition </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The FTSE 100 was launched in 1984. Since then, its makeup has changed to reflect <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mergersandacquisitions.asp">mergers and acquisitions</a> as well as entering and exiting companies, underscoring its function as a barometer of market activity.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> A company need not be British to be in the FTSE but must be listed on the LSE. Because many of the listed companies are foreign-based or do most business overseas, the value of the pound is a factor as well. A weaker pound means a dollar-based company would be worth more in pounds, and a rising pound means companies doing business in Europe would earn less in the U.K. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The FTSE reviews the components of the FTSE 100 quarterly to ensure it includes the highest market cap companies.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The top 10 largest companies by market cap included in the FTSE 100 as of June 21, 2023, are as follows:<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_22-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style="width: 197px;"></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>Company</b></td> <td><b>Market Cap </b></td> </tr> <tr> <td>AstraZeneca</td> <td>£180.3 billion</td> </tr> <tr> <td>Shell</td> <td>£157.2 billion</td> </tr> <tr> <td>HSBC</td> <td>£122.2 billion</td> </tr> <tr> <td>Unilever</td> <td>£102.0 billion</td> </tr> <tr> <td>BP</td> <td>£79.3 billion</td> </tr> <tr> <td>Diageo</td> <td>£74.3 billion</td> </tr> <tr> <td>RIO Tinto</td> <td>£64.5 billion</td> </tr> <tr> <td>British American Tobacco</td> <td>£57.5 billion</td> </tr> <tr> <td>Glencore</td> <td>£56.1 billion</td> </tr> <tr> <td>GSK</td> <td>£ 55.8 billion</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-other-ftse-indices"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Other FTSE Indices </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> FTSE also researches and publishes many other indices that track a wide range of securities and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialinstrument.asp">financial instruments</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Other FTSE U.K. indices include the FTSE 250, which includes the next 250 largest companies after the FTSE 100. The FTSE 100 and FTSE 250 make up the FTSE 350, and together with the FTSE SmallCap comprise the FTSE All-Share.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-investing-in-the-ftse-100"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Investing in the FTSE 100 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> As the FTSE 100 is an index, it is impossible to invest directly in the index. To get exposure to the index, investors can invest in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/uk-etfs-how-they-work-8549739">exchange-traded funds that track and invest</a> in the companies listed in the index. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The two most popular ETFs for this purpose are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li>iShares Core FTSE 100 UCITS ETF</li><li>Vanguard FTSE 100 UCITS ETF</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Other ETF options that track the index include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li>HSBC FTSE 100 UCITS ETF</li><li>UBS FTSE 100 UCITS ETF<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-makes-up-the-ftse-100"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Makes Up the FTSE 100?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The FTSE 100 is made up of the largest 100 companies by market capitalization that trade on the London Stock Exchange. The index tracks these companies.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-can-americans-invest-in-the-ftse-100"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Americans Invest in the FTSE 100?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, American investors can invest in the FTSE 100. The best way to do this is to invest in exchange-traded funds. There are funds that focus on replicating, tracking, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/etfs-mutual-funds/072816/top-3-etfs-short-ftse-100-xuks-suk2.asp">shorting the companies of the index</a>. Examples include iShares Core FTSE 100 UCITS, Vanguard FTSE 100 UCITS, and HSBC FTSE 100 UCITS.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-what-is-the-us-equivalent-of-the-ftse-100"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the U.S. Equivalent of the FTSE 100?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The U.S. equivalent of the FTSE 100 is the S&amp;P 500. Though the FTSE 100 tracks 100 companies and the S&amp;P 500 tracks 500 companies, both are considered to be the key indexes in their respective countries that serve as a broader market indicator.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The FTSE 100 index, made up of the largest 100 companies trading on the LSE by market cap, is an important indicator of the broader financial market. It is closely followed by investors and is similar in function to the DJIA and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">S&amp;P 500</a>, and contains some of the largest companies in the world, such as BP and Shell. </p></div>

## What Is the Footsie? "Footsie" is slang for the Financial Times-Stock Exchange 100 Share Index (FTSE 100). The index tracks the 100 largest public companies by market capitalization that trade on the London Stock Exchange ([LSE](https://www.investopedia.com/terms/l/lse.asp)). "FTSE" is an acronym for the Financial Times and the LSE, its original parent companies. ### Key Takeaways * "Footsie" is a slang term referring to the Financial Times-Stock Exchange 100 Share Index (FTSE 100). * The index tracks the 100 largest public companies by market cap on the London Stock Exchange. * The index functions similarly to the Dow Jones Industrial Average (DJIA) and the S&P 500 in the U.S. and serves as an indicator of the broader market. ## Understanding the Footsie The FTSE is now owned and maintained by the London Stock Exchange Group. It has similar importance in London to the U.S. Dow Jones Industrial Average and S&P 500 and is a major indicator of the performance of the broader market. The level of the [FTSE](https://www.investopedia.com/terms/f/ftse.asp) 100 is calculated using the total [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp) of the constituent companies and the index value. Total market capitalization changes with individual share prices of the indexed companies throughout the trading day, so the index value also changes. When the FTSE 100 is quoted up or down, it is measured against the previous day’s market close. It is calculated continuously on every trading day from 8:00 AM at the market opening until the 4:30 p.m. LSE close. A FTSE 100 decline means that the value of the largest U.K. [listed](https://www.investopedia.com/terms/l/listed.asp) companies decreased. The FTSE hitting a new high means that the total worth of all the indexed companies increased. ## FTSE Composition The FTSE 100 was launched in 1984. Since then, its makeup has changed to reflect [mergers and acquisitions](https://www.investopedia.com/terms/m/mergersandacquisitions.asp) as well as entering and exiting companies, underscoring its function as a barometer of market activity. A company need not be British to be in the FTSE but must be listed on the LSE. Because many of the listed companies are foreign-based or do most business overseas, the value of the pound is a factor as well. A weaker pound means a dollar-based company would be worth more in pounds, and a rising pound means companies doing business in Europe would earn less in the U.K. The FTSE reviews the components of the FTSE 100 quarterly to ensure it includes the highest market cap companies. The top 10 largest companies by market cap included in the FTSE 100 as of June 21, 2023, are as follows: | **Company** | **Market Cap** | | --- | --- | | AstraZeneca | £180.3 billion | | Shell | £157.2 billion | | HSBC | £122.2 billion | | Unilever | £102.0 billion | | BP | £79.3 billion | | Diageo | £74.3 billion | | RIO Tinto | £64.5 billion | | British American Tobacco | £57.5 billion | | Glencore | £56.1 billion | | GSK | £ 55.8 billion | ## Other FTSE Indices FTSE also researches and publishes many other indices that track a wide range of securities and [financial instruments](https://www.investopedia.com/terms/f/financialinstrument.asp). Other FTSE U.K. indices include the FTSE 250, which includes the next 250 largest companies after the FTSE 100. The FTSE 100 and FTSE 250 make up the FTSE 350, and together with the FTSE SmallCap comprise the FTSE All-Share. ## Investing in the FTSE 100 As the FTSE 100 is an index, it is impossible to invest directly in the index. To get exposure to the index, investors can invest in [exchange-traded funds that track and invest](https://www.investopedia.com/uk-etfs-how-they-work-8549739) in the companies listed in the index. The two most popular ETFs for this purpose are: * iShares Core FTSE 100 UCITS ETF * Vanguard FTSE 100 UCITS ETF Other ETF options that track the index include: * HSBC FTSE 100 UCITS ETF * UBS FTSE 100 UCITS ETF ## What Makes Up the FTSE 100? The FTSE 100 is made up of the largest 100 companies by market capitalization that trade on the London Stock Exchange. The index tracks these companies. ## Can Americans Invest in the FTSE 100? Yes, American investors can invest in the FTSE 100. The best way to do this is to invest in exchange-traded funds. There are funds that focus on replicating, tracking, and [shorting the companies of the index](https://www.investopedia.com/articles/etfs-mutual-funds/072816/top-3-etfs-short-ftse-100-xuks-suk2.asp). Examples include iShares Core FTSE 100 UCITS, Vanguard FTSE 100 UCITS, and HSBC FTSE 100 UCITS. ## What Is the U.S. Equivalent of the FTSE 100? The U.S. equivalent of the FTSE 100 is the S&P 500. Though the FTSE 100 tracks 100 companies and the S&P 500 tracks 500 companies, both are considered to be the key indexes in their respective countries that serve as a broader market indicator. ## The Bottom Line The FTSE 100 index, made up of the largest 100 companies trading on the LSE by market cap, is an important indicator of the broader financial market. It is closely followed by investors and is similar in function to the DJIA and [S&P 500](https://www.investopedia.com/terms/s/sp500.asp), and contains some of the largest companies in the world, such as BP and Shell.

What Is the Footsie? "Footsie" is slang for the Financial Times-Stock Exchange 100 Share Index (FTSE 100). The index tracks the 100 largest public companies by market capitalization that trade on the London Stock Exchange (LSE). "FTSE" is an acronym for the Financial Times and the LSE, its original parent companies. Key Takeaways "Footsie" is a slang term referring to the Financial Times-Stock Exchange 100 Share Index (FTSE 100).The index tracks the 100 largest public companies by market cap on the London Stock Exchange.The index functions similarly to the Dow Jones Industrial Average (DJIA) and the S&P 500 in the U.S. and serves as an indicator of the broader market. Understanding the Footsie The FTSE is now owned and maintained by the London Stock Exchange Group. It has similar importance in London to the U.S. Dow Jones Industrial Average and S&P 500 and is a major indicator of the performance of the broader market. The level of the FTSE 100 is calculated using the total market capitalization of the constituent companies and the index value. Total market capitalization changes with individual share prices of the indexed companies throughout the trading day, so the index value also changes. When the FTSE 100 is quoted up or down, it is measured against the previous day’s market close. It is calculated continuously on every trading day from 8:00 AM at the market opening until the 4:30 p.m. LSE close. A FTSE 100 decline means that the value of the largest U.K. listed companies decreased. The FTSE hitting a new high means that the total worth of all the indexed companies increased. FTSE Composition The FTSE 100 was launched in 1984. Since then, its makeup has changed to reflect mergers and acquisitions as well as entering and exiting companies, underscoring its function as a barometer of market activity. A company need not be British to be in the FTSE but must be listed on the LSE. Because many of the listed companies are foreign-based or do most business overseas, the value of the pound is a factor as well. A weaker pound means a dollar-based company would be worth more in pounds, and a rising pound means companies doing business in Europe would earn less in the U.K. The FTSE reviews the components of the FTSE 100 quarterly to ensure it includes the highest market cap companies. The top 10 largest companies by market cap included in the FTSE 100 as of June 21, 2023, are as follows: Company Market Cap  AstraZeneca £180.3 billion Shell £157.2 billion HSBC £122.2 billion Unilever £102.0 billion BP £79.3 billion Diageo £74.3 billion RIO Tinto £64.5 billion British American Tobacco £57.5 billion Glencore £56.1 billion GSK £ 55.8 billion Other FTSE Indices FTSE also researches and publishes many other indices that track a wide range of securities and financial instruments. Other FTSE U.K. indices include the FTSE 250, which includes the next 250 largest companies after the FTSE 100. The FTSE 100 and FTSE 250 make up the FTSE 350, and together with the FTSE SmallCap comprise the FTSE All-Share. Investing in the FTSE 100 As the FTSE 100 is an index, it is impossible to invest directly in the index. To get exposure to the index, investors can invest in exchange-traded funds that track and invest in the companies listed in the index. The two most popular ETFs for this purpose are: iShares Core FTSE 100 UCITS ETFVanguard FTSE 100 UCITS ETF Other ETF options that track the index include: HSBC FTSE 100 UCITS ETFUBS FTSE 100 UCITS ETF What Makes Up the FTSE 100? The FTSE 100 is made up of the largest 100 companies by market capitalization that trade on the London Stock Exchange. The index tracks these companies. Can Americans Invest in the FTSE 100? Yes, American investors can invest in the FTSE 100. The best way to do this is to invest in exchange-traded funds. There are funds that focus on replicating, tracking, and shorting the companies of the index. Examples include iShares Core FTSE 100 UCITS, Vanguard FTSE 100 UCITS, and HSBC FTSE 100 UCITS. What Is the U.S. Equivalent of the FTSE 100? The U.S. equivalent of the FTSE 100 is the S&P 500. Though the FTSE 100 tracks 100 companies and the S&P 500 tracks 500 companies, both are considered to be the key indexes in their respective countries that serve as a broader market indicator. The Bottom Line The FTSE 100 index, made up of the largest 100 companies trading on the LSE by market cap, is an important indicator of the broader financial market. It is closely followed by investors and is similar in function to the DJIA and S&P 500, and contains some of the largest companies in the world, such as BP and Shell.

https://www.investopedia.com/how-london-became-the-world-s-financial-hub-4589324

How London Became the World’s Financial Hub

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The U.K. is the world's highest net exporter of financial services and London, with its convenient time zone and feather-light regulations, vies with New York as the world’s financial capital. The two cities regularly swap places as the number one and number two global financial hubs, depending on the criteria used. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Many other cities, including Venice and Amsterdam, have held and lost the title throughout history.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Great Britain's departure from the European Union has raised questions about whether the city can keep its position at the heart of the international financial system. But how did it get there? We briefly trace the history. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>London and New York regularly trade places at the top of the lists of global financial hubs.</li><li>In 1979, a move to deregulate the financial markets so significant it is still known as "The Big Bang" pushed London to the top of the list.</li><li>More recent events, notably Brexit, have clouded the prospect of The City's continued financial dominance.</li></ul></div></div></div> <span class="heading-toc" id="toc-the-city-of-london"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> The City of London </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/londons-financial-districts-7548716">London’s financial district</a> is actually The City within the city of London. Known as The City of London, it was established a few years after the Roman invasion in AD 50 on the north bank of the River Thames. It has its own mayor and governing body, called the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-city-of-london-corporation-7547068">City of London Corporation</a>.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> From its early years, commerce flourished in the City, and its ports drew merchants and entrepreneurs from many nations. Historian Peter Borsay says London's population went from about 50,000 to 60,000 in the 1520s to a million by the end of the 18th century. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Between 1650 and 1750, it saw the arrival of 8,000 immigrants a year, according to historical demographer Tony Wrigley. They included craftsmen and merchants who joined or established guilds and wielded great influence and power in The City. They secured freedoms and rights for their members that businesses enjoy to this day. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-subheading__text"> Emergence of the Bank of England </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Some of those merchants went into banking and developed the sector. The Bank of England, which stands in the middle of the City, began as a private corporation started by merchants in 1694, and it stayed private until the close of World War II. Its first task was to fund the government’s military efforts in the Nine Years' War with France. It received various long-term privileges and became a monopoly.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Coffee houses, which were enormously popular within the City’s walls around this time, were used as makeshift offices that evolved into financial institutions. The London Stock Exchange was started by stockbrokers who had conducted business in Jonathan’s Coffee House in Change Alley. The insurance market Lloyd’s of London is named after a coffee house on Tower Street that was frequented by marine underwriters.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-square figure-low-res" id="mntl-sc-block_21-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:80.2%;"> <img class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/Ep--OWSadRbFIzgxrldFTlrnXW8=/680x0/filters:no_upscale():max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/Q2OFAPJvdGvmbzL8R40udlYUH2w=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg" data-srcset="https://www.investopedia.com/thmb/ebNsBIB-PJmxnsMMDZhvqAK_3M4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg 750w" data-tracking-container="true" height="546" id="mntl-sc-block-image_1-0" width="680"/> <noscript> <img class="img--noscript universal-image__image" height="546" sizes="750px" src="https://www.investopedia.com/thmb/Q2OFAPJvdGvmbzL8R40udlYUH2w=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg" srcset="https://www.investopedia.com/thmb/ebNsBIB-PJmxnsMMDZhvqAK_3M4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg 750w" width="680"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-text">Map drawn of the City by Robert Walton in 1676 displays the various guild halls.</span> <span class="figure-article-caption-owner"> Harvard Library</span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> There was little question as to which U.K. city would be its financial and trade center. "An ancient banking tradition, a major port, the capital seat, the hub of the railroad network built after 1830, all forces were brought to bear on the single locality, itself with a minor ambivalence between the City and the West End. The Irish and Scottish different banking systems reached across their boundaries and linked up with London,” wrote economic historian Charles P. Kindleberger in <em>The Formation of Financial Centers</em>.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-international-competition"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> International Competition </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> London borrowed financial innovations from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aex.asp">Amsterdam</a>, the world’s trading and financial center in the 17th century, and improved on them. It developed a market-centered system as opposed to the bank-centered of its Dutch rival city and grew more dominant in the 18th century as the Netherlands began an economic and political decline.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> London then competed with Paris to be the biggest global financial hub until the mid-19th century. Paris lost out in 1848 when the Bank of France ran into trouble after France lost a war with Prussia. The French bank was forced to halt specie payments, meaning it could no longer exchange paper money for gold. France, and its bank, were running short on gold.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-subheading__text"> London Emerges </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> “Since the suspension of specie payments by the Bank of France, its use as a reservoir of specie is at an end. No one can draw a cheque on it and be sure of getting gold or silver for that cheque. Accordingly the whole liability for such international payments in cash is thrown on the Bank of Eng­land,” wrote Walter Bagehot in his famous 1873 book <em>Lombard Street: A Description of the Money Market.</em><span class="ql-inline-citation" data-cite="10"></span> <em>"</em>London has become the sole great settling-house of exchange transactions in Europe, instead of being formerly one of two. And this pre-eminence London will probably maintain, for it is a natural pre-eminence. The number of mercantile bills drawn upon London incalculably surpasses those drawn on any other Euro­pean city; London is the place which receives more than any other place, and pays more than any other place, and therefore it is the natural ‘clearing house.’ The pre-eminence of Paris partly arose from a distribution of political power, which is already disturbed.”<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> London held supreme until the start of the First World War. During that devastating conflict, Kindleberger says, The City began to have “difficulty in maintaining its role as a center for foreign reserves and a source of short- and long-term credit.”<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> New York Captures Top Spot </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> This period coincided with the emergence of the U.S. as a global financial force. The New York Stock Exchange overtook the London Stock Exchange. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> New York was briefly the financial center of the world after the Second World War until the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymarket.asp">eurodollar market </a>developed in the 1950s and London took a lion’s share of it, according to Kindleberger.<span class="ql-inline-citation" data-cite="7"></span> English common law meant that the Bank of England could allow lightly regulated, offshore markets to flourish. Hundreds of foreign banks set up branches in London.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-subheading__text"> London vs. New York: The Regulatory Environment </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The U.S. had its own version of common law and could have adopted and developed a parallel market in New York, but its government chose to stay with a stricter standard of financial regulations.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Economist Ronen Palan explained that the U.S. was then a rising hegemonic power focused on developing its manufacturing and commercial sector, while the British Empire was a declining state with a weak manufacturing and commercial sector and a relatively powerful financial sector.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> “The City of London developed at the heart of the British Empire, somewhat divorced from the U.K.’s mainland economic needs, to finance trading and manufacturing throughout the formal and informal British Empire,” he wrote. “Although nationalized in 1948, the Bank of England remained effectively under the control of the City’s commercial banks. The Bank of England consistently pursued policies that favored the City’s position as a world financial center, even when such policies were seen as harmful to the UK’s mainland manufacturing needs. The pound was consistently overvalued, interest rates relatively high, in a country that saw a declining manufacturing sector.”<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> But the Square Mile hadn’t definitively beaten Wall Street yet. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-the-big-bang-to-brexit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> The Big Bang to Brexit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> In October 1979, Britain removed controls on foreign exchange that had been in place from the Second World War.<span class="ql-inline-citation" data-cite="9"></span> Nicholas Goodison, chair of the London Stock Exchange at the time, told the New York Times the restrictions had “done a lot of harm to London as one of the leading financial centers.”<span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Seven years later, the city’s financial markets were deregulated in a move so tremendous that it was dubbed the "Big Bang.” The removal of fixed rate commissions, the entry of foreign companies, and a switch to electronic trading kicked off a financial revolution that would cement London’s place as the global financial capital.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> The average daily turnover of the London Stock Exchange rose from 500 million pounds in 1986 to more than $2 billion in 1995.<span class="ql-inline-citation" data-cite="18"></span> Small British firms were bought up by international players. The culture of the country's financial sector changed forever. The city also became a hub for the multitrillion-dollar global <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> market in the 1990s. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-subheading__text"> Enter Brexit </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> London has enjoyed a good run, but <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brexit.asp">Brexit</a> is a cloud that hangs over its skyscrapers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Consultancy firm EY said assets worth nearly 800 billion pounds were being moved from Britain to other European financial centers in the run-up to the finalization of the nation's departure from the European Union.<span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Brexit also threatens the city's access to foreign talent, which it has relied on for centuries. In 2017, 18% of the workforce in the City was born in Europe, versus 7% for the country as a whole. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Vying for London's position in Europe are Dublin, Luxembourg, Frankfurt, and Paris. After being toppled from the top spot in the eighteenth century, Amsterdam may regain some of its former glory, too. After the Brexit vote, Reuters reported that 20 financial firms were applying for licenses to operate in the city.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> New York has already replaced London as the financial center of the world, according to a survey by London-based think-tank Z/Yen. A new chapter begins.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <span class="heading-toc" id="toc-new-york-regains-top-spot"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-heading__text"> New York Regains Top Spot </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> In 2023, New York City had regained its top spot as the financial center of the world while London was second on the list, according to an index compiled by Z/Yen Partners and the China Development Center.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> But the rest of the top 10 on the list would come as a shock to an 18th-century financier in either city. The list includes Singapore, Hong Kong, San Francisco, Los Angeles, Shanghai, Chicago, Boston, and Seoul. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_71-0"><span class="heading-toc" id="toc-what-city-is-the-worlds-top-financial-center"></span> <h2 class="mntl-sc-block-questionandanswer__question">What City Is the World's Top Financial Center?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In 2023, most sources choose New York, for its sheer size and volume and its strategic location as a place to do business. London is usually in second place.</p><p>Not all agree. For example, the International Financial Centers Index reverses the order, putting London on top of New York. Its findings are compiled by CEOWorld magazine based on a survey of financial services professionals plus no fewer than 50 other analyses of cities for their global competitiveness. It takes into account not just size but factors such as regulatory and political environment, tax policies, and infrastructure.<span class="ql-inline-citation" data-cite="20"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_73-0"><span class="heading-toc" id="toc-what-cities-rank-highest-as-global-financial-centers"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Cities Rank Highest as Global Financial Centers?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A city gains its status as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/091114/worlds-top-financial-cities.asp">global financial hub</a> when it has a strategic location, a reputable stock exchange, and a concentration of major financial institutions, To keep that status, it needs a stable government, good infrastructure, and a sound regulatory system.</p><p>Today's top global financial centers, in addition to London and New York, include Singapore, Zurich, Hong Kong, Chicago, Tokyo, Frankfurt, and Shanghai.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_75-0"><span class="heading-toc" id="toc-how-does-brexit-jeopardize-londons-financial-dominance"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Brexit Jeopardize London's Financial Dominance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The markets hate uncertainty, and Brexit raises colossal uncertainty.</p><p>Some financial institutions are poised to move to other hubs such as Frankfurt in order to stay competitive in European Union nations.</p><p>Some foreign nationals (and there are many of them working in The City) are wondering whether they can continue to stay in Britain. Recruitment of foreign nationals has become more complicated.</p><p>These are early days for Brexit. The next few years will determine its real impact on The City.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_77-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> London is the world's foremost financial center, or maybe New York is. The two cities regularly swap places on the list depending in part on the criteria used. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> But another factor is the political environment. Brexit has added an element of uncertainty to the continuing status of London as a global financial hub.<br/> </p></div>

The U.K. is the world's highest net exporter of financial services and London, with its convenient time zone and feather-light regulations, vies with New York as the world’s financial capital. The two cities regularly swap places as the number one and number two global financial hubs, depending on the criteria used. Many other cities, including Venice and Amsterdam, have held and lost the title throughout history.  Great Britain's departure from the European Union has raised questions about whether the city can keep its position at the heart of the international financial system. But how did it get there? We briefly trace the history. ### Key Takeaways * London and New York regularly trade places at the top of the lists of global financial hubs. * In 1979, a move to deregulate the financial markets so significant it is still known as "The Big Bang" pushed London to the top of the list. * More recent events, notably Brexit, have clouded the prospect of The City's continued financial dominance. ## The City of London [London’s financial district](https://www.investopedia.com/londons-financial-districts-7548716) is actually The City within the city of London. Known as The City of London, it was established a few years after the Roman invasion in AD 50 on the north bank of the River Thames. It has its own mayor and governing body, called the [City of London Corporation](https://www.investopedia.com/the-city-of-london-corporation-7547068). From its early years, commerce flourished in the City, and its ports drew merchants and entrepreneurs from many nations. Historian Peter Borsay says London's population went from about 50,000 to 60,000 in the 1520s to a million by the end of the 18th century. Between 1650 and 1750, it saw the arrival of 8,000 immigrants a year, according to historical demographer Tony Wrigley. They included craftsmen and merchants who joined or established guilds and wielded great influence and power in The City. They secured freedoms and rights for their members that businesses enjoy to this day. ### Emergence of the Bank of England Some of those merchants went into banking and developed the sector. The Bank of England, which stands in the middle of the City, began as a private corporation started by merchants in 1694, and it stayed private until the close of World War II. Its first task was to fund the government’s military efforts in the Nine Years' War with France. It received various long-term privileges and became a monopoly. Coffee houses, which were enormously popular within the City’s walls around this time, were used as makeshift offices that evolved into financial institutions. The London Stock Exchange was started by stockbrokers who had conducted business in Jonathan’s Coffee House in Change Alley. The insurance market Lloyd’s of London is named after a coffee house on Tower Street that was frequented by marine underwriters. ![]() :max_bytes(150000):strip_icc()/7157771-5c935fedc9e77c00010a5d0f.jpeg) Map drawn of the City by Robert Walton in 1676 displays the various guild halls.  Harvard Library There was little question as to which U.K. city would be its financial and trade center. "An ancient banking tradition, a major port, the capital seat, the hub of the railroad network built after 1830, all forces were brought to bear on the single locality, itself with a minor ambivalence between the City and the West End. The Irish and Scottish different banking systems reached across their boundaries and linked up with London,” wrote economic historian Charles P. Kindleberger in *The Formation of Financial Centers*. ## International Competition London borrowed financial innovations from [Amsterdam](https://www.investopedia.com/terms/a/aex.asp), the world’s trading and financial center in the 17th century, and improved on them. It developed a market-centered system as opposed to the bank-centered of its Dutch rival city and grew more dominant in the 18th century as the Netherlands began an economic and political decline. London then competed with Paris to be the biggest global financial hub until the mid-19th century. Paris lost out in 1848 when the Bank of France ran into trouble after France lost a war with Prussia. The French bank was forced to halt specie payments, meaning it could no longer exchange paper money for gold. France, and its bank, were running short on gold. ### London Emerges “Since the suspension of specie payments by the Bank of France, its use as a reservoir of specie is at an end. No one can draw a cheque on it and be sure of getting gold or silver for that cheque. Accordingly the whole liability for such international payments in cash is thrown on the Bank of Eng­land,” wrote Walter Bagehot in his famous 1873 book *Lombard Street: A Description of the Money Market.* *"*London has become the sole great settling-house of exchange transactions in Europe, instead of being formerly one of two. And this pre-eminence London will probably maintain, for it is a natural pre-eminence. The number of mercantile bills drawn upon London incalculably surpasses those drawn on any other Euro­pean city; London is the place which receives more than any other place, and pays more than any other place, and therefore it is the natural ‘clearing house.’ The pre-eminence of Paris partly arose from a distribution of political power, which is already disturbed.” London held supreme until the start of the First World War. During that devastating conflict, Kindleberger says, The City began to have “difficulty in maintaining its role as a center for foreign reserves and a source of short- and long-term credit.” ### New York Captures Top Spot This period coincided with the emergence of the U.S. as a global financial force. The New York Stock Exchange overtook the London Stock Exchange. New York was briefly the financial center of the world after the Second World War until the [eurodollar market](https://www.investopedia.com/terms/m/moneymarket.asp) developed in the 1950s and London took a lion’s share of it, according to Kindleberger. English common law meant that the Bank of England could allow lightly regulated, offshore markets to flourish. Hundreds of foreign banks set up branches in London. ### London vs. New York: The Regulatory Environment The U.S. had its own version of common law and could have adopted and developed a parallel market in New York, but its government chose to stay with a stricter standard of financial regulations. Economist Ronen Palan explained that the U.S. was then a rising hegemonic power focused on developing its manufacturing and commercial sector, while the British Empire was a declining state with a weak manufacturing and commercial sector and a relatively powerful financial sector. “The City of London developed at the heart of the British Empire, somewhat divorced from the U.K.’s mainland economic needs, to finance trading and manufacturing throughout the formal and informal British Empire,” he wrote. “Although nationalized in 1948, the Bank of England remained effectively under the control of the City’s commercial banks. The Bank of England consistently pursued policies that favored the City’s position as a world financial center, even when such policies were seen as harmful to the UK’s mainland manufacturing needs. The pound was consistently overvalued, interest rates relatively high, in a country that saw a declining manufacturing sector.” But the Square Mile hadn’t definitively beaten Wall Street yet. ## The Big Bang to Brexit In October 1979, Britain removed controls on foreign exchange that had been in place from the Second World War. Nicholas Goodison, chair of the London Stock Exchange at the time, told the New York Times the restrictions had “done a lot of harm to London as one of the leading financial centers.” Seven years later, the city’s financial markets were deregulated in a move so tremendous that it was dubbed the "Big Bang.” The removal of fixed rate commissions, the entry of foreign companies, and a switch to electronic trading kicked off a financial revolution that would cement London’s place as the global financial capital. The average daily turnover of the London Stock Exchange rose from 500 million pounds in 1986 to more than $2 billion in 1995. Small British firms were bought up by international players. The culture of the country's financial sector changed forever. The city also became a hub for the multitrillion-dollar global [derivatives](https://www.investopedia.com/terms/d/derivative.asp) market in the 1990s. ### Enter Brexit London has enjoyed a good run, but [Brexit](https://www.investopedia.com/terms/b/brexit.asp) is a cloud that hangs over its skyscrapers. Consultancy firm EY said assets worth nearly 800 billion pounds were being moved from Britain to other European financial centers in the run-up to the finalization of the nation's departure from the European Union. Brexit also threatens the city's access to foreign talent, which it has relied on for centuries. In 2017, 18% of the workforce in the City was born in Europe, versus 7% for the country as a whole. Vying for London's position in Europe are Dublin, Luxembourg, Frankfurt, and Paris. After being toppled from the top spot in the eighteenth century, Amsterdam may regain some of its former glory, too. After the Brexit vote, Reuters reported that 20 financial firms were applying for licenses to operate in the city. New York has already replaced London as the financial center of the world, according to a survey by London-based think-tank Z/Yen. A new chapter begins. ## New York Regains Top Spot In 2023, New York City had regained its top spot as the financial center of the world while London was second on the list, according to an index compiled by Z/Yen Partners and the China Development Center. But the rest of the top 10 on the list would come as a shock to an 18th-century financier in either city. The list includes Singapore, Hong Kong, San Francisco, Los Angeles, Shanghai, Chicago, Boston, and Seoul. ## What City Is the World's Top Financial Center? In 2023, most sources choose New York, for its sheer size and volume and its strategic location as a place to do business. London is usually in second place. Not all agree. For example, the International Financial Centers Index reverses the order, putting London on top of New York. Its findings are compiled by CEOWorld magazine based on a survey of financial services professionals plus no fewer than 50 other analyses of cities for their global competitiveness. It takes into account not just size but factors such as regulatory and political environment, tax policies, and infrastructure. ## What Cities Rank Highest as Global Financial Centers? A city gains its status as a [global financial hub](https://www.investopedia.com/articles/investing/091114/worlds-top-financial-cities.asp) when it has a strategic location, a reputable stock exchange, and a concentration of major financial institutions, To keep that status, it needs a stable government, good infrastructure, and a sound regulatory system. Today's top global financial centers, in addition to London and New York, include Singapore, Zurich, Hong Kong, Chicago, Tokyo, Frankfurt, and Shanghai. ## How Does Brexit Jeopardize London's Financial Dominance? The markets hate uncertainty, and Brexit raises colossal uncertainty. Some financial institutions are poised to move to other hubs such as Frankfurt in order to stay competitive in European Union nations. Some foreign nationals (and there are many of them working in The City) are wondering whether they can continue to stay in Britain. Recruitment of foreign nationals has become more complicated. These are early days for Brexit. The next few years will determine its real impact on The City. ## The Bottom Line London is the world's foremost financial center, or maybe New York is. The two cities regularly swap places on the list depending in part on the criteria used. But another factor is the political environment. Brexit has added an element of uncertainty to the continuing status of London as a global financial hub.

The U.K. is the world's highest net exporter of financial services and London, with its convenient time zone and feather-light regulations, vies with New York as the world’s financial capital. The two cities regularly swap places as the number one and number two global financial hubs, depending on the criteria used. Many other cities, including Venice and Amsterdam, have held and lost the title throughout history.  Great Britain's departure from the European Union has raised questions about whether the city can keep its position at the heart of the international financial system. But how did it get there? We briefly trace the history. Key Takeaways London and New York regularly trade places at the top of the lists of global financial hubs.In 1979, a move to deregulate the financial markets so significant it is still known as "The Big Bang" pushed London to the top of the list.More recent events, notably Brexit, have clouded the prospect of The City's continued financial dominance. The City of London London’s financial district is actually The City within the city of London. Known as The City of London, it was established a few years after the Roman invasion in AD 50 on the north bank of the River Thames. It has its own mayor and governing body, called the City of London Corporation. From its early years, commerce flourished in the City, and its ports drew merchants and entrepreneurs from many nations. Historian Peter Borsay says London's population went from about 50,000 to 60,000 in the 1520s to a million by the end of the 18th century. Between 1650 and 1750, it saw the arrival of 8,000 immigrants a year, according to historical demographer Tony Wrigley. They included craftsmen and merchants who joined or established guilds and wielded great influence and power in The City. They secured freedoms and rights for their members that businesses enjoy to this day. Emergence of the Bank of England Some of those merchants went into banking and developed the sector. The Bank of England, which stands in the middle of the City, began as a private corporation started by merchants in 1694, and it stayed private until the close of World War II. Its first task was to fund the government’s military efforts in the Nine Years' War with France. It received various long-term privileges and became a monopoly. Coffee houses, which were enormously popular within the City’s walls around this time, were used as makeshift offices that evolved into financial institutions. The London Stock Exchange was started by stockbrokers who had conducted business in Jonathan’s Coffee House in Change Alley. The insurance market Lloyd’s of London is named after a coffee house on Tower Street that was frequented by marine underwriters. Map drawn of the City by Robert Walton in 1676 displays the various guild halls.  Harvard Library There was little question as to which U.K. city would be its financial and trade center. "An ancient banking tradition, a major port, the capital seat, the hub of the railroad network built after 1830, all forces were brought to bear on the single locality, itself with a minor ambivalence between the City and the West End. The Irish and Scottish different banking systems reached across their boundaries and linked up with London,” wrote economic historian Charles P. Kindleberger in The Formation of Financial Centers. International Competition London borrowed financial innovations from Amsterdam, the world’s trading and financial center in the 17th century, and improved on them. It developed a market-centered system as opposed to the bank-centered of its Dutch rival city and grew more dominant in the 18th century as the Netherlands began an economic and political decline. London then competed with Paris to be the biggest global financial hub until the mid-19th century. Paris lost out in 1848 when the Bank of France ran into trouble after France lost a war with Prussia. The French bank was forced to halt specie payments, meaning it could no longer exchange paper money for gold. France, and its bank, were running short on gold. London Emerges “Since the suspension of specie payments by the Bank of France, its use as a reservoir of specie is at an end. No one can draw a cheque on it and be sure of getting gold or silver for that cheque. Accordingly the whole liability for such international payments in cash is thrown on the Bank of Eng­land,” wrote Walter Bagehot in his famous 1873 book Lombard Street: A Description of the Money Market. "London has become the sole great settling-house of exchange transactions in Europe, instead of being formerly one of two. And this pre-eminence London will probably maintain, for it is a natural pre-eminence. The number of mercantile bills drawn upon London incalculably surpasses those drawn on any other Euro­pean city; London is the place which receives more than any other place, and pays more than any other place, and therefore it is the natural ‘clearing house.’ The pre-eminence of Paris partly arose from a distribution of political power, which is already disturbed.” London held supreme until the start of the First World War. During that devastating conflict, Kindleberger says, The City began to have “difficulty in maintaining its role as a center for foreign reserves and a source of short- and long-term credit.” New York Captures Top Spot This period coincided with the emergence of the U.S. as a global financial force. The New York Stock Exchange overtook the London Stock Exchange. New York was briefly the financial center of the world after the Second World War until the eurodollar market developed in the 1950s and London took a lion’s share of it, according to Kindleberger. English common law meant that the Bank of England could allow lightly regulated, offshore markets to flourish. Hundreds of foreign banks set up branches in London. London vs. New York: The Regulatory Environment The U.S. had its own version of common law and could have adopted and developed a parallel market in New York, but its government chose to stay with a stricter standard of financial regulations. Economist Ronen Palan explained that the U.S. was then a rising hegemonic power focused on developing its manufacturing and commercial sector, while the British Empire was a declining state with a weak manufacturing and commercial sector and a relatively powerful financial sector. “The City of London developed at the heart of the British Empire, somewhat divorced from the U.K.’s mainland economic needs, to finance trading and manufacturing throughout the formal and informal British Empire,” he wrote. “Although nationalized in 1948, the Bank of England remained effectively under the control of the City’s commercial banks. The Bank of England consistently pursued policies that favored the City’s position as a world financial center, even when such policies were seen as harmful to the UK’s mainland manufacturing needs. The pound was consistently overvalued, interest rates relatively high, in a country that saw a declining manufacturing sector.” But the Square Mile hadn’t definitively beaten Wall Street yet. The Big Bang to Brexit In October 1979, Britain removed controls on foreign exchange that had been in place from the Second World War. Nicholas Goodison, chair of the London Stock Exchange at the time, told the New York Times the restrictions had “done a lot of harm to London as one of the leading financial centers.” Seven years later, the city’s financial markets were deregulated in a move so tremendous that it was dubbed the "Big Bang.” The removal of fixed rate commissions, the entry of foreign companies, and a switch to electronic trading kicked off a financial revolution that would cement London’s place as the global financial capital. The average daily turnover of the London Stock Exchange rose from 500 million pounds in 1986 to more than $2 billion in 1995. Small British firms were bought up by international players. The culture of the country's financial sector changed forever. The city also became a hub for the multitrillion-dollar global derivatives market in the 1990s. Enter Brexit London has enjoyed a good run, but Brexit is a cloud that hangs over its skyscrapers. Consultancy firm EY said assets worth nearly 800 billion pounds were being moved from Britain to other European financial centers in the run-up to the finalization of the nation's departure from the European Union. Brexit also threatens the city's access to foreign talent, which it has relied on for centuries. In 2017, 18% of the workforce in the City was born in Europe, versus 7% for the country as a whole. Vying for London's position in Europe are Dublin, Luxembourg, Frankfurt, and Paris. After being toppled from the top spot in the eighteenth century, Amsterdam may regain some of its former glory, too. After the Brexit vote, Reuters reported that 20 financial firms were applying for licenses to operate in the city. New York has already replaced London as the financial center of the world, according to a survey by London-based think-tank Z/Yen. A new chapter begins. New York Regains Top Spot In 2023, New York City had regained its top spot as the financial center of the world while London was second on the list, according to an index compiled by Z/Yen Partners and the China Development Center. But the rest of the top 10 on the list would come as a shock to an 18th-century financier in either city. The list includes Singapore, Hong Kong, San Francisco, Los Angeles, Shanghai, Chicago, Boston, and Seoul. What City Is the World's Top Financial Center? In 2023, most sources choose New York, for its sheer size and volume and its strategic location as a place to do business. London is usually in second place.Not all agree. For example, the International Financial Centers Index reverses the order, putting London on top of New York. Its findings are compiled by CEOWorld magazine based on a survey of financial services professionals plus no fewer than 50 other analyses of cities for their global competitiveness. It takes into account not just size but factors such as regulatory and political environment, tax policies, and infrastructure. What Cities Rank Highest as Global Financial Centers? A city gains its status as a global financial hub when it has a strategic location, a reputable stock exchange, and a concentration of major financial institutions, To keep that status, it needs a stable government, good infrastructure, and a sound regulatory system.Today's top global financial centers, in addition to London and New York, include Singapore, Zurich, Hong Kong, Chicago, Tokyo, Frankfurt, and Shanghai. How Does Brexit Jeopardize London's Financial Dominance? The markets hate uncertainty, and Brexit raises colossal uncertainty.Some financial institutions are poised to move to other hubs such as Frankfurt in order to stay competitive in European Union nations.Some foreign nationals (and there are many of them working in The City) are wondering whether they can continue to stay in Britain. Recruitment of foreign nationals has become more complicated.These are early days for Brexit. The next few years will determine its real impact on The City. The Bottom Line London is the world's foremost financial center, or maybe New York is. The two cities regularly swap places on the list depending in part on the criteria used. But another factor is the political environment. Brexit has added an element of uncertainty to the continuing status of London as a global financial hub.

https://www.investopedia.com/who-invented-cds-5268017

Who Invented CDs?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Certificate of deposit (CD) accounts are a type of time deposit you can use to save for short- or long-term goals. While you might think of CDs as being a feature of modern banking, they've existed in different forms for centuries. The concept of issuing certificates of deposit originated in the 1600s with the European banking system. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A certificate of deposit (CD) is a time deposit account that allows savers to earn interest over a set time period.</li><li>The concept of issuing certificates of deposit dates back to European banking practices in the 1600s.</li><li>Banks began issuing certificates of deposit to savers in the U.S. in the 1800s.<span class="ql-inline-citation" data-cite="9"></span></li><li>Today, banks and credit unions offer CDs to savers as a way to set aside money for short- and long-term financial goals.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-certificate-of-deposit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> What Is a Certificate of Deposit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificate of deposit (CD)</a>, also called a time or term deposit account, is a special type of savings vehicle. When you open a CD account, you deposit money with the agreement that you'll leave those funds in your account for a set time period. While the money is in your CD, it earns interest. Once the CD reaches the end of the specified time period or matures, you can withdraw your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savings.asp">savings</a> or roll it into a new CD.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Traditional banks, online banks, and credit unions can offer CD accounts to savers. There are different types of CDs you might be able to choose from, which include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>Standard CDs</li> <li>Jumbo CDs</li> <li>Step-up CDs</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bumpupcd.asp">Bump-up CDs</a></li> <li>Raise-your-rate CDs</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169">Add-on CDs</a></li> <li>No-penalty CDs</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The minimum deposit requirements for a CD can vary by the type of account and the bank. You might be able to open a standard CD with $500, for example, while a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jumbocd.asp">jumbo CD</a> might require a $10,000 minimum deposit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> In terms of CD rates, those are typically determined by the term of the CD. CD terms may be as short as 28 or 30 days or extend anywhere from five to 10 years. As a general rule of thumb, the longer the CD term, the higher the rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> CDs are protected by Federal Deposit Insurance Corporation (FDIC) coverage when held at FDIC member banks. The National Credit Union Administration (NCUA) provides coverage for CDs held at NCUA member credit unions. The current coverage limits for both are $250,000 per depositor, per account ownership type, per financial institution.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Important</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Withdrawing money from a CD before it reaches maturity can trigger an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cd-early-withdrawal-penalty-5225111">early withdrawal penalty</a>, which may be equivalent to some or all of the interest earned.</p></div></div></div> <span class="heading-toc" id="toc-who-invented-certificates-of-deposit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Who Invented Certificates of Deposit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/when-were-certificates-of-deposit-invented-5224230">history of CDs</a> stretches back to the 1600s when banks in Europe began issuing certificates of deposit to customers. At that time, CDs were typically issued as engravings which would allow the holder to claim their deposits later, with interest earned. The idea behind CDs was the same then as it was now: to encourage savers to keep their money with a certain bank. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Certificates of deposit were introduced in the U.S. as the banking system began to take shape after the Revolutionary War.<span class="ql-inline-citation" data-cite="8"></span> Banks began offering different types of accounts, including demand accounts, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/safe-deposit-box.asp">safe deposit boxes</a>, and CDs in response to growing demand among consumers for secure places to keep their money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Early CD products did not have any type of banking protection. That changed with the advent of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corporation (FDIC)</a> in 1933. The FDIC was established under the Roosevelt administration as a means of promoting stability and public confidence in the nation's banking system.<span class="ql-inline-citation" data-cite="10"></span> Today, the FDIC insures deposit accounts, including CDs, at member institutions in the event that a bank fails.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_27-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_28-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Certain types of CDs, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yankeecd.asp">Yankee CDs</a> and some <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokered-cd.asp">brokered CDs</a>, do not enjoy FDIC protection.</p></div></div></div> <span class="heading-toc" id="toc-how-to-open-a-certificate-of-deposit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> How To Open a Certificate of Deposit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> If you'd like to use a CD to save, opening one is fairly simple and many banks and credit unions allow you to do so online. Before opening a CD, consider your savings goals first. Next, take time to compare CD options. Specifically, consider: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> <li>CD interest rates</li><li>Maturity terms</li><li>Minimum deposit requirements</li><li>CD fees</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Choosing a longer term might help you to secure a higher interest rate, but you'll need to be fairly certain you won't need to withdraw that money before maturity. Also, consider how much money you'll need to open a CD and what you might pay in fees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> A CD account typically doesn't charge any monthly maintenance fees the way a savings account might. But you may pay an early withdrawal penalty if you take money from the CD before it reaches maturity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_39-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0">Tip</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Consider building a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cd-ladder.asp">CD ladder</a> with CDs of varying maturity terms and interest rates for more flexibility with your savings.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-can-you-lose-money-in-a-cd"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Lose Money in a CD?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Bank-issued CDs and CDs from credit unions are some of the safest places to save money. These CDs can offer a guaranteed rate of return with low risk. Other CDs, such as Yankee CDs or brokered CDs, may carry more risk and the possibility of losing money on your investment.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-happens-to-a-cd-if-the-bank-fails"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens to a CD if the Bank Fails?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Bank failures are a rarity but when they happen, the FDIC can step in to protect consumers. If you have a CD at an FDIC member bank, your accounts are protected up to $250,000 per depositor, per account ownership type, per financial institution.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-how-much-will-a-cd-earn-in-five-years"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Will a CD Earn in Five Years?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The amount of interest a CD will earn in five years depends on the interest rate and annual percentage yield, as well as the amount of your initial deposit. Longer-term CDs tend to offer higher interest rates than shorter-term CDs. Using a CD calculator can help you estimate your potential interest earnings with a five-year CD.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_46-0"><span class="heading-toc" id="toc-are-cds-a-good-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are CDs a Good Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-invest-with-cds-4795661">CD could be a good investment</a> if you're looking for a safe place to save money while earning interest. On the other hand, if you're hoping for higher returns, you may be better off putting your money into other investment vehicles, such as stocks, mutual funds, or exchange-traded funds (ETFs).</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> CDs have a long history and we can thank the European banking system for inventing them hundreds of years ago to encourage people to save. A certificate of deposit may be right for your savings plan, though it's important to shop around to find the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">best CD rates</a>. Also, consider how other savings options, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/042116/money-market-vs-cds-which-better-investment.asp">money market accounts</a> or high-yield savings accounts, will help you to reach your goals. </p></div>

Certificate of deposit (CD) accounts are a type of time deposit you can use to save for short- or long-term goals. While you might think of CDs as being a feature of modern banking, they've existed in different forms for centuries. The concept of issuing certificates of deposit originated in the 1600s with the European banking system. ### Key Takeaways * A certificate of deposit (CD) is a time deposit account that allows savers to earn interest over a set time period. * The concept of issuing certificates of deposit dates back to European banking practices in the 1600s. * Banks began issuing certificates of deposit to savers in the U.S. in the 1800s. * Today, banks and credit unions offer CDs to savers as a way to set aside money for short- and long-term financial goals. ## What Is a Certificate of Deposit? A [certificate of deposit (CD)](https://www.investopedia.com/terms/c/certificateofdeposit.asp), also called a time or term deposit account, is a special type of savings vehicle. When you open a CD account, you deposit money with the agreement that you'll leave those funds in your account for a set time period. While the money is in your CD, it earns interest. Once the CD reaches the end of the specified time period or matures, you can withdraw your [savings](https://www.investopedia.com/terms/s/savings.asp) or roll it into a new CD. Traditional banks, online banks, and credit unions can offer CD accounts to savers. There are different types of CDs you might be able to choose from, which include: * Standard CDs * Jumbo CDs * Step-up CDs * [Bump-up CDs](https://www.investopedia.com/terms/b/bumpupcd.asp) * Raise-your-rate CDs * [Add-on CDs](https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169) * No-penalty CDs The minimum deposit requirements for a CD can vary by the type of account and the bank. You might be able to open a standard CD with $500, for example, while a [jumbo CD](https://www.investopedia.com/terms/j/jumbocd.asp) might require a $10,000 minimum deposit. In terms of CD rates, those are typically determined by the term of the CD. CD terms may be as short as 28 or 30 days or extend anywhere from five to 10 years. As a general rule of thumb, the longer the CD term, the higher the rate. CDs are protected by Federal Deposit Insurance Corporation (FDIC) coverage when held at FDIC member banks. The National Credit Union Administration (NCUA) provides coverage for CDs held at NCUA member credit unions. The current coverage limits for both are $250,000 per depositor, per account ownership type, per financial institution. ### Important Withdrawing money from a CD before it reaches maturity can trigger an [early withdrawal penalty](https://www.investopedia.com/cd-early-withdrawal-penalty-5225111), which may be equivalent to some or all of the interest earned. ## Who Invented Certificates of Deposit? The [history of CDs](https://www.investopedia.com/when-were-certificates-of-deposit-invented-5224230) stretches back to the 1600s when banks in Europe began issuing certificates of deposit to customers. At that time, CDs were typically issued as engravings which would allow the holder to claim their deposits later, with interest earned. The idea behind CDs was the same then as it was now: to encourage savers to keep their money with a certain bank. Certificates of deposit were introduced in the U.S. as the banking system began to take shape after the Revolutionary War. Banks began offering different types of accounts, including demand accounts, [safe deposit boxes](https://www.investopedia.com/terms/s/safe-deposit-box.asp), and CDs in response to growing demand among consumers for secure places to keep their money. Early CD products did not have any type of banking protection. That changed with the advent of the [Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/terms/f/fdic.asp) in 1933. The FDIC was established under the Roosevelt administration as a means of promoting stability and public confidence in the nation's banking system. Today, the FDIC insures deposit accounts, including CDs, at member institutions in the event that a bank fails. ### Note Certain types of CDs, including [Yankee CDs](https://www.investopedia.com/terms/y/yankeecd.asp) and some [brokered CDs](https://www.investopedia.com/terms/b/brokered-cd.asp), do not enjoy FDIC protection. ## How To Open a Certificate of Deposit If you'd like to use a CD to save, opening one is fairly simple and many banks and credit unions allow you to do so online. Before opening a CD, consider your savings goals first. Next, take time to compare CD options. Specifically, consider: * CD interest rates * Maturity terms * Minimum deposit requirements * CD fees Choosing a longer term might help you to secure a higher interest rate, but you'll need to be fairly certain you won't need to withdraw that money before maturity. Also, consider how much money you'll need to open a CD and what you might pay in fees. A CD account typically doesn't charge any monthly maintenance fees the way a savings account might. But you may pay an early withdrawal penalty if you take money from the CD before it reaches maturity. ### Tip Consider building a [CD ladder](https://www.investopedia.com/terms/c/cd-ladder.asp) with CDs of varying maturity terms and interest rates for more flexibility with your savings. ## Can You Lose Money in a CD? Bank-issued CDs and CDs from credit unions are some of the safest places to save money. These CDs can offer a guaranteed rate of return with low risk. Other CDs, such as Yankee CDs or brokered CDs, may carry more risk and the possibility of losing money on your investment. ## What Happens to a CD if the Bank Fails? Bank failures are a rarity but when they happen, the FDIC can step in to protect consumers. If you have a CD at an FDIC member bank, your accounts are protected up to $250,000 per depositor, per account ownership type, per financial institution. ## How Much Will a CD Earn in Five Years? The amount of interest a CD will earn in five years depends on the interest rate and annual percentage yield, as well as the amount of your initial deposit. Longer-term CDs tend to offer higher interest rates than shorter-term CDs. Using a CD calculator can help you estimate your potential interest earnings with a five-year CD. ## Are CDs a Good Investment? A [CD could be a good investment](https://www.investopedia.com/how-to-invest-with-cds-4795661) if you're looking for a safe place to save money while earning interest. On the other hand, if you're hoping for higher returns, you may be better off putting your money into other investment vehicles, such as stocks, mutual funds, or exchange-traded funds (ETFs). ## The Bottom Line CDs have a long history and we can thank the European banking system for inventing them hundreds of years ago to encourage people to save. A certificate of deposit may be right for your savings plan, though it's important to shop around to find the [best CD rates](https://www.investopedia.com/best-cd-rates-4770214). Also, consider how other savings options, such as [money market accounts](https://www.investopedia.com/articles/personal-finance/042116/money-market-vs-cds-which-better-investment.asp) or high-yield savings accounts, will help you to reach your goals.

Certificate of deposit (CD) accounts are a type of time deposit you can use to save for short- or long-term goals. While you might think of CDs as being a feature of modern banking, they've existed in different forms for centuries. The concept of issuing certificates of deposit originated in the 1600s with the European banking system. Key Takeaways A certificate of deposit (CD) is a time deposit account that allows savers to earn interest over a set time period.The concept of issuing certificates of deposit dates back to European banking practices in the 1600s.Banks began issuing certificates of deposit to savers in the U.S. in the 1800s.Today, banks and credit unions offer CDs to savers as a way to set aside money for short- and long-term financial goals. What Is a Certificate of Deposit? A certificate of deposit (CD), also called a time or term deposit account, is a special type of savings vehicle. When you open a CD account, you deposit money with the agreement that you'll leave those funds in your account for a set time period. While the money is in your CD, it earns interest. Once the CD reaches the end of the specified time period or matures, you can withdraw your savings or roll it into a new CD. Traditional banks, online banks, and credit unions can offer CD accounts to savers. There are different types of CDs you might be able to choose from, which include: Standard CDs Jumbo CDs Step-up CDs Bump-up CDs Raise-your-rate CDs Add-on CDs No-penalty CDs The minimum deposit requirements for a CD can vary by the type of account and the bank. You might be able to open a standard CD with $500, for example, while a jumbo CD might require a $10,000 minimum deposit. In terms of CD rates, those are typically determined by the term of the CD. CD terms may be as short as 28 or 30 days or extend anywhere from five to 10 years. As a general rule of thumb, the longer the CD term, the higher the rate. CDs are protected by Federal Deposit Insurance Corporation (FDIC) coverage when held at FDIC member banks. The National Credit Union Administration (NCUA) provides coverage for CDs held at NCUA member credit unions. The current coverage limits for both are $250,000 per depositor, per account ownership type, per financial institution. Important Withdrawing money from a CD before it reaches maturity can trigger an early withdrawal penalty, which may be equivalent to some or all of the interest earned. Who Invented Certificates of Deposit? The history of CDs stretches back to the 1600s when banks in Europe began issuing certificates of deposit to customers. At that time, CDs were typically issued as engravings which would allow the holder to claim their deposits later, with interest earned. The idea behind CDs was the same then as it was now: to encourage savers to keep their money with a certain bank. Certificates of deposit were introduced in the U.S. as the banking system began to take shape after the Revolutionary War. Banks began offering different types of accounts, including demand accounts, safe deposit boxes, and CDs in response to growing demand among consumers for secure places to keep their money. Early CD products did not have any type of banking protection. That changed with the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933. The FDIC was established under the Roosevelt administration as a means of promoting stability and public confidence in the nation's banking system. Today, the FDIC insures deposit accounts, including CDs, at member institutions in the event that a bank fails. Note Certain types of CDs, including Yankee CDs and some brokered CDs, do not enjoy FDIC protection. How To Open a Certificate of Deposit If you'd like to use a CD to save, opening one is fairly simple and many banks and credit unions allow you to do so online. Before opening a CD, consider your savings goals first. Next, take time to compare CD options. Specifically, consider: CD interest ratesMaturity termsMinimum deposit requirementsCD fees Choosing a longer term might help you to secure a higher interest rate, but you'll need to be fairly certain you won't need to withdraw that money before maturity. Also, consider how much money you'll need to open a CD and what you might pay in fees. A CD account typically doesn't charge any monthly maintenance fees the way a savings account might. But you may pay an early withdrawal penalty if you take money from the CD before it reaches maturity. Tip Consider building a CD ladder with CDs of varying maturity terms and interest rates for more flexibility with your savings. Can You Lose Money in a CD? Bank-issued CDs and CDs from credit unions are some of the safest places to save money. These CDs can offer a guaranteed rate of return with low risk. Other CDs, such as Yankee CDs or brokered CDs, may carry more risk and the possibility of losing money on your investment. What Happens to a CD if the Bank Fails? Bank failures are a rarity but when they happen, the FDIC can step in to protect consumers. If you have a CD at an FDIC member bank, your accounts are protected up to $250,000 per depositor, per account ownership type, per financial institution. How Much Will a CD Earn in Five Years? The amount of interest a CD will earn in five years depends on the interest rate and annual percentage yield, as well as the amount of your initial deposit. Longer-term CDs tend to offer higher interest rates than shorter-term CDs. Using a CD calculator can help you estimate your potential interest earnings with a five-year CD. Are CDs a Good Investment? A CD could be a good investment if you're looking for a safe place to save money while earning interest. On the other hand, if you're hoping for higher returns, you may be better off putting your money into other investment vehicles, such as stocks, mutual funds, or exchange-traded funds (ETFs). The Bottom Line CDs have a long history and we can thank the European banking system for inventing them hundreds of years ago to encourage people to save. A certificate of deposit may be right for your savings plan, though it's important to shop around to find the best CD rates. Also, consider how other savings options, such as money market accounts or high-yield savings accounts, will help you to reach your goals.

https://www.investopedia.com/terms/f/fiduciary.asp

Fiduciary Definition: Examples and Why They Are Important

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Fiduciaries are persons or organizations that act on behalf of others and are required to put the clients’ interests ahead of their own, with a duty to preserve good faith and trust. Fiduciaries are thus legally and ethically bound to act in the other’s best interests. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task usually involves finances—for example, managing the assets of another person or a group of people. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibilities.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Fiduciaries are legally bound to put their client’s best interests ahead of their own.</li><li>Fiduciary duties appear in various business relationships, including between a trustee and a beneficiary, corporate board members and shareholders, and executors and legatees.</li><li>An investment fiduciary is anyone with legal responsibility for managing somebody else’s money, such as a member of the investment committee of a charity.</li><li>Registered investment advisors and insurance agents have a fiduciary duty to their clients.</li><li>Broker-dealers may be subject to the less stringent standard set by the Securities and Exchange Commission (SEC) Regulation Best Interest, implemented in 2019.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_7-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Fiduciary" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/_44QyJGsdEHqexj-LsYLwyz9QY4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/_44QyJGsdEHqexj-LsYLwyz9QY4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg" data-srcset="https://www.investopedia.com/thmb/4yUU61Ylleg60sFrWQsLh2EnDOY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Fiduciary" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/_44QyJGsdEHqexj-LsYLwyz9QY4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg" srcset="https://www.investopedia.com/thmb/4yUU61Ylleg60sFrWQsLh2EnDOY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Joules Garcia / Investopedia</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-fiduciaries"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Fiduciaries </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A fiduciary’s responsibilities and duties are ethical and legal. When a party knowingly accepts a fiduciary duty on behalf of another, they are required to act in the best interest of the principal (i.e., the client or party whose assets they are managing). This is what is known as a “prudent person standard of care,” which stems from an 1830 court ruling, <em>Harvard College vs. Armory</em>, and is found in many state laws via the American Law Institute's Uniform Prudent Investor Act from 1994.<span class="ql-inline-citation" data-cite="9"></span><span class="ql-inline-citation" data-cite="7"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prudentmanrule.asp">prudent-person rule</a> requires a fiduciary to act first and foremost with the needs of beneficiaries in mind. Strict care must be taken to ensure that no conflict of interest arises between the fiduciary and the principal. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> In many cases, no profit is to be made from the relationship unless explicit consent is granted when the relationship begins. For example, in the United Kingdom, fiduciaries cannot profit from their position, according to an English High Court ruling, <em>Keech vs. Sandford</em> (1726).<span class="ql-inline-citation" data-cite="10"></span> If the principal provides consent, then the fiduciary can keep whatever benefit they have received; these benefits can be either monetary or defined more broadly as an “opportunity.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Tip</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Want more advice for saving money toward your financial goals? Order a copy of Investopedia's <a data-component="amazon" data-ordinal="1" data-source="affiliate" data-type="externalLink" href="https://www.amazon.com/dp/1547862912/ref=sr_1_7?keywords=investopedia&amp;qid=1684168403&amp;sr=8-7" rel="nofollow">What To Do With $10,000</a>.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Fiduciary duties appear in a wide variety of common business relationships, including the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>Trustee and beneficiary (the most common type)</li><li>Corporate board members and shareholders</li><li>Executors and legatees</li><li>Guardians and wards</li><li>Promoters and stock subscribers</li><li>Lawyers and clients</li><li>Investment corporations and investors</li><li>Insurance companies/agents and policyholders</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fiduciary_negligence.asp">Fiduciary negligence</a> is a form of professional malpractice when a person fails to honor their fiduciary obligations and responsibilities.</p></div></div></div> <span class="heading-toc" id="toc-fiduciary-relationship-between-trustee-and-beneficiary"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Fiduciary Relationship Between Trustee and Beneficiary </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Estate arrangements and trusts involve both a trustee and a beneficiary. An individual named as a trust or estate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trustee.asp">trustee</a> is the fiduciary, and the beneficiary is the principal. Under a trustee/beneficiary duty, the fiduciary has legal ownership of the property or assets and holds the power necessary to handle assets held in the name of the trust. In estate law, the trustee may also be known as the estate’s executor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Trustees must make decisions that are in the best interest of the beneficiary, as the latter holds equitable title to the property. The trustee/beneficiary relationship is an important aspect of estate planning, and special care should be taken to determine who is to be the trustee.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Politicians often set up blind trusts to avoid real or perceived conflict-of-interest scandals. A blind trust is a relationship in which a trustee is in charge of all investments of a beneficiary’s assets without the beneficiary knowing how the assets are being invested. Even though the beneficiary has no knowledge, the trustee has a fiduciary duty to invest according to the prudent person standard of conduct.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <span class="heading-toc" id="toc-fiduciary-relationship-between-board-members-and-shareholders"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Fiduciary Relationship Between Board Members and Shareholders </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> A similar fiduciary duty can be held by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/boardofdirectors.asp">corporate directors</a>, as they can be considered trustees for stockholders if on the board of a corporation, or trustees of depositors if they serve as the director of a bank.<span class="ql-inline-citation" data-cite="14"></span> Specific duties include the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Duty of care </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duty-care.asp">Duty of care</a> applies to how the board makes decisions that affect the future of the business. The board has the duty to thoroughly investigate all possible decisions and how they might affect the business.<span class="ql-inline-citation" data-cite="15"></span> If the board is voting to elect a new chief executive officer, for example, the decision should not be based solely on the board’s knowledge or opinion of one possible candidate; it is the board’s responsibility to investigate all viable applicants to ensure that the best person for the job is chosen. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> Duty to act in good faith </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Even after the board reasonably investigates all the options before it, it has the responsibility to choose the option it believes best serves the interests of the business and its shareholders.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <span class="heading-toc" id="toc-duty-of-loyalty"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Duty of loyalty </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duty-loyalty.asp">Duty of loyalty</a> means the board is required to put no other cause, interest, or affiliation above its allegiance to the company and the company’s investors. Board members must refrain from personal or professional dealings that might put their own self-interest or that of another person or business above the interests of the company.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> If a member of a board of directors is found to be in breach of their fiduciary duty, they can be held liable in a court of law by the company or its shareholders.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_44-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_45-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Contrary to popular belief, there is no legal mandate that a corporation is required to maximize shareholder returns.</p></div></div></div> <span class="heading-toc" id="toc-more-examples-of-fiduciaries"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> More Examples of Fiduciaries </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> Fiduciary relationship between executor and legatee </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Fiduciary responsibilities can also apply to specific or one-time transactions. For example, a fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf of the property owner. A fiduciary deed is useful when a property owner wishes to sell but can't handle their affairs due to illness, incompetence, or other circumstances and needs someone to do so for them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> A fiduciary is required by law to disclose to the potential buyer the true condition of the property being sold, and they cannot receive any financial benefits from the sale. A fiduciary deed is also useful when the property owner has died, and their property is part of an estate that needs oversight or management. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-subheading__text"> Fiduciary relationship between guardian and ward </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Under a guardian/ward relationship, the legal guardianship of a minor is transferred to an appointed adult. As the fiduciary, the guardian is tasked with ensuring the minor child or ward has appropriate care, which can include deciding where the minor attends school, that the minor has suitable medical care, that they are disciplined in a reasonable manner, and that their daily welfare remains intact. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> A guardian is appointed by the state court when the natural guardian of a minor child can't care for the child. In most states, a guardian/ward relationship remains intact until the minor child reaches the age of majority. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-subheading__text"> Fiduciary relationship between attorney and client </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> The attorney/client fiduciary relationship is one of the most stringent and well-known. The U.S. Supreme Court states that the highest level of trust and confidence must exist between an attorney and a client and that an attorney, as a fiduciary, must act with complete fairness, loyalty, and fidelity when dealing with and representing their clients. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Attorneys are held liable for breaches of their fiduciary duties to the client and are accountable to the court, where that client is represented when a breach occurs.<span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> Fiduciary relationship between principal and agent </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> A more generic example of fiduciary duty lies in the principal/agent relationship. Any person, corporation, partnership, or government agency can act as a principal or agent as long as the person or business has the legal capacity to do so. Under a principal/agent duty, an agent is legally appointed to act on behalf of the principal without conflict of interest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> A common example of a principal/agent relationship with a fiduciary duty is a group of shareholders acting as principals and electing management to act as agents. Similarly, investors act as principals when selecting <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/qpam.asp">investment fund managers as agents to manage assets</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-subheading__text"> Investment fiduciary </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> An investment fiduciary need not be a financial professional (money manager, banker, and so on) but is any<em> </em>person with the legal responsibility for managing somebody else’s money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> That means you have a fiduciary responsibility if you volunteered to sit on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/company-insights/082716/investment-committees-duties-and-responsibilities.asp">investment committee</a> of the board of your local charity or other organization. You have been placed in a position of trust, and there may be consequences for betraying that trust. Also, hiring a financial or investment expert does not relieve the committee members of all their duties. They still have an obligation to prudently choose and monitor the activities of the expert.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <span class="heading-toc" id="toc-regulation-best-interest-and-the-suitability-rule"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_72-0"> <span class="mntl-sc-block-heading__text"> Regulation Best Interest and the Suitability Rule </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> Broker-dealers were once allowed to adhere to a less stringent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/suitable.asp">suitability standard</a> but are now subject to a heightened standard of conduct when recommending investments to retail customers. In 2019, the SEC adopted Regulation Best Interest (BI), which requires broker-dealers to act in the best interest of the retail customer at the time a recommendation is made. This goes beyond the previous suitability standard, which required that recommendations be suitable given the customer's financial situation.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> Under Regulation BI, broker-dealers must disclose material conflicts of interest; exercise reasonable diligence, care, and skill when making a recommendation; and establish policies and procedures to mitigate conflicts of interest. They are prohibited from putting their financial interests ahead of the customer's interests. This establishes a "best interest" standard like the fiduciary duty investment advisors owe their clients. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> Broker-dealers can still be compensated through commissions. However, Regulation BI requires them to consider cost and other factors in the recommendation process, not just suitability. Recommendations, importantly, cannot place the broker-dealer's interests ahead of the client's.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> Regulation BI raises the standard of conduct for broker-dealers when recommendations are made to retail investors. While not a fiduciary duty, it goes beyond the old suitability standard to require broker-dealers to act in their customers' best interest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_80-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_81-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_82-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_5-0"><p>Investment advisors, who are usually paid through fees, are bound to a fiduciary standard that was established in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investadvact.asp">Investment Advisers Act of 1940</a>. The act defines what a fiduciary means and stipulates a duty of loyalty and care, which means that the advisor must put the client’s interests above their own.<span class="ql-inline-citation" data-cite="8"></span></p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_83-0"> <span class="mntl-sc-block-subheading__text"> Regulation Best Interest vs. the fiduciary standard </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> Regulation BI and the fiduciary standard are two <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp">codes of conduct</a> that apply to financial professionals providing investment advice to clients. Regulation BI mostly applies to broker-dealers compensated by commission, while the fiduciary standard applies to investment advisors paid a fee for their services. The main difference between the two standards is the level of duty and loyalty the financial professional owes to the client.<br/><br/>Regulation BI requires broker-dealers to act in the client's best interest at the time of the recommendation without placing their own interest ahead of the client's interest. However, this does not mean that broker-dealers must eliminate all conflicts of interest or always recommend the lowest-cost or best-performing product. Broker-dealers can still receive commissions, incentives, or other benefits from their recommendations as long as they disclose them to the client and mitigate any material conflicts of interest. Regulation BI also does not impose a continuous duty of care or loyalty to the client, meaning that broker-dealers are not required to monitor the client's account or update their recommendations.<span class="ql-inline-citation" data-cite="8"></span><br/><br/>The fiduciary standard, meanwhile, requires investment advisors to act with the highest level of duty and loyalty to the client, putting the client's interest above their own at all times. <span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span>This means that investment advisors have to avoid or eliminate any conflicts of interest that could compromise their objectivity or impartiality, and they cannot receive any compensation or benefit that is contrary to the client's best interest. Investment advisors must also review and update their recommendations based on the client's changing needs and circumstances. Here are the main points: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> <li>Fiduciary duties are ongoing, while Regulation BI applies only at the time of the investment recommendation.</li><li>Regulation BI still allows commissions and certain conflicts of interest.</li><li>Fiduciary duty prohibits favoring the advisor's interests over the client's.</li><li>Regulation BI does not impose a fiduciary duty.<span class="ql-inline-citation" data-cite="19"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> Clients should be aware of the differences between the two standards and the potential conflicts arising from the financial professional's compensation structure. Clients should also read the Form CRS Relationship Summary that the financial professional is required to provide, which summarizes the nature and scope of the relationship, the services offered, the fees and costs, the conflicts of interest, the standard of conduct, and the disciplinary history of the financial professional and their firm.<span class="ql-inline-citation" data-cite="20"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <span class="heading-toc" id="toc-the-short-lived-fiduciary-rule"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_90-0"> <span class="mntl-sc-block-heading__text"> The Short-Lived Fiduciary Rule </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_91-0"> While “suitability” was the standard for transactional accounts or brokerage accounts, the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/updates/dol-fiduciary-rule/">Department of Labor Fiduciary Rule</a> proposed to toughen things up for brokers. Anyone with retirement money under management, who made recommendations or solicitations for an individual retirement account or other tax-advantaged retirement accounts, would be considered a fiduciary required to adhere to that standard, rather than to the suitability standard that was otherwise in effect.<span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_92-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_93-0"> The fiduciary rule had a long and yet unclear implementation. Originally proposed in 2010, it was scheduled to go into effect between April 10, 2017, and Jan. 1, 2018. After then-President Donald Trump took office, its effective date was postponed to June 9, 2017, including a transition period for certain exemptions extending through Jan. 1, 2018.<span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_95-0"> Later, the implementation of all elements of the rule was pushed back to July 1, 2019. Before that could happen, the rule was vacated following a June 2018 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/dols-fiduciary-rule-officially-shelved-0/">decision</a> by the Fifth U.S. Circuit Court.<span class="ql-inline-citation" data-cite="4"></span> In June 2020, a new proposal, Proposal 3.0, was released by the Department of Labor, which “reinstated the investment advice fiduciary definition in effect since 1975 accompanied by new interpretations that extended its reach in the rollover setting, and proposed a new exemption for conflicted investment advice and principal transactions.”<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_96-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_97-0"> After taking office in 2021, the Biden administration didn't revive the defunct fiduciary rule. While President Biden has expressed support for holding Wall Street to higher standards of accountability, his administration has not pursued new rulemaking on reinstating the fiduciary rule. More recently, the Department of Labor under President Biden proposed a new fiduciary rule aimed at strengthening standards for retirement plan advice. However, this would be the fourth attempt to do so since the Obama administration, and there will likely be legal challenges like those of the previous efforts.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div> <span class="heading-toc" id="toc-risks-of-being-a-fiduciary"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_99-0"> <span class="mntl-sc-block-heading__text"> Risks of Being a Fiduciary </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_100-0"> The possibility of a trustee/agent not optimally performing in the beneficiary’s best interests is called “fiduciary risk.” This does not necessarily mean that the trustee is using the beneficiary’s resources for their own benefit; this could be the risk that the trustee is not achieving the best value for the beneficiary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_101-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_102-0"> For example, a fund manager (agent) making more trades than necessary for a client’s portfolio is a fiduciary risk because the fund manager is slowly eroding the client’s gains by incurring higher transaction costs than needed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_103-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_104-0"> In contrast, when an individual or entity legally appointed to manage another party’s assets uses their power in an unethical or illegal fashion to benefit financially or to serve their self-interest in some other way, this is called “fiduciary abuse” or “fiduciary fraud.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <span class="heading-toc" id="toc-fiduciary-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_106-0"> <span class="mntl-sc-block-heading__text"> Fiduciary Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_107-0"> A business can insure the fiduciaries of a qualified retirement plan, such as the company’s directors, officers, employees, and other natural person trustees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_108-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_109-0"> Fiduciary <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability_insurance.asp">liability insurance</a> is meant to fill in the gaps in traditional coverage offered through employee benefits liability or director’s and officer’s policies. It provides financial protection when <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/statutory-liability.asp">liability litigation</a> arises due to purported mismanagement of funds or investments, administrative errors or delays in transfers or distributions, a change or reduction in benefits, or erroneous advice surrounding investment allocations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_110-0"></div> <span class="heading-toc" id="toc-investment-fiduciary-guidelines"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_111-0"> <span class="mntl-sc-block-heading__text"> Investment Fiduciary Guidelines </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_112-0"> Responding to the need for better guidance for investment fiduciaries, the nonprofit Foundation for Fiduciary Studies was established to define the following prudent investment practices:<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_113-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_114-0"> <span class="mntl-sc-block-subheading__text"> Step 1: Organize </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_115-0"> The process begins with fiduciaries educating themselves on the laws and rules that will apply to their situations. Once fiduciaries identify their governing rules, they then need to define the roles and responsibilities of all parties involved in the process. If investment service providers are used, then any service agreements should be in writing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_117-0"> <span class="mntl-sc-block-subheading__text"> Step 2: Formalize </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_118-0"> The investment process starts by creating the investment program’s goals and objectives. Fiduciaries should identify the investment horizon, an acceptable level of risk, and expected return. By identifying these factors, fiduciaries create a framework for evaluating investment options.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_119-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_120-0"> Fiduciaries then need to select the appropriate asset classes that will enable them to create a diversified portfolio through some justifiable method. Most fiduciaries go about this by employing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/modernportfoliotheory.asp">modern portfolio theory</a>, because it's one of the most accepted methods for creating investment portfolios that target a desired risk/return profile.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_121-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_122-0"> Finally, the fiduciary should formalize these steps by creating an investment policy statement that provides the necessary details for implementing a specific investment strategy. Now the fiduciary is ready to proceed with the implementation of the investment program, as identified in the first two steps. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_123-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_124-0"> <span class="mntl-sc-block-subheading__text"> Step 3: Execute </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_125-0"> Specific investments or investment managers can now be selected to fulfill the investment policy statement. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duediligence.asp">due diligence</a> process must be designed to evaluate potential investments. The due diligence process should identify criteria and filter potential investment options. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_126-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_127-0"> The implementation phase is usually performed with the assistance of an investment advisor because many fiduciaries lack the skill or resources to perform this step. When an advisor assists in the implementation phase, fiduciaries and advisors must communicate to ensure that an agreed-upon due diligence process is used while selecting investments or managers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_128-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_129-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_130-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_6-0">Fiduciary Rules and Regulations</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_6-0"><p>A U.S. Department of the Treasury agency, the Office of the Comptroller of the Currency, regulates federal savings associations and their fiduciary activities in the U.S. Fiduciary duties can, at times, conflict with one another, a problem that often occurs with real estate agents and lawyers. Two opposing interests can, at best, be balanced; however, balancing interests is not the same as serving a client's best interest.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_131-0"> <span class="mntl-sc-block-subheading__text"> Step 4: Monitor </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_132-0"> The final step can be the most time-consuming and the most neglected part of the process. Fiduciaries should not neglect continuous monitoring since they could be equally liable for negligence here as elsewhere in these steps. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_133-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_134-0"> To properly monitor the investment process, fiduciaries must periodically review reports that benchmark their investments’ performance against the appropriate index and peer group and determine whether the investment policy statement objectives are being met. Simply monitoring performance statistics is not enough. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_135-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_136-0"> Fiduciaries must also monitor qualitative data, such as changes in the organizational structure of investment managers used in the portfolio. If the investment decision-makers in an organization have left, or if their level of authority has changed, then investors must consider how this information may impact future performance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_137-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_138-0"> In addition to performance reviews, fiduciaries must review the expenses involved. Fiduciaries are responsible not only for how funds are invested but also for how funds are spent. Investment fees directly impact performance, and fiduciaries must ensure that fees paid for investment management are fair and reasonable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_139-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_140-0"><span class="heading-toc" id="toc-what-are-the-three-fiduciary-duties-owed-to-shareholders"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Three Fiduciary Duties Owed to Shareholders?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Since corporate directors can be considered fiduciaries for shareholders, they possess the following three fiduciary duties:<span class="ql-inline-citation" data-cite="14"></span></p><ul><li>Duty of care requires directors to make decisions in good faith for shareholders in a reasonably prudent manner.</li><li>Duty of loyalty requires that directors should not put other interests, causes, or entities above the interest of the company and its shareholders.</li><li>Finally, duty to act in good faith requires that directors choose the best option to serve the company and its stakeholders.</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_141-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_142-0"><span class="heading-toc" id="toc-how-can-fiduciary-duties-influence-investment-strategies"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Fiduciary Duties Influence Investment Strategies?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Fiduciary responsibilities can significantly shape investment strategies, especially with the growing emphasis on ethical investing, including environmental, social, and governance (ESG) criteria. Fiduciaries, such as financial advisors and fund managers, must act in the best interests of their clients or beneficiaries. This duty extends to considering long-term risks and opportunities, which increasingly involve ethical considerations. For instance, a fiduciary might assess a company's sustainability practices or the social impact of an investment to determine its alignment with a client's values or its potential for long-term performance. This approach not only seeks to align investments with ethical values but also to mitigate risks and identify prospects that could affect financial returns, fulfilling their obligation to act in their clients' best interests.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_143-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_144-0"><span class="heading-toc" id="toc-why-does-someone-need-a-fiduciary"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Does Someone Need a Fiduciary?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Working with a fiduciary means that you can be assured that a financial professional will always be putting your interests first, and not their own. This means that you don’t have to worry about conflicts of interest, misplaced incentives, or aggressive sales tactics.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_145-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_146-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_147-0"> A fiduciary is a person or other entity in a position of control and influence over another person’s property or finances. The concept of fiduciaries can be found in a wide array of legal contexts in the United States and throughout the world. Fiduciary relationships are most often found when individuals are entrusted with carrying out a particular act for another, such as a trustee handling assets on behalf of a trust beneficiary. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_148-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_149-0"> The term “fiduciary” is widely used in the context of financial advising and brokerage relationships when the client’s best interests must be put first. Because of the significance of these fiduciary relationships, new legal challenges often arise concerning properly carrying out one’s fiduciary responsibilities. </p></div>

Fiduciaries are persons or organizations that act on behalf of others and are required to put the clients’ interests ahead of their own, with a duty to preserve good faith and trust. Fiduciaries are thus legally and ethically bound to act in the other’s best interests. A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task usually involves finances—for example, managing the assets of another person or a group of people. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibilities.  ### Key Takeaways * Fiduciaries are legally bound to put their client’s best interests ahead of their own. * Fiduciary duties appear in various business relationships, including between a trustee and a beneficiary, corporate board members and shareholders, and executors and legatees. * An investment fiduciary is anyone with legal responsibility for managing somebody else’s money, such as a member of the investment committee of a charity. * Registered investment advisors and insurance agents have a fiduciary duty to their clients. * Broker-dealers may be subject to the less stringent standard set by the Securities and Exchange Commission (SEC) Regulation Best Interest, implemented in 2019. ![Fiduciary]() :max_bytes(150000):strip_icc()/fiduciary-fcde6a47733d4ecea06b608b4966a531.jpg) Joules Garcia / Investopedia ## Understanding Fiduciaries A fiduciary’s responsibilities and duties are ethical and legal. When a party knowingly accepts a fiduciary duty on behalf of another, they are required to act in the best interest of the principal (i.e., the client or party whose assets they are managing). This is what is known as a “prudent person standard of care,” which stems from an 1830 court ruling, *Harvard College vs. Armory*, and is found in many state laws via the American Law Institute's Uniform Prudent Investor Act from 1994.  The [prudent-person rule](https://www.investopedia.com/terms/p/prudentmanrule.asp) requires a fiduciary to act first and foremost with the needs of beneficiaries in mind. Strict care must be taken to ensure that no conflict of interest arises between the fiduciary and the principal. In many cases, no profit is to be made from the relationship unless explicit consent is granted when the relationship begins. For example, in the United Kingdom, fiduciaries cannot profit from their position, according to an English High Court ruling, *Keech vs. Sandford* (1726). If the principal provides consent, then the fiduciary can keep whatever benefit they have received; these benefits can be either monetary or defined more broadly as an “opportunity.” ### Tip Want more advice for saving money toward your financial goals? Order a copy of Investopedia's [What To Do With $10,000](https://www.amazon.com/dp/1547862912/ref=sr_1_7?keywords=investopedia&qid=1684168403&sr=8-7). Fiduciary duties appear in a wide variety of common business relationships, including the following: * Trustee and beneficiary (the most common type) * Corporate board members and shareholders * Executors and legatees * Guardians and wards * Promoters and stock subscribers * Lawyers and clients * Investment corporations and investors * Insurance companies/agents and policyholders ### [Fiduciary negligence](https://www.investopedia.com/terms/f/fiduciary_negligence.asp) is a form of professional malpractice when a person fails to honor their fiduciary obligations and responsibilities. ## Fiduciary Relationship Between Trustee and Beneficiary Estate arrangements and trusts involve both a trustee and a beneficiary. An individual named as a trust or estate [trustee](https://www.investopedia.com/terms/t/trustee.asp) is the fiduciary, and the beneficiary is the principal. Under a trustee/beneficiary duty, the fiduciary has legal ownership of the property or assets and holds the power necessary to handle assets held in the name of the trust. In estate law, the trustee may also be known as the estate’s executor. Trustees must make decisions that are in the best interest of the beneficiary, as the latter holds equitable title to the property. The trustee/beneficiary relationship is an important aspect of estate planning, and special care should be taken to determine who is to be the trustee. Politicians often set up blind trusts to avoid real or perceived conflict-of-interest scandals. A blind trust is a relationship in which a trustee is in charge of all investments of a beneficiary’s assets without the beneficiary knowing how the assets are being invested. Even though the beneficiary has no knowledge, the trustee has a fiduciary duty to invest according to the prudent person standard of conduct. ## Fiduciary Relationship Between Board Members and Shareholders A similar fiduciary duty can be held by [corporate directors](https://www.investopedia.com/terms/b/boardofdirectors.asp), as they can be considered trustees for stockholders if on the board of a corporation, or trustees of depositors if they serve as the director of a bank. Specific duties include the following: ### Duty of care [Duty of care](https://www.investopedia.com/terms/d/duty-care.asp) applies to how the board makes decisions that affect the future of the business. The board has the duty to thoroughly investigate all possible decisions and how they might affect the business. If the board is voting to elect a new chief executive officer, for example, the decision should not be based solely on the board’s knowledge or opinion of one possible candidate; it is the board’s responsibility to investigate all viable applicants to ensure that the best person for the job is chosen. ### Duty to act in good faith Even after the board reasonably investigates all the options before it, it has the responsibility to choose the option it believes best serves the interests of the business and its shareholders. ## Duty of loyalty [Duty of loyalty](https://www.investopedia.com/terms/d/duty-loyalty.asp) means the board is required to put no other cause, interest, or affiliation above its allegiance to the company and the company’s investors. Board members must refrain from personal or professional dealings that might put their own self-interest or that of another person or business above the interests of the company. If a member of a board of directors is found to be in breach of their fiduciary duty, they can be held liable in a court of law by the company or its shareholders. ### Contrary to popular belief, there is no legal mandate that a corporation is required to maximize shareholder returns. ## More Examples of Fiduciaries ### Fiduciary relationship between executor and legatee Fiduciary responsibilities can also apply to specific or one-time transactions. For example, a fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf of the property owner. A fiduciary deed is useful when a property owner wishes to sell but can't handle their affairs due to illness, incompetence, or other circumstances and needs someone to do so for them. A fiduciary is required by law to disclose to the potential buyer the true condition of the property being sold, and they cannot receive any financial benefits from the sale. A fiduciary deed is also useful when the property owner has died, and their property is part of an estate that needs oversight or management. ### Fiduciary relationship between guardian and ward Under a guardian/ward relationship, the legal guardianship of a minor is transferred to an appointed adult. As the fiduciary, the guardian is tasked with ensuring the minor child or ward has appropriate care, which can include deciding where the minor attends school, that the minor has suitable medical care, that they are disciplined in a reasonable manner, and that their daily welfare remains intact. A guardian is appointed by the state court when the natural guardian of a minor child can't care for the child. In most states, a guardian/ward relationship remains intact until the minor child reaches the age of majority. ### Fiduciary relationship between attorney and client The attorney/client fiduciary relationship is one of the most stringent and well-known. The U.S. Supreme Court states that the highest level of trust and confidence must exist between an attorney and a client and that an attorney, as a fiduciary, must act with complete fairness, loyalty, and fidelity when dealing with and representing their clients. Attorneys are held liable for breaches of their fiduciary duties to the client and are accountable to the court, where that client is represented when a breach occurs. ### Fiduciary relationship between principal and agent A more generic example of fiduciary duty lies in the principal/agent relationship. Any person, corporation, partnership, or government agency can act as a principal or agent as long as the person or business has the legal capacity to do so. Under a principal/agent duty, an agent is legally appointed to act on behalf of the principal without conflict of interest. A common example of a principal/agent relationship with a fiduciary duty is a group of shareholders acting as principals and electing management to act as agents. Similarly, investors act as principals when selecting [investment fund managers as agents to manage assets](https://www.investopedia.com/terms/q/qpam.asp). ### Investment fiduciary An investment fiduciary need not be a financial professional (money manager, banker, and so on) but is anyperson with the legal responsibility for managing somebody else’s money. That means you have a fiduciary responsibility if you volunteered to sit on the [investment committee](https://www.investopedia.com/articles/company-insights/082716/investment-committees-duties-and-responsibilities.asp) of the board of your local charity or other organization. You have been placed in a position of trust, and there may be consequences for betraying that trust. Also, hiring a financial or investment expert does not relieve the committee members of all their duties. They still have an obligation to prudently choose and monitor the activities of the expert.  ## Regulation Best Interest and the Suitability Rule Broker-dealers were once allowed to adhere to a less stringent [suitability standard](https://www.investopedia.com/terms/s/suitable.asp) but are now subject to a heightened standard of conduct when recommending investments to retail customers. In 2019, the SEC adopted Regulation Best Interest (BI), which requires broker-dealers to act in the best interest of the retail customer at the time a recommendation is made. This goes beyond the previous suitability standard, which required that recommendations be suitable given the customer's financial situation. Under Regulation BI, broker-dealers must disclose material conflicts of interest; exercise reasonable diligence, care, and skill when making a recommendation; and establish policies and procedures to mitigate conflicts of interest. They are prohibited from putting their financial interests ahead of the customer's interests. This establishes a "best interest" standard like the fiduciary duty investment advisors owe their clients. Broker-dealers can still be compensated through commissions. However, Regulation BI requires them to consider cost and other factors in the recommendation process, not just suitability. Recommendations, importantly, cannot place the broker-dealer's interests ahead of the client's. Regulation BI raises the standard of conduct for broker-dealers when recommendations are made to retail investors. While not a fiduciary duty, it goes beyond the old suitability standard to require broker-dealers to act in their customers' best interest. ### Investment advisors, who are usually paid through fees, are bound to a fiduciary standard that was established in the [Investment Advisers Act of 1940](https://www.investopedia.com/terms/i/investadvact.asp). The act defines what a fiduciary means and stipulates a duty of loyalty and care, which means that the advisor must put the client’s interests above their own. ### Regulation Best Interest vs. the fiduciary standard Regulation BI and the fiduciary standard are two [codes of conduct](https://www.investopedia.com/articles/professionaleducation/11/suitability-fiduciary-standards.asp) that apply to financial professionals providing investment advice to clients. Regulation BI mostly applies to broker-dealers compensated by commission, while the fiduciary standard applies to investment advisors paid a fee for their services. The main difference between the two standards is the level of duty and loyalty the financial professional owes to the client. Regulation BI requires broker-dealers to act in the client's best interest at the time of the recommendation without placing their own interest ahead of the client's interest. However, this does not mean that broker-dealers must eliminate all conflicts of interest or always recommend the lowest-cost or best-performing product. Broker-dealers can still receive commissions, incentives, or other benefits from their recommendations as long as they disclose them to the client and mitigate any material conflicts of interest. Regulation BI also does not impose a continuous duty of care or loyalty to the client, meaning that broker-dealers are not required to monitor the client's account or update their recommendations. The fiduciary standard, meanwhile, requires investment advisors to act with the highest level of duty and loyalty to the client, putting the client's interest above their own at all times. This means that investment advisors have to avoid or eliminate any conflicts of interest that could compromise their objectivity or impartiality, and they cannot receive any compensation or benefit that is contrary to the client's best interest. Investment advisors must also review and update their recommendations based on the client's changing needs and circumstances. Here are the main points: * Fiduciary duties are ongoing, while Regulation BI applies only at the time of the investment recommendation. * Regulation BI still allows commissions and certain conflicts of interest. * Fiduciary duty prohibits favoring the advisor's interests over the client's. * Regulation BI does not impose a fiduciary duty. Clients should be aware of the differences between the two standards and the potential conflicts arising from the financial professional's compensation structure. Clients should also read the Form CRS Relationship Summary that the financial professional is required to provide, which summarizes the nature and scope of the relationship, the services offered, the fees and costs, the conflicts of interest, the standard of conduct, and the disciplinary history of the financial professional and their firm. ## The Short-Lived Fiduciary Rule While “suitability” was the standard for transactional accounts or brokerage accounts, the U.S. [Department of Labor Fiduciary Rule](https://www.investopedia.com/updates/dol-fiduciary-rule/) proposed to toughen things up for brokers. Anyone with retirement money under management, who made recommendations or solicitations for an individual retirement account or other tax-advantaged retirement accounts, would be considered a fiduciary required to adhere to that standard, rather than to the suitability standard that was otherwise in effect. The fiduciary rule had a long and yet unclear implementation. Originally proposed in 2010, it was scheduled to go into effect between April 10, 2017, and Jan. 1, 2018. After then-President Donald Trump took office, its effective date was postponed to June 9, 2017, including a transition period for certain exemptions extending through Jan. 1, 2018. Later, the implementation of all elements of the rule was pushed back to July 1, 2019. Before that could happen, the rule was vacated following a June 2018 [decision](https://www.investopedia.com/news/dols-fiduciary-rule-officially-shelved-0/) by the Fifth U.S. Circuit Court. In June 2020, a new proposal, Proposal 3.0, was released by the Department of Labor, which “reinstated the investment advice fiduciary definition in effect since 1975 accompanied by new interpretations that extended its reach in the rollover setting, and proposed a new exemption for conflicted investment advice and principal transactions.” After taking office in 2021, the Biden administration didn't revive the defunct fiduciary rule. While President Biden has expressed support for holding Wall Street to higher standards of accountability, his administration has not pursued new rulemaking on reinstating the fiduciary rule. More recently, the Department of Labor under President Biden proposed a new fiduciary rule aimed at strengthening standards for retirement plan advice. However, this would be the fourth attempt to do so since the Obama administration, and there will likely be legal challenges like those of the previous efforts. ## Risks of Being a Fiduciary The possibility of a trustee/agent not optimally performing in the beneficiary’s best interests is called “fiduciary risk.” This does not necessarily mean that the trustee is using the beneficiary’s resources for their own benefit; this could be the risk that the trustee is not achieving the best value for the beneficiary. For example, a fund manager (agent) making more trades than necessary for a client’s portfolio is a fiduciary risk because the fund manager is slowly eroding the client’s gains by incurring higher transaction costs than needed. In contrast, when an individual or entity legally appointed to manage another party’s assets uses their power in an unethical or illegal fashion to benefit financially or to serve their self-interest in some other way, this is called “fiduciary abuse” or “fiduciary fraud.” ## Fiduciary Insurance A business can insure the fiduciaries of a qualified retirement plan, such as the company’s directors, officers, employees, and other natural person trustees. Fiduciary [liability insurance](https://www.investopedia.com/terms/l/liability_insurance.asp) is meant to fill in the gaps in traditional coverage offered through employee benefits liability or director’s and officer’s policies. It provides financial protection when [liability litigation](https://www.investopedia.com/terms/s/statutory-liability.asp) arises due to purported mismanagement of funds or investments, administrative errors or delays in transfers or distributions, a change or reduction in benefits, or erroneous advice surrounding investment allocations. ## Investment Fiduciary Guidelines Responding to the need for better guidance for investment fiduciaries, the nonprofit Foundation for Fiduciary Studies was established to define the following prudent investment practices: ### Step 1: Organize The process begins with fiduciaries educating themselves on the laws and rules that will apply to their situations. Once fiduciaries identify their governing rules, they then need to define the roles and responsibilities of all parties involved in the process. If investment service providers are used, then any service agreements should be in writing. ### Step 2: Formalize The investment process starts by creating the investment program’s goals and objectives. Fiduciaries should identify the investment horizon, an acceptable level of risk, and expected return. By identifying these factors, fiduciaries create a framework for evaluating investment options.  Fiduciaries then need to select the appropriate asset classes that will enable them to create a diversified portfolio through some justifiable method. Most fiduciaries go about this by employing [modern portfolio theory](https://www.investopedia.com/terms/m/modernportfoliotheory.asp), because it's one of the most accepted methods for creating investment portfolios that target a desired risk/return profile.  Finally, the fiduciary should formalize these steps by creating an investment policy statement that provides the necessary details for implementing a specific investment strategy. Now the fiduciary is ready to proceed with the implementation of the investment program, as identified in the first two steps. ### Step 3: Execute Specific investments or investment managers can now be selected to fulfill the investment policy statement. A [due diligence](https://www.investopedia.com/terms/d/duediligence.asp) process must be designed to evaluate potential investments. The due diligence process should identify criteria and filter potential investment options. The implementation phase is usually performed with the assistance of an investment advisor because many fiduciaries lack the skill or resources to perform this step. When an advisor assists in the implementation phase, fiduciaries and advisors must communicate to ensure that an agreed-upon due diligence process is used while selecting investments or managers. ### Fiduciary Rules and Regulations A U.S. Department of the Treasury agency, the Office of the Comptroller of the Currency, regulates federal savings associations and their fiduciary activities in the U.S. Fiduciary duties can, at times, conflict with one another, a problem that often occurs with real estate agents and lawyers. Two opposing interests can, at best, be balanced; however, balancing interests is not the same as serving a client's best interest. ### Step 4: Monitor The final step can be the most time-consuming and the most neglected part of the process. Fiduciaries should not neglect continuous monitoring since they could be equally liable for negligence here as elsewhere in these steps. To properly monitor the investment process, fiduciaries must periodically review reports that benchmark their investments’ performance against the appropriate index and peer group and determine whether the investment policy statement objectives are being met. Simply monitoring performance statistics is not enough. Fiduciaries must also monitor qualitative data, such as changes in the organizational structure of investment managers used in the portfolio. If the investment decision-makers in an organization have left, or if their level of authority has changed, then investors must consider how this information may impact future performance. In addition to performance reviews, fiduciaries must review the expenses involved. Fiduciaries are responsible not only for how funds are invested but also for how funds are spent. Investment fees directly impact performance, and fiduciaries must ensure that fees paid for investment management are fair and reasonable. ## What Are the Three Fiduciary Duties Owed to Shareholders? Since corporate directors can be considered fiduciaries for shareholders, they possess the following three fiduciary duties: * Duty of care requires directors to make decisions in good faith for shareholders in a reasonably prudent manner. * Duty of loyalty requires that directors should not put other interests, causes, or entities above the interest of the company and its shareholders. * Finally, duty to act in good faith requires that directors choose the best option to serve the company and its stakeholders. ## How Can Fiduciary Duties Influence Investment Strategies? Fiduciary responsibilities can significantly shape investment strategies, especially with the growing emphasis on ethical investing, including environmental, social, and governance (ESG) criteria. Fiduciaries, such as financial advisors and fund managers, must act in the best interests of their clients or beneficiaries. This duty extends to considering long-term risks and opportunities, which increasingly involve ethical considerations. For instance, a fiduciary might assess a company's sustainability practices or the social impact of an investment to determine its alignment with a client's values or its potential for long-term performance. This approach not only seeks to align investments with ethical values but also to mitigate risks and identify prospects that could affect financial returns, fulfilling their obligation to act in their clients' best interests. ## Why Does Someone Need a Fiduciary? Working with a fiduciary means that you can be assured that a financial professional will always be putting your interests first, and not their own. This means that you don’t have to worry about conflicts of interest, misplaced incentives, or aggressive sales tactics. ## The Bottom Line A fiduciary is a person or other entity in a position of control and influence over another person’s property or finances. The concept of fiduciaries can be found in a wide array of legal contexts in the United States and throughout the world. Fiduciary relationships are most often found when individuals are entrusted with carrying out a particular act for another, such as a trustee handling assets on behalf of a trust beneficiary. The term “fiduciary” is widely used in the context of financial advising and brokerage relationships when the client’s best interests must be put first. Because of the significance of these fiduciary relationships, new legal challenges often arise concerning properly carrying out one’s fiduciary responsibilities.

Fiduciaries are persons or organizations that act on behalf of others and are required to put the clients’ interests ahead of their own, with a duty to preserve good faith and trust. Fiduciaries are thus legally and ethically bound to act in the other’s best interests. A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task usually involves finances—for example, managing the assets of another person or a group of people. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibilities.  Key Takeaways Fiduciaries are legally bound to put their client’s best interests ahead of their own.Fiduciary duties appear in various business relationships, including between a trustee and a beneficiary, corporate board members and shareholders, and executors and legatees.An investment fiduciary is anyone with legal responsibility for managing somebody else’s money, such as a member of the investment committee of a charity.Registered investment advisors and insurance agents have a fiduciary duty to their clients.Broker-dealers may be subject to the less stringent standard set by the Securities and Exchange Commission (SEC) Regulation Best Interest, implemented in 2019. Joules Garcia / Investopedia Understanding Fiduciaries A fiduciary’s responsibilities and duties are ethical and legal. When a party knowingly accepts a fiduciary duty on behalf of another, they are required to act in the best interest of the principal (i.e., the client or party whose assets they are managing). This is what is known as a “prudent person standard of care,” which stems from an 1830 court ruling, Harvard College vs. Armory, and is found in many state laws via the American Law Institute's Uniform Prudent Investor Act from 1994.  The prudent-person rule requires a fiduciary to act first and foremost with the needs of beneficiaries in mind. Strict care must be taken to ensure that no conflict of interest arises between the fiduciary and the principal. In many cases, no profit is to be made from the relationship unless explicit consent is granted when the relationship begins. For example, in the United Kingdom, fiduciaries cannot profit from their position, according to an English High Court ruling, Keech vs. Sandford (1726). If the principal provides consent, then the fiduciary can keep whatever benefit they have received; these benefits can be either monetary or defined more broadly as an “opportunity.” Tip Want more advice for saving money toward your financial goals? Order a copy of Investopedia's What To Do With $10,000. Fiduciary duties appear in a wide variety of common business relationships, including the following: Trustee and beneficiary (the most common type)Corporate board members and shareholdersExecutors and legateesGuardians and wardsPromoters and stock subscribersLawyers and clientsInvestment corporations and investorsInsurance companies/agents and policyholders Fiduciary negligence is a form of professional malpractice when a person fails to honor their fiduciary obligations and responsibilities. Fiduciary Relationship Between Trustee and Beneficiary Estate arrangements and trusts involve both a trustee and a beneficiary. An individual named as a trust or estate trustee is the fiduciary, and the beneficiary is the principal. Under a trustee/beneficiary duty, the fiduciary has legal ownership of the property or assets and holds the power necessary to handle assets held in the name of the trust. In estate law, the trustee may also be known as the estate’s executor. Trustees must make decisions that are in the best interest of the beneficiary, as the latter holds equitable title to the property. The trustee/beneficiary relationship is an important aspect of estate planning, and special care should be taken to determine who is to be the trustee. Politicians often set up blind trusts to avoid real or perceived conflict-of-interest scandals. A blind trust is a relationship in which a trustee is in charge of all investments of a beneficiary’s assets without the beneficiary knowing how the assets are being invested. Even though the beneficiary has no knowledge, the trustee has a fiduciary duty to invest according to the prudent person standard of conduct. Fiduciary Relationship Between Board Members and Shareholders A similar fiduciary duty can be held by corporate directors, as they can be considered trustees for stockholders if on the board of a corporation, or trustees of depositors if they serve as the director of a bank. Specific duties include the following: Duty of care Duty of care applies to how the board makes decisions that affect the future of the business. The board has the duty to thoroughly investigate all possible decisions and how they might affect the business. If the board is voting to elect a new chief executive officer, for example, the decision should not be based solely on the board’s knowledge or opinion of one possible candidate; it is the board’s responsibility to investigate all viable applicants to ensure that the best person for the job is chosen. Duty to act in good faith Even after the board reasonably investigates all the options before it, it has the responsibility to choose the option it believes best serves the interests of the business and its shareholders. Duty of loyalty Duty of loyalty means the board is required to put no other cause, interest, or affiliation above its allegiance to the company and the company’s investors. Board members must refrain from personal or professional dealings that might put their own self-interest or that of another person or business above the interests of the company. If a member of a board of directors is found to be in breach of their fiduciary duty, they can be held liable in a court of law by the company or its shareholders. Contrary to popular belief, there is no legal mandate that a corporation is required to maximize shareholder returns. More Examples of Fiduciaries Fiduciary relationship between executor and legatee Fiduciary responsibilities can also apply to specific or one-time transactions. For example, a fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf of the property owner. A fiduciary deed is useful when a property owner wishes to sell but can't handle their affairs due to illness, incompetence, or other circumstances and needs someone to do so for them. A fiduciary is required by law to disclose to the potential buyer the true condition of the property being sold, and they cannot receive any financial benefits from the sale. A fiduciary deed is also useful when the property owner has died, and their property is part of an estate that needs oversight or management. Fiduciary relationship between guardian and ward Under a guardian/ward relationship, the legal guardianship of a minor is transferred to an appointed adult. As the fiduciary, the guardian is tasked with ensuring the minor child or ward has appropriate care, which can include deciding where the minor attends school, that the minor has suitable medical care, that they are disciplined in a reasonable manner, and that their daily welfare remains intact. A guardian is appointed by the state court when the natural guardian of a minor child can't care for the child. In most states, a guardian/ward relationship remains intact until the minor child reaches the age of majority. Fiduciary relationship between attorney and client The attorney/client fiduciary relationship is one of the most stringent and well-known. The U.S. Supreme Court states that the highest level of trust and confidence must exist between an attorney and a client and that an attorney, as a fiduciary, must act with complete fairness, loyalty, and fidelity when dealing with and representing their clients. Attorneys are held liable for breaches of their fiduciary duties to the client and are accountable to the court, where that client is represented when a breach occurs. Fiduciary relationship between principal and agent A more generic example of fiduciary duty lies in the principal/agent relationship. Any person, corporation, partnership, or government agency can act as a principal or agent as long as the person or business has the legal capacity to do so. Under a principal/agent duty, an agent is legally appointed to act on behalf of the principal without conflict of interest. A common example of a principal/agent relationship with a fiduciary duty is a group of shareholders acting as principals and electing management to act as agents. Similarly, investors act as principals when selecting investment fund managers as agents to manage assets. Investment fiduciary An investment fiduciary need not be a financial professional (money manager, banker, and so on) but is any person with the legal responsibility for managing somebody else’s money. That means you have a fiduciary responsibility if you volunteered to sit on the investment committee of the board of your local charity or other organization. You have been placed in a position of trust, and there may be consequences for betraying that trust. Also, hiring a financial or investment expert does not relieve the committee members of all their duties. They still have an obligation to prudently choose and monitor the activities of the expert.  Regulation Best Interest and the Suitability Rule Broker-dealers were once allowed to adhere to a less stringent suitability standard but are now subject to a heightened standard of conduct when recommending investments to retail customers. In 2019, the SEC adopted Regulation Best Interest (BI), which requires broker-dealers to act in the best interest of the retail customer at the time a recommendation is made. This goes beyond the previous suitability standard, which required that recommendations be suitable given the customer's financial situation. Under Regulation BI, broker-dealers must disclose material conflicts of interest; exercise reasonable diligence, care, and skill when making a recommendation; and establish policies and procedures to mitigate conflicts of interest. They are prohibited from putting their financial interests ahead of the customer's interests. This establishes a "best interest" standard like the fiduciary duty investment advisors owe their clients. Broker-dealers can still be compensated through commissions. However, Regulation BI requires them to consider cost and other factors in the recommendation process, not just suitability. Recommendations, importantly, cannot place the broker-dealer's interests ahead of the client's. Regulation BI raises the standard of conduct for broker-dealers when recommendations are made to retail investors. While not a fiduciary duty, it goes beyond the old suitability standard to require broker-dealers to act in their customers' best interest. Investment advisors, who are usually paid through fees, are bound to a fiduciary standard that was established in the Investment Advisers Act of 1940. The act defines what a fiduciary means and stipulates a duty of loyalty and care, which means that the advisor must put the client’s interests above their own. Regulation Best Interest vs. the fiduciary standard Regulation BI and the fiduciary standard are two codes of conduct that apply to financial professionals providing investment advice to clients. Regulation BI mostly applies to broker-dealers compensated by commission, while the fiduciary standard applies to investment advisors paid a fee for their services. The main difference between the two standards is the level of duty and loyalty the financial professional owes to the client.Regulation BI requires broker-dealers to act in the client's best interest at the time of the recommendation without placing their own interest ahead of the client's interest. However, this does not mean that broker-dealers must eliminate all conflicts of interest or always recommend the lowest-cost or best-performing product. Broker-dealers can still receive commissions, incentives, or other benefits from their recommendations as long as they disclose them to the client and mitigate any material conflicts of interest. Regulation BI also does not impose a continuous duty of care or loyalty to the client, meaning that broker-dealers are not required to monitor the client's account or update their recommendations.The fiduciary standard, meanwhile, requires investment advisors to act with the highest level of duty and loyalty to the client, putting the client's interest above their own at all times. This means that investment advisors have to avoid or eliminate any conflicts of interest that could compromise their objectivity or impartiality, and they cannot receive any compensation or benefit that is contrary to the client's best interest. Investment advisors must also review and update their recommendations based on the client's changing needs and circumstances. Here are the main points: Fiduciary duties are ongoing, while Regulation BI applies only at the time of the investment recommendation.Regulation BI still allows commissions and certain conflicts of interest.Fiduciary duty prohibits favoring the advisor's interests over the client's.Regulation BI does not impose a fiduciary duty. Clients should be aware of the differences between the two standards and the potential conflicts arising from the financial professional's compensation structure. Clients should also read the Form CRS Relationship Summary that the financial professional is required to provide, which summarizes the nature and scope of the relationship, the services offered, the fees and costs, the conflicts of interest, the standard of conduct, and the disciplinary history of the financial professional and their firm. The Short-Lived Fiduciary Rule While “suitability” was the standard for transactional accounts or brokerage accounts, the U.S. Department of Labor Fiduciary Rule proposed to toughen things up for brokers. Anyone with retirement money under management, who made recommendations or solicitations for an individual retirement account or other tax-advantaged retirement accounts, would be considered a fiduciary required to adhere to that standard, rather than to the suitability standard that was otherwise in effect. The fiduciary rule had a long and yet unclear implementation. Originally proposed in 2010, it was scheduled to go into effect between April 10, 2017, and Jan. 1, 2018. After then-President Donald Trump took office, its effective date was postponed to June 9, 2017, including a transition period for certain exemptions extending through Jan. 1, 2018. Later, the implementation of all elements of the rule was pushed back to July 1, 2019. Before that could happen, the rule was vacated following a June 2018 decision by the Fifth U.S. Circuit Court. In June 2020, a new proposal, Proposal 3.0, was released by the Department of Labor, which “reinstated the investment advice fiduciary definition in effect since 1975 accompanied by new interpretations that extended its reach in the rollover setting, and proposed a new exemption for conflicted investment advice and principal transactions.” After taking office in 2021, the Biden administration didn't revive the defunct fiduciary rule. While President Biden has expressed support for holding Wall Street to higher standards of accountability, his administration has not pursued new rulemaking on reinstating the fiduciary rule. More recently, the Department of Labor under President Biden proposed a new fiduciary rule aimed at strengthening standards for retirement plan advice. However, this would be the fourth attempt to do so since the Obama administration, and there will likely be legal challenges like those of the previous efforts. Risks of Being a Fiduciary The possibility of a trustee/agent not optimally performing in the beneficiary’s best interests is called “fiduciary risk.” This does not necessarily mean that the trustee is using the beneficiary’s resources for their own benefit; this could be the risk that the trustee is not achieving the best value for the beneficiary. For example, a fund manager (agent) making more trades than necessary for a client’s portfolio is a fiduciary risk because the fund manager is slowly eroding the client’s gains by incurring higher transaction costs than needed. In contrast, when an individual or entity legally appointed to manage another party’s assets uses their power in an unethical or illegal fashion to benefit financially or to serve their self-interest in some other way, this is called “fiduciary abuse” or “fiduciary fraud.” Fiduciary Insurance A business can insure the fiduciaries of a qualified retirement plan, such as the company’s directors, officers, employees, and other natural person trustees. Fiduciary liability insurance is meant to fill in the gaps in traditional coverage offered through employee benefits liability or director’s and officer’s policies. It provides financial protection when liability litigation arises due to purported mismanagement of funds or investments, administrative errors or delays in transfers or distributions, a change or reduction in benefits, or erroneous advice surrounding investment allocations. Investment Fiduciary Guidelines Responding to the need for better guidance for investment fiduciaries, the nonprofit Foundation for Fiduciary Studies was established to define the following prudent investment practices: Step 1: Organize The process begins with fiduciaries educating themselves on the laws and rules that will apply to their situations. Once fiduciaries identify their governing rules, they then need to define the roles and responsibilities of all parties involved in the process. If investment service providers are used, then any service agreements should be in writing. Step 2: Formalize The investment process starts by creating the investment program’s goals and objectives. Fiduciaries should identify the investment horizon, an acceptable level of risk, and expected return. By identifying these factors, fiduciaries create a framework for evaluating investment options.  Fiduciaries then need to select the appropriate asset classes that will enable them to create a diversified portfolio through some justifiable method. Most fiduciaries go about this by employing modern portfolio theory, because it's one of the most accepted methods for creating investment portfolios that target a desired risk/return profile.  Finally, the fiduciary should formalize these steps by creating an investment policy statement that provides the necessary details for implementing a specific investment strategy. Now the fiduciary is ready to proceed with the implementation of the investment program, as identified in the first two steps. Step 3: Execute Specific investments or investment managers can now be selected to fulfill the investment policy statement. A due diligence process must be designed to evaluate potential investments. The due diligence process should identify criteria and filter potential investment options. The implementation phase is usually performed with the assistance of an investment advisor because many fiduciaries lack the skill or resources to perform this step. When an advisor assists in the implementation phase, fiduciaries and advisors must communicate to ensure that an agreed-upon due diligence process is used while selecting investments or managers. Fiduciary Rules and Regulations A U.S. Department of the Treasury agency, the Office of the Comptroller of the Currency, regulates federal savings associations and their fiduciary activities in the U.S. Fiduciary duties can, at times, conflict with one another, a problem that often occurs with real estate agents and lawyers. Two opposing interests can, at best, be balanced; however, balancing interests is not the same as serving a client's best interest. Step 4: Monitor The final step can be the most time-consuming and the most neglected part of the process. Fiduciaries should not neglect continuous monitoring since they could be equally liable for negligence here as elsewhere in these steps. To properly monitor the investment process, fiduciaries must periodically review reports that benchmark their investments’ performance against the appropriate index and peer group and determine whether the investment policy statement objectives are being met. Simply monitoring performance statistics is not enough. Fiduciaries must also monitor qualitative data, such as changes in the organizational structure of investment managers used in the portfolio. If the investment decision-makers in an organization have left, or if their level of authority has changed, then investors must consider how this information may impact future performance. In addition to performance reviews, fiduciaries must review the expenses involved. Fiduciaries are responsible not only for how funds are invested but also for how funds are spent. Investment fees directly impact performance, and fiduciaries must ensure that fees paid for investment management are fair and reasonable. What Are the Three Fiduciary Duties Owed to Shareholders? Since corporate directors can be considered fiduciaries for shareholders, they possess the following three fiduciary duties:Duty of care requires directors to make decisions in good faith for shareholders in a reasonably prudent manner.Duty of loyalty requires that directors should not put other interests, causes, or entities above the interest of the company and its shareholders.Finally, duty to act in good faith requires that directors choose the best option to serve the company and its stakeholders. How Can Fiduciary Duties Influence Investment Strategies? Fiduciary responsibilities can significantly shape investment strategies, especially with the growing emphasis on ethical investing, including environmental, social, and governance (ESG) criteria. Fiduciaries, such as financial advisors and fund managers, must act in the best interests of their clients or beneficiaries. This duty extends to considering long-term risks and opportunities, which increasingly involve ethical considerations. For instance, a fiduciary might assess a company's sustainability practices or the social impact of an investment to determine its alignment with a client's values or its potential for long-term performance. This approach not only seeks to align investments with ethical values but also to mitigate risks and identify prospects that could affect financial returns, fulfilling their obligation to act in their clients' best interests. Why Does Someone Need a Fiduciary? Working with a fiduciary means that you can be assured that a financial professional will always be putting your interests first, and not their own. This means that you don’t have to worry about conflicts of interest, misplaced incentives, or aggressive sales tactics. The Bottom Line A fiduciary is a person or other entity in a position of control and influence over another person’s property or finances. The concept of fiduciaries can be found in a wide array of legal contexts in the United States and throughout the world. Fiduciary relationships are most often found when individuals are entrusted with carrying out a particular act for another, such as a trustee handling assets on behalf of a trust beneficiary. The term “fiduciary” is widely used in the context of financial advising and brokerage relationships when the client’s best interests must be put first. Because of the significance of these fiduciary relationships, new legal challenges often arise concerning properly carrying out one’s fiduciary responsibilities.

https://www.investopedia.com/risk-from-covid-19-variants-drives-rebalancing-in-favor-of-equities-and-cash-5200464

Risk From COVID-19 Variants Drives Rebalancing in Favor of Equities and Cash

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Over a year into the pandemic, risk from COVID-19 variants remains a top concern for American investors, and most are adjusting their portfolios in response to risk from delta variants, a recent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://pressroom.aboutschwab.com/press-releases/press-release/2021/Active-Traders-Cautious-While-Navigating-Delta-Variant-and-Other-Market-Drivers/default.aspx?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsletter_axiosmarkets&amp;stream=business&amp;utm_term=24844195" rel="nofollow">survey</a> by Charles Schwab found. Survey responses showed the pandemic topped surveyed U.S. active traders’ concerns as of August. Over a third said they’d already made changes to their trading strategies in response to the rise of the delta variant, and among those who said they haven’t, half said they’re considering it.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> However, the kind of modifications they had in mind were somewhat different. For those who already implemented strategy changes based on pandemic-related concerns, close to half or 44% indicated that meant buying more equities. But those who were still planning on making changes as a result of pandemic-related risk were more likely to be considering selling them, with 36% reporting they would increase cash holdings and 30% saying they would sell equities.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_5-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/nBtrT/3/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Adjusting to COVID-19 risk"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_1-0"></cite></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The results echoed findings from a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investors-take-their-foot-off-the-gas-as-expectations-dim-5196807">survey</a> of Investopedia and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.treehugger.com/" rel="nofollow">Treehugger</a> readers in August, with some key differences. While most readers surveyed indicated that they had <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rebalancing.asp">rebalanced</a> their portfolio within the last few months primarily because they do so on a regular basis or because they felt overexposed to a given sector, our research also found that shifting to less risky investments or cash holdings was a recurring theme in open-ended responses. And although risk from the spread of COVID-19 variants was not our readers’ number one concern (more were worried about government spending and inflation), COVID-19 variants still ranked among their top four choices.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> More broadly, in the face of job losses and other financial difficulties, the pandemic has pushed many Americans to take a closer look at their finances, revealing an acute lack of savings. In another <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.thebalancemoney.com:443/half-of-americans-dont-have-usd250-to-spare-5120766" rel="nofollow">survey</a> by The Balance back in the first quarter of 2021, half of Americans surveyed said they had less than $250 left over each month after accounting for their necessary expenses and regular spending. Twelve percent said they had nothing.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Reevaluating savings, emergency funds, and the liquidity of assets has led to record high savings rates in the U.S. Since the onset of the pandemic, Americans are saving more than ever, according to the U.S. Bureau of Economic Analysis.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The first half of 2021 has also generally been good to U.S. equity investors. The S&amp;P 500 returned 14.4% in the first half, well above average historical returns, in the second-best first half in over two decades.<span class="ql-inline-citation" data-cite="3"></span> It’s on track for a record number of record high closes at 53 and counting. Although our readers indicated they were less optimistic about the market in August than they were in May, enthusiasm for equities remains relatively high.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Still Bullish on Stocks </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Most or 86% of respondents in Charles Schwab’s Active Trader Pulse survey think we’re currently in a stock market bubble. Still, 65% said they’re bullish on domestic stocks for the second half of the year. Many of our readers agreed—most felt we’re in a bubble, but more identified residential real estate as the source than U.S. stocks. But at the end of the day, more of our readers said they would invest in stocks if they had an extra $10,000, ahead of ETFs, savings, and paying down debt.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_18-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/oIzWi/1/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="If you had an extra $10,000"></iframe> <cite class="comp mntl-sc-block-iframe__caption mntl-text-block" id="mntl-sc-block-iframe__caption_2-0"></cite></div></div>

Over a year into the pandemic, risk from COVID-19 variants remains a top concern for American investors, and most are adjusting their portfolios in response to risk from delta variants, a recent [survey](https://pressroom.aboutschwab.com/press-releases/press-release/2021/Active-Traders-Cautious-While-Navigating-Delta-Variant-and-Other-Market-Drivers/default.aspx?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosmarkets&stream=business&utm_term=24844195) by Charles Schwab found. Survey responses showed the pandemic topped surveyed U.S. active traders’ concerns as of August. Over a third said they’d already made changes to their trading strategies in response to the rise of the delta variant, and among those who said they haven’t, half said they’re considering it.  However, the kind of modifications they had in mind were somewhat different. For those who already implemented strategy changes based on pandemic-related concerns, close to half or 44% indicated that meant buying more equities. But those who were still planning on making changes as a result of pandemic-related risk were more likely to be considering selling them, with 36% reporting they would increase cash holdings and 30% saying they would sell equities. The results echoed findings from a [survey](https://www.investopedia.com/investors-take-their-foot-off-the-gas-as-expectations-dim-5196807) of Investopedia and [Treehugger](https://www.treehugger.com/) readers in August, with some key differences. While most readers surveyed indicated that they had [rebalanced](https://www.investopedia.com/terms/r/rebalancing.asp) their portfolio within the last few months primarily because they do so on a regular basis or because they felt overexposed to a given sector, our research also found that shifting to less risky investments or cash holdings was a recurring theme in open-ended responses. And although risk from the spread of COVID-19 variants was not our readers’ number one concern (more were worried about government spending and inflation), COVID-19 variants still ranked among their top four choices.  More broadly, in the face of job losses and other financial difficulties, the pandemic has pushed many Americans to take a closer look at their finances, revealing an acute lack of savings. In another [survey](https://www.thebalancemoney.com:443/half-of-americans-dont-have-usd250-to-spare-5120766) by The Balance back in the first quarter of 2021, half of Americans surveyed said they had less than $250 left over each month after accounting for their necessary expenses and regular spending. Twelve percent said they had nothing.  Reevaluating savings, emergency funds, and the liquidity of assets has led to record high savings rates in the U.S. Since the onset of the pandemic, Americans are saving more than ever, according to the U.S. Bureau of Economic Analysis. The first half of 2021 has also generally been good to U.S. equity investors. The S&P 500 returned 14.4% in the first half, well above average historical returns, in the second-best first half in over two decades. It’s on track for a record number of record high closes at 53 and counting. Although our readers indicated they were less optimistic about the market in August than they were in May, enthusiasm for equities remains relatively high.  ### Still Bullish on Stocks Most or 86% of respondents in Charles Schwab’s Active Trader Pulse survey think we’re currently in a stock market bubble. Still, 65% said they’re bullish on domestic stocks for the second half of the year. Many of our readers agreed—most felt we’re in a bubble, but more identified residential real estate as the source than U.S. stocks. But at the end of the day, more of our readers said they would invest in stocks if they had an extra $10,000, ahead of ETFs, savings, and paying down debt.

Over a year into the pandemic, risk from COVID-19 variants remains a top concern for American investors, and most are adjusting their portfolios in response to risk from delta variants, a recent survey by Charles Schwab found. Survey responses showed the pandemic topped surveyed U.S. active traders’ concerns as of August. Over a third said they’d already made changes to their trading strategies in response to the rise of the delta variant, and among those who said they haven’t, half said they’re considering it.  However, the kind of modifications they had in mind were somewhat different. For those who already implemented strategy changes based on pandemic-related concerns, close to half or 44% indicated that meant buying more equities. But those who were still planning on making changes as a result of pandemic-related risk were more likely to be considering selling them, with 36% reporting they would increase cash holdings and 30% saying they would sell equities. The results echoed findings from a survey of Investopedia and Treehugger readers in August, with some key differences. While most readers surveyed indicated that they had rebalanced their portfolio within the last few months primarily because they do so on a regular basis or because they felt overexposed to a given sector, our research also found that shifting to less risky investments or cash holdings was a recurring theme in open-ended responses. And although risk from the spread of COVID-19 variants was not our readers’ number one concern (more were worried about government spending and inflation), COVID-19 variants still ranked among their top four choices.  More broadly, in the face of job losses and other financial difficulties, the pandemic has pushed many Americans to take a closer look at their finances, revealing an acute lack of savings. In another survey by The Balance back in the first quarter of 2021, half of Americans surveyed said they had less than $250 left over each month after accounting for their necessary expenses and regular spending. Twelve percent said they had nothing.  Reevaluating savings, emergency funds, and the liquidity of assets has led to record high savings rates in the U.S. Since the onset of the pandemic, Americans are saving more than ever, according to the U.S. Bureau of Economic Analysis. The first half of 2021 has also generally been good to U.S. equity investors. The S&P 500 returned 14.4% in the first half, well above average historical returns, in the second-best first half in over two decades. It’s on track for a record number of record high closes at 53 and counting. Although our readers indicated they were less optimistic about the market in August than they were in May, enthusiasm for equities remains relatively high.  Still Bullish on Stocks Most or 86% of respondents in Charles Schwab’s Active Trader Pulse survey think we’re currently in a stock market bubble. Still, 65% said they’re bullish on domestic stocks for the second half of the year. Many of our readers agreed—most felt we’re in a bubble, but more identified residential real estate as the source than U.S. stocks. But at the end of the day, more of our readers said they would invest in stocks if they had an extra $10,000, ahead of ETFs, savings, and paying down debt.

https://www.investopedia.com/terms/b/basic_materials.asp

Basic Materials Sector: Definition, Examples, and Stocks

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-the-basic-materials-sector-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> The Basic Materials Sector: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The basic materials sector is an industry category made up of businesses engaged in the discovery, development, and processing of raw materials. The sector includes companies engaged in mining and metal refining, chemical products, and forestry products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Within this sector are the companies that supply most of the materials used in construction. That makes the companies and their stocks sensitive to changes in the business cycle. They tend to thrive when the economy is strong. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> The category is sometimes referred to simply as the materials sector. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <span class="heading-toc" id="toc-basic-materials-explained"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Basic Materials Explained </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Companies in the basic materials sector are involved in the physical acquisition, development, and initial processing of the many products commonly referred to as raw materials. Oil, gold, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/martin-marietta-outlook-lifts-building-materials-stocks-4707745" rel="noopener noreferrer">stone</a> are examples. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_11-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_12-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials, from gold and oil to timber.</li><li>The raw materials they finish are sold for use in nearly all other industry sectors.</li><li>The sector is particularly sensitive to the ups and downs of the economy.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> For the most part, raw materials are naturally occurring resources. Some are considered finite. That is, it takes millions of years for them to develop, well outside the long-range plans of any company. Others are reusable but are not available in infinite quantities at any given point in time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> The Basic Materials Stock Sector </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For the purposes of stock categorization, the most common materials within the sector are mined products, such as metals and ore, and forestry products, or lumber. The stocks of certain chemical producers and energy sources also are included in the basic materials sector. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Containers and packaging are categorized as basic materials, whether they're made of glass, metal, or cardboard. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Basic Materials or Not? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Not all businesses that work with basic materials are included in the sector. For example, while a metal mining company is considered a basic materials processor, a jewelry company, even one which works only with mined metal, is not. It is deemed a retailer or a wholesaler who is a buyer of the basic material. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Not even all chemicals qualify as basic materials. For example, industrial fertilizers and paint additives are categorized as complex cleaning products or pharmaceuticals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>More than 200 mutual funds, index funds, and ETFs focus their investments in the basic materials sector.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Energy Sources </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Certain energy sources, notably natural gas, are considered basic materials. Crude oil and coal qualify in their natural state as do some refined products such as gasoline. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> The refined versions of these products are included because the demand for them is nearly universal. They are critical to the operation of almost every industry. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Demand for Basic Materials </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The basic materials sector is subject to the law of supply and demand in the same way as consumer goods are. In fact, they are closely interrelated. If the demand for consumer goods drops, the demand for the raw materials involved in their production also drops. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> The basic materials sector also is affected by shifts in the housing market as many raw materials are finished in order to be used in construction projects. If new housing development slows, the demand for lumber products decreases. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_37-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_38-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><ul><li>The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials.</li><li>Most industries rely on companies in this sector for the raw materials they need to manufacture their goods.</li><li>Basic materials are substances that occur naturally such as oil, stone, and gold.</li><li>The basic materials sector is subject to supply and demand.</li></ul></div></div></div> <span class="heading-toc" id="toc-examples-of-basic-materials-companies"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Examples of Basic Materials Companies </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Three of the biggest American companies are included in the basic materials sector, and all three are involved in the oil business. These are Exxon Mobil Corp., Chevron Corp., and the oil field services company Schlumberger Ltd. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> DuPont de Nemours and Co. and Monsanto Co., both chemicals companies, are listed in this sector. So are two big producers of construction materials, Vulcan Materials Co., a producer of crushed stone, gravel, and concrete, and Steel Dynamics Inc., a maker of finished steel products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-subheading__text"> Basic Materials Stocks </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> More than 300 stock mutual funds, index funds, and exchange-traded funds (ETFs) focus on investments in the basic materials sector.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The many ETFs include Vanguard's Vanguard Materials ETF, Blackrock's iShares Global Materials ETF, and iShares U.S. Basic Materials ETF.<span class="ql-inline-citation" data-cite="4"></span> <span class="ql-inline-citation" data-cite="3"></span> <span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Mutual funds in the sector sometimes focus narrowly on one segment, such as the Fidelity Select Chemicals Fund and the VanEck Vectors Gold Miners ETF.<span class="ql-inline-citation" data-cite="6"></span> <span class="ql-inline-citation" data-cite="5"></span> </p></div>

## The Basic Materials Sector: An Overview The basic materials sector is an industry category made up of businesses engaged in the discovery, development, and processing of raw materials. The sector includes companies engaged in mining and metal refining, chemical products, and forestry products. Within this sector are the companies that supply most of the materials used in construction. That makes the companies and their stocks sensitive to changes in the business cycle. They tend to thrive when the economy is strong. The category is sometimes referred to simply as the materials sector. ## Basic Materials Explained Companies in the basic materials sector are involved in the physical acquisition, development, and initial processing of the many products commonly referred to as raw materials. Oil, gold, and [stone](https://www.investopedia.com/martin-marietta-outlook-lifts-building-materials-stocks-4707745) are examples. ### Key Takeaways * The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials, from gold and oil to timber. * The raw materials they finish are sold for use in nearly all other industry sectors. * The sector is particularly sensitive to the ups and downs of the economy. For the most part, raw materials are naturally occurring resources. Some are considered finite. That is, it takes millions of years for them to develop, well outside the long-range plans of any company. Others are reusable but are not available in infinite quantities at any given point in time. ### The Basic Materials Stock Sector For the purposes of stock categorization, the most common materials within the sector are mined products, such as metals and ore, and forestry products, or lumber. The stocks of certain chemical producers and energy sources also are included in the basic materials sector. Containers and packaging are categorized as basic materials, whether they're made of glass, metal, or cardboard. ### Basic Materials or Not? Not all businesses that work with basic materials are included in the sector. For example, while a metal mining company is considered a basic materials processor, a jewelry company, even one which works only with mined metal, is not. It is deemed a retailer or a wholesaler who is a buyer of the basic material. Not even all chemicals qualify as basic materials. For example, industrial fertilizers and paint additives are categorized as complex cleaning products or pharmaceuticals. ### More than 200 mutual funds, index funds, and ETFs focus their investments in the basic materials sector. ### Energy Sources Certain energy sources, notably natural gas, are considered basic materials. Crude oil and coal qualify in their natural state as do some refined products such as gasoline. The refined versions of these products are included because the demand for them is nearly universal. They are critical to the operation of almost every industry. ### Demand for Basic Materials The basic materials sector is subject to the law of supply and demand in the same way as consumer goods are. In fact, they are closely interrelated. If the demand for consumer goods drops, the demand for the raw materials involved in their production also drops. The basic materials sector also is affected by shifts in the housing market as many raw materials are finished in order to be used in construction projects. If new housing development slows, the demand for lumber products decreases. ### Key Takeaways * The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials. * Most industries rely on companies in this sector for the raw materials they need to manufacture their goods. * Basic materials are substances that occur naturally such as oil, stone, and gold. * The basic materials sector is subject to supply and demand. ## Examples of Basic Materials Companies Three of the biggest American companies are included in the basic materials sector, and all three are involved in the oil business. These are Exxon Mobil Corp., Chevron Corp., and the oil field services company Schlumberger Ltd. DuPont de Nemours and Co. and Monsanto Co., both chemicals companies, are listed in this sector. So are two big producers of construction materials, Vulcan Materials Co., a producer of crushed stone, gravel, and concrete, and Steel Dynamics Inc., a maker of finished steel products. ### Basic Materials Stocks More than 300 stock mutual funds, index funds, and exchange-traded funds (ETFs) focus on investments in the basic materials sector. The many ETFs include Vanguard's Vanguard Materials ETF, Blackrock's iShares Global Materials ETF, and iShares U.S. Basic Materials ETF.   Mutual funds in the sector sometimes focus narrowly on one segment, such as the Fidelity Select Chemicals Fund and the VanEck Vectors Gold Miners ETF. 

The Basic Materials Sector: An Overview The basic materials sector is an industry category made up of businesses engaged in the discovery, development, and processing of raw materials. The sector includes companies engaged in mining and metal refining, chemical products, and forestry products. Within this sector are the companies that supply most of the materials used in construction. That makes the companies and their stocks sensitive to changes in the business cycle. They tend to thrive when the economy is strong. The category is sometimes referred to simply as the materials sector. Basic Materials Explained Companies in the basic materials sector are involved in the physical acquisition, development, and initial processing of the many products commonly referred to as raw materials. Oil, gold, and stone are examples. Key Takeaways The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials, from gold and oil to timber.The raw materials they finish are sold for use in nearly all other industry sectors.The sector is particularly sensitive to the ups and downs of the economy. For the most part, raw materials are naturally occurring resources. Some are considered finite. That is, it takes millions of years for them to develop, well outside the long-range plans of any company. Others are reusable but are not available in infinite quantities at any given point in time. The Basic Materials Stock Sector For the purposes of stock categorization, the most common materials within the sector are mined products, such as metals and ore, and forestry products, or lumber. The stocks of certain chemical producers and energy sources also are included in the basic materials sector. Containers and packaging are categorized as basic materials, whether they're made of glass, metal, or cardboard. Basic Materials or Not? Not all businesses that work with basic materials are included in the sector. For example, while a metal mining company is considered a basic materials processor, a jewelry company, even one which works only with mined metal, is not. It is deemed a retailer or a wholesaler who is a buyer of the basic material. Not even all chemicals qualify as basic materials. For example, industrial fertilizers and paint additives are categorized as complex cleaning products or pharmaceuticals. More than 200 mutual funds, index funds, and ETFs focus their investments in the basic materials sector. Energy Sources Certain energy sources, notably natural gas, are considered basic materials. Crude oil and coal qualify in their natural state as do some refined products such as gasoline. The refined versions of these products are included because the demand for them is nearly universal. They are critical to the operation of almost every industry. Demand for Basic Materials The basic materials sector is subject to the law of supply and demand in the same way as consumer goods are. In fact, they are closely interrelated. If the demand for consumer goods drops, the demand for the raw materials involved in their production also drops. The basic materials sector also is affected by shifts in the housing market as many raw materials are finished in order to be used in construction projects. If new housing development slows, the demand for lumber products decreases. Key Takeaways The basic materials sector is made up of companies involved in the discovery, development, and processing of raw materials.Most industries rely on companies in this sector for the raw materials they need to manufacture their goods.Basic materials are substances that occur naturally such as oil, stone, and gold.The basic materials sector is subject to supply and demand. Examples of Basic Materials Companies Three of the biggest American companies are included in the basic materials sector, and all three are involved in the oil business. These are Exxon Mobil Corp., Chevron Corp., and the oil field services company Schlumberger Ltd. DuPont de Nemours and Co. and Monsanto Co., both chemicals companies, are listed in this sector. So are two big producers of construction materials, Vulcan Materials Co., a producer of crushed stone, gravel, and concrete, and Steel Dynamics Inc., a maker of finished steel products. Basic Materials Stocks More than 300 stock mutual funds, index funds, and exchange-traded funds (ETFs) focus on investments in the basic materials sector. The many ETFs include Vanguard's Vanguard Materials ETF, Blackrock's iShares Global Materials ETF, and iShares U.S. Basic Materials ETF.   Mutual funds in the sector sometimes focus narrowly on one segment, such as the Fidelity Select Chemicals Fund and the VanEck Vectors Gold Miners ETF. 

https://www.investopedia.com/how-anthropics-new-ios-app-and-enterprise-plan-could-help-amazon-in-ai-race-8641931

How Anthropic's New Claude iOS App and Enterprise Plan Could Help Amazon in AI Race

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Amazon-backed Anthropic announced on Wednesday the launch of a Claude app on iOS and a new Teams plan for enterprise customers.</li><li>Anthropic's new artificial intelligence app, which gives users mobile access to the Claude AI model, could improve the positions of the AI startup and Amazon in the AI race.</li><li>The new Teams plan, made for enterprise customers that want Claude access for employees, could help Anthropic and Amazon gain as early AI leaders find some success in monetizing AI through enterprise offerings.<br/></li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Amazon-backed (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN">AMZN</a>) Anthropic announced on Wednesday the launch of the Claude app on Apple (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>) devices, which allows users to access the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">artificial intelligence (AI)</a> model from their phones, and a new Teams plan for enterprise customers.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The iOS app, available for free download on the Apple app store, syncs with Claude users' web chats. The app has vision capabilities that allow users to use photos from their library, take new pictures, or upload files for "real-time image analysis, contextual understanding, and mobile-centric use cases on the go." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <span class="heading-toc" id="toc-the-race-to-get-ai-workloads-on-phones"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> The Race to Get AI Workloads on Phones </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The new app could make Anthropic's AI tech more accessible at a time when early AI leaders work towards running AI workloads on phones. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Microsoft (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>) <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/why-microsoft-is-building-smaller-ai-systems-that-can-fit-in-phones-8637643">recently announced</a> its smallest AI model that can fit in a smartphone. Analysts <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/apple-stock-jumps-after-bank-of-america-upgrade-citing-likely-ai-related-boost-for-iphones-8431769">have said</a> that AI-capable tech could be the catalyst for an accelerated phone upgrade cycle. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Anthropic is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/amazon-completes-usd4-billion-investment-in-ai-startup-anthropic-to-advance-genai-edge-8621157">backed</a> by Amazon through multi-billion dollar investments from the e-commerce giant in a relationship similar to that between Microsoft and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-chatgpt-7094342">ChatGPT</a> maker OpenAI. The partnership positioned Amazon to gain from the AI startup's advancements. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-monetizing-ai-through-enterprise-offerings"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Monetizing AI Through Enterprise Offerings </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The AI company also announced a new Teams plan for enterprise customers to provide employees with access to Anthropic's AI tools. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The Team plan includes everything offered in Anthropic's Pro tier, as well as increased usage, access to the latest model family, Claude 3, a 200K context window, and administrative billing management. The new entreprise plan is priced at $30 per user per month. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Anthropic's new Teams plan could help the company gain, as tech giants such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/microsoft-doubles-down-on-ai-with-copilot-expansion-and-vodafone-partnership-8426674">Microsoft</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>) and Alphabet's <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/why-google-is-rebranding-its-bard-ai-chatbot-as-gemini-with-a-new-app-and-subscription-8572209">Google</a> (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL">GOOGL</a>) have found some early success <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-amazon-entreprise-ai-assistant-amazon-q-could-heat-up-big-tech-ai-race-8640995">monetizing AI through enterprise customer offerings</a>.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Amazon shares gained 2.2% to finish Wednesday's session at $178.86. The stock has gained over 70% in the past 12 months.<br> </br></p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Amazon-backed Anthropic announced on Wednesday the launch of a Claude app on iOS and a new Teams plan for enterprise customers. * Anthropic's new artificial intelligence app, which gives users mobile access to the Claude AI model, could improve the positions of the AI startup and Amazon in the AI race. * The new Teams plan, made for enterprise customers that want Claude access for employees, could help Anthropic and Amazon gain as early AI leaders find some success in monetizing AI through enterprise offerings. Amazon-backed ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN)) Anthropic announced on Wednesday the launch of the Claude app on Apple ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) devices, which allows users to access the [artificial intelligence (AI)](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) model from their phones, and a new Teams plan for enterprise customers. The iOS app, available for free download on the Apple app store, syncs with Claude users' web chats. The app has vision capabilities that allow users to use photos from their library, take new pictures, or upload files for "real-time image analysis, contextual understanding, and mobile-centric use cases on the go." ## The Race to Get AI Workloads on Phones The new app could make Anthropic's AI tech more accessible at a time when early AI leaders work towards running AI workloads on phones. Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) [recently announced](https://www.investopedia.com/why-microsoft-is-building-smaller-ai-systems-that-can-fit-in-phones-8637643) its smallest AI model that can fit in a smartphone. Analysts [have said](https://www.investopedia.com/apple-stock-jumps-after-bank-of-america-upgrade-citing-likely-ai-related-boost-for-iphones-8431769) that AI-capable tech could be the catalyst for an accelerated phone upgrade cycle. Anthropic is [backed](https://www.investopedia.com/amazon-completes-usd4-billion-investment-in-ai-startup-anthropic-to-advance-genai-edge-8621157) by Amazon through multi-billion dollar investments from the e-commerce giant in a relationship similar to that between Microsoft and [ChatGPT](https://www.investopedia.com/what-is-chatgpt-7094342) maker OpenAI. The partnership positioned Amazon to gain from the AI startup's advancements. ## Monetizing AI Through Enterprise Offerings The AI company also announced a new Teams plan for enterprise customers to provide employees with access to Anthropic's AI tools. The Team plan includes everything offered in Anthropic's Pro tier, as well as increased usage, access to the latest model family, Claude 3, a 200K context window, and administrative billing management. The new entreprise plan is priced at $30 per user per month. Anthropic's new Teams plan could help the company gain, as tech giants such as [Microsoft](https://www.investopedia.com/microsoft-doubles-down-on-ai-with-copilot-expansion-and-vodafone-partnership-8426674) ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) and Alphabet's [Google](https://www.investopedia.com/why-google-is-rebranding-its-bard-ai-chatbot-as-gemini-with-a-new-app-and-subscription-8572209) ([GOOGL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL)) have found some early success [monetizing AI through enterprise customer offerings](https://www.investopedia.com/how-amazon-entreprise-ai-assistant-amazon-q-could-heat-up-big-tech-ai-race-8640995). Amazon shares gained 2.2% to finish Wednesday's session at $178.86. The stock has gained over 70% in the past 12 months. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Amazon-backed Anthropic announced on Wednesday the launch of a Claude app on iOS and a new Teams plan for enterprise customers.Anthropic's new artificial intelligence app, which gives users mobile access to the Claude AI model, could improve the positions of the AI startup and Amazon in the AI race.The new Teams plan, made for enterprise customers that want Claude access for employees, could help Anthropic and Amazon gain as early AI leaders find some success in monetizing AI through enterprise offerings. Amazon-backed (AMZN) Anthropic announced on Wednesday the launch of the Claude app on Apple (AAPL) devices, which allows users to access the artificial intelligence (AI) model from their phones, and a new Teams plan for enterprise customers. The iOS app, available for free download on the Apple app store, syncs with Claude users' web chats. The app has vision capabilities that allow users to use photos from their library, take new pictures, or upload files for "real-time image analysis, contextual understanding, and mobile-centric use cases on the go." The Race to Get AI Workloads on Phones The new app could make Anthropic's AI tech more accessible at a time when early AI leaders work towards running AI workloads on phones. Microsoft (MSFT) recently announced its smallest AI model that can fit in a smartphone. Analysts have said that AI-capable tech could be the catalyst for an accelerated phone upgrade cycle. Anthropic is backed by Amazon through multi-billion dollar investments from the e-commerce giant in a relationship similar to that between Microsoft and ChatGPT maker OpenAI. The partnership positioned Amazon to gain from the AI startup's advancements. Monetizing AI Through Enterprise Offerings The AI company also announced a new Teams plan for enterprise customers to provide employees with access to Anthropic's AI tools. The Team plan includes everything offered in Anthropic's Pro tier, as well as increased usage, access to the latest model family, Claude 3, a 200K context window, and administrative billing management. The new entreprise plan is priced at $30 per user per month. Anthropic's new Teams plan could help the company gain, as tech giants such as Microsoft (MSFT) and Alphabet's Google (GOOGL) have found some early success monetizing AI through enterprise customer offerings. Amazon shares gained 2.2% to finish Wednesday's session at $178.86. The stock has gained over 70% in the past 12 months. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/investing/how-navigate-complex-landscape-etf-discounts-and-premiums/

How to Navigate the Complex Landscape of ETF Discounts and Premiums

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">Exchange-traded funds</a> (ETFs) are known for being low-cost investments. However, determining the actual price of an ETF can be tricky, in part because there is the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value</a> (NAV) of a fund and its <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indicative_net_asset_value.asp">intraday NAV</a> (iNAV), as well as the current market price. The discrepancies between these prices can result in so-called premiums and discounts, which occur when an ETF is trading above or below its NAV, respectively. Sometimes, the charts reflecting premiums and discounts can make it appear as if a customer will encounter a significant change in price when transacting. However, as a 2018 report by FactSet points out, this is most often not the case, as premiums and discounts tend to be short-lived.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <span class="heading-toc" id="toc-premiumdiscount-variability"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> Premium/Discount Variability </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> As an example, the report highlights the MSCI EAFE ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=efa">EFA</a>). This ETF <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/etfs-mutual-funds/052116/5-largest-developed-market-etfs-efa-vea.asp">trades quite closely</a> with its instantaneous fair value: it has an average daily <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spread.asp">spread</a> of just 0.01%, with daily trades of $1.38 billion. This indicates that the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/arbitrage.asp">arbitrage</a> system for this ETF is working as it should, allowing it to be bought and sold easily. With individuals competing for profit, the ETF's <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bid.asp">bids</a> and <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/offer.asp">offers</a> remain closely in line with its underlying portfolio value. As a result, it has a one-year median premium of just 0.06%, much of which is due to its 0.04% fee. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> A minute premium is not necessarily a significant problem for investors, though. Of greater concern is the perception that an ETF like EFA can swing significantly higher and lower than the median, even in the span of just a single day. If it appears possible that the ETF can trade at a discount of more than 3% at the close of one day, only to the leap up to a 2% premium the next day, that is likely to throw investors off. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> In cases like this, though, there are important factors to keep in mind. An ETF may end the day with its NAV offset from its closing market price, but it can still be trading in line with the value of its underlying portfolio. In situations like this, for instance, the perceived variability between one day's discount and the next day's premium is simply a statistical artifact, as the report indicates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> One reason for this is that EFA in particular holds foreign stocks. The fund's accountants have to price out each <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">security</a> to determine NAV. Because security <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuation.asp">valuation</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currency-translation.asp">currency translation</a> do not line up temporally, the NAV ends up being out of date when <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/afterhourstrading.asp">after-hours trading</a> takes place. The result is a perceived fluctuation in premiums and discounts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-why-premiumdiscount-artifacts-exist"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Why Premium/Discount Artifacts Exist </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> For funds synched up with the closing times of the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equitymarket.asp">equity market</a>, this is not an issue. These funds can utilize up-to-the-minute prices for the underlying securities, ensuring no discrepancy. However, for funds like EFA, it's normal to expect some artifact premiums and discounts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> It's not just funds with foreign equity that can be affected, either. Those ETFs involved in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedincome.asp">fixed income</a>, precious metals, non-native currency cash and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a> also run into the same synchronization problem. Because their NAVs are not up-to-date, they end up reflecting changes to premiums and discounts that are not really there. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond-etf.asp">Bond ETFs</a> in particular run into a problem with regard to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/ustreasury.asp">U.S. Treasury</a> market, which closes at 3 p.m. Eastern time. Add to this the fact that some bond ETF NAVs are determined based on the closing bid, not the last traded price, and you have even more reasons why they might appear to trade at a premium or discount.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> That's not to say that all funds experience phantom premium/discount artifacts, or that all discrepancies of this kind are misleading. It simply means that investors should be aware of those situations in which <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/etfs-mutual-funds/061416/biggest-etf-risks.asp">it may only appear</a> that an ETF experiences widely variable premiums and discounts. </p></div>

[Exchange-traded funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs) are known for being low-cost investments. However, determining the actual price of an ETF can be tricky, in part because there is the [net asset value](https://www.investopedia.com/terms/n/nav.asp) (NAV) of a fund and its [intraday NAV](https://www.investopedia.com/terms/i/indicative_net_asset_value.asp) (iNAV), as well as the current market price. The discrepancies between these prices can result in so-called premiums and discounts, which occur when an ETF is trading above or below its NAV, respectively. Sometimes, the charts reflecting premiums and discounts can make it appear as if a customer will encounter a significant change in price when transacting. However, as a 2018 report by FactSet points out, this is most often not the case, as premiums and discounts tend to be short-lived. ## Premium/Discount Variability As an example, the report highlights the MSCI EAFE ETF ([EFA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=efa)). This ETF [trades quite closely](https://www.investopedia.com/articles/etfs-mutual-funds/052116/5-largest-developed-market-etfs-efa-vea.asp) with its instantaneous fair value: it has an average daily [spread](https://www.investopedia.com/terms/s/spread.asp) of just 0.01%, with daily trades of $1.38 billion. This indicates that the [arbitrage](https://www.investopedia.com/terms/a/arbitrage.asp) system for this ETF is working as it should, allowing it to be bought and sold easily. With individuals competing for profit, the ETF's [bids](https://www.investopedia.com/terms/b/bid.asp) and [offers](https://www.investopedia.com/terms/o/offer.asp) remain closely in line with its underlying portfolio value. As a result, it has a one-year median premium of just 0.06%, much of which is due to its 0.04% fee. A minute premium is not necessarily a significant problem for investors, though. Of greater concern is the perception that an ETF like EFA can swing significantly higher and lower than the median, even in the span of just a single day. If it appears possible that the ETF can trade at a discount of more than 3% at the close of one day, only to the leap up to a 2% premium the next day, that is likely to throw investors off. In cases like this, though, there are important factors to keep in mind. An ETF may end the day with its NAV offset from its closing market price, but it can still be trading in line with the value of its underlying portfolio. In situations like this, for instance, the perceived variability between one day's discount and the next day's premium is simply a statistical artifact, as the report indicates. One reason for this is that EFA in particular holds foreign stocks. The fund's accountants have to price out each [security](https://www.investopedia.com/terms/s/security.asp) to determine NAV. Because security [valuation](https://www.investopedia.com/terms/v/valuation.asp) and [currency translation](https://www.investopedia.com/terms/c/currency-translation.asp) do not line up temporally, the NAV ends up being out of date when [after-hours trading](https://www.investopedia.com/terms/a/afterhourstrading.asp) takes place. The result is a perceived fluctuation in premiums and discounts. ## Why Premium/Discount Artifacts Exist For funds synched up with the closing times of the U.S. [equity market](https://www.investopedia.com/terms/e/equitymarket.asp), this is not an issue. These funds can utilize up-to-the-minute prices for the underlying securities, ensuring no discrepancy. However, for funds like EFA, it's normal to expect some artifact premiums and discounts. It's not just funds with foreign equity that can be affected, either. Those ETFs involved in [fixed income](https://www.investopedia.com/terms/f/fixedincome.asp), precious metals, non-native currency cash and [futures](https://www.investopedia.com/terms/f/futures.asp) also run into the same synchronization problem. Because their NAVs are not up-to-date, they end up reflecting changes to premiums and discounts that are not really there. [Bond ETFs](https://www.investopedia.com/terms/b/bond-etf.asp) in particular run into a problem with regard to the [U.S. Treasury](https://www.investopedia.com/terms/u/ustreasury.asp) market, which closes at 3 p.m. Eastern time. Add to this the fact that some bond ETF NAVs are determined based on the closing bid, not the last traded price, and you have even more reasons why they might appear to trade at a premium or discount. That's not to say that all funds experience phantom premium/discount artifacts, or that all discrepancies of this kind are misleading. It simply means that investors should be aware of those situations in which [it may only appear](https://www.investopedia.com/articles/etfs-mutual-funds/061416/biggest-etf-risks.asp) that an ETF experiences widely variable premiums and discounts.

Exchange-traded funds (ETFs) are known for being low-cost investments. However, determining the actual price of an ETF can be tricky, in part because there is the net asset value (NAV) of a fund and its intraday NAV (iNAV), as well as the current market price. The discrepancies between these prices can result in so-called premiums and discounts, which occur when an ETF is trading above or below its NAV, respectively. Sometimes, the charts reflecting premiums and discounts can make it appear as if a customer will encounter a significant change in price when transacting. However, as a 2018 report by FactSet points out, this is most often not the case, as premiums and discounts tend to be short-lived. Premium/Discount Variability As an example, the report highlights the MSCI EAFE ETF (EFA). This ETF trades quite closely with its instantaneous fair value: it has an average daily spread of just 0.01%, with daily trades of $1.38 billion. This indicates that the arbitrage system for this ETF is working as it should, allowing it to be bought and sold easily. With individuals competing for profit, the ETF's bids and offers remain closely in line with its underlying portfolio value. As a result, it has a one-year median premium of just 0.06%, much of which is due to its 0.04% fee. A minute premium is not necessarily a significant problem for investors, though. Of greater concern is the perception that an ETF like EFA can swing significantly higher and lower than the median, even in the span of just a single day. If it appears possible that the ETF can trade at a discount of more than 3% at the close of one day, only to the leap up to a 2% premium the next day, that is likely to throw investors off. In cases like this, though, there are important factors to keep in mind. An ETF may end the day with its NAV offset from its closing market price, but it can still be trading in line with the value of its underlying portfolio. In situations like this, for instance, the perceived variability between one day's discount and the next day's premium is simply a statistical artifact, as the report indicates. One reason for this is that EFA in particular holds foreign stocks. The fund's accountants have to price out each security to determine NAV. Because security valuation and currency translation do not line up temporally, the NAV ends up being out of date when after-hours trading takes place. The result is a perceived fluctuation in premiums and discounts. Why Premium/Discount Artifacts Exist For funds synched up with the closing times of the U.S. equity market, this is not an issue. These funds can utilize up-to-the-minute prices for the underlying securities, ensuring no discrepancy. However, for funds like EFA, it's normal to expect some artifact premiums and discounts. It's not just funds with foreign equity that can be affected, either. Those ETFs involved in fixed income, precious metals, non-native currency cash and futures also run into the same synchronization problem. Because their NAVs are not up-to-date, they end up reflecting changes to premiums and discounts that are not really there. Bond ETFs in particular run into a problem with regard to the U.S. Treasury market, which closes at 3 p.m. Eastern time. Add to this the fact that some bond ETF NAVs are determined based on the closing bid, not the last traded price, and you have even more reasons why they might appear to trade at a premium or discount. That's not to say that all funds experience phantom premium/discount artifacts, or that all discrepancies of this kind are misleading. It simply means that investors should be aware of those situations in which it may only appear that an ETF experiences widely variable premiums and discounts.

https://www.investopedia.com/best-brokers-for-etfs-4587875

Best Brokers for ETFs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="24" data-sc-ad-track-spacing="100" data-sc-breakpoint="50em" data-sc-content-positions="[300,600,900,1200,1500,1800,2100]" data-sc-load-immediate="1" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="60" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Investors’ demand for exchange-traded funds (ETFs) continues to grow. ETFs are a cost-effective way for novice investors to begin investing in the stock market and they remain a great diversification tool for experienced investors. The attraction of ETFs is anchored in their lower fees, as well as the lower risks they provide through broad diversification. We’ve evaluated the ETF research, screening tools, commissions, trading platforms, and other related features to help you find the best online brokers for ETFs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <span class="heading-toc" id="toc-best-online-brokers-for-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> Best Online Brokers for ETFs: </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <li>Best Online Broker for ETFs: <a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=1500096.1073&amp;type=3&amp;subid=0" rel="sponsored nofollow"><strong>Fidelity</strong></a></li> <li>Best ETF Research: <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.interactivebrokers.com/mkt/?src=investopedia98a&amp;url=%2Fen%2Fwhyib%2Foverview.php" rel="sponsored nofollow"><strong>Interactive Brokers</strong></a></li> <li>Best ETF Screeners: <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.schwab.com/" rel="sponsored nofollow"><strong>Charles Schwab</strong></a><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <span class="heading-toc" id="toc-fidelity-best-online-broker-for-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Fidelity: Best Online Broker for ETFs </span> </h2> <div class="comp mntl-sc-block finance-sc-block-starrating mntl-block" id="mntl-sc-block_7-0"><div aria-label="4.8 out of 5 stars" class="comp mntl-sc-block mntl-sc-block-starrating" id="mntl-sc-block_8-0"><div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 80%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <span class="mntl-sc-block__label mntl-sc-block-starrating__label">4.8</span></div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <div class="comp mntl-sc-block finance-sc-block-review mntl-sc-block-review" id="mntl-sc-block_10-0"> <div class="mntl-sc-block__header-link mntl-sc-block-review__header-link"> <a href="https://www.investopedia.com/fidelity-review-4587897" rel="nocaes" target="_blank"><img height="0" src="https://www.investopedia.com/thmb/2z0zeePI0hjFFCPW3eB8ckVLU6s=/2160x0/filters:no_upscale():max_bytes(150000):strip_icc()/Fid-Logo-Blk-2160x480-8a29ae20e787478b80d7e7732debf40f.jpg" width="2160"/></a> </div> <div class="loc entity-link"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-tracking-container="true" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=1500096.1073&amp;type=3&amp;subid=0" id="mntl-sc-block-review__entity-link_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div> <div class="mntl-sc-block__quick-facts mntl-sc-block-review__quick-facts"> <ul class="mntl-sc-block__quick-list mntl-sc-block-review__quick-list"> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Account Minimum</strong>: $0 </li> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Fees</strong>: $0 for stock/ETF trades, $0 plus $0.65/contract for options trades </li> </ul> <div class="loc article-link"><a class="mntl-sc-block-review__article-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/fidelity-review-4587897" id="mntl-sc-block-review__article-link_1-0" rel="noopener nocaes" target="_blank"><span class="link__wrapper">Read full review</span></a> </div> </div> <div class="loc entity-link mntl-sc-block__trailing-links mntl-sc-block-review__trailing-links"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-tracking-container="true" href="https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&amp;offerid=1500096.1073&amp;type=3&amp;subid=0" id="mntl-sc-block-review__entity-link_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-why-we-chose-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Why We Chose It </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Fidelity is a new winner this year as our pick for Best Online Broker for ETFs, in addition to being our best overall pick among brokers. We chose <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fidelity-review-4587897">Fidelity</a> for the top slot because they have increased efforts to meet customers’ needs by adding associates and introducing new platform offers and tools. Fidelity has also enhanced its mobile platform for all trading, including ETFs. The competition for this category has been close between Fidelity and Charles Schwab in recent years. However, Fidelity’s offering of fractional share trading for ETFs is what has moved this broker to the front of the pack. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_17-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Customizable trading dashboard</p></li> <li><p>Digital, direct indexing</p></li> <li><p>Fractional shares trading in over 7000 U.S. stocks and ETFs</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Higher broker-assisted trade fees</p></li> <li><p>Minimum balance for some index trading</p></li> <li><p>Limited branch locations</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Fidelity was founded in 1946 to strengthen and secure its clients’ financial well-being, and this mission is the same today.<span class="ql-inline-citation" data-cite="12"></span> Not only is Fidelity a global brokerage firm, but the company also manages various types of assets, such as mutual funds, ETFs, fixed income investments, and alternative investments. Fidelity also provides retirement plans for employers and financial planning services. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Fidelity continues to grow, with gains in retail accounts and discretionary assets in 2023.<span class="ql-inline-citation" data-cite="2"></span> In 2022 introduced two new digital, direct indexing platforms, refreshed its suite of mobile apps, and several new ETFs, including two bond funds following <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp">environmental, social, and governance</a> (ESG) criteria, one following companies providing the technology around cryptocurrency, and one focused on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/metaverse-definition-5206578">metaverse</a>.<span class="ql-inline-citation" data-cite="18"></span> Fidelity's additions in 2023 so far have been focused on support, including a young investor toolkit for wealth management firms, the acquisition of an equity management platform for startups, and a financial independence planner, among other improvements.<span class="ql-inline-citation" data-cite="19"></span> One major change at Fidelity is that the direct crypto investment capabilities previously limited to institutional clients are now open to retail investors. This is in addition to the cryptocurrency-related ETF Fidelity launched in 2022. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> You can find ETF-related education and topics in Fidelity’s learning center.<span class="ql-inline-citation" data-cite="20"></span> The customizable ETF screener is a great tool to help investors identify specific ETFs based on various characteristics, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sri.asp">socially responsible investing</a> (SRI) criteria. You can also compare multiple ETFs using the same screener. Fidelity’s Research tool can also be leveraged to evaluate ETFs, providing comprehensive information on risk factors, growth outlook, top holdings, performance,<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp"> </a>volatility, and more.<span class="ql-inline-citation" data-cite="21"></span> The tools are easily accessible on Fidelity’s website and mobile apps. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Customers can receive direct help and guidance from a Fidelity advisor at one of its 200 investor centers across the United States. Fidelity has more than 70,000 associates and its customers consist of over 43 million individuals and nearly 23,000 businesses.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-interactive-brokers-best-etf-research"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> Interactive Brokers: Best ETF Research </span> </h2> <div class="comp mntl-sc-block finance-sc-block-starrating mntl-block" id="mntl-sc-block_29-0"><div aria-label="4.2 out of 5 stars" class="comp mntl-sc-block mntl-sc-block-starrating" id="mntl-sc-block_30-0"><div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 20%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <span class="mntl-sc-block__label mntl-sc-block-starrating__label">4.2</span></div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <div class="comp mntl-sc-block finance-sc-block-review mntl-sc-block-review" id="mntl-sc-block_32-0"> <div class="mntl-sc-block__header-link mntl-sc-block-review__header-link"> <a href="https://www.investopedia.com/interactive-brokers-review-4587904" rel="nocaes" target="_blank"><img height="0" src="https://www.investopedia.com/thmb/Jlqwe9PIU2-1CgoUVti1ZBdVI5g=/4200x0/filters:no_upscale():max_bytes(150000):strip_icc()/interactive_brokers_productcard-5c61eec746e0fb0001f25462.png" width="4200"/></a> </div> <div class="loc entity-link"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-tracking-container="true" href="https://www.interactivebrokers.com/mkt/?src=investopedia98a&amp;url=%2Fen%2Fwhyib%2Foverview.php" id="mntl-sc-block-review__entity-link_3-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div> <div class="mntl-sc-block__quick-facts mntl-sc-block-review__quick-facts"> <ul class="mntl-sc-block__quick-list mntl-sc-block-review__quick-list"> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Account Minimum:</strong> $0.00 </li> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Fees: </strong>$0.00 commissions for equities/ETFs available on IBKR’s TWS Lite, or low costs scaled by volume for active traders that want access to advanced functionality such as order routing. $0.65 per contract for options on TWS Lite; that is also the base rate for TWS Pro users, with scaled rates based on volume. $0.85 per contract for futures. </li> </ul> <div class="loc article-link"><a class="mntl-sc-block-review__article-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/interactive-brokers-review-4587904" id="mntl-sc-block-review__article-link_3-0" rel="noopener nocaes" target="_blank"><span class="link__wrapper">Read full review</span></a> </div> </div> <div class="loc entity-link mntl-sc-block__trailing-links mntl-sc-block-review__trailing-links"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-tracking-container="true" href="https://www.interactivebrokers.com/mkt/?src=investopedia98a&amp;url=%2Fen%2Fwhyib%2Foverview.php" id="mntl-sc-block-review__entity-link_3-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-why-we-chose-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> Why We Chose It </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> We selected <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/interactive-brokers-review-4587904">Interactive Brokers</a> as the best for ETF research because its platforms and tools help customers and non-customers research and access real-time, global market data. Its ETF scanner is top notch for researching financial metrics and market prices in multiple currencies for over 150 global markets.<span class="ql-inline-citation" data-cite="10"></span> As in many categories throughout our review, the sheer breadth of the markets covered by Interactive Brokers in a given asset class gives it a huge advantage for serious investors.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_38-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_39-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Impressive breadth of products</p></li> <li><p>ETF commission rebate program</p></li> <li><p>Extensive global market access</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>IBKR's SmartRouting not available to IBKR Lite clients</p></li> <li><p>Tiered fee-based pricing structure can be confusing</p></li> <li><p>May be too advanced for new investors</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> We selected Interactive Brokers as the best for ETF research because of its extensive platforms and tools that customers (and even non-customers) can use to research the global market and make fully informed investment decisions.<span class="ql-inline-citation" data-cite="22"></span> Interactive Brokers is an incredibly robust trading platform for all assets and markets, but it can be intimidating to newer investors. If you take the time to absorb the educational content the company has been actively enhancing, however, you’ll be able to appreciate that IBKR has built one of the most powerful platforms in the industry for researching and trading ETFs.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Interactive Brokers was originally formed as T.P. &amp; Co. in 1978 by Thomas Peterffy, who is the Chairman of the Interactive Brokers Group. The company’s purpose has always been to "Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products, and advanced trading tools."<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Interactive Brokers has a breadth of products in desktop, mobile, and web formats, which provide investors with access to global market information and services. In 2023, Interactive Brokers passed the 2.22 million mark in terms of customer accounts and reports $342.1 billion in client equity.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-charles-schwab-best-etf-screeners"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> Charles Schwab: Best ETF Screeners </span> </h2> <div class="comp mntl-sc-block finance-sc-block-starrating mntl-block" id="mntl-sc-block_49-0"><div aria-label="4 out of 5 stars" class="comp mntl-sc-block mntl-sc-block-starrating" id="mntl-sc-block_50-0"><div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 100%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-starrating__wrapper"> <div class="mntl-sc-block__background mntl-sc-block-starrating__background"></div> <div class="mntl-sc-block__bar mntl-sc-block-starrating__bar" style="width: 0%;"></div> <svg class="icon icon-star mntl-sc-block__svg mntl-sc-block-starrating__svg"> <use xlink:href="#icon-star" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> </div> <span class="mntl-sc-block__label mntl-sc-block-starrating__label">4</span></div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-review mntl-sc-block-review" id="mntl-sc-block_52-0"> <div class="mntl-sc-block__header-link mntl-sc-block-review__header-link"> <a href="https://www.investopedia.com/charles-schwab-review-4587888" rel="nocaes" target="_blank"><img height="0" src="https://www.investopedia.com/thmb/p-xwUVi8CfYUF9oWOYPQE1IaHJk=/2939x0/filters:no_upscale():max_bytes(150000):strip_icc()/charles-schwab-productcard-5c742da0c9e77c00010d6c5b.png" width="2939"/></a> </div> <div class="loc entity-link"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-tracking-container="true" href="https://www.schwab.com/" id="mntl-sc-block-review__entity-link_5-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div> <div class="mntl-sc-block__quick-facts mntl-sc-block-review__quick-facts"> <ul class="mntl-sc-block__quick-list mntl-sc-block-review__quick-list"> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Account Minimum</strong>: $0 </li> <li class="mntl-sc-block__quick-list__item mntl-sc-block-review__quick-list__item"> <strong>Fees</strong>: $0 for stock/ETF trades, $0.65 per contract for options </li> </ul> <div class="loc article-link"><a class="mntl-sc-block-review__article-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/charles-schwab-review-4587888" id="mntl-sc-block-review__article-link_5-0" rel="noopener nocaes" target="_blank"><span class="link__wrapper">Read full review</span></a> </div> </div> <div class="loc entity-link mntl-sc-block__trailing-links mntl-sc-block-review__trailing-links"><a class="mntl-sc-block-review__entity-link mntl-text-link" data-tracking-container="true" href="https://www.schwab.com/" id="mntl-sc-block-review__entity-link_5-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open an Account</span></a> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <span class="heading-toc" id="toc-why-we-chose-it"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_55-0"> <span class="mntl-sc-block-heading__text"> Why We Chose It </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> We selected <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/charles-schwab-review-4587888">Charles Schwab</a> to win best broker for ETF screeners because of its diverse selection of trading platforms and tools, its robust ETF screening tool, and the direct access customers have to their accounts through Schwab.com or the Schwab Mobile app. Charles Schwab provides real-time market research data for its customers along with its excellent screener, making well-informed investing decisions easy for investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <span class="heading-toc" id="toc-pros--cons"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Pros &amp; Cons </span> </h2> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_59-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_60-0"> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Powerful StreetSmart Edge ETF screener</p></li> <li><p>Robust and customizable trading platforms and tools</p></li> <li><p>Automated investing</p></li> <li><p>Solid overall brokerage</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>High transaction fee on some mutual funds</p></li> <li><p>Minimum investment for Schwab Intelligent Portfolios account</p></li> <li><p>No fractional share trading in ETFs</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <span class="heading-toc" id="toc-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> We selected Charles Schwab to win best broker for ETF screeners because of the robust ETF screening tool, variety of trading platforms and tools, and the flexible digital platforms available to customers to access their accounts.<span class="ql-inline-citation" data-cite="23"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Charles Schwab was originally formed in April 1971 as First Commander Corporation by Chuck Schwab and his partners, and the company’s name was changed to Charles Schwab &amp; Co., Inc. in 1973.<span class="ql-inline-citation" data-cite="6"></span> The company’s goal has always been to put the customer first and provide more value and better experiences than its competitors as part of its “Through Clients’ Eyes” philosophy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Charles Schwab provides an automated investing tool for customers called Schwab Intelligent Portfolios, which is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp">robo-advisor</a>. Customers also have access to 24/7 live support from a Schwab investment professional if they have questions. As of Sept. 30, 2023, Charles Schwab services 34.5 million brokerage accounts, manages $7.82 trillion of customers’ assets, and has $890.4 billion in proprietary mutual funds and ETFs.<span class="ql-inline-citation" data-cite="9"></span> Customers can use the Schwab Mobile app 24/7 to manage and monitor their accounts, make trades, deposit checks, research the market, and more. The app has an intelligent assistant called Schwab Assistant, which allows customers to use voice commands to do things such as make trades, set alerts, find answers to their questions, and more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_69-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_70-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p>After TD Ameritrade was acquired by Charles Schwab in 2020, the integration between these two top-rated brokers is expected to conclude in late 2024. TD Ameritrade is no longer accepting new clients.<span class="ql-inline-citation" data-cite="24"></span> Even though <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/schwab-announces-thinkorswim-platform-will-survive-5073994">Charles Schwab has acquired TD Ameritrade</a>, the broker still operates as a separate entity.<span class="ql-inline-citation" data-cite="25"></span></p></div></div></div> <span class="heading-toc" id="toc-final-verdict"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Part of evaluating the best brokers for ETFs is researching the types of tools and resources they provide to help you find the right ETFs for your portfolio strategy. As technology evolves, online brokers must also upgrade their services, platforms, and tools so that customers can have access to the most current information and resources for ETFs. We found that Fidelity and Charles Schwab are focusing on providing more socially responsible ETFs and expanding ETF offerings in emerging themes that include cryptocurrencies, artificial intelligence, and digital economies. Interactive Brokers does not create ETFs, but offers access to all manner of ETFs across the globe.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> There are fine points of differentiation, such as Fidelity and Interactive Brokers both offering fractional shares on ETFs, while Schwab does not. Due to the wider offering at IBKR, however, not all the ETFs available are necessarily eligible for fractional share purchase. Beyond a wide selection of ETFs, investors also need research and tools to evaluate ETFs, as well as the education and customer support to use them. These three brokers have high scores in all the categories related to ETFs and any of them will give you an excellent investing experience. In the end, though, we ultimately gave the top spot to Fidelity. Fidelity’s platform may not be as expansive as IBKR when it comes to selection, but it gives you access to fractional share trading in ETFs, along with the educational content and research tools needed without being overwhelming for casual investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> <em>Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document"> Characteristics and Risks of Standardized Options</a>. Supporting documentation for any claims, if applicable, will be furnished upon request.</em> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> <em>There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. See Fidelity.com/commissions for details.</em> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_80-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/cNix6/3/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="2"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <div class="comp mntl-sc-block finance-sc-block-inlinevideo mntl-sc-block-inlinevideo mntl-block has-details inline-video" id="mntl-sc-block_82-0"><div class="comp mntl-sc-block-inlinevideo__video-container mntl-block" id="mntl-sc-block-inlinevideo__video-container_1-0"><div class="comp mntl-sc-block-inlinevideo__video mntl-jwplayer mm-video lazyload aspectratio-16:9" data-bgset="https://cdn.jwplayer.com/v2/media/pizsSJMQ/poster.jpg?width=720" data-sizes="auto" id="mntl-sc-block-inlinevideo__video_1-0"></div></div> <h4 class="comp mntl-sc-block-inlinevideo__title mntl-text-block" id="mntl-sc-block-inlinevideo__title_1-0">Everything You Need to Know About Brokerage Accounts</h4> <div class="comp mntl-sc-block-inlinevideo__feature-link-wrapper mntl-block" id="mntl-sc-block-inlinevideo__feature-link-wrapper_1-0"><span class="comp mntl-sc-block-inlinevideo__feature-link mntl-text-link mntl-sc-block-inlinevideo__feature-link mntl-text-link" id="mntl-sc-block-inlinevideo__feature-link_1-0"></span></div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-what-is-etf-trading"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is ETF Trading?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An exchange-traded fund (ETF) is a security that tracks a basket of market assets that you can buy or sell through your broker. ETFs generally track a specific index, such as the S&amp;P 500, Dow Jones Industrial Average (DJIA), or Nasdaq 100. ETFs have ticker symbols and intraday price data, and they are bought and sold just like stocks on stock exchanges. You can gain exposure to virtually any market or industry sector by trading ETFs, so they can be an important diversification tool.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_86-0"><span class="heading-toc" id="toc-who-should-invest-in-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Should Invest in ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Investors seeking broad diversification for their portfolios should consider purchasing ETFs. ETFs typically have low trading fees, which are on average lower than mutual funds trading fees. Additionally, ETFs have greater tax efficiency than actively managed mutual funds. ETFs trade like stocks, so investors can trade ETFs during normal market hours. ETFs are worth considering if you are looking for these benefits and need a true passive investment that won’t require constant maintenance. ETFs are a great choice for all levels of investors. For instance, experienced investors may use ETFs to act as a proxy for specific markets and asset classes in establishing multi-asset or multi-market trades.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_88-0"><span class="heading-toc" id="toc-what-is-the-difference-between-etfs-stocks-and-mutual-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between ETFs, Stocks, and Mutual Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Stocks, ETFs, and mutual funds are types of securities, but they differ in terms of risk, costs, tax efficiency, and how you buy and sell them.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_90-0"><span class="heading-toc" id="toc-how-do-i-buy-an-etf-online"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Buy an ETF online?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ETFs trade on stock exchanges just like stocks. You can buy and sell ETFs through your brokerage account during regular market hours (when the stock exchanges are open). Many brokers today offer commission-free trading for ETFs; however, ETFs charge fees, known as expense ratios. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratio</a> is listed as an annual percentage. For example, a 1% expense ratio means you'll pay $10 for every $1,000 you invest in the ETF. The expense ratio can take a significant bite out of your profits, so it's important to compare expenses when researching ETFs (and mutual funds).</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_92-0"><span class="heading-toc" id="toc-do-etfs-pay-dividends"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do ETFs Pay Dividends?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Some ETFs do pay shareholders distributions in the form of dividends. There are two types of dividends issued to ETF investors:</p><ul><li><strong>Qualified dividends:</strong> These dividends are taxed at the capital gains rate, which depends on your modified adjusted gross income and taxable income rate (0%, 15%, or 20%). These dividends are paid on stocks the ETF held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date. To receive the dividend, you must own shares of the dividend-paying ETF for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date. That means investors who actively trade ETFs generally don't receive any dividends.<span class="ql-inline-citation" data-cite="17"></span></li><li><strong>Non-qualified dividends:</strong> These dividends are taxed at ordinary income tax rates because they are not designated as qualified. Dividends may be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/ordinary-dividends.asp">nonqualified</a> if the ETF held the dividend-paying stock for fewer than the required 60 days.</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_94-0"><span class="heading-toc" id="toc-are-etfs-safe"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are ETFs Safe?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In general, ETFs are considered low-risk investments because they are funds that track a basket of various market assets, which means broad diversification for your portfolio. ETFs can be less risky than individual stocks because they aren't impacted by the performance of one company like a single blue-chip stock is. If one stock in the ETF doesn’t perform well, it won't negatively impact the entire fund (provided it's a well-balanced fund).</p><p>However, investors should understand that ETFs aren't risk-free, and potential returns can be affected by things like market volatility and low liquidity. Also, not all ETFs are created equal. Index funds tend to be safe since they invest in the same securities as a given index and try to match the index's returns each year. Leveraged ETFs, on the other hand, also track indexes, but they use large amounts of debt to try to generate larger returns than the index themselves. Leverage is considered a double-edged sword because it maximizes potential gains—and potential losses.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_96-0"><span class="heading-toc" id="toc-why-invest-in-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Invest in ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ETFs are great for young investors and recent grads because they offer an affordable way to build a diversified portfolio. With their low expense ratios, greater tax efficiency, and trading any time during market hours, they’re a good choice when compared to mutual funds. ETFs are simple to trade since the transactions take place like stocks on regulated exchanges. ETFs can be traded on margin, have no short-selling restrictions, and provide intraday trading opportunities and plenty of liquidity. A large percentage of ETFs are optionable as well, allowing traders to manage their portfolio risk using derivatives.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_97-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_98-0"><span class="heading-toc" id="toc-what-to-consider-when-choosing-a-broker-for-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">What to Consider When Choosing a Broker for ETFs</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>When choosing an ETF broker, look for the same features you would for any broker: a strong industry reputation, current compliant security standards, solid customer service, reasonable costs, robust trading tools, helpful educational content, and access to the markets you want to trade. It's also helpful to choose a broker that has a robust ETF screener and ETF-specific research to help you find your next investment. Additionally, make sure you read the ETF’s prospectus to learn more about who manages the fund, the fund’s historical performance, the holdings included in the fund, and more.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_100-0"><span class="heading-toc" id="toc-should-you-buy-commission-free-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should You Buy Commission-Free ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Before making the decision to purchase ETFs, you should first determine your investing goals, your ideal asset allocation, and the types of ETFs you want to purchase. Then you can develop your investing budget to determine how much you have to invest, including the expenses associated with managing ETFs. Once all that groundwork is done, low-cost, commission-free ETFs become a very attractive tool because of their ability to deliver diversification through a single investment. </p><p>Commission-free means that whenever you buy or sell shares of an ETF, you don’t pay any trading fees. However, there are still other costs associated with commission-free ETFs such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/operating-expense-ratio.asp">operating expense ratio</a> (OER). The OER is the percentage taken from the fund annually to pay for the fund’s expenses. For example, if you have $5,000 in an ETF with a 0.3% OER, your expense is $15 a year. A good rule of thumb is to look for ETFs with an OER that doesn’t exceed 1%. Commission-free ETFs are also a good idea if you trade frequently and you want to save money on overall investing costs.</p></div> </div> <div class="comp textnote-placeholder mntl-block" id="textnote-placeholder_1-0"></div> <div class="comp textnote mm-ads-gpt-adunit gpt textnote" id="textnote_1-0"> <div class="wrapper" id="textnote"></div> </div></div>

Investors’ demand for exchange-traded funds (ETFs) continues to grow. ETFs are a cost-effective way for novice investors to begin investing in the stock market and they remain a great diversification tool for experienced investors. The attraction of ETFs is anchored in their lower fees, as well as the lower risks they provide through broad diversification. We’ve evaluated the ETF research, screening tools, commissions, trading platforms, and other related features to help you find the best online brokers for ETFs. ## Best Online Brokers for ETFs: * Best Online Broker for ETFs: [**Fidelity**](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=1500096.1073&type=3&subid=0) * Best ETF Research: [**Interactive Brokers**](https://www.interactivebrokers.com/mkt/?src=investopedia98a&url=%2Fen%2Fwhyib%2Foverview.php) * Best ETF Screeners: [**Charles Schwab**](https://www.schwab.com/) ## Fidelity: Best Online Broker for ETFs 4.8 [:max_bytes(150000):strip_icc()/Fid-Logo-Blk-2160x480-8a29ae20e787478b80d7e7732debf40f.jpg)](https://www.investopedia.com/fidelity-review-4587897) [Open an Account](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=1500096.1073&type=3&subid=0) * **Account Minimum**: $0 * **Fees**: $0 for stock/ETF trades, $0 plus $0.65/contract for options trades [Read full review](https://www.investopedia.com/fidelity-review-4587897) [Open an Account](https://click.linksynergy.com/fs-bin/click?id=RL7M2q*4kuk&offerid=1500096.1073&type=3&subid=0) ## Why We Chose It Fidelity is a new winner this year as our pick for Best Online Broker for ETFs, in addition to being our best overall pick among brokers. We chose [Fidelity](https://www.investopedia.com/fidelity-review-4587897) for the top slot because they have increased efforts to meet customers’ needs by adding associates and introducing new platform offers and tools. Fidelity has also enhanced its mobile platform for all trading, including ETFs. The competition for this category has been close between Fidelity and Charles Schwab in recent years. However, Fidelity’s offering of fractional share trading for ETFs is what has moved this broker to the front of the pack. Pros * Customizable trading dashboard * Digital, direct indexing * Fractional shares trading in over 7000 U.S. stocks and ETFs Cons * Higher broker-assisted trade fees * Minimum balance for some index trading * Limited branch locations ## Overview Fidelity was founded in 1946 to strengthen and secure its clients’ financial well-being, and this mission is the same today. Not only is Fidelity a global brokerage firm, but the company also manages various types of assets, such as mutual funds, ETFs, fixed income investments, and alternative investments. Fidelity also provides retirement plans for employers and financial planning services. Fidelity continues to grow, with gains in retail accounts and discretionary assets in 2023. In 2022 introduced two new digital, direct indexing platforms, refreshed its suite of mobile apps, and several new ETFs, including two bond funds following [environmental, social, and governance](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) (ESG) criteria, one following companies providing the technology around cryptocurrency, and one focused on the [metaverse](https://www.investopedia.com/metaverse-definition-5206578). Fidelity's additions in 2023 so far have been focused on support, including a young investor toolkit for wealth management firms, the acquisition of an equity management platform for startups, and a financial independence planner, among other improvements. One major change at Fidelity is that the direct crypto investment capabilities previously limited to institutional clients are now open to retail investors. This is in addition to the cryptocurrency-related ETF Fidelity launched in 2022. You can find ETF-related education and topics in Fidelity’s learning center. The customizable ETF screener is a great tool to help investors identify specific ETFs based on various characteristics, including [socially responsible investing](https://www.investopedia.com/terms/s/sri.asp) (SRI) criteria. You can also compare multiple ETFs using the same screener. Fidelity’s Research tool can also be leveraged to evaluate ETFs, providing comprehensive information on risk factors, growth outlook, top holdings, performance,volatility, and more. The tools are easily accessible on Fidelity’s website and mobile apps. Customers can receive direct help and guidance from a Fidelity advisor at one of its 200 investor centers across the United States. Fidelity has more than 70,000 associates and its customers consist of over 43 million individuals and nearly 23,000 businesses. ## Interactive Brokers: Best ETF Research 4.2 [:max_bytes(150000):strip_icc()/interactive_brokers_productcard-5c61eec746e0fb0001f25462.png)](https://www.investopedia.com/interactive-brokers-review-4587904) [Open an Account](https://www.interactivebrokers.com/mkt/?src=investopedia98a&url=%2Fen%2Fwhyib%2Foverview.php) * **Account Minimum:** $0.00 * **Fees:**$0.00 commissions for equities/ETFs available on IBKR’s TWS Lite, or low costs scaled by volume for active traders that want access to advanced functionality such as order routing. $0.65 per contract for options on TWS Lite; that is also the base rate for TWS Pro users, with scaled rates based on volume. $0.85 per contract for futures. [Read full review](https://www.investopedia.com/interactive-brokers-review-4587904) [Open an Account](https://www.interactivebrokers.com/mkt/?src=investopedia98a&url=%2Fen%2Fwhyib%2Foverview.php) ## Why We Chose It We selected [Interactive Brokers](https://www.investopedia.com/interactive-brokers-review-4587904) as the best for ETF research because its platforms and tools help customers and non-customers research and access real-time, global market data. Its ETF scanner is top notch for researching financial metrics and market prices in multiple currencies for over 150 global markets. As in many categories throughout our review, the sheer breadth of the markets covered by Interactive Brokers in a given asset class gives it a huge advantage for serious investors. Pros * Impressive breadth of products * ETF commission rebate program * Extensive global market access Cons * IBKR's SmartRouting not available to IBKR Lite clients * Tiered fee-based pricing structure can be confusing * May be too advanced for new investors ## Overview We selected Interactive Brokers as the best for ETF research because of its extensive platforms and tools that customers (and even non-customers) can use to research the global market and make fully informed investment decisions. Interactive Brokers is an incredibly robust trading platform for all assets and markets, but it can be intimidating to newer investors. If you take the time to absorb the educational content the company has been actively enhancing, however, you’ll be able to appreciate that IBKR has built one of the most powerful platforms in the industry for researching and trading ETFs.  Interactive Brokers was originally formed as T.P. & Co. in 1978 by Thomas Peterffy, who is the Chairman of the Interactive Brokers Group. The company’s purpose has always been to "Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products, and advanced trading tools." Interactive Brokers has a breadth of products in desktop, mobile, and web formats, which provide investors with access to global market information and services. In 2023, Interactive Brokers passed the 2.22 million mark in terms of customer accounts and reports $342.1 billion in client equity. ## Charles Schwab: Best ETF Screeners 4 [:max_bytes(150000):strip_icc()/charles-schwab-productcard-5c742da0c9e77c00010d6c5b.png)](https://www.investopedia.com/charles-schwab-review-4587888) [Open an Account](https://www.schwab.com/) * **Account Minimum**: $0 * **Fees**: $0 for stock/ETF trades, $0.65 per contract for options [Read full review](https://www.investopedia.com/charles-schwab-review-4587888) [Open an Account](https://www.schwab.com/) ## Why We Chose It We selected [Charles Schwab](https://www.investopedia.com/charles-schwab-review-4587888) to win best broker for ETF screeners because of its diverse selection of trading platforms and tools, its robust ETF screening tool, and the direct access customers have to their accounts through Schwab.com or the Schwab Mobile app. Charles Schwab provides real-time market research data for its customers along with its excellent screener, making well-informed investing decisions easy for investors. ## Pros & Cons Pros * Powerful StreetSmart Edge ETF screener * Robust and customizable trading platforms and tools * Automated investing * Solid overall brokerage Cons * High transaction fee on some mutual funds * Minimum investment for Schwab Intelligent Portfolios account * No fractional share trading in ETFs ## Overview We selected Charles Schwab to win best broker for ETF screeners because of the robust ETF screening tool, variety of trading platforms and tools, and the flexible digital platforms available to customers to access their accounts.  Charles Schwab was originally formed in April 1971 as First Commander Corporation by Chuck Schwab and his partners, and the company’s name was changed to Charles Schwab & Co., Inc. in 1973. The company’s goal has always been to put the customer first and provide more value and better experiences than its competitors as part of its “Through Clients’ Eyes” philosophy. Charles Schwab provides an automated investing tool for customers called Schwab Intelligent Portfolios, which is a [robo-advisor](https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp). Customers also have access to 24/7 live support from a Schwab investment professional if they have questions. As of Sept. 30, 2023, Charles Schwab services 34.5 million brokerage accounts, manages $7.82 trillion of customers’ assets, and has $890.4 billion in proprietary mutual funds and ETFs. Customers can use the Schwab Mobile app 24/7 to manage and monitor their accounts, make trades, deposit checks, research the market, and more. The app has an intelligent assistant called Schwab Assistant, which allows customers to use voice commands to do things such as make trades, set alerts, find answers to their questions, and more. ### After TD Ameritrade was acquired by Charles Schwab in 2020, the integration between these two top-rated brokers is expected to conclude in late 2024. TD Ameritrade is no longer accepting new clients. Even though [Charles Schwab has acquired TD Ameritrade](https://www.investopedia.com/schwab-announces-thinkorswim-platform-will-survive-5073994), the broker still operates as a separate entity. ## Final Verdict Part of evaluating the best brokers for ETFs is researching the types of tools and resources they provide to help you find the right ETFs for your portfolio strategy. As technology evolves, online brokers must also upgrade their services, platforms, and tools so that customers can have access to the most current information and resources for ETFs. We found that Fidelity and Charles Schwab are focusing on providing more socially responsible ETFs and expanding ETF offerings in emerging themes that include cryptocurrencies, artificial intelligence, and digital economies. Interactive Brokers does not create ETFs, but offers access to all manner of ETFs across the globe.  There are fine points of differentiation, such as Fidelity and Interactive Brokers both offering fractional shares on ETFs, while Schwab does not. Due to the wider offering at IBKR, however, not all the ETFs available are necessarily eligible for fractional share purchase. Beyond a wide selection of ETFs, investors also need research and tools to evaluate ETFs, as well as the education and customer support to use them. These three brokers have high scores in all the categories related to ETFs and any of them will give you an excellent investing experience. In the end, though, we ultimately gave the top spot to Fidelity. Fidelity’s platform may not be as expansive as IBKR when it comes to selection, but it gives you access to fractional share trading in ETFs, along with the educational content and research tools needed without being overwhelming for casual investors. *Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read[Characteristics and Risks of Standardized Options](https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document). Supporting documentation for any claims, if applicable, will be furnished upon request.* *There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. See Fidelity.com/commissions for details.* #### Everything You Need to Know About Brokerage Accounts ## What Is ETF Trading? An exchange-traded fund (ETF) is a security that tracks a basket of market assets that you can buy or sell through your broker. ETFs generally track a specific index, such as the S&P 500, Dow Jones Industrial Average (DJIA), or Nasdaq 100. ETFs have ticker symbols and intraday price data, and they are bought and sold just like stocks on stock exchanges. You can gain exposure to virtually any market or industry sector by trading ETFs, so they can be an important diversification tool. ## Who Should Invest in ETFs? Investors seeking broad diversification for their portfolios should consider purchasing ETFs. ETFs typically have low trading fees, which are on average lower than mutual funds trading fees. Additionally, ETFs have greater tax efficiency than actively managed mutual funds. ETFs trade like stocks, so investors can trade ETFs during normal market hours. ETFs are worth considering if you are looking for these benefits and need a true passive investment that won’t require constant maintenance. ETFs are a great choice for all levels of investors. For instance, experienced investors may use ETFs to act as a proxy for specific markets and asset classes in establishing multi-asset or multi-market trades. ## What Is the Difference Between ETFs, Stocks, and Mutual Funds? Stocks, ETFs, and mutual funds are types of securities, but they differ in terms of risk, costs, tax efficiency, and how you buy and sell them. ## How Do I Buy an ETF online? ETFs trade on stock exchanges just like stocks. You can buy and sell ETFs through your brokerage account during regular market hours (when the stock exchanges are open). Many brokers today offer commission-free trading for ETFs; however, ETFs charge fees, known as expense ratios. The [expense ratio](https://www.investopedia.com/terms/e/expenseratio.asp) is listed as an annual percentage. For example, a 1% expense ratio means you'll pay $10 for every $1,000 you invest in the ETF. The expense ratio can take a significant bite out of your profits, so it's important to compare expenses when researching ETFs (and mutual funds). ## Do ETFs Pay Dividends? Some ETFs do pay shareholders distributions in the form of dividends. There are two types of dividends issued to ETF investors: * **Qualified dividends:** These dividends are taxed at the capital gains rate, which depends on your modified adjusted gross income and taxable income rate (0%, 15%, or 20%). These dividends are paid on stocks the ETF held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date. To receive the dividend, you must own shares of the dividend-paying ETF for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date. That means investors who actively trade ETFs generally don't receive any dividends. * **Non-qualified dividends:** These dividends are taxed at ordinary income tax rates because they are not designated as qualified. Dividends may be [nonqualified](https://www.investopedia.com/terms/o/ordinary-dividends.asp) if the ETF held the dividend-paying stock for fewer than the required 60 days. ## Are ETFs Safe? In general, ETFs are considered low-risk investments because they are funds that track a basket of various market assets, which means broad diversification for your portfolio. ETFs can be less risky than individual stocks because they aren't impacted by the performance of one company like a single blue-chip stock is. If one stock in the ETF doesn’t perform well, it won't negatively impact the entire fund (provided it's a well-balanced fund). However, investors should understand that ETFs aren't risk-free, and potential returns can be affected by things like market volatility and low liquidity. Also, not all ETFs are created equal. Index funds tend to be safe since they invest in the same securities as a given index and try to match the index's returns each year. Leveraged ETFs, on the other hand, also track indexes, but they use large amounts of debt to try to generate larger returns than the index themselves. Leverage is considered a double-edged sword because it maximizes potential gains—and potential losses. ## Why Invest in ETFs? ETFs are great for young investors and recent grads because they offer an affordable way to build a diversified portfolio. With their low expense ratios, greater tax efficiency, and trading any time during market hours, they’re a good choice when compared to mutual funds. ETFs are simple to trade since the transactions take place like stocks on regulated exchanges. ETFs can be traded on margin, have no short-selling restrictions, and provide intraday trading opportunities and plenty of liquidity. A large percentage of ETFs are optionable as well, allowing traders to manage their portfolio risk using derivatives. ## What to Consider When Choosing a Broker for ETFs When choosing an ETF broker, look for the same features you would for any broker: a strong industry reputation, current compliant security standards, solid customer service, reasonable costs, robust trading tools, helpful educational content, and access to the markets you want to trade. It's also helpful to choose a broker that has a robust ETF screener and ETF-specific research to help you find your next investment. Additionally, make sure you read the ETF’s prospectus to learn more about who manages the fund, the fund’s historical performance, the holdings included in the fund, and more. ## Should You Buy Commission-Free ETFs? Before making the decision to purchase ETFs, you should first determine your investing goals, your ideal asset allocation, and the types of ETFs you want to purchase. Then you can develop your investing budget to determine how much you have to invest, including the expenses associated with managing ETFs. Once all that groundwork is done, low-cost, commission-free ETFs become a very attractive tool because of their ability to deliver diversification through a single investment.  Commission-free means that whenever you buy or sell shares of an ETF, you don’t pay any trading fees. However, there are still other costs associated with commission-free ETFs such as the [operating expense ratio](https://www.investopedia.com/terms/o/operating-expense-ratio.asp) (OER). The OER is the percentage taken from the fund annually to pay for the fund’s expenses. For example, if you have $5,000 in an ETF with a 0.3% OER, your expense is $15 a year. A good rule of thumb is to look for ETFs with an OER that doesn’t exceed 1%. Commission-free ETFs are also a good idea if you trade frequently and you want to save money on overall investing costs.

Investors’ demand for exchange-traded funds (ETFs) continues to grow. ETFs are a cost-effective way for novice investors to begin investing in the stock market and they remain a great diversification tool for experienced investors. The attraction of ETFs is anchored in their lower fees, as well as the lower risks they provide through broad diversification. We’ve evaluated the ETF research, screening tools, commissions, trading platforms, and other related features to help you find the best online brokers for ETFs. Best Online Brokers for ETFs: Best Online Broker for ETFs: Fidelity Best ETF Research: Interactive Brokers Best ETF Screeners: Charles Schwab Fidelity: Best Online Broker for ETFs 4.8 Open an Account Account Minimum: $0 Fees: $0 for stock/ETF trades, $0 plus $0.65/contract for options trades Read full review Open an Account Why We Chose It Fidelity is a new winner this year as our pick for Best Online Broker for ETFs, in addition to being our best overall pick among brokers. We chose Fidelity for the top slot because they have increased efforts to meet customers’ needs by adding associates and introducing new platform offers and tools. Fidelity has also enhanced its mobile platform for all trading, including ETFs. The competition for this category has been close between Fidelity and Charles Schwab in recent years. However, Fidelity’s offering of fractional share trading for ETFs is what has moved this broker to the front of the pack. Pros Customizable trading dashboard Digital, direct indexing Fractional shares trading in over 7000 U.S. stocks and ETFs Cons Higher broker-assisted trade fees Minimum balance for some index trading Limited branch locations Overview Fidelity was founded in 1946 to strengthen and secure its clients’ financial well-being, and this mission is the same today. Not only is Fidelity a global brokerage firm, but the company also manages various types of assets, such as mutual funds, ETFs, fixed income investments, and alternative investments. Fidelity also provides retirement plans for employers and financial planning services. Fidelity continues to grow, with gains in retail accounts and discretionary assets in 2023. In 2022 introduced two new digital, direct indexing platforms, refreshed its suite of mobile apps, and several new ETFs, including two bond funds following environmental, social, and governance (ESG) criteria, one following companies providing the technology around cryptocurrency, and one focused on the metaverse. Fidelity's additions in 2023 so far have been focused on support, including a young investor toolkit for wealth management firms, the acquisition of an equity management platform for startups, and a financial independence planner, among other improvements. One major change at Fidelity is that the direct crypto investment capabilities previously limited to institutional clients are now open to retail investors. This is in addition to the cryptocurrency-related ETF Fidelity launched in 2022. You can find ETF-related education and topics in Fidelity’s learning center. The customizable ETF screener is a great tool to help investors identify specific ETFs based on various characteristics, including socially responsible investing (SRI) criteria. You can also compare multiple ETFs using the same screener. Fidelity’s Research tool can also be leveraged to evaluate ETFs, providing comprehensive information on risk factors, growth outlook, top holdings, performance, volatility, and more. The tools are easily accessible on Fidelity’s website and mobile apps. Customers can receive direct help and guidance from a Fidelity advisor at one of its 200 investor centers across the United States. Fidelity has more than 70,000 associates and its customers consist of over 43 million individuals and nearly 23,000 businesses. Interactive Brokers: Best ETF Research 4.2 Open an Account Account Minimum: $0.00 Fees: $0.00 commissions for equities/ETFs available on IBKR’s TWS Lite, or low costs scaled by volume for active traders that want access to advanced functionality such as order routing. $0.65 per contract for options on TWS Lite; that is also the base rate for TWS Pro users, with scaled rates based on volume. $0.85 per contract for futures. Read full review Open an Account Why We Chose It We selected Interactive Brokers as the best for ETF research because its platforms and tools help customers and non-customers research and access real-time, global market data. Its ETF scanner is top notch for researching financial metrics and market prices in multiple currencies for over 150 global markets. As in many categories throughout our review, the sheer breadth of the markets covered by Interactive Brokers in a given asset class gives it a huge advantage for serious investors. Pros Impressive breadth of products ETF commission rebate program Extensive global market access Cons IBKR's SmartRouting not available to IBKR Lite clients Tiered fee-based pricing structure can be confusing May be too advanced for new investors Overview We selected Interactive Brokers as the best for ETF research because of its extensive platforms and tools that customers (and even non-customers) can use to research the global market and make fully informed investment decisions. Interactive Brokers is an incredibly robust trading platform for all assets and markets, but it can be intimidating to newer investors. If you take the time to absorb the educational content the company has been actively enhancing, however, you’ll be able to appreciate that IBKR has built one of the most powerful platforms in the industry for researching and trading ETFs.  Interactive Brokers was originally formed as T.P. & Co. in 1978 by Thomas Peterffy, who is the Chairman of the Interactive Brokers Group. The company’s purpose has always been to "Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products, and advanced trading tools." Interactive Brokers has a breadth of products in desktop, mobile, and web formats, which provide investors with access to global market information and services. In 2023, Interactive Brokers passed the 2.22 million mark in terms of customer accounts and reports $342.1 billion in client equity. Charles Schwab: Best ETF Screeners 4 Open an Account Account Minimum: $0 Fees: $0 for stock/ETF trades, $0.65 per contract for options Read full review Open an Account Why We Chose It We selected Charles Schwab to win best broker for ETF screeners because of its diverse selection of trading platforms and tools, its robust ETF screening tool, and the direct access customers have to their accounts through Schwab.com or the Schwab Mobile app. Charles Schwab provides real-time market research data for its customers along with its excellent screener, making well-informed investing decisions easy for investors. Pros & Cons Pros Powerful StreetSmart Edge ETF screener Robust and customizable trading platforms and tools Automated investing Solid overall brokerage Cons High transaction fee on some mutual funds Minimum investment for Schwab Intelligent Portfolios account No fractional share trading in ETFs Overview We selected Charles Schwab to win best broker for ETF screeners because of the robust ETF screening tool, variety of trading platforms and tools, and the flexible digital platforms available to customers to access their accounts.  Charles Schwab was originally formed in April 1971 as First Commander Corporation by Chuck Schwab and his partners, and the company’s name was changed to Charles Schwab & Co., Inc. in 1973. The company’s goal has always been to put the customer first and provide more value and better experiences than its competitors as part of its “Through Clients’ Eyes” philosophy. Charles Schwab provides an automated investing tool for customers called Schwab Intelligent Portfolios, which is a robo-advisor. Customers also have access to 24/7 live support from a Schwab investment professional if they have questions. As of Sept. 30, 2023, Charles Schwab services 34.5 million brokerage accounts, manages $7.82 trillion of customers’ assets, and has $890.4 billion in proprietary mutual funds and ETFs. Customers can use the Schwab Mobile app 24/7 to manage and monitor their accounts, make trades, deposit checks, research the market, and more. The app has an intelligent assistant called Schwab Assistant, which allows customers to use voice commands to do things such as make trades, set alerts, find answers to their questions, and more. After TD Ameritrade was acquired by Charles Schwab in 2020, the integration between these two top-rated brokers is expected to conclude in late 2024. TD Ameritrade is no longer accepting new clients. Even though Charles Schwab has acquired TD Ameritrade, the broker still operates as a separate entity. Final Verdict Part of evaluating the best brokers for ETFs is researching the types of tools and resources they provide to help you find the right ETFs for your portfolio strategy. As technology evolves, online brokers must also upgrade their services, platforms, and tools so that customers can have access to the most current information and resources for ETFs. We found that Fidelity and Charles Schwab are focusing on providing more socially responsible ETFs and expanding ETF offerings in emerging themes that include cryptocurrencies, artificial intelligence, and digital economies. Interactive Brokers does not create ETFs, but offers access to all manner of ETFs across the globe.  There are fine points of differentiation, such as Fidelity and Interactive Brokers both offering fractional shares on ETFs, while Schwab does not. Due to the wider offering at IBKR, however, not all the ETFs available are necessarily eligible for fractional share purchase. Beyond a wide selection of ETFs, investors also need research and tools to evaluate ETFs, as well as the education and customer support to use them. These three brokers have high scores in all the categories related to ETFs and any of them will give you an excellent investing experience. In the end, though, we ultimately gave the top spot to Fidelity. Fidelity’s platform may not be as expansive as IBKR when it comes to selection, but it gives you access to fractional share trading in ETFs, along with the educational content and research tools needed without being overwhelming for casual investors. Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request. There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. See Fidelity.com/commissions for details. Everything You Need to Know About Brokerage Accounts What Is ETF Trading? An exchange-traded fund (ETF) is a security that tracks a basket of market assets that you can buy or sell through your broker. ETFs generally track a specific index, such as the S&P 500, Dow Jones Industrial Average (DJIA), or Nasdaq 100. ETFs have ticker symbols and intraday price data, and they are bought and sold just like stocks on stock exchanges. You can gain exposure to virtually any market or industry sector by trading ETFs, so they can be an important diversification tool. Who Should Invest in ETFs? Investors seeking broad diversification for their portfolios should consider purchasing ETFs. ETFs typically have low trading fees, which are on average lower than mutual funds trading fees. Additionally, ETFs have greater tax efficiency than actively managed mutual funds. ETFs trade like stocks, so investors can trade ETFs during normal market hours. ETFs are worth considering if you are looking for these benefits and need a true passive investment that won’t require constant maintenance. ETFs are a great choice for all levels of investors. For instance, experienced investors may use ETFs to act as a proxy for specific markets and asset classes in establishing multi-asset or multi-market trades. What Is the Difference Between ETFs, Stocks, and Mutual Funds? Stocks, ETFs, and mutual funds are types of securities, but they differ in terms of risk, costs, tax efficiency, and how you buy and sell them. How Do I Buy an ETF online? ETFs trade on stock exchanges just like stocks. You can buy and sell ETFs through your brokerage account during regular market hours (when the stock exchanges are open). Many brokers today offer commission-free trading for ETFs; however, ETFs charge fees, known as expense ratios. The expense ratio is listed as an annual percentage. For example, a 1% expense ratio means you'll pay $10 for every $1,000 you invest in the ETF. The expense ratio can take a significant bite out of your profits, so it's important to compare expenses when researching ETFs (and mutual funds). Do ETFs Pay Dividends? Some ETFs do pay shareholders distributions in the form of dividends. There are two types of dividends issued to ETF investors:Qualified dividends: These dividends are taxed at the capital gains rate, which depends on your modified adjusted gross income and taxable income rate (0%, 15%, or 20%). These dividends are paid on stocks the ETF held for at least 60 days during the 121-day period beginning 60 days before the ex-dividend date. To receive the dividend, you must own shares of the dividend-paying ETF for at least 60 days during the 121-day period that begins 60 days before the ex-dividend date. That means investors who actively trade ETFs generally don't receive any dividends.Non-qualified dividends: These dividends are taxed at ordinary income tax rates because they are not designated as qualified. Dividends may be nonqualified if the ETF held the dividend-paying stock for fewer than the required 60 days. Are ETFs Safe? In general, ETFs are considered low-risk investments because they are funds that track a basket of various market assets, which means broad diversification for your portfolio. ETFs can be less risky than individual stocks because they aren't impacted by the performance of one company like a single blue-chip stock is. If one stock in the ETF doesn’t perform well, it won't negatively impact the entire fund (provided it's a well-balanced fund).However, investors should understand that ETFs aren't risk-free, and potential returns can be affected by things like market volatility and low liquidity. Also, not all ETFs are created equal. Index funds tend to be safe since they invest in the same securities as a given index and try to match the index's returns each year. Leveraged ETFs, on the other hand, also track indexes, but they use large amounts of debt to try to generate larger returns than the index themselves. Leverage is considered a double-edged sword because it maximizes potential gains—and potential losses. Why Invest in ETFs? ETFs are great for young investors and recent grads because they offer an affordable way to build a diversified portfolio. With their low expense ratios, greater tax efficiency, and trading any time during market hours, they’re a good choice when compared to mutual funds. ETFs are simple to trade since the transactions take place like stocks on regulated exchanges. ETFs can be traded on margin, have no short-selling restrictions, and provide intraday trading opportunities and plenty of liquidity. A large percentage of ETFs are optionable as well, allowing traders to manage their portfolio risk using derivatives. What to Consider When Choosing a Broker for ETFs When choosing an ETF broker, look for the same features you would for any broker: a strong industry reputation, current compliant security standards, solid customer service, reasonable costs, robust trading tools, helpful educational content, and access to the markets you want to trade. It's also helpful to choose a broker that has a robust ETF screener and ETF-specific research to help you find your next investment. Additionally, make sure you read the ETF’s prospectus to learn more about who manages the fund, the fund’s historical performance, the holdings included in the fund, and more. Should You Buy Commission-Free ETFs? Before making the decision to purchase ETFs, you should first determine your investing goals, your ideal asset allocation, and the types of ETFs you want to purchase. Then you can develop your investing budget to determine how much you have to invest, including the expenses associated with managing ETFs. Once all that groundwork is done, low-cost, commission-free ETFs become a very attractive tool because of their ability to deliver diversification through a single investment. Commission-free means that whenever you buy or sell shares of an ETF, you don’t pay any trading fees. However, there are still other costs associated with commission-free ETFs such as the operating expense ratio (OER). The OER is the percentage taken from the fund annually to pay for the fund’s expenses. For example, if you have $5,000 in an ETF with a 0.3% OER, your expense is $15 a year. A good rule of thumb is to look for ETFs with an OER that doesn’t exceed 1%. Commission-free ETFs are also a good idea if you trade frequently and you want to save money on overall investing costs.

https://www.investopedia.com/what-to-expect-in-the-markets-this-week-may-20-2024-8650191

What To Expect in the Markets This Week

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Chipmaker Nvidia will report earnings on Wednesday, in what could be a highlight of the week's events.</li><li>Several big retailers also report earnings this week, including Target, Ross Stores, and hardware chain Lowe’s. </li><li>Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">Artificial intelligence (AI)</a> darling Nvidia (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>) is set to report earnings after markets close on Wednesday, in what could be a highlight of this week's events. The chipmaker is expected to post another strong quarter of earnings and revenue growth amid a surge in demand for AI.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Other tech companies issuing updates on their financials this week will include cybersecurity firm Palo Alto Networks (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PANW">PANW</a>) and cloud computing company Snowflake (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW">SNOW</a>). Retail earnings will be in focus as well this week, with Lowe’s (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LOW">LOW</a>), Target (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TGT">TGT</a>), Macy’s (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=M">M</a>), Ross Stores (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROST">ROST</a>), and Marshalls parent TJX (<a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TJX">TJX</a>) set to report results ahead of a <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/stockexchangeclosed.asp">long holiday weekend</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <strong>Monday, May 20</strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li>Atlanta Fed President Raphael Bostic and Fed Vice Chair Michael S. Barr deliver remarks</li> <li>Palo Alto Networks (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PANW">PANW</a>), Trip.com Group (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TCOM">TCOM</a>), and Zoom Video Communications (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ZM">ZM</a>) report earnings</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <strong>Tuesday, May 21</strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> <li>Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin, and New York Fed President John C. Williams deliver remarks</li> <li>Microsoft Build conference keynote address by CEO Satya Nadella</li> <li>Lowe’s (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LOW">LOW</a>), AutoZone (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AZO">AZO</a>), XPeng (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=XPEV">XPEV</a>), and Macy’s (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=M">M</a>) report earnings<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> <strong>Wednesday, May 22</strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>Existing home sales (April)</li> <li>Minutes of May FOMC meeting</li> <li>Nvidia (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>), TJX (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TJX">TJX</a>), Target (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TGT">TGT</a>), Snowflake (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW">SNOW</a>), Toll Brothers (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TOL">TOL</a>), and Williams-Sonoma (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=WSM">WSM</a>) report earnings</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <strong>Thursday, May 23</strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li>Initial jobless claims (Week ending May 11)</li> <li>S&amp;P flash U.S. services PMI (May)</li> <li>S&amp;P flash U.S. manufacturing PMI (May)</li> <li>New home sales (April)</li> <li>Federal balance sheet</li> <li>Atlanta Fed President Raphael Bostic delivers remarks</li> <li>Intuit (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=INTU">INTU</a>), Medtronic (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MDT">MDT</a>), Toronto-Dominion Bank (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TD">TD</a>) and Ross Stores (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROST">ROST</a>) deliver earnings</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <strong>Friday, May 24</strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li>Durable-goods orders (April)</li> <li>Consumer sentiment, final (May)</li> <li>Booz Allen Hamilton (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BAH">BAH</a>) reports earnings</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-nvidia-expected-to-report-earnings-revenue-growth-amid-ai-boom"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Nvidia Expected To Report Earnings, Revenue Growth Amid AI Boom </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <br/>Nvidia will be in the spotlight this week with the AI chipmaker's earnings report set to come after the bell on Wednesday. Analysts are projecting another big quarter for Nvidia, with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/nvidia-q1-fy-2025-earnings-preview-8643286">revenue and earnings projected to grow</a> as the chipmaker benefits from surging demand for AI-capable chips.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Nvidia isn’t the only tech company reporting this week. On Monday, cybersecurity provider Palo Alto Networks will release its latest quarterly financial results, with investors likely to be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/palo-alto-networks-q3-fy-2024-earnings-preview-8649133">watching its sales</a> after the company lowered its outlook. Cloud computing company Snowflake will deliver its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/snowflake-stock-plunges-after-company-names-new-ceo-issues-disappointing-guidance-8601946">first earnings report under CEO Sridhar Ramaswamy</a> on Wednesday, coming after the company increased its revenue and narrowed losses in the previous quarter.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Several retailers are scheduled to report earnings this week as well, coming after the most-recent U.S. retail sales report showed some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/april-2024-retail-sales-soft-consumers-reaching-limit-8648861">potential weakening of U.S. consumers' spending</a>. Lowe’s will release its latest quarterly results on Tuesday, after the home improvement chain <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lowes-4q-earnings-beat-expectations-but-2024-outlook-remains-bleak-8600856">issued weak full-year guidance</a> as sales fell in the prior quarter. Target will follow with its earnings report on Wednesday, coming after Target <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/target-q4-fy-2023-earnings-8604229">reported stronger-than-expected earnings</a> in the prior quarter as its inventory management improved. TJ Maxx and Marshalls parent TJX, Macy’s, and Ross Stores will also deliver financial results this week. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-fed-meeting-minutes-and-speaker-comments-could-offer-insights-into-policymakers-stance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Fed Meeting Minutes and Speaker Comments Could Offer Insights Into Policymakers' Stance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <br>Investors will have more opportunities to obtain insights from the Federal Reserve this week, as its officials have cited the need for more data on the path of inflation before moving to change interest rates. </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> On Wednesday, the release of the minutes from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fomc.asp">Federal Open Market Committee’s (FOMC)</a> May meeting could provide more information on the deliberations between members. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-may-1-8641676">The Fed kept rates unchanged</a> at the meeting, but since then, some officials have <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-may-17-8650246">raised doubts</a> about whether the central bank will be able to follow through with interest rate cuts this year.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Several Fed officials will also deliver remarks this week, including Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, and Atlanta Fed President Raphael Bostic, at the Atlanta Federal Reserve’s annual Financial Markets Conference.  </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Chipmaker Nvidia will report earnings on Wednesday, in what could be a highlight of the week's events. * Several big retailers also report earnings this week, including Target, Ross Stores, and hardware chain Lowe’s. * Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation. [Artificial intelligence (AI)](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) darling Nvidia ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)) is set to report earnings after markets close on Wednesday, in what could be a highlight of this week's events. The chipmaker is expected to post another strong quarter of earnings and revenue growth amid a surge in demand for AI.  Other tech companies issuing updates on their financials this week will include cybersecurity firm Palo Alto Networks ([PANW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PANW)) and cloud computing company Snowflake ([SNOW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW)). Retail earnings will be in focus as well this week, with Lowe’s ([LOW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LOW)), Target ([TGT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TGT)), Macy’s ([M](https://www.investopedia.com/markets/quote?tvwidgetsymbol=M)), Ross Stores ([ROST](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROST)), and Marshalls parent TJX ([TJX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TJX)) set to report results ahead of a [long holiday weekend](https://www.investopedia.com/ask/answers/06/stockexchangeclosed.asp). Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation. **Monday, May 20** * Atlanta Fed President Raphael Bostic and Fed Vice Chair Michael S. Barr deliver remarks * Palo Alto Networks ([PANW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PANW)), Trip.com Group ([TCOM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TCOM)), and Zoom Video Communications ([ZM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ZM)) report earnings **Tuesday, May 21** * Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin, and New York Fed President John C. Williams deliver remarks * Microsoft Build conference keynote address by CEO Satya Nadella * Lowe’s ([LOW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LOW)), AutoZone ([AZO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AZO)), XPeng ([XPEV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=XPEV)), and Macy’s ([M](https://www.investopedia.com/markets/quote?tvwidgetsymbol=M)) report earnings **Wednesday, May 22** * Existing home sales (April) * Minutes of May FOMC meeting * Nvidia ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)), TJX ([TJX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TJX)), Target ([TGT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TGT)), Snowflake ([SNOW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW)), Toll Brothers ([TOL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TOL)), and Williams-Sonoma ([WSM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=WSM)) report earnings **Thursday, May 23** * Initial jobless claims (Week ending May 11) * S&P flash U.S. services PMI (May) * S&P flash U.S. manufacturing PMI (May) * New home sales (April) * Federal balance sheet * Atlanta Fed President Raphael Bostic delivers remarks * Intuit ([INTU](https://www.investopedia.com/markets/quote?tvwidgetsymbol=INTU)), Medtronic ([MDT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MDT)), Toronto-Dominion Bank ([TD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TD)) and Ross Stores ([ROST](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROST)) deliver earnings **Friday, May 24** * Durable-goods orders (April) * Consumer sentiment, final (May) * Booz Allen Hamilton ([BAH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BAH)) reports earnings ## Nvidia Expected To Report Earnings, Revenue Growth Amid AI Boom Nvidia will be in the spotlight this week with the AI chipmaker's earnings report set to come after the bell on Wednesday. Analysts are projecting another big quarter for Nvidia, with [revenue and earnings projected to grow](https://www.investopedia.com/nvidia-q1-fy-2025-earnings-preview-8643286) as the chipmaker benefits from surging demand for AI-capable chips.  Nvidia isn’t the only tech company reporting this week. On Monday, cybersecurity provider Palo Alto Networks will release its latest quarterly financial results, with investors likely to be [watching its sales](https://www.investopedia.com/palo-alto-networks-q3-fy-2024-earnings-preview-8649133) after the company lowered its outlook. Cloud computing company Snowflake will deliver its [first earnings report under CEO Sridhar Ramaswamy](https://www.investopedia.com/snowflake-stock-plunges-after-company-names-new-ceo-issues-disappointing-guidance-8601946) on Wednesday, coming after the company increased its revenue and narrowed losses in the previous quarter.  Several retailers are scheduled to report earnings this week as well, coming after the most-recent U.S. retail sales report showed some [potential weakening of U.S. consumers' spending](https://www.investopedia.com/april-2024-retail-sales-soft-consumers-reaching-limit-8648861). Lowe’s will release its latest quarterly results on Tuesday, after the home improvement chain [issued weak full-year guidance](https://www.investopedia.com/lowes-4q-earnings-beat-expectations-but-2024-outlook-remains-bleak-8600856) as sales fell in the prior quarter. Target will follow with its earnings report on Wednesday, coming after Target [reported stronger-than-expected earnings](https://www.investopedia.com/target-q4-fy-2023-earnings-8604229) in the prior quarter as its inventory management improved. TJ Maxx and Marshalls parent TJX, Macy’s, and Ross Stores will also deliver financial results this week. ## Fed Meeting Minutes and Speaker Comments Could Offer Insights Into Policymakers' Stance Investors will have more opportunities to obtain insights from the Federal Reserve this week, as its officials have cited the need for more data on the path of inflation before moving to change interest rates. On Wednesday, the release of the minutes from the [Federal Open Market Committee’s (FOMC)](https://www.investopedia.com/terms/f/fomc.asp) May meeting could provide more information on the deliberations between members. [The Fed kept rates unchanged](https://www.investopedia.com/us-economy-news-today-may-1-8641676) at the meeting, but since then, some officials have [raised doubts](https://www.investopedia.com/us-economy-news-may-17-8650246) about whether the central bank will be able to follow through with interest rate cuts this year.  Several Fed officials will also deliver remarks this week, including Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, and Atlanta Fed President Raphael Bostic, at the Atlanta Federal Reserve’s annual Financial Markets Conference.  Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Chipmaker Nvidia will report earnings on Wednesday, in what could be a highlight of the week's events.Several big retailers also report earnings this week, including Target, Ross Stores, and hardware chain Lowe’s. Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation. Artificial intelligence (AI) darling Nvidia (NVDA) is set to report earnings after markets close on Wednesday, in what could be a highlight of this week's events. The chipmaker is expected to post another strong quarter of earnings and revenue growth amid a surge in demand for AI.  Other tech companies issuing updates on their financials this week will include cybersecurity firm Palo Alto Networks (PANW) and cloud computing company Snowflake (SNOW). Retail earnings will be in focus as well this week, with Lowe’s (LOW), Target (TGT), Macy’s (M), Ross Stores (ROST), and Marshalls parent TJX (TJX) set to report results ahead of a long holiday weekend. Minutes from the most recent Federal Open Market Committee meeting and comments from Federal Reserve speakers could also offer insights into how officials are looking at inflation. Monday, May 20 Atlanta Fed President Raphael Bostic and Fed Vice Chair Michael S. Barr deliver remarks Palo Alto Networks (PANW), Trip.com Group (TCOM), and Zoom Video Communications (ZM) report earnings Tuesday, May 21 Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin, and New York Fed President John C. Williams deliver remarks Microsoft Build conference keynote address by CEO Satya Nadella Lowe’s (LOW), AutoZone (AZO), XPeng (XPEV), and Macy’s (M) report earnings Wednesday, May 22 Existing home sales (April) Minutes of May FOMC meeting Nvidia (NVDA), TJX (TJX), Target (TGT), Snowflake (SNOW), Toll Brothers (TOL), and Williams-Sonoma (WSM) report earnings Thursday, May 23 Initial jobless claims (Week ending May 11) S&P flash U.S. services PMI (May) S&P flash U.S. manufacturing PMI (May) New home sales (April) Federal balance sheet Atlanta Fed President Raphael Bostic delivers remarks Intuit (INTU), Medtronic (MDT), Toronto-Dominion Bank (TD) and Ross Stores (ROST) deliver earnings Friday, May 24 Durable-goods orders (April) Consumer sentiment, final (May) Booz Allen Hamilton (BAH) reports earnings Nvidia Expected To Report Earnings, Revenue Growth Amid AI Boom Nvidia will be in the spotlight this week with the AI chipmaker's earnings report set to come after the bell on Wednesday. Analysts are projecting another big quarter for Nvidia, with revenue and earnings projected to grow as the chipmaker benefits from surging demand for AI-capable chips.  Nvidia isn’t the only tech company reporting this week. On Monday, cybersecurity provider Palo Alto Networks will release its latest quarterly financial results, with investors likely to be watching its sales after the company lowered its outlook. Cloud computing company Snowflake will deliver its first earnings report under CEO Sridhar Ramaswamy on Wednesday, coming after the company increased its revenue and narrowed losses in the previous quarter.  Several retailers are scheduled to report earnings this week as well, coming after the most-recent U.S. retail sales report showed some potential weakening of U.S. consumers' spending. Lowe’s will release its latest quarterly results on Tuesday, after the home improvement chain issued weak full-year guidance as sales fell in the prior quarter. Target will follow with its earnings report on Wednesday, coming after Target reported stronger-than-expected earnings in the prior quarter as its inventory management improved. TJ Maxx and Marshalls parent TJX, Macy’s, and Ross Stores will also deliver financial results this week. Fed Meeting Minutes and Speaker Comments Could Offer Insights Into Policymakers' Stance Investors will have more opportunities to obtain insights from the Federal Reserve this week, as its officials have cited the need for more data on the path of inflation before moving to change interest rates. On Wednesday, the release of the minutes from the Federal Open Market Committee’s (FOMC) May meeting could provide more information on the deliberations between members. The Fed kept rates unchanged at the meeting, but since then, some officials have raised doubts about whether the central bank will be able to follow through with interest rate cuts this year.  Several Fed officials will also deliver remarks this week, including Boston Fed President Susan M. Collins, Cleveland Fed President Loretta Mester, and Atlanta Fed President Raphael Bostic, at the Atlanta Federal Reserve’s annual Financial Markets Conference.  Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/ask/answers/173.asp

Mutual Funds vs. Hedge Funds: What’s the Difference?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-mutual-funds-vs-hedge-funds-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Mutual Funds vs. Hedge Funds: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Both mutual funds and hedge funds are managed portfolios built from pooled funds with the goal of achieving returns through diversification. This pooling of funds means that a manager—or group of managers—uses investment capital from multiple investors to invest in securities that fit a specific strategy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp">Mutual funds</a> are offered by institutional fund managers with a variety of options for retail and institutional investors. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp">Hedge funds</a> target high-net-worth investors. These funds require that investors meet specific accredited characteristics. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Mutual funds are regulated investment products offered to the public and available for daily trading.</li><li>Hedge funds are private investments that are only available to accredited investors.</li><li>Hedge funds are known for using higher-risk investing strategies with the goal of achieving higher returns for their investors.</li></ul></div></div></div> <span class="heading-toc" id="toc-mutual-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Mutual Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Mutual funds are commonly known in the investment industry. The first mutual fund was created in 1924 and offered by MFS Investment Management.<span class="ql-inline-citation" data-cite="1"></span> Since then, mutual funds have evolved to provide investors with a wide range of choices in both passively and actively managed investments.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Passive funds allow investors to invest in an index for targeted market exposure at a low cost. Active funds provide an investment product that offers the benefit of professional portfolio fund management. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> More than 115 million investors held shares in 9,346 mutual funds in 2022, according to research giant Investment Company Institute (ICI), with those funds holding $22 trillion in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aum.asp">assets under management (AUM)</a>.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Regulation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The Securities and Exchange Commission comprehensively regulates mutual funds through two regulatory directives: The Securities Act of 1933 and the Investment Company Act of 1940.<span class="ql-inline-citation" data-cite="4"></span> The 1933 Act requires a documented prospectus for investor education and transparency; the 1940 act provides the framework for mutual fund structuring which can fall under either an open-end or closed-end fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-subheading__text"> Trading </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Both open-end and closed-end mutual funds trade daily on the financial market exchanges. An open-end fund offers different share classes that have varying fees and sales loads. These funds price daily, at the end of trading, at their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value (NAV)</a>.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Closed-end funds offer a fixed number of shares in an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ipo.asp">initial public offering</a> (IPO). They trade throughout the trading day like stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_23-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_24-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Mutual funds are available for all types of investors. However, some funds can come with minimum investment requirements that can range from $250 to $3,000 or more, depending on the fund.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Generally, mutual funds are managed to trade securities based on a specific strategy. While strategy complexity can vary, most mutual funds do not heavily depend on alternative investing or derivatives. By limiting the use of these high-risk investments, it makes them better suited for the mass investing public. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Largest Mutual Fund Managers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The three largest mutual fund asset managers are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li>Vanguard, with $5.1 trillion in mutual fund assets<span class="ql-inline-citation" data-cite="11"></span></li><li>Fidelity, with $2.6 trillion in mutual fund assets<span class="ql-inline-citation" data-cite="13"></span></li><li>BlackRock, with $307 billion in mutual fund assets<span class="ql-inline-citation" data-cite="12"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-hedge-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Hedge Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Hedge funds have the same basic pooled fund structure as mutual funds. However, hedge funds are only offered privately. Typically, they are known for taking higher-risk positions with the goal of higher returns for the investor. As such, they may use options, leverage, short-selling, and other alternative strategies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Overall, hedge funds are usually managed much more aggressively than their mutual fund counterparts. Many seek to take globally cyclical positions or to achieve returns in markets that are falling. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> Regulation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> While built around the same concepts for investing as the mutual fund, hedge funds are structured and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-theory/11/how-to-legally-form-a-hedge-fund.asp">regulated much differently</a>. Since hedge funds offer their investments privately, this requires them to include only accredited investors and allows them to build their fund structure. Regulation D of the 1933 Act mandates investments from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accreditedinvestor.asp">accredited investors</a> in private hedge funds.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Accredited investors are deemed to have advanced knowledge of financial market investing, typically with higher risk tolerance than standard investors.<span class="ql-inline-citation" data-cite="8"></span> These investors are willing to bypass the standard protections offered to mutual fund investors for the opportunity to potentially earn higher returns. As private funds, hedge funds also differ in that they usually deploy a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp">tiered partnership structure</a> which includes a general partner and limited partners. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> Trading </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> The private nature of hedge funds allows them a great deal of flexibility in their investing provisions and investor terms. As such, hedge funds often charge much higher fees than mutual funds. They can also offer less liquidity due to varying lock-up periods and redemption allowances. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Some funds may even close redemptions during volatile market periods to protect investors from a potential selloff in the fund’s portfolio. It is vital that hedge fund investors fully understand a fund’s strategy risks and governing terms. These terms are not made public like a mutual fund prospectus. Instead, hedge funds rely on private placement memorandums, a limited partnership or operating agreement, and subscription documents to govern their operations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> Largest Hedge Fund Managers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Based on total assets under management, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/011515/worlds-top-10-hedge-fund-firms.asp">top hedge funds</a> as of 2023 include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> <li>Citadel ($339 billion AUM)<span class="ql-inline-citation" data-cite="9"></span></li><li>Bridgewater Associates ($196.8 billion AUM)<span class="ql-inline-citation" data-cite="9"></span></li><li>AQR Capital Management ($120 billion AUM)<span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_52-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-advisorinsight" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_53-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">Advisor Insight</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/rebecca-dawson-4692618">Rebecca Dawson</a><br/>Silber Bennett Financial, Los Angeles, CA</p> <p>A key difference between hedge funds and mutual funds is their redemption terms. Mutual fund investors can redeem their units on any given business day and receive the NAV (net asset value) of that day. Hedge funds, on the other hand, tend to be much less liquid. Some offer weekly or monthly redemptions, while others only offer quarterly or annually redemptions. Many hedge funds impose a lock-up period, where you cannot withdraw your money at all. During periods of market volatility, such as the most recent financial crisis, several hedge funds actually suspended redemptions entirely in order to protect the remaining investors from a potential fire sale of the fund’s portfolio. It is important to carefully read the hedge fund’s offering memorandum to fully understand your redemption rights.</p></div></div></div> <span class="heading-toc" id="toc-comparing-performance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> Comparing Performance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Indexes provide one of the best ways to gauge the performance of a variety of market sectors and segments. Since hedge fund performance details are not publicly transparent, it can be helpful to compare the performance of hedge fund indexes to the S&amp;P 500 to understand the performance metrics involved in comparing hedge funds over standard <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/10/mutual-funds-advantages-disadvantages.asp">mutual funds</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/03/121003.asp">Fees</a> also play a big part in performance comparison as well. Mutual fund operational fees are known to range from approximately 0.05% to as high as 5% or more. Hedge funds once commonly integrated what was known as a "two-and-twenty fee," which included a management fee of 2% and a performance fee of 20%. However, the average hedge fund fee has come down somewhat, with management fees averaging 1.37% in 2020 and performance fees averaging 16.36%.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Index performance as of Feb. 17, 2024, shows the following gross annualized returns for the S&amp;P 500 versus the Hedge Fund Research Index® (HFRI) Fund Weighted Composite Index.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_61-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td>Index</td> <td>1-Year</td> <td>3-Year</td> <td>5-Year</td> </tr> <tr> <td>HFRI Fund Weighted Composite Index</td> <td>-5.78%</td> <td>4.25%</td> <td>6.48%</td> </tr> <tr> <td>S&amp;P 500</td> <td>24.23%</td> <td>26.89%</td> <td>28.88%</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_63-0"><span class="heading-toc" id="toc-are-mutual-funds-better-than-hedge-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Mutual Funds Better Than Hedge Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It depends on what you mean by "better:" lower risk or bigger returns? Hedge funds tend to take more outsized risks to try to earn bigger returns, while mutual funds tend to take more constrained risks and therefore earn smaller returns.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-which-is-riskier-hedge-fund-or-mutual-fund"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Is Riskier, Hedge Fund or Mutual Fund?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Hedge fund managers tend to take bigger risks than mutual fund managers, using leverage and other techniques to amplify their profits. However, this means that these funds experience more volatility as a result.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_67-0"><span class="heading-toc" id="toc-what-is-the-minimum-investment-for-a-hedge-fund"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Minimum Investment for a Hedge Fund?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Usually, you'll need to be an accredited investor to invest in a hedge fund, with a minimum net worth of at least $1 million. Hedge fund minimum investments may range from $100,000 to $1 million or more.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_69-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> Both mutual funds and hedge funds are managed portfolios, and both are designed to earn returns through diversification. However, mutual funds are available to everyday investors, while hedge funds are typically only offered privately to accredited investors. Mutual funds also tend to be much more liquid than hedge funds, making them easier to trade, while hedge funds may have strict redemption rules that protect all the investors of the fund.<br> </br></p></div>

## Mutual Funds vs. Hedge Funds: An Overview Both mutual funds and hedge funds are managed portfolios built from pooled funds with the goal of achieving returns through diversification. This pooling of funds means that a manager—or group of managers—uses investment capital from multiple investors to invest in securities that fit a specific strategy. [Mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) are offered by institutional fund managers with a variety of options for retail and institutional investors. [Hedge funds](https://www.investopedia.com/terms/h/hedgefund.asp) target high-net-worth investors. These funds require that investors meet specific accredited characteristics. ### Key Takeaways * Mutual funds are regulated investment products offered to the public and available for daily trading. * Hedge funds are private investments that are only available to accredited investors. * Hedge funds are known for using higher-risk investing strategies with the goal of achieving higher returns for their investors. ## Mutual Funds Mutual funds are commonly known in the investment industry. The first mutual fund was created in 1924 and offered by MFS Investment Management. Since then, mutual funds have evolved to provide investors with a wide range of choices in both passively and actively managed investments.  Passive funds allow investors to invest in an index for targeted market exposure at a low cost. Active funds provide an investment product that offers the benefit of professional portfolio fund management. More than 115 million investors held shares in 9,346 mutual funds in 2022, according to research giant Investment Company Institute (ICI), with those funds holding $22 trillion in [assets under management (AUM)](https://www.investopedia.com/terms/a/aum.asp). ### Regulation The Securities and Exchange Commission comprehensively regulates mutual funds through two regulatory directives: The Securities Act of 1933 and the Investment Company Act of 1940. The 1933 Act requires a documented prospectus for investor education and transparency; the 1940 act provides the framework for mutual fund structuring which can fall under either an open-end or closed-end fund. ### Trading Both open-end and closed-end mutual funds trade daily on the financial market exchanges. An open-end fund offers different share classes that have varying fees and sales loads. These funds price daily, at the end of trading, at their [net asset value (NAV)](https://www.investopedia.com/terms/n/nav.asp).  Closed-end funds offer a fixed number of shares in an [initial public offering](https://www.investopedia.com/terms/i/ipo.asp) (IPO). They trade throughout the trading day like stocks. ### Mutual funds are available for all types of investors. However, some funds can come with minimum investment requirements that can range from $250 to $3,000 or more, depending on the fund. Generally, mutual funds are managed to trade securities based on a specific strategy. While strategy complexity can vary, most mutual funds do not heavily depend on alternative investing or derivatives. By limiting the use of these high-risk investments, it makes them better suited for the mass investing public. ### Largest Mutual Fund Managers The three largest mutual fund asset managers are: * Vanguard, with $5.1 trillion in mutual fund assets * Fidelity, with $2.6 trillion in mutual fund assets * BlackRock, with $307 billion in mutual fund assets ## Hedge Funds Hedge funds have the same basic pooled fund structure as mutual funds. However, hedge funds are only offered privately. Typically, they are known for taking higher-risk positions with the goal of higher returns for the investor. As such, they may use options, leverage, short-selling, and other alternative strategies. Overall, hedge funds are usually managed much more aggressively than their mutual fund counterparts. Many seek to take globally cyclical positions or to achieve returns in markets that are falling. ### Regulation While built around the same concepts for investing as the mutual fund, hedge funds are structured and [regulated much differently](https://www.investopedia.com/articles/financial-theory/11/how-to-legally-form-a-hedge-fund.asp). Since hedge funds offer their investments privately, this requires them to include only accredited investors and allows them to build their fund structure. Regulation D of the 1933 Act mandates investments from [accredited investors](https://www.investopedia.com/terms/a/accreditedinvestor.asp) in private hedge funds. Accredited investors are deemed to have advanced knowledge of financial market investing, typically with higher risk tolerance than standard investors. These investors are willing to bypass the standard protections offered to mutual fund investors for the opportunity to potentially earn higher returns. As private funds, hedge funds also differ in that they usually deploy a [tiered partnership structure](https://www.investopedia.com/terms/h/hedgefund.asp) which includes a general partner and limited partners. ### Trading The private nature of hedge funds allows them a great deal of flexibility in their investing provisions and investor terms. As such, hedge funds often charge much higher fees than mutual funds. They can also offer less liquidity due to varying lock-up periods and redemption allowances. Some funds may even close redemptions during volatile market periods to protect investors from a potential selloff in the fund’s portfolio. It is vital that hedge fund investors fully understand a fund’s strategy risks and governing terms. These terms are not made public like a mutual fund prospectus. Instead, hedge funds rely on private placement memorandums, a limited partnership or operating agreement, and subscription documents to govern their operations. ### Largest Hedge Fund Managers Based on total assets under management, the [top hedge funds](https://www.investopedia.com/articles/personal-finance/011515/worlds-top-10-hedge-fund-firms.asp) as of 2023 include: * Citadel ($339 billion AUM) * Bridgewater Associates ($196.8 billion AUM) * AQR Capital Management ($120 billion AUM) ### Advisor Insight [Rebecca Dawson](https://www.investopedia.com/rebecca-dawson-4692618) Silber Bennett Financial, Los Angeles, CA A key difference between hedge funds and mutual funds is their redemption terms. Mutual fund investors can redeem their units on any given business day and receive the NAV (net asset value) of that day. Hedge funds, on the other hand, tend to be much less liquid. Some offer weekly or monthly redemptions, while others only offer quarterly or annually redemptions. Many hedge funds impose a lock-up period, where you cannot withdraw your money at all. During periods of market volatility, such as the most recent financial crisis, several hedge funds actually suspended redemptions entirely in order to protect the remaining investors from a potential fire sale of the fund’s portfolio. It is important to carefully read the hedge fund’s offering memorandum to fully understand your redemption rights. ## Comparing Performance Indexes provide one of the best ways to gauge the performance of a variety of market sectors and segments. Since hedge fund performance details are not publicly transparent, it can be helpful to compare the performance of hedge fund indexes to the S&P 500 to understand the performance metrics involved in comparing hedge funds over standard [mutual funds](https://www.investopedia.com/ask/answers/10/mutual-funds-advantages-disadvantages.asp). [Fees](https://www.investopedia.com/articles/03/121003.asp) also play a big part in performance comparison as well. Mutual fund operational fees are known to range from approximately 0.05% to as high as 5% or more. Hedge funds once commonly integrated what was known as a "two-and-twenty fee," which included a management fee of 2% and a performance fee of 20%. However, the average hedge fund fee has come down somewhat, with management fees averaging 1.37% in 2020 and performance fees averaging 16.36%. Index performance as of Feb. 17, 2024, shows the following gross annualized returns for the S&P 500 versus the Hedge Fund Research Index® (HFRI) Fund Weighted Composite Index. | Index | 1-Year | 3-Year | 5-Year | | --- | --- | --- | --- | | HFRI Fund Weighted Composite Index | -5.78% | 4.25% | 6.48% | | S&P 500 | 24.23% | 26.89% | 28.88% | ## Are Mutual Funds Better Than Hedge Funds? It depends on what you mean by "better:" lower risk or bigger returns? Hedge funds tend to take more outsized risks to try to earn bigger returns, while mutual funds tend to take more constrained risks and therefore earn smaller returns. ## Which Is Riskier, Hedge Fund or Mutual Fund? Hedge fund managers tend to take bigger risks than mutual fund managers, using leverage and other techniques to amplify their profits. However, this means that these funds experience more volatility as a result. ## What Is the Minimum Investment for a Hedge Fund? Usually, you'll need to be an accredited investor to invest in a hedge fund, with a minimum net worth of at least $1 million. Hedge fund minimum investments may range from $100,000 to $1 million or more. ## The Bottom Line Both mutual funds and hedge funds are managed portfolios, and both are designed to earn returns through diversification. However, mutual funds are available to everyday investors, while hedge funds are typically only offered privately to accredited investors. Mutual funds also tend to be much more liquid than hedge funds, making them easier to trade, while hedge funds may have strict redemption rules that protect all the investors of the fund.

Mutual Funds vs. Hedge Funds: An Overview Both mutual funds and hedge funds are managed portfolios built from pooled funds with the goal of achieving returns through diversification. This pooling of funds means that a manager—or group of managers—uses investment capital from multiple investors to invest in securities that fit a specific strategy. Mutual funds are offered by institutional fund managers with a variety of options for retail and institutional investors. Hedge funds target high-net-worth investors. These funds require that investors meet specific accredited characteristics. Key Takeaways Mutual funds are regulated investment products offered to the public and available for daily trading.Hedge funds are private investments that are only available to accredited investors.Hedge funds are known for using higher-risk investing strategies with the goal of achieving higher returns for their investors. Mutual Funds Mutual funds are commonly known in the investment industry. The first mutual fund was created in 1924 and offered by MFS Investment Management. Since then, mutual funds have evolved to provide investors with a wide range of choices in both passively and actively managed investments.  Passive funds allow investors to invest in an index for targeted market exposure at a low cost. Active funds provide an investment product that offers the benefit of professional portfolio fund management. More than 115 million investors held shares in 9,346 mutual funds in 2022, according to research giant Investment Company Institute (ICI), with those funds holding $22 trillion in assets under management (AUM). Regulation The Securities and Exchange Commission comprehensively regulates mutual funds through two regulatory directives: The Securities Act of 1933 and the Investment Company Act of 1940. The 1933 Act requires a documented prospectus for investor education and transparency; the 1940 act provides the framework for mutual fund structuring which can fall under either an open-end or closed-end fund. Trading Both open-end and closed-end mutual funds trade daily on the financial market exchanges. An open-end fund offers different share classes that have varying fees and sales loads. These funds price daily, at the end of trading, at their net asset value (NAV).  Closed-end funds offer a fixed number of shares in an initial public offering (IPO). They trade throughout the trading day like stocks. Mutual funds are available for all types of investors. However, some funds can come with minimum investment requirements that can range from $250 to $3,000 or more, depending on the fund. Generally, mutual funds are managed to trade securities based on a specific strategy. While strategy complexity can vary, most mutual funds do not heavily depend on alternative investing or derivatives. By limiting the use of these high-risk investments, it makes them better suited for the mass investing public. Largest Mutual Fund Managers The three largest mutual fund asset managers are: Vanguard, with $5.1 trillion in mutual fund assetsFidelity, with $2.6 trillion in mutual fund assetsBlackRock, with $307 billion in mutual fund assets Hedge Funds Hedge funds have the same basic pooled fund structure as mutual funds. However, hedge funds are only offered privately. Typically, they are known for taking higher-risk positions with the goal of higher returns for the investor. As such, they may use options, leverage, short-selling, and other alternative strategies. Overall, hedge funds are usually managed much more aggressively than their mutual fund counterparts. Many seek to take globally cyclical positions or to achieve returns in markets that are falling. Regulation While built around the same concepts for investing as the mutual fund, hedge funds are structured and regulated much differently. Since hedge funds offer their investments privately, this requires them to include only accredited investors and allows them to build their fund structure. Regulation D of the 1933 Act mandates investments from accredited investors in private hedge funds. Accredited investors are deemed to have advanced knowledge of financial market investing, typically with higher risk tolerance than standard investors. These investors are willing to bypass the standard protections offered to mutual fund investors for the opportunity to potentially earn higher returns. As private funds, hedge funds also differ in that they usually deploy a tiered partnership structure which includes a general partner and limited partners. Trading The private nature of hedge funds allows them a great deal of flexibility in their investing provisions and investor terms. As such, hedge funds often charge much higher fees than mutual funds. They can also offer less liquidity due to varying lock-up periods and redemption allowances. Some funds may even close redemptions during volatile market periods to protect investors from a potential selloff in the fund’s portfolio. It is vital that hedge fund investors fully understand a fund’s strategy risks and governing terms. These terms are not made public like a mutual fund prospectus. Instead, hedge funds rely on private placement memorandums, a limited partnership or operating agreement, and subscription documents to govern their operations. Largest Hedge Fund Managers Based on total assets under management, the top hedge funds as of 2023 include: Citadel ($339 billion AUM)Bridgewater Associates ($196.8 billion AUM)AQR Capital Management ($120 billion AUM) Advisor Insight Rebecca DawsonSilber Bennett Financial, Los Angeles, CA A key difference between hedge funds and mutual funds is their redemption terms. Mutual fund investors can redeem their units on any given business day and receive the NAV (net asset value) of that day. Hedge funds, on the other hand, tend to be much less liquid. Some offer weekly or monthly redemptions, while others only offer quarterly or annually redemptions. Many hedge funds impose a lock-up period, where you cannot withdraw your money at all. During periods of market volatility, such as the most recent financial crisis, several hedge funds actually suspended redemptions entirely in order to protect the remaining investors from a potential fire sale of the fund’s portfolio. It is important to carefully read the hedge fund’s offering memorandum to fully understand your redemption rights. Comparing Performance Indexes provide one of the best ways to gauge the performance of a variety of market sectors and segments. Since hedge fund performance details are not publicly transparent, it can be helpful to compare the performance of hedge fund indexes to the S&P 500 to understand the performance metrics involved in comparing hedge funds over standard mutual funds. Fees also play a big part in performance comparison as well. Mutual fund operational fees are known to range from approximately 0.05% to as high as 5% or more. Hedge funds once commonly integrated what was known as a "two-and-twenty fee," which included a management fee of 2% and a performance fee of 20%. However, the average hedge fund fee has come down somewhat, with management fees averaging 1.37% in 2020 and performance fees averaging 16.36%. Index performance as of Feb. 17, 2024, shows the following gross annualized returns for the S&P 500 versus the Hedge Fund Research Index® (HFRI) Fund Weighted Composite Index. Index 1-Year 3-Year 5-Year HFRI Fund Weighted Composite Index -5.78% 4.25% 6.48% S&P 500 24.23% 26.89% 28.88% Are Mutual Funds Better Than Hedge Funds? It depends on what you mean by "better:" lower risk or bigger returns? Hedge funds tend to take more outsized risks to try to earn bigger returns, while mutual funds tend to take more constrained risks and therefore earn smaller returns. Which Is Riskier, Hedge Fund or Mutual Fund? Hedge fund managers tend to take bigger risks than mutual fund managers, using leverage and other techniques to amplify their profits. However, this means that these funds experience more volatility as a result. What Is the Minimum Investment for a Hedge Fund? Usually, you'll need to be an accredited investor to invest in a hedge fund, with a minimum net worth of at least $1 million. Hedge fund minimum investments may range from $100,000 to $1 million or more. The Bottom Line Both mutual funds and hedge funds are managed portfolios, and both are designed to earn returns through diversification. However, mutual funds are available to everyday investors, while hedge funds are typically only offered privately to accredited investors. Mutual funds also tend to be much more liquid than hedge funds, making them easier to trade, while hedge funds may have strict redemption rules that protect all the investors of the fund.

https://www.investopedia.com/terms/m/medicare-medicaid-fraud.asp

Medicare and Medicaid Fraud: Meaning, Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-medicare-and-medicaid-fraud"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Medicare and Medicaid Fraud? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Medicare and Medicaid fraud refer to illegal practices aimed at getting unfairly high payouts from government-funded healthcare programs. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fraud.asp">Fraud</a> involves deceit with the intention to illegally or unethically gain at the expense of another, in this case in order to illegally gain at the expense of government-sponsored healthcare programs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties.</li><li>Medicare and Medicaid are government programs to provide affordable healthcare to certain populations.</li><li>Common examples of Medicare or Medicaid fraud include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible.</li><li>The Medicaid Fraud Control Units, or MFCUs, operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.</li><li>Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year.</li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-understanding-medicare-and-medicaid-fraud"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Medicare and Medicaid Fraud </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients or program participants, and outside parties who may pretend to be one of these parties. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> There are many types of Medicare and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicaid.asp">Medicaid</a> fraud. Common examples include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li>Billing for services that weren't provided, in the form of phantom billing and upcoding.</li><li>Performing unnecessary tests or giving unnecessary referrals, which is known as ping-ponging.</li><li>Charging separately for services that are usually charged at a package rate, known as unbundling.</li><li>Abusing or mistreating patients.</li><li>Providing benefits to which the patients or participants who receive them are not eligible, by means of fraud or deception, or by not correctly reporting assets, income, or other financial information.</li><li>Filing claims for reimbursement to which the claimant is not legitimately entitled.</li><li>Committing identity theft to receive services by pretending to be someone who is eligible to receive services.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">$60+ billion</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>According to the government, Medicare fraud costs U.S. taxpayers more than $60 billion per year.<span class="ql-inline-citation" data-cite="6"></span></p></div></div></div> <span class="heading-toc" id="toc-the-challenges-of-fighting-medicare-and-medicaid-fraud"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> The Challenges of Fighting Medicare and Medicaid Fraud </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Medicare and Medicaid fraud are a multibillion-dollar drain on a system that is already expensive to maintain. The departments that oversee these programs have internal staff members who are charged with monitoring activities for signs of fraud. In addition, there are also external auditors who are responsible for reviewing suspicious claim patterns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> These entities that provide investigation and oversight related to potential fraud include the Medicaid Fraud Control Units, or MFCUs, which operate in 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.<span class="ql-inline-citation" data-cite="1"></span> Most MFCUs operate as part of the Attorney General’s office in that state, and must be independent and separate from the state’s Medicaid office. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> In an effort to help prevent fraud that is related to identity theft, Medicare implemented a new program in the spring of 2018. Beginning in April 2018, Medicare participants started to receive new ID cards that include a Medicare Number instead of the participant’s Social Security number. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Detecting and preventing fraud is an important priority for the people and departments that oversee these critical programs. The wasted funds that are lost to fraud and other illegal tactics represent resources that could be used to support participants who really need assistance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">$86.5 billion</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Medicaid fraud is estimated to be even larger than Medicare fraud, costing taxpayers around $86.5 billion in 2020.<span class="ql-inline-citation" data-cite="7"></span></p></div></div></div> <span class="heading-toc" id="toc-the-cares-act-of-2020"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> The CARES Act of 2020 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> On March 27, 2020, President Trump signed into law a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707">$2 trillion coronavirus emergency stimulus package</a> called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also:<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> <li>Increases flexibility for Medicare to cover telehealth services.</li><li>Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.</li><li>Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-examples-of-medicare-and-medicaid-fraud"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Examples of Medicare and Medicaid Fraud </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Charging the government for medically unnecessary drugs, procedures, or tests in order to profit is one example of healthcare fraud. In 2022, for example, a Florida man who owned and operated several telemedicine platforms was sentenced to 14 years in prison for fraud that cost Medicare more than $20 million dollars. He marketed and prescribed medically unnecessary genetic tests to Medicare beneficiaries in exchange for kickbacks and bribes. The accused knew that the genetic laboratories involved would bill Medicare for medically unnecessary goods and services.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Another way of committing fraud is to impersonate a licensed provider. For example, in 2022, a Texas woman was accused of using her ex-husband’s provider number to submit fraudulent claims to Medicaid for counseling services that were never provided, receiving more than $600,000 in fraudulent claims.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-how-do-you-report-medicare-or-medicaid-fraud"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Report Medicare or Medicaid Fraud?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you witness or suspect Medicare or Medicaid fraud, you are encouraged to report it, which can be done anonymously. You should contact the federal government's tip line at 1-800-HHS-TIPS or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://oig.hhs.gov/FRAUD/REPORT-FRAUD/INDEX.ASP">online here</a>.<span class="ql-inline-citation" data-cite="5"></span> State governments often also have their own Medicaid fraud tip lines.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-who-investigates-medicaid-fraud"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Investigates Medicaid Fraud?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>State Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud as well as abuse or neglect of residents in health care facilities.<span class="ql-inline-citation" data-cite="1"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-what-are-the-penalties-for-medicare-and-medicaid-fraud"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Penalties for Medicare and Medicaid Fraud?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Depending on the severity of the case, those found guilty of Medicare or Medicaid fraud can face both prison time and fines. You may also become ineligible for future benefits, Medical professionals may face further sanction such as suspension of their medical license.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties. Medicare or Medicaid fraud can include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible. Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The Medicaid Fraud Control Units, or MFCUs, are responsible for investigating Medicare and Medicaid fraud. They operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.<br/> </p></div>

## What Is Medicare and Medicaid Fraud? Medicare and Medicaid fraud refer to illegal practices aimed at getting unfairly high payouts from government-funded healthcare programs. [Fraud](https://www.investopedia.com/terms/f/fraud.asp) involves deceit with the intention to illegally or unethically gain at the expense of another, in this case in order to illegally gain at the expense of government-sponsored healthcare programs. ### Key Takeaways * Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties. * Medicare and Medicaid are government programs to provide affordable healthcare to certain populations. * Common examples of Medicare or Medicaid fraud include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible. * The Medicaid Fraud Control Units, or MFCUs, operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud. * Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year. ## Understanding Medicare and Medicaid Fraud Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients or program participants, and outside parties who may pretend to be one of these parties. There are many types of Medicare and [Medicaid](https://www.investopedia.com/terms/m/medicaid.asp) fraud. Common examples include: * Billing for services that weren't provided, in the form of phantom billing and upcoding. * Performing unnecessary tests or giving unnecessary referrals, which is known as ping-ponging. * Charging separately for services that are usually charged at a package rate, known as unbundling. * Abusing or mistreating patients. * Providing benefits to which the patients or participants who receive them are not eligible, by means of fraud or deception, or by not correctly reporting assets, income, or other financial information. * Filing claims for reimbursement to which the claimant is not legitimately entitled. * Committing identity theft to receive services by pretending to be someone who is eligible to receive services. ### $60+ billion According to the government, Medicare fraud costs U.S. taxpayers more than $60 billion per year. ## The Challenges of Fighting Medicare and Medicaid Fraud Medicare and Medicaid fraud are a multibillion-dollar drain on a system that is already expensive to maintain. The departments that oversee these programs have internal staff members who are charged with monitoring activities for signs of fraud. In addition, there are also external auditors who are responsible for reviewing suspicious claim patterns. These entities that provide investigation and oversight related to potential fraud include the Medicaid Fraud Control Units, or MFCUs, which operate in 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Most MFCUs operate as part of the Attorney General’s office in that state, and must be independent and separate from the state’s Medicaid office. In an effort to help prevent fraud that is related to identity theft, Medicare implemented a new program in the spring of 2018. Beginning in April 2018, Medicare participants started to receive new ID cards that include a Medicare Number instead of the participant’s Social Security number. Detecting and preventing fraud is an important priority for the people and departments that oversee these critical programs. The wasted funds that are lost to fraud and other illegal tactics represent resources that could be used to support participants who really need assistance. ### $86.5 billion Medicaid fraud is estimated to be even larger than Medicare fraud, costing taxpayers around $86.5 billion in 2020. ## The CARES Act of 2020 On March 27, 2020, President Trump signed into law a [$2 trillion coronavirus emergency stimulus package](https://www.investopedia.com/coronavirus-aid-relief-and-economic-security-cares-act-4800707) called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also: * Increases flexibility for Medicare to cover telehealth services. * Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists. * Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment. For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option. ## Examples of Medicare and Medicaid Fraud Charging the government for medically unnecessary drugs, procedures, or tests in order to profit is one example of healthcare fraud. In 2022, for example, a Florida man who owned and operated several telemedicine platforms was sentenced to 14 years in prison for fraud that cost Medicare more than $20 million dollars. He marketed and prescribed medically unnecessary genetic tests to Medicare beneficiaries in exchange for kickbacks and bribes. The accused knew that the genetic laboratories involved would bill Medicare for medically unnecessary goods and services. Another way of committing fraud is to impersonate a licensed provider. For example, in 2022, a Texas woman was accused of using her ex-husband’s provider number to submit fraudulent claims to Medicaid for counseling services that were never provided, receiving more than $600,000 in fraudulent claims. ## How Do You Report Medicare or Medicaid Fraud? If you witness or suspect Medicare or Medicaid fraud, you are encouraged to report it, which can be done anonymously. You should contact the federal government's tip line at 1-800-HHS-TIPS or [online here](https://oig.hhs.gov/FRAUD/REPORT-FRAUD/INDEX.ASP). State governments often also have their own Medicaid fraud tip lines. ## Who Investigates Medicaid Fraud? State Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud as well as abuse or neglect of residents in health care facilities. ## What Are the Penalties for Medicare and Medicaid Fraud? Depending on the severity of the case, those found guilty of Medicare or Medicaid fraud can face both prison time and fines. You may also become ineligible for future benefits, Medical professionals may face further sanction such as suspension of their medical license. ## The Bottom Line Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties. Medicare or Medicaid fraud can include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible. Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year. The Medicaid Fraud Control Units, or MFCUs, are responsible for investigating Medicare and Medicaid fraud. They operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.

What Is Medicare and Medicaid Fraud? Medicare and Medicaid fraud refer to illegal practices aimed at getting unfairly high payouts from government-funded healthcare programs. Fraud involves deceit with the intention to illegally or unethically gain at the expense of another, in this case in order to illegally gain at the expense of government-sponsored healthcare programs. Key Takeaways Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties.Medicare and Medicaid are government programs to provide affordable healthcare to certain populations.Common examples of Medicare or Medicaid fraud include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible.The Medicaid Fraud Control Units, or MFCUs, operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year. Understanding Medicare and Medicaid Fraud Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients or program participants, and outside parties who may pretend to be one of these parties. There are many types of Medicare and Medicaid fraud. Common examples include: Billing for services that weren't provided, in the form of phantom billing and upcoding.Performing unnecessary tests or giving unnecessary referrals, which is known as ping-ponging.Charging separately for services that are usually charged at a package rate, known as unbundling.Abusing or mistreating patients.Providing benefits to which the patients or participants who receive them are not eligible, by means of fraud or deception, or by not correctly reporting assets, income, or other financial information.Filing claims for reimbursement to which the claimant is not legitimately entitled.Committing identity theft to receive services by pretending to be someone who is eligible to receive services. $60+ billion According to the government, Medicare fraud costs U.S. taxpayers more than $60 billion per year. The Challenges of Fighting Medicare and Medicaid Fraud Medicare and Medicaid fraud are a multibillion-dollar drain on a system that is already expensive to maintain. The departments that oversee these programs have internal staff members who are charged with monitoring activities for signs of fraud. In addition, there are also external auditors who are responsible for reviewing suspicious claim patterns. These entities that provide investigation and oversight related to potential fraud include the Medicaid Fraud Control Units, or MFCUs, which operate in 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Most MFCUs operate as part of the Attorney General’s office in that state, and must be independent and separate from the state’s Medicaid office. In an effort to help prevent fraud that is related to identity theft, Medicare implemented a new program in the spring of 2018. Beginning in April 2018, Medicare participants started to receive new ID cards that include a Medicare Number instead of the participant’s Social Security number. Detecting and preventing fraud is an important priority for the people and departments that oversee these critical programs. The wasted funds that are lost to fraud and other illegal tactics represent resources that could be used to support participants who really need assistance. $86.5 billion Medicaid fraud is estimated to be even larger than Medicare fraud, costing taxpayers around $86.5 billion in 2020. The CARES Act of 2020 On March 27, 2020, President Trump signed into law a $2 trillion coronavirus emergency stimulus package called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It expands Medicare's ability to cover treatment and services for those affected by COVID-19. The CARES Act also: Increases flexibility for Medicare to cover telehealth services.Authorizes Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.Increases Medicare payments for COVID-19-related hospital stays and durable medical equipment. For Medicaid, the CARES Act clarifies that non-expansion states can use the Medicaid program to cover COVID-19-related services for uninsured adults who would have qualified for Medicaid if the state had chosen to expand. Other populations with limited Medicaid coverage are also eligible for coverage under this state option. Examples of Medicare and Medicaid Fraud Charging the government for medically unnecessary drugs, procedures, or tests in order to profit is one example of healthcare fraud. In 2022, for example, a Florida man who owned and operated several telemedicine platforms was sentenced to 14 years in prison for fraud that cost Medicare more than $20 million dollars. He marketed and prescribed medically unnecessary genetic tests to Medicare beneficiaries in exchange for kickbacks and bribes. The accused knew that the genetic laboratories involved would bill Medicare for medically unnecessary goods and services. Another way of committing fraud is to impersonate a licensed provider. For example, in 2022, a Texas woman was accused of using her ex-husband’s provider number to submit fraudulent claims to Medicaid for counseling services that were never provided, receiving more than $600,000 in fraudulent claims. How Do You Report Medicare or Medicaid Fraud? If you witness or suspect Medicare or Medicaid fraud, you are encouraged to report it, which can be done anonymously. You should contact the federal government's tip line at 1-800-HHS-TIPS or online here. State governments often also have their own Medicaid fraud tip lines. Who Investigates Medicaid Fraud? State Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud as well as abuse or neglect of residents in health care facilities. What Are the Penalties for Medicare and Medicaid Fraud? Depending on the severity of the case, those found guilty of Medicare or Medicaid fraud can face both prison time and fines. You may also become ineligible for future benefits, Medical professionals may face further sanction such as suspension of their medical license. The Bottom Line Medicare and Medicaid fraud can be committed by medical professionals, healthcare facilities, patients, and others who pretend to be one of these parties. Medicare or Medicaid fraud can include billing for services that weren't provided, performing unnecessary tests, and receiving benefits when you're not eligible. Combined, Medicare and Medicare fraud cost taxpayers more than $146.5 billion per year. The Medicaid Fraud Control Units, or MFCUs, are responsible for investigating Medicare and Medicaid fraud. They operate in 49 states and the District of Columbia to provide investigation and oversight related to potential fraud.

https://www.investopedia.com/terms/b/breakevenpoint.asp

Breakeven Point: Definition, Examples, and How to Calculate

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-breakeven-point-bep"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Breakeven Point (BEP)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The breakeven point (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/breakeven-price.asp">breakeven price</a>) for a trade or investment is determined by comparing the market price of an asset to the original cost; the breakeven point is reached when the two prices are equal. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> In corporate accounting, the breakeven point (BEP) formula is determined by dividing the total <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedcost.asp">fixed costs</a> associated with production by the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> per individual unit minus the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variablecost.asp">variable costs</a> per unit. In this case, fixed costs refer to those that do not change depending upon the number of units sold. Put differently, the breakeven point is the production level at which total revenues for a product equal total expenses.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>In accounting, the breakeven point is calculated by dividing the fixed costs of production by the price per unit minus the variable costs of production.</li><li>The breakeven point is the level of production at which the costs of production equal the revenues for a product.</li><li>In investing, the breakeven point is said to be achieved when the market price of an asset is the same as its original cost.</li><li>A breakeven analysis can help with f<strong>i</strong>nding missing expenses, limiting decisions based on emotions, establishing goals, securing funding, and setting appropriate prices.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Breakeven Point" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/qVUF5UZbNDL2z-f-6uZ4SgXS3Dc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/qVUF5UZbNDL2z-f-6uZ4SgXS3Dc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg" data-srcset="https://www.investopedia.com/thmb/0u7ejk7jLw05_ZRMvJnKJIZ8yUM=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Breakeven Point" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/qVUF5UZbNDL2z-f-6uZ4SgXS3Dc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg" srcset="https://www.investopedia.com/thmb/0u7ejk7jLw05_ZRMvJnKJIZ8yUM=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Nez Riaz</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-breakeven-points-beps"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding Breakeven Points (BEPs) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Breakeven points (BEPs) can be applied to a wide variety of contexts. For instance, the breakeven point in a property would be how much money the homeowner would need to generate from a sale to exactly offset the net <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/purchaseprice.asp">purchase price</a>, inclusive of closing costs, taxes, fees, insurance, and interest paid on the mortgage—as well as costs related to maintenance and home improvements. At that price, the homeowner would exactly break even, neither making nor losing any money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Companies can use <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/profit-volume-chart.asp">profit-volume charting</a> to track their earnings or losses by looking at how much product they must sell to achieve profitability. This comparison helps to set sales goals and determine if new or additional product production would be profitable. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Traders also apply BEPs to trades, figuring out what price a security must reach to exactly cover all costs associated with a trade, including taxes, commissions, management fees, and so on. A company’s breakeven point is likewise calculated by taking fixed costs and dividing that figure by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grossmargin.asp">gross profit margin</a> percentage. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-benefits-of-a-breakeven-analysis"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Benefits of a Breakeven Analysis </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> A breakeven analysis can help with many things, including: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li><strong>Finding missing expenses</strong>. A breakeven analysis can help uncover expenses that you otherwise might not have seen coming. Your financial commitments will be determined at the end of a breakeven analysis, so there won’t be any surprises down the line.</li><li><strong>Limiting decisions based on emotions</strong>. Making business decisions based on emotions is rarely a good idea, but it can be hard to avoid. A breakeven analysis leaves you with hard facts, which is a better viewpoint from which to make business decisions.</li><li><strong>Setting goals</strong>. You will know exactly what kind of goals need to be met to make a profit after a breakeven analysis. This helps you set goals and work toward them.</li><li><strong>Securing funding</strong>. Often, you will need to use a breakeven analysis to secure funding and show investors the plan for your business.</li><li><strong>Pricing appropriately</strong>. A breakeven analysis will show you how to properly price your products from a business standpoint.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-stock-market-breakeven-points"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Stock Market Breakeven Points </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Assume an investor buys Microsoft stock (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>) at $110. That is now their breakeven point on the trade. If the price moves above $110, the investor is making money. If the stock drops below $110, they are losing money. If the price stays right at $110, they are at the BEP because they are not making or losing anything. Options can help investors who are holding a losing stock position using the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/08/repair-strategy.asp">option repair strategy</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <span class="heading-toc" id="toc-options-trade-breakeven-points"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-heading__text"> Options Trade Breakeven Points </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Call Option Breakeven Point Example </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> For options trading, the breakeven point is the market price that an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underlying-asset.asp">underlying asset</a> must reach for an option buyer to avoid a loss if they exercise the option. For a call buyer, the breakeven point is reached when the underlying asset is equal to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/strikeprice.asp">strike price</a> plus the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp">premium</a> paid, while the BEP for a put position is reached when the underlying asset is equal to the strike price minus the premium paid.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span> The breakeven point doesn’t typically factor in <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commission.asp">commission</a> costs, although these fees could be included if desired. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Assume that an investor pays a $5 premium for an Apple stock (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>) <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/calloption.asp">call option</a> with a $170 strike price. This means that the investor has the right to buy 100 shares of Apple at $170 per share at any time before the options <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expirationdate.asp">expire</a>. The breakeven point for the call option is the $170 strike price plus the $5 call premium, or $175. If the stock is trading below this, then the benefit of the option has not exceeded its cost. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> If the stock is trading at $190 per share, the call owner buys Apple at $170 and sells the securities at the $190 market price. The profit is $190 minus the $175 breakeven price, or $15 per share. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Put Option Breakeven Point Example </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Assume an investor pays a $4 premium for a Meta (formerly Facebook) <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/putoption.asp">put option</a> with a $180 strike price. That allows the put buyer to sell <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/boardlot.asp">100 shares</a> of Meta stock (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=META">META</a>) at $180 per share until the option’s expiration date. The put position’s breakeven price is $180 minus the $4 premium, or $176. If the stock is trading above that price, then the benefit of the option has not exceeded its cost. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> If the stock is trading at a market price of $170, for example, the trader has a profit of $6 (breakeven of $176 minus the current market price of $170).  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-business-breakeven-points"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Business Breakeven Points </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> The breakeven formula for a business provides a dollar figure that is needed to break even. This can be converted into units by calculating the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/contributionmargin.asp">contribution margin</a> (unit sale price less variable costs). Dividing the fixed costs by the contribution margin will provide how many units are needed to break even.</p> <p><span data-value="\begin{aligned} &amp;\text{Business Breakeven} = \frac { \text{Fixed Costs} }{ \text{Gross Profit Margin} } \\ \end{aligned}"><span class="katex"><span class="katex-mathml"> <math> <semantics> <mtable> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mtext> Business Breakeven </mtext> <mo> = </mo> <mfrac> <mtext> Fixed Costs </mtext> <mtext> Gross Profit Margin </mtext> </mfrac> </mrow> </mstyle> </mtd> </mtr> </mtable> <annotation encoding="application/x-tex"> \begin{aligned} &amp;\text{Business Breakeven} = \frac { \text{Fixed Costs} }{ \text{Gross Profit Margin} } \\ \end{aligned} </annotation> </semantics> </math></span><span class="katex-html"><span class="base"><span class="strut"></span><span class="mord"><span class="mtable"><span class="col-align-r"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist"><span class=""><span class="pstrut"></span><span class="mord"></span></span></span><span class="vlist-s">​</span></span><span class="vlist-r"><span class="vlist"><span class=""></span></span></span></span></span><span class="col-align-l"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist"><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord text"><span class="mord">Business Breakeven</span></span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord"><span class="mopen nulldelimiter"></span><span class="mfrac"><span class="vlist-t vlist-t2"><span class="vlist-r"><span class="vlist"><span class=""><span class="pstrut"></span><span class="mord"><span class="mord text"><span class="mord">Gross Profit Margin</span></span></span></span><span class=""><span class="pstrut"></span><span class="frac-line"></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord text"><span class="mord">Fixed Costs</span></span></span></span></span><span class="vlist-s">​</span></span><span class="vlist-r"><span class="vlist"><span class=""></span></span></span></span></span><span class="mclose nulldelimiter"></span></span></span></span></span><span class="vlist-s">​</span></span><span class="vlist-r"><span class="vlist"><span class=""></span></span></span></span></span></span></span></span></span></span></span></p> <p>The information required to calculate a business’s BEP can be found in its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-statements.asp">financial statements</a>. <span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span>The first pieces of information required are the fixed costs and the gross margin percentage.</p> <p>Assume a company has $1 million in fixed costs and a gross margin of 37%. Its breakeven point is $2.7 million ($1 million ÷ 0.37). In this breakeven point example, the company must generate $2.7 million in revenue to cover its fixed and variable costs. If it generates more sales, the company will have a profit. If it generates fewer sales, there will be a loss.</p> <p>It is also possible to calculate <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/profit-volume-chart.asp">how many units need to be sold</a> to cover the fixed costs, which will result in the company breaking even. To do this, calculate the contribution margin, which is the sale price of the product less <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variablecost.asp">variable costs</a>.</p> <p>Assume a company has a $50 sale price for its product and variable costs of $10. The contribution margin is $40 ($50 - $10). Divide the fixed costs by the contribution margin to determine how many units the company has to sell: $1 million ÷ $40 = 25,000 units. If the company sells more units than this, it will show a profit. If it sells fewer, there will be a loss. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-is-a-breakeven-point"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is a breakeven point?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A breakeven point is used in multiple areas of business and finance. In accounting terms, it refers to the production level at which total production revenue equals total production costs. In investing, the breakeven point is the point at which the original cost equals the market price. Meanwhile, the breakeven point in options trading occurs when the market price of an underlying asset reaches the level at which a buyer will not incur a loss.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-how-do-you-calculate-a-breakeven-point"></span> <h2 class="mntl-sc-block-questionandanswer__question">How do you calculate a breakeven point?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Generally, to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/072215/how-do-you-find-breakeven-point-using-payback-period.asp">calculate the breakeven point in business</a>, fixed costs are divided by the gross profit margin. This produces a dollar figure that a company needs to break even. When it comes to stocks, for example, if a trader bought a stock at $200, and nine months later, it reached $200 again after falling from $250, it would have reached the breakeven point.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-how-do-you-calculate-a-breakeven-point-in-options-trading"></span> <h2 class="mntl-sc-block-questionandanswer__question">How do you calculate a breakeven point in options trading?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Consider the following example in which an investor pays a $10 premium for a stock call option, and the strike price is $100. The breakeven point would equal the $10 premium plus the $100 strike price, or $110. On the other hand, if this were applied to a put option, the breakeven point would be calculated as the $100 strike price minus the $10 premium paid, amounting to $90.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> A breakeven point tells you what price level, yield, profit, or other metric must be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/breakeven-yield.asp">achieved not to lose any money</a>—or to make back an initial investment on a trade or project. Thus, if a project costs $1 million to undertake, it would need to generate $1 million in net profits before it breaks even. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Calculating breakeven points can be used when talking about a business or with traders in the market when they consider recouping losses or some initial outlay. Options traders also use the technique to figure out what price level the underlying price must be for a trade so that it expires <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inthemoney.asp">in the money</a>. A breakeven point calculation is often done by also including the costs of any fees, commissions, taxes, and in some cases, the effects of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a>. </p></div>

## What Is the Breakeven Point (BEP)? The breakeven point ([breakeven price](https://www.investopedia.com/terms/b/breakeven-price.asp)) for a trade or investment is determined by comparing the market price of an asset to the original cost; the breakeven point is reached when the two prices are equal. In corporate accounting, the breakeven point (BEP) formula is determined by dividing the total [fixed costs](https://www.investopedia.com/terms/f/fixedcost.asp) associated with production by the [revenue](https://www.investopedia.com/terms/r/revenue.asp) per individual unit minus the [variable costs](https://www.investopedia.com/terms/v/variablecost.asp) per unit. In this case, fixed costs refer to those that do not change depending upon the number of units sold. Put differently, the breakeven point is the production level at which total revenues for a product equal total expenses. ### Key Takeaways * In accounting, the breakeven point is calculated by dividing the fixed costs of production by the price per unit minus the variable costs of production. * The breakeven point is the level of production at which the costs of production equal the revenues for a product. * In investing, the breakeven point is said to be achieved when the market price of an asset is the same as its original cost. * A breakeven analysis can help with f**i**nding missing expenses, limiting decisions based on emotions, establishing goals, securing funding, and setting appropriate prices. ![Breakeven Point]() :max_bytes(150000):strip_icc()/BreakevenPoint-b6ed6dc69b2742358a937e280a3fc103.jpg) Investopedia / Nez Riaz ## Understanding Breakeven Points (BEPs) Breakeven points (BEPs) can be applied to a wide variety of contexts. For instance, the breakeven point in a property would be how much money the homeowner would need to generate from a sale to exactly offset the net [purchase price](https://www.investopedia.com/terms/p/purchaseprice.asp), inclusive of closing costs, taxes, fees, insurance, and interest paid on the mortgage—as well as costs related to maintenance and home improvements. At that price, the homeowner would exactly break even, neither making nor losing any money. Companies can use [profit-volume charting](https://www.investopedia.com/terms/p/profit-volume-chart.asp) to track their earnings or losses by looking at how much product they must sell to achieve profitability. This comparison helps to set sales goals and determine if new or additional product production would be profitable. Traders also apply BEPs to trades, figuring out what price a security must reach to exactly cover all costs associated with a trade, including taxes, commissions, management fees, and so on. A company’s breakeven point is likewise calculated by taking fixed costs and dividing that figure by the [gross profit margin](https://www.investopedia.com/terms/g/grossmargin.asp) percentage. ## Benefits of a Breakeven Analysis A breakeven analysis can help with many things, including: * **Finding missing expenses**. A breakeven analysis can help uncover expenses that you otherwise might not have seen coming. Your financial commitments will be determined at the end of a breakeven analysis, so there won’t be any surprises down the line. * **Limiting decisions based on emotions**. Making business decisions based on emotions is rarely a good idea, but it can be hard to avoid. A breakeven analysis leaves you with hard facts, which is a better viewpoint from which to make business decisions. * **Setting goals**. You will know exactly what kind of goals need to be met to make a profit after a breakeven analysis. This helps you set goals and work toward them. * **Securing funding**. Often, you will need to use a breakeven analysis to secure funding and show investors the plan for your business. * **Pricing appropriately**. A breakeven analysis will show you how to properly price your products from a business standpoint. ## Stock Market Breakeven Points Assume an investor buys Microsoft stock ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) at $110. That is now their breakeven point on the trade. If the price moves above $110, the investor is making money. If the stock drops below $110, they are losing money. If the price stays right at $110, they are at the BEP because they are not making or losing anything. Options can help investors who are holding a losing stock position using the [option repair strategy](https://www.investopedia.com/articles/trading/08/repair-strategy.asp). ## Options Trade Breakeven Points ### Call Option Breakeven Point Example For options trading, the breakeven point is the market price that an [underlying asset](https://www.investopedia.com/terms/u/underlying-asset.asp) must reach for an option buyer to avoid a loss if they exercise the option. For a call buyer, the breakeven point is reached when the underlying asset is equal to the [strike price](https://www.investopedia.com/terms/s/strikeprice.asp) plus the [premium](https://www.investopedia.com/terms/p/premium.asp) paid, while the BEP for a put position is reached when the underlying asset is equal to the strike price minus the premium paid. The breakeven point doesn’t typically factor in [commission](https://www.investopedia.com/terms/c/commission.asp) costs, although these fees could be included if desired. Assume that an investor pays a $5 premium for an Apple stock ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) [call option](https://www.investopedia.com/terms/c/calloption.asp) with a $170 strike price. This means that the investor has the right to buy 100 shares of Apple at $170 per share at any time before the options [expire](https://www.investopedia.com/terms/e/expirationdate.asp). The breakeven point for the call option is the $170 strike price plus the $5 call premium, or $175. If the stock is trading below this, then the benefit of the option has not exceeded its cost. If the stock is trading at $190 per share, the call owner buys Apple at $170 and sells the securities at the $190 market price. The profit is $190 minus the $175 breakeven price, or $15 per share. ### Put Option Breakeven Point Example Assume an investor pays a $4 premium for a Meta (formerly Facebook) [put option](https://www.investopedia.com/terms/p/putoption.asp) with a $180 strike price. That allows the put buyer to sell [100 shares](https://www.investopedia.com/terms/b/boardlot.asp) of Meta stock ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)) at $180 per share until the option’s expiration date. The put position’s breakeven price is $180 minus the $4 premium, or $176. If the stock is trading above that price, then the benefit of the option has not exceeded its cost. If the stock is trading at a market price of $170, for example, the trader has a profit of $6 (breakeven of $176 minus the current market price of $170).  ## Business Breakeven Points The breakeven formula for a business provides a dollar figure that is needed to break even. This can be converted into units by calculating the [contribution margin](https://www.investopedia.com/terms/c/contributionmargin.asp) (unit sale price less variable costs). Dividing the fixed costs by the contribution margin will provide how many units are needed to break even. Business Breakeven = Fixed Costs Gross Profit Margin \begin{aligned} &\text{Business Breakeven} = \frac { \text{Fixed Costs} }{ \text{Gross Profit Margin} } \\ \end{aligned} ​Business Breakeven=Gross Profit MarginFixed Costs​​ The information required to calculate a business’s BEP can be found in its [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp). The first pieces of information required are the fixed costs and the gross margin percentage. Assume a company has $1 million in fixed costs and a gross margin of 37%. Its breakeven point is $2.7 million ($1 million ÷ 0.37). In this breakeven point example, the company must generate $2.7 million in revenue to cover its fixed and variable costs. If it generates more sales, the company will have a profit. If it generates fewer sales, there will be a loss. It is also possible to calculate [how many units need to be sold](https://www.investopedia.com/terms/p/profit-volume-chart.asp) to cover the fixed costs, which will result in the company breaking even. To do this, calculate the contribution margin, which is the sale price of the product less [variable costs](https://www.investopedia.com/terms/v/variablecost.asp). Assume a company has a $50 sale price for its product and variable costs of $10. The contribution margin is $40 ($50 - $10). Divide the fixed costs by the contribution margin to determine how many units the company has to sell: $1 million ÷ $40 = 25,000 units. If the company sells more units than this, it will show a profit. If it sells fewer, there will be a loss. ## What is a breakeven point? A breakeven point is used in multiple areas of business and finance. In accounting terms, it refers to the production level at which total production revenue equals total production costs. In investing, the breakeven point is the point at which the original cost equals the market price. Meanwhile, the breakeven point in options trading occurs when the market price of an underlying asset reaches the level at which a buyer will not incur a loss. ## How do you calculate a breakeven point? Generally, to [calculate the breakeven point in business](https://www.investopedia.com/ask/answers/072215/how-do-you-find-breakeven-point-using-payback-period.asp), fixed costs are divided by the gross profit margin. This produces a dollar figure that a company needs to break even. When it comes to stocks, for example, if a trader bought a stock at $200, and nine months later, it reached $200 again after falling from $250, it would have reached the breakeven point. ## How do you calculate a breakeven point in options trading? Consider the following example in which an investor pays a $10 premium for a stock call option, and the strike price is $100. The breakeven point would equal the $10 premium plus the $100 strike price, or $110. On the other hand, if this were applied to a put option, the breakeven point would be calculated as the $100 strike price minus the $10 premium paid, amounting to $90. ## The Bottom Line A breakeven point tells you what price level, yield, profit, or other metric must be [achieved not to lose any money](https://www.investopedia.com/terms/b/breakeven-yield.asp)—or to make back an initial investment on a trade or project. Thus, if a project costs $1 million to undertake, it would need to generate $1 million in net profits before it breaks even. Calculating breakeven points can be used when talking about a business or with traders in the market when they consider recouping losses or some initial outlay. Options traders also use the technique to figure out what price level the underlying price must be for a trade so that it expires [in the money](https://www.investopedia.com/terms/i/inthemoney.asp). A breakeven point calculation is often done by also including the costs of any fees, commissions, taxes, and in some cases, the effects of [inflation](https://www.investopedia.com/terms/i/inflation.asp).

What Is the Breakeven Point (BEP)? The breakeven point (breakeven price) for a trade or investment is determined by comparing the market price of an asset to the original cost; the breakeven point is reached when the two prices are equal. In corporate accounting, the breakeven point (BEP) formula is determined by dividing the total fixed costs associated with production by the revenue per individual unit minus the variable costs per unit. In this case, fixed costs refer to those that do not change depending upon the number of units sold. Put differently, the breakeven point is the production level at which total revenues for a product equal total expenses. Key Takeaways In accounting, the breakeven point is calculated by dividing the fixed costs of production by the price per unit minus the variable costs of production.The breakeven point is the level of production at which the costs of production equal the revenues for a product.In investing, the breakeven point is said to be achieved when the market price of an asset is the same as its original cost.A breakeven analysis can help with finding missing expenses, limiting decisions based on emotions, establishing goals, securing funding, and setting appropriate prices. Investopedia / Nez Riaz Understanding Breakeven Points (BEPs) Breakeven points (BEPs) can be applied to a wide variety of contexts. For instance, the breakeven point in a property would be how much money the homeowner would need to generate from a sale to exactly offset the net purchase price, inclusive of closing costs, taxes, fees, insurance, and interest paid on the mortgage—as well as costs related to maintenance and home improvements. At that price, the homeowner would exactly break even, neither making nor losing any money. Companies can use profit-volume charting to track their earnings or losses by looking at how much product they must sell to achieve profitability. This comparison helps to set sales goals and determine if new or additional product production would be profitable. Traders also apply BEPs to trades, figuring out what price a security must reach to exactly cover all costs associated with a trade, including taxes, commissions, management fees, and so on. A company’s breakeven point is likewise calculated by taking fixed costs and dividing that figure by the gross profit margin percentage. Benefits of a Breakeven Analysis A breakeven analysis can help with many things, including: Finding missing expenses. A breakeven analysis can help uncover expenses that you otherwise might not have seen coming. Your financial commitments will be determined at the end of a breakeven analysis, so there won’t be any surprises down the line.Limiting decisions based on emotions. Making business decisions based on emotions is rarely a good idea, but it can be hard to avoid. A breakeven analysis leaves you with hard facts, which is a better viewpoint from which to make business decisions.Setting goals. You will know exactly what kind of goals need to be met to make a profit after a breakeven analysis. This helps you set goals and work toward them.Securing funding. Often, you will need to use a breakeven analysis to secure funding and show investors the plan for your business.Pricing appropriately. A breakeven analysis will show you how to properly price your products from a business standpoint. Stock Market Breakeven Points Assume an investor buys Microsoft stock (MSFT) at $110. That is now their breakeven point on the trade. If the price moves above $110, the investor is making money. If the stock drops below $110, they are losing money. If the price stays right at $110, they are at the BEP because they are not making or losing anything. Options can help investors who are holding a losing stock position using the option repair strategy. Options Trade Breakeven Points Call Option Breakeven Point Example For options trading, the breakeven point is the market price that an underlying asset must reach for an option buyer to avoid a loss if they exercise the option. For a call buyer, the breakeven point is reached when the underlying asset is equal to the strike price plus the premium paid, while the BEP for a put position is reached when the underlying asset is equal to the strike price minus the premium paid. The breakeven point doesn’t typically factor in commission costs, although these fees could be included if desired. Assume that an investor pays a $5 premium for an Apple stock (AAPL) call option with a $170 strike price. This means that the investor has the right to buy 100 shares of Apple at $170 per share at any time before the options expire. The breakeven point for the call option is the $170 strike price plus the $5 call premium, or $175. If the stock is trading below this, then the benefit of the option has not exceeded its cost. If the stock is trading at $190 per share, the call owner buys Apple at $170 and sells the securities at the $190 market price. The profit is $190 minus the $175 breakeven price, or $15 per share. Put Option Breakeven Point Example Assume an investor pays a $4 premium for a Meta (formerly Facebook) put option with a $180 strike price. That allows the put buyer to sell 100 shares of Meta stock (META) at $180 per share until the option’s expiration date. The put position’s breakeven price is $180 minus the $4 premium, or $176. If the stock is trading above that price, then the benefit of the option has not exceeded its cost. If the stock is trading at a market price of $170, for example, the trader has a profit of $6 (breakeven of $176 minus the current market price of $170).  Business Breakeven Points The breakeven formula for a business provides a dollar figure that is needed to break even. This can be converted into units by calculating the contribution margin (unit sale price less variable costs). Dividing the fixed costs by the contribution margin will provide how many units are needed to break even. Business Breakeven = Fixed Costs Gross Profit Margin \begin{aligned} &\text{Business Breakeven} = \frac { \text{Fixed Costs} }{ \text{Gross Profit Margin} } \\ \end{aligned} ​Business Breakeven=Gross Profit MarginFixed Costs​​ The information required to calculate a business’s BEP can be found in its financial statements. The first pieces of information required are the fixed costs and the gross margin percentage. Assume a company has $1 million in fixed costs and a gross margin of 37%. Its breakeven point is $2.7 million ($1 million ÷ 0.37). In this breakeven point example, the company must generate $2.7 million in revenue to cover its fixed and variable costs. If it generates more sales, the company will have a profit. If it generates fewer sales, there will be a loss. It is also possible to calculate how many units need to be sold to cover the fixed costs, which will result in the company breaking even. To do this, calculate the contribution margin, which is the sale price of the product less variable costs. Assume a company has a $50 sale price for its product and variable costs of $10. The contribution margin is $40 ($50 - $10). Divide the fixed costs by the contribution margin to determine how many units the company has to sell: $1 million ÷ $40 = 25,000 units. If the company sells more units than this, it will show a profit. If it sells fewer, there will be a loss. What is a breakeven point? A breakeven point is used in multiple areas of business and finance. In accounting terms, it refers to the production level at which total production revenue equals total production costs. In investing, the breakeven point is the point at which the original cost equals the market price. Meanwhile, the breakeven point in options trading occurs when the market price of an underlying asset reaches the level at which a buyer will not incur a loss. How do you calculate a breakeven point? Generally, to calculate the breakeven point in business, fixed costs are divided by the gross profit margin. This produces a dollar figure that a company needs to break even. When it comes to stocks, for example, if a trader bought a stock at $200, and nine months later, it reached $200 again after falling from $250, it would have reached the breakeven point. How do you calculate a breakeven point in options trading? Consider the following example in which an investor pays a $10 premium for a stock call option, and the strike price is $100. The breakeven point would equal the $10 premium plus the $100 strike price, or $110. On the other hand, if this were applied to a put option, the breakeven point would be calculated as the $100 strike price minus the $10 premium paid, amounting to $90. The Bottom Line A breakeven point tells you what price level, yield, profit, or other metric must be achieved not to lose any money—or to make back an initial investment on a trade or project. Thus, if a project costs $1 million to undertake, it would need to generate $1 million in net profits before it breaks even. Calculating breakeven points can be used when talking about a business or with traders in the market when they consider recouping losses or some initial outlay. Options traders also use the technique to figure out what price level the underlying price must be for a trade so that it expires in the money. A breakeven point calculation is often done by also including the costs of any fees, commissions, taxes, and in some cases, the effects of inflation.

https://www.investopedia.com/terms/t/timberlandinvestment.asp

Timberland Investment: Overview, Risks, Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-timberland-investment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Timberland Investment? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Timber (lumber) is often seen as a good portfolio diversifier that can hedge against inflation. Timberland investment involves investment in land that producers timber. There are millions of acres of timberland in the U.S. that are owned by pension funds, charitable trusts, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/strategies-for-managing-portfolio-of-mutual-funds/">individual investors</a>, and universities. Investors can own timberland through a variety of investment vehicles that have a stake in timberland. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Timberland investments involve ownership of productive forest lands.</li><li>Large institutional investors such as public and private pension funds primarily use timberland investment instruments.</li><li>Timber ETFs (exchange-traded funds) are comprised of many companies that own forests and produce timber-related products.</li><li>There are multiple ways in which investors can earn a rate of return on a timber investment including biological growth, and price and land appreciation. </li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-timberland-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding Timberland Investments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The benefits of timberland investments arise from the tendency for demand in wood and lumber products to rise over the long term and are not directly linked to market forces that can affect other investment instruments like stocks and bonds. Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Investors can take a position in timber by investing in timber ETFs (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded funds</a>), which are comprised of many companies that own forests and produce timber-related products. Also, investors can invest in REITs (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reit.asp">real estate investment trusts</a>) that contain one owner of forested land and produce timber-related products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Timberland investment instruments are primarily used by large institutional investors such as public and private pension funds whereby the two main underlying assets are tree farms and managed natural forests. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timo.asp">Timber Investment Management Organization</a> (TIMO) is a financial management group that aids institutional investors in managing their timberland investment portfolios. A TIMO acts as a broker for institutional clients to find, analyze and acquire investment properties that would best suit their clients. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_13-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_14-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Timberland is often seen as a good portfolio diversifier since it is not typically correlated with stocks and bonds and tends to be a good hedge against inflation.</p></div></div></div> <span class="heading-toc" id="toc-making-a-profit-with-timberland"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> Making a Profit with Timberland </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Upward product class movement occurs when trees grow and mature over time, the number of applications for timber increases. For example, trees that are used to make paper typically take over ten years to grow before they can be used for paper products. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> There are a few sources from which investors can earn a positive rate of return on a timber investment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Biological Growth </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Biological growth means that as trees grow, they increase in weight and density. As biological growth adds volume, the trees become more valuable on a per-ton basis as they can be used for larger and more unique projects, or else can produce more standard lumber per tree. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Land Appreciation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Land appreciation can occur if the timber is located on valuable real estate. For example, if the forested land is located near a populated area, the land could be converted to a golf course or shopping mall after the timber has been harvested. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Price Appreciation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Timber price appreciation can occur as demand for housing increases. Softwood is typically used in the construction of homes. As a result, an expansionary economy and housing market might lead to increases in timber since demand would be high for softwood. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_29-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_30-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge.</p></div></div></div> <span class="heading-toc" id="toc-risks-of-a-timberland-investment"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Risks of a Timberland Investment </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Timberland investments are not perfect investments meaning they are vulnerable to risks, which can include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <li>Demand for lumber can fall during a recession, causing prices to fall in turn.</li><li>Natural disasters can destroy the forestland eroding an investment.</li><li>Housing market downturns can hurt demand for timber resulting in lower prices.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-real-world-examples-of-timberland-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Real-World Examples of Timberland Investments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> There are a number of ways to invest in timberland besides buying the land as an individual investor. Some of those investment vehicles include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Guggenheim Timber <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=cut">(CUT)</a> is an ETF that consists of over two dozen companies that produce timber products or own forestland. The dividend yield on this global timber fund is typically over 3% per year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The iShares S&amp;P Global Timber &amp; Forestry Index ETF <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wood">(WOOD)</a> tracks the S&amp;P Global Timber &amp; Forestry Index and typically produces a dividend yield of over 2.5%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Weyerhaeuser Company <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wy">(WY)</a> is a REIT that invests in forestland in order to manufacture, sell, and distribute forest products. Weyerhaeuser Co. is one of the largest owners of forestland in the world. </p></div>

## What Is a Timberland Investment? Timber (lumber) is often seen as a good portfolio diversifier that can hedge against inflation. Timberland investment involves investment in land that producers timber. There are millions of acres of timberland in the U.S. that are owned by pension funds, charitable trusts, [individual investors](https://www.investopedia.com/investing/strategies-for-managing-portfolio-of-mutual-funds/), and universities. Investors can own timberland through a variety of investment vehicles that have a stake in timberland. ### Key Takeaways * Timberland investments involve ownership of productive forest lands. * Large institutional investors such as public and private pension funds primarily use timberland investment instruments. * Timber ETFs (exchange-traded funds) are comprised of many companies that own forests and produce timber-related products. * There are multiple ways in which investors can earn a rate of return on a timber investment including biological growth, and price and land appreciation. ## Understanding Timberland Investments The benefits of timberland investments arise from the tendency for demand in wood and lumber products to rise over the long term and are not directly linked to market forces that can affect other investment instruments like stocks and bonds. Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge. Investors can take a position in timber by investing in timber ETFs ([exchange-traded funds](https://www.investopedia.com/terms/e/etf.asp)), which are comprised of many companies that own forests and produce timber-related products. Also, investors can invest in REITs ([real estate investment trusts](https://www.investopedia.com/terms/r/reit.asp)) that contain one owner of forested land and produce timber-related products. Timberland investment instruments are primarily used by large institutional investors such as public and private pension funds whereby the two main underlying assets are tree farms and managed natural forests. A [Timber Investment Management Organization](https://www.investopedia.com/terms/t/timo.asp) (TIMO) is a financial management group that aids institutional investors in managing their timberland investment portfolios. A TIMO acts as a broker for institutional clients to find, analyze and acquire investment properties that would best suit their clients. ### Timberland is often seen as a good portfolio diversifier since it is not typically correlated with stocks and bonds and tends to be a good hedge against inflation. ## Making a Profit with Timberland Upward product class movement occurs when trees grow and mature over time, the number of applications for timber increases. For example, trees that are used to make paper typically take over ten years to grow before they can be used for paper products. There are a few sources from which investors can earn a positive rate of return on a timber investment. ### Biological Growth Biological growth means that as trees grow, they increase in weight and density. As biological growth adds volume, the trees become more valuable on a per-ton basis as they can be used for larger and more unique projects, or else can produce more standard lumber per tree. ### Land Appreciation Land appreciation can occur if the timber is located on valuable real estate. For example, if the forested land is located near a populated area, the land could be converted to a golf course or shopping mall after the timber has been harvested. ### Price Appreciation Timber price appreciation can occur as demand for housing increases. Softwood is typically used in the construction of homes. As a result, an expansionary economy and housing market might lead to increases in timber since demand would be high for softwood. ### Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge. ## Risks of a Timberland Investment Timberland investments are not perfect investments meaning they are vulnerable to risks, which can include: * Demand for lumber can fall during a recession, causing prices to fall in turn. * Natural disasters can destroy the forestland eroding an investment. * Housing market downturns can hurt demand for timber resulting in lower prices. ## Real-World Examples of Timberland Investments There are a number of ways to invest in timberland besides buying the land as an individual investor. Some of those investment vehicles include: Guggenheim Timber [(CUT)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=cut) is an ETF that consists of over two dozen companies that produce timber products or own forestland. The dividend yield on this global timber fund is typically over 3% per year. The iShares S&P Global Timber & Forestry Index ETF [(WOOD)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wood) tracks the S&P Global Timber & Forestry Index and typically produces a dividend yield of over 2.5%. Weyerhaeuser Company [(WY)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wy) is a REIT that invests in forestland in order to manufacture, sell, and distribute forest products. Weyerhaeuser Co. is one of the largest owners of forestland in the world.

What Is a Timberland Investment? Timber (lumber) is often seen as a good portfolio diversifier that can hedge against inflation. Timberland investment involves investment in land that producers timber. There are millions of acres of timberland in the U.S. that are owned by pension funds, charitable trusts, individual investors, and universities. Investors can own timberland through a variety of investment vehicles that have a stake in timberland. Key Takeaways Timberland investments involve ownership of productive forest lands.Large institutional investors such as public and private pension funds primarily use timberland investment instruments.Timber ETFs (exchange-traded funds) are comprised of many companies that own forests and produce timber-related products.There are multiple ways in which investors can earn a rate of return on a timber investment including biological growth, and price and land appreciation.  Understanding Timberland Investments The benefits of timberland investments arise from the tendency for demand in wood and lumber products to rise over the long term and are not directly linked to market forces that can affect other investment instruments like stocks and bonds. Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge. Investors can take a position in timber by investing in timber ETFs (exchange-traded funds), which are comprised of many companies that own forests and produce timber-related products. Also, investors can invest in REITs (real estate investment trusts) that contain one owner of forested land and produce timber-related products. Timberland investment instruments are primarily used by large institutional investors such as public and private pension funds whereby the two main underlying assets are tree farms and managed natural forests. A Timber Investment Management Organization (TIMO) is a financial management group that aids institutional investors in managing their timberland investment portfolios. A TIMO acts as a broker for institutional clients to find, analyze and acquire investment properties that would best suit their clients. Timberland is often seen as a good portfolio diversifier since it is not typically correlated with stocks and bonds and tends to be a good hedge against inflation. Making a Profit with Timberland Upward product class movement occurs when trees grow and mature over time, the number of applications for timber increases. For example, trees that are used to make paper typically take over ten years to grow before they can be used for paper products. There are a few sources from which investors can earn a positive rate of return on a timber investment. Biological Growth Biological growth means that as trees grow, they increase in weight and density. As biological growth adds volume, the trees become more valuable on a per-ton basis as they can be used for larger and more unique projects, or else can produce more standard lumber per tree. Land Appreciation Land appreciation can occur if the timber is located on valuable real estate. For example, if the forested land is located near a populated area, the land could be converted to a golf course or shopping mall after the timber has been harvested. Price Appreciation Timber price appreciation can occur as demand for housing increases. Softwood is typically used in the construction of homes. As a result, an expansionary economy and housing market might lead to increases in timber since demand would be high for softwood. Steady growth is one of the reasons why timberland is used to diversify a portfolio and as an inflation hedge. Risks of a Timberland Investment Timberland investments are not perfect investments meaning they are vulnerable to risks, which can include: Demand for lumber can fall during a recession, causing prices to fall in turn.Natural disasters can destroy the forestland eroding an investment.Housing market downturns can hurt demand for timber resulting in lower prices. Real-World Examples of Timberland Investments There are a number of ways to invest in timberland besides buying the land as an individual investor. Some of those investment vehicles include: Guggenheim Timber (CUT) is an ETF that consists of over two dozen companies that produce timber products or own forestland. The dividend yield on this global timber fund is typically over 3% per year. The iShares S&P Global Timber & Forestry Index ETF (WOOD) tracks the S&P Global Timber & Forestry Index and typically produces a dividend yield of over 2.5%. Weyerhaeuser Company (WY) is a REIT that invests in forestland in order to manufacture, sell, and distribute forest products. Weyerhaeuser Co. is one of the largest owners of forestland in the world.

https://www.investopedia.com/terms/p/profitwarning.asp

Profit Warning

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-profit-warning"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Profit Warning? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Profit warning occurs when a company advises shareholders and the public that its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp">earnings</a> results will not meet <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/analyst-expectation.asp">analyst expectations</a>. A company generally issues a profit warning prior to the public announcement of its official earnings results. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <span class="heading-toc" id="toc-profit-warnings-explained"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Profit Warnings Explained </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> A company usually announces a profit warning two or more weeks before an earnings announcement. Some companies do this to soften the blow to investors, allowing both them and the market as a whole more time to adjust accordingly. This ideally takes some of the sting out of the expected price adjustment. If a company does not issue a profit warning, its earnings announcement is called a negative <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earningssurprise.asp">earnings surprise</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> A profit warning may occur if the company is in a down <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businesscycle.asp">business cycle</a>; however, since this event is more expected it is often due to poor performance or a single challenging incident either internal to the company or external from the industry or business environment. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> During a profit warning the company might mention issues related to key growth <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/driver.asp">drivers</a> like sales and margins, its supply chain, new customers, and more. As with regular earnings reports, a profit warning can get into granular detail or can remain more general, noting only a few places in its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-statements.asp">financial statements</a> where its performance could fall below what shareholders anticipate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-example-of-a-profit-warning"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Example of a Profit Warning </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> One of the largest outsourcing companies in the U.K., Capita, issued a profit warning in January 2018, noting it had not been awarded any central government contracts. (Capital supplies a wide variety of public services, including assessments for disabled benefit claimants, electronic tagging for offenders, facilitating the administration of teachers’ pensions and more.) The announcement erased £1 billion off its market capitalization in a single day. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> While Capita had received contracts from the BBC and Northern Ireland authorities, its lack of government contracts represented a large gap in a major source of revenue. The company also noted a pre-tax loss of £535 million in 2017, which was up from £90 million in 2016. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-profit-warning-and-earnings-announcement"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Profit Warning and Earnings Announcement </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Following a profit warning usually comes the company’s official earnings announcement. The format of this is often a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings-call.asp">call with management</a> that shareholders and the public may dial into. A company’s investor relations team subsequently publishes a transcript of this call, including questions and answers from those listening in. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> If the earnings announcement follows the profit warning, it will often expand upon the reasons for the miss in expectations – particularly in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mdanalysis.asp">management discussion and analysis</a> (MD&amp;A) section. </p></div>

## What Is a Profit Warning? Profit warning occurs when a company advises shareholders and the public that its [earnings](https://www.investopedia.com/terms/e/earnings.asp) results will not meet [analyst expectations](https://www.investopedia.com/terms/a/analyst-expectation.asp). A company generally issues a profit warning prior to the public announcement of its official earnings results. ## Profit Warnings Explained A company usually announces a profit warning two or more weeks before an earnings announcement. Some companies do this to soften the blow to investors, allowing both them and the market as a whole more time to adjust accordingly. This ideally takes some of the sting out of the expected price adjustment. If a company does not issue a profit warning, its earnings announcement is called a negative [earnings surprise](https://www.investopedia.com/terms/e/earningssurprise.asp). A profit warning may occur if the company is in a down [business cycle](https://www.investopedia.com/terms/b/businesscycle.asp); however, since this event is more expected it is often due to poor performance or a single challenging incident either internal to the company or external from the industry or business environment. During a profit warning the company might mention issues related to key growth [drivers](https://www.investopedia.com/terms/d/driver.asp) like sales and margins, its supply chain, new customers, and more. As with regular earnings reports, a profit warning can get into granular detail or can remain more general, noting only a few places in its [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp) where its performance could fall below what shareholders anticipate. ## Example of a Profit Warning One of the largest outsourcing companies in the U.K., Capita, issued a profit warning in January 2018, noting it had not been awarded any central government contracts. (Capital supplies a wide variety of public services, including assessments for disabled benefit claimants, electronic tagging for offenders, facilitating the administration of teachers’ pensions and more.) The announcement erased £1 billion off its market capitalization in a single day. While Capita had received contracts from the BBC and Northern Ireland authorities, its lack of government contracts represented a large gap in a major source of revenue. The company also noted a pre-tax loss of £535 million in 2017, which was up from £90 million in 2016. ## Profit Warning and Earnings Announcement Following a profit warning usually comes the company’s official earnings announcement. The format of this is often a [call with management](https://www.investopedia.com/terms/e/earnings-call.asp) that shareholders and the public may dial into. A company’s investor relations team subsequently publishes a transcript of this call, including questions and answers from those listening in. If the earnings announcement follows the profit warning, it will often expand upon the reasons for the miss in expectations – particularly in the [management discussion and analysis](https://www.investopedia.com/terms/m/mdanalysis.asp) (MD&A) section.

What Is a Profit Warning? Profit warning occurs when a company advises shareholders and the public that its earnings results will not meet analyst expectations. A company generally issues a profit warning prior to the public announcement of its official earnings results. Profit Warnings Explained A company usually announces a profit warning two or more weeks before an earnings announcement. Some companies do this to soften the blow to investors, allowing both them and the market as a whole more time to adjust accordingly. This ideally takes some of the sting out of the expected price adjustment. If a company does not issue a profit warning, its earnings announcement is called a negative earnings surprise. A profit warning may occur if the company is in a down business cycle; however, since this event is more expected it is often due to poor performance or a single challenging incident either internal to the company or external from the industry or business environment. During a profit warning the company might mention issues related to key growth drivers like sales and margins, its supply chain, new customers, and more. As with regular earnings reports, a profit warning can get into granular detail or can remain more general, noting only a few places in its financial statements where its performance could fall below what shareholders anticipate. Example of a Profit Warning One of the largest outsourcing companies in the U.K., Capita, issued a profit warning in January 2018, noting it had not been awarded any central government contracts. (Capital supplies a wide variety of public services, including assessments for disabled benefit claimants, electronic tagging for offenders, facilitating the administration of teachers’ pensions and more.) The announcement erased £1 billion off its market capitalization in a single day. While Capita had received contracts from the BBC and Northern Ireland authorities, its lack of government contracts represented a large gap in a major source of revenue. The company also noted a pre-tax loss of £535 million in 2017, which was up from £90 million in 2016. Profit Warning and Earnings Announcement Following a profit warning usually comes the company’s official earnings announcement. The format of this is often a call with management that shareholders and the public may dial into. A company’s investor relations team subsequently publishes a transcript of this call, including questions and answers from those listening in. If the earnings announcement follows the profit warning, it will often expand upon the reasons for the miss in expectations – particularly in the management discussion and analysis (MD&A) section.

https://www.investopedia.com/terms/c/catchupcontribution.asp

Catch-Up Contribution: What It Is, How It Works, Rules, and Limits

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-catch-up-contribution"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Catch-Up Contribution? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/401k-catch-up-contributions-5499024">catch-up contribution</a> is a type of retirement savings contribution that allows people aged 50 or older to make additional contributions to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/401kplan.asp">401(k)</a> accounts and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/traditionalira.asp">individual retirement accounts (IRAs)</a>. When a catch-up contribution is made, the total contribution will be <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/112415/are-catchup-contributions-included-415-limit.asp">larger than the standard contribution limit</a>.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/egtrra.asp">Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)</a> created the catch-up contribution provision, thus allowing older workers to set aside more earnings for retirement.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Catch-ups are permitted for workers aged 50 years and older.</li><li>For 2023, the catch-up contribution limit for an IRA is an additional $1,000 on top of the annual contribution limit. For 2024, the contribution limit is $7,000 (plus the additional $1,000 catch-up contribution).</li><li>For 401(k) participants, the catch-up contribution limit is $7,500 for 2023, on top of the annual $22,500 contribution limit. The catch-up contribution limit is $7,500 in 2024 on top of the annual $23,000 contribution limit.</li><li>The IRS allows catch-up contributions for people who also participated in 403(b) and Thrift Savings Plans. For 2024, the catch-up contribution amount for these plans is $7,500.</li><li>For SIMPLE IRA plan participants, catch-up contributions are $3,500 in 2023 and 2024.<span class="ql-inline-citation" data-cite="17"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-how-catch-up-contributions-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How Catch-Up Contributions Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Originally, catch-up contributions under EGTRRA were scheduled to expire at the end of 2010.<span class="ql-inline-citation" data-cite="1"></span> However, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pensionprotectionact2006.asp">Pension Protection Act of 2006</a> made catch-up contributions and other pension-related provisions permanent.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Workers can make catch-up contributions to a variety of retirement plans, including the popular employee-sponsored 401(k). Those who do not have an employee-sponsored plan can contribute to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/traditionalira.asp">traditional IRA</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rothira.asp">Roth IRA</a>. Other options include the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/simple-ira.asp">SIMPLE IRA</a> and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sep.asp">Simplified Employee Pension (SEP)</a>. It's essential to have one of these retirement plans and begin contributing early, so there is no need to make catch-up contributions later in life. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> In addition to offering catch-up contributions, the average plan offers approximately two dozen different investment options that balance risk and reward, according to employee preference. Many fund expenses and management fees have remained level or even declined, making the 401(k) option feasible for more workers. A more widespread understanding of 401(k)s, through education and disclosure initiatives, will continue to boost participation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You can make IRA contributions up until your federal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/can-you-fund-a-roth-ira-after-filing-taxes-4770667">tax filing date of the following year</a>. However, your contribution must be made before the April filing deadline and is not eligible for extensions.<span class="ql-inline-citation" data-cite="18"></span></p></div></div></div> <span class="heading-toc" id="toc-catch-up-contribution-limits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Catch-Up Contribution Limits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The IRS reviews and adjusts contribution limits each year, primary in consideration for inflation impacts. Below are recent contribution limits for 2023 and 2024.<span class="ql-inline-citation" data-cite="17"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_20-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>Plan</b></td> <td><b>2023 Catch-Up Limit</b></td> <td><b>2024 Catch-Up Limit</b></td> </tr> <tr> <td>IRA (traditional or Roth)</td> <td>$1,000</td> <td>$1,000</td> </tr> <tr> <td>401(k)</td> <td>$7,500</td> <td>$7,500</td> </tr> <tr> <td>403(b)</td> <td>$7,500</td> <td>$7,500</td> </tr> <tr> <td>SIMPLE IRA</td> <td>$3,500</td> <td>$3,500</td> </tr> <tr> <td>457</td> <td>$7,500</td> <td>$7,500</td> </tr> <tr> <td>Thrift Savings Account</td> <td>$7,500</td> <td>$7,500</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-catch-up-contribution-requirements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Catch-Up Contribution Requirements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The primary eligibility requirement for catch-up contributions is the individual's age. Plan participants 50 years or over at the end of the calendar year are often eligible to make annual catch-up contributions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Plan participants are limited to contribution catch-up limits. In addition, participants can not contribute more than the excess of the participant's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/salaries-and-compensation-4689802">compensation</a> over elective deferral contributions that are not catch-up contributions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Some plans may have specific eligibility requirements as well. For example, employees with at least 15 years of service may be eligible to make additional contributions to a 403(b) plan in addition to regular catch-up contributions for participants based on age.<span class="ql-inline-citation" data-cite="16"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_29-0"><span class="heading-toc" id="toc-are-catch-up-contributions-worth-it"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Catch-Up Contributions Worth It?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For some, catch-up contributions is critical in preserving the ability to retire with financial flexibility. Especially true for individuals who have not been saving for retirement during the life, catch-up contributions may allow some individuals to have tax benefits as they strive to squeeze in retirement savings towards the end of the working career.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-how-many-years-can-you-do-a-401k-catch-up"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Years Can You Do a 401(k) Catch-Up?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Eligible individuals can do a 401(k) catch-up every year as long as they meet contribution requirements. Once the individual has hit their annual contribution limit, they are not eligible for another catch-up contribution until the next year.<span class="ql-inline-citation" data-cite="16"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-do-employers-match-catch-up-contributions"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Employers Match Catch-Up Contributions?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Employer matching for catch-up contributions depends on the terms of the employer's retirement plan. The matching of catch-up contributions is not required or guaranteed.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> For workers 50 years and older, a major tax benefit is catch-up contributions that shield retirement savings from income tax liability. Each type of retirement account (401(k), IRA, SIMPLE IRA, etc.) have different catch-up contribution amounts. In addition, some may have varying degrees of eligibility or deadlines. In the end, catch-up contributions are a tremendous resource for savers looking for an advantage as they approach retirement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <em>Correction—Dec. 4, 2022:<strong> </strong></em>This article was edited from a previous version that provided incorrect information about the IRA annual contribution limits and catch-up contribution.  <br/> </p></div>

## What Is a Catch-Up Contribution? A [catch-up contribution](https://www.investopedia.com/401k-catch-up-contributions-5499024) is a type of retirement savings contribution that allows people aged 50 or older to make additional contributions to [401(k)](https://www.investopedia.com/terms/1/401kplan.asp) accounts and [individual retirement accounts (IRAs)](https://www.investopedia.com/terms/t/traditionalira.asp). When a catch-up contribution is made, the total contribution will be [larger than the standard contribution limit](https://www.investopedia.com/ask/answers/112415/are-catchup-contributions-included-415-limit.asp). The [Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)](https://www.investopedia.com/terms/e/egtrra.asp) created the catch-up contribution provision, thus allowing older workers to set aside more earnings for retirement. ### Key Takeaways * Catch-ups are permitted for workers aged 50 years and older. * For 2023, the catch-up contribution limit for an IRA is an additional $1,000 on top of the annual contribution limit. For 2024, the contribution limit is $7,000 (plus the additional $1,000 catch-up contribution). * For 401(k) participants, the catch-up contribution limit is $7,500 for 2023, on top of the annual $22,500 contribution limit. The catch-up contribution limit is $7,500 in 2024 on top of the annual $23,000 contribution limit. * The IRS allows catch-up contributions for people who also participated in 403(b) and Thrift Savings Plans. For 2024, the catch-up contribution amount for these plans is $7,500. * For SIMPLE IRA plan participants, catch-up contributions are $3,500 in 2023 and 2024. ## How Catch-Up Contributions Work Originally, catch-up contributions under EGTRRA were scheduled to expire at the end of 2010. However, the [Pension Protection Act of 2006](https://www.investopedia.com/terms/p/pensionprotectionact2006.asp) made catch-up contributions and other pension-related provisions permanent. Workers can make catch-up contributions to a variety of retirement plans, including the popular employee-sponsored 401(k). Those who do not have an employee-sponsored plan can contribute to a [traditional IRA](https://www.investopedia.com/terms/t/traditionalira.asp) or [Roth IRA](https://www.investopedia.com/terms/r/rothira.asp). Other options include the [SIMPLE IRA](https://www.investopedia.com/terms/s/simple-ira.asp) and [Simplified Employee Pension (SEP)](https://www.investopedia.com/terms/s/sep.asp). It's essential to have one of these retirement plans and begin contributing early, so there is no need to make catch-up contributions later in life. In addition to offering catch-up contributions, the average plan offers approximately two dozen different investment options that balance risk and reward, according to employee preference. Many fund expenses and management fees have remained level or even declined, making the 401(k) option feasible for more workers. A more widespread understanding of 401(k)s, through education and disclosure initiatives, will continue to boost participation. ### You can make IRA contributions up until your federal [tax filing date of the following year](https://www.investopedia.com/can-you-fund-a-roth-ira-after-filing-taxes-4770667). However, your contribution must be made before the April filing deadline and is not eligible for extensions. ## Catch-Up Contribution Limits The IRS reviews and adjusts contribution limits each year, primary in consideration for inflation impacts. Below are recent contribution limits for 2023 and 2024. | **Plan** | **2023 Catch-Up Limit** | **2024 Catch-Up Limit** | | --- | --- | --- | | IRA (traditional or Roth) | $1,000 | $1,000 | | 401(k) | $7,500 | $7,500 | | 403(b) | $7,500 | $7,500 | | SIMPLE IRA | $3,500 | $3,500 | | 457 | $7,500 | $7,500 | | Thrift Savings Account | $7,500 | $7,500 | ## Catch-Up Contribution Requirements The primary eligibility requirement for catch-up contributions is the individual's age. Plan participants 50 years or over at the end of the calendar year are often eligible to make annual catch-up contributions. Plan participants are limited to contribution catch-up limits. In addition, participants can not contribute more than the excess of the participant's [compensation](https://www.investopedia.com/salaries-and-compensation-4689802) over elective deferral contributions that are not catch-up contributions. Some plans may have specific eligibility requirements as well. For example, employees with at least 15 years of service may be eligible to make additional contributions to a 403(b) plan in addition to regular catch-up contributions for participants based on age. ## Are Catch-Up Contributions Worth It? For some, catch-up contributions is critical in preserving the ability to retire with financial flexibility. Especially true for individuals who have not been saving for retirement during the life, catch-up contributions may allow some individuals to have tax benefits as they strive to squeeze in retirement savings towards the end of the working career. ## How Many Years Can You Do a 401(k) Catch-Up? Eligible individuals can do a 401(k) catch-up every year as long as they meet contribution requirements. Once the individual has hit their annual contribution limit, they are not eligible for another catch-up contribution until the next year. ## Do Employers Match Catch-Up Contributions? Employer matching for catch-up contributions depends on the terms of the employer's retirement plan. The matching of catch-up contributions is not required or guaranteed. ## The Bottom Line For workers 50 years and older, a major tax benefit is catch-up contributions that shield retirement savings from income tax liability. Each type of retirement account (401(k), IRA, SIMPLE IRA, etc.) have different catch-up contribution amounts. In addition, some may have varying degrees of eligibility or deadlines. In the end, catch-up contributions are a tremendous resource for savers looking for an advantage as they approach retirement. *Correction—Dec. 4, 2022:*This article was edited from a previous version that provided incorrect information about the IRA annual contribution limits and catch-up contribution.  

What Is a Catch-Up Contribution? A catch-up contribution is a type of retirement savings contribution that allows people aged 50 or older to make additional contributions to 401(k) accounts and individual retirement accounts (IRAs). When a catch-up contribution is made, the total contribution will be larger than the standard contribution limit. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) created the catch-up contribution provision, thus allowing older workers to set aside more earnings for retirement. Key Takeaways Catch-ups are permitted for workers aged 50 years and older.For 2023, the catch-up contribution limit for an IRA is an additional $1,000 on top of the annual contribution limit. For 2024, the contribution limit is $7,000 (plus the additional $1,000 catch-up contribution).For 401(k) participants, the catch-up contribution limit is $7,500 for 2023, on top of the annual $22,500 contribution limit. The catch-up contribution limit is $7,500 in 2024 on top of the annual $23,000 contribution limit.The IRS allows catch-up contributions for people who also participated in 403(b) and Thrift Savings Plans. For 2024, the catch-up contribution amount for these plans is $7,500.For SIMPLE IRA plan participants, catch-up contributions are $3,500 in 2023 and 2024. How Catch-Up Contributions Work Originally, catch-up contributions under EGTRRA were scheduled to expire at the end of 2010. However, the Pension Protection Act of 2006 made catch-up contributions and other pension-related provisions permanent. Workers can make catch-up contributions to a variety of retirement plans, including the popular employee-sponsored 401(k). Those who do not have an employee-sponsored plan can contribute to a traditional IRA or Roth IRA. Other options include the SIMPLE IRA and Simplified Employee Pension (SEP). It's essential to have one of these retirement plans and begin contributing early, so there is no need to make catch-up contributions later in life. In addition to offering catch-up contributions, the average plan offers approximately two dozen different investment options that balance risk and reward, according to employee preference. Many fund expenses and management fees have remained level or even declined, making the 401(k) option feasible for more workers. A more widespread understanding of 401(k)s, through education and disclosure initiatives, will continue to boost participation. You can make IRA contributions up until your federal tax filing date of the following year. However, your contribution must be made before the April filing deadline and is not eligible for extensions. Catch-Up Contribution Limits The IRS reviews and adjusts contribution limits each year, primary in consideration for inflation impacts. Below are recent contribution limits for 2023 and 2024. Plan 2023 Catch-Up Limit 2024 Catch-Up Limit IRA (traditional or Roth) $1,000 $1,000 401(k) $7,500 $7,500 403(b) $7,500 $7,500 SIMPLE IRA $3,500 $3,500 457 $7,500 $7,500 Thrift Savings Account $7,500 $7,500 Catch-Up Contribution Requirements The primary eligibility requirement for catch-up contributions is the individual's age. Plan participants 50 years or over at the end of the calendar year are often eligible to make annual catch-up contributions. Plan participants are limited to contribution catch-up limits. In addition, participants can not contribute more than the excess of the participant's compensation over elective deferral contributions that are not catch-up contributions. Some plans may have specific eligibility requirements as well. For example, employees with at least 15 years of service may be eligible to make additional contributions to a 403(b) plan in addition to regular catch-up contributions for participants based on age. Are Catch-Up Contributions Worth It? For some, catch-up contributions is critical in preserving the ability to retire with financial flexibility. Especially true for individuals who have not been saving for retirement during the life, catch-up contributions may allow some individuals to have tax benefits as they strive to squeeze in retirement savings towards the end of the working career. How Many Years Can You Do a 401(k) Catch-Up? Eligible individuals can do a 401(k) catch-up every year as long as they meet contribution requirements. Once the individual has hit their annual contribution limit, they are not eligible for another catch-up contribution until the next year. Do Employers Match Catch-Up Contributions? Employer matching for catch-up contributions depends on the terms of the employer's retirement plan. The matching of catch-up contributions is not required or guaranteed. The Bottom Line For workers 50 years and older, a major tax benefit is catch-up contributions that shield retirement savings from income tax liability. Each type of retirement account (401(k), IRA, SIMPLE IRA, etc.) have different catch-up contribution amounts. In addition, some may have varying degrees of eligibility or deadlines. In the end, catch-up contributions are a tremendous resource for savers looking for an advantage as they approach retirement. Correction—Dec. 4, 2022: This article was edited from a previous version that provided incorrect information about the IRA annual contribution limits and catch-up contribution.  

https://www.investopedia.com/best-technical-analysis-courses-5118327

Best Technical Analysis Courses

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <svg class="mntl-svg-resource is-hidden"> <defs> <symbol id="featured-partners__info-svg"><svg fill="none" height="13" width="12" xmlns="http://www.w3.org/2000/svg"><path d="M5.5 9h1V6h-1v3zM6 1.5c-2.76 0-5 2.24-5 5s2.24 5 5 5 5-2.24 5-5-2.24-5-5-5zm0 9c-2.205 0-4-1.795-4-4s1.795-4 4-4 4 1.795 4 4-1.795 4-4 4zM5.5 5h1V4h-1v1z" fill="#000" fill-opacity=".95" fill-rule="evenodd"></path></svg></symbol> <symbol id="light-box-arrow"><svg viewbox="2575 18840 48 48" xmlns="http://www.w3.org/2000/svg"><g transform="translate(1355 18464)"><circle cx="24" cy="24" fill="#fff" r="24" transform="translate(1220 376)"></circle><path d="M1248.675 390l9.38 9.38M1258.055 399.38l-9.38 9.553M1232 399.38h25.186" fill="none" stroke="#000" stroke-linecap="round" stroke-miterlimit="10" stroke-width="3"></path></g></svg></symbol> </defs> </svg> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="u-font-carbon--dd112"> <div class="comp product-roundup-content--finance product-roundup--base product-roundup--base" data-tracking-container="true" data-tracking-id="PRM Roundup | PRM Template" id="product-roundup-content--finance_1-0"> <div class="article-content"> <div class="article-intro article-content__description article-container expert-content structured-content text-passage"> <div class="comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block" id="intro-content_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Successful traders look to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">technical analysis</a> to unlock the key to stock price movements in order to identify potentially profitable trading opportunities. Technical analysis is a complex discipline involving price trend lines, chart patterns, and calculated indicators that need to be interpreted to know the optimum time to enter and exit a trade. While it's not an exact science, successful traders who master technical analysis get it right much more often than they get it wrong. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-1"> Trading with technical analysis requires a lot of study and practice. In addition to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/trading/best-ways-learn-technical-analysis/">studying patterns and indicators</a>, you need to master behavioral economics and risk management. The more knowledge and practice you have, the more confidence you gain. The best way to get there is with a quality technical analysis trading course.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-2"> The popularity of trading in stocks, penny stocks, options, and forex has led to the proliferation of trading courses, including technical analysis. The problem is many trading courses promise spectacular results but then fail to deliver. To navigate that minefield effectively, we reviewed the top technical analysis courses in six distinct categories. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce intro-content prm-sc-page mntl-sc-page mntl-block --> <div class="comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" id="product-roundup-content__summary-list_1-0"> <span class="heading-toc" id="summary-list"></span> <h2 class="summary-list__title"> Best Technical Analysis Courses in 2024 </h2> <ul class="summary-list__content"> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best Overall:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&amp;mid=39197&amp;murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Udemy</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Beginners:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Travis Rose</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Learning While Trading:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://bullishbears.com/referral.html?p=DotdashPM&amp;w=daytrading" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Bullish Bears</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Charting Services:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://stockcharts.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> StockCharts</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Comprehensive Offering:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.chartguys.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Chart Guys</a><!-- end: summary-list__item-top-pick --> </span> </li> <li class="summary-list__item"> <span class="summary-list__item-top-pick-container"> <strong class="summary-list__item-category">Best for Learning From One of the Greats:</strong> <a class="summary-list__item-top-pick" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.chartingschool.com/courses/chartingschool" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Charting School</a><!-- end: summary-list__item-top-pick --> </span> </li> </ul> </div><!-- end: comp js-toc-appear product-roundup-content__summary-list summary-list--finance summary-list--roundup summary-list --> <div class="comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block" id="post-intro_1-0"> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Investopedia offers its own technical analysis course as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://academy.investopedia.com/products/financial-modeling">Investopedia Academy</a>.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> </div> <div class="article-body"> <div class="loc article-left-nav article-body__left-nav product-roundup__left-nav js-sticky-container"> <div class="comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="product-roundup__toc_1-0"> <div 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mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Best Technical Analysis Courses" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_1-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_2-0"> Best Technical Analysis Courses</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_1-0"> <li class="comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item" id="toc__listsc-item_1-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" href="#summary-list" rel="nocaes"> <span class="link__wrapper">Our Top Picks</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp toc__listsc-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Udemy" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Udemy" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-udemy" rel="nocaes"> <span class="link__wrapper">Udemy</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Travis Rose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Travis Rose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-beginners-travis-rose" rel="nocaes"> <span class="link__wrapper">Travis Rose</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Bullish Bears" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-2"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bullish Bears" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-learning-while-trading-bullish-bears" rel="nocaes"> <span class="link__wrapper">Bullish Bears</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-StockCharts" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-3"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-StockCharts" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-charting-services-stockcharts" rel="nocaes"> <span class="link__wrapper">StockCharts</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Chart Guys" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-4"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Chart Guys" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-comprehensive-offering-chart-guys" rel="nocaes"> <span class="link__wrapper">Chart Guys</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Charting School" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_2-0-5"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Charting School" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-learning-from-one-of-the-greats-charting-school" rel="nocaes"> <span class="link__wrapper">Charting School</span> </a><!-- end: mntl-toc__list-item-link js-mntl-toc-link --></li><!-- end: comp nested-toc-item nested-toc-item--additional mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item --> <li class="comp toc-items__chop mntl-text-block" data-click-action="OnPageClick-See More" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="toc-items__chop_1-0"> See More (3)</li><!-- end: comp toc-items__chop mntl-text-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final 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mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Frequently Asked Questions" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Frequently Asked Questions</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is Technical Analysis?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-technical-analysis" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">What Is Technical Analysis?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Is Technical Analysis Used For?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-is-technical-analysis-used-for" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">What Is Technical Analysis Used For?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Skills Do You Learn in a Technical Analysis Course?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-skills-do-you-learn-in-a-technical-analysis-course" id="mntl-toc__list-item-link_1-0-5" rel="nocaes"><span class="link__wrapper">What Skills Do You Learn in a Technical Analysis Course?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-What Makes a Great Technical Analysis Course?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-makes-a-great-technical-analysis-course" id="mntl-toc__list-item-link_1-0-6" rel="nocaes"><span class="link__wrapper">What Makes a Great Technical Analysis Course?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-7"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-7"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How Much Do Technical Analysis Courses Cost?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-much-do-technical-analysis-courses-cost" id="mntl-toc__list-item-link_1-0-7" rel="nocaes"><span class="link__wrapper">How Much Do Technical Analysis Courses Cost?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-8"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-8"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Who Should Take a Technical Analysis Course?" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-who-should-take-a-technical-analysis-course" id="mntl-toc__list-item-link_1-0-8" rel="nocaes"><span class="link__wrapper">Who Should Take a Technical Analysis Course?</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_1-0-9"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_1-0-9"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-technical-analysis-courses" id="mntl-toc__list-item-link_1-0-9" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc--finance product-roundup__toc sticky-toc--finance-roundup sticky-toc--roundup sticky-toc--base mntl-sticky-toc mntl-block --> </div> <div class="loc article-body__inner article-body__inner"> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0"> <span class="heading-toc" id="toc-best-overall-udemy"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best Overall</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Udemy</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Udemy" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/05mvJB0Mh2hxjspeMfSeAB9gPgE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-3ce2d06eb4524ac9ab04ef55f8a2ca60.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Udemy" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/05mvJB0Mh2hxjspeMfSeAB9gPgE=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-3ce2d06eb4524ac9ab04ef55f8a2ca60.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Udemy</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-1"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Udemy" data-retailer-type="other" data-tracking-container="true" href="https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&amp;mid=39197&amp;murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> Udemy's Technical Analysis Masterclass covers everything beginning and intermediate traders need to know for a low price of $17.99, making it our choice as the best overall technical analysis course. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-3"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>World-class provider of educational courses</p></li> <li><p>Beginning to intermediate instruction for less than $40</p></li> <li><p>Courses taught by successful traders</p></li> <li><p>Lifetime access to materials</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No opportunity for practical application</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-4"> As the world's largest online learning marketplace, Udemy has become the go-to source for anything related to investing. Udemy's Technical Analysis Masterclass is one of its more popular courses, offering on-demand video, downloadable resources, practice tests, and lifetime access. Led by Certified Technical Analyst Jyoti Bansal, Udemy's Technical Analysis Masterclass makes our list as the best overall technical analysis course.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-5"> Udemy is known for bringing world-class instructors to its education platform, and Jyoti Bansal is no exception. She is a double-Certified Technical Analyst with deep industry experience. As evidenced by the more than 55,000 students who've taken her class with over 11,000 positive reviews, Jyoti really delivers in the class. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> In addition to seven on-demand video classes, you get access to seven articles, eight downloadable resources, two practice tests, and four assignments with in-depth explanations. For the low price of $17.99, you also get lifetime access to all materials, including updated content. Upon successful completion of the course, students receive a certificate of completion. You can then follow up the beginning course with the Technical Analysis Masterclass part two for another $17.99. Part two helps you to maximize your knowledge to become a more efficient trader. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-7"> CourseMarks, which helps students find the best classes based on student feedback and content freshness and diversity, gives the Technical Analysis Masterclass a rating of 9.8 out of 10. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-1"> <span class="heading-toc" id="toc-best-for-beginners-travis-rose"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-1"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Beginners</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Travis Rose</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-1"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-1"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-1"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-8" style="--imgWidth: 205px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Entrepreneur.com Store" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/4OCKN6vvhoDJe1wEeJdZ0HkuoZY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/store-5a8be8a5fc344d91b9e37691e8736316.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Entrepreneur.com Store" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/4OCKN6vvhoDJe1wEeJdZ0HkuoZY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/store-5a8be8a5fc344d91b9e37691e8736316.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <span class="figure-article-caption-owner"><p>Entrepreneur.com Store</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-9"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Entrepreneur.com" data-retailer-type="other" data-tracking-container="true" href="https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> The Ultimate Candlestick Trading &amp; Analysis Masterclass Bundle by Travis Rose is a content-rich course that can take you from complete novice to trading in just a few weeks. That's why it is our choice as the best technical analysis course for beginners. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-11"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Designed specifically for beginners</p></li> <li><p>Comprehensive course</p></li> <li><p>Lifetime access to materials</p></li> <li><p>Top rating</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No coaching or mentoring</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> The Ultimate Candlestick Trading &amp; Analysis Masterclass Bundle is designed for new traders who want to learn a step-by-step process for properly analyzing candlestick charts. Travis Rose, a full-time day trader and investor with more than five years of sustained success, has laid out an extensive course to help novice traders avoid the mistakes and pain points he experienced starting out, making it our choice as the best technical analysis course for beginners.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> The five-course bundle is stacked with beginner-friendly content and resources, including 136 lessons, 40 lectures, on-demand videos, 14 multiple-choice quizzes, a free stock trading ebook with bonus in-depth trading strategies, tips, and valuable market resources. It also includes live market examples for watching trades in action.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> For $1,000 you get lifetime access to the course content, which is refreshed regularly. While there is no coaching, mentoring, or chat rooms for interactive learning, this extensive, self-paced course can elevate you to a level where you can get more out of a paid trading program.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-15"> Travis Rose's courses have earned an average of 4.5 out of five stars on the Entrepreneur.com Store. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-2"> <span class="heading-toc" id="toc-best-for-learning-while-trading-bullish-bears"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-2"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Learning While Trading</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Bullish Bears</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-2"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-2"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-2"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-16" style="--imgWidth: 309px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Bullish Bears" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/FG_pPtgV_5z59YgIQZlrBOAwAYY=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Bullish Bears" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/FG_pPtgV_5z59YgIQZlrBOAwAYY=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-2"> <span class="figure-article-caption-owner"><p> Bullish Bears</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-17"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Bullish Bears" data-retailer-type="other" data-tracking-container="true" href="https://bullishbears.com/referral.html?p=DotdashPM&amp;w=daytrading" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> For beginning traders who want to be a part of the action while learning technical analysis, the Bullish Bears is a great choice. It offers ten free courses and an ebook with free, seven-day access to its trading room and other valuable trading tools, making it our pick as the best technical analysis course for learning while doing. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-19"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free beginner course and ebook</p></li> <li><p>7-day free trial membership with complete access</p></li> <li><p>Low-cost access to comprehensive training resources</p></li> <li><p>24/7 access to chat rooms</p></li> <li><p>Live-stream screen share and other tools for understanding trading action</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Few online reviews</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> For people who prefer experiential learning—learning by doing—Bullish Bears offers a free ebook and courses on technical analysis along with a 7-day free membership trial with complete access to its trading room and other valuable learning tools. That makes the Bullish Bears our choice as the best technical analysis course for learning while doing.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> Bullish Bears has made a name for itself as a stock trading service that "pays it forward," based on its desire to help anyone who wants to learn to succeed as a trader. To that end, it has managed to stack its membership with the tools, resources, and instruction anyone could need to develop as a trader for just $49 a month.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> In recognition that successful trading begins with sound technical analysis, Bullish Bears added ten free technical analysis courses and an ebook to its extensive learning toolkit. While it's not required, you could subscribe to their free seven-day trial for the opportunity to learn alongside other traders. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> You'll be exposed to traders utilizing technical analysis to set up your trades and hear their commentary as the trades unfold. At most, it can reinforce your learning, and, at the very least, it can be very motivating.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-24"> When the trial is over, you can continue full access to additional courses, the trading room, and valuable trading tools for $49 a month or $249 a year. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-3"> <span class="heading-toc" id="toc-best-for-charting-services-stockcharts"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-3"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Charting Services</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> StockCharts</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-3"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-3"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-3"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-25" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="StockCharts" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/gIsKIf72hF_XqnZoQ0J62G_HSIo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/StockCharts-8ad1e22859ea4ef48eecf69605e6ff0d.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="StockCharts" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/gIsKIf72hF_XqnZoQ0J62G_HSIo=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/StockCharts-8ad1e22859ea4ef48eecf69605e6ff0d.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-3"> <span class="figure-article-caption-owner"><p>StockCharts</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-26"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at StockCharts" data-retailer-type="other" data-tracking-container="true" href="https://stockcharts.com/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-27"> StockCharts is a premier provider of chart services that also offers a voluminous library of articles, guides, and resources to learn how to read and interpret them, making it our choice as the best technical analysis course for charting services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-28"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free access to extensive learning library</p></li> <li><p>Includes free access to charting services</p></li> <li><p>Extensive offering of charts</p></li> <li><p>Low-cost monthly membership</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Free charting service is limited</p></li> <li><p>Free chart data is not dynamic</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Learning technical analysis through a charting service can be overwhelming for new traders. You could have access to the best charts and analysis tools in the world but, if you can't read and interpret them, they are worthless. StockCharts is a leading chart service that also offers a Charting School with a wide range of free articles, guides, and resources to help traders of any experience level move up the learning curve. That's why we chose StockCharts as the best technical analysis course for charting services. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> A good charting service can be an advantage for traders looking for a leg up in technical analysis. StockCharts offers a variety of useful chart types and analysis tools. The more you know about technical analysis and charts, the more valuable they can be. New traders can use StockCharts' Charting School to learn experientially. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-31"> The Charting School is an extensive library of dozens of articles organized as course chapters, such as Chart Analysis, Technical Indicators &amp; Overlays, and Market Analysis. In another section, you can learn how to use the various charting tools and resources, such as StockCharts' award-winning financial charting tool and its full-screen, interactive Advanced Charting Platform. The section goes on to teach you how to use the many chart analysis tools available through StockCharts.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-32"> The Charting School is free—as is its charting service that you can use to start analyzing charts. However, the free service has delayed data and limited access to other tools such as the scanner, intraday charts, and alerts. However, that may be sufficient if you aren't an intraday trader.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-33"> StockCharts offers three levels of paid monthly service—Basic ($14.95), Extra ($24.95), and Pro ($39.95)—with varying rates of data. The higher the level of service, the quicker refreshing of the data. Each level offers a one-month free trial. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-4"> <span class="heading-toc" id="toc-best-for-comprehensive-offering-chart-guys"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-4"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Comprehensive Offering</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Chart Guys</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-4"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-4"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-4"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-34" style="--imgWidth: 675px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Chart Guys" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/BQM5IDHMhL9RIaL7lMn5cjNKh1E=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chart_Guys-4891c1ac52394554b059291edbc5c11d.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Chart Guys" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/BQM5IDHMhL9RIaL7lMn5cjNKh1E=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Chart_Guys-4891c1ac52394554b059291edbc5c11d.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-4"> <span class="figure-article-caption-owner"><p> Chart Guys</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-3x2 upscaleImg mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-35"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Chart Guys" data-retailer-type="other" data-tracking-container="true" href="https://www.chartguys.com/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> You can start with the Chart Guys' excellent beginner's course for free, but the educational resources really begin to flow once you subscribe as a member, which is why we picked the Chart Guys as the best technical analysis course for a comprehensive offering. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-37"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Comprehensive beginner's course offering</p></li> <li><p>Extensive trading community</p></li> <li><p>Supportive learning environment</p></li> <li><p>Great value for a $99 membership</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> With its seven modules and 40 lessons of on-demand video content, the beginner's course ranks high as one of the best free course offerings. However, the real learning begins with a paid membership ($99 per month or $899 per year). It is as packed full of educational resources as you will find, making it our choice as the best technical analysis course for comprehensive offering.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-39"> The Chart Guys was established in 2015 as an educational resource for traders focusing on technical analysis, but its strength lies in its community of thousands of traders who actively lend their insights and support to each other. Mentoring, group-based learning, and peer-led study groups form a vital pillar of the learning experience.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-40"> Its educational library consists of courses, reference materials, and educational videos. The interactive component is comprised of regular live webinars, beginner-friendly conference calls, daily live coverage of the markets, real-time Q&amp;A with the community of professional traders, and individual consultation sessions. All of this is conducted in the context of a 24/7 trading community. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> <div class="comp mntl-sc-list-item structured-content list-sc-item mntl-block" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard" id="list-sc-item_1-0-5"> <span class="heading-toc" id="toc-best-for-learning-from-one-of-the-greats-charting-school"></span> <h3 class="comp list-sc-item__heading split-text--roundup-title split-text" data-click-action="Null" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Header" id="list-sc-item__heading_1-0-5"> <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary">Best for Learning From One of the Greats</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Charting School</span> </span> </span></h3><!-- end: comp list-sc-item__heading split-text--roundup-title split-text --> <hr class="comp list-sc-item__header-break mntl-block" id="list-sc-item__header-break_1-0-5"/><!-- end: comp list-sc-item__header-break mntl-block --> <div class="comp list-sc-item__content mntl-block" id="list-sc-item__content_1-0-5"> <div class="comp list-sc-item__intro mntl-block" id="list-sc-item__intro_1-0-5"> <div class="tabbed-sc-block-intro"> <figure class="comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res" data-click-action="OffPageNavClick" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Logo" id="mntl-sc-block_3-0-41" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Charting School" class="lazyload universal-image__image" data-click-action="Null" data-click-tracked="true" data-expand="300" data-img-lightbox="false" data-src="https://www.investopedia.com/thmb/c57g7v0aY6ctipT0wcnEjlGy7-M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Charting_School-4d300fd1422a4f228210156527ed5259.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Charting School" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/c57g7v0aY6ctipT0wcnEjlGy7-M=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Charting_School-4d300fd1422a4f228210156527ed5259.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <span class="figure-article-caption-owner"><p> Charting School</p></span> </figcaption><!-- end: comp figure-caption mntl-figure-caption figure-article-caption --> </figure><!-- end: comp mntl-sc-block-image figure-2x1 mntl-sc-block prm-sc-block-image mntl-sc-block-universal-image figure-landscape figure-high-res --> <div class="tabbed-sc-block-intro__content"> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-42"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Charting School" data-retailer-type="other" data-tracking-container="true" href="https://www.chartingschool.com/courses/chartingschool" id="button_1-0-5" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div> </div> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> When your money is on the line, learning from one of the greats can be priceless, and course designer and instructor JC Parets is one of the most widely followed technical analysts in the world. That makes the Charting School our choice as the best technical analysis course for learning from one of the greats. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-44"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Designed and instructed by world-renowned technical analyst</p></li> <li><p>Deep dive into critical technical analysis topics</p></li> <li><p>Fair price for an expert-led course</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Course designed primarily for beginners</p></li> <li><p>No coaching, mentoring, or trading community</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> If you're going to learn something as complex as technical analysis, you might as well learn from one of the best. JC Parets is a world-renowned technical analyst and founder of All-Star Charts. You might recognize JC from one of his many appearances on the major financial media outlets. Fortunately for his many students, one of his strengths is translating complex concepts into terms anyone can understand. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-46"> For $495, the Charting School offers a seven-course curriculum designed for beginners. The course combines studio-quality videos with lesson quizzes to help with your retention throughout the course. Each lesson takes you in-depth to learn critical technical analysis concepts such as trend recognition, momentum and relative strength, risk management, and technical analysis in action. The course objective is to have students walk away with the knowledge and skills to initiate profitable trades consistently.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-47"> For beginners, the best use of JC Paret's Charting School course may be to use it as a follow-up to another beginner's course to gain valuable insight while reinforcing what you have already learned. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-1"> While it's certainly possible to learn technical analysis from a book, the most effective way to learn everything you need to know is from a course. A quality course will include much of the same content as a book, but it adds visual learning along with expert instruction for added insights, context, and real-world demonstration of the concepts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-2"> For most people, that is a better investment of their time or money. All the courses in our roundup meet those criteria, but the benefits vary for individuals with different experience levels, learning styles, and budgets.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> For example, if you're a complete novice to technical analysis, there is no better course than Travis Rose's Ultimate Candlestick Trading &amp; Analysis Masterclass Bundle. His focus is on sharing his knowledge so you can avoid the mistakes he made starting out. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-4"> But if you prefer to put your knowledge to work while you learn, the Bearish Bulls is a great way to join a trading community that is open to helping new traders.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-5"> Having access to top-tier charts and analysis tools is critical for applying your knowledge. StockCharts is one of the best charting services that brings traders along with its standout Charting School.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-6"> With its comprehensive offering of educational resources, Chart Guys is a virtual soup-to-nuts source of everything you need to move all the way up the learning curve.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-7"> As with any challenging endeavor, you can't go wrong with learning from one of the greats. That's what the Charting School offers. Designed and instructed by the world-renowned technical analyst, JC Parets.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-8"> Finally, you can't do better than Udemy's low-cost, in-depth, expert instruction through its Technical Analysis Masterclass—our pick as the best overall technical analysis course.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-9"> <span class="mntl-sc-block-heading__text"> Compare Providers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-10"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Technical Analysis Course</b></th> <th><b>Wins For</b></th> <th><b>Cost</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><a data-affiliate-link-rewriter="u1=${REQUEST_ID}-${DOC_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&amp;mid=39197&amp;murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F" rel="sponsored nofollow">Udemy</a></td> <td>Best Overall</td> <td>$17.99</td> </tr> <tr> <td><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle" rel="sponsored nofollow">Travis Rose</a></td> <td>Best for Beginners</td> <td>$1000.00</td> </tr> <tr> <td><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bullishbears.com/online-trading-courses/" rel="sponsored nofollow">Bearish Bulls</a></td> <td>Best for Learning While Trading</td> <td>Free course, then $49 per month</td> </tr> <tr> <td><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://stockcharts.com/" rel="sponsored nofollow">StockCharts</a></td> <td>Best for Charting Services</td> <td>Free course, then $14.95 per month</td> </tr> <tr> <td><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chartguys.com/" rel="sponsored nofollow">Chart Guys</a></td> <td>Best for Comprehensive Offering</td> <td>Free course, then $99 per month</td> </tr> <tr> <td><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.chartingschool.com/courses/chartingschool" rel="sponsored nofollow">Charting School</a></td> <td>Best for Learning From One of the Greats</td> <td>$495</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-frequently-asked-questions"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-11"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions<br/> </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-12"> <span class="heading-toc" id="toc-what-is-technical-analysis"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Technical Analysis?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Unlike <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/difference-between-fundamental-and-technical-analysis/">fundamental analysis</a>, which looks at a company's financials and market position to determine if its stock is undervalued or overvalued, technical analysis focuses on the price action to predict future movements with a high probability. By using technical charts to identify a stock's strengths and weaknesses and reviewing its history of price action, trends, and volume, traders use technical analysis to predict its movement in the short term.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-13"> <span class="heading-toc" id="toc-what-is-technical-analysis-used-for"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Technical Analysis Used For?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The information gathered through technical analysis is used to predict the likely outcomes of a trade so you can make better trading decisions in an unemotional and unbiased way. It is used in different ways depending on your investment objectives. For example, it could be used by day traders trying to capture short-term profits between the opening and closing bells of the market. Swing traders use it to monitor price changes and identify trends over a more extended period of time. Portfolio managers use technical analysis alongside fundamental analysis to identify investment opportunities for their clients. Generally, any investor who used technical analysis is trying to maximize their return on investment.  </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-14"> <span class="heading-toc" id="toc-what-skills-do-you-learn-in-a-technical-analysis-course"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Skills Do You Learn in a Technical Analysis Course?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You should expect to spend time gaining a fundamental understanding of the critical concepts, such as the purpose of technical analysis, how to read and analyze a stock chart, how to use support and resistance, and how to read and interpret the various chart patterns. Beyond the technical aspects, a good course will delve into behavioral economics and risk management. </p><p>The next step is to apply the knowledge you learn. Some courses offer the opportunity to learn while doing. For courses that don't, you can sign up for a demo trading account, such as TD Ameritrade's thinkorswim platform, which allows you to practice trades and backtest them to see how they might have performed over time. The idea is to experience trial and error and build your confidence without actually risking any money.</p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-15"> <span class="heading-toc" id="toc-what-makes-a-great-technical-analysis-course"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Makes a Great Technical Analysis Course?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Not all technical analysis courses are the same. What differentiates the great courses is expert instruction and access to tools and resources to accelerate the learning curve. While most instructors for technical analysis courses claim a successful track record of profitable trades, not all have the unique ability to translate complex concepts into easily understood terms. The most successful trader in the world has no value in a technical analysis course if he makes it difficult to learn. A great course has a comprehensive offering of content, learning resources, and tools so you can progress from learning to doing quickly. Finally, access to the instructor, or a mentor, or a community is critical for addressing your specific needs and questions. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-16"> <span class="heading-toc" id="toc-how-much-do-technical-analysis-courses-cost"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Do Technical Analysis Courses Cost?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You don't have to spend a dime to access a technical analysis course if you don't want to. Several of the courses in this roundup offer free access to beginning courses. Consider whether you can gain enough from a free course to make the leap from education to practical application. You can always take a free course and then use a demo trading platform to practice. The advantage of some of the more expensive courses is not only the expert instruction, but it's also the access to trading tools and resources that can further advance your learning. A course that offers that, along with access to mentors or a supportive trading community, can be well worth the investment. From the courses in this roundup, that investment can be as low as $15 up to $99 a month for the subscriptions. Other courses give lifetime access, but can charge $1,000+.  </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-17"> <span class="heading-toc" id="toc-who-should-take-a-technical-analysis-course"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Should Take a Technical Analysis Course?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Anyone who has ambitions of generating profits through trading should take a technical analysis course. It's certainly worthwhile for complete <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/102914/technical-analysis-strategies-beginners.asp">novices</a>, but even intermediate and advanced traders can use a course to sharpen their skills, especially if they have access to a community of like-minded traders. </p></div> </div><!-- end: comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer --> <span class="heading-toc" id="toc-how-we-chose-the-best-technical-analysis-courses"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-18"> <span class="mntl-sc-block-heading__text"> How We Chose the Best Technical Analysis Courses </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-19"> Many trading courses offer technical analysis classes as part of their curriculum, and some are very good. We chose to target trading courses that focus on technical analysis because it is a specialized part of the trading process. In our initial search of technical analysis courses, we found more than 20 U.S.-based online courses. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-20"> We narrowed the list to a dozen using criteria such as track record, instructor experience, course format, learning resources, mentor or community support, price, and other value-added features. We then compared those to find the best technical analysis courses in six categories. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> </div> <figure class="comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image" id="primary-image--roundup_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Best Technical Analysis Course" class="primary-image__image mntl-primary-image--blurry" height="1414" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/8j9MUwVGYOLoV7g_8ANSBakQdpk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg" srcset="https://www.investopedia.com/thmb/kBsFAOMJmQUpX1P0tpTuvcaL6gY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="2121"/> <noscript> <img alt="Best Technical Analysis Course" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1414" sizes="750px" src="https://www.investopedia.com/thmb/8j9MUwVGYOLoV7g_8ANSBakQdpk=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg" srcset="https://www.investopedia.com/thmb/kBsFAOMJmQUpX1P0tpTuvcaL6gY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg 750w" width="2121"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>d3sign / Getty Images</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--roundup primary-image mntl-universal-primary-image primary-image --> </div> </div> </div><!-- end: comp 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Successful traders look to [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) to unlock the key to stock price movements in order to identify potentially profitable trading opportunities. Technical analysis is a complex discipline involving price trend lines, chart patterns, and calculated indicators that need to be interpreted to know the optimum time to enter and exit a trade. While it's not an exact science, successful traders who master technical analysis get it right much more often than they get it wrong. Trading with technical analysis requires a lot of study and practice. In addition to [studying patterns and indicators](https://www.investopedia.com/trading/best-ways-learn-technical-analysis/), you need to master behavioral economics and risk management. The more knowledge and practice you have, the more confidence you gain. The best way to get there is with a quality technical analysis trading course.  The popularity of trading in stocks, penny stocks, options, and forex has led to the proliferation of trading courses, including technical analysis. The problem is many trading courses promise spectacular results but then fail to deliver. To navigate that minefield effectively, we reviewed the top technical analysis courses in six distinct categories. ## Best Technical Analysis Courses in 2024 * **Best Overall:** [Udemy](https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&mid=39197&murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F) * **Best for Beginners:** [Travis Rose](https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle) * **Best for Learning While Trading:** [Bullish Bears](https://bullishbears.com/referral.html?p=DotdashPM&w=daytrading) * **Best for Charting Services:** [StockCharts](https://stockcharts.com/) * **Best for Comprehensive Offering:** [Chart Guys](https://www.chartguys.com/) * **Best for Learning From One of the Greats:** [Charting School](https://www.chartingschool.com/courses/chartingschool) Investopedia offers its own technical analysis course as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the [Investopedia Academy](https://academy.investopedia.com/products/financial-modeling). Best Technical Analysis Courses Expand Best Technical Analysis Courses * [Our Top Picks](#summary-list) * [Udemy](#toc-best-overall-udemy) * [Travis Rose](#toc-best-for-beginners-travis-rose) * [Bullish Bears](#toc-best-for-learning-while-trading-bullish-bears) * [StockCharts](#toc-best-for-charting-services-stockcharts) * [Chart Guys](#toc-best-for-comprehensive-offering-chart-guys) * [Charting School](#toc-best-for-learning-from-one-of-the-greats-charting-school) * See More (3) * [Final Verdict](#toc-final-verdict) * [Compare Providers](#toc-compare-providers) * [Frequently Asked Questions](#toc-frequently-asked-questions) * [What Is Technical Analysis?](#toc-what-is-technical-analysis) * [What Is Technical Analysis Used For?](#toc-what-is-technical-analysis-used-for) * [What Skills Do You Learn in a Technical Analysis Course?](#toc-what-skills-do-you-learn-in-a-technical-analysis-course) * [What Makes a Great Technical Analysis Course?](#toc-what-makes-a-great-technical-analysis-course) * [How Much Do Technical Analysis Courses Cost?](#toc-how-much-do-technical-analysis-courses-cost) * [Who Should Take a Technical Analysis Course?](#toc-who-should-take-a-technical-analysis-course) * [Methodology](#toc-how-we-chose-the-best-technical-analysis-courses) ### Best Overall : Udemy --- ![Udemy]() :fill(white):max_bytes(150000):strip_icc()/Udemy_Logo_TM_Pos_RGB_Lcopy-3ce2d06eb4524ac9ab04ef55f8a2ca60.jpg) Udemy [Sign Up Now](https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&mid=39197&murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F) Udemy's Technical Analysis Masterclass covers everything beginning and intermediate traders need to know for a low price of $17.99, making it our choice as the best overall technical analysis course. Pros * World-class provider of educational courses * Beginning to intermediate instruction for less than $40 * Courses taught by successful traders * Lifetime access to materials Cons * No opportunity for practical application As the world's largest online learning marketplace, Udemy has become the go-to source for anything related to investing. Udemy's Technical Analysis Masterclass is one of its more popular courses, offering on-demand video, downloadable resources, practice tests, and lifetime access. Led by Certified Technical Analyst Jyoti Bansal, Udemy's Technical Analysis Masterclass makes our list as the best overall technical analysis course.  Udemy is known for bringing world-class instructors to its education platform, and Jyoti Bansal is no exception. She is a double-Certified Technical Analyst with deep industry experience. As evidenced by the more than 55,000 students who've taken her class with over 11,000 positive reviews, Jyoti really delivers in the class. In addition to seven on-demand video classes, you get access to seven articles, eight downloadable resources, two practice tests, and four assignments with in-depth explanations. For the low price of $17.99, you also get lifetime access to all materials, including updated content. Upon successful completion of the course, students receive a certificate of completion. You can then follow up the beginning course with the Technical Analysis Masterclass part two for another $17.99. Part two helps you to maximize your knowledge to become a more efficient trader. CourseMarks, which helps students find the best classes based on student feedback and content freshness and diversity, gives the Technical Analysis Masterclass a rating of 9.8 out of 10. ### Best for Beginners : Travis Rose --- ![Entrepreneur.com Store]() :fill(white):max_bytes(150000):strip_icc()/store-5a8be8a5fc344d91b9e37691e8736316.jpg) Entrepreneur.com Store [Sign Up Now](https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle) The Ultimate Candlestick Trading & Analysis Masterclass Bundle by Travis Rose is a content-rich course that can take you from complete novice to trading in just a few weeks. That's why it is our choice as the best technical analysis course for beginners. Pros * Designed specifically for beginners * Comprehensive course * Lifetime access to materials * Top rating Cons * No coaching or mentoring The Ultimate Candlestick Trading & Analysis Masterclass Bundle is designed for new traders who want to learn a step-by-step process for properly analyzing candlestick charts. Travis Rose, a full-time day trader and investor with more than five years of sustained success, has laid out an extensive course to help novice traders avoid the mistakes and pain points he experienced starting out, making it our choice as the best technical analysis course for beginners.  The five-course bundle is stacked with beginner-friendly content and resources, including 136 lessons, 40 lectures, on-demand videos, 14 multiple-choice quizzes, a free stock trading ebook with bonus in-depth trading strategies, tips, and valuable market resources. It also includes live market examples for watching trades in action.  For $1,000 you get lifetime access to the course content, which is refreshed regularly. While there is no coaching, mentoring, or chat rooms for interactive learning, this extensive, self-paced course can elevate you to a level where you can get more out of a paid trading program.  Travis Rose's courses have earned an average of 4.5 out of five stars on the Entrepreneur.com Store. ### Best for Learning While Trading : Bullish Bears --- ![Bullish Bears]() :fill(white):max_bytes(150000):strip_icc()/Bullish_bears-f4ca6307cf8a4a0b920765b18df080b5.jpg)  Bullish Bears [Sign Up Now](https://bullishbears.com/referral.html?p=DotdashPM&w=daytrading) For beginning traders who want to be a part of the action while learning technical analysis, the Bullish Bears is a great choice. It offers ten free courses and an ebook with free, seven-day access to its trading room and other valuable trading tools, making it our pick as the best technical analysis course for learning while doing. Pros * Free beginner course and ebook * 7-day free trial membership with complete access * Low-cost access to comprehensive training resources * 24/7 access to chat rooms * Live-stream screen share and other tools for understanding trading action Cons * Few online reviews For people who prefer experiential learning—learning by doing—Bullish Bears offers a free ebook and courses on technical analysis along with a 7-day free membership trial with complete access to its trading room and other valuable learning tools. That makes the Bullish Bears our choice as the best technical analysis course for learning while doing.  Bullish Bears has made a name for itself as a stock trading service that "pays it forward," based on its desire to help anyone who wants to learn to succeed as a trader. To that end, it has managed to stack its membership with the tools, resources, and instruction anyone could need to develop as a trader for just $49 a month.  In recognition that successful trading begins with sound technical analysis, Bullish Bears added ten free technical analysis courses and an ebook to its extensive learning toolkit. While it's not required, you could subscribe to their free seven-day trial for the opportunity to learn alongside other traders. You'll be exposed to traders utilizing technical analysis to set up your trades and hear their commentary as the trades unfold. At most, it can reinforce your learning, and, at the very least, it can be very motivating.  When the trial is over, you can continue full access to additional courses, the trading room, and valuable trading tools for $49 a month or $249 a year. ### Best for Charting Services : StockCharts --- ![StockCharts]() :fill(white):max_bytes(150000):strip_icc()/StockCharts-8ad1e22859ea4ef48eecf69605e6ff0d.jpg) StockCharts [Sign Up Now](https://stockcharts.com/) StockCharts is a premier provider of chart services that also offers a voluminous library of articles, guides, and resources to learn how to read and interpret them, making it our choice as the best technical analysis course for charting services. Pros * Free access to extensive learning library * Includes free access to charting services * Extensive offering of charts * Low-cost monthly membership Cons * Free charting service is limited * Free chart data is not dynamic Learning technical analysis through a charting service can be overwhelming for new traders. You could have access to the best charts and analysis tools in the world but, if you can't read and interpret them, they are worthless. StockCharts is a leading chart service that also offers a Charting School with a wide range of free articles, guides, and resources to help traders of any experience level move up the learning curve. That's why we chose StockCharts as the best technical analysis course for charting services. A good charting service can be an advantage for traders looking for a leg up in technical analysis. StockCharts offers a variety of useful chart types and analysis tools. The more you know about technical analysis and charts, the more valuable they can be. New traders can use StockCharts' Charting School to learn experientially. The Charting School is an extensive library of dozens of articles organized as course chapters, such as Chart Analysis, Technical Indicators & Overlays, and Market Analysis. In another section, you can learn how to use the various charting tools and resources, such as StockCharts' award-winning financial charting tool and its full-screen, interactive Advanced Charting Platform. The section goes on to teach you how to use the many chart analysis tools available through StockCharts.  The Charting School is free—as is its charting service that you can use to start analyzing charts. However, the free service has delayed data and limited access to other tools such as the scanner, intraday charts, and alerts. However, that may be sufficient if you aren't an intraday trader.  StockCharts offers three levels of paid monthly service—Basic ($14.95), Extra ($24.95), and Pro ($39.95)—with varying rates of data. The higher the level of service, the quicker refreshing of the data. Each level offers a one-month free trial. ### Best for Comprehensive Offering : Chart Guys --- ![Chart Guys]() :fill(white):max_bytes(150000):strip_icc()/Chart_Guys-4891c1ac52394554b059291edbc5c11d.jpg)  Chart Guys [Sign Up Now](https://www.chartguys.com/) You can start with the Chart Guys' excellent beginner's course for free, but the educational resources really begin to flow once you subscribe as a member, which is why we picked the Chart Guys as the best technical analysis course for a comprehensive offering. Pros * Comprehensive beginner's course offering * Extensive trading community * Supportive learning environment * Great value for a $99 membership Cons With its seven modules and 40 lessons of on-demand video content, the beginner's course ranks high as one of the best free course offerings. However, the real learning begins with a paid membership ($99 per month or $899 per year). It is as packed full of educational resources as you will find, making it our choice as the best technical analysis course for comprehensive offering.  The Chart Guys was established in 2015 as an educational resource for traders focusing on technical analysis, but its strength lies in its community of thousands of traders who actively lend their insights and support to each other. Mentoring, group-based learning, and peer-led study groups form a vital pillar of the learning experience.  Its educational library consists of courses, reference materials, and educational videos. The interactive component is comprised of regular live webinars, beginner-friendly conference calls, daily live coverage of the markets, real-time Q&A with the community of professional traders, and individual consultation sessions. All of this is conducted in the context of a 24/7 trading community. ### Best for Learning From One of the Greats : Charting School --- ![Charting School]() :fill(white):max_bytes(150000):strip_icc()/Charting_School-4d300fd1422a4f228210156527ed5259.jpg)  Charting School [Sign Up Now](https://www.chartingschool.com/courses/chartingschool) When your money is on the line, learning from one of the greats can be priceless, and course designer and instructor JC Parets is one of the most widely followed technical analysts in the world. That makes the Charting School our choice as the best technical analysis course for learning from one of the greats. Pros * Designed and instructed by world-renowned technical analyst * Deep dive into critical technical analysis topics * Fair price for an expert-led course Cons * Course designed primarily for beginners * No coaching, mentoring, or trading community If you're going to learn something as complex as technical analysis, you might as well learn from one of the best. JC Parets is a world-renowned technical analyst and founder of All-Star Charts. You might recognize JC from one of his many appearances on the major financial media outlets. Fortunately for his many students, one of his strengths is translating complex concepts into terms anyone can understand. For $495, the Charting School offers a seven-course curriculum designed for beginners. The course combines studio-quality videos with lesson quizzes to help with your retention throughout the course. Each lesson takes you in-depth to learn critical technical analysis concepts such as trend recognition, momentum and relative strength, risk management, and technical analysis in action. The course objective is to have students walk away with the knowledge and skills to initiate profitable trades consistently.  For beginners, the best use of JC Paret's Charting School course may be to use it as a follow-up to another beginner's course to gain valuable insight while reinforcing what you have already learned. ## Final Verdict While it's certainly possible to learn technical analysis from a book, the most effective way to learn everything you need to know is from a course. A quality course will include much of the same content as a book, but it adds visual learning along with expert instruction for added insights, context, and real-world demonstration of the concepts. For most people, that is a better investment of their time or money. All the courses in our roundup meet those criteria, but the benefits vary for individuals with different experience levels, learning styles, and budgets.  For example, if you're a complete novice to technical analysis, there is no better course than Travis Rose's Ultimate Candlestick Trading & Analysis Masterclass Bundle. His focus is on sharing his knowledge so you can avoid the mistakes he made starting out. But if you prefer to put your knowledge to work while you learn, the Bearish Bulls is a great way to join a trading community that is open to helping new traders.  Having access to top-tier charts and analysis tools is critical for applying your knowledge. StockCharts is one of the best charting services that brings traders along with its standout Charting School.  With its comprehensive offering of educational resources, Chart Guys is a virtual soup-to-nuts source of everything you need to move all the way up the learning curve.  As with any challenging endeavor, you can't go wrong with learning from one of the greats. That's what the Charting School offers. Designed and instructed by the world-renowned technical analyst, JC Parets.  Finally, you can't do better than Udemy's low-cost, in-depth, expert instruction through its Technical Analysis Masterclass—our pick as the best overall technical analysis course.  ## Compare Providers | **Technical Analysis Course** | **Wins For** | **Cost** | | --- | --- | --- | | [Udemy](https://click.linksynergy.com/deeplink?id=Q*Sg3glZ/fs&mid=39197&murl=https%3A%2F%2Fwww.udemy.com%2Fcourse%2Ftechnical_analysis%2F) | Best Overall | $17.99 | | [Travis Rose](https://store.entrepreneur.com/sales/the-ultimate-candlestick-trading-analysis-masterclass-bundle) | Best for Beginners | $1000.00 | | [Bearish Bulls](https://bullishbears.com/online-trading-courses/) | Best for Learning While Trading | Free course, then $49 per month | | [StockCharts](https://stockcharts.com/) | Best for Charting Services | Free course, then $14.95 per month | | [Chart Guys](https://www.chartguys.com/) | Best for Comprehensive Offering | Free course, then $99 per month | | [Charting School](https://www.chartingschool.com/courses/chartingschool) | Best for Learning From One of the Greats | $495 | ## Frequently Asked Questions ## What Is Technical Analysis? Unlike [fundamental analysis](https://www.investopedia.com/ask/answers/difference-between-fundamental-and-technical-analysis/), which looks at a company's financials and market position to determine if its stock is undervalued or overvalued, technical analysis focuses on the price action to predict future movements with a high probability. By using technical charts to identify a stock's strengths and weaknesses and reviewing its history of price action, trends, and volume, traders use technical analysis to predict its movement in the short term. ## What Is Technical Analysis Used For? The information gathered through technical analysis is used to predict the likely outcomes of a trade so you can make better trading decisions in an unemotional and unbiased way. It is used in different ways depending on your investment objectives. For example, it could be used by day traders trying to capture short-term profits between the opening and closing bells of the market. Swing traders use it to monitor price changes and identify trends over a more extended period of time. Portfolio managers use technical analysis alongside fundamental analysis to identify investment opportunities for their clients. Generally, any investor who used technical analysis is trying to maximize their return on investment.   ## What Skills Do You Learn in a Technical Analysis Course? You should expect to spend time gaining a fundamental understanding of the critical concepts, such as the purpose of technical analysis, how to read and analyze a stock chart, how to use support and resistance, and how to read and interpret the various chart patterns. Beyond the technical aspects, a good course will delve into behavioral economics and risk management.  The next step is to apply the knowledge you learn. Some courses offer the opportunity to learn while doing. For courses that don't, you can sign up for a demo trading account, such as TD Ameritrade's thinkorswim platform, which allows you to practice trades and backtest them to see how they might have performed over time. The idea is to experience trial and error and build your confidence without actually risking any money. ## What Makes a Great Technical Analysis Course? Not all technical analysis courses are the same. What differentiates the great courses is expert instruction and access to tools and resources to accelerate the learning curve. While most instructors for technical analysis courses claim a successful track record of profitable trades, not all have the unique ability to translate complex concepts into easily understood terms. The most successful trader in the world has no value in a technical analysis course if he makes it difficult to learn. A great course has a comprehensive offering of content, learning resources, and tools so you can progress from learning to doing quickly. Finally, access to the instructor, or a mentor, or a community is critical for addressing your specific needs and questions.  ## How Much Do Technical Analysis Courses Cost? You don't have to spend a dime to access a technical analysis course if you don't want to. Several of the courses in this roundup offer free access to beginning courses. Consider whether you can gain enough from a free course to make the leap from education to practical application. You can always take a free course and then use a demo trading platform to practice. The advantage of some of the more expensive courses is not only the expert instruction, but it's also the access to trading tools and resources that can further advance your learning. A course that offers that, along with access to mentors or a supportive trading community, can be well worth the investment. From the courses in this roundup, that investment can be as low as $15 up to $99 a month for the subscriptions. Other courses give lifetime access, but can charge $1,000+.   ## Who Should Take a Technical Analysis Course? Anyone who has ambitions of generating profits through trading should take a technical analysis course. It's certainly worthwhile for complete [novices](https://www.investopedia.com/articles/active-trading/102914/technical-analysis-strategies-beginners.asp), but even intermediate and advanced traders can use a course to sharpen their skills, especially if they have access to a community of like-minded traders.  ## How We Chose the Best Technical Analysis Courses Many trading courses offer technical analysis classes as part of their curriculum, and some are very good. We chose to target trading courses that focus on technical analysis because it is a specialized part of the trading process. In our initial search of technical analysis courses, we found more than 20 U.S.-based online courses. We narrowed the list to a dozen using criteria such as track record, instructor experience, course format, learning resources, mentor or community support, price, and other value-added features. We then compared those to find the best technical analysis courses in six categories. :max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg) :max_bytes(150000):strip_icc()/GettyImages-1300072590-bf0b5892da5e44d2ac62410ba68ad8f1.jpg) d3sign / Getty Images Related Articles [![The Best Online Stock Trading Classes of 2024]() :max_bytes(150000):strip_icc()/best-online-stock-trading-classes-5089249-final-5f670112acf14b0bad8dd17476aff54c.png) Best Online Stock Trading Classes](https://www.investopedia.com/best-online-stock-trading-classes-5089249) [![Cryptocurrency Trading Courses]() :max_bytes(150000):strip_icc()/GettyImages-1355479732-318ac0f2644c4a0585a6272f48263115.jpg) Best Cryptocurrency Trading Courses](https://www.investopedia.com/best-cryptocurrency-trading-courses-5111984) [![Best Investing Courses of 2024]() :max_bytes(150000):strip_icc()/best-investing-courses-4783334-final-c2944bda24bd4811838dfdc898c9148a.png) Best Investing Courses](https://www.investopedia.com/best-investing-courses-4783334) [![Online Excel Classes]() :max_bytes(150000):strip_icc()/GettyImages-1338939205-39760f3cc00f40bea60d3ac2db71fa00.jpg) Best Online Excel Courses for May 2024](https://www.investopedia.com/best-online-excel-classes-4845516) [![Best Day Trading Courses]() :max_bytes(150000):strip_icc()/GettyImages-1300319507-1360c0adac604e6f952763ff41c1ce26.jpg) Best Day Trading Courses](https://www.investopedia.com/best-day-trading-courses-5176199) [![Best Seriess 66 Exam Prep Courses]() :max_bytes(150000):strip_icc()/GettyImages-1401269015-41777a0c07cc4a26968c83e2b1c2e56e.jpg) Best Series 66 Exam Prep Courses](https://www.investopedia.com/best-series-66-exam-prep-courses-5085115) Related Terms [Forex Training: What It is, How It Works](https://www.investopedia.com/terms/forex/f/forex-currency-trading-training.asp) Forex training, broadly, is a guide for retail forex traders, offering them insight into successful strategies, signals and systems. [more](https://www.investopedia.com/terms/forex/f/forex-currency-trading-training.asp) [Entrepreneur: What It Means to Be One and How to Get Started](https://www.investopedia.com/terms/e/entrepreneur.asp) Entrepreneurs create new businesses, taking on all the risks and rewards of their company. Learn about entrepreneurship and the challenges facing entrepreneurs. [more](https://www.investopedia.com/terms/e/entrepreneur.asp) [Passive Income: What It Is and Ideas for 2024](https://www.investopedia.com/terms/p/passiveincome.asp) Passive income is earnings from a rental property, limited partnership, or other enterprise in which a person is not actively involved. [more](https://www.investopedia.com/terms/p/passiveincome.asp) [What Is a Bloomberg Terminal? Functions, Costs, and Alternatives](https://www.investopedia.com/terms/b/bloomberg_terminal.asp) A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. [more](https://www.investopedia.com/terms/b/bloomberg_terminal.asp) [Aptitude Test: Definition, How It's Used, Types, and How to Pass](https://www.investopedia.com/terms/a/aptitude-test.asp) An aptitude test is an exam or survey used to determine an individual's propensity to succeed in a given activity. [more](https://www.investopedia.com/terms/a/aptitude-test.asp) [Technical Analysis of Stocks and Trends Definition](https://www.investopedia.com/terms/t/technical-analysis-of-stocks-and-trends.asp) Technical analysis of stocks and trends is the study of historical market data, including price and volume, to predict future market behavior. [more](https://www.investopedia.com/terms/t/technical-analysis-of-stocks-and-trends.asp)

Successful traders look to technical analysis to unlock the key to stock price movements in order to identify potentially profitable trading opportunities. Technical analysis is a complex discipline involving price trend lines, chart patterns, and calculated indicators that need to be interpreted to know the optimum time to enter and exit a trade. While it's not an exact science, successful traders who master technical analysis get it right much more often than they get it wrong. Trading with technical analysis requires a lot of study and practice. In addition to studying patterns and indicators, you need to master behavioral economics and risk management. The more knowledge and practice you have, the more confidence you gain. The best way to get there is with a quality technical analysis trading course.  The popularity of trading in stocks, penny stocks, options, and forex has led to the proliferation of trading courses, including technical analysis. The problem is many trading courses promise spectacular results but then fail to deliver. To navigate that minefield effectively, we reviewed the top technical analysis courses in six distinct categories. Best Technical Analysis Courses in 2024 Best Overall: Udemy Best for Beginners: Travis Rose Best for Learning While Trading: Bullish Bears Best for Charting Services: StockCharts Best for Comprehensive Offering: Chart Guys Best for Learning From One of the Greats: Charting School Investopedia offers its own technical analysis course as part of the Investopedia Academy, but to maintain objectivity, we opted to exclude it from this roundup. If you are interested in this course, please visit the Investopedia Academy. Best Technical Analysis Courses Expand Best Technical Analysis Courses Our Top Picks Udemy Travis Rose Bullish Bears StockCharts Chart Guys Charting School See More (3) Final Verdict Compare Providers Frequently Asked Questions What Is Technical Analysis? What Is Technical Analysis Used For? What Skills Do You Learn in a Technical Analysis Course? What Makes a Great Technical Analysis Course? How Much Do Technical Analysis Courses Cost? Who Should Take a Technical Analysis Course? Methodology Best Overall : Udemy Udemy Sign Up Now Udemy's Technical Analysis Masterclass covers everything beginning and intermediate traders need to know for a low price of $17.99, making it our choice as the best overall technical analysis course. Pros World-class provider of educational courses Beginning to intermediate instruction for less than $40 Courses taught by successful traders Lifetime access to materials Cons No opportunity for practical application As the world's largest online learning marketplace, Udemy has become the go-to source for anything related to investing. Udemy's Technical Analysis Masterclass is one of its more popular courses, offering on-demand video, downloadable resources, practice tests, and lifetime access. Led by Certified Technical Analyst Jyoti Bansal, Udemy's Technical Analysis Masterclass makes our list as the best overall technical analysis course.  Udemy is known for bringing world-class instructors to its education platform, and Jyoti Bansal is no exception. She is a double-Certified Technical Analyst with deep industry experience. As evidenced by the more than 55,000 students who've taken her class with over 11,000 positive reviews, Jyoti really delivers in the class. In addition to seven on-demand video classes, you get access to seven articles, eight downloadable resources, two practice tests, and four assignments with in-depth explanations. For the low price of $17.99, you also get lifetime access to all materials, including updated content. Upon successful completion of the course, students receive a certificate of completion. You can then follow up the beginning course with the Technical Analysis Masterclass part two for another $17.99. Part two helps you to maximize your knowledge to become a more efficient trader. CourseMarks, which helps students find the best classes based on student feedback and content freshness and diversity, gives the Technical Analysis Masterclass a rating of 9.8 out of 10. Best for Beginners : Travis Rose Entrepreneur.com Store Sign Up Now The Ultimate Candlestick Trading & Analysis Masterclass Bundle by Travis Rose is a content-rich course that can take you from complete novice to trading in just a few weeks. That's why it is our choice as the best technical analysis course for beginners. Pros Designed specifically for beginners Comprehensive course Lifetime access to materials Top rating Cons No coaching or mentoring The Ultimate Candlestick Trading & Analysis Masterclass Bundle is designed for new traders who want to learn a step-by-step process for properly analyzing candlestick charts. Travis Rose, a full-time day trader and investor with more than five years of sustained success, has laid out an extensive course to help novice traders avoid the mistakes and pain points he experienced starting out, making it our choice as the best technical analysis course for beginners.  The five-course bundle is stacked with beginner-friendly content and resources, including 136 lessons, 40 lectures, on-demand videos, 14 multiple-choice quizzes, a free stock trading ebook with bonus in-depth trading strategies, tips, and valuable market resources. It also includes live market examples for watching trades in action.  For $1,000 you get lifetime access to the course content, which is refreshed regularly. While there is no coaching, mentoring, or chat rooms for interactive learning, this extensive, self-paced course can elevate you to a level where you can get more out of a paid trading program.  Travis Rose's courses have earned an average of 4.5 out of five stars on the Entrepreneur.com Store. Best for Learning While Trading : Bullish Bears  Bullish Bears Sign Up Now For beginning traders who want to be a part of the action while learning technical analysis, the Bullish Bears is a great choice. It offers ten free courses and an ebook with free, seven-day access to its trading room and other valuable trading tools, making it our pick as the best technical analysis course for learning while doing. Pros Free beginner course and ebook 7-day free trial membership with complete access Low-cost access to comprehensive training resources 24/7 access to chat rooms Live-stream screen share and other tools for understanding trading action Cons Few online reviews For people who prefer experiential learning—learning by doing—Bullish Bears offers a free ebook and courses on technical analysis along with a 7-day free membership trial with complete access to its trading room and other valuable learning tools. That makes the Bullish Bears our choice as the best technical analysis course for learning while doing.  Bullish Bears has made a name for itself as a stock trading service that "pays it forward," based on its desire to help anyone who wants to learn to succeed as a trader. To that end, it has managed to stack its membership with the tools, resources, and instruction anyone could need to develop as a trader for just $49 a month.  In recognition that successful trading begins with sound technical analysis, Bullish Bears added ten free technical analysis courses and an ebook to its extensive learning toolkit. While it's not required, you could subscribe to their free seven-day trial for the opportunity to learn alongside other traders. You'll be exposed to traders utilizing technical analysis to set up your trades and hear their commentary as the trades unfold. At most, it can reinforce your learning, and, at the very least, it can be very motivating.  When the trial is over, you can continue full access to additional courses, the trading room, and valuable trading tools for $49 a month or $249 a year. Best for Charting Services : StockCharts StockCharts Sign Up Now StockCharts is a premier provider of chart services that also offers a voluminous library of articles, guides, and resources to learn how to read and interpret them, making it our choice as the best technical analysis course for charting services. Pros Free access to extensive learning library Includes free access to charting services Extensive offering of charts Low-cost monthly membership Cons Free charting service is limited Free chart data is not dynamic Learning technical analysis through a charting service can be overwhelming for new traders. You could have access to the best charts and analysis tools in the world but, if you can't read and interpret them, they are worthless. StockCharts is a leading chart service that also offers a Charting School with a wide range of free articles, guides, and resources to help traders of any experience level move up the learning curve. That's why we chose StockCharts as the best technical analysis course for charting services. A good charting service can be an advantage for traders looking for a leg up in technical analysis. StockCharts offers a variety of useful chart types and analysis tools. The more you know about technical analysis and charts, the more valuable they can be. New traders can use StockCharts' Charting School to learn experientially. The Charting School is an extensive library of dozens of articles organized as course chapters, such as Chart Analysis, Technical Indicators & Overlays, and Market Analysis. In another section, you can learn how to use the various charting tools and resources, such as StockCharts' award-winning financial charting tool and its full-screen, interactive Advanced Charting Platform. The section goes on to teach you how to use the many chart analysis tools available through StockCharts.  The Charting School is free—as is its charting service that you can use to start analyzing charts. However, the free service has delayed data and limited access to other tools such as the scanner, intraday charts, and alerts. However, that may be sufficient if you aren't an intraday trader.  StockCharts offers three levels of paid monthly service—Basic ($14.95), Extra ($24.95), and Pro ($39.95)—with varying rates of data. The higher the level of service, the quicker refreshing of the data. Each level offers a one-month free trial. Best for Comprehensive Offering : Chart Guys  Chart Guys Sign Up Now You can start with the Chart Guys' excellent beginner's course for free, but the educational resources really begin to flow once you subscribe as a member, which is why we picked the Chart Guys as the best technical analysis course for a comprehensive offering. Pros Comprehensive beginner's course offering Extensive trading community Supportive learning environment Great value for a $99 membership Cons With its seven modules and 40 lessons of on-demand video content, the beginner's course ranks high as one of the best free course offerings. However, the real learning begins with a paid membership ($99 per month or $899 per year). It is as packed full of educational resources as you will find, making it our choice as the best technical analysis course for comprehensive offering.  The Chart Guys was established in 2015 as an educational resource for traders focusing on technical analysis, but its strength lies in its community of thousands of traders who actively lend their insights and support to each other. Mentoring, group-based learning, and peer-led study groups form a vital pillar of the learning experience.  Its educational library consists of courses, reference materials, and educational videos. The interactive component is comprised of regular live webinars, beginner-friendly conference calls, daily live coverage of the markets, real-time Q&A with the community of professional traders, and individual consultation sessions. All of this is conducted in the context of a 24/7 trading community. Best for Learning From One of the Greats : Charting School  Charting School Sign Up Now When your money is on the line, learning from one of the greats can be priceless, and course designer and instructor JC Parets is one of the most widely followed technical analysts in the world. That makes the Charting School our choice as the best technical analysis course for learning from one of the greats. Pros Designed and instructed by world-renowned technical analyst Deep dive into critical technical analysis topics Fair price for an expert-led course Cons Course designed primarily for beginners No coaching, mentoring, or trading community If you're going to learn something as complex as technical analysis, you might as well learn from one of the best. JC Parets is a world-renowned technical analyst and founder of All-Star Charts. You might recognize JC from one of his many appearances on the major financial media outlets. Fortunately for his many students, one of his strengths is translating complex concepts into terms anyone can understand. For $495, the Charting School offers a seven-course curriculum designed for beginners. The course combines studio-quality videos with lesson quizzes to help with your retention throughout the course. Each lesson takes you in-depth to learn critical technical analysis concepts such as trend recognition, momentum and relative strength, risk management, and technical analysis in action. The course objective is to have students walk away with the knowledge and skills to initiate profitable trades consistently.  For beginners, the best use of JC Paret's Charting School course may be to use it as a follow-up to another beginner's course to gain valuable insight while reinforcing what you have already learned. Final Verdict While it's certainly possible to learn technical analysis from a book, the most effective way to learn everything you need to know is from a course. A quality course will include much of the same content as a book, but it adds visual learning along with expert instruction for added insights, context, and real-world demonstration of the concepts. For most people, that is a better investment of their time or money. All the courses in our roundup meet those criteria, but the benefits vary for individuals with different experience levels, learning styles, and budgets.  For example, if you're a complete novice to technical analysis, there is no better course than Travis Rose's Ultimate Candlestick Trading & Analysis Masterclass Bundle. His focus is on sharing his knowledge so you can avoid the mistakes he made starting out. But if you prefer to put your knowledge to work while you learn, the Bearish Bulls is a great way to join a trading community that is open to helping new traders.  Having access to top-tier charts and analysis tools is critical for applying your knowledge. StockCharts is one of the best charting services that brings traders along with its standout Charting School.  With its comprehensive offering of educational resources, Chart Guys is a virtual soup-to-nuts source of everything you need to move all the way up the learning curve.  As with any challenging endeavor, you can't go wrong with learning from one of the greats. That's what the Charting School offers. Designed and instructed by the world-renowned technical analyst, JC Parets.  Finally, you can't do better than Udemy's low-cost, in-depth, expert instruction through its Technical Analysis Masterclass—our pick as the best overall technical analysis course.  Compare Providers Technical Analysis Course Wins For Cost Udemy Best Overall $17.99 Travis Rose Best for Beginners $1000.00 Bearish Bulls Best for Learning While Trading Free course, then $49 per month StockCharts Best for Charting Services Free course, then $14.95 per month Chart Guys Best for Comprehensive Offering Free course, then $99 per month Charting School Best for Learning From One of the Greats $495 Frequently Asked Questions What Is Technical Analysis? Unlike fundamental analysis, which looks at a company's financials and market position to determine if its stock is undervalued or overvalued, technical analysis focuses on the price action to predict future movements with a high probability. By using technical charts to identify a stock's strengths and weaknesses and reviewing its history of price action, trends, and volume, traders use technical analysis to predict its movement in the short term. What Is Technical Analysis Used For? The information gathered through technical analysis is used to predict the likely outcomes of a trade so you can make better trading decisions in an unemotional and unbiased way. It is used in different ways depending on your investment objectives. For example, it could be used by day traders trying to capture short-term profits between the opening and closing bells of the market. Swing traders use it to monitor price changes and identify trends over a more extended period of time. Portfolio managers use technical analysis alongside fundamental analysis to identify investment opportunities for their clients. Generally, any investor who used technical analysis is trying to maximize their return on investment.   What Skills Do You Learn in a Technical Analysis Course? You should expect to spend time gaining a fundamental understanding of the critical concepts, such as the purpose of technical analysis, how to read and analyze a stock chart, how to use support and resistance, and how to read and interpret the various chart patterns. Beyond the technical aspects, a good course will delve into behavioral economics and risk management. The next step is to apply the knowledge you learn. Some courses offer the opportunity to learn while doing. For courses that don't, you can sign up for a demo trading account, such as TD Ameritrade's thinkorswim platform, which allows you to practice trades and backtest them to see how they might have performed over time. The idea is to experience trial and error and build your confidence without actually risking any money. What Makes a Great Technical Analysis Course? Not all technical analysis courses are the same. What differentiates the great courses is expert instruction and access to tools and resources to accelerate the learning curve. While most instructors for technical analysis courses claim a successful track record of profitable trades, not all have the unique ability to translate complex concepts into easily understood terms. The most successful trader in the world has no value in a technical analysis course if he makes it difficult to learn. A great course has a comprehensive offering of content, learning resources, and tools so you can progress from learning to doing quickly. Finally, access to the instructor, or a mentor, or a community is critical for addressing your specific needs and questions.  How Much Do Technical Analysis Courses Cost? You don't have to spend a dime to access a technical analysis course if you don't want to. Several of the courses in this roundup offer free access to beginning courses. Consider whether you can gain enough from a free course to make the leap from education to practical application. You can always take a free course and then use a demo trading platform to practice. The advantage of some of the more expensive courses is not only the expert instruction, but it's also the access to trading tools and resources that can further advance your learning. A course that offers that, along with access to mentors or a supportive trading community, can be well worth the investment. From the courses in this roundup, that investment can be as low as $15 up to $99 a month for the subscriptions. Other courses give lifetime access, but can charge $1,000+.   Who Should Take a Technical Analysis Course? Anyone who has ambitions of generating profits through trading should take a technical analysis course. It's certainly worthwhile for complete novices, but even intermediate and advanced traders can use a course to sharpen their skills, especially if they have access to a community of like-minded traders.  How We Chose the Best Technical Analysis Courses Many trading courses offer technical analysis classes as part of their curriculum, and some are very good. We chose to target trading courses that focus on technical analysis because it is a specialized part of the trading process. In our initial search of technical analysis courses, we found more than 20 U.S.-based online courses. We narrowed the list to a dozen using criteria such as track record, instructor experience, course format, learning resources, mentor or community support, price, and other value-added features. We then compared those to find the best technical analysis courses in six categories. d3sign / Getty Images Related Articles Best Online Stock Trading Classes Best Cryptocurrency Trading Courses Best Investing Courses Best Online Excel Courses for May 2024 Best Day Trading Courses Best Series 66 Exam Prep Courses Related Terms Forex Training: What It is, How It Works Forex training, broadly, is a guide for retail forex traders, offering them insight into successful strategies, signals and systems. more Entrepreneur: What It Means to Be One and How to Get Started Entrepreneurs create new businesses, taking on all the risks and rewards of their company. Learn about entrepreneurship and the challenges facing entrepreneurs. more Passive Income: What It Is and Ideas for 2024 Passive income is earnings from a rental property, limited partnership, or other enterprise in which a person is not actively involved. more What Is a Bloomberg Terminal? Functions, Costs, and Alternatives A Bloomberg terminal is a computer system offering access to Bloomberg's investment data service, news feeds, messaging, and trade execution services. more Aptitude Test: Definition, How It's Used, Types, and How to Pass An aptitude test is an exam or survey used to determine an individual's propensity to succeed in a given activity. more Technical Analysis of Stocks and Trends Definition Technical analysis of stocks and trends is the study of historical market data, including price and volume, to predict future market behavior. more

https://www.investopedia.com/articles/markets/081716/facultative-vs-treaty-reinsurance-differences-and-examples.asp

Facultative vs. Treaty Reinsurance: What's the Difference?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-facultative-vs-treaty-reinsurance-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Facultative vs. Treaty Reinsurance: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/facultative-reinsurance.asp">Facultative reinsurance</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treaty-reinsurance.asp">reinsurance treaties</a> are two types of reinsurance contracts. When it comes to facultative reinsurance, the main insurer covers one risk or a series of risks held in its own books. Treaty reinsurance, on the other hand, is insurance purchased by an insurer from another company. With facultative reinsurance, the reinsurer can review the risks involved in an insurance policy and either accept or reject them. But the reinsurer in a treaty reinsurance policy, on the other hand, generally accepts all the risks involved with certain policies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Facultative and treaty reinsurance are both forms of reinsurance.</li><li>Facultative reinsurance is reinsurance for a single risk or a defined package of risks. </li><li>Facultative reinsurance occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured.</li><li>The ceding company in treaty reinsurance agrees to cede all risks to the reinsurer.</li><li>The reinsurer in treaty reinsurance agrees to cover all risks, even though the reinsurer hasn't performed individual underwriting for each policy.</li></ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_6-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Facultative vs. Treaty Reinsurance " class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/MePkixVqhWIUGnlIoCjyeO7axSo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/MePkixVqhWIUGnlIoCjyeO7axSo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png" data-srcset="https://www.investopedia.com/thmb/E10cjbjOCBVYGb-cpN7jYmWzXNY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Facultative vs. Treaty Reinsurance " class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/MePkixVqhWIUGnlIoCjyeO7axSo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png" srcset="https://www.investopedia.com/thmb/E10cjbjOCBVYGb-cpN7jYmWzXNY=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Alison Czinkota</p></span> </figcaption></figure> <span class="heading-toc" id="toc-facultative-reinsurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Facultative Reinsurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Facultative reinsurance is usually the simplest way for an insurer to obtain <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/08/reinsurance.asp">reinsurance</a> protection. These policies are also the easiest to tailor to specific circumstances. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Facultative reinsurance is reinsurance purchased by an insurer for a single <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risk</a> or a defined package of risks. Usually a one-off transaction, it occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured. Under these agreements, each facultatively <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underwriting.asp">underwritten</a> policy is considered a single transaction, not lumped together by class. Such reinsurance contracts are usually less attractive to the ceding company, which may be forced to retain only the riskiest policies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Suppose a standard insurance provider issues a policy on major <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercialrealestate.asp">commercial real estate</a>, such as a large corporate office building. The policy is written for $35 million, meaning the original insurer faces a potential $35 million in liability if the building is badly damaged. But the insurer believes it cannot afford to pay out more than $25 million. So before even agreeing to issue the policy, the insurer must look for facultative reinsurance and try the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/market.asp">market</a> until it gets takers for the remaining $10 million. The insurer might get pieces of the $10 million from 10 different reinsurers. But without that, it cannot agree to issue the policy. Once it has the agreement from the companies to cover the $10 million and is confident it can potentially cover the full amount should a claim come in, it can issue the policy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-treaty-reinsurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Treaty Reinsurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Treaty reinsurance occurs whenever the ceding company agrees to cede all risks within a specific class of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance.asp">insurance</a> policies to the reinsurance company. In turn, the reinsurance company agrees to indemnify the ceding company of all risks therein, even though the reinsurance company has not performed individual underwriting for each policy. The reinsurance often applies even to those policies that have not yet been written, so long as they pertain to the pre-agreed class. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The most important characteristic of a treaty agreement is the lack of individual underwriting on behalf of the assuming insurer. This structure transfers underwriting risks from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/ceding-company.asp">ceding company</a> to the assuming company, leaving the assuming company exposed to the possibility that the initial underwriting process did not adequately evaluate the risks to be insured. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> There are different kinds of treaty agreements. The most common is called proportional treaties, in which a percentage of the ceding insurer's original policies is reinsured, up to a limit. Any policies written in excess of the limit are not to be covered by the reinsurance treaty. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> For example, one reinsurance company may agree to indemnify 75% of the original insurer's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/car-insurance-costs.asp">automobile policies</a>—up to a $100 million limit. This means the ceding company is not indemnified for $25 million of the first $100 million in auto policies written under the agreement. That $25 million is known as the ceding company's retention limit. If the ceding company writes $200 million worth of automobile insurance, it retains $25 million from the first $100 million and all of the subsequent $100 million, unless it arranges a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/surplus-share-treaty.asp">surplus treaty</a>. Generally speaking, reinsurance policy <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp">premiums</a> are lower when retention limits are higher. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Reinsurance companies offer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coreinsurance.asp">insurance to other insurers</a>, safeguarding against circumstances when the traditional insurer does not have enough money to pay out all of the claims against its written policies. Reinsurance contracts take place between a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reinsurer.asp">reinsurer</a> or assuming company, and the reinsured or ceding company. In effect, a standard insurance provider can spread its own risk of loss even further by entering into a reinsurance contract. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_26-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_27-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Reinsurance companies provide coverage to other insurers that can't pay out all of the claims against their written policies.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> In a traditional insurance arrangement, the risk of loss is spread among many different policyholders, each of whom pays a premium to the insurer in exchange for the insurer's protection against some uncertain potential event. It is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/businessmodel.asp">business model</a> that works whenever the sum of received premiums from all members exceeds the amount paid out on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance_claim.asp">insurance claims</a> against the policies. There are times, however, when the amount paid out in claims by the insurer exceeds the sum of money received from policyholder premiums. In such instances, it is the insurer who faces the greatest risk of loss. </p></div>

## Facultative vs. Treaty Reinsurance: An Overview [Facultative reinsurance](https://www.investopedia.com/terms/f/facultative-reinsurance.asp) and [reinsurance treaties](https://www.investopedia.com/terms/t/treaty-reinsurance.asp) are two types of reinsurance contracts. When it comes to facultative reinsurance, the main insurer covers one risk or a series of risks held in its own books. Treaty reinsurance, on the other hand, is insurance purchased by an insurer from another company. With facultative reinsurance, the reinsurer can review the risks involved in an insurance policy and either accept or reject them. But the reinsurer in a treaty reinsurance policy, on the other hand, generally accepts all the risks involved with certain policies. ### Key Takeaways * Facultative and treaty reinsurance are both forms of reinsurance. * Facultative reinsurance is reinsurance for a single risk or a defined package of risks. * Facultative reinsurance occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured. * The ceding company in treaty reinsurance agrees to cede all risks to the reinsurer. * The reinsurer in treaty reinsurance agrees to cover all risks, even though the reinsurer hasn't performed individual underwriting for each policy. ![Facultative vs. Treaty Reinsurance ]() :max_bytes(150000):strip_icc()/modular-vs-manufactured-home-insurance-5074202_final-fdb217e866f84bdda6418d6c68e4c267.png) Investopedia / Alison Czinkota ## Facultative Reinsurance Facultative reinsurance is usually the simplest way for an insurer to obtain [reinsurance](https://www.investopedia.com/ask/answers/08/reinsurance.asp) protection. These policies are also the easiest to tailor to specific circumstances. Facultative reinsurance is reinsurance purchased by an insurer for a single [risk](https://www.investopedia.com/terms/r/risk.asp) or a defined package of risks. Usually a one-off transaction, it occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured. Under these agreements, each facultatively [underwritten](https://www.investopedia.com/terms/u/underwriting.asp) policy is considered a single transaction, not lumped together by class. Such reinsurance contracts are usually less attractive to the ceding company, which may be forced to retain only the riskiest policies. Suppose a standard insurance provider issues a policy on major [commercial real estate](https://www.investopedia.com/terms/c/commercialrealestate.asp), such as a large corporate office building. The policy is written for $35 million, meaning the original insurer faces a potential $35 million in liability if the building is badly damaged. But the insurer believes it cannot afford to pay out more than $25 million. So before even agreeing to issue the policy, the insurer must look for facultative reinsurance and try the [market](https://www.investopedia.com/terms/m/market.asp) until it gets takers for the remaining $10 million. The insurer might get pieces of the $10 million from 10 different reinsurers. But without that, it cannot agree to issue the policy. Once it has the agreement from the companies to cover the $10 million and is confident it can potentially cover the full amount should a claim come in, it can issue the policy. ## Treaty Reinsurance Treaty reinsurance occurs whenever the ceding company agrees to cede all risks within a specific class of [insurance](https://www.investopedia.com/terms/i/insurance.asp) policies to the reinsurance company. In turn, the reinsurance company agrees to indemnify the ceding company of all risks therein, even though the reinsurance company has not performed individual underwriting for each policy. The reinsurance often applies even to those policies that have not yet been written, so long as they pertain to the pre-agreed class. The most important characteristic of a treaty agreement is the lack of individual underwriting on behalf of the assuming insurer. This structure transfers underwriting risks from the [ceding company](https://www.investopedia.com/terms/c/ceding-company.asp) to the assuming company, leaving the assuming company exposed to the possibility that the initial underwriting process did not adequately evaluate the risks to be insured. There are different kinds of treaty agreements. The most common is called proportional treaties, in which a percentage of the ceding insurer's original policies is reinsured, up to a limit. Any policies written in excess of the limit are not to be covered by the reinsurance treaty. For example, one reinsurance company may agree to indemnify 75% of the original insurer's [automobile policies](https://www.investopedia.com/articles/pf/08/car-insurance-costs.asp)—up to a $100 million limit. This means the ceding company is not indemnified for $25 million of the first $100 million in auto policies written under the agreement. That $25 million is known as the ceding company's retention limit. If the ceding company writes $200 million worth of automobile insurance, it retains $25 million from the first $100 million and all of the subsequent $100 million, unless it arranges a [surplus treaty](https://www.investopedia.com/terms/s/surplus-share-treaty.asp). Generally speaking, reinsurance policy [premiums](https://www.investopedia.com/terms/p/premium.asp) are lower when retention limits are higher. ## Special Considerations Reinsurance companies offer [insurance to other insurers](https://www.investopedia.com/terms/c/coreinsurance.asp), safeguarding against circumstances when the traditional insurer does not have enough money to pay out all of the claims against its written policies. Reinsurance contracts take place between a [reinsurer](https://www.investopedia.com/terms/r/reinsurer.asp) or assuming company, and the reinsured or ceding company. In effect, a standard insurance provider can spread its own risk of loss even further by entering into a reinsurance contract. ### Reinsurance companies provide coverage to other insurers that can't pay out all of the claims against their written policies. In a traditional insurance arrangement, the risk of loss is spread among many different policyholders, each of whom pays a premium to the insurer in exchange for the insurer's protection against some uncertain potential event. It is a [business model](https://www.investopedia.com/terms/b/businessmodel.asp) that works whenever the sum of received premiums from all members exceeds the amount paid out on [insurance claims](https://www.investopedia.com/terms/i/insurance_claim.asp) against the policies. There are times, however, when the amount paid out in claims by the insurer exceeds the sum of money received from policyholder premiums. In such instances, it is the insurer who faces the greatest risk of loss.

Facultative vs. Treaty Reinsurance: An Overview Facultative reinsurance and reinsurance treaties are two types of reinsurance contracts. When it comes to facultative reinsurance, the main insurer covers one risk or a series of risks held in its own books. Treaty reinsurance, on the other hand, is insurance purchased by an insurer from another company. With facultative reinsurance, the reinsurer can review the risks involved in an insurance policy and either accept or reject them. But the reinsurer in a treaty reinsurance policy, on the other hand, generally accepts all the risks involved with certain policies. Key Takeaways Facultative and treaty reinsurance are both forms of reinsurance.Facultative reinsurance is reinsurance for a single risk or a defined package of risks. Facultative reinsurance occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured.The ceding company in treaty reinsurance agrees to cede all risks to the reinsurer.The reinsurer in treaty reinsurance agrees to cover all risks, even though the reinsurer hasn't performed individual underwriting for each policy. Investopedia / Alison Czinkota Facultative Reinsurance Facultative reinsurance is usually the simplest way for an insurer to obtain reinsurance protection. These policies are also the easiest to tailor to specific circumstances. Facultative reinsurance is reinsurance purchased by an insurer for a single risk or a defined package of risks. Usually a one-off transaction, it occurs whenever the reinsurance company insists on performing its own underwriting for some or all the policies to be reinsured. Under these agreements, each facultatively underwritten policy is considered a single transaction, not lumped together by class. Such reinsurance contracts are usually less attractive to the ceding company, which may be forced to retain only the riskiest policies. Suppose a standard insurance provider issues a policy on major commercial real estate, such as a large corporate office building. The policy is written for $35 million, meaning the original insurer faces a potential $35 million in liability if the building is badly damaged. But the insurer believes it cannot afford to pay out more than $25 million. So before even agreeing to issue the policy, the insurer must look for facultative reinsurance and try the market until it gets takers for the remaining $10 million. The insurer might get pieces of the $10 million from 10 different reinsurers. But without that, it cannot agree to issue the policy. Once it has the agreement from the companies to cover the $10 million and is confident it can potentially cover the full amount should a claim come in, it can issue the policy. Treaty Reinsurance Treaty reinsurance occurs whenever the ceding company agrees to cede all risks within a specific class of insurance policies to the reinsurance company. In turn, the reinsurance company agrees to indemnify the ceding company of all risks therein, even though the reinsurance company has not performed individual underwriting for each policy. The reinsurance often applies even to those policies that have not yet been written, so long as they pertain to the pre-agreed class. The most important characteristic of a treaty agreement is the lack of individual underwriting on behalf of the assuming insurer. This structure transfers underwriting risks from the ceding company to the assuming company, leaving the assuming company exposed to the possibility that the initial underwriting process did not adequately evaluate the risks to be insured. There are different kinds of treaty agreements. The most common is called proportional treaties, in which a percentage of the ceding insurer's original policies is reinsured, up to a limit. Any policies written in excess of the limit are not to be covered by the reinsurance treaty. For example, one reinsurance company may agree to indemnify 75% of the original insurer's automobile policies—up to a $100 million limit. This means the ceding company is not indemnified for $25 million of the first $100 million in auto policies written under the agreement. That $25 million is known as the ceding company's retention limit. If the ceding company writes $200 million worth of automobile insurance, it retains $25 million from the first $100 million and all of the subsequent $100 million, unless it arranges a surplus treaty. Generally speaking, reinsurance policy premiums are lower when retention limits are higher. Special Considerations Reinsurance companies offer insurance to other insurers, safeguarding against circumstances when the traditional insurer does not have enough money to pay out all of the claims against its written policies. Reinsurance contracts take place between a reinsurer or assuming company, and the reinsured or ceding company. In effect, a standard insurance provider can spread its own risk of loss even further by entering into a reinsurance contract. Reinsurance companies provide coverage to other insurers that can't pay out all of the claims against their written policies. In a traditional insurance arrangement, the risk of loss is spread among many different policyholders, each of whom pays a premium to the insurer in exchange for the insurer's protection against some uncertain potential event. It is a business model that works whenever the sum of received premiums from all members exceeds the amount paid out on insurance claims against the policies. There are times, however, when the amount paid out in claims by the insurer exceeds the sum of money received from policyholder premiums. In such instances, it is the insurer who faces the greatest risk of loss.

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<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> A financial advisor can help you with a one-time need, such as developing a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial_plan.asp">financial plan</a>, or they can be more of a long-term financial guide. “Financial advisor” is a term that applies to a number of professionals, including financial planners, investment managers, and financial coaches.<span class="ql-inline-citation" data-cite="20"></span> It’s worth noting that there’s no general licensing or certification requirements for financial advisors, although specific professionals may need to meet certain requirements.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> For these reasons, it’s best to take your time finding one and use your goals, peer recommendations, an advisor's background and their fees structure as guiding pillars.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A financial advisor can help with a wide range of financial matters, such as retirement planning, investment strategies, and debt management.</li><li>Financial advisors generally make money by charging hourly fees, flat fees, or percentage fees.</li><li>Not all financial advisors are licensed or certified.</li><li>Finding a financial advisor typically involves steps such as getting recommendations from trusted people, checking an advisor’s background, and inquiring about their fees.</li></ul></div></div></div> <span class="heading-toc" id="toc-evaluate-your-financial-situation"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Evaluate Your Financial Situation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Before you hire a financial advisor, give some thought to what you want a financial advisor to do for you. For instance: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>Are you <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/retirement/11/5-steps-to-retirement-plan.asp">seeking help with your retirement plan</a>? A financial advisor should be able to guide you toward making choices about investments and other retirement issues that’ll put you on the road toward a satisfying retirement.</li> <li>Are you confused about whether to invest in stocks, bonds, mutual funds, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded funds (ETFs)</a>, or something else? A financial advisor may be able to clear up any investment questions you’ve got.</li> <li>Are you drowning in debt? If you’re feeling overwhelmed by credit card and student loan debt, you’re certainly not alone. A financial advisor can often offer <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/082615/5-things-deliberately-do-improve-your-trading.asp">advice besides what to trade</a>, such as ways to pay off your debt, that will enable you to resolve your debt dilemma.</li> <li>Are you striving to achieve a short-term financial goal? Let’s say you want to save money for your child’s college education or buy a second home on the beach. A financial advisor may be able to help you prioritize the steps you need to take to realize that goal.</li> <li>Are you puzzled about your taxes? Unless you’re a financial whiz, the thought of tackling tax issues on your own can be, well, taxing. A financial advisor might be equipped to help take the mystery out of taxes.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-understand-your-budget"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Understand Your Budget </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> As you’re thinking about hiring a financial advisor, take into account how much it will cost to use their services. The amount can vary widely depending on the services being provided. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> A financial advisor might, for example, charge a one-time fee of $2,500, an annual retainer fee of $4,000, or an hourly fee of $250.<span class="ql-inline-citation" data-cite="21"></span> Or they might charge a percentage fee, such as 1% for managing assets worth up to $1 million.<span class="ql-inline-citation" data-cite="22"></span> If you’re working with a financial advisor who’s buying and selling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-product.asp">investment products</a> on your behalf, they might receive a fee equal to 1% to 2% of the transaction value, or they might charge a flat fee.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> To pay for a financial advisor, you might tap your checking account, dip into your savings account, or use a credit card. Be sure to ask a financial advisor whether they offer a payment plan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-do-your-research"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Do Your Research </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> If you’re going to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-advisors/050115/top-places-work-financial-advisors-rjf-axp.asp">entrust your financial well-being</a> to a financial advisor, it’s smart to do your homework. What type of advisor do you need? How do you know they’re reputable? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Decide on the Type of Advisor You Need </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> When you shop around for a financial advisor, pay attention to the services they provide. The types of financial advisors you’ll come across include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> <li><strong>A fee-only advisor</strong>, such as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialplanner.asp">financial planner</a>, makes money by charging fees for their services. They don’t earn commissions on investment products they buy and sell on a client’s behalf.<span class="ql-inline-citation" data-cite="24"></span></li> <li><strong>A fee-based advisor</strong>, such as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockbroker.asp">stockbroker</a>, earns a commission on investments being bought and sold. They also might charge an hourly fee, flat fee, or percentage fee.<span class="ql-inline-citation" data-cite="26"></span><span class="ql-inline-citation" data-cite="25"></span></li> <li><strong>A commission-based advisor</strong>, such as an <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetmanagement.asp">asset manager</a>, earns fees solely from the sale of investment products and services.<span class="ql-inline-citation" data-cite="27"></span></li> <li><strong>A registered investment advisor</strong> can be an asset manager or <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-manager.asp">investment manager</a>. The ways in which they make money include charging a percentage fee or an hourly fee.<span class="ql-inline-citation" data-cite="28"></span></li> <li><strong>A robo-advisor</strong> is a <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp">digital platform</a> that automates investment decisions based on a client’s input.<span class="ql-inline-citation" data-cite="29"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Verify a Financial Advisor’s Background and Credentials </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Another factor that goes into selecting a financial advisor is their reputation. If they’re licensed or certified, it’s fairly easy to investigate their background and credentials through an online search. Here’s how. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority (FINRA)</a> BrokerCheck tool allows you to research a stockbroker or any other professional who buys and sells investment products.<span class="ql-inline-citation" data-cite="30"></span></li> <li>Take advantage of the Investment Adviser Public Disclosure tool from the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/112914/understanding-sec.asp">Securities and Exchange Commission (SEC)</a>. With this database you can investigate an investment advisor’s background.<span class="ql-inline-citation" data-cite="31"></span></li> <li>Use the SEC Action Lookup tool, which provides details about any investment professional who’s been named in an SEC court case or administrative case.<span class="ql-inline-citation" data-cite="32"></span></li> <li>Contact your state’s securities regulator. Visit the website of the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasaa.asp">North American Securities Administrators Association (NASAA)</a> to look up the securities regulator in your state. A state securities regulator oversees certain investment professionals.<span class="ql-inline-citation" data-cite="33"></span></li> <li>Take advantage of the Verify a CFP professional tool. Here, you can check whether a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfp.asp">certified financial planner (CFP)</a> actually holds certification.<span class="ql-inline-citation" data-cite="34"></span> Keep in mind that not all financial planners hold the CFP designation.<span class="ql-inline-citation" data-cite="35"></span></li> <li>Search the <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-the-better-business-bureau-5024818">Better Business Bureau</a>’s list of accredited financial consultants.<span class="ql-inline-citation" data-cite="36"></span></li> <li>Look at a financial advisor’s website and social media presence, as well as online reviews about them.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_32-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_33-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Before hiring or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-advisor/042216/4-signs-its-time-fire-your-financial-advisor.asp">replacing a financial advisor</a>, ensure their services align with your needs. For instance, if you’re looking for tax guidance, you might seek help from an accountant instead of a financial planner.<br/></p></div></div></div> <span class="heading-toc" id="toc-consider-what-services-you-need"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Consider What Services You Need </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Financial advisors offer an array of services. Consider which ones you need before hiring an advisor. They include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <li>Investment strategy</li> <li>Insurance recommendations</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">Retirement planning</a></li> <li>Tax planning</li> <li>College planning</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/estateplanning.asp">Estate planning</a></li> <li>Debt management</li> <li>Budgeting help<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <span class="heading-toc" id="toc-where-to-look-for-a-financial-advisor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Where to Look for a Financial Advisor </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Among the ways you can look for a financial advisor are by: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> <li>Visiting the website of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/national-association-personal-financial-advisors-napfa.asp">National Association of Personal Financial Advisors (NAPFA)</a><span class="ql-inline-citation" data-cite="37"></span></li> <li>Using the Certified Financial Planner (CFP) Board of Standards tool for finding a CFP<span class="ql-inline-citation" data-cite="39"></span><span class="ql-inline-citation" data-cite="38"></span></li> <li>Seeking recommendations from relatives, friends, colleagues, and other people you trust</li> <li>Getting a referral from someone at your bank or credit union</li> <li>Asking a professional whose services you already use, such as your accountant or attorney for recommendations</li> <li>Reviewing Investopedia’s <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inv-100-top-financial-advisors-7556227">list of the country’s top 100 financial advisors</a></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_44-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_45-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Many, but not all, financial advisors are licensed or certified, and you can verify their credentials through a number of organizations, such as the Certified Financial Planner (CFP) Board of Standards.<br/></p></div></div></div> <span class="heading-toc" id="toc-questions-to-ask-a-financial-advisor"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> Questions to Ask a Financial Advisor </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> So, how to find a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/103013/how-do-i-know-i-can-trust-my-financial-advisor.asp">financial advisor you can trust</a>? Once you’ve zeroed in on a few that you’re interested in hiring, you should prepare a list of questions to ask each of them. Here are 12 good ones. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> <li>What services do you provide?</li> <li>What are your areas of specialty?</li> <li>Are you a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fiduciary.asp">fiduciary</a>? (A fiduciary manages money on someone else’s behalf and must act in their clients’ best interest.)<span class="ql-inline-citation" data-cite="40"></span></li> <li>How would you describe your investment philosophy?</li> <li>What are your fees?</li> <li>What will the total cost be for using your services?</li> <li>Do you offer a free first-time consultation?</li> <li>What is your professional experience?</li> <li>What licenses or certifications do you have?</li> <li>Have you ever been sued or disciplined over something related to your work as a financial advisor?</li> <li>What types of clients do you have?</li> <li>How do you like to communicate with clients?</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-is-it-worth-the-money-to-hire-a-financial-advisor"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is It Worth the Money to Hire a Financial Advisor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you’re unsure about retirement planning and other key aspects of your financial life, it can be worth the money to hire a financial advisor.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_53-0"><span class="heading-toc" id="toc-what-is-the-true-cost-of-a-financial-advisor"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the True Cost of a Financial Advisor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/021216/can-you-afford-financial-advisor.asp">true cost of a financial advisor</a> depends on how you pay for their services. A financial advisor might charge an hourly fee, flat fee, or percentage fee.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_55-0"><span class="heading-toc" id="toc-what-is-the-difference-between-a-financial-planner-and-a-financial-advisor"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between a Financial Planner and a Financial Advisor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Generally, a financial planner works with a client on managing money and achieving financial goals. The term “financial advisor” refers to a variety of financial professionals, such as financial planners, investment managers, and stockbrokers.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_57-0"><span class="heading-toc" id="toc-is-an-accountant-better-than-a-financial-advisor"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is an Accountant Better Than a Financial Advisor?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you need overall financial help, a financial advisor probably is better than an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/040115/do-i-need-personal-accountant.asp">accountant</a>. On the other hand, if you need help with things such as bookkeeping and tax planning, an accountant likely is a better choice.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Hiring a financial advisor is a big step in your financial life, whether you need assistance with retirement planning, investment strategy, or debt management. Because of the vital role that a financial advisor can play, it’s best to take your time <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-advisor/trust-advisors-most-important-asset/">finding one you feel you can trust</a>. Before making your choice, review your financial goals, seek recommendations, investigate an advisor’s background, and ask about the advisor’s fees.<strong><br/></strong> </p></div>

A financial advisor can help you with a one-time need, such as developing a [financial plan](https://www.investopedia.com/terms/f/financial_plan.asp), or they can be more of a long-term financial guide. “Financial advisor” is a term that applies to a number of professionals, including financial planners, investment managers, and financial coaches. It’s worth noting that there’s no general licensing or certification requirements for financial advisors, although specific professionals may need to meet certain requirements. For these reasons, it’s best to take your time finding one and use your goals, peer recommendations, an advisor's background and their fees structure as guiding pillars. ### Key Takeaways * A financial advisor can help with a wide range of financial matters, such as retirement planning, investment strategies, and debt management. * Financial advisors generally make money by charging hourly fees, flat fees, or percentage fees. * Not all financial advisors are licensed or certified. * Finding a financial advisor typically involves steps such as getting recommendations from trusted people, checking an advisor’s background, and inquiring about their fees. ## Evaluate Your Financial Situation Before you hire a financial advisor, give some thought to what you want a financial advisor to do for you. For instance: * Are you [seeking help with your retirement plan](https://www.investopedia.com/articles/retirement/11/5-steps-to-retirement-plan.asp)? A financial advisor should be able to guide you toward making choices about investments and other retirement issues that’ll put you on the road toward a satisfying retirement. * Are you confused about whether to invest in stocks, bonds, mutual funds, [exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp), or something else? A financial advisor may be able to clear up any investment questions you’ve got. * Are you drowning in debt? If you’re feeling overwhelmed by credit card and student loan debt, you’re certainly not alone. A financial advisor can often offer [advice besides what to trade](https://www.investopedia.com/articles/investing/082615/5-things-deliberately-do-improve-your-trading.asp), such as ways to pay off your debt, that will enable you to resolve your debt dilemma. * Are you striving to achieve a short-term financial goal? Let’s say you want to save money for your child’s college education or buy a second home on the beach. A financial advisor may be able to help you prioritize the steps you need to take to realize that goal. * Are you puzzled about your taxes? Unless you’re a financial whiz, the thought of tackling tax issues on your own can be, well, taxing. A financial advisor might be equipped to help take the mystery out of taxes. ## Understand Your Budget As you’re thinking about hiring a financial advisor, take into account how much it will cost to use their services. The amount can vary widely depending on the services being provided. A financial advisor might, for example, charge a one-time fee of $2,500, an annual retainer fee of $4,000, or an hourly fee of $250. Or they might charge a percentage fee, such as 1% for managing assets worth up to $1 million. If you’re working with a financial advisor who’s buying and selling [investment products](https://www.investopedia.com/terms/i/investment-product.asp) on your behalf, they might receive a fee equal to 1% to 2% of the transaction value, or they might charge a flat fee. To pay for a financial advisor, you might tap your checking account, dip into your savings account, or use a credit card. Be sure to ask a financial advisor whether they offer a payment plan. ## Do Your Research If you’re going to [entrust your financial well-being](https://www.investopedia.com/articles/financial-advisors/050115/top-places-work-financial-advisors-rjf-axp.asp) to a financial advisor, it’s smart to do your homework. What type of advisor do you need? How do you know they’re reputable? ### Decide on the Type of Advisor You Need When you shop around for a financial advisor, pay attention to the services they provide. The types of financial advisors you’ll come across include: * **A fee-only advisor**, such as a [financial planner](https://www.investopedia.com/terms/f/financialplanner.asp), makes money by charging fees for their services. They don’t earn commissions on investment products they buy and sell on a client’s behalf. * **A fee-based advisor**, such as a [stockbroker](https://www.investopedia.com/terms/s/stockbroker.asp), earns a commission on investments being bought and sold. They also might charge an hourly fee, flat fee, or percentage fee. * **A commission-based advisor**, such as an [asset manager](https://www.investopedia.com/terms/a/assetmanagement.asp), earns fees solely from the sale of investment products and services. * **A registered investment advisor** can be an asset manager or [investment manager](https://www.investopedia.com/terms/i/investment-manager.asp). The ways in which they make money include charging a percentage fee or an hourly fee. * **A robo-advisor** is a [digital platform](https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp) that automates investment decisions based on a client’s input. ### Verify a Financial Advisor’s Background and Credentials Another factor that goes into selecting a financial advisor is their reputation. If they’re licensed or certified, it’s fairly easy to investigate their background and credentials through an online search. Here’s how. * The [Financial Industry Regulatory Authority (FINRA)](https://www.investopedia.com/terms/f/finra.asp) BrokerCheck tool allows you to research a stockbroker or any other professional who buys and sells investment products. * Take advantage of the Investment Adviser Public Disclosure tool from the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/articles/investing/112914/understanding-sec.asp). With this database you can investigate an investment advisor’s background. * Use the SEC Action Lookup tool, which provides details about any investment professional who’s been named in an SEC court case or administrative case. * Contact your state’s securities regulator. Visit the website of the [North American Securities Administrators Association (NASAA)](https://www.investopedia.com/terms/n/nasaa.asp) to look up the securities regulator in your state. A state securities regulator oversees certain investment professionals. * Take advantage of the Verify a CFP professional tool. Here, you can check whether a [certified financial planner (CFP)](https://www.investopedia.com/terms/c/cfp.asp) actually holds certification. Keep in mind that not all financial planners hold the CFP designation. * Search the [Better Business Bureau](https://www.investopedia.com/what-is-the-better-business-bureau-5024818)’s list of accredited financial consultants. * Look at a financial advisor’s website and social media presence, as well as online reviews about them. ### Before hiring or [replacing a financial advisor](https://www.investopedia.com/articles/financial-advisor/042216/4-signs-its-time-fire-your-financial-advisor.asp), ensure their services align with your needs. For instance, if you’re looking for tax guidance, you might seek help from an accountant instead of a financial planner. ## Consider What Services You Need Financial advisors offer an array of services. Consider which ones you need before hiring an advisor. They include: * Investment strategy * Insurance recommendations * [Retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp) * Tax planning * College planning * [Estate planning](https://www.investopedia.com/terms/e/estateplanning.asp) * Debt management * Budgeting help ## Where to Look for a Financial Advisor Among the ways you can look for a financial advisor are by: * Visiting the website of the [National Association of Personal Financial Advisors (NAPFA)](https://www.investopedia.com/terms/n/national-association-personal-financial-advisors-napfa.asp) * Using the Certified Financial Planner (CFP) Board of Standards tool for finding a CFP * Seeking recommendations from relatives, friends, colleagues, and other people you trust * Getting a referral from someone at your bank or credit union * Asking a professional whose services you already use, such as your accountant or attorney for recommendations * Reviewing Investopedia’s [list of the country’s top 100 financial advisors](https://www.investopedia.com/inv-100-top-financial-advisors-7556227) ### Many, but not all, financial advisors are licensed or certified, and you can verify their credentials through a number of organizations, such as the Certified Financial Planner (CFP) Board of Standards. ## Questions to Ask a Financial Advisor So, how to find a [financial advisor you can trust](https://www.investopedia.com/articles/personal-finance/103013/how-do-i-know-i-can-trust-my-financial-advisor.asp)? Once you’ve zeroed in on a few that you’re interested in hiring, you should prepare a list of questions to ask each of them. Here are 12 good ones. 1. What services do you provide? 2. What are your areas of specialty? 3. Are you a [fiduciary](https://www.investopedia.com/terms/f/fiduciary.asp)? (A fiduciary manages money on someone else’s behalf and must act in their clients’ best interest.) 4. How would you describe your investment philosophy? 5. What are your fees? 6. What will the total cost be for using your services? 7. Do you offer a free first-time consultation? 8. What is your professional experience? 9. What licenses or certifications do you have? 10. Have you ever been sued or disciplined over something related to your work as a financial advisor? 11. What types of clients do you have? 12. How do you like to communicate with clients? ## Is It Worth the Money to Hire a Financial Advisor? If you’re unsure about retirement planning and other key aspects of your financial life, it can be worth the money to hire a financial advisor. ## What Is the True Cost of a Financial Advisor? The [true cost of a financial advisor](https://www.investopedia.com/articles/personal-finance/021216/can-you-afford-financial-advisor.asp) depends on how you pay for their services. A financial advisor might charge an hourly fee, flat fee, or percentage fee. ## What Is the Difference Between a Financial Planner and a Financial Advisor? Generally, a financial planner works with a client on managing money and achieving financial goals. The term “financial advisor” refers to a variety of financial professionals, such as financial planners, investment managers, and stockbrokers. ## Is an Accountant Better Than a Financial Advisor? If you need overall financial help, a financial advisor probably is better than an [accountant](https://www.investopedia.com/articles/personal-finance/040115/do-i-need-personal-accountant.asp). On the other hand, if you need help with things such as bookkeeping and tax planning, an accountant likely is a better choice. ## The Bottom Line Hiring a financial advisor is a big step in your financial life, whether you need assistance with retirement planning, investment strategy, or debt management. Because of the vital role that a financial advisor can play, it’s best to take your time [finding one you feel you can trust](https://www.investopedia.com/financial-advisor/trust-advisors-most-important-asset/). Before making your choice, review your financial goals, seek recommendations, investigate an advisor’s background, and ask about the advisor’s fees.

A financial advisor can help you with a one-time need, such as developing a financial plan, or they can be more of a long-term financial guide. “Financial advisor” is a term that applies to a number of professionals, including financial planners, investment managers, and financial coaches. It’s worth noting that there’s no general licensing or certification requirements for financial advisors, although specific professionals may need to meet certain requirements. For these reasons, it’s best to take your time finding one and use your goals, peer recommendations, an advisor's background and their fees structure as guiding pillars. Key Takeaways A financial advisor can help with a wide range of financial matters, such as retirement planning, investment strategies, and debt management.Financial advisors generally make money by charging hourly fees, flat fees, or percentage fees.Not all financial advisors are licensed or certified.Finding a financial advisor typically involves steps such as getting recommendations from trusted people, checking an advisor’s background, and inquiring about their fees. Evaluate Your Financial Situation Before you hire a financial advisor, give some thought to what you want a financial advisor to do for you. For instance: Are you seeking help with your retirement plan? A financial advisor should be able to guide you toward making choices about investments and other retirement issues that’ll put you on the road toward a satisfying retirement. Are you confused about whether to invest in stocks, bonds, mutual funds, exchange-traded funds (ETFs), or something else? A financial advisor may be able to clear up any investment questions you’ve got. Are you drowning in debt? If you’re feeling overwhelmed by credit card and student loan debt, you’re certainly not alone. A financial advisor can often offer advice besides what to trade, such as ways to pay off your debt, that will enable you to resolve your debt dilemma. Are you striving to achieve a short-term financial goal? Let’s say you want to save money for your child’s college education or buy a second home on the beach. A financial advisor may be able to help you prioritize the steps you need to take to realize that goal. Are you puzzled about your taxes? Unless you’re a financial whiz, the thought of tackling tax issues on your own can be, well, taxing. A financial advisor might be equipped to help take the mystery out of taxes. Understand Your Budget As you’re thinking about hiring a financial advisor, take into account how much it will cost to use their services. The amount can vary widely depending on the services being provided. A financial advisor might, for example, charge a one-time fee of $2,500, an annual retainer fee of $4,000, or an hourly fee of $250. Or they might charge a percentage fee, such as 1% for managing assets worth up to $1 million. If you’re working with a financial advisor who’s buying and selling investment products on your behalf, they might receive a fee equal to 1% to 2% of the transaction value, or they might charge a flat fee. To pay for a financial advisor, you might tap your checking account, dip into your savings account, or use a credit card. Be sure to ask a financial advisor whether they offer a payment plan. Do Your Research If you’re going to entrust your financial well-being to a financial advisor, it’s smart to do your homework. What type of advisor do you need? How do you know they’re reputable? Decide on the Type of Advisor You Need When you shop around for a financial advisor, pay attention to the services they provide. The types of financial advisors you’ll come across include: A fee-only advisor, such as a financial planner, makes money by charging fees for their services. They don’t earn commissions on investment products they buy and sell on a client’s behalf. A fee-based advisor, such as a stockbroker, earns a commission on investments being bought and sold. They also might charge an hourly fee, flat fee, or percentage fee. A commission-based advisor, such as an asset manager, earns fees solely from the sale of investment products and services. A registered investment advisor can be an asset manager or investment manager. The ways in which they make money include charging a percentage fee or an hourly fee. A robo-advisor is a digital platform that automates investment decisions based on a client’s input. Verify a Financial Advisor’s Background and Credentials Another factor that goes into selecting a financial advisor is their reputation. If they’re licensed or certified, it’s fairly easy to investigate their background and credentials through an online search. Here’s how. The Financial Industry Regulatory Authority (FINRA) BrokerCheck tool allows you to research a stockbroker or any other professional who buys and sells investment products. Take advantage of the Investment Adviser Public Disclosure tool from the Securities and Exchange Commission (SEC). With this database you can investigate an investment advisor’s background. Use the SEC Action Lookup tool, which provides details about any investment professional who’s been named in an SEC court case or administrative case. Contact your state’s securities regulator. Visit the website of the North American Securities Administrators Association (NASAA) to look up the securities regulator in your state. A state securities regulator oversees certain investment professionals. Take advantage of the Verify a CFP professional tool. Here, you can check whether a certified financial planner (CFP) actually holds certification. Keep in mind that not all financial planners hold the CFP designation. Search the Better Business Bureau’s list of accredited financial consultants. Look at a financial advisor’s website and social media presence, as well as online reviews about them. Before hiring or replacing a financial advisor, ensure their services align with your needs. For instance, if you’re looking for tax guidance, you might seek help from an accountant instead of a financial planner. Consider What Services You Need Financial advisors offer an array of services. Consider which ones you need before hiring an advisor. They include: Investment strategy Insurance recommendations Retirement planning Tax planning College planning Estate planning Debt management Budgeting help Where to Look for a Financial Advisor Among the ways you can look for a financial advisor are by: Visiting the website of the National Association of Personal Financial Advisors (NAPFA) Using the Certified Financial Planner (CFP) Board of Standards tool for finding a CFP Seeking recommendations from relatives, friends, colleagues, and other people you trust Getting a referral from someone at your bank or credit union Asking a professional whose services you already use, such as your accountant or attorney for recommendations Reviewing Investopedia’s list of the country’s top 100 financial advisors Many, but not all, financial advisors are licensed or certified, and you can verify their credentials through a number of organizations, such as the Certified Financial Planner (CFP) Board of Standards. Questions to Ask a Financial Advisor So, how to find a financial advisor you can trust? Once you’ve zeroed in on a few that you’re interested in hiring, you should prepare a list of questions to ask each of them. Here are 12 good ones. What services do you provide? What are your areas of specialty? Are you a fiduciary? (A fiduciary manages money on someone else’s behalf and must act in their clients’ best interest.) How would you describe your investment philosophy? What are your fees? What will the total cost be for using your services? Do you offer a free first-time consultation? What is your professional experience? What licenses or certifications do you have? Have you ever been sued or disciplined over something related to your work as a financial advisor? What types of clients do you have? How do you like to communicate with clients? Is It Worth the Money to Hire a Financial Advisor? If you’re unsure about retirement planning and other key aspects of your financial life, it can be worth the money to hire a financial advisor. What Is the True Cost of a Financial Advisor? The true cost of a financial advisor depends on how you pay for their services. A financial advisor might charge an hourly fee, flat fee, or percentage fee. What Is the Difference Between a Financial Planner and a Financial Advisor? Generally, a financial planner works with a client on managing money and achieving financial goals. The term “financial advisor” refers to a variety of financial professionals, such as financial planners, investment managers, and stockbrokers. Is an Accountant Better Than a Financial Advisor? If you need overall financial help, a financial advisor probably is better than an accountant. On the other hand, if you need help with things such as bookkeeping and tax planning, an accountant likely is a better choice. The Bottom Line Hiring a financial advisor is a big step in your financial life, whether you need assistance with retirement planning, investment strategy, or debt management. Because of the vital role that a financial advisor can play, it’s best to take your time finding one you feel you can trust. Before making your choice, review your financial goals, seek recommendations, investigate an advisor’s background, and ask about the advisor’s fees.

https://www.investopedia.com/terms/w/warrantpremium.asp

Warrant Premium: Meaning, Calculation, Example

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-warrant-premium"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Warrant Premium? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A warrant premium is the difference between the current traded price of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warrant.asp">warrant</a> and its minimum value. A warrant's minimum value is the difference between its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exerciseprice.asp">exercise price</a> and the current traded price of its underlying stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Alternatively, a warrant premium is the percentage difference between the cost of purchasing shares by exercising a warrant and buying them in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/open-market.asp">open market</a> at the current price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A warrant premium represents the additional value of a warrant above its stated minimum, which can be estimated as the difference between its strike price and the market price of the underlying.</li><li>It can also refer to the premium given to exercising a warrant over buying shares in the open market.</li><li>A warrant is a type of call option granted by companies that gives employees or managers the right to purchase company shares in the future at favorable terms.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-warrant-premium"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding a Warrant Premium </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Warrants have both a price and a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp">premium</a>. Typically, the premium will decrease as the price of the warrant rises coupled with the decrease in the time to expiration. A warrant is <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inthemoney.asp">in-the-money</a> (ITM) when the exercise price is less than the current share price. The more in-the-money the warrant is, the lower the warrant premium. High volatility may also cause the warrant premium to be higher. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> As with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/calloption.asp">call options</a>, the premium can increase or decrease depending on supply and demand factors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-calculating-the-warrant-premium"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Calculating the Warrant Premium </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> For the simple definition, the premium is the amount above the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intrinsicvalue.asp">intrinsic</a>, or minimum value. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <li>Premium = current price of the warrant - minimum value</li><li>Minimum value = exercise price - current price of the underlying stock</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-example-of-warrant-premium"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Example of Warrant Premium </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> In this example, if the warrant price is $10, the exercise price is $25, and the current share price is $30, then the warrant premium would be $10-( $30-$25) = $5. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> For the second calculation, the premium, expressed as a percentage, is the difference between buying warrant shares vs. buying shares through the open market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li>Premium = [(Warrant Price+Exercise Price-Current Share Price) / Current Share Price] * 100</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> For example, an investor holds a warrant with a price of $10 and an exercise price of $25. The current share price is $30. The warrant premium would be [( $10+$25-$30) / $30] * 100 = 16.7%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Warrants tend to trade at premiums because <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trader.asp">traders</a> believe that the underlying stock can increase in price. Therefore, the longer the time until expiration, the longer the stock has to rise. However, as with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/option.asp">options</a>, as expiration approaches, the premium shrinks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <span class="heading-toc" id="toc-difference-between-options-and-warrants"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_29-0"> <span class="mntl-sc-block-heading__text"> Difference Between Options and Warrants </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> A warrant is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/071513/warrants-and-call-options.asp">similar to a call option</a>. It gives the owner the right, but not the obligation, to buy an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underlying-security.asp">underlying security</a> at a specific price, quantity, and at a future time. Warrants are unlike an option in that it is issued by a company, whereas an option is an instrument of the stock exchange. The security represented in a warrant, usually share <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity.asp">equity</a>, is delivered by the issuing company instead of by an investor holding the shares. Traders cannot write warrants. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Companies will often include warrants as part of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/newissue.asp">new-issue offering</a> to entice investors into buying the new security. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_34-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_35-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>While most listed options have a maximum expiration term of one to three years, warrants may have expiries of up to 15 years or more.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_36-0"><span class="heading-toc" id="toc-how-do-warrants-differ-from-company-stock"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Warrants Differ From Company Stock?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Warrants are sometimes given by companies to their employees as a form of equity compensation known as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eso.asp">employee stock options</a> (ESO). Because they are options contracts, they do not pay dividends nor have any voting rights. The warrants, however, may be exercised and converted into shares.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-what-is-a-warrant-sweetener"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Warrant Sweetener?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Sometimes a company will <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warrantcoverage.asp">attach warrants to other securities</a> that it issues in order to raise capital, making the issue more attractive to investors. For example, a warrant may be attached ("wedded") to corporate bonds or preferred shares. This is known as a "<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sweetener.asp">sweetener</a>."</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-how-can-warrants-dilute-earnings-per-share-eps"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Warrants Dilute Earnings Per Share (EPS)?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Earnings per share (EPS) is a key metric followed by investors and analysts. It is computed as a company's net income for a certain period divided by the number of shares outstanding. Warrants, however, can have a dilutive effect in that these contracts represent <em>potential</em> new shares that are not yet available. Therefore, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/061715/whats-difference-between-basic-shares-and-fully-diluted-shares.asp">fully-diluted EPS</a> is often preferred, which takes into account all potential new shares that could be brought about through warrants, other employee stock compensation, and convertible securities.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> <em>Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.</em> </p></div>

## What Is a Warrant Premium? A warrant premium is the difference between the current traded price of a [warrant](https://www.investopedia.com/terms/w/warrant.asp) and its minimum value. A warrant's minimum value is the difference between its [exercise price](https://www.investopedia.com/terms/e/exerciseprice.asp) and the current traded price of its underlying stock. Alternatively, a warrant premium is the percentage difference between the cost of purchasing shares by exercising a warrant and buying them in the [open market](https://www.investopedia.com/terms/o/open-market.asp) at the current price. ### Key Takeaways * A warrant premium represents the additional value of a warrant above its stated minimum, which can be estimated as the difference between its strike price and the market price of the underlying. * It can also refer to the premium given to exercising a warrant over buying shares in the open market. * A warrant is a type of call option granted by companies that gives employees or managers the right to purchase company shares in the future at favorable terms. ## Understanding a Warrant Premium Warrants have both a price and a [premium](https://www.investopedia.com/terms/p/premium.asp). Typically, the premium will decrease as the price of the warrant rises coupled with the decrease in the time to expiration. A warrant is [in-the-money](https://www.investopedia.com/terms/i/inthemoney.asp) (ITM) when the exercise price is less than the current share price. The more in-the-money the warrant is, the lower the warrant premium. High volatility may also cause the warrant premium to be higher. As with [call options](https://www.investopedia.com/terms/c/calloption.asp), the premium can increase or decrease depending on supply and demand factors. ## Calculating the Warrant Premium For the simple definition, the premium is the amount above the [intrinsic](https://www.investopedia.com/terms/i/intrinsicvalue.asp), or minimum value. * Premium = current price of the warrant - minimum value * Minimum value = exercise price - current price of the underlying stock ## Example of Warrant Premium In this example, if the warrant price is $10, the exercise price is $25, and the current share price is $30, then the warrant premium would be $10-( $30-$25) = $5. For the second calculation, the premium, expressed as a percentage, is the difference between buying warrant shares vs. buying shares through the open market. * Premium = [(Warrant Price+Exercise Price-Current Share Price) / Current Share Price] \* 100 For example, an investor holds a warrant with a price of $10 and an exercise price of $25. The current share price is $30. The warrant premium would be [( $10+$25-$30) / $30] \* 100 = 16.7%. Warrants tend to trade at premiums because [traders](https://www.investopedia.com/terms/t/trader.asp) believe that the underlying stock can increase in price. Therefore, the longer the time until expiration, the longer the stock has to rise. However, as with [options](https://www.investopedia.com/terms/o/option.asp), as expiration approaches, the premium shrinks. ## Difference Between Options and Warrants A warrant is [similar to a call option](https://www.investopedia.com/articles/investing/071513/warrants-and-call-options.asp). It gives the owner the right, but not the obligation, to buy an [underlying security](https://www.investopedia.com/terms/u/underlying-security.asp) at a specific price, quantity, and at a future time. Warrants are unlike an option in that it is issued by a company, whereas an option is an instrument of the stock exchange. The security represented in a warrant, usually share [equity](https://www.investopedia.com/terms/e/equity.asp), is delivered by the issuing company instead of by an investor holding the shares. Traders cannot write warrants. Companies will often include warrants as part of a [new-issue offering](https://www.investopedia.com/terms/n/newissue.asp) to entice investors into buying the new security. ### While most listed options have a maximum expiration term of one to three years, warrants may have expiries of up to 15 years or more. ## How Do Warrants Differ From Company Stock? Warrants are sometimes given by companies to their employees as a form of equity compensation known as [employee stock options](https://www.investopedia.com/terms/e/eso.asp) (ESO). Because they are options contracts, they do not pay dividends nor have any voting rights. The warrants, however, may be exercised and converted into shares. ## What Is a Warrant Sweetener? Sometimes a company will [attach warrants to other securities](https://www.investopedia.com/terms/w/warrantcoverage.asp) that it issues in order to raise capital, making the issue more attractive to investors. For example, a warrant may be attached ("wedded") to corporate bonds or preferred shares. This is known as a "[sweetener](https://www.investopedia.com/terms/s/sweetener.asp)." ## How Can Warrants Dilute Earnings Per Share (EPS)? Earnings per share (EPS) is a key metric followed by investors and analysts. It is computed as a company's net income for a certain period divided by the number of shares outstanding. Warrants, however, can have a dilutive effect in that these contracts represent *potential* new shares that are not yet available. Therefore, [fully-diluted EPS](https://www.investopedia.com/ask/answers/061715/whats-difference-between-basic-shares-and-fully-diluted-shares.asp) is often preferred, which takes into account all potential new shares that could be brought about through warrants, other employee stock compensation, and convertible securities. *Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.*

What Is a Warrant Premium? A warrant premium is the difference between the current traded price of a warrant and its minimum value. A warrant's minimum value is the difference between its exercise price and the current traded price of its underlying stock. Alternatively, a warrant premium is the percentage difference between the cost of purchasing shares by exercising a warrant and buying them in the open market at the current price. Key Takeaways A warrant premium represents the additional value of a warrant above its stated minimum, which can be estimated as the difference between its strike price and the market price of the underlying.It can also refer to the premium given to exercising a warrant over buying shares in the open market.A warrant is a type of call option granted by companies that gives employees or managers the right to purchase company shares in the future at favorable terms. Understanding a Warrant Premium Warrants have both a price and a premium. Typically, the premium will decrease as the price of the warrant rises coupled with the decrease in the time to expiration. A warrant is in-the-money (ITM) when the exercise price is less than the current share price. The more in-the-money the warrant is, the lower the warrant premium. High volatility may also cause the warrant premium to be higher. As with call options, the premium can increase or decrease depending on supply and demand factors. Calculating the Warrant Premium For the simple definition, the premium is the amount above the intrinsic, or minimum value. Premium = current price of the warrant - minimum valueMinimum value = exercise price - current price of the underlying stock Example of Warrant Premium In this example, if the warrant price is $10, the exercise price is $25, and the current share price is $30, then the warrant premium would be $10-( $30-$25) = $5. For the second calculation, the premium, expressed as a percentage, is the difference between buying warrant shares vs. buying shares through the open market. Premium = [(Warrant Price+Exercise Price-Current Share Price) / Current Share Price] * 100 For example, an investor holds a warrant with a price of $10 and an exercise price of $25. The current share price is $30. The warrant premium would be [( $10+$25-$30) / $30] * 100 = 16.7%. Warrants tend to trade at premiums because traders believe that the underlying stock can increase in price. Therefore, the longer the time until expiration, the longer the stock has to rise. However, as with options, as expiration approaches, the premium shrinks. Difference Between Options and Warrants A warrant is similar to a call option. It gives the owner the right, but not the obligation, to buy an underlying security at a specific price, quantity, and at a future time. Warrants are unlike an option in that it is issued by a company, whereas an option is an instrument of the stock exchange. The security represented in a warrant, usually share equity, is delivered by the issuing company instead of by an investor holding the shares. Traders cannot write warrants. Companies will often include warrants as part of a new-issue offering to entice investors into buying the new security. While most listed options have a maximum expiration term of one to three years, warrants may have expiries of up to 15 years or more. How Do Warrants Differ From Company Stock? Warrants are sometimes given by companies to their employees as a form of equity compensation known as employee stock options (ESO). Because they are options contracts, they do not pay dividends nor have any voting rights. The warrants, however, may be exercised and converted into shares. What Is a Warrant Sweetener? Sometimes a company will attach warrants to other securities that it issues in order to raise capital, making the issue more attractive to investors. For example, a warrant may be attached ("wedded") to corporate bonds or preferred shares. This is known as a "sweetener." How Can Warrants Dilute Earnings Per Share (EPS)? Earnings per share (EPS) is a key metric followed by investors and analysts. It is computed as a company's net income for a certain period divided by the number of shares outstanding. Warrants, however, can have a dilutive effect in that these contracts represent potential new shares that are not yet available. Therefore, fully-diluted EPS is often preferred, which takes into account all potential new shares that could be brought about through warrants, other employee stock compensation, and convertible securities. Investopedia does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal.

https://www.investopedia.com/articles/pf/08/negotiate-credit-card-apr.asp

How to Lower Your Credit Card Interest Rate

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> One of the great misconceptions about <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp">credit card</a> debt is that the cards themselves are bad. The truth is, they're really not. Rather, it's the effect of double-digit interest rates that make them so toxic to our personal finances. The exponential growth of an account balance quickly causes purchases we thought we'd easily pay off over a few months to grow into something that seems like it will take years to knock out. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Luckily, ridiculously high-<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> don't have to be part of your credit card experience. It's possible to negotiate to get a lower interest rate if you know whom to talk to and what strings to pull. If you can do a little bit of work to get inside your credit card company's head and are willing to spend 15 to 20 minutes on the phone, there's at least a chance you can save yourself some dollars over the next year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Customers can negotiate with credit card companies for lower interest rates.</li><li>Seeking to negotiate a credit card rate can be a good solution in a variety of situations.</li><li>Requesting a lower rate should not affect your credit score or credit account.</li></ul></div></div></div> <span class="heading-toc" id="toc-why-try-to-get-your-rate-lowered"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Why Try to Get Your Rate Lowered? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> You're probably reading this article because you've decided to step up and do battle with your credit card <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/cut-credit-debt.asp">debt</a>. With this in mind, it's crucial to realize that even a small cut in your credit card's <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">annual percentage rate (APR)</a> can shorten the amount of time it takes for you to become debt-free. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Consider a credit card with a $10,000 balance that's charging 25% annually. All else being equal, that credit card balance will cost you $2,500 in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> over the coming year. If you could get your interest rate on that credit card lowered from 25% to 15%, this would lead to an annual savings of $1,000, which you could put toward paying down your debt further. A lower interest rate can make a huge difference in how long it takes to become debt-free. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Though this prospect may sound too good to be true, it isn't. If you can get the right person at the credit card company on the phone, you can often negotiate the APR down to a lower rate. Even better, there is no risk in asking. Unlike some other balance-reduction techniques, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-does-credit-card-debt-relief-work-8426359">such as debt settlement</a>, simply requesting a reduction in your APR does not show up on your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp">credit report</a>, nor does it require hiring a professional to help.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_14-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_15-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Many people are surprised by how easy it can be to get a rate reduction.</p></div></div></div> <span class="heading-toc" id="toc-understanding-your-credit-card-company"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Understanding Your Credit Card Company </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> When you owe a large sum of money to a credit card company, it is easy to begin to fear talking to them. Perhaps people think they're going to get yelled at, shamed about the situation, or possibly penalized. The reality is that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/want-credit-card-fees-waived-just-ask/">credit card companies</a> are in business to make a profit, and their biggest profit is made from charging interest to people with unpaid balances. The bigger the balance, the more money the credit card company is able to make. In other words, if you are carrying a large balance, you are one of their best customers. The credit card company should love you and want you to stick around to keep paying interest. This positioning is something you can use in your favor. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Most credit card companies don't want to lose you or your balance, especially if you are paying a rate that's double or triple the historical <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rateofreturn.asp">rate of return</a> in the stock market. In fact, many credit card companies will go to great lengths to keep you happy and keep you spending, lest they go out of business. This fact is your most important piece of leverage when it comes to getting your APR lowered. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-how-to-negotiate-a-lower-apr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> How to Negotiate a Lower APR </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The process of getting your credit card rate lowered only involves a few steps, shouldn't take more than 15 to 20 minutes, and doesn't require any advanced negotiating skills. It just takes getting the right information in your hands and the right person on the phone. Here's how to negotiate with credit card companies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-subheading__text"> 1.  Assess Your Situation </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Every customer’s circumstances are different. First, assess your own situation and have a goal for improving it. If you have a solid <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit score</a>, you can potentially collect some competitive offers with lower interest rates. In other words, show your credit card company that you're serious about taking your balance—its source of profit—elsewhere. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> You can probably collect a stack of competitive offers simply by letting your junk mail pile up for a month. In that stack, you may find plenty of balance transfer offers from other credit card companies offering temporarily lowered rates for transferring your balance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> You can also spend a few minutes checking the major credit card companies' websites for their balance transfer rates. Ideally, you want to find three to four offers for a long-term rate of around 10%. Some offers may be temporary, like for 12 months or less. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> If you are seeking to negotiate your rate as a last resort before bankruptcy or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/debt-settlement.asp">debt settlement</a>, you can let them know that as well. Many people in troubled situations may inquire about closing their accounts altogether because it is too expensive to maintain. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> 2.  Ask the Right Person </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Next, grab your credit card, flip it over, and call the customer service number on the back. Then, keep pressing zero or whatever it takes to talk to a live person. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Be reasonable with the representative about your concerns. If you have found numerous <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-cards/balance-transfer-credit-card/">other offers</a> you are eligible for, let them know. Tell the representative that you've received numerous offers for a much lower interest rate from other credit card companies, but that you don't want to have to move your balance to another company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> If you are calling for assistance as a last resort, you can potentially let them know you are inquiring about closing your account but would rather try to negotiate. Lowering your interest rate as an alternative to other debt settlement solutions can be particularly helpful when your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt.asp">debt</a> has become overwhelming. Many credit card companies are willing to offer a deal if you are thinking about leaving. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Whatever your situation, you don’t necessarily have to take no for an answer. If a customer service representative says that a lower rate isn't possible, ask to speak to their supervisor. If you are refused, ask for the representative's full name and customer service identification number—this usually puts a little fear into the person, and they will want to hand you off as soon as possible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> When you get the customer service manager, which is probably the person you've wanted to talk to from the start, you'll again want to make your pitch. Be even sweeter this time. Be sure to tell the agent how much you've enjoyed having your account with the company and how much you'd like to keep it there. Also, explain your case. There's at least a 50% chance, if not better, that your request will be granted. Even if the company won't match a competitor's rate, it may still agree to some rate reduction. Any reduction in the rate will save you money, and the higher the reduction agreed upon, the better. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-what-to-do-after-a-decision"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> What to Do After a Decision </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> If you are able to get your rate lowered, it's time to supercharge your journey to eliminating debt. First, try to get the credit card company's agreement to lower your rate, as well as the related fine print, in writing. Plenty of people get a promise of some kind from a customer service rep only to discover that the rates have not been changed. Additionally, a credit card company's agreement to lower rates can be loaded with conditions that will raise your rate as high as it was or even higher than before if you fail to pay your bill on time or keep your balance under the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_limit.asp">credit limit</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Second, make sure the money you save on interest goes toward reducing your credit card or other debt. This isn't the time to go on a shopping spree or blow off some steam on a vacation with the extra money you're saving. Continue making payments in the same amount you were making before your rate was reduced. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> If your credit card company says no, ask them about their procedures for rate reductions. Also, see if there is a time period for consideration or reconsideration. Ultimately, if better rates and/or terms are offered somewhere else, it may be best to take advantage of them, potentially through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/111214/pros-and-cons-balance-transfers.asp">balance transfer</a> promotions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Remember that in the end, your balance is usually a valuable asset to a credit card company. Without its customers, the company loses the ability to earn a very attractive rate of return. By expressing in a non-confrontational but direct manner that you'd like the company's help to keep you as a customer, there's a good chance it will grant your request and lower your rate. Because there's nothing to lose but a little bit of your time, everyone with a substantial credit card balance should give these techniques a shot. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Alternatively, if your credit card company refuses to budge, you can always turn to that pile of balance transfer offers you made at the start. So long as they are among the best balance transfer cards currently available, switching to a new card could be your ticket to a lower interest rate. </p></div>

One of the great misconceptions about [credit card](https://www.investopedia.com/terms/c/creditcard.asp) debt is that the cards themselves are bad. The truth is, they're really not. Rather, it's the effect of double-digit interest rates that make them so toxic to our personal finances. The exponential growth of an account balance quickly causes purchases we thought we'd easily pay off over a few months to grow into something that seems like it will take years to knock out. Luckily, ridiculously high-[interest rates](https://www.investopedia.com/terms/i/interestrate.asp) don't have to be part of your credit card experience. It's possible to negotiate to get a lower interest rate if you know whom to talk to and what strings to pull. If you can do a little bit of work to get inside your credit card company's head and are willing to spend 15 to 20 minutes on the phone, there's at least a chance you can save yourself some dollars over the next year. ### Key Takeaways * Customers can negotiate with credit card companies for lower interest rates. * Seeking to negotiate a credit card rate can be a good solution in a variety of situations. * Requesting a lower rate should not affect your credit score or credit account. ## Why Try to Get Your Rate Lowered? You're probably reading this article because you've decided to step up and do battle with your credit card [debt](https://www.investopedia.com/articles/pf/07/cut-credit-debt.asp). With this in mind, it's crucial to realize that even a small cut in your credit card's [annual percentage rate (APR)](https://www.investopedia.com/terms/a/apr.asp) can shorten the amount of time it takes for you to become debt-free. Consider a credit card with a $10,000 balance that's charging 25% annually. All else being equal, that credit card balance will cost you $2,500 in [interest](https://www.investopedia.com/terms/i/interest.asp) over the coming year. If you could get your interest rate on that credit card lowered from 25% to 15%, this would lead to an annual savings of $1,000, which you could put toward paying down your debt further. A lower interest rate can make a huge difference in how long it takes to become debt-free. Though this prospect may sound too good to be true, it isn't. If you can get the right person at the credit card company on the phone, you can often negotiate the APR down to a lower rate. Even better, there is no risk in asking. Unlike some other balance-reduction techniques, [such as debt settlement](https://www.investopedia.com/how-does-credit-card-debt-relief-work-8426359), simply requesting a reduction in your APR does not show up on your [credit report](https://www.investopedia.com/terms/c/creditreport.asp), nor does it require hiring a professional to help. ### Many people are surprised by how easy it can be to get a rate reduction. ## Understanding Your Credit Card Company When you owe a large sum of money to a credit card company, it is easy to begin to fear talking to them. Perhaps people think they're going to get yelled at, shamed about the situation, or possibly penalized. The reality is that [credit card companies](https://www.investopedia.com/personal-finance/want-credit-card-fees-waived-just-ask/) are in business to make a profit, and their biggest profit is made from charging interest to people with unpaid balances. The bigger the balance, the more money the credit card company is able to make. In other words, if you are carrying a large balance, you are one of their best customers. The credit card company should love you and want you to stick around to keep paying interest. This positioning is something you can use in your favor. Most credit card companies don't want to lose you or your balance, especially if you are paying a rate that's double or triple the historical [rate of return](https://www.investopedia.com/terms/r/rateofreturn.asp) in the stock market. In fact, many credit card companies will go to great lengths to keep you happy and keep you spending, lest they go out of business. This fact is your most important piece of leverage when it comes to getting your APR lowered. ## How to Negotiate a Lower APR The process of getting your credit card rate lowered only involves a few steps, shouldn't take more than 15 to 20 minutes, and doesn't require any advanced negotiating skills. It just takes getting the right information in your hands and the right person on the phone. Here's how to negotiate with credit card companies. ### 1.  Assess Your Situation Every customer’s circumstances are different. First, assess your own situation and have a goal for improving it. If you have a solid [credit score](https://www.investopedia.com/terms/c/credit_score.asp), you can potentially collect some competitive offers with lower interest rates. In other words, show your credit card company that you're serious about taking your balance—its source of profit—elsewhere. You can probably collect a stack of competitive offers simply by letting your junk mail pile up for a month. In that stack, you may find plenty of balance transfer offers from other credit card companies offering temporarily lowered rates for transferring your balance. You can also spend a few minutes checking the major credit card companies' websites for their balance transfer rates. Ideally, you want to find three to four offers for a long-term rate of around 10%. Some offers may be temporary, like for 12 months or less. If you are seeking to negotiate your rate as a last resort before bankruptcy or [debt settlement](https://www.investopedia.com/articles/pf/09/debt-settlement.asp), you can let them know that as well. Many people in troubled situations may inquire about closing their accounts altogether because it is too expensive to maintain. ### 2.  Ask the Right Person Next, grab your credit card, flip it over, and call the customer service number on the back. Then, keep pressing zero or whatever it takes to talk to a live person. Be reasonable with the representative about your concerns. If you have found numerous [other offers](https://www.investopedia.com/credit-cards/balance-transfer-credit-card/) you are eligible for, let them know. Tell the representative that you've received numerous offers for a much lower interest rate from other credit card companies, but that you don't want to have to move your balance to another company. If you are calling for assistance as a last resort, you can potentially let them know you are inquiring about closing your account but would rather try to negotiate. Lowering your interest rate as an alternative to other debt settlement solutions can be particularly helpful when your [debt](https://www.investopedia.com/terms/d/debt.asp) has become overwhelming. Many credit card companies are willing to offer a deal if you are thinking about leaving. Whatever your situation, you don’t necessarily have to take no for an answer. If a customer service representative says that a lower rate isn't possible, ask to speak to their supervisor. If you are refused, ask for the representative's full name and customer service identification number—this usually puts a little fear into the person, and they will want to hand you off as soon as possible. When you get the customer service manager, which is probably the person you've wanted to talk to from the start, you'll again want to make your pitch. Be even sweeter this time. Be sure to tell the agent how much you've enjoyed having your account with the company and how much you'd like to keep it there. Also, explain your case. There's at least a 50% chance, if not better, that your request will be granted. Even if the company won't match a competitor's rate, it may still agree to some rate reduction. Any reduction in the rate will save you money, and the higher the reduction agreed upon, the better. ## What to Do After a Decision If you are able to get your rate lowered, it's time to supercharge your journey to eliminating debt. First, try to get the credit card company's agreement to lower your rate, as well as the related fine print, in writing. Plenty of people get a promise of some kind from a customer service rep only to discover that the rates have not been changed. Additionally, a credit card company's agreement to lower rates can be loaded with conditions that will raise your rate as high as it was or even higher than before if you fail to pay your bill on time or keep your balance under the [credit limit](https://www.investopedia.com/terms/c/credit_limit.asp). Second, make sure the money you save on interest goes toward reducing your credit card or other debt. This isn't the time to go on a shopping spree or blow off some steam on a vacation with the extra money you're saving. Continue making payments in the same amount you were making before your rate was reduced. If your credit card company says no, ask them about their procedures for rate reductions. Also, see if there is a time period for consideration or reconsideration. Ultimately, if better rates and/or terms are offered somewhere else, it may be best to take advantage of them, potentially through [balance transfer](https://www.investopedia.com/articles/personal-finance/111214/pros-and-cons-balance-transfers.asp) promotions. ## The Bottom Line Remember that in the end, your balance is usually a valuable asset to a credit card company. Without its customers, the company loses the ability to earn a very attractive rate of return. By expressing in a non-confrontational but direct manner that you'd like the company's help to keep you as a customer, there's a good chance it will grant your request and lower your rate. Because there's nothing to lose but a little bit of your time, everyone with a substantial credit card balance should give these techniques a shot. Alternatively, if your credit card company refuses to budge, you can always turn to that pile of balance transfer offers you made at the start. So long as they are among the best balance transfer cards currently available, switching to a new card could be your ticket to a lower interest rate.

One of the great misconceptions about credit card debt is that the cards themselves are bad. The truth is, they're really not. Rather, it's the effect of double-digit interest rates that make them so toxic to our personal finances. The exponential growth of an account balance quickly causes purchases we thought we'd easily pay off over a few months to grow into something that seems like it will take years to knock out. Luckily, ridiculously high-interest rates don't have to be part of your credit card experience. It's possible to negotiate to get a lower interest rate if you know whom to talk to and what strings to pull. If you can do a little bit of work to get inside your credit card company's head and are willing to spend 15 to 20 minutes on the phone, there's at least a chance you can save yourself some dollars over the next year. Key Takeaways Customers can negotiate with credit card companies for lower interest rates.Seeking to negotiate a credit card rate can be a good solution in a variety of situations.Requesting a lower rate should not affect your credit score or credit account. Why Try to Get Your Rate Lowered? You're probably reading this article because you've decided to step up and do battle with your credit card debt. With this in mind, it's crucial to realize that even a small cut in your credit card's annual percentage rate (APR) can shorten the amount of time it takes for you to become debt-free. Consider a credit card with a $10,000 balance that's charging 25% annually. All else being equal, that credit card balance will cost you $2,500 in interest over the coming year. If you could get your interest rate on that credit card lowered from 25% to 15%, this would lead to an annual savings of $1,000, which you could put toward paying down your debt further. A lower interest rate can make a huge difference in how long it takes to become debt-free. Though this prospect may sound too good to be true, it isn't. If you can get the right person at the credit card company on the phone, you can often negotiate the APR down to a lower rate. Even better, there is no risk in asking. Unlike some other balance-reduction techniques, such as debt settlement, simply requesting a reduction in your APR does not show up on your credit report, nor does it require hiring a professional to help. Many people are surprised by how easy it can be to get a rate reduction. Understanding Your Credit Card Company When you owe a large sum of money to a credit card company, it is easy to begin to fear talking to them. Perhaps people think they're going to get yelled at, shamed about the situation, or possibly penalized. The reality is that credit card companies are in business to make a profit, and their biggest profit is made from charging interest to people with unpaid balances. The bigger the balance, the more money the credit card company is able to make. In other words, if you are carrying a large balance, you are one of their best customers. The credit card company should love you and want you to stick around to keep paying interest. This positioning is something you can use in your favor. Most credit card companies don't want to lose you or your balance, especially if you are paying a rate that's double or triple the historical rate of return in the stock market. In fact, many credit card companies will go to great lengths to keep you happy and keep you spending, lest they go out of business. This fact is your most important piece of leverage when it comes to getting your APR lowered. How to Negotiate a Lower APR The process of getting your credit card rate lowered only involves a few steps, shouldn't take more than 15 to 20 minutes, and doesn't require any advanced negotiating skills. It just takes getting the right information in your hands and the right person on the phone. Here's how to negotiate with credit card companies. 1.  Assess Your Situation Every customer’s circumstances are different. First, assess your own situation and have a goal for improving it. If you have a solid credit score, you can potentially collect some competitive offers with lower interest rates. In other words, show your credit card company that you're serious about taking your balance—its source of profit—elsewhere. You can probably collect a stack of competitive offers simply by letting your junk mail pile up for a month. In that stack, you may find plenty of balance transfer offers from other credit card companies offering temporarily lowered rates for transferring your balance. You can also spend a few minutes checking the major credit card companies' websites for their balance transfer rates. Ideally, you want to find three to four offers for a long-term rate of around 10%. Some offers may be temporary, like for 12 months or less. If you are seeking to negotiate your rate as a last resort before bankruptcy or debt settlement, you can let them know that as well. Many people in troubled situations may inquire about closing their accounts altogether because it is too expensive to maintain. 2.  Ask the Right Person Next, grab your credit card, flip it over, and call the customer service number on the back. Then, keep pressing zero or whatever it takes to talk to a live person. Be reasonable with the representative about your concerns. If you have found numerous other offers you are eligible for, let them know. Tell the representative that you've received numerous offers for a much lower interest rate from other credit card companies, but that you don't want to have to move your balance to another company. If you are calling for assistance as a last resort, you can potentially let them know you are inquiring about closing your account but would rather try to negotiate. Lowering your interest rate as an alternative to other debt settlement solutions can be particularly helpful when your debt has become overwhelming. Many credit card companies are willing to offer a deal if you are thinking about leaving. Whatever your situation, you don’t necessarily have to take no for an answer. If a customer service representative says that a lower rate isn't possible, ask to speak to their supervisor. If you are refused, ask for the representative's full name and customer service identification number—this usually puts a little fear into the person, and they will want to hand you off as soon as possible. When you get the customer service manager, which is probably the person you've wanted to talk to from the start, you'll again want to make your pitch. Be even sweeter this time. Be sure to tell the agent how much you've enjoyed having your account with the company and how much you'd like to keep it there. Also, explain your case. There's at least a 50% chance, if not better, that your request will be granted. Even if the company won't match a competitor's rate, it may still agree to some rate reduction. Any reduction in the rate will save you money, and the higher the reduction agreed upon, the better. What to Do After a Decision If you are able to get your rate lowered, it's time to supercharge your journey to eliminating debt. First, try to get the credit card company's agreement to lower your rate, as well as the related fine print, in writing. Plenty of people get a promise of some kind from a customer service rep only to discover that the rates have not been changed. Additionally, a credit card company's agreement to lower rates can be loaded with conditions that will raise your rate as high as it was or even higher than before if you fail to pay your bill on time or keep your balance under the credit limit. Second, make sure the money you save on interest goes toward reducing your credit card or other debt. This isn't the time to go on a shopping spree or blow off some steam on a vacation with the extra money you're saving. Continue making payments in the same amount you were making before your rate was reduced. If your credit card company says no, ask them about their procedures for rate reductions. Also, see if there is a time period for consideration or reconsideration. Ultimately, if better rates and/or terms are offered somewhere else, it may be best to take advantage of them, potentially through balance transfer promotions. The Bottom Line Remember that in the end, your balance is usually a valuable asset to a credit card company. Without its customers, the company loses the ability to earn a very attractive rate of return. By expressing in a non-confrontational but direct manner that you'd like the company's help to keep you as a customer, there's a good chance it will grant your request and lower your rate. Because there's nothing to lose but a little bit of your time, everyone with a substantial credit card balance should give these techniques a shot. Alternatively, if your credit card company refuses to budge, you can always turn to that pile of balance transfer offers you made at the start. So long as they are among the best balance transfer cards currently available, switching to a new card could be your ticket to a lower interest rate.

https://www.investopedia.com/terms/q/quantitative-trading.asp

What Is Quantitative Trading? Definition, Examples, and Profit

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-quantitative-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Quantitative Trading? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Quantitative trading consists of trading strategies based on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quantitativeanalysis.asp">quantitative analysis</a>, which rely on mathematical computations and number crunching to identify trading opportunities. Price and volume are two of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> As quantitative trading is generally used by financial institutions and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp">hedge funds</a>, the transactions are usually large and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is becoming more commonly used by individual investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Quantitative trading utilizes mathematical functions and automated trading models to make trading decisions. </li><li>In this type of trading, backtested data are applied to various scenarios to help identify opportunities for profit.</li><li>The advantage of quantitative trading is that it allows for optimal use of available data and eliminates the emotional decision-making that can occur during trading. </li><li>A disadvantage of quantitative trading is that it has limited use: a quantitative trading strategy loses its effectiveness once other market actors learn of it, or as market conditions change.</li><li>High-frequency trading (HFT) is an example of quantitative trading at scale.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-quantitative-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Quantitative Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Quantitative traders take advantage of modern technology, mathematics, and the availability of comprehensive databases for making rational trading decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Quantitative traders take a trading technique and create a model of it using mathematics, and then they develop a computer program that applies the model to historical market data. The model is then backtested and optimized. If favorable results are achieved, the system is then implemented in real-time markets with real capital. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The way quantitative trading models function can best be described using an analogy. Consider a weather report in which the meteorologist forecasts a 90% chance of rain while the sun is shining. The meteorologist derives this counterintuitive conclusion by collecting and analyzing climate data from sensors throughout the area. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> A computerized quantitative analysis reveals specific patterns in the data. When these patterns are compared to the same patterns revealed in historical climate data (backtesting), and 90 out of 100 times the result is rain, then the meteorologist can draw the conclusion with confidence—hence, the 90% forecast. Quantitative traders apply this same process to the financial market to make trading decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Historical price, volume, and correlation with other assets are some of the more common data inputs used in quantitative analysis as the main inputs to mathematical models.</p></div></div></div> <span class="heading-toc" id="toc-examples-of-quantitative-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Examples of Quantitative Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Depending on the trader's research and preferences, quantitative trading algorithms can be customized to evaluate different parameters related to a stock. Consider the case of a trader who believes in momentum investing. They can choose to write a simple program that picks out the winners during an upward momentum in the markets. During the next market upturn, the program will buy those stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> This is a fairly simple example of quantitative trading. Typically an assortment of parameters, from technical analysis to value stocks to fundamental analysis, is used to pick out a complex mix of stocks designed to maximize profits. These parameters are programmed into a trading system to take advantage of market movements. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Quantitative trading techniques are utilized extensively by certain hedge funds, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/high-frequency-trading.asp">high-frequency trading</a> (HFT) firms, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/algorithmictrading.asp">algorithmic trading</a> platforms, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/statisticalarbitrage.asp">statistical arbitrage</a> desks. These techniques may involve rapid-fire order execution and typically have short-term investment horizons.</p></div></div></div> <span class="heading-toc" id="toc-advantages-and-disadvantages-of-quantitative-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Advantages and Disadvantages of Quantitative Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The objective of trading is to calculate the optimal probability of executing a profitable trade. A typical trader can effectively monitor, analyze and make trading decisions on a limited number of securities before the amount of incoming data overwhelms the decision-making process. The use of quantitative trading techniques illuminates this limit by using computers to automate the monitoring, analyzing, and trading decisions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Overcoming emotion is one of the most pervasive problems with trading. Be it fear or greed, when trading, emotion serves only to stifle rational thinking, which usually leads to losses. Computers and mathematics do not possess emotions, so quantitative trading eliminates this problem. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Quantitative trading does have its problems. Financial markets are some of the most dynamic entities that exist. Therefore, quantitative trading models must be as dynamic to be consistently successful. Many quantitative traders develop models that are temporarily profitable for the market condition for which they were developed, but they ultimately fail when market conditions change. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <span class="heading-toc" id="toc-frequently-asked-questions"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> Do quant traders make a lot of money? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Because they must possess a certain level of mathematical skill, training, and knowledge, quant traders are often in demand on Wall St. Indeed, many quants have advanced degrees in fields like applied statistics, computer science, or mathematical modeling. As a result, successful quants can earn a great deal of money, especially if they are employed by a successful hedge fund or trading firm. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> What is a quantitative trader? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Quantitative traders, or quants for short, use mathematical models and large data sets to identify trading opportunities and buy and sell securities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_40-0"> <span class="mntl-sc-block-subheading__text"> How do I become a quant? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> An aspiring quant trader needs to be exceptionally skilled and interested in all things mathematical. A bachelor's degree in math, a master's degree in financial engineering or quantitative financial modeling, or an MBA are all helpful for scoring a job; many analysts will also have a Ph.D. in these or similar fields. In addition to an advanced degree, a quant should also have experience and familiarity with data mining, research methods, statistical analysis, and automated trading systems. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-subheading__text"> What is the difference between algorithmic and quantitative trading? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> The primary difference is that algorithmic trading is able to automate trading decisions and executions. While a human can be a quant, computers are much faster and more accurate than even the most dexterous trader. However, the bottom line is that the two are not mutually exclusive. Algorithm trading is normally quantitate trading being done by automated computer algorithms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> Where can I learn algorithmic or quantitative trading for free? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Because quant trading requires a mastery of math, statistics, and programming, it is unlikely to be the case that one can simply read a few books and become adept. Rather, successful quants invest a great deal of time and money in formal education, industry credentialing, and self-study. Additionally, the cost of the trading systems and infrastructure to begin trading as a quant are high and capital-intensive. That said, online courses on the subject do exist. These could be a great way to get an introduction and try out the field before investing further. </p></div>

## What Is Quantitative Trading? Quantitative trading consists of trading strategies based on [quantitative analysis](https://www.investopedia.com/terms/q/quantitativeanalysis.asp), which rely on mathematical computations and number crunching to identify trading opportunities. Price and volume are two of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. As quantitative trading is generally used by financial institutions and [hedge funds](https://www.investopedia.com/terms/h/hedgefund.asp), the transactions are usually large and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is becoming more commonly used by individual investors. ### Key Takeaways * Quantitative trading utilizes mathematical functions and automated trading models to make trading decisions. * In this type of trading, backtested data are applied to various scenarios to help identify opportunities for profit. * The advantage of quantitative trading is that it allows for optimal use of available data and eliminates the emotional decision-making that can occur during trading. * A disadvantage of quantitative trading is that it has limited use: a quantitative trading strategy loses its effectiveness once other market actors learn of it, or as market conditions change. * High-frequency trading (HFT) is an example of quantitative trading at scale. ## Understanding Quantitative Trading Quantitative traders take advantage of modern technology, mathematics, and the availability of comprehensive databases for making rational trading decisions. Quantitative traders take a trading technique and create a model of it using mathematics, and then they develop a computer program that applies the model to historical market data. The model is then backtested and optimized. If favorable results are achieved, the system is then implemented in real-time markets with real capital. The way quantitative trading models function can best be described using an analogy. Consider a weather report in which the meteorologist forecasts a 90% chance of rain while the sun is shining. The meteorologist derives this counterintuitive conclusion by collecting and analyzing climate data from sensors throughout the area. A computerized quantitative analysis reveals specific patterns in the data. When these patterns are compared to the same patterns revealed in historical climate data (backtesting), and 90 out of 100 times the result is rain, then the meteorologist can draw the conclusion with confidence—hence, the 90% forecast. Quantitative traders apply this same process to the financial market to make trading decisions. ### Historical price, volume, and correlation with other assets are some of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. ## Examples of Quantitative Trading Depending on the trader's research and preferences, quantitative trading algorithms can be customized to evaluate different parameters related to a stock. Consider the case of a trader who believes in momentum investing. They can choose to write a simple program that picks out the winners during an upward momentum in the markets. During the next market upturn, the program will buy those stocks. This is a fairly simple example of quantitative trading. Typically an assortment of parameters, from technical analysis to value stocks to fundamental analysis, is used to pick out a complex mix of stocks designed to maximize profits. These parameters are programmed into a trading system to take advantage of market movements. ### Quantitative trading techniques are utilized extensively by certain hedge funds, [high-frequency trading](https://www.investopedia.com/terms/h/high-frequency-trading.asp) (HFT) firms, [algorithmic trading](https://www.investopedia.com/terms/a/algorithmictrading.asp) platforms, and [statistical arbitrage](https://www.investopedia.com/terms/s/statisticalarbitrage.asp) desks. These techniques may involve rapid-fire order execution and typically have short-term investment horizons. ## Advantages and Disadvantages of Quantitative Trading The objective of trading is to calculate the optimal probability of executing a profitable trade. A typical trader can effectively monitor, analyze and make trading decisions on a limited number of securities before the amount of incoming data overwhelms the decision-making process. The use of quantitative trading techniques illuminates this limit by using computers to automate the monitoring, analyzing, and trading decisions. Overcoming emotion is one of the most pervasive problems with trading. Be it fear or greed, when trading, emotion serves only to stifle rational thinking, which usually leads to losses. Computers and mathematics do not possess emotions, so quantitative trading eliminates this problem. Quantitative trading does have its problems. Financial markets are some of the most dynamic entities that exist. Therefore, quantitative trading models must be as dynamic to be consistently successful. Many quantitative traders develop models that are temporarily profitable for the market condition for which they were developed, but they ultimately fail when market conditions change. ## Frequently Asked Questions ### Do quant traders make a lot of money? Because they must possess a certain level of mathematical skill, training, and knowledge, quant traders are often in demand on Wall St. Indeed, many quants have advanced degrees in fields like applied statistics, computer science, or mathematical modeling. As a result, successful quants can earn a great deal of money, especially if they are employed by a successful hedge fund or trading firm. ### What is a quantitative trader? Quantitative traders, or quants for short, use mathematical models and large data sets to identify trading opportunities and buy and sell securities. ### How do I become a quant? An aspiring quant trader needs to be exceptionally skilled and interested in all things mathematical. A bachelor's degree in math, a master's degree in financial engineering or quantitative financial modeling, or an MBA are all helpful for scoring a job; many analysts will also have a Ph.D. in these or similar fields. In addition to an advanced degree, a quant should also have experience and familiarity with data mining, research methods, statistical analysis, and automated trading systems. ### What is the difference between algorithmic and quantitative trading? The primary difference is that algorithmic trading is able to automate trading decisions and executions. While a human can be a quant, computers are much faster and more accurate than even the most dexterous trader. However, the bottom line is that the two are not mutually exclusive. Algorithm trading is normally quantitate trading being done by automated computer algorithms. ### Where can I learn algorithmic or quantitative trading for free? Because quant trading requires a mastery of math, statistics, and programming, it is unlikely to be the case that one can simply read a few books and become adept. Rather, successful quants invest a great deal of time and money in formal education, industry credentialing, and self-study. Additionally, the cost of the trading systems and infrastructure to begin trading as a quant are high and capital-intensive. That said, online courses on the subject do exist. These could be a great way to get an introduction and try out the field before investing further.

What Is Quantitative Trading? Quantitative trading consists of trading strategies based on quantitative analysis, which rely on mathematical computations and number crunching to identify trading opportunities. Price and volume are two of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. As quantitative trading is generally used by financial institutions and hedge funds, the transactions are usually large and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is becoming more commonly used by individual investors. Key Takeaways Quantitative trading utilizes mathematical functions and automated trading models to make trading decisions. In this type of trading, backtested data are applied to various scenarios to help identify opportunities for profit.The advantage of quantitative trading is that it allows for optimal use of available data and eliminates the emotional decision-making that can occur during trading. A disadvantage of quantitative trading is that it has limited use: a quantitative trading strategy loses its effectiveness once other market actors learn of it, or as market conditions change.High-frequency trading (HFT) is an example of quantitative trading at scale. Understanding Quantitative Trading Quantitative traders take advantage of modern technology, mathematics, and the availability of comprehensive databases for making rational trading decisions. Quantitative traders take a trading technique and create a model of it using mathematics, and then they develop a computer program that applies the model to historical market data. The model is then backtested and optimized. If favorable results are achieved, the system is then implemented in real-time markets with real capital. The way quantitative trading models function can best be described using an analogy. Consider a weather report in which the meteorologist forecasts a 90% chance of rain while the sun is shining. The meteorologist derives this counterintuitive conclusion by collecting and analyzing climate data from sensors throughout the area. A computerized quantitative analysis reveals specific patterns in the data. When these patterns are compared to the same patterns revealed in historical climate data (backtesting), and 90 out of 100 times the result is rain, then the meteorologist can draw the conclusion with confidence—hence, the 90% forecast. Quantitative traders apply this same process to the financial market to make trading decisions. Historical price, volume, and correlation with other assets are some of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. Examples of Quantitative Trading Depending on the trader's research and preferences, quantitative trading algorithms can be customized to evaluate different parameters related to a stock. Consider the case of a trader who believes in momentum investing. They can choose to write a simple program that picks out the winners during an upward momentum in the markets. During the next market upturn, the program will buy those stocks. This is a fairly simple example of quantitative trading. Typically an assortment of parameters, from technical analysis to value stocks to fundamental analysis, is used to pick out a complex mix of stocks designed to maximize profits. These parameters are programmed into a trading system to take advantage of market movements. Quantitative trading techniques are utilized extensively by certain hedge funds, high-frequency trading (HFT) firms, algorithmic trading platforms, and statistical arbitrage desks. These techniques may involve rapid-fire order execution and typically have short-term investment horizons. Advantages and Disadvantages of Quantitative Trading The objective of trading is to calculate the optimal probability of executing a profitable trade. A typical trader can effectively monitor, analyze and make trading decisions on a limited number of securities before the amount of incoming data overwhelms the decision-making process. The use of quantitative trading techniques illuminates this limit by using computers to automate the monitoring, analyzing, and trading decisions. Overcoming emotion is one of the most pervasive problems with trading. Be it fear or greed, when trading, emotion serves only to stifle rational thinking, which usually leads to losses. Computers and mathematics do not possess emotions, so quantitative trading eliminates this problem. Quantitative trading does have its problems. Financial markets are some of the most dynamic entities that exist. Therefore, quantitative trading models must be as dynamic to be consistently successful. Many quantitative traders develop models that are temporarily profitable for the market condition for which they were developed, but they ultimately fail when market conditions change. Frequently Asked Questions Do quant traders make a lot of money? Because they must possess a certain level of mathematical skill, training, and knowledge, quant traders are often in demand on Wall St. Indeed, many quants have advanced degrees in fields like applied statistics, computer science, or mathematical modeling. As a result, successful quants can earn a great deal of money, especially if they are employed by a successful hedge fund or trading firm. What is a quantitative trader? Quantitative traders, or quants for short, use mathematical models and large data sets to identify trading opportunities and buy and sell securities. How do I become a quant? An aspiring quant trader needs to be exceptionally skilled and interested in all things mathematical. A bachelor's degree in math, a master's degree in financial engineering or quantitative financial modeling, or an MBA are all helpful for scoring a job; many analysts will also have a Ph.D. in these or similar fields. In addition to an advanced degree, a quant should also have experience and familiarity with data mining, research methods, statistical analysis, and automated trading systems. What is the difference between algorithmic and quantitative trading? The primary difference is that algorithmic trading is able to automate trading decisions and executions. While a human can be a quant, computers are much faster and more accurate than even the most dexterous trader. However, the bottom line is that the two are not mutually exclusive. Algorithm trading is normally quantitate trading being done by automated computer algorithms. Where can I learn algorithmic or quantitative trading for free? Because quant trading requires a mastery of math, statistics, and programming, it is unlikely to be the case that one can simply read a few books and become adept. Rather, successful quants invest a great deal of time and money in formal education, industry credentialing, and self-study. Additionally, the cost of the trading systems and infrastructure to begin trading as a quant are high and capital-intensive. That said, online courses on the subject do exist. These could be a great way to get an introduction and try out the field before investing further.

https://www.investopedia.com/articles/personal-finance/062315/how-set-trust-fund-uk.asp

How to Set up a Trust Fund in the UK

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> British trust law enjoys a long, fascinating history dating back to the feudal times of the 12th century and the Statute of Uses adopted during the reign of Henry VIII in the 16th century. Back then, trust and equity rules were established as a parallel justice system to address “inequity” of common law around property disputes (and to appease disgruntled claimants).<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Initially, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trust-fund.asp">trust funds</a> were mostly utilized for the management of “will monies” and to create family settlements. Today, “trust” has evolved into an umbrella term for a variety of financial frameworks that allow citizens to protect assets, distribute earnings, and manage wealth both for the present day and for future generations. Although traditionally associated with millionaires and magnates, trusts can benefit middle-class families as well. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Consider working with a well-respected legal professional when even considering setting up a trust.</li><li>Trusts are not only for the wealthy. In fact, they have benefits for all classes of wealth.</li><li>Trusts are basically the same in every country, but individual quirks in the UK system mean you need to go through the trust line by line with a professional. </li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-trust-fund"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is a Trust Fund? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> In principle, a trust is a very simple concept. It’s a private legal arrangement in which the ownership of someone’s assets (which might include stock shares, cash, real estate or even artworks) is transferred to a private fund, and held or managed by an individual (or group of individuals) for the benefit of the trust members. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The person providing the assets is generally referred to as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/settlor.asp">settlor</a>. Those appointed to look after the assets are known as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trustee.asp">trustees</a>, and those who receive disbursements from the trust are the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/beneficiary.asp">beneficiaries</a>.<span class="ql-inline-citation" data-cite="11"></span> Once assigned to the trust, in most cases, assets are no longer deemed personal possessions of the settlors and are thus safeguarded from creditors (even in cases of bankruptcy), financial setbacks, family disagreements, and lawsuits.<span class="ql-inline-citation" data-cite="2"></span> As such, trusts are a widely used ”safe haven” arrangement for family and business assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-why-create-a-trust"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Why Create a Trust? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Trusts serve a variety of needs, and the reasons for establishing them are seemingly endless. The most common include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> <li>To control and protect family assets (possibly the number-one motive)</li> <li>Estate and inheritance planning</li> <li>When someone is too young (or incapacitated) to handle their own financial affairs</li> <li>To protect ”spendthrifts” against their own lack of control</li> <li>For management and distribution of pension or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/retirement/021117/how-retire-uk-american.asp" rel="noopener noreferrer">retirement</a> funds during the term of an individual’s employment</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-what-types-of-trusts-are-there"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> What Types of Trusts Are There? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Since trusts function as multipurpose legal tools, they take many forms. The United Kingdom recognizes numerous trust arrangements (each with its own specific procedures and regulations) that generally fall into one of the following categories: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Bare Trusts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Also known as a “simple trust,” property or assets in this form are held in the name of a trustee who has no discretion over what income is paid to the beneficiary and has no active duties to perform. The beneficiary has the absolute right to all of the capital and income of the trust at any time—if they are 18 or over (in England and Wales), or 16 and above (in Scotland). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Bare trusts are often utilized as a vehicle through which assets are passed to young people. Trustees simply manage the assets until the beneficiary is old enough to handle that responsibility, which means assets set aside by the settlor will always go directly to the intended beneficiary.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-subheading__text"> Interest in Possession Trusts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> This structure provides an individual with a ”present right to the present enjoyment” of something, so the trustee must pass on all trust income to the beneficiary as it arises (less any expenses and tax). This type of trust can give the ”interest in possession” to a beneficiary for a fixed period, an indefinite period, or most frequently, for the rest of the beneficiary's life.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> In a “life interest” trust, the interest in possession ends when the income beneficiary (known as the “life tenant”) dies, relocates or remarries.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-subheading__text"> Discretionary Trusts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> As the name implies, this instrument provides the trustee with discretion over distributions from the trust. Discretion must be exercised in accordance with the terms of the trust deed; however, it is entirely up to the trustees to decide as to the timing, size, and nature of the distributions, and even, in some cases, which of the potential beneficiaries is to benefit.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The assets are said to be “held in trust” for the beneficiaries to one day decide what to do with those assets. A discretionary trust is a very flexible form of trust commonly used to keep wealth within families while allowing them some flexibility to make decisions about where the assets go. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_35-0"> <span class="mntl-sc-block-subheading__text"> Accumulation and Maintenance Trusts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> This version allows the trustees to augment the trust’s capital and income. Trustees of an accumulation and maintenance trust are given the power to “accumulate” the trust's assets (through savings and investments), until a certain date, at which time the beneficiary is entitled to the property of the trust, or to some of the income arising from that property. When the beneficiary reaches the age of 18 (at least, but no older than 25), they become entitled to the full income generated by the trust.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Mixed Trusts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> As the name suggests, this form contains different types of trusts within one structure.<span class="ql-inline-citation" data-cite="12"></span> Some assets may be set aside in an Interest in Possession Trust, while others may be treated in a Discretionary Trust manner. Mixed Trusts are often created to benefit sibling beneficiaries who reach inheritance age at different times. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-how-do-i-create-a-trust"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> How Do I Create a Trust? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> While simple in theory, trusts can become a web of complexity if they're to operate properly. A solicitor is needed to draw up a trust because the legal wording must be precise. The process can be costly (around £1,000 or more), depending upon the extent of the advice required.<span class="ql-inline-citation" data-cite="10"></span> By being prepared before you start in the consultation process, however, you can considerably reduce professional advice time and associated costs, irrespective of trust type. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-subheading__text"> Step 1: Decide Upon the Assets </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> You will need to list the items and value of those items that have been allocated, or will otherwise be acquired, at trust inception. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> Step 2: Appoint Trustee(s) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Select an individual or management <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/trustee-responsibility.asp" rel="noopener noreferrer">company you trust</a> (banks are often used) because the trustee will bear significant legal authority with control over trust assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-subheading__text"> Step 3: Determine the Beneficiaries </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Compile a list of people or entities that will be entitled to receive benefits and include the percentage of those benefits to which each beneficiary is entitled. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-subheading__text"> Step 4: Outline the Terms </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> A trust is generally created by way of a deed. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trustdeed.asp" rel="noopener noreferrer">trust deed</a> is a legal document prescribing the rules that govern your fund and the powers of the trustee. It includes the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <li>The fund’s objectives</li><li>Original trust assets</li><li>The beneficiaries</li><li>How benefits are to be paid (either via lump sum or income stream)</li><li>How the trust may be settled (that is, terminated)</li><li>The rules for the operation of the trust bank account</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Although the deed itself should be crafted by someone with adequate specialized legal, tax, and financial knowledge, you should decide on all these aspects, and sketch them out for the professional preparer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> The trust deed will specify the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> <li>The identities of the trustees and beneficiaries</li><li>Which assets are being passed into the trust for management by the trustee</li><li>How the money or property is to be managed</li><li>The permitted use of the money</li><li>Who receives the money or property when the trust is terminated</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_64-0"><span class="heading-toc" id="toc-who-can-set-up-a-trust-fund"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Can Set Up a Trust Fund?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You don't need to be wealthy to start a trust fund. As long as you have assets (not necessarily high-value assets), saving, property, or business shares, you can set up a trust fund. Be aware though of the costs associated with setting up a trust fund.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_66-0"><span class="heading-toc" id="toc-how-much-does-it-cost-to-set-up-a-trust-in-the-uk"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does It Cost to Set Up a Trust in the U.K.?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Creating a simple trust costs anywhere from £1000 to £1,500, depending on how much initial legal advice you need and how long it takes your solicitor to draft the wording. If you have a complex collection of assets including foreign assets, as well as business interests, the cost can be as high as £10,000.<span class="ql-inline-citation" data-cite="10"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_68-0"><span class="heading-toc" id="toc-are-trust-tunds-taxed"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Trust Tunds Taxed?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Different rates of income tax, capital gains tax, and inheritance tax are applied to trust funds depending on the type of trust and trust income received.<span class="ql-inline-citation" data-cite="15"></span><span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="17"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Given their practicality, flexibility, and many financial benefits, trust funds have become an incredibly popular way of structuring financial affairs. However, the complex nature of many trusts requires a crystal-clear understanding of the legal relationships and obligations involved. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> If you’d like to set up a trust, you can always start with your own solicitor, accountant, or tax advisor. Law Societies also maintain searchable databases to help you find a qualified solicitor in your area: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> <li>England and Wales: The Law Society<span class="ql-inline-citation" data-cite="7"></span></li><li>Scotland: The Law Society of Scotland<span class="ql-inline-citation" data-cite="8"></span></li><li>Northern Ireland: Law Society of Northern Ireland<span class="ql-inline-citation" data-cite="9"></span></li> </ul></div>

British trust law enjoys a long, fascinating history dating back to the feudal times of the 12th century and the Statute of Uses adopted during the reign of Henry VIII in the 16th century. Back then, trust and equity rules were established as a parallel justice system to address “inequity” of common law around property disputes (and to appease disgruntled claimants). Initially, [trust funds](https://www.investopedia.com/terms/t/trust-fund.asp) were mostly utilized for the management of “will monies” and to create family settlements. Today, “trust” has evolved into an umbrella term for a variety of financial frameworks that allow citizens to protect assets, distribute earnings, and manage wealth both for the present day and for future generations. Although traditionally associated with millionaires and magnates, trusts can benefit middle-class families as well. ### Key Takeaways * Consider working with a well-respected legal professional when even considering setting up a trust. * Trusts are not only for the wealthy. In fact, they have benefits for all classes of wealth. * Trusts are basically the same in every country, but individual quirks in the UK system mean you need to go through the trust line by line with a professional. ## What Is a Trust Fund? In principle, a trust is a very simple concept. It’s a private legal arrangement in which the ownership of someone’s assets (which might include stock shares, cash, real estate or even artworks) is transferred to a private fund, and held or managed by an individual (or group of individuals) for the benefit of the trust members. The person providing the assets is generally referred to as the [settlor](https://www.investopedia.com/terms/s/settlor.asp). Those appointed to look after the assets are known as [trustees](https://www.investopedia.com/terms/t/trustee.asp), and those who receive disbursements from the trust are the [beneficiaries](https://www.investopedia.com/terms/b/beneficiary.asp). Once assigned to the trust, in most cases, assets are no longer deemed personal possessions of the settlors and are thus safeguarded from creditors (even in cases of bankruptcy), financial setbacks, family disagreements, and lawsuits. As such, trusts are a widely used ”safe haven” arrangement for family and business assets. ## Why Create a Trust? Trusts serve a variety of needs, and the reasons for establishing them are seemingly endless. The most common include: * To control and protect family assets (possibly the number-one motive) * Estate and inheritance planning * When someone is too young (or incapacitated) to handle their own financial affairs * To protect ”spendthrifts” against their own lack of control * For management and distribution of pension or [retirement](https://www.investopedia.com/articles/retirement/021117/how-retire-uk-american.asp) funds during the term of an individual’s employment ## What Types of Trusts Are There? Since trusts function as multipurpose legal tools, they take many forms. The United Kingdom recognizes numerous trust arrangements (each with its own specific procedures and regulations) that generally fall into one of the following categories: ### Bare Trusts Also known as a “simple trust,” property or assets in this form are held in the name of a trustee who has no discretion over what income is paid to the beneficiary and has no active duties to perform. The beneficiary has the absolute right to all of the capital and income of the trust at any time—if they are 18 or over (in England and Wales), or 16 and above (in Scotland). Bare trusts are often utilized as a vehicle through which assets are passed to young people. Trustees simply manage the assets until the beneficiary is old enough to handle that responsibility, which means assets set aside by the settlor will always go directly to the intended beneficiary. ### Interest in Possession Trusts This structure provides an individual with a ”present right to the present enjoyment” of something, so the trustee must pass on all trust income to the beneficiary as it arises (less any expenses and tax). This type of trust can give the ”interest in possession” to a beneficiary for a fixed period, an indefinite period, or most frequently, for the rest of the beneficiary's life. In a “life interest” trust, the interest in possession ends when the income beneficiary (known as the “life tenant”) dies, relocates or remarries. ### Discretionary Trusts As the name implies, this instrument provides the trustee with discretion over distributions from the trust. Discretion must be exercised in accordance with the terms of the trust deed; however, it is entirely up to the trustees to decide as to the timing, size, and nature of the distributions, and even, in some cases, which of the potential beneficiaries is to benefit. The assets are said to be “held in trust” for the beneficiaries to one day decide what to do with those assets. A discretionary trust is a very flexible form of trust commonly used to keep wealth within families while allowing them some flexibility to make decisions about where the assets go. ### Accumulation and Maintenance Trusts This version allows the trustees to augment the trust’s capital and income. Trustees of an accumulation and maintenance trust are given the power to “accumulate” the trust's assets (through savings and investments), until a certain date, at which time the beneficiary is entitled to the property of the trust, or to some of the income arising from that property. When the beneficiary reaches the age of 18 (at least, but no older than 25), they become entitled to the full income generated by the trust. ### Mixed Trusts As the name suggests, this form contains different types of trusts within one structure. Some assets may be set aside in an Interest in Possession Trust, while others may be treated in a Discretionary Trust manner. Mixed Trusts are often created to benefit sibling beneficiaries who reach inheritance age at different times. ## How Do I Create a Trust? While simple in theory, trusts can become a web of complexity if they're to operate properly. A solicitor is needed to draw up a trust because the legal wording must be precise. The process can be costly (around £1,000 or more), depending upon the extent of the advice required. By being prepared before you start in the consultation process, however, you can considerably reduce professional advice time and associated costs, irrespective of trust type. ### Step 1: Decide Upon the Assets You will need to list the items and value of those items that have been allocated, or will otherwise be acquired, at trust inception. ### Step 2: Appoint Trustee(s) Select an individual or management [company you trust](https://www.investopedia.com/articles/pf/07/trustee-responsibility.asp) (banks are often used) because the trustee will bear significant legal authority with control over trust assets. ### Step 3: Determine the Beneficiaries Compile a list of people or entities that will be entitled to receive benefits and include the percentage of those benefits to which each beneficiary is entitled. ### Step 4: Outline the Terms A trust is generally created by way of a deed. A [trust deed](https://www.investopedia.com/terms/t/trustdeed.asp) is a legal document prescribing the rules that govern your fund and the powers of the trustee. It includes the following: * The fund’s objectives * Original trust assets * The beneficiaries * How benefits are to be paid (either via lump sum or income stream) * How the trust may be settled (that is, terminated) * The rules for the operation of the trust bank account Although the deed itself should be crafted by someone with adequate specialized legal, tax, and financial knowledge, you should decide on all these aspects, and sketch them out for the professional preparer. The trust deed will specify the following: * The identities of the trustees and beneficiaries * Which assets are being passed into the trust for management by the trustee * How the money or property is to be managed * The permitted use of the money * Who receives the money or property when the trust is terminated ## Who Can Set Up a Trust Fund? You don't need to be wealthy to start a trust fund. As long as you have assets (not necessarily high-value assets), saving, property, or business shares, you can set up a trust fund. Be aware though of the costs associated with setting up a trust fund. ## How Much Does It Cost to Set Up a Trust in the U.K.? Creating a simple trust costs anywhere from £1000 to £1,500, depending on how much initial legal advice you need and how long it takes your solicitor to draft the wording. If you have a complex collection of assets including foreign assets, as well as business interests, the cost can be as high as £10,000. ## Are Trust Tunds Taxed? Yes. Different rates of income tax, capital gains tax, and inheritance tax are applied to trust funds depending on the type of trust and trust income received. ## The Bottom Line Given their practicality, flexibility, and many financial benefits, trust funds have become an incredibly popular way of structuring financial affairs. However, the complex nature of many trusts requires a crystal-clear understanding of the legal relationships and obligations involved. If you’d like to set up a trust, you can always start with your own solicitor, accountant, or tax advisor. Law Societies also maintain searchable databases to help you find a qualified solicitor in your area: * England and Wales: The Law Society * Scotland: The Law Society of Scotland * Northern Ireland: Law Society of Northern Ireland

British trust law enjoys a long, fascinating history dating back to the feudal times of the 12th century and the Statute of Uses adopted during the reign of Henry VIII in the 16th century. Back then, trust and equity rules were established as a parallel justice system to address “inequity” of common law around property disputes (and to appease disgruntled claimants). Initially, trust funds were mostly utilized for the management of “will monies” and to create family settlements. Today, “trust” has evolved into an umbrella term for a variety of financial frameworks that allow citizens to protect assets, distribute earnings, and manage wealth both for the present day and for future generations. Although traditionally associated with millionaires and magnates, trusts can benefit middle-class families as well. Key Takeaways Consider working with a well-respected legal professional when even considering setting up a trust.Trusts are not only for the wealthy. In fact, they have benefits for all classes of wealth.Trusts are basically the same in every country, but individual quirks in the UK system mean you need to go through the trust line by line with a professional. What Is a Trust Fund? In principle, a trust is a very simple concept. It’s a private legal arrangement in which the ownership of someone’s assets (which might include stock shares, cash, real estate or even artworks) is transferred to a private fund, and held or managed by an individual (or group of individuals) for the benefit of the trust members. The person providing the assets is generally referred to as the settlor. Those appointed to look after the assets are known as trustees, and those who receive disbursements from the trust are the beneficiaries. Once assigned to the trust, in most cases, assets are no longer deemed personal possessions of the settlors and are thus safeguarded from creditors (even in cases of bankruptcy), financial setbacks, family disagreements, and lawsuits. As such, trusts are a widely used ”safe haven” arrangement for family and business assets. Why Create a Trust? Trusts serve a variety of needs, and the reasons for establishing them are seemingly endless. The most common include: To control and protect family assets (possibly the number-one motive) Estate and inheritance planning When someone is too young (or incapacitated) to handle their own financial affairs To protect ”spendthrifts” against their own lack of control For management and distribution of pension or retirement funds during the term of an individual’s employment What Types of Trusts Are There? Since trusts function as multipurpose legal tools, they take many forms. The United Kingdom recognizes numerous trust arrangements (each with its own specific procedures and regulations) that generally fall into one of the following categories: Bare Trusts Also known as a “simple trust,” property or assets in this form are held in the name of a trustee who has no discretion over what income is paid to the beneficiary and has no active duties to perform. The beneficiary has the absolute right to all of the capital and income of the trust at any time—if they are 18 or over (in England and Wales), or 16 and above (in Scotland). Bare trusts are often utilized as a vehicle through which assets are passed to young people. Trustees simply manage the assets until the beneficiary is old enough to handle that responsibility, which means assets set aside by the settlor will always go directly to the intended beneficiary. Interest in Possession Trusts This structure provides an individual with a ”present right to the present enjoyment” of something, so the trustee must pass on all trust income to the beneficiary as it arises (less any expenses and tax). This type of trust can give the ”interest in possession” to a beneficiary for a fixed period, an indefinite period, or most frequently, for the rest of the beneficiary's life. In a “life interest” trust, the interest in possession ends when the income beneficiary (known as the “life tenant”) dies, relocates or remarries. Discretionary Trusts As the name implies, this instrument provides the trustee with discretion over distributions from the trust. Discretion must be exercised in accordance with the terms of the trust deed; however, it is entirely up to the trustees to decide as to the timing, size, and nature of the distributions, and even, in some cases, which of the potential beneficiaries is to benefit. The assets are said to be “held in trust” for the beneficiaries to one day decide what to do with those assets. A discretionary trust is a very flexible form of trust commonly used to keep wealth within families while allowing them some flexibility to make decisions about where the assets go. Accumulation and Maintenance Trusts This version allows the trustees to augment the trust’s capital and income. Trustees of an accumulation and maintenance trust are given the power to “accumulate” the trust's assets (through savings and investments), until a certain date, at which time the beneficiary is entitled to the property of the trust, or to some of the income arising from that property. When the beneficiary reaches the age of 18 (at least, but no older than 25), they become entitled to the full income generated by the trust. Mixed Trusts As the name suggests, this form contains different types of trusts within one structure. Some assets may be set aside in an Interest in Possession Trust, while others may be treated in a Discretionary Trust manner. Mixed Trusts are often created to benefit sibling beneficiaries who reach inheritance age at different times. How Do I Create a Trust? While simple in theory, trusts can become a web of complexity if they're to operate properly. A solicitor is needed to draw up a trust because the legal wording must be precise. The process can be costly (around £1,000 or more), depending upon the extent of the advice required. By being prepared before you start in the consultation process, however, you can considerably reduce professional advice time and associated costs, irrespective of trust type. Step 1: Decide Upon the Assets You will need to list the items and value of those items that have been allocated, or will otherwise be acquired, at trust inception. Step 2: Appoint Trustee(s) Select an individual or management company you trust (banks are often used) because the trustee will bear significant legal authority with control over trust assets. Step 3: Determine the Beneficiaries Compile a list of people or entities that will be entitled to receive benefits and include the percentage of those benefits to which each beneficiary is entitled. Step 4: Outline the Terms A trust is generally created by way of a deed. A trust deed is a legal document prescribing the rules that govern your fund and the powers of the trustee. It includes the following: The fund’s objectivesOriginal trust assetsThe beneficiariesHow benefits are to be paid (either via lump sum or income stream)How the trust may be settled (that is, terminated)The rules for the operation of the trust bank account Although the deed itself should be crafted by someone with adequate specialized legal, tax, and financial knowledge, you should decide on all these aspects, and sketch them out for the professional preparer. The trust deed will specify the following: The identities of the trustees and beneficiariesWhich assets are being passed into the trust for management by the trusteeHow the money or property is to be managedThe permitted use of the moneyWho receives the money or property when the trust is terminated Who Can Set Up a Trust Fund? You don't need to be wealthy to start a trust fund. As long as you have assets (not necessarily high-value assets), saving, property, or business shares, you can set up a trust fund. Be aware though of the costs associated with setting up a trust fund. How Much Does It Cost to Set Up a Trust in the U.K.? Creating a simple trust costs anywhere from £1000 to £1,500, depending on how much initial legal advice you need and how long it takes your solicitor to draft the wording. If you have a complex collection of assets including foreign assets, as well as business interests, the cost can be as high as £10,000. Are Trust Tunds Taxed? Yes. Different rates of income tax, capital gains tax, and inheritance tax are applied to trust funds depending on the type of trust and trust income received. The Bottom Line Given their practicality, flexibility, and many financial benefits, trust funds have become an incredibly popular way of structuring financial affairs. However, the complex nature of many trusts requires a crystal-clear understanding of the legal relationships and obligations involved. If you’d like to set up a trust, you can always start with your own solicitor, accountant, or tax advisor. Law Societies also maintain searchable databases to help you find a qualified solicitor in your area: England and Wales: The Law SocietyScotland: The Law Society of ScotlandNorthern Ireland: Law Society of Northern Ireland

https://www.investopedia.com/financial-edge/0211/why-the-first-1-million-is-the-hardest.aspx

Why The First $1 Million Is the Hardest

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Existing in the shadowy world between trope and meme is the notion that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/12/saving-first-100k.asp">on the path to wealth</a>, nothing is quite as hard as making the first $1 million. While it may be a phrase repeated in jest by people who think building even $1 million in wealth is unthinkable or impossible, there are actually a lot of interesting reasons that this saying is true. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Moreover, the more people understand about the difficulties that go into building the first $1 million, the better their odds of surmounting these obstacles and achieving that worthy goal. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>There are now more than 22.7 million millionaires in the United States.<span class="ql-inline-citation" data-cite="2"></span> These individuals have amassed more than $1 million in net wealth.</li><li>Wealthy people often quip that earning their first million was the hardest. Why is this the case?</li><li>Having money makes it easier to make more money, through investment, ability to take risks, and opportunities that reveal themselves.</li></ul></div></div></div> <span class="heading-toc" id="toc-the-difference-between-wealth-and-income"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> The Difference Between Wealth and Income </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> For starters, it is very important to distinguish between making a million dollars and having a million dollars. While having an accumulated net wealth of over $1 million is an attainable goal for most people, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/decamillionaire.asp">only a very select few will ever earn that much</a> in a single year. Moreover, "earning" a million-dollar paycheck may not leave someone as rich as commonly thought—recent history abounds with examples of athletes, entertainers, businessmen, and lottery winners squandering their money by throwing away unthinkable amounts of money on frivolities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> It is also worth noting that there are many "million-dollar earners" who do not actually earn $1 million. Someone may own a business that brings $1 million in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a>, but has to pay most of that out in expenses. Likewise, owning a million-dollar piece of property secured by $2 million in debt is not really being a millionaire. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-hard-to-get-started"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Hard to Get Started </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> One of the biggest obstacles to having $1 million in the bank is the slow rate at which people save early in life. While some jobs do offer starting salaries in excess of $60,000, they are the exception. More often, new graduates are scraping by to pay the rent, repay student loans, and still put together enough to have some semblance of a life. Even for those highly disciplined few who can save $10,000 or $15,000 a year, that would take over 66 years to build $1 million with no interest or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/compounding.asp">compounding</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> But as people advance in age and experience, the picture changes. Not only do people typically see their salaries rise, but they often find that they no longer have to pay so much for those "starting expenses"—student debts are paid down, they have the furniture they need, and perhaps they have a romantic partner with whom they can share living expenses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-the-power-of-compounding"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> The Power of Compounding </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> One of the reasons that the first $1 million is so hard is that it is such a large amount of money relative to where most people begin. To go from $500,000 in assets to $1 million requires a 100% return—a level of performance very hard to achieve in less than six years. To go from $1 million to $2 million likewise requires 100% growth, but the next million after that requires only 50% growth (and then 33% and so on). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> In fact, many wealthy people can and do "live off the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a>." That is, they put a chunk of their fortune in a relatively safe collection of income-generating assets and live off of that—allowing them to be more adventurous with the rest. Consider that $1 million invested in a portfolio of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aaa.asp">AAA-rated</a> corporate bonds would produce in excess of $50,000 of interest income (pre-tax), and you can see some of the leverage of passive income and compound interest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-extra-wealth-means-extra-options"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Extra Wealth Means Extra Options </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> In at least one key respect, the rich <em>are</em> different; they have access to investment options that regular people do not. Hedge funds are simply not accessible to most people because they do not meet the minimum income or wealth levels established by regulators (to say nothing of the minimums that individual firms/funds impose).<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> It is also hard to invest in "ground floor" opportunities without wealth. Start-ups and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capitalists</a> want to attract millionaires and billionaires, not regular people who can invest a few thousand (or even tens of thousands) dollars. Similarly, it can be very difficult to invest in lucrative asset classes like farmland or timberland without a sizable amount of wealth to start. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <span class="heading-toc" id="toc-risk-aversion-easy-to-risk-a-lot-when-you-have-a-lot"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Risk Aversion: Easy to Risk a Lot When You Have a Lot </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Risk aversion is another under-appreciated obstacle to accumulating and building wealth. When many people are first starting to save and invest, they zealously guard that grubstake against risk for fear of losing it all. Although it is understandable, the fact remains that the ties between risk and reward are hard to break. Though investors may rightly fear the relatively small risk of "losing it all," playing it safe means that they are earning lower returns and making it all the more difficult to build towards that first million. A portfolio of bonds and conservative stocks may outpace <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a>, but it will indeed make the road to $1 million very long. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Conversely, once people <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-build-generational-wealth-8417999">have enough wealth to feel comfortable</a> and not particularly vulnerable to an economic downturn or bear market, they often take bigger risks. Not all wealthy people invest this way (Warren Buffett is a famous example of a wealthy and very conservative investor), but many do. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> There is no point in minimizing the fact that it <em>is</em> hard to build that first million dollars of wealth. But just because something is difficult is no reason not to try. Try to save as much money as possible, invest that money with a prudent balance between risk and opportunity, and be on a never-ending hunt for ways to work better, smarter, and harder. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> After all, the rewards are there to be won and figuring out how to make the second million dollars is a problem that is certainly worth having. </p></div>

Existing in the shadowy world between trope and meme is the notion that [on the path to wealth](https://www.investopedia.com/articles/pf/12/saving-first-100k.asp), nothing is quite as hard as making the first $1 million. While it may be a phrase repeated in jest by people who think building even $1 million in wealth is unthinkable or impossible, there are actually a lot of interesting reasons that this saying is true. Moreover, the more people understand about the difficulties that go into building the first $1 million, the better their odds of surmounting these obstacles and achieving that worthy goal. ### Key Takeaways * There are now more than 22.7 million millionaires in the United States. These individuals have amassed more than $1 million in net wealth. * Wealthy people often quip that earning their first million was the hardest. Why is this the case? * Having money makes it easier to make more money, through investment, ability to take risks, and opportunities that reveal themselves. ## The Difference Between Wealth and Income For starters, it is very important to distinguish between making a million dollars and having a million dollars. While having an accumulated net wealth of over $1 million is an attainable goal for most people, [only a very select few will ever earn that much](https://www.investopedia.com/terms/d/decamillionaire.asp) in a single year. Moreover, "earning" a million-dollar paycheck may not leave someone as rich as commonly thought—recent history abounds with examples of athletes, entertainers, businessmen, and lottery winners squandering their money by throwing away unthinkable amounts of money on frivolities. It is also worth noting that there are many "million-dollar earners" who do not actually earn $1 million. Someone may own a business that brings $1 million in [revenue](https://www.investopedia.com/terms/r/revenue.asp), but has to pay most of that out in expenses. Likewise, owning a million-dollar piece of property secured by $2 million in debt is not really being a millionaire. ## Hard to Get Started One of the biggest obstacles to having $1 million in the bank is the slow rate at which people save early in life. While some jobs do offer starting salaries in excess of $60,000, they are the exception. More often, new graduates are scraping by to pay the rent, repay student loans, and still put together enough to have some semblance of a life. Even for those highly disciplined few who can save $10,000 or $15,000 a year, that would take over 66 years to build $1 million with no interest or [compounding](https://www.investopedia.com/terms/c/compounding.asp). But as people advance in age and experience, the picture changes. Not only do people typically see their salaries rise, but they often find that they no longer have to pay so much for those "starting expenses"—student debts are paid down, they have the furniture they need, and perhaps they have a romantic partner with whom they can share living expenses. ## The Power of Compounding One of the reasons that the first $1 million is so hard is that it is such a large amount of money relative to where most people begin. To go from $500,000 in assets to $1 million requires a 100% return—a level of performance very hard to achieve in less than six years. To go from $1 million to $2 million likewise requires 100% growth, but the next million after that requires only 50% growth (and then 33% and so on). In fact, many wealthy people can and do "live off the [interest](https://www.investopedia.com/terms/i/interest.asp)." That is, they put a chunk of their fortune in a relatively safe collection of income-generating assets and live off of that—allowing them to be more adventurous with the rest. Consider that $1 million invested in a portfolio of [AAA-rated](https://www.investopedia.com/terms/a/aaa.asp) corporate bonds would produce in excess of $50,000 of interest income (pre-tax), and you can see some of the leverage of passive income and compound interest. ## Extra Wealth Means Extra Options In at least one key respect, the rich *are* different; they have access to investment options that regular people do not. Hedge funds are simply not accessible to most people because they do not meet the minimum income or wealth levels established by regulators (to say nothing of the minimums that individual firms/funds impose). It is also hard to invest in "ground floor" opportunities without wealth. Start-ups and [venture capitalists](https://www.investopedia.com/terms/v/venturecapital.asp) want to attract millionaires and billionaires, not regular people who can invest a few thousand (or even tens of thousands) dollars. Similarly, it can be very difficult to invest in lucrative asset classes like farmland or timberland without a sizable amount of wealth to start. ## Risk Aversion: Easy to Risk a Lot When You Have a Lot Risk aversion is another under-appreciated obstacle to accumulating and building wealth. When many people are first starting to save and invest, they zealously guard that grubstake against risk for fear of losing it all. Although it is understandable, the fact remains that the ties between risk and reward are hard to break. Though investors may rightly fear the relatively small risk of "losing it all," playing it safe means that they are earning lower returns and making it all the more difficult to build towards that first million. A portfolio of bonds and conservative stocks may outpace [inflation](https://www.investopedia.com/terms/i/inflation.asp), but it will indeed make the road to $1 million very long. Conversely, once people [have enough wealth to feel comfortable](https://www.investopedia.com/how-to-build-generational-wealth-8417999) and not particularly vulnerable to an economic downturn or bear market, they often take bigger risks. Not all wealthy people invest this way (Warren Buffett is a famous example of a wealthy and very conservative investor), but many do. ## The Bottom Line There is no point in minimizing the fact that it *is* hard to build that first million dollars of wealth. But just because something is difficult is no reason not to try. Try to save as much money as possible, invest that money with a prudent balance between risk and opportunity, and be on a never-ending hunt for ways to work better, smarter, and harder. After all, the rewards are there to be won and figuring out how to make the second million dollars is a problem that is certainly worth having.

Existing in the shadowy world between trope and meme is the notion that on the path to wealth, nothing is quite as hard as making the first $1 million. While it may be a phrase repeated in jest by people who think building even $1 million in wealth is unthinkable or impossible, there are actually a lot of interesting reasons that this saying is true. Moreover, the more people understand about the difficulties that go into building the first $1 million, the better their odds of surmounting these obstacles and achieving that worthy goal. Key Takeaways There are now more than 22.7 million millionaires in the United States. These individuals have amassed more than $1 million in net wealth.Wealthy people often quip that earning their first million was the hardest. Why is this the case?Having money makes it easier to make more money, through investment, ability to take risks, and opportunities that reveal themselves. The Difference Between Wealth and Income For starters, it is very important to distinguish between making a million dollars and having a million dollars. While having an accumulated net wealth of over $1 million is an attainable goal for most people, only a very select few will ever earn that much in a single year. Moreover, "earning" a million-dollar paycheck may not leave someone as rich as commonly thought—recent history abounds with examples of athletes, entertainers, businessmen, and lottery winners squandering their money by throwing away unthinkable amounts of money on frivolities. It is also worth noting that there are many "million-dollar earners" who do not actually earn $1 million. Someone may own a business that brings $1 million in revenue, but has to pay most of that out in expenses. Likewise, owning a million-dollar piece of property secured by $2 million in debt is not really being a millionaire. Hard to Get Started One of the biggest obstacles to having $1 million in the bank is the slow rate at which people save early in life. While some jobs do offer starting salaries in excess of $60,000, they are the exception. More often, new graduates are scraping by to pay the rent, repay student loans, and still put together enough to have some semblance of a life. Even for those highly disciplined few who can save $10,000 or $15,000 a year, that would take over 66 years to build $1 million with no interest or compounding. But as people advance in age and experience, the picture changes. Not only do people typically see their salaries rise, but they often find that they no longer have to pay so much for those "starting expenses"—student debts are paid down, they have the furniture they need, and perhaps they have a romantic partner with whom they can share living expenses. The Power of Compounding One of the reasons that the first $1 million is so hard is that it is such a large amount of money relative to where most people begin. To go from $500,000 in assets to $1 million requires a 100% return—a level of performance very hard to achieve in less than six years. To go from $1 million to $2 million likewise requires 100% growth, but the next million after that requires only 50% growth (and then 33% and so on). In fact, many wealthy people can and do "live off the interest." That is, they put a chunk of their fortune in a relatively safe collection of income-generating assets and live off of that—allowing them to be more adventurous with the rest. Consider that $1 million invested in a portfolio of AAA-rated corporate bonds would produce in excess of $50,000 of interest income (pre-tax), and you can see some of the leverage of passive income and compound interest. Extra Wealth Means Extra Options In at least one key respect, the rich are different; they have access to investment options that regular people do not. Hedge funds are simply not accessible to most people because they do not meet the minimum income or wealth levels established by regulators (to say nothing of the minimums that individual firms/funds impose). It is also hard to invest in "ground floor" opportunities without wealth. Start-ups and venture capitalists want to attract millionaires and billionaires, not regular people who can invest a few thousand (or even tens of thousands) dollars. Similarly, it can be very difficult to invest in lucrative asset classes like farmland or timberland without a sizable amount of wealth to start. Risk Aversion: Easy to Risk a Lot When You Have a Lot Risk aversion is another under-appreciated obstacle to accumulating and building wealth. When many people are first starting to save and invest, they zealously guard that grubstake against risk for fear of losing it all. Although it is understandable, the fact remains that the ties between risk and reward are hard to break. Though investors may rightly fear the relatively small risk of "losing it all," playing it safe means that they are earning lower returns and making it all the more difficult to build towards that first million. A portfolio of bonds and conservative stocks may outpace inflation, but it will indeed make the road to $1 million very long. Conversely, once people have enough wealth to feel comfortable and not particularly vulnerable to an economic downturn or bear market, they often take bigger risks. Not all wealthy people invest this way (Warren Buffett is a famous example of a wealthy and very conservative investor), but many do. The Bottom Line There is no point in minimizing the fact that it is hard to build that first million dollars of wealth. But just because something is difficult is no reason not to try. Try to save as much money as possible, invest that money with a prudent balance between risk and opportunity, and be on a never-ending hunt for ways to work better, smarter, and harder. After all, the rewards are there to be won and figuring out how to make the second million dollars is a problem that is certainly worth having.

https://www.investopedia.com/what-you-need-to-know-about-student-loan-consolidation-ahead-of-new-deadline-8649139

What You Need to Know About Student Loan Consolidation Ahead of New Deadline

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The deadline for consolidation of student loans has been extended through June 30. </li><li>Those with older types of privately held loans can consolidate their loans into federal ones to qualify for revamped repayment programs. </li><li>You can visit the federal student loan website, fill out an application and choose a repayment plan.</li><li>Under the new repayment plans, some student loans will be eligible for forgiveness. </li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Student loan borrowers with certain discontinued student loans now have more time to consolidate their debt to take advantage of a program that gives them extra credit toward full forgiveness. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Borrowers now must consolidate their loans by June 30 to gain eligibility for a one-time account adjustment scheduled to take effect in September. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The Department of Education <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/department-of-education-extends-key-student-loan-forgiveness-deadline-8649029">extended the deadline this week</a>, as the process has already resulted in forgiveness for nearly 1 million borrowers, the department said. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <span class="heading-toc" id="toc-why-the-government-is-asking-borrowers-to-consolidate-their-student-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Why the Government is Asking Borrowers To Consolidate Their Student Loans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> During the administration of President Joe Biden, the Department of Education changed the rules of student loan repayment dramatically in favor of borrowers. The changes have often resulted in people owing less than they did before, with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/biden-administration-forgives-usd7-4-billion-more-in-student-loans-8630647">4.3 million people receiving $153 billion in loan forgiveness as of April</a>.<span class="ql-inline-citation" data-cite="1"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Crucially, those changes only affect loans that are owed to the federal government, not to private lenders, meaning that many borrowers will have to consolidate their loans in order to be eligible.<span class="ql-inline-citation" data-cite="2"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Today, most students who get student loans borrow directly from the federal government through a program called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-direct-student-loan-program.asp">Direct Loan</a>, making them subject to any student loan relief the government decides to offer. Others borrow from private lenders that have nothing to do with the federal government, making them ineligible for any forgiveness.<br/><br/>Years ago, the situation was more mixed: Students borrowed from commercial lenders, whose loans were guaranteed by the federal government through a program called Family Federal Education Loans (FFEL), which was discontinued in 2010. As of the second quarter of 2024, 7.8 million people still had those older FFEL loans, most of them through commercial lenders, versus 37.9 million with Direct Loans, according to data from the Department of Education.<span class="ql-inline-citation" data-cite="3"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Those millions of FFEL borrowers were given a strong reason to consolidate their loans into federal ones when the Department of Education began a program with a mouthful of a title but a simple takeaway. The Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs will result in an estimated 3.6 million people having their loans forgiven or making progress toward forgiveness, but only those with Direct Loans.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-consolidated-loans-play-into-revamped-repayment-plans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Consolidated Loans Play Into Revamped Repayment Plans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The payment count adjustment mentioned above has to do with income-driven repayment plans. In income-driven repayment plans (IDRs), borrowers’ monthly payments are based on how much money they make, not on how much they owe. After paying a certain percentage of their income for 20 or 25 years (depending on the specific IDR program and kind of schooling the loan was for), borrowers with IDR plans have any remaining balance forgiven. On an IDR plan, every month you pay your bill is counted and puts you one step closer toward having your loan wiped out.<span class="ql-inline-citation" data-cite="5"></span><br><br>A related program, Public Service Loan Forgiveness (PSLF), similarly requires income-based payments, and offers forgiveness after 10 years (in other words, 120 monthly payments) for people who work for government or nonprofit organizations.<span class="ql-inline-citation" data-cite="6"></span>  </br></br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> In 2022, the Department of Education began going through borrowers’ accounts to correct mistakes made by the companies that administer student loans on behalf of the government. In some cases, companies had improperly put borrowers into forbearance, pausing their payments and their progress towards forgiveness.<span class="ql-inline-citation" data-cite="7"></span><br/><br/>To correct those errors, the department is revising payment counts to give borrowers up to three years worth of credit for the time their loans were in forbearance, and in several other situations.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> To be eligible for this extra credit, borrowers have to consolidate their loans—combining multiple loans into one and transferring it to the federal government, before June 30. Normally, consolidation resets the clock on income-driven repayment plans and wipes out any progress toward forgiveness. However, during the payment adjustment, all past payments will count.<span class="ql-inline-citation" data-cite="8"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-how-do-i-consolidate-my-student-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> How Do I Consolidate My Student Loans? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> To consolidate your student loans for extra credit under this new program, you'll need your personal information, including your Social Security number, address, and contact information. You'll also need two references. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> First, to check if your loans are the FFEL type, log onto <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://studentaid.gov/">https://studentaid.gov/</a>. If you navigate to the "My Aide" chart after you log in, click "view details" and scroll to the "Loan Types" section of the page, you can select the drop-down that will show you a list of all your loans, the total you have in each and the type of loan it is. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Once you confirm your loan is an FFEL, you can go to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://studentaid.gov/loan-consolidation/">Direct Consolidation Loan Application</a> and fill out your personal information. If you are eligible for the PSLF, make sure to mark that you have or will apply. Otherwise, to qualify for the program, you must sign up for an income-driven repayment plan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The application will also require two references. The references will not be responsible for paying the loan. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> <em>Elizabeth Guevara contributed to this report. </em><br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * The deadline for consolidation of student loans has been extended through June 30. * Those with older types of privately held loans can consolidate their loans into federal ones to qualify for revamped repayment programs. * You can visit the federal student loan website, fill out an application and choose a repayment plan. * Under the new repayment plans, some student loans will be eligible for forgiveness. Student loan borrowers with certain discontinued student loans now have more time to consolidate their debt to take advantage of a program that gives them extra credit toward full forgiveness. Borrowers now must consolidate their loans by June 30 to gain eligibility for a one-time account adjustment scheduled to take effect in September. The Department of Education [extended the deadline this week](https://www.investopedia.com/department-of-education-extends-key-student-loan-forgiveness-deadline-8649029), as the process has already resulted in forgiveness for nearly 1 million borrowers, the department said. ## Why the Government is Asking Borrowers To Consolidate Their Student Loans During the administration of President Joe Biden, the Department of Education changed the rules of student loan repayment dramatically in favor of borrowers. The changes have often resulted in people owing less than they did before, with [4.3 million people receiving $153 billion in loan forgiveness as of April](https://www.investopedia.com/biden-administration-forgives-usd7-4-billion-more-in-student-loans-8630647).  Crucially, those changes only affect loans that are owed to the federal government, not to private lenders, meaning that many borrowers will have to consolidate their loans in order to be eligible.  Today, most students who get student loans borrow directly from the federal government through a program called [Direct Loan](https://www.investopedia.com/terms/f/federal-direct-student-loan-program.asp), making them subject to any student loan relief the government decides to offer. Others borrow from private lenders that have nothing to do with the federal government, making them ineligible for any forgiveness. Years ago, the situation was more mixed: Students borrowed from commercial lenders, whose loans were guaranteed by the federal government through a program called Family Federal Education Loans (FFEL), which was discontinued in 2010. As of the second quarter of 2024, 7.8 million people still had those older FFEL loans, most of them through commercial lenders, versus 37.9 million with Direct Loans, according to data from the Department of Education.  Those millions of FFEL borrowers were given a strong reason to consolidate their loans into federal ones when the Department of Education began a program with a mouthful of a title but a simple takeaway. The Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs will result in an estimated 3.6 million people having their loans forgiven or making progress toward forgiveness, but only those with Direct Loans. ## Consolidated Loans Play Into Revamped Repayment Plans The payment count adjustment mentioned above has to do with income-driven repayment plans. In income-driven repayment plans (IDRs), borrowers’ monthly payments are based on how much money they make, not on how much they owe. After paying a certain percentage of their income for 20 or 25 years (depending on the specific IDR program and kind of schooling the loan was for), borrowers with IDR plans have any remaining balance forgiven. On an IDR plan, every month you pay your bill is counted and puts you one step closer toward having your loan wiped out. A related program, Public Service Loan Forgiveness (PSLF), similarly requires income-based payments, and offers forgiveness after 10 years (in other words, 120 monthly payments) for people who work for government or nonprofit organizations.  In 2022, the Department of Education began going through borrowers’ accounts to correct mistakes made by the companies that administer student loans on behalf of the government. In some cases, companies had improperly put borrowers into forbearance, pausing their payments and their progress towards forgiveness. To correct those errors, the department is revising payment counts to give borrowers up to three years worth of credit for the time their loans were in forbearance, and in several other situations.   To be eligible for this extra credit, borrowers have to consolidate their loans—combining multiple loans into one and transferring it to the federal government, before June 30. Normally, consolidation resets the clock on income-driven repayment plans and wipes out any progress toward forgiveness. However, during the payment adjustment, all past payments will count. ## How Do I Consolidate My Student Loans? To consolidate your student loans for extra credit under this new program, you'll need your personal information, including your Social Security number, address, and contact information. You'll also need two references. First, to check if your loans are the FFEL type, log onto <https://studentaid.gov/>. If you navigate to the "My Aide" chart after you log in, click "view details" and scroll to the "Loan Types" section of the page, you can select the drop-down that will show you a list of all your loans, the total you have in each and the type of loan it is. Once you confirm your loan is an FFEL, you can go to the [Direct Consolidation Loan Application](https://studentaid.gov/loan-consolidation/) and fill out your personal information. If you are eligible for the PSLF, make sure to mark that you have or will apply. Otherwise, to qualify for the program, you must sign up for an income-driven repayment plan. The application will also require two references. The references will not be responsible for paying the loan. *Elizabeth Guevara contributed to this report.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways The deadline for consolidation of student loans has been extended through June 30. Those with older types of privately held loans can consolidate their loans into federal ones to qualify for revamped repayment programs. You can visit the federal student loan website, fill out an application and choose a repayment plan.Under the new repayment plans, some student loans will be eligible for forgiveness. Student loan borrowers with certain discontinued student loans now have more time to consolidate their debt to take advantage of a program that gives them extra credit toward full forgiveness. Borrowers now must consolidate their loans by June 30 to gain eligibility for a one-time account adjustment scheduled to take effect in September. The Department of Education extended the deadline this week, as the process has already resulted in forgiveness for nearly 1 million borrowers, the department said. Why the Government is Asking Borrowers To Consolidate Their Student Loans During the administration of President Joe Biden, the Department of Education changed the rules of student loan repayment dramatically in favor of borrowers. The changes have often resulted in people owing less than they did before, with 4.3 million people receiving $153 billion in loan forgiveness as of April.  Crucially, those changes only affect loans that are owed to the federal government, not to private lenders, meaning that many borrowers will have to consolidate their loans in order to be eligible.  Today, most students who get student loans borrow directly from the federal government through a program called Direct Loan, making them subject to any student loan relief the government decides to offer. Others borrow from private lenders that have nothing to do with the federal government, making them ineligible for any forgiveness.Years ago, the situation was more mixed: Students borrowed from commercial lenders, whose loans were guaranteed by the federal government through a program called Family Federal Education Loans (FFEL), which was discontinued in 2010. As of the second quarter of 2024, 7.8 million people still had those older FFEL loans, most of them through commercial lenders, versus 37.9 million with Direct Loans, according to data from the Department of Education.  Those millions of FFEL borrowers were given a strong reason to consolidate their loans into federal ones when the Department of Education began a program with a mouthful of a title but a simple takeaway. The Payment Count Adjustments Toward Income-Driven Repayment and Public Service Loan Forgiveness Programs will result in an estimated 3.6 million people having their loans forgiven or making progress toward forgiveness, but only those with Direct Loans. Consolidated Loans Play Into Revamped Repayment Plans The payment count adjustment mentioned above has to do with income-driven repayment plans. In income-driven repayment plans (IDRs), borrowers’ monthly payments are based on how much money they make, not on how much they owe. After paying a certain percentage of their income for 20 or 25 years (depending on the specific IDR program and kind of schooling the loan was for), borrowers with IDR plans have any remaining balance forgiven. On an IDR plan, every month you pay your bill is counted and puts you one step closer toward having your loan wiped out.A related program, Public Service Loan Forgiveness (PSLF), similarly requires income-based payments, and offers forgiveness after 10 years (in other words, 120 monthly payments) for people who work for government or nonprofit organizations.  In 2022, the Department of Education began going through borrowers’ accounts to correct mistakes made by the companies that administer student loans on behalf of the government. In some cases, companies had improperly put borrowers into forbearance, pausing their payments and their progress towards forgiveness.To correct those errors, the department is revising payment counts to give borrowers up to three years worth of credit for the time their loans were in forbearance, and in several other situations.   To be eligible for this extra credit, borrowers have to consolidate their loans—combining multiple loans into one and transferring it to the federal government, before June 30. Normally, consolidation resets the clock on income-driven repayment plans and wipes out any progress toward forgiveness. However, during the payment adjustment, all past payments will count. How Do I Consolidate My Student Loans? To consolidate your student loans for extra credit under this new program, you'll need your personal information, including your Social Security number, address, and contact information. You'll also need two references. First, to check if your loans are the FFEL type, log onto https://studentaid.gov/. If you navigate to the "My Aide" chart after you log in, click "view details" and scroll to the "Loan Types" section of the page, you can select the drop-down that will show you a list of all your loans, the total you have in each and the type of loan it is. Once you confirm your loan is an FFEL, you can go to the Direct Consolidation Loan Application and fill out your personal information. If you are eligible for the PSLF, make sure to mark that you have or will apply. Otherwise, to qualify for the program, you must sign up for an income-driven repayment plan. The application will also require two references. The references will not be responsible for paying the loan. Elizabeth Guevara contributed to this report. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/retirement-savings-by-gender-5100948

Retirement Savings by Gender

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> When it comes to retirement savings, a significant gender gap persists.  Women, especially those between 55 and 66 years old, often have less saved up than men. About 50% of these women have no personal retirement savings at all, while this is true for 47% of men in the same age group. Furthermore, women usually save a smaller portion of their salaries for retirement — 6.2% on average, compared to men's 6.6%.<span class="ql-inline-citation" data-cite="52"></span><span class="ql-inline-citation" data-cite="53"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> This gap in savings can be traced back to issues like the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/wage-gaps-by-gender-5082675">gender pay gap</a>, as women often earn less than men, despite <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/equal-pay-act-1963-5207271">The Equal Pay Act of 1963</a> prohibiting employers from paying different wages to men and women performing the same job. As a result, women may need to work longer before they can retire. Plus, women tend to live longer than men, which means they really need to save more to support themselves in later years.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Women typically have less money saved for retirement than men.</li><li>Women generally earn less than men and can have career gaps due to caregiver roles that can lead to lower savings, lifetime wages, and Social Security.</li><li>A lack of financial and educational opportunities leads to lower financial literacy among some women, resulting in delayed retirement savings plans.</li><li>Improving access to financial education will help improve savings across genders.</li><li>Continuing to close the gender wage gap and potential policy changes could help bolster retirement savings potential.</li></ul></div></div></div> <span class="heading-toc" id="toc-retirement-savings-men-vs-women"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Retirement Savings: Men vs. Women </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Federal data shows that just 22% of women have $100,000 or more saved for retirement, while 30% of men do. A major factor behind this gap is the gender pay disparity: on average, women earn 84 cents for every dollar that men earn, a ratio that has remained unchanged for almost twenty years.<span class="ql-inline-citation" data-cite="52"></span><span class="ql-inline-citation" data-cite="65"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Another study conducted by the Transamerica Center for Retirement Studies estimates that the median retirement savings for women is $43,000, less than half of men’s ($91,000). Men are much more likely than women to have $250,000 or more in retirement savings—32% compared to 21%. The study also found that 25% of women have saved less than $10,000, or nothing at all, compared to 16% of men.<span class="ql-inline-citation" data-cite="49"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The below chart shows the difference between the median retirement savings of men and women by generation:<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_14-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Total Median Retirement Savings by Generation: Women vs. Men</th> </tr> <tr> <th> </th> <th><b> Women</b></th> <th><b>Men</b></th> </tr> </thead> <tbody data-check="0"> <tr> <th>Baby Boomers</th> <td>$101,000</td> <td>$248,000</td> </tr> <tr> <th>Generation X</th> <td>$51,000</td> <td>$127,000</td> </tr> <tr> <th> Millenials</th> <td> $29,000</td> <td>$63,000</td> </tr> <tr> <th> Generation Z</th> <td> $26,000</td> <td>$42,000</td> </tr> </tbody> </table> <figcaption>Source: Transamerica Center for Retirement Studies </figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_16-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_17-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Important</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The COVID-19 pandemic threw a big wrench into retirement savings planning, with some 4 million people in the U.S. out of work for six months or longer.<span class="ql-inline-citation" data-cite="37"></span> Women sustained more damage than men in terms of job losses.<span class="ql-inline-citation" data-cite="38"></span> The impact was felt even more deeply by transgender people.<span class="ql-inline-citation" data-cite="13"></span> These painful setbacks will likely be felt for years to come.</p></div></div></div> <span class="heading-toc" id="toc-why-a-retirement-savings-gender-gap-exists"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Why a Retirement Savings Gender Gap Exists </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> There are a number of reasons why women have historically socked away less for retirement. One big driving force behind the savings disparity is the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/wage-gaps-by-gender-5082675">gender wage gap</a>. In the U.S., on average, women working full-time throughout the year earn about 84 cents for every dollar earned by men, leading to an annual wage gap of $10,000. This gap widens for women of color and women with disabilities, who earn even less compared to their male counterparts.<span class="ql-inline-citation" data-cite="63"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Lower earnings result in reduced savings for retirement. Women often experience employment breaks due to maternity leave or caring for family members, which affects their Social Security benefits and contributes to a smaller net worth. A woman's net worth is an average of $5,541, significantly less than a man's average net worth of $12,188.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="64"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> For example, in 2023, the average monthly Social Security benefit for retirees, disabled workers, and aged widows/widowers was approximately $1,788, totaling around $21,455 annually. Comparatively, in 2021, men received an average monthly Social Security payment of $1,838, while women received $1,484.<span class="ql-inline-citation" data-cite="55"></span><span class="ql-inline-citation" data-cite="56"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Here are some other likely reasons the retirement savings gender gap exists: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li>Women often prioritize different financial goals than men, such as emergency funds, debt repayment, and child support, impacting their capacity to save for retirement.<span class="ql-inline-citation" data-cite="57"></span></li><li>Women's access to employer-sponsored retirement plans is generally lower, especially for part-time workers, which disproportionately affects women. This leads to fewer women having the opportunity to contribute to 401(k)s or similar plans.<span class="ql-inline-citation" data-cite="57"></span></li><li>Many women are forced to withdraw from their retirement savings prematurely. This reduces the potential for long-term growth of retirement funds.<span class="ql-inline-citation" data-cite="57"></span></li><li>Women often handle unpaid duties, including childcare and elder care, resulting in career pauses during their prime income-producing years.<span class="ql-inline-citation" data-cite="58"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_29-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_30-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">$45,300</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Taking three months of parental leave can reduce lifetime Social Security retirement benefits by approximately 3 to 4 percent per leave. Leave-taking parents lose about $15,100 in lifetime retirement benefits for each three months of leave, equal to $45,300 for three children.<span class="ql-inline-citation" data-cite="59"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Another reason why the retirement savings gap has persisted is a lack of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-literacy.asp">financial literacy</a>. Knowledge is power, and never has that been truer than when it comes to retirement savings. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Women's financial literacy, on average, is lower than men's in the United States. The gap is even more pronounced among underrepresented minority women, who scored lower in financial literacy compared to their white peers, with minority women answering 38% of the questions correctly versus 54% for white women.<span class="ql-inline-citation" data-cite="60"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Several factors contribute to the lower levels of financial literacy among women. These include discomfort in discussing financial matters and a lack of knowledge about where to seek reliable financial information. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-how-to-narrow-the-gender-retirement-savings-gap"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> How to Narrow the Gender Retirement Savings Gap </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> To help close the gap in retirement savings, it all starts with learning about money and improving <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guide-to-financial-literacy-4800530">financial literacy</a>. Knowing how and why to save is really important. The sooner you start learning about <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/051613/how-start-saving-retirement.asp">saving for retirement</a>, the better. It doesn’t matter how old you are. There are lots of helpful tips and information available to help you start saving or to keep your savings growing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> For those needing time off for family reasons or working part-time without access to savings plans, policy changes could make a significant difference. Introducing a paid <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/family-and-medical-leave-act.asp">Family and Medical Leave Act</a> (FMLA) at the federal level could be one such change. While the FMLA currently offers 12 weeks of unpaid leave, only 13 states and Washington D.C. have enacted mandatory paid family leave systems.<span class="ql-inline-citation" data-cite="61"></span> New Hampshire and Vermont have implemented optional paid family and medical leave insurance programs. Additionally, six states (Alabama, Arkansas, Florida, Tennessee, Texas and Virginia) allow insurers to offer family leave insurance policies to employers.<span class="ql-inline-citation" data-cite="22"></span><span class="ql-inline-citation" data-cite="61"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> And though the wage gap has narrowed, it will likely require some major policy changes to really move that needle. Iceland serves as a prime example, having implemented a law that mandates companies with 25 or more employees to report that they provide equal pay for men and women. Failure to comply results in daily fines.<span class="ql-inline-citation" data-cite="46"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> In the U.S., President Joe Biden outlined an ambitious plan to tackle some of the financial disparities between men and women, starting with the creation of the White House Council on Gender Equality.<span class="ql-inline-citation" data-cite="24"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_46-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_47-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_4-0">March 12</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Equal Pay Day, scheduled for March 12, 2024, highlights the ongoing issue of the gender wage gap. Introduced in 1996 by the National Committee on Pay Equity, it highlights how long into the new year women need to work to match the previous year's earnings of men, spotlighting the disparity in wages.<span class="ql-inline-citation" data-cite="62"></span></p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_48-0"><span class="heading-toc" id="toc-how-long-will-retirement-savings-last"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Long Will Retirement Savings Last?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>How long your retirement savings will last depends on a number of factors including your living expenses after you retire, how much you have in retirement savings and income, and how long you live. One rule of thumb, called the 4% rule, suggests that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/retirement/retirement-income-planning/">if you don’t want to outlive your savings</a> (assuming you live 30 years after retirement) you can withdraw about 4% of your retirement savings annually, in addition to retirement income such as Social Security. For example, if you plan to withdraw $40,000 a year for 25 years, you would need $1 million in your nest egg.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_50-0"><span class="heading-toc" id="toc-what-is-the-average-retirement-savings"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Average Retirement Savings?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The average IRA balance in Q3 2023 was $109,600 a decrease of 4% from last quarter, but an 8% increase from a year ago, according to research published by Fidelity. The average <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/401kplan.asp">401(k)</a> balance decreased to $107,700, down 4% from the prior quarter. Fidelity also reports that the average 403(b) account balance was $97,200, down 5% from last quarter, but up 11% from last year.<span class="ql-inline-citation" data-cite="47"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_52-0"><span class="heading-toc" id="toc-how-do-you-start-saving-for-retirement"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Start Saving for Retirement?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can start saving for retirement by contributing to a tax-advantaged retirement plan or account. If you work for an employer that offers a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/why-women-have-less-401k-savings-than-men-on-average-5521631">401(k) plan</a>, contributions can be automatically deducted from your paycheck. If you don’t have access to a 401(k), you can set up and make contributions to a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-brokers-for-iras-4587879">traditional IRA</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-brokers-for-roth-iras-4587878">Roth IRA</a>, or both.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> It’s a vicious cycle. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/wage-gaps-by-gender-5082675">Though the wage gap is narrowing</a>, as noted above, women still only earn about 84 cents for every dollar a man earns. Lower wages translates to lower net worth and savings, which impacts how much money will be available in retirement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Closing the gender wage gap and implementing policy changes could help <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/building-better-retirement-strategies-for-women-8367558">bolster retirement savings</a> for all people in the U.S. efforts to enhance financial literacy, alongside meaningful policy reforms, can also significantly contribute to equalizing retirement savings opportunities. </p></div>

When it comes to retirement savings, a significant gender gap persists.  Women, especially those between 55 and 66 years old, often have less saved up than men. About 50% of these women have no personal retirement savings at all, while this is true for 47% of men in the same age group. Furthermore, women usually save a smaller portion of their salaries for retirement — 6.2% on average, compared to men's 6.6%. This gap in savings can be traced back to issues like the [gender pay gap](https://www.investopedia.com/wage-gaps-by-gender-5082675), as women often earn less than men, despite [The Equal Pay Act of 1963](https://www.investopedia.com/equal-pay-act-1963-5207271) prohibiting employers from paying different wages to men and women performing the same job. As a result, women may need to work longer before they can retire. Plus, women tend to live longer than men, which means they really need to save more to support themselves in later years. ### Key Takeaways * Women typically have less money saved for retirement than men. * Women generally earn less than men and can have career gaps due to caregiver roles that can lead to lower savings, lifetime wages, and Social Security. * A lack of financial and educational opportunities leads to lower financial literacy among some women, resulting in delayed retirement savings plans. * Improving access to financial education will help improve savings across genders. * Continuing to close the gender wage gap and potential policy changes could help bolster retirement savings potential. ## Retirement Savings: Men vs. Women Federal data shows that just 22% of women have $100,000 or more saved for retirement, while 30% of men do. A major factor behind this gap is the gender pay disparity: on average, women earn 84 cents for every dollar that men earn, a ratio that has remained unchanged for almost twenty years. Another study conducted by the Transamerica Center for Retirement Studies estimates that the median retirement savings for women is $43,000, less than half of men’s ($91,000). Men are much more likely than women to have $250,000 or more in retirement savings—32% compared to 21%. The study also found that 25% of women have saved less than $10,000, or nothing at all, compared to 16% of men. The below chart shows the difference between the median retirement savings of men and women by generation: | Total Median Retirement Savings by Generation: Women vs. Men | | | | --- | --- | --- | | | **Women** | **Men** | | Baby Boomers | $101,000 | $248,000 | | Generation X | $51,000 | $127,000 | | Millenials | $29,000 | $63,000 | | Generation Z | $26,000 | $42,000 | Source: Transamerica Center for Retirement Studies ### Important The COVID-19 pandemic threw a big wrench into retirement savings planning, with some 4 million people in the U.S. out of work for six months or longer. Women sustained more damage than men in terms of job losses. The impact was felt even more deeply by transgender people. These painful setbacks will likely be felt for years to come. ## Why a Retirement Savings Gender Gap Exists There are a number of reasons why women have historically socked away less for retirement. One big driving force behind the savings disparity is the [gender wage gap](https://www.investopedia.com/wage-gaps-by-gender-5082675). In the U.S., on average, women working full-time throughout the year earn about 84 cents for every dollar earned by men, leading to an annual wage gap of $10,000. This gap widens for women of color and women with disabilities, who earn even less compared to their male counterparts. Lower earnings result in reduced savings for retirement. Women often experience employment breaks due to maternity leave or caring for family members, which affects their Social Security benefits and contributes to a smaller net worth. A woman's net worth is an average of $5,541, significantly less than a man's average net worth of $12,188. For example, in 2023, the average monthly Social Security benefit for retirees, disabled workers, and aged widows/widowers was approximately $1,788, totaling around $21,455 annually. Comparatively, in 2021, men received an average monthly Social Security payment of $1,838, while women received $1,484. Here are some other likely reasons the retirement savings gender gap exists: * Women often prioritize different financial goals than men, such as emergency funds, debt repayment, and child support, impacting their capacity to save for retirement. * Women's access to employer-sponsored retirement plans is generally lower, especially for part-time workers, which disproportionately affects women. This leads to fewer women having the opportunity to contribute to 401(k)s or similar plans. * Many women are forced to withdraw from their retirement savings prematurely. This reduces the potential for long-term growth of retirement funds. * Women often handle unpaid duties, including childcare and elder care, resulting in career pauses during their prime income-producing years. ### $45,300 Taking three months of parental leave can reduce lifetime Social Security retirement benefits by approximately 3 to 4 percent per leave. Leave-taking parents lose about $15,100 in lifetime retirement benefits for each three months of leave, equal to $45,300 for three children. Another reason why the retirement savings gap has persisted is a lack of [financial literacy](https://www.investopedia.com/terms/f/financial-literacy.asp). Knowledge is power, and never has that been truer than when it comes to retirement savings. Women's financial literacy, on average, is lower than men's in the United States. The gap is even more pronounced among underrepresented minority women, who scored lower in financial literacy compared to their white peers, with minority women answering 38% of the questions correctly versus 54% for white women. Several factors contribute to the lower levels of financial literacy among women. These include discomfort in discussing financial matters and a lack of knowledge about where to seek reliable financial information. ## How to Narrow the Gender Retirement Savings Gap To help close the gap in retirement savings, it all starts with learning about money and improving [financial literacy](https://www.investopedia.com/guide-to-financial-literacy-4800530). Knowing how and why to save is really important. The sooner you start learning about [saving for retirement](https://www.investopedia.com/articles/personal-finance/051613/how-start-saving-retirement.asp), the better. It doesn’t matter how old you are. There are lots of helpful tips and information available to help you start saving or to keep your savings growing. For those needing time off for family reasons or working part-time without access to savings plans, policy changes could make a significant difference. Introducing a paid [Family and Medical Leave Act](https://www.investopedia.com/terms/f/family-and-medical-leave-act.asp) (FMLA) at the federal level could be one such change. While the FMLA currently offers 12 weeks of unpaid leave, only 13 states and Washington D.C. have enacted mandatory paid family leave systems. New Hampshire and Vermont have implemented optional paid family and medical leave insurance programs. Additionally, six states (Alabama, Arkansas, Florida, Tennessee, Texas and Virginia) allow insurers to offer family leave insurance policies to employers. And though the wage gap has narrowed, it will likely require some major policy changes to really move that needle. Iceland serves as a prime example, having implemented a law that mandates companies with 25 or more employees to report that they provide equal pay for men and women. Failure to comply results in daily fines. In the U.S., President Joe Biden outlined an ambitious plan to tackle some of the financial disparities between men and women, starting with the creation of the White House Council on Gender Equality. ### March 12 Equal Pay Day, scheduled for March 12, 2024, highlights the ongoing issue of the gender wage gap. Introduced in 1996 by the National Committee on Pay Equity, it highlights how long into the new year women need to work to match the previous year's earnings of men, spotlighting the disparity in wages. ## How Long Will Retirement Savings Last? How long your retirement savings will last depends on a number of factors including your living expenses after you retire, how much you have in retirement savings and income, and how long you live. One rule of thumb, called the 4% rule, suggests that [if you don’t want to outlive your savings](https://www.investopedia.com/retirement/retirement-income-planning/) (assuming you live 30 years after retirement) you can withdraw about 4% of your retirement savings annually, in addition to retirement income such as Social Security. For example, if you plan to withdraw $40,000 a year for 25 years, you would need $1 million in your nest egg. ## What Is the Average Retirement Savings? The average IRA balance in Q3 2023 was $109,600 a decrease of 4% from last quarter, but an 8% increase from a year ago, according to research published by Fidelity. The average [401(k)](https://www.investopedia.com/terms/1/401kplan.asp) balance decreased to $107,700, down 4% from the prior quarter. Fidelity also reports that the average 403(b) account balance was $97,200, down 5% from last quarter, but up 11% from last year. ## How Do You Start Saving for Retirement? You can start saving for retirement by contributing to a tax-advantaged retirement plan or account. If you work for an employer that offers a [401(k) plan](https://www.investopedia.com/why-women-have-less-401k-savings-than-men-on-average-5521631), contributions can be automatically deducted from your paycheck. If you don’t have access to a 401(k), you can set up and make contributions to a [traditional IRA](https://www.investopedia.com/best-brokers-for-iras-4587879), [Roth IRA](https://www.investopedia.com/best-brokers-for-roth-iras-4587878), or both. ## The Bottom Line It’s a vicious cycle. [Though the wage gap is narrowing](https://www.investopedia.com/wage-gaps-by-gender-5082675), as noted above, women still only earn about 84 cents for every dollar a man earns. Lower wages translates to lower net worth and savings, which impacts how much money will be available in retirement. Closing the gender wage gap and implementing policy changes could help [bolster retirement savings](https://www.investopedia.com/building-better-retirement-strategies-for-women-8367558) for all people in the U.S. efforts to enhance financial literacy, alongside meaningful policy reforms, can also significantly contribute to equalizing retirement savings opportunities.

When it comes to retirement savings, a significant gender gap persists.  Women, especially those between 55 and 66 years old, often have less saved up than men. About 50% of these women have no personal retirement savings at all, while this is true for 47% of men in the same age group. Furthermore, women usually save a smaller portion of their salaries for retirement — 6.2% on average, compared to men's 6.6%. This gap in savings can be traced back to issues like the gender pay gap, as women often earn less than men, despite The Equal Pay Act of 1963 prohibiting employers from paying different wages to men and women performing the same job. As a result, women may need to work longer before they can retire. Plus, women tend to live longer than men, which means they really need to save more to support themselves in later years. Key Takeaways Women typically have less money saved for retirement than men.Women generally earn less than men and can have career gaps due to caregiver roles that can lead to lower savings, lifetime wages, and Social Security.A lack of financial and educational opportunities leads to lower financial literacy among some women, resulting in delayed retirement savings plans.Improving access to financial education will help improve savings across genders.Continuing to close the gender wage gap and potential policy changes could help bolster retirement savings potential. Retirement Savings: Men vs. Women Federal data shows that just 22% of women have $100,000 or more saved for retirement, while 30% of men do. A major factor behind this gap is the gender pay disparity: on average, women earn 84 cents for every dollar that men earn, a ratio that has remained unchanged for almost twenty years. Another study conducted by the Transamerica Center for Retirement Studies estimates that the median retirement savings for women is $43,000, less than half of men’s ($91,000). Men are much more likely than women to have $250,000 or more in retirement savings—32% compared to 21%. The study also found that 25% of women have saved less than $10,000, or nothing at all, compared to 16% of men. The below chart shows the difference between the median retirement savings of men and women by generation: Total Median Retirement Savings by Generation: Women vs. Men    Women Men Baby Boomers $101,000 $248,000 Generation X $51,000 $127,000  Millenials  $29,000 $63,000  Generation Z  $26,000 $42,000 Source: Transamerica Center for Retirement Studies Important The COVID-19 pandemic threw a big wrench into retirement savings planning, with some 4 million people in the U.S. out of work for six months or longer. Women sustained more damage than men in terms of job losses. The impact was felt even more deeply by transgender people. These painful setbacks will likely be felt for years to come. Why a Retirement Savings Gender Gap Exists There are a number of reasons why women have historically socked away less for retirement. One big driving force behind the savings disparity is the gender wage gap. In the U.S., on average, women working full-time throughout the year earn about 84 cents for every dollar earned by men, leading to an annual wage gap of $10,000. This gap widens for women of color and women with disabilities, who earn even less compared to their male counterparts. Lower earnings result in reduced savings for retirement. Women often experience employment breaks due to maternity leave or caring for family members, which affects their Social Security benefits and contributes to a smaller net worth. A woman's net worth is an average of $5,541, significantly less than a man's average net worth of $12,188. For example, in 2023, the average monthly Social Security benefit for retirees, disabled workers, and aged widows/widowers was approximately $1,788, totaling around $21,455 annually. Comparatively, in 2021, men received an average monthly Social Security payment of $1,838, while women received $1,484. Here are some other likely reasons the retirement savings gender gap exists: Women often prioritize different financial goals than men, such as emergency funds, debt repayment, and child support, impacting their capacity to save for retirement.Women's access to employer-sponsored retirement plans is generally lower, especially for part-time workers, which disproportionately affects women. This leads to fewer women having the opportunity to contribute to 401(k)s or similar plans.Many women are forced to withdraw from their retirement savings prematurely. This reduces the potential for long-term growth of retirement funds.Women often handle unpaid duties, including childcare and elder care, resulting in career pauses during their prime income-producing years. $45,300 Taking three months of parental leave can reduce lifetime Social Security retirement benefits by approximately 3 to 4 percent per leave. Leave-taking parents lose about $15,100 in lifetime retirement benefits for each three months of leave, equal to $45,300 for three children. Another reason why the retirement savings gap has persisted is a lack of financial literacy. Knowledge is power, and never has that been truer than when it comes to retirement savings. Women's financial literacy, on average, is lower than men's in the United States. The gap is even more pronounced among underrepresented minority women, who scored lower in financial literacy compared to their white peers, with minority women answering 38% of the questions correctly versus 54% for white women. Several factors contribute to the lower levels of financial literacy among women. These include discomfort in discussing financial matters and a lack of knowledge about where to seek reliable financial information. How to Narrow the Gender Retirement Savings Gap To help close the gap in retirement savings, it all starts with learning about money and improving financial literacy. Knowing how and why to save is really important. The sooner you start learning about saving for retirement, the better. It doesn’t matter how old you are. There are lots of helpful tips and information available to help you start saving or to keep your savings growing. For those needing time off for family reasons or working part-time without access to savings plans, policy changes could make a significant difference. Introducing a paid Family and Medical Leave Act (FMLA) at the federal level could be one such change. While the FMLA currently offers 12 weeks of unpaid leave, only 13 states and Washington D.C. have enacted mandatory paid family leave systems. New Hampshire and Vermont have implemented optional paid family and medical leave insurance programs. Additionally, six states (Alabama, Arkansas, Florida, Tennessee, Texas and Virginia) allow insurers to offer family leave insurance policies to employers. And though the wage gap has narrowed, it will likely require some major policy changes to really move that needle. Iceland serves as a prime example, having implemented a law that mandates companies with 25 or more employees to report that they provide equal pay for men and women. Failure to comply results in daily fines. In the U.S., President Joe Biden outlined an ambitious plan to tackle some of the financial disparities between men and women, starting with the creation of the White House Council on Gender Equality. March 12 Equal Pay Day, scheduled for March 12, 2024, highlights the ongoing issue of the gender wage gap. Introduced in 1996 by the National Committee on Pay Equity, it highlights how long into the new year women need to work to match the previous year's earnings of men, spotlighting the disparity in wages. How Long Will Retirement Savings Last? How long your retirement savings will last depends on a number of factors including your living expenses after you retire, how much you have in retirement savings and income, and how long you live. One rule of thumb, called the 4% rule, suggests that if you don’t want to outlive your savings (assuming you live 30 years after retirement) you can withdraw about 4% of your retirement savings annually, in addition to retirement income such as Social Security. For example, if you plan to withdraw $40,000 a year for 25 years, you would need $1 million in your nest egg. What Is the Average Retirement Savings? The average IRA balance in Q3 2023 was $109,600 a decrease of 4% from last quarter, but an 8% increase from a year ago, according to research published by Fidelity. The average 401(k) balance decreased to $107,700, down 4% from the prior quarter. Fidelity also reports that the average 403(b) account balance was $97,200, down 5% from last quarter, but up 11% from last year. How Do You Start Saving for Retirement? You can start saving for retirement by contributing to a tax-advantaged retirement plan or account. If you work for an employer that offers a 401(k) plan, contributions can be automatically deducted from your paycheck. If you don’t have access to a 401(k), you can set up and make contributions to a traditional IRA, Roth IRA, or both. The Bottom Line It’s a vicious cycle. Though the wage gap is narrowing, as noted above, women still only earn about 84 cents for every dollar a man earns. Lower wages translates to lower net worth and savings, which impacts how much money will be available in retirement. Closing the gender wage gap and implementing policy changes could help bolster retirement savings for all people in the U.S. efforts to enhance financial literacy, alongside meaningful policy reforms, can also significantly contribute to equalizing retirement savings opportunities.

https://www.investopedia.com/terms/p/pricetarget.asp

Price Target: How to Understand and Calculate Plus Accuracy

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-price-target"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Price Target? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A price target is an analyst's projection of a security's future price. Price targets can pertain to all types of securities, from complex <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment-product.asp">investment products</a> to stocks and bonds. When setting a stock's price target, an analyst is trying to determine what the stock is worth and where the price will be in 12 or 18 months. Ultimately, price targets depend on the <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuation.asp">valuation</a> of the company that's issuing the stock. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Analysts generally publish their price targets in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/research-report.asp">research reports</a> on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A price target is an analyst's projection of a security's future price, one at which an analyst believes a stock is fairly valued.</li><li>Analysts consider numerous fundamental and technical factors to arrive at a price target.</li><li>Analysts generally publish their price targets along with their buy, sell, and hold recommendations for a stock.</li><li>Price targets for the same security can be different because of the various valuation methods used by analysts, traders, and institutions. </li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-price-targets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Price Targets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A price target is a price at which an analyst believes a stock to be fairly valued relative to its projected and historical <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp" rel="noopener noreferrer">earnings</a>. When an analyst raises their price target for a stock, they generally expect the stock price to rise. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Conversely, lowering their price target may mean that the analyst expects the stock price to fall. Price targets are an organic factor in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-analysis.asp" rel="noopener noreferrer">financial analysis</a>; they can change over time as new information becomes available. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-factors-that-help-to-determine-a-price-target"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Factors That Help to Determine a Price Target </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The price target is based on assumptions about a security's future supply and demand, technical levels, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentals.asp">fundamentals</a>. Different analysts and financial institutions use various valuation methods and take into account different economic conditions when deciding on a price target. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentalanalysis.asp">fundamental analysts</a>, a common way to discern the price target for a stock is to create a multiple of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">price-to-earnings (P/E) ratio</a>—by multiplying the market price by the company’s trailing 12-month earnings.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In some cases, particularly with volatile stocks, analysts will look for additional guidance to form their price targets, which could include reviewing a company’s balance sheet and other financial statements and comparing them to historical results, current economics, and the competitive environment, studying the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/02/062602.asp">health of a company's management</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/ratioanalysis.asp">analyzing other ratios</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp">Technical analysts</a> use indicators, price action, statistics, trends, and price momentum to gauge the future price of a security. One way that they arrive at a price target is to find areas of defined <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/trading/support-and-resistance-basics/">support and resistance</a>. An analyst will do this by charting a price that moves between at least two similar highs and lows without breaking above or below those points at any point in between. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-special-considerations-about-price-targets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Special Considerations About Price Targets </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> For Traders </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trader.asp" rel="noopener noreferrer">Traders</a> will generally look to exit their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/position.asp" rel="noopener noreferrer">position</a> on a stock when the originally expected value of the trade has been recognized. Although price targets can help traders understand when to buy or sell a stock, traders can and should determine their own price targets for entering and exiting positions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> If You're a Sophisticated Investor </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> For individual investors, the assumptions that underlie analysts’ price targets are not always obvious. Investors should use analysts' price targets and recommendations as just one part of their investment <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duediligence.asp" rel="noopener noreferrer">due diligence</a>, which could include reviewing a company's financials and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sec-and-regulatory-bodies-4689753" rel="noopener noreferrer">regulatory filings</a>, among other resources. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_29-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_30-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Despite the most careful analysis, we cannot know for certain the price at which a stock will trade in the future. Nevertheless, when a prominent analyst changes their price target, it can have a significant impact on the price of a security.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Price Targets Are Powerful Guesstimates </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Accurately forecasting a security's price movement is based on projection, probability, numerous tools, and lots of experience. However, even for the most seasoned professional, a price target is still a calculated guess. Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfoliomanager.asp" rel="noopener noreferrer">portfolio managers</a> believe that price targets, along with research reports, function mainly as marketing tools for brokerages and investment banks to generate interest in a security that they're <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underwriting.asp" rel="noopener noreferrer">underwriting</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_34-0"><span class="heading-toc" id="toc-how-are-price-targets-calculated"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Are Price Targets Calculated?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Price targets try to predict what a given security will be worth at some point in the future. Analysts attempt to satisfy this basic question by projecting a security's future price using a blend of fundamental data points and educated assumptions about the security's future valuation.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_36-0"><span class="heading-toc" id="toc-are-price-targets-accurate"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Price Targets Accurate?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Despite the best efforts of analysts, a price target is a guess with the variance in analyst projections linked to their estimates of future performance. Studies have found that, historically, the overall accuracy rate is around 30% for price targets with 12-18 month horizons. However, price targets do have the ability to sway investor sentiment, especially if they come from credible analysts.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_38-0"><span class="heading-toc" id="toc-where-are-price-targets-found"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Are Price Targets Found?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Analysts generally publish their price targets in research reports on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media.</p></div> </div></div>

## What Is a Price Target? A price target is an analyst's projection of a security's future price. Price targets can pertain to all types of securities, from complex [investment products](https://www.investopedia.com/terms/i/investment-product.asp) to stocks and bonds. When setting a stock's price target, an analyst is trying to determine what the stock is worth and where the price will be in 12 or 18 months. Ultimately, price targets depend on the [valuation](https://www.investopedia.com/terms/v/valuation.asp) of the company that's issuing the stock. Analysts generally publish their price targets in [research reports](https://www.investopedia.com/terms/r/research-report.asp) on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media. ### Key Takeaways * A price target is an analyst's projection of a security's future price, one at which an analyst believes a stock is fairly valued. * Analysts consider numerous fundamental and technical factors to arrive at a price target. * Analysts generally publish their price targets along with their buy, sell, and hold recommendations for a stock. * Price targets for the same security can be different because of the various valuation methods used by analysts, traders, and institutions. ## Understanding Price Targets A price target is a price at which an analyst believes a stock to be fairly valued relative to its projected and historical [earnings](https://www.investopedia.com/terms/e/earnings.asp). When an analyst raises their price target for a stock, they generally expect the stock price to rise. Conversely, lowering their price target may mean that the analyst expects the stock price to fall. Price targets are an organic factor in [financial analysis](https://www.investopedia.com/terms/f/financial-analysis.asp); they can change over time as new information becomes available. ## Factors That Help to Determine a Price Target The price target is based on assumptions about a security's future supply and demand, technical levels, and [fundamentals](https://www.investopedia.com/terms/f/fundamentals.asp). Different analysts and financial institutions use various valuation methods and take into account different economic conditions when deciding on a price target. For [fundamental analysts](https://www.investopedia.com/terms/f/fundamentalanalysis.asp), a common way to discern the price target for a stock is to create a multiple of the [price-to-earnings (P/E) ratio](https://www.investopedia.com/terms/p/price-earningsratio.asp)—by multiplying the market price by the company’s trailing 12-month earnings. In some cases, particularly with volatile stocks, analysts will look for additional guidance to form their price targets, which could include reviewing a company’s balance sheet and other financial statements and comparing them to historical results, current economics, and the competitive environment, studying the [health of a company's management](https://www.investopedia.com/articles/02/062602.asp), and [analyzing other ratios](https://www.investopedia.com/terms/r/ratioanalysis.asp). [Technical analysts](https://www.investopedia.com/terms/t/technicalanalysis.asp) use indicators, price action, statistics, trends, and price momentum to gauge the future price of a security. One way that they arrive at a price target is to find areas of defined [support and resistance](https://www.investopedia.com/trading/support-and-resistance-basics/). An analyst will do this by charting a price that moves between at least two similar highs and lows without breaking above or below those points at any point in between. ## Special Considerations About Price Targets ### For Traders [Traders](https://www.investopedia.com/terms/t/trader.asp) will generally look to exit their [position](https://www.investopedia.com/terms/p/position.asp) on a stock when the originally expected value of the trade has been recognized. Although price targets can help traders understand when to buy or sell a stock, traders can and should determine their own price targets for entering and exiting positions. ### If You're a Sophisticated Investor For individual investors, the assumptions that underlie analysts’ price targets are not always obvious. Investors should use analysts' price targets and recommendations as just one part of their investment [due diligence](https://www.investopedia.com/terms/d/duediligence.asp), which could include reviewing a company's financials and [regulatory filings](https://www.investopedia.com/sec-and-regulatory-bodies-4689753), among other resources. ### Despite the most careful analysis, we cannot know for certain the price at which a stock will trade in the future. Nevertheless, when a prominent analyst changes their price target, it can have a significant impact on the price of a security. ### Price Targets Are Powerful Guesstimates Accurately forecasting a security's price movement is based on projection, probability, numerous tools, and lots of experience. However, even for the most seasoned professional, a price target is still a calculated guess. Some [portfolio managers](https://www.investopedia.com/terms/p/portfoliomanager.asp) believe that price targets, along with research reports, function mainly as marketing tools for brokerages and investment banks to generate interest in a security that they're [underwriting](https://www.investopedia.com/terms/u/underwriting.asp). ## How Are Price Targets Calculated? Price targets try to predict what a given security will be worth at some point in the future. Analysts attempt to satisfy this basic question by projecting a security's future price using a blend of fundamental data points and educated assumptions about the security's future valuation. ## Are Price Targets Accurate? Despite the best efforts of analysts, a price target is a guess with the variance in analyst projections linked to their estimates of future performance. Studies have found that, historically, the overall accuracy rate is around 30% for price targets with 12-18 month horizons. However, price targets do have the ability to sway investor sentiment, especially if they come from credible analysts. ## Where Are Price Targets Found? Analysts generally publish their price targets in research reports on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media.

What Is a Price Target? A price target is an analyst's projection of a security's future price. Price targets can pertain to all types of securities, from complex investment products to stocks and bonds. When setting a stock's price target, an analyst is trying to determine what the stock is worth and where the price will be in 12 or 18 months. Ultimately, price targets depend on the valuation of the company that's issuing the stock. Analysts generally publish their price targets in research reports on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media. Key Takeaways A price target is an analyst's projection of a security's future price, one at which an analyst believes a stock is fairly valued.Analysts consider numerous fundamental and technical factors to arrive at a price target.Analysts generally publish their price targets along with their buy, sell, and hold recommendations for a stock.Price targets for the same security can be different because of the various valuation methods used by analysts, traders, and institutions. Understanding Price Targets A price target is a price at which an analyst believes a stock to be fairly valued relative to its projected and historical earnings. When an analyst raises their price target for a stock, they generally expect the stock price to rise. Conversely, lowering their price target may mean that the analyst expects the stock price to fall. Price targets are an organic factor in financial analysis; they can change over time as new information becomes available. Factors That Help to Determine a Price Target The price target is based on assumptions about a security's future supply and demand, technical levels, and fundamentals. Different analysts and financial institutions use various valuation methods and take into account different economic conditions when deciding on a price target. For fundamental analysts, a common way to discern the price target for a stock is to create a multiple of the price-to-earnings (P/E) ratio—by multiplying the market price by the company’s trailing 12-month earnings. In some cases, particularly with volatile stocks, analysts will look for additional guidance to form their price targets, which could include reviewing a company’s balance sheet and other financial statements and comparing them to historical results, current economics, and the competitive environment, studying the health of a company's management, and analyzing other ratios. Technical analysts use indicators, price action, statistics, trends, and price momentum to gauge the future price of a security. One way that they arrive at a price target is to find areas of defined support and resistance. An analyst will do this by charting a price that moves between at least two similar highs and lows without breaking above or below those points at any point in between. Special Considerations About Price Targets For Traders Traders will generally look to exit their position on a stock when the originally expected value of the trade has been recognized. Although price targets can help traders understand when to buy or sell a stock, traders can and should determine their own price targets for entering and exiting positions. If You're a Sophisticated Investor For individual investors, the assumptions that underlie analysts’ price targets are not always obvious. Investors should use analysts' price targets and recommendations as just one part of their investment due diligence, which could include reviewing a company's financials and regulatory filings, among other resources. Despite the most careful analysis, we cannot know for certain the price at which a stock will trade in the future. Nevertheless, when a prominent analyst changes their price target, it can have a significant impact on the price of a security. Price Targets Are Powerful Guesstimates Accurately forecasting a security's price movement is based on projection, probability, numerous tools, and lots of experience. However, even for the most seasoned professional, a price target is still a calculated guess. Some portfolio managers believe that price targets, along with research reports, function mainly as marketing tools for brokerages and investment banks to generate interest in a security that they're underwriting. How Are Price Targets Calculated? Price targets try to predict what a given security will be worth at some point in the future. Analysts attempt to satisfy this basic question by projecting a security's future price using a blend of fundamental data points and educated assumptions about the security's future valuation. Are Price Targets Accurate? Despite the best efforts of analysts, a price target is a guess with the variance in analyst projections linked to their estimates of future performance. Studies have found that, historically, the overall accuracy rate is around 30% for price targets with 12-18 month horizons. However, price targets do have the ability to sway investor sentiment, especially if they come from credible analysts. Where Are Price Targets Found? Analysts generally publish their price targets in research reports on specific companies, along with their buy, sell, and hold recommendations for the company's stock. Stock price targets are often quoted in the financial news media.

https://www.investopedia.com/terms/t/taxtreaty.asp

What Is a Tax Treaty Between Countries & How Does It Work?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-tax-treaty"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Tax Treaty? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens. Income tax treaties generally determine the amount of tax that a country can apply to a taxpayer's income, capital, estate, or wealth. <span class="ql-inline-citation" data-cite="8"></span> An income tax treaty is also called a Double Tax Agreement (DTA).<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Some countries are seen as being <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxhaven.asp" rel="noopener noreferrer">tax havens</a>. Generally, a tax haven is a country or a place with low or no corporate taxes that allow foreign investors to set up businesses there. Tax havens typically do not enter into tax treaties. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens.</li><li>When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise.</li><li>Both countries may enter into a tax treaty to agree on which country should tax the investment income to prevent the same income from getting taxed twice.</li><li>Some countries are seen as being tax havens; these countries typically do not enter into tax treaties.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-tax-treaty-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> How a Tax Treaty Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise. Both countries–the source country and the residence country–may enter into a tax treaty to agree on which country should tax the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentincome.asp" rel="noopener noreferrer">investment income</a> to prevent the same income from getting taxed twice. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The source country is the country that hosts the inward investment. The source country is also sometimes referred to as the capital-importing country. The residence country is the investor's country of residence. The residence country is also sometimes referred to as the capital-exporting country. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> To avoid <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/double_taxation.asp" rel="noopener noreferrer">double taxation</a>, tax treaties may follow one of two models: The Organization for Economic Co-operation and Development (OECD) Model and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/united-nations-un.asp" rel="noopener noreferrer">United Nations</a> (UN) Model Convention.<span class="ql-inline-citation" data-cite="10"></span> <span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <span class="heading-toc" id="toc-oecd-tax-treaty-model-vs-un-tax-treaty-model"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-heading__text"> OECD Tax Treaty Model vs. UN Tax Treaty Model </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/oecd.asp" rel="noopener noreferrer">Organization for Economic Co-operation and Development</a> (OECD) is a group of 37 countries with a drive to promote world trade and economic progress.<span class="ql-inline-citation" data-cite="11"></span> <span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The OECD Tax Convention on Income and on Capital is more favorable to capital-exporting countries than capital-importing countries. It requires the source country to give up some or all of its tax on certain categories of income earned by residents of the other treaty country.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The two involved countries will benefit from such an agreement if the flow of trade and investment between the two countries is reasonably equal and the residence country taxes any income exempted by the source country. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The second tax treaty model is formally referred to as the United Nations Model Double Taxation Convention between Developed and Developing Countries. The UN is an international organization that seeks to increase political and economic cooperation amongst its member countries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> A treaty that follows the UN's model gives favorable taxing rights to the foreign country of investment. Typically, this favorable taxing scheme benefits developing countries receiving inward investment. It gives the source country increased taxing rights over the business income of non-residents compared to the OECD Model Convention.<span class="ql-inline-citation" data-cite="10"></span> The United Nations Model Convention draws heavily from the OECD Model Convention.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-withholding-taxes-policy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Withholding Taxes Policy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> One of the most important aspects of a tax treaty is the treaty's policy on withholding taxes because it determines how much tax is levied on any income earned (interest and dividends) from securities owned by a non-resident.<span class="ql-inline-citation" data-cite="7"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> For example, if a tax treaty between country A and country B determines that their bilateral withholding tax on dividends is 10%, then country A will tax <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/03/102203.asp" rel="noopener noreferrer">dividend payments</a> that are going to country B at a rate of 10%, and vice versa. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The U.S. has tax treaties with multiple countries that help to reduce—or eliminate—the tax paid by residents of foreign countries. These reduced rates and exemptions vary among countries and specific items of income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Under these same treaties, residents or citizens of the U.S. are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Tax treaties are said to be reciprocal because they apply in both treaty countries. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Income tax treaties typically include a clause, referred to as a "saving clause," that is intended to prevent residents of the U.S. from taking advantage of certain parts of the tax treaty in order to avoid taxation of a domestic source of income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> For individuals that are residents of countries that do not have tax treaties with the U.S., any source of income that is earned within the U.S. is taxed in the same way and at the same rates shown in the instructions for the applicable U.S. tax return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> For individuals who are residents of the U.S., it is important to keep in mind that some individual states within the U.S. do not honor the provisions of tax treaties. <span class="ql-inline-citation" data-cite="6"></span> </p></div>

## What Is a Tax Treaty? A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens. Income tax treaties generally determine the amount of tax that a country can apply to a taxpayer's income, capital, estate, or wealth.  An income tax treaty is also called a Double Tax Agreement (DTA). Some countries are seen as being [tax havens](https://www.investopedia.com/terms/t/taxhaven.asp). Generally, a tax haven is a country or a place with low or no corporate taxes that allow foreign investors to set up businesses there. Tax havens typically do not enter into tax treaties. ### Key Takeaways * A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens. * When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise. * Both countries may enter into a tax treaty to agree on which country should tax the investment income to prevent the same income from getting taxed twice. * Some countries are seen as being tax havens; these countries typically do not enter into tax treaties. ## How a Tax Treaty Works When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise. Both countries–the source country and the residence country–may enter into a tax treaty to agree on which country should tax the [investment income](https://www.investopedia.com/terms/i/investmentincome.asp) to prevent the same income from getting taxed twice. The source country is the country that hosts the inward investment. The source country is also sometimes referred to as the capital-importing country. The residence country is the investor's country of residence. The residence country is also sometimes referred to as the capital-exporting country. To avoid [double taxation](https://www.investopedia.com/terms/d/double_taxation.asp), tax treaties may follow one of two models: The Organization for Economic Co-operation and Development (OECD) Model and the [United Nations](https://www.investopedia.com/terms/u/united-nations-un.asp) (UN) Model Convention.  ## OECD Tax Treaty Model vs. UN Tax Treaty Model The [Organization for Economic Co-operation and Development](https://www.investopedia.com/terms/o/oecd.asp) (OECD) is a group of 37 countries with a drive to promote world trade and economic progress.  The OECD Tax Convention on Income and on Capital is more favorable to capital-exporting countries than capital-importing countries. It requires the source country to give up some or all of its tax on certain categories of income earned by residents of the other treaty country. The two involved countries will benefit from such an agreement if the flow of trade and investment between the two countries is reasonably equal and the residence country taxes any income exempted by the source country. The second tax treaty model is formally referred to as the United Nations Model Double Taxation Convention between Developed and Developing Countries. The UN is an international organization that seeks to increase political and economic cooperation amongst its member countries. A treaty that follows the UN's model gives favorable taxing rights to the foreign country of investment. Typically, this favorable taxing scheme benefits developing countries receiving inward investment. It gives the source country increased taxing rights over the business income of non-residents compared to the OECD Model Convention. The United Nations Model Convention draws heavily from the OECD Model Convention. ## Withholding Taxes Policy One of the most important aspects of a tax treaty is the treaty's policy on withholding taxes because it determines how much tax is levied on any income earned (interest and dividends) from securities owned by a non-resident. For example, if a tax treaty between country A and country B determines that their bilateral withholding tax on dividends is 10%, then country A will tax [dividend payments](https://www.investopedia.com/ask/answers/03/102203.asp) that are going to country B at a rate of 10%, and vice versa. The U.S. has tax treaties with multiple countries that help to reduce—or eliminate—the tax paid by residents of foreign countries. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the U.S. are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Tax treaties are said to be reciprocal because they apply in both treaty countries. Income tax treaties typically include a clause, referred to as a "saving clause," that is intended to prevent residents of the U.S. from taking advantage of certain parts of the tax treaty in order to avoid taxation of a domestic source of income. For individuals that are residents of countries that do not have tax treaties with the U.S., any source of income that is earned within the U.S. is taxed in the same way and at the same rates shown in the instructions for the applicable U.S. tax return. For individuals who are residents of the U.S., it is important to keep in mind that some individual states within the U.S. do not honor the provisions of tax treaties. 

What Is a Tax Treaty? A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens. Income tax treaties generally determine the amount of tax that a country can apply to a taxpayer's income, capital, estate, or wealth.  An income tax treaty is also called a Double Tax Agreement (DTA). Some countries are seen as being tax havens. Generally, a tax haven is a country or a place with low or no corporate taxes that allow foreign investors to set up businesses there. Tax havens typically do not enter into tax treaties. Key Takeaways A tax treaty is a bilateral (two-party) agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens.When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise.Both countries may enter into a tax treaty to agree on which country should tax the investment income to prevent the same income from getting taxed twice.Some countries are seen as being tax havens; these countries typically do not enter into tax treaties. How a Tax Treaty Works When an individual or business invests in a foreign country, the issue of which country should tax the investor’s earnings may arise. Both countries–the source country and the residence country–may enter into a tax treaty to agree on which country should tax the investment income to prevent the same income from getting taxed twice. The source country is the country that hosts the inward investment. The source country is also sometimes referred to as the capital-importing country. The residence country is the investor's country of residence. The residence country is also sometimes referred to as the capital-exporting country. To avoid double taxation, tax treaties may follow one of two models: The Organization for Economic Co-operation and Development (OECD) Model and the United Nations (UN) Model Convention.  OECD Tax Treaty Model vs. UN Tax Treaty Model The Organization for Economic Co-operation and Development (OECD) is a group of 37 countries with a drive to promote world trade and economic progress.  The OECD Tax Convention on Income and on Capital is more favorable to capital-exporting countries than capital-importing countries. It requires the source country to give up some or all of its tax on certain categories of income earned by residents of the other treaty country. The two involved countries will benefit from such an agreement if the flow of trade and investment between the two countries is reasonably equal and the residence country taxes any income exempted by the source country. The second tax treaty model is formally referred to as the United Nations Model Double Taxation Convention between Developed and Developing Countries. The UN is an international organization that seeks to increase political and economic cooperation amongst its member countries. A treaty that follows the UN's model gives favorable taxing rights to the foreign country of investment. Typically, this favorable taxing scheme benefits developing countries receiving inward investment. It gives the source country increased taxing rights over the business income of non-residents compared to the OECD Model Convention. The United Nations Model Convention draws heavily from the OECD Model Convention. Withholding Taxes Policy One of the most important aspects of a tax treaty is the treaty's policy on withholding taxes because it determines how much tax is levied on any income earned (interest and dividends) from securities owned by a non-resident. For example, if a tax treaty between country A and country B determines that their bilateral withholding tax on dividends is 10%, then country A will tax dividend payments that are going to country B at a rate of 10%, and vice versa. The U.S. has tax treaties with multiple countries that help to reduce—or eliminate—the tax paid by residents of foreign countries. These reduced rates and exemptions vary among countries and specific items of income. Under these same treaties, residents or citizens of the U.S. are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Tax treaties are said to be reciprocal because they apply in both treaty countries. Income tax treaties typically include a clause, referred to as a "saving clause," that is intended to prevent residents of the U.S. from taking advantage of certain parts of the tax treaty in order to avoid taxation of a domestic source of income. For individuals that are residents of countries that do not have tax treaties with the U.S., any source of income that is earned within the U.S. is taxed in the same way and at the same rates shown in the instructions for the applicable U.S. tax return. For individuals who are residents of the U.S., it is important to keep in mind that some individual states within the U.S. do not honor the provisions of tax treaties. 

https://www.investopedia.com/cryptocurrency-market-news-mar-18-bitcoin-and-ether-prices-fall-after-dencun-upgrade-8610485

Cryptocurrency Market News: Bitcoin and Ether Prices Fall After Dencun Upgrade

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Bitcoin hit another high to start last week, but ended it sharply lower.</li><li>Fees on various Ethereum Layer 2 networks fell dramatically last week after the Dencun upgrade, but ether prices also declined.</li><li>Government prosecutors in the trial against Sam Bankman-Fried recommended up to 50 years in prison for the former FTX CEO.</li><li>Digital asset manager Grayscale filed for a second bitcoin exchange-traded fund (ETF), to use the BTC ticker.</li><li>This week, analysts are tracking the inflows into bitcoin ETFs, and the numbers from March already have dwarfed those from January and February.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-happened-in-crypto-markets-last-week"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0"> <span class="mntl-sc-block-heading__text"> What Happened in Crypto Markets Last Week? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Last week proved to be a roller-coaster ride for bitcoin (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BTCUSD">BTC</a>) investors, as the largest cryptocurrency by market capitalization topped another lifetime high of $73,000 to start the week but fell below the $65,000 mark by Sunday after a sell-off. Ethereum's <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-you-need-to-know-ahead-of-ethereum-dencun-update-wednesday-8607518">Dencun upgrade</a> fulfilled its intended goal by lowering fees on various Layer 2 networks but ether (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ETHUSD">ETH</a>) prices also weakened at the end of the week. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Elsewhere, prosecutors recommended that former FTX Chief Executive Officer (CEO) Sam Bankman-Fried receive up to 50 years in prison for charges related to fraud and money laundering. Additionally, digital asset manager <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/grayscale-wants-to-launch-a-mini-bitcoin-fund-amid-gbtc-outflows-8607872">Grayscale Investments</a> has filed for a second spot bitcoin ETF in an effort to offer lower its management fees. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> Dencun Upgrade Leads to Lower Fees on Ethereum Layer 2 Networks </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Following the Dencun upgrade on Ethereum's mainnet on March 13, Ethereum <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-are-layer-1-and-layer-2-blockchain-scaling-solutions-7104877">Layer 2 (L2)</a> protocols have experienced a remarkable reduction in transaction fees, with some protocols slashing fees by as much as 99%. Dencun, hailed as a pivotal scalability-focused upgrade, is being called one of Ethereum's most significant advancements since <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-ethereum-merge-6504132">The Merge</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Prominent L2 protocols have marked an impressive 99% decrease in gas fees post-upgrade, with current fees for some like Starknet plummeting to 2.7 cents.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="1"></span> The introduction of data blobs through EIP-484 during the Dencun <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hard-fork.asp">hard fork</a> has improved transaction data processing, offering faster and more cost-effective transactions for L2s.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-subheading__text"> Prosecutors Recommend Up to 50 Years for Former FTX CEO Bankman-Fried </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Federal prosecutors are advocating for a substantial sentence of up to 50 years for the disgraced cryptocurrency prodigy <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/who-is-sam-bankman-fried-6830274">Sam Bankman-Fried</a>, according to court documents <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-prosecutors-seek-50-year-prison-sentence-for-former-ftx-ceo-sam-bankman-fried-8609923">unveiled</a> on Friday. Bankman-Fried, the former CEO and co-founder of the failed cryptocurrency exchange FTX, was convicted of multiple criminal charges including wire fraud and money laundering. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The prosecution contends that his actions warrant a sentence commensurate with the scale of his offenses, emphasizing the necessity for justice in the face of widespread harm and flagrant disregard for the law. As the March 28 sentencing date approaches, the severity of the recommended punishment stands in stark contrast to the comparatively lenient request put forth by Bankman-Fried's legal team. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-subheading__text"> Grayscale Files for New Bitcoin ETF with BTC Ticker </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Digital asset manager Grayscale Investments made headlines last Tuesday by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/grayscale-wants-to-launch-a-mini-bitcoin-fund-amid-gbtc-outflows-8607872">filing</a> for a spin-off of its Grayscale Bitcoin Trust (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC">GBTC</a>), a move aimed at providing investors with more cost-effective exposure to bitcoin. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The spin-off, designed to reduce fees associated with GBTC, comes in response to investors' preference for lower-cost alternatives, particularly as GBTC's fees have been comparatively higher than its competitors'. Grayscale plans to introduce the Grayscale Bitcoin Mini Trust—which will hold a portion of the bitcoin currently held by GBTC—with existing GBTC shareholders receiving shares in the Mini Trust in exchange. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Despite bitcoin's surge to record highs, GBTC has experienced significant capital outflows of more than $11 billion since January, versus inflows at competing ETFs such as BlackRock's iShares Bitcoin ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=IBIT">IBIT</a>) and Fidelity Wise Origin Bitcoin Fund (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=FBTC">FBTC</a>).<span class="ql-inline-citation" data-cite="9"></span> While Grayscale has yet to finalize the fees for the Mini Trust, the spin-off signals a strategic move toward independent operation for both GBTC and the Mini Trust after regulatory approval earlier this year, marking a significant development in the evolving landscape of bitcoin investment opportunities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-what-to-expect-in-the-markets-this-week"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> What To Expect in The Markets This Week </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Spot bitcoin ETF volumes in March already are much larger than they were in January and February.<span class="ql-inline-citation" data-cite="3"></span> In addition, BlackRock has accumulated more than 230,000 bitcoin via its IBIT offering.<span class="ql-inline-citation" data-cite="5"></span> That said, inflows appear to be slowing after peaking at more than $1 billion on March 12, according to data from Farside Investors.<span class="ql-inline-citation" data-cite="6"></span> This week, analysts will be watching to see if inflows into these ETFs continue to slide. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Bitcoin hit another high to start last week, but ended it sharply lower. * Fees on various Ethereum Layer 2 networks fell dramatically last week after the Dencun upgrade, but ether prices also declined. * Government prosecutors in the trial against Sam Bankman-Fried recommended up to 50 years in prison for the former FTX CEO. * Digital asset manager Grayscale filed for a second bitcoin exchange-traded fund (ETF), to use the BTC ticker. * This week, analysts are tracking the inflows into bitcoin ETFs, and the numbers from March already have dwarfed those from January and February. ## What Happened in Crypto Markets Last Week? Last week proved to be a roller-coaster ride for bitcoin ([BTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BTCUSD)) investors, as the largest cryptocurrency by market capitalization topped another lifetime high of $73,000 to start the week but fell below the $65,000 mark by Sunday after a sell-off. Ethereum's [Dencun upgrade](https://www.investopedia.com/what-you-need-to-know-ahead-of-ethereum-dencun-update-wednesday-8607518) fulfilled its intended goal by lowering fees on various Layer 2 networks but ether ([ETH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ETHUSD)) prices also weakened at the end of the week. Elsewhere, prosecutors recommended that former FTX Chief Executive Officer (CEO) Sam Bankman-Fried receive up to 50 years in prison for charges related to fraud and money laundering. Additionally, digital asset manager [Grayscale Investments](https://www.investopedia.com/grayscale-wants-to-launch-a-mini-bitcoin-fund-amid-gbtc-outflows-8607872) has filed for a second spot bitcoin ETF in an effort to offer lower its management fees. ### Dencun Upgrade Leads to Lower Fees on Ethereum Layer 2 Networks Following the Dencun upgrade on Ethereum's mainnet on March 13, Ethereum [Layer 2 (L2)](https://www.investopedia.com/what-are-layer-1-and-layer-2-blockchain-scaling-solutions-7104877) protocols have experienced a remarkable reduction in transaction fees, with some protocols slashing fees by as much as 99%. Dencun, hailed as a pivotal scalability-focused upgrade, is being called one of Ethereum's most significant advancements since [The Merge](https://www.investopedia.com/the-ethereum-merge-6504132). Prominent L2 protocols have marked an impressive 99% decrease in gas fees post-upgrade, with current fees for some like Starknet plummeting to 2.7 cents. The introduction of data blobs through EIP-484 during the Dencun [hard fork](https://www.investopedia.com/terms/h/hard-fork.asp) has improved transaction data processing, offering faster and more cost-effective transactions for L2s. ### Prosecutors Recommend Up to 50 Years for Former FTX CEO Bankman-Fried Federal prosecutors are advocating for a substantial sentence of up to 50 years for the disgraced cryptocurrency prodigy [Sam Bankman-Fried](https://www.investopedia.com/who-is-sam-bankman-fried-6830274), according to court documents [unveiled](https://www.investopedia.com/us-prosecutors-seek-50-year-prison-sentence-for-former-ftx-ceo-sam-bankman-fried-8609923) on Friday. Bankman-Fried, the former CEO and co-founder of the failed cryptocurrency exchange FTX, was convicted of multiple criminal charges including wire fraud and money laundering. The prosecution contends that his actions warrant a sentence commensurate with the scale of his offenses, emphasizing the necessity for justice in the face of widespread harm and flagrant disregard for the law. As the March 28 sentencing date approaches, the severity of the recommended punishment stands in stark contrast to the comparatively lenient request put forth by Bankman-Fried's legal team. ### Grayscale Files for New Bitcoin ETF with BTC Ticker Digital asset manager Grayscale Investments made headlines last Tuesday by [filing](https://www.investopedia.com/grayscale-wants-to-launch-a-mini-bitcoin-fund-amid-gbtc-outflows-8607872) for a spin-off of its Grayscale Bitcoin Trust ([GBTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC)), a move aimed at providing investors with more cost-effective exposure to bitcoin. The spin-off, designed to reduce fees associated with GBTC, comes in response to investors' preference for lower-cost alternatives, particularly as GBTC's fees have been comparatively higher than its competitors'. Grayscale plans to introduce the Grayscale Bitcoin Mini Trust—which will hold a portion of the bitcoin currently held by GBTC—with existing GBTC shareholders receiving shares in the Mini Trust in exchange. Despite bitcoin's surge to record highs, GBTC has experienced significant capital outflows of more than $11 billion since January, versus inflows at competing ETFs such as BlackRock's iShares Bitcoin ETF ([IBIT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=IBIT)) and Fidelity Wise Origin Bitcoin Fund ([FBTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=FBTC)). While Grayscale has yet to finalize the fees for the Mini Trust, the spin-off signals a strategic move toward independent operation for both GBTC and the Mini Trust after regulatory approval earlier this year, marking a significant development in the evolving landscape of bitcoin investment opportunities. ## What To Expect in The Markets This Week Spot bitcoin ETF volumes in March already are much larger than they were in January and February. In addition, BlackRock has accumulated more than 230,000 bitcoin via its IBIT offering. That said, inflows appear to be slowing after peaking at more than $1 billion on March 12, according to data from Farside Investors. This week, analysts will be watching to see if inflows into these ETFs continue to slide. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Bitcoin hit another high to start last week, but ended it sharply lower.Fees on various Ethereum Layer 2 networks fell dramatically last week after the Dencun upgrade, but ether prices also declined.Government prosecutors in the trial against Sam Bankman-Fried recommended up to 50 years in prison for the former FTX CEO.Digital asset manager Grayscale filed for a second bitcoin exchange-traded fund (ETF), to use the BTC ticker.This week, analysts are tracking the inflows into bitcoin ETFs, and the numbers from March already have dwarfed those from January and February. What Happened in Crypto Markets Last Week? Last week proved to be a roller-coaster ride for bitcoin (BTC) investors, as the largest cryptocurrency by market capitalization topped another lifetime high of $73,000 to start the week but fell below the $65,000 mark by Sunday after a sell-off. Ethereum's Dencun upgrade fulfilled its intended goal by lowering fees on various Layer 2 networks but ether (ETH) prices also weakened at the end of the week. Elsewhere, prosecutors recommended that former FTX Chief Executive Officer (CEO) Sam Bankman-Fried receive up to 50 years in prison for charges related to fraud and money laundering. Additionally, digital asset manager Grayscale Investments has filed for a second spot bitcoin ETF in an effort to offer lower its management fees. Dencun Upgrade Leads to Lower Fees on Ethereum Layer 2 Networks Following the Dencun upgrade on Ethereum's mainnet on March 13, Ethereum Layer 2 (L2) protocols have experienced a remarkable reduction in transaction fees, with some protocols slashing fees by as much as 99%. Dencun, hailed as a pivotal scalability-focused upgrade, is being called one of Ethereum's most significant advancements since The Merge. Prominent L2 protocols have marked an impressive 99% decrease in gas fees post-upgrade, with current fees for some like Starknet plummeting to 2.7 cents. The introduction of data blobs through EIP-484 during the Dencun hard fork has improved transaction data processing, offering faster and more cost-effective transactions for L2s. Prosecutors Recommend Up to 50 Years for Former FTX CEO Bankman-Fried Federal prosecutors are advocating for a substantial sentence of up to 50 years for the disgraced cryptocurrency prodigy Sam Bankman-Fried, according to court documents unveiled on Friday. Bankman-Fried, the former CEO and co-founder of the failed cryptocurrency exchange FTX, was convicted of multiple criminal charges including wire fraud and money laundering. The prosecution contends that his actions warrant a sentence commensurate with the scale of his offenses, emphasizing the necessity for justice in the face of widespread harm and flagrant disregard for the law. As the March 28 sentencing date approaches, the severity of the recommended punishment stands in stark contrast to the comparatively lenient request put forth by Bankman-Fried's legal team. Grayscale Files for New Bitcoin ETF with BTC Ticker Digital asset manager Grayscale Investments made headlines last Tuesday by filing for a spin-off of its Grayscale Bitcoin Trust (GBTC), a move aimed at providing investors with more cost-effective exposure to bitcoin. The spin-off, designed to reduce fees associated with GBTC, comes in response to investors' preference for lower-cost alternatives, particularly as GBTC's fees have been comparatively higher than its competitors'. Grayscale plans to introduce the Grayscale Bitcoin Mini Trust—which will hold a portion of the bitcoin currently held by GBTC—with existing GBTC shareholders receiving shares in the Mini Trust in exchange. Despite bitcoin's surge to record highs, GBTC has experienced significant capital outflows of more than $11 billion since January, versus inflows at competing ETFs such as BlackRock's iShares Bitcoin ETF (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC). While Grayscale has yet to finalize the fees for the Mini Trust, the spin-off signals a strategic move toward independent operation for both GBTC and the Mini Trust after regulatory approval earlier this year, marking a significant development in the evolving landscape of bitcoin investment opportunities. What To Expect in The Markets This Week Spot bitcoin ETF volumes in March already are much larger than they were in January and February. In addition, BlackRock has accumulated more than 230,000 bitcoin via its IBIT offering. That said, inflows appear to be slowing after peaking at more than $1 billion on March 12, according to data from Farside Investors. This week, analysts will be watching to see if inflows into these ETFs continue to slide. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/ask/answers/09/bond-over-the-counter.asp

Why Are Most Bonds Traded on the Secondary Market "Over the Counter"?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock.asp">stocks</a>, after issuance in the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/primarymarket.asp">primary market</a>, bonds are traded between investors in the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/secondarymarket.asp">secondary market</a>. However, unlike stocks, most bonds are not traded in the secondary market via exchanges. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Rather, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond.asp">bonds</a> are traded <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/over-the-countermarket.asp">over-the-counter (OTC)</a>. There are several reasons why most bonds are traded OTC, but chief among them is their diversity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Unlike shares of a company that trade on stock exchanges, most corporate bonds trade over-the-counter (OTC).</li><li>This is because bonds come from several different issuers, and each issuer will have several bonds offered - with different maturity, coupon, nominal value, and credit rating.</li><li>Since they are not listed on major exchanges, investors must look to their brokers to arrange the purchase and sale of bonds in many cases.</li><li>OTC markets tend to be less regulated, less transparent, and less liquid than exchange-traded securities, increasing transaction and counterparty risk.</li></ul></div></div></div> <span class="heading-toc" id="toc-stocks-vs-bonds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Stocks vs. Bonds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Before looking at the bond market, let's consider how stocks commonly trade. Stocks have two primary types, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commonstock.asp">common stock</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preferredstock.asp">preferred stock</a>, and are limited to just a few characteristics. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Bonds, on the other hand, each have different qualities, maturities, and yields. The outcome of this diversity is more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be traded on exchanges. Another reason why bonds are traded over the counter is the difficulty in listing current prices. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Stock prices are affected by news events, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">P/E ratio</a> of a company and, ultimately, the supply and demand of shares, which are reflected in the daily stock price. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> In contrast, bond prices are affected by changing interest rates and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrating.asp">credit ratings</a>. Since trade time between issues can last weeks or even months, it is difficult to list current prices for a particular bond issue, which would make it challenging to trade bonds on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockmarket.asp">stock market</a>.<span class="ql-inline-citation" data-cite="15"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-what-kinds-of-bonds-are-commonly-traded-over-the-counter"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> What Kinds of Bonds Are Commonly Traded Over the Counter? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporatebond.asp">corporate bonds</a> issued by private and public corporations are traded OTC rather than listed on exchanges. Furthermore, many of the transactions involving exchange-traded bonds are done through OTC markets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Corporate bonds are issued by firms to raise capital to fund various expenditures. They are attractive to investors because they provide much higher yields than bonds issued by the government. However, this higher yield is accompanied by higher risk.<span class="ql-inline-citation" data-cite="13"></span> Investment in corporate bonds comes primarily from pension funds, mutual funds, banks, insurance companies, and individual investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The bonds that are traded on the OTC markets vary in the degree of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquidity</a> that they enjoy. Liquidity gives investors ample opportunity to buy and sell bonds before maturity at fair prices. Along with this liquidity, corporate bonds traded OTC provide investors with a steady stream of income and security because they are rated based on the credit history of the issuing firm. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> However, these bonds are not perfect investments, and they include major risks, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrisk.asp">credit risk</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/callrisk.asp">call risk</a>. Credit risk can arise when an issuer is unable to maintain payments on the bond or if a rating corporation lowers the credit rating of the issuer. Call risk occurs when an issuer redeems the issue before maturity, leaving the investor with less favorable investing possibilities.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-why-otc-transactions-can-be-seen-as-controversial"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Why OTC Transactions Can Be Seen As Controversial </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Many analysts and pundits claim that over-the-counter (OTC) transactions and financial instruments, especially derivatives, increase systematic risk. In particular, concerns about <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/optioninvestor/11/understanding-counterparty-risk.asp">counterparty risk</a> grew following the financial crisis of 2007-2009, when credit-default swaps in the derivatives market received much of the blame for massive losses in the financial sector.<span class="ql-inline-citation" data-cite="14"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Transactions in financial markets are either organized in exchanges, such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/03/103103.asp">New York Stock Exchange and Nasdaq</a>, or occur over-the-counter. An OTC trade is executed directly between two parties and is not overseen or subject to the rules of major exchanges. These off-exchange trades incorporate all of the types of assets seen in exchanges, including commodities, equities, and debt instruments.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Derivatives can be made of any asset and only represent contracts based on the value of underlying financial assets. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futurescontract.asp">Futures contracts</a>, forward contracts, options, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/swap.asp">swaps</a> are all derivatives. Derivatives trading makes up a large part of global markets and is increasingly prevalent due to improvements in computing technology.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The controversy about OTC transactions centers on a lack of oversight and information.<span class="ql-inline-citation" data-cite="7"></span> Major exchanges have a large incentive to control and regulate trades that occur on their watch. OTC traders watch out for themselves to a greater degree. That said, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskmanagement.asp">risk of financial loss</a> is very real on exchanges as well, and there is no guarantee exchange trading is less risky than OTC trading. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Overall, OTC transactions do not have the same rules about contract enforcement as most exchanges. The risk of a party failing to live up to its contractual obligations is often called counterparty risk, although it may sometimes be referred to as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/defaultrisk.asp">default risk</a>. While counterparty risk exists in any contract, it is perceived as a larger threat when the contracts are made over the counter.<span class="ql-inline-citation" data-cite="5"></span> </p></div>

Like [stocks](https://www.investopedia.com/terms/s/stock.asp), after issuance in the [primary market](https://www.investopedia.com/terms/p/primarymarket.asp), bonds are traded between investors in the [secondary market](https://www.investopedia.com/terms/s/secondarymarket.asp). However, unlike stocks, most bonds are not traded in the secondary market via exchanges. Rather, [bonds](https://www.investopedia.com/terms/b/bond.asp) are traded [over-the-counter (OTC)](https://www.investopedia.com/terms/o/over-the-countermarket.asp). There are several reasons why most bonds are traded OTC, but chief among them is their diversity. ### Key Takeaways * Unlike shares of a company that trade on stock exchanges, most corporate bonds trade over-the-counter (OTC). * This is because bonds come from several different issuers, and each issuer will have several bonds offered - with different maturity, coupon, nominal value, and credit rating. * Since they are not listed on major exchanges, investors must look to their brokers to arrange the purchase and sale of bonds in many cases. * OTC markets tend to be less regulated, less transparent, and less liquid than exchange-traded securities, increasing transaction and counterparty risk. ## Stocks vs. Bonds Before looking at the bond market, let's consider how stocks commonly trade. Stocks have two primary types, [common stock](https://www.investopedia.com/terms/c/commonstock.asp) and [preferred stock](https://www.investopedia.com/terms/p/preferredstock.asp), and are limited to just a few characteristics. Bonds, on the other hand, each have different qualities, maturities, and yields. The outcome of this diversity is more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be traded on exchanges. Another reason why bonds are traded over the counter is the difficulty in listing current prices. Stock prices are affected by news events, the [P/E ratio](https://www.investopedia.com/terms/p/price-earningsratio.asp) of a company and, ultimately, the supply and demand of shares, which are reflected in the daily stock price. In contrast, bond prices are affected by changing interest rates and [credit ratings](https://www.investopedia.com/terms/c/creditrating.asp). Since trade time between issues can last weeks or even months, it is difficult to list current prices for a particular bond issue, which would make it challenging to trade bonds on the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp). ## What Kinds of Bonds Are Commonly Traded Over the Counter? Most [corporate bonds](https://www.investopedia.com/terms/c/corporatebond.asp) issued by private and public corporations are traded OTC rather than listed on exchanges. Furthermore, many of the transactions involving exchange-traded bonds are done through OTC markets. Corporate bonds are issued by firms to raise capital to fund various expenditures. They are attractive to investors because they provide much higher yields than bonds issued by the government. However, this higher yield is accompanied by higher risk. Investment in corporate bonds comes primarily from pension funds, mutual funds, banks, insurance companies, and individual investors. The bonds that are traded on the OTC markets vary in the degree of [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) that they enjoy. Liquidity gives investors ample opportunity to buy and sell bonds before maturity at fair prices. Along with this liquidity, corporate bonds traded OTC provide investors with a steady stream of income and security because they are rated based on the credit history of the issuing firm. However, these bonds are not perfect investments, and they include major risks, such as [credit risk](https://www.investopedia.com/terms/c/creditrisk.asp) and [call risk](https://www.investopedia.com/terms/c/callrisk.asp). Credit risk can arise when an issuer is unable to maintain payments on the bond or if a rating corporation lowers the credit rating of the issuer. Call risk occurs when an issuer redeems the issue before maturity, leaving the investor with less favorable investing possibilities. ## Why OTC Transactions Can Be Seen As Controversial Many analysts and pundits claim that over-the-counter (OTC) transactions and financial instruments, especially derivatives, increase systematic risk. In particular, concerns about [counterparty risk](https://www.investopedia.com/articles/optioninvestor/11/understanding-counterparty-risk.asp) grew following the financial crisis of 2007-2009, when credit-default swaps in the derivatives market received much of the blame for massive losses in the financial sector. Transactions in financial markets are either organized in exchanges, such as the [New York Stock Exchange and Nasdaq](https://www.investopedia.com/articles/basics/03/103103.asp), or occur over-the-counter. An OTC trade is executed directly between two parties and is not overseen or subject to the rules of major exchanges. These off-exchange trades incorporate all of the types of assets seen in exchanges, including commodities, equities, and debt instruments. Derivatives can be made of any asset and only represent contracts based on the value of underlying financial assets. [Futures contracts](https://www.investopedia.com/terms/f/futurescontract.asp), forward contracts, options, and [swaps](https://www.investopedia.com/terms/s/swap.asp) are all derivatives. Derivatives trading makes up a large part of global markets and is increasingly prevalent due to improvements in computing technology. The controversy about OTC transactions centers on a lack of oversight and information. Major exchanges have a large incentive to control and regulate trades that occur on their watch. OTC traders watch out for themselves to a greater degree. That said, the [risk of financial loss](https://www.investopedia.com/terms/r/riskmanagement.asp) is very real on exchanges as well, and there is no guarantee exchange trading is less risky than OTC trading. ## The Bottom Line Overall, OTC transactions do not have the same rules about contract enforcement as most exchanges. The risk of a party failing to live up to its contractual obligations is often called counterparty risk, although it may sometimes be referred to as [default risk](https://www.investopedia.com/terms/d/defaultrisk.asp). While counterparty risk exists in any contract, it is perceived as a larger threat when the contracts are made over the counter.

Like stocks, after issuance in the primary market, bonds are traded between investors in the secondary market. However, unlike stocks, most bonds are not traded in the secondary market via exchanges. Rather, bonds are traded over-the-counter (OTC). There are several reasons why most bonds are traded OTC, but chief among them is their diversity. Key Takeaways Unlike shares of a company that trade on stock exchanges, most corporate bonds trade over-the-counter (OTC).This is because bonds come from several different issuers, and each issuer will have several bonds offered - with different maturity, coupon, nominal value, and credit rating.Since they are not listed on major exchanges, investors must look to their brokers to arrange the purchase and sale of bonds in many cases.OTC markets tend to be less regulated, less transparent, and less liquid than exchange-traded securities, increasing transaction and counterparty risk. Stocks vs. Bonds Before looking at the bond market, let's consider how stocks commonly trade. Stocks have two primary types, common stock and preferred stock, and are limited to just a few characteristics. Bonds, on the other hand, each have different qualities, maturities, and yields. The outcome of this diversity is more issuers, and issues of bonds with different characteristics, which makes it difficult for bonds to be traded on exchanges. Another reason why bonds are traded over the counter is the difficulty in listing current prices. Stock prices are affected by news events, the P/E ratio of a company and, ultimately, the supply and demand of shares, which are reflected in the daily stock price. In contrast, bond prices are affected by changing interest rates and credit ratings. Since trade time between issues can last weeks or even months, it is difficult to list current prices for a particular bond issue, which would make it challenging to trade bonds on the stock market. What Kinds of Bonds Are Commonly Traded Over the Counter? Most corporate bonds issued by private and public corporations are traded OTC rather than listed on exchanges. Furthermore, many of the transactions involving exchange-traded bonds are done through OTC markets. Corporate bonds are issued by firms to raise capital to fund various expenditures. They are attractive to investors because they provide much higher yields than bonds issued by the government. However, this higher yield is accompanied by higher risk. Investment in corporate bonds comes primarily from pension funds, mutual funds, banks, insurance companies, and individual investors. The bonds that are traded on the OTC markets vary in the degree of liquidity that they enjoy. Liquidity gives investors ample opportunity to buy and sell bonds before maturity at fair prices. Along with this liquidity, corporate bonds traded OTC provide investors with a steady stream of income and security because they are rated based on the credit history of the issuing firm. However, these bonds are not perfect investments, and they include major risks, such as credit risk and call risk. Credit risk can arise when an issuer is unable to maintain payments on the bond or if a rating corporation lowers the credit rating of the issuer. Call risk occurs when an issuer redeems the issue before maturity, leaving the investor with less favorable investing possibilities. Why OTC Transactions Can Be Seen As Controversial Many analysts and pundits claim that over-the-counter (OTC) transactions and financial instruments, especially derivatives, increase systematic risk. In particular, concerns about counterparty risk grew following the financial crisis of 2007-2009, when credit-default swaps in the derivatives market received much of the blame for massive losses in the financial sector. Transactions in financial markets are either organized in exchanges, such as the New York Stock Exchange and Nasdaq, or occur over-the-counter. An OTC trade is executed directly between two parties and is not overseen or subject to the rules of major exchanges. These off-exchange trades incorporate all of the types of assets seen in exchanges, including commodities, equities, and debt instruments. Derivatives can be made of any asset and only represent contracts based on the value of underlying financial assets. Futures contracts, forward contracts, options, and swaps are all derivatives. Derivatives trading makes up a large part of global markets and is increasingly prevalent due to improvements in computing technology. The controversy about OTC transactions centers on a lack of oversight and information. Major exchanges have a large incentive to control and regulate trades that occur on their watch. OTC traders watch out for themselves to a greater degree. That said, the risk of financial loss is very real on exchanges as well, and there is no guarantee exchange trading is less risky than OTC trading. The Bottom Line Overall, OTC transactions do not have the same rules about contract enforcement as most exchanges. The risk of a party failing to live up to its contractual obligations is often called counterparty risk, although it may sometimes be referred to as default risk. While counterparty risk exists in any contract, it is perceived as a larger threat when the contracts are made over the counter.

https://www.investopedia.com/terms/s/social-commerce.asp

Social Commerce: Definition, Tactics, and Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-social-commerce"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Social Commerce? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Social commerce uses <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-networking.asp">networking websites</a> to promote and sell products and services. Social commerce involves the entire shopping experience over social media sites like Facebook, Instagram, and the X platform (formerly Twitter). This means products and services are marketed on these sites, which allow consumers to browse, shop, and make purchases. A social commerce campaign's success is measured by the degree to which consumers interact with the company's marketing through retweets, likes, and shares. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Social commerce is a form of e-commerce that involves the sale of products and services using social networking sites like Facebook, Instagram, and X.</li><li>The social commerce experience includes marketing, browsing, shopping, and completing purchases.</li><li>Retweets, likes, and shares measure the success of social commerce campaigns.</li><li>Social commerce also seeks to engage online shoppers by offering expert product advice and support.</li><li>Social commerce is distinct from e-commerce, which allows consumers to make purchases on dedicated e-commerce websites and apps.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-social-commerce-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How Social Commerce Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> As noted above, social commerce involves selling products and services over <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-media.asp">social media</a>. It encourages social shopping tools, such as forums and communities, where buyers and sellers discuss their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/buy-sell-online.asp">online shopping</a> experiences and compare notes. It is an evolving field of online marketing that works in conjunction with social media and online shopping growth. Fashion and shopping-related blogs use social commerce and media to entice shoppers to purchase linked items online. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Social commerce professionals create and post messages and interactive features that promote online sales and other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ecommerce.asp">e-commerce</a> initiatives. Some of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketing.asp">marketing</a> tactics social commerce employs include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li>Inviting users to vote on product style or choices</li> <li>Offering personalized buyer options</li> <li>Applying large and striking graphics to attract viewer clicks</li> <li>Using videos to show the product in use and from multiple angles</li> <li>Encouraging user-submitted photos, commentary, and feedback</li> <li>Using celebrity <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/endorsement.asp">endorsements</a> of the product line</li> <li>Linking directly to the checkout or shopping cart</li> <li>Offering promotions or giveaways to users who share the product on their feeds</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Many popular fashion blogs have Instagram accounts that allow followers to like, share, and comment on the offered product. The tagged article frequently links directly to the store's shopping cart or check-out desk. Consumer interactions (likes, retweets, and shares) determine the success of a social commerce campaign—the more they receive, the more successful they tend to be. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_15-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_16-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The popularity of social networks such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets/101315/biggest-risks-investing-facebook-stock.asp" rel="noopener noreferrer">Facebook</a> and Instagram allows vendors to showcase their products and quickly respond to follow buyer-led trends and fads.</p></div></div></div> <span class="heading-toc" id="toc-history-of-social-commerce"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> History of Social Commerce </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In the article "Social Commerce: A New Electronic Commerce," Yao Zhong said the concept of consumer marketing promotions online first appeared on the internet in November 2005 in Yahoo! The site promoted their Shoposphere pick lists, which highlighted the most popular products.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The notion of social commerce developed further to engage online shoppers by offering reliable advice and support from online experts regarding their purchases. Marketing blogger Jeff Bullas identifies the following four brands as being among the best in the business: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <li>Nordstrom, which pins a popular Pinterest label on store items that trend online</li> <li>Coca-Cola, which personalized its labels on bottles in stores and then invited social media users to post photos of their name-branded soda with the hashtag #ShareACoke</li> <li>Lolly Wolly Doodle, a fashion brand that allows followers to design and order their own clothes right on its Facebook page</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp">Starbucks</a>, which awards bonus points to customers who unlock Mayor badges on Foursquare<span class="ql-inline-citation" data-cite="2"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_24-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_25-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Don't confuse social commerce with social shopping. While social commerce collaborates with online vendors, social shopping is a collaboration of online shoppers who network together.</p></div></div></div> <span class="heading-toc" id="toc-social-commerce-vs-e-commerce"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Social Commerce vs. E-Commerce </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Don't confuse social commerce with e-commerce or online shopping. Although there may be some similarities between the two, they are inherently different. As noted above, social commerce is a form of e-commerce that takes place on social media sites. As such, the experience takes place directly and entirely over social media. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Online shopping, on the other hand, is a way for people to shop through sites and apps that are devoted entirely to a shopping experience without the social media aspect. For instance, people can make purchases for products and services on dedicated e-commerce sites like <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/061215/difference-between-amazon-and-alibabas-business-models.asp">Amazon and Alibaba</a>. Or consumers can make purchases directly from the websites of retailers, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/070715/target-vs-walmart-whos-winning-big-box-war.asp">Walmart and Target</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_31-0"><span class="heading-toc" id="toc-how-does-social-commerce-work"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Social Commerce Work?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Social commerce is a shopping experience that takes place over social media. Companies can market their products and services while consumers can complete purchases entirely over social networking sites like Facebook, Instagram, and X. Social commerce also allows consumers to get support and advice from experts.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-whats-the-difference-between-social-commerce-and-online-shopping"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Difference Between Social Commerce and Online Shopping?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Although they may seem similar, social commerce and online shopping are two different ideas. While social commerce provides consumers with the entire shopping experience through social media and networking sites, online shopping is done entirely on websites and apps devoted entirely to e-commerce. This includes sites like Amazon and Alibaba, as well as those of individual retailers like Walmart and Target.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-which-social-media-sites-boast-the-highest-rate-of-social-commerce"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Social Media Sites Boast the Highest Rate of Social Commerce?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Market research shows that Facebook is the dominant force in social commerce, reaching as many as 63.5 million social buyers in 2022. This figure is expected to increase to 71.1 million by 2026.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Social media allows you to connect, network, and share posts, photos, videos, and experiences. But now, they offer more than just a personal experience. Many social networking sites are now hubs for social commerce. This form of e-commerce allows you to connect with companies and marketers for a complete shopping experience. You can browse and complete purchases for goods and services with the click of a button—all without even leaving your favorite social media site.<br> </br></p></div>

## What Is Social Commerce? Social commerce uses [networking websites](https://www.investopedia.com/terms/s/social-networking.asp) to promote and sell products and services. Social commerce involves the entire shopping experience over social media sites like Facebook, Instagram, and the X platform (formerly Twitter). This means products and services are marketed on these sites, which allow consumers to browse, shop, and make purchases. A social commerce campaign's success is measured by the degree to which consumers interact with the company's marketing through retweets, likes, and shares. ### Key Takeaways * Social commerce is a form of e-commerce that involves the sale of products and services using social networking sites like Facebook, Instagram, and X. * The social commerce experience includes marketing, browsing, shopping, and completing purchases. * Retweets, likes, and shares measure the success of social commerce campaigns. * Social commerce also seeks to engage online shoppers by offering expert product advice and support. * Social commerce is distinct from e-commerce, which allows consumers to make purchases on dedicated e-commerce websites and apps. ## How Social Commerce Works As noted above, social commerce involves selling products and services over [social media](https://www.investopedia.com/terms/s/social-media.asp). It encourages social shopping tools, such as forums and communities, where buyers and sellers discuss their [online shopping](https://www.investopedia.com/articles/pf/08/buy-sell-online.asp) experiences and compare notes. It is an evolving field of online marketing that works in conjunction with social media and online shopping growth. Fashion and shopping-related blogs use social commerce and media to entice shoppers to purchase linked items online. Social commerce professionals create and post messages and interactive features that promote online sales and other [e-commerce](https://www.investopedia.com/terms/e/ecommerce.asp) initiatives. Some of the [marketing](https://www.investopedia.com/terms/m/marketing.asp) tactics social commerce employs include: * Inviting users to vote on product style or choices * Offering personalized buyer options * Applying large and striking graphics to attract viewer clicks * Using videos to show the product in use and from multiple angles * Encouraging user-submitted photos, commentary, and feedback * Using celebrity [endorsements](https://www.investopedia.com/terms/e/endorsement.asp) of the product line * Linking directly to the checkout or shopping cart * Offering promotions or giveaways to users who share the product on their feeds Many popular fashion blogs have Instagram accounts that allow followers to like, share, and comment on the offered product. The tagged article frequently links directly to the store's shopping cart or check-out desk. Consumer interactions (likes, retweets, and shares) determine the success of a social commerce campaign—the more they receive, the more successful they tend to be. ### The popularity of social networks such as [Facebook](https://www.investopedia.com/articles/markets/101315/biggest-risks-investing-facebook-stock.asp) and Instagram allows vendors to showcase their products and quickly respond to follow buyer-led trends and fads. ## History of Social Commerce In the article "Social Commerce: A New Electronic Commerce," Yao Zhong said the concept of consumer marketing promotions online first appeared on the internet in November 2005 in Yahoo! The site promoted their Shoposphere pick lists, which highlighted the most popular products. The notion of social commerce developed further to engage online shoppers by offering reliable advice and support from online experts regarding their purchases. Marketing blogger Jeff Bullas identifies the following four brands as being among the best in the business: * Nordstrom, which pins a popular Pinterest label on store items that trend online * Coca-Cola, which personalized its labels on bottles in stores and then invited social media users to post photos of their name-branded soda with the hashtag #ShareACoke * Lolly Wolly Doodle, a fashion brand that allows followers to design and order their own clothes right on its Facebook page * [Starbucks](https://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp), which awards bonus points to customers who unlock Mayor badges on Foursquare ### Don't confuse social commerce with social shopping. While social commerce collaborates with online vendors, social shopping is a collaboration of online shoppers who network together. ## Social Commerce vs. E-Commerce Don't confuse social commerce with e-commerce or online shopping. Although there may be some similarities between the two, they are inherently different. As noted above, social commerce is a form of e-commerce that takes place on social media sites. As such, the experience takes place directly and entirely over social media. Online shopping, on the other hand, is a way for people to shop through sites and apps that are devoted entirely to a shopping experience without the social media aspect. For instance, people can make purchases for products and services on dedicated e-commerce sites like [Amazon and Alibaba](https://www.investopedia.com/articles/investing/061215/difference-between-amazon-and-alibabas-business-models.asp). Or consumers can make purchases directly from the websites of retailers, such as [Walmart and Target](https://www.investopedia.com/articles/active-trading/070715/target-vs-walmart-whos-winning-big-box-war.asp). ## How Does Social Commerce Work? Social commerce is a shopping experience that takes place over social media. Companies can market their products and services while consumers can complete purchases entirely over social networking sites like Facebook, Instagram, and X. Social commerce also allows consumers to get support and advice from experts. ## What's the Difference Between Social Commerce and Online Shopping? Although they may seem similar, social commerce and online shopping are two different ideas. While social commerce provides consumers with the entire shopping experience through social media and networking sites, online shopping is done entirely on websites and apps devoted entirely to e-commerce. This includes sites like Amazon and Alibaba, as well as those of individual retailers like Walmart and Target. ## Which Social Media Sites Boast the Highest Rate of Social Commerce? Market research shows that Facebook is the dominant force in social commerce, reaching as many as 63.5 million social buyers in 2022. This figure is expected to increase to 71.1 million by 2026. ## The Bottom Line Social media allows you to connect, network, and share posts, photos, videos, and experiences. But now, they offer more than just a personal experience. Many social networking sites are now hubs for social commerce. This form of e-commerce allows you to connect with companies and marketers for a complete shopping experience. You can browse and complete purchases for goods and services with the click of a button—all without even leaving your favorite social media site.

What Is Social Commerce? Social commerce uses networking websites to promote and sell products and services. Social commerce involves the entire shopping experience over social media sites like Facebook, Instagram, and the X platform (formerly Twitter). This means products and services are marketed on these sites, which allow consumers to browse, shop, and make purchases. A social commerce campaign's success is measured by the degree to which consumers interact with the company's marketing through retweets, likes, and shares. Key Takeaways Social commerce is a form of e-commerce that involves the sale of products and services using social networking sites like Facebook, Instagram, and X.The social commerce experience includes marketing, browsing, shopping, and completing purchases.Retweets, likes, and shares measure the success of social commerce campaigns.Social commerce also seeks to engage online shoppers by offering expert product advice and support.Social commerce is distinct from e-commerce, which allows consumers to make purchases on dedicated e-commerce websites and apps. How Social Commerce Works As noted above, social commerce involves selling products and services over social media. It encourages social shopping tools, such as forums and communities, where buyers and sellers discuss their online shopping experiences and compare notes. It is an evolving field of online marketing that works in conjunction with social media and online shopping growth. Fashion and shopping-related blogs use social commerce and media to entice shoppers to purchase linked items online. Social commerce professionals create and post messages and interactive features that promote online sales and other e-commerce initiatives. Some of the marketing tactics social commerce employs include: Inviting users to vote on product style or choices Offering personalized buyer options Applying large and striking graphics to attract viewer clicks Using videos to show the product in use and from multiple angles Encouraging user-submitted photos, commentary, and feedback Using celebrity endorsements of the product line Linking directly to the checkout or shopping cart Offering promotions or giveaways to users who share the product on their feeds Many popular fashion blogs have Instagram accounts that allow followers to like, share, and comment on the offered product. The tagged article frequently links directly to the store's shopping cart or check-out desk. Consumer interactions (likes, retweets, and shares) determine the success of a social commerce campaign—the more they receive, the more successful they tend to be. The popularity of social networks such as Facebook and Instagram allows vendors to showcase their products and quickly respond to follow buyer-led trends and fads. History of Social Commerce In the article "Social Commerce: A New Electronic Commerce," Yao Zhong said the concept of consumer marketing promotions online first appeared on the internet in November 2005 in Yahoo! The site promoted their Shoposphere pick lists, which highlighted the most popular products. The notion of social commerce developed further to engage online shoppers by offering reliable advice and support from online experts regarding their purchases. Marketing blogger Jeff Bullas identifies the following four brands as being among the best in the business: Nordstrom, which pins a popular Pinterest label on store items that trend online Coca-Cola, which personalized its labels on bottles in stores and then invited social media users to post photos of their name-branded soda with the hashtag #ShareACoke Lolly Wolly Doodle, a fashion brand that allows followers to design and order their own clothes right on its Facebook page Starbucks, which awards bonus points to customers who unlock Mayor badges on Foursquare Don't confuse social commerce with social shopping. While social commerce collaborates with online vendors, social shopping is a collaboration of online shoppers who network together. Social Commerce vs. E-Commerce Don't confuse social commerce with e-commerce or online shopping. Although there may be some similarities between the two, they are inherently different. As noted above, social commerce is a form of e-commerce that takes place on social media sites. As such, the experience takes place directly and entirely over social media. Online shopping, on the other hand, is a way for people to shop through sites and apps that are devoted entirely to a shopping experience without the social media aspect. For instance, people can make purchases for products and services on dedicated e-commerce sites like Amazon and Alibaba. Or consumers can make purchases directly from the websites of retailers, such as Walmart and Target. How Does Social Commerce Work? Social commerce is a shopping experience that takes place over social media. Companies can market their products and services while consumers can complete purchases entirely over social networking sites like Facebook, Instagram, and X. Social commerce also allows consumers to get support and advice from experts. What's the Difference Between Social Commerce and Online Shopping? Although they may seem similar, social commerce and online shopping are two different ideas. While social commerce provides consumers with the entire shopping experience through social media and networking sites, online shopping is done entirely on websites and apps devoted entirely to e-commerce. This includes sites like Amazon and Alibaba, as well as those of individual retailers like Walmart and Target. Which Social Media Sites Boast the Highest Rate of Social Commerce? Market research shows that Facebook is the dominant force in social commerce, reaching as many as 63.5 million social buyers in 2022. This figure is expected to increase to 71.1 million by 2026. The Bottom Line Social media allows you to connect, network, and share posts, photos, videos, and experiences. But now, they offer more than just a personal experience. Many social networking sites are now hubs for social commerce. This form of e-commerce allows you to connect with companies and marketers for a complete shopping experience. You can browse and complete purchases for goods and services with the click of a button—all without even leaving your favorite social media site.

https://www.investopedia.com/the-express-podcast-episode-159-8367507

Redefining Retirement as Peak 65 Approaches

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block megaphone" id="mntl-sc-block_1-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://playlist.megaphone.fm/?e=MERE5736157856" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Redefining Retirement as Peak 65 Approaches"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> <strong>Subscribe Now</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197" rel="nofollow">Apple Podcasts</a> / <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9" rel="nofollow">Spotify</a> / <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver">Google Podcasts</a> / <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://player.fm/series/2836180">PlayerFM</a> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://investors.principal.com/investor-relations/our-business/leadership/senior-management-bios/default.aspx" rel="nofollow">Dan Houston</a>, President and CEO of the Principal Financial Group, joins <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-investopedia-express-podcast-5215636">The Express</a> to talk about how we need to rethink, redefine and reeducate ourselves about retirement given rising costs, longer lifespans and a lack of financial education. Plus, the 10-year U.S. Treasury yield <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investors-forced-to-recalibrate-as-10-year-treasury-yields-flirts-with-5-percent-8364526">topped 5% last week</a> for the first time since 2007. That's adding pressure across the capital markets and changing the long-term investing equation for generations of investors. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

**Subscribe Now**: [Apple Podcasts](https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197) / [Spotify](https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9) / [Google Podcasts](https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver) / [PlayerFM](https://player.fm/series/2836180) [Dan Houston](https://investors.principal.com/investor-relations/our-business/leadership/senior-management-bios/default.aspx), President and CEO of the Principal Financial Group, joins [The Express](https://www.investopedia.com/the-investopedia-express-podcast-5215636) to talk about how we need to rethink, redefine and reeducate ourselves about retirement given rising costs, longer lifespans and a lack of financial education. Plus, the 10-year U.S. Treasury yield [topped 5% last week](https://www.investopedia.com/investors-forced-to-recalibrate-as-10-year-treasury-yields-flirts-with-5-percent-8364526) for the first time since 2007. That's adding pressure across the capital markets and changing the long-term investing equation for generations of investors. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Subscribe Now: Apple Podcasts / Spotify / Google Podcasts / PlayerFM Dan Houston, President and CEO of the Principal Financial Group, joins The Express to talk about how we need to rethink, redefine and reeducate ourselves about retirement given rising costs, longer lifespans and a lack of financial education. Plus, the 10-year U.S. Treasury yield topped 5% last week for the first time since 2007. That's adding pressure across the capital markets and changing the long-term investing equation for generations of investors. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/e/enhanced_index_fund.asp

Enhanced Index Fund (Eif): What It Is, How It Works

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-an-enhanced-index-fund-eif"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is an Enhanced Index Fund (EIF)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An enhanced index fund is a fund that seeks to enhance the returns of an index by using active management to modify the weights of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/holdings.asp">holdings</a> for additional return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <span class="heading-toc" id="toc-understanding-enhanced-index-funds-eif"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Understanding Enhanced Index Funds (EIF) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Enhanced index funds are constrained to investing in securities from the index they are benchmarking. These strategies can deploy various types of investment analysis. They may utilize qualitative and quantitative methodologies to identify and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overweight.asp">overweight</a> top-performing stocks. In some cases, they may also use leverage and derivatives to enhance returns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <span class="heading-toc" id="toc-enhanced-index-fund-strategies"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Enhanced Index Fund Strategies </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Enhanced index funds can be benchmarked to any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/index.asp">index</a> in the world. They begin with the benchmark index as a basis for investment. Through qualitative and quantitative analysis, portfolio managers seek to identify top performing stocks, which then receive greater weight in the portfolio. Some funds may use leverage and derivatives, allowing the funds to increase the weights of stocks they choose to buy and decrease the weights of stocks they choose to sell. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> With leverage, funds can take deeper long positions in stocks they favor. Leverage and derivatives also allow the fund manager to short stocks they believe will trend lower. Fund managers may also take no position in a stock, giving it a weighting of 0% in the portfolio. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Theoretically, the ability to take both long and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/short.asp">short positions</a> should help a fund to generate additional <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alpha.asp">alpha</a> from potential stock gains and losses. However, the use of leverage and derivatives can add additional costs and increase the potential for losses. Therefore most enhanced index funds rely on active management methodologies built around a specific index universe without the use of alternative investing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-enhanced-index-fund-investments"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Enhanced Index Fund Investments </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> While enhanced index funds use the same index universe for investment as passive funds, their investing characteristics will be very different. Enhanced index funds typically have higher management fees and higher transaction costs than comparable index funds. Risks can also be higher depending on leverage and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> used. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Investors will find enhanced index fund offerings from investment managers across the industry, with most of the largest asset managers offering a broad range of enhanced index fund products. The Fidelity Large Cap Value Enhanced Index Fund provides one example. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-the-fidelity-large-cap-value-enhanced-index-fund"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> The Fidelity Large Cap Value Enhanced Index Fund </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The Fidelity Large Cap Value Enhanced Index Fund seeks to enhance the return of the Russell 1000 Value Index. The Fund uses quantitative fundamental analysis in its investment decisions, investing at least 80% of assets in Russell 1000 Value stocks. The Fund does not substantially rely on leverage or derivatives in its management strategy. The Fund has steadily outperformed the Russell 1000 Value since inception with a return of 7.08% versus 6.85% for the Index.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span> </p></div>

## What Is an Enhanced Index Fund (EIF)? An enhanced index fund is a fund that seeks to enhance the returns of an index by using active management to modify the weights of [holdings](https://www.investopedia.com/terms/h/holdings.asp) for additional return. ## Understanding Enhanced Index Funds (EIF) Enhanced index funds are constrained to investing in securities from the index they are benchmarking. These strategies can deploy various types of investment analysis. They may utilize qualitative and quantitative methodologies to identify and [overweight](https://www.investopedia.com/terms/o/overweight.asp) top-performing stocks. In some cases, they may also use leverage and derivatives to enhance returns. ## Enhanced Index Fund Strategies Enhanced index funds can be benchmarked to any [index](https://www.investopedia.com/terms/i/index.asp) in the world. They begin with the benchmark index as a basis for investment. Through qualitative and quantitative analysis, portfolio managers seek to identify top performing stocks, which then receive greater weight in the portfolio. Some funds may use leverage and derivatives, allowing the funds to increase the weights of stocks they choose to buy and decrease the weights of stocks they choose to sell. With leverage, funds can take deeper long positions in stocks they favor. Leverage and derivatives also allow the fund manager to short stocks they believe will trend lower. Fund managers may also take no position in a stock, giving it a weighting of 0% in the portfolio. Theoretically, the ability to take both long and [short positions](https://www.investopedia.com/terms/s/short.asp) should help a fund to generate additional [alpha](https://www.investopedia.com/terms/a/alpha.asp) from potential stock gains and losses. However, the use of leverage and derivatives can add additional costs and increase the potential for losses. Therefore most enhanced index funds rely on active management methodologies built around a specific index universe without the use of alternative investing. ## Enhanced Index Fund Investments While enhanced index funds use the same index universe for investment as passive funds, their investing characteristics will be very different. Enhanced index funds typically have higher management fees and higher transaction costs than comparable index funds. Risks can also be higher depending on leverage and [derivatives](https://www.investopedia.com/terms/d/derivative.asp) used. Investors will find enhanced index fund offerings from investment managers across the industry, with most of the largest asset managers offering a broad range of enhanced index fund products. The Fidelity Large Cap Value Enhanced Index Fund provides one example. ## The Fidelity Large Cap Value Enhanced Index Fund The Fidelity Large Cap Value Enhanced Index Fund seeks to enhance the return of the Russell 1000 Value Index. The Fund uses quantitative fundamental analysis in its investment decisions, investing at least 80% of assets in Russell 1000 Value stocks. The Fund does not substantially rely on leverage or derivatives in its management strategy. The Fund has steadily outperformed the Russell 1000 Value since inception with a return of 7.08% versus 6.85% for the Index.

What Is an Enhanced Index Fund (EIF)? An enhanced index fund is a fund that seeks to enhance the returns of an index by using active management to modify the weights of holdings for additional return. Understanding Enhanced Index Funds (EIF) Enhanced index funds are constrained to investing in securities from the index they are benchmarking. These strategies can deploy various types of investment analysis. They may utilize qualitative and quantitative methodologies to identify and overweight top-performing stocks. In some cases, they may also use leverage and derivatives to enhance returns. Enhanced Index Fund Strategies Enhanced index funds can be benchmarked to any index in the world. They begin with the benchmark index as a basis for investment. Through qualitative and quantitative analysis, portfolio managers seek to identify top performing stocks, which then receive greater weight in the portfolio. Some funds may use leverage and derivatives, allowing the funds to increase the weights of stocks they choose to buy and decrease the weights of stocks they choose to sell. With leverage, funds can take deeper long positions in stocks they favor. Leverage and derivatives also allow the fund manager to short stocks they believe will trend lower. Fund managers may also take no position in a stock, giving it a weighting of 0% in the portfolio. Theoretically, the ability to take both long and short positions should help a fund to generate additional alpha from potential stock gains and losses. However, the use of leverage and derivatives can add additional costs and increase the potential for losses. Therefore most enhanced index funds rely on active management methodologies built around a specific index universe without the use of alternative investing. Enhanced Index Fund Investments While enhanced index funds use the same index universe for investment as passive funds, their investing characteristics will be very different. Enhanced index funds typically have higher management fees and higher transaction costs than comparable index funds. Risks can also be higher depending on leverage and derivatives used. Investors will find enhanced index fund offerings from investment managers across the industry, with most of the largest asset managers offering a broad range of enhanced index fund products. The Fidelity Large Cap Value Enhanced Index Fund provides one example. The Fidelity Large Cap Value Enhanced Index Fund The Fidelity Large Cap Value Enhanced Index Fund seeks to enhance the return of the Russell 1000 Value Index. The Fund uses quantitative fundamental analysis in its investment decisions, investing at least 80% of assets in Russell 1000 Value stocks. The Fund does not substantially rely on leverage or derivatives in its management strategy. The Fund has steadily outperformed the Russell 1000 Value since inception with a return of 7.08% versus 6.85% for the Index.

https://www.investopedia.com/articles/mortgages-real-estate/09/new-homeowner-tips.asp

7 Smart Steps Every New Homeowner Should Take

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Few things are more exciting than leaping from being a renter to being a first-time <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/updates/first-time-home-buyer/" rel="noopener noreferrer">homeowner</a>. Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn. Following a series of practical steps early in the homeowning experience can save new owners time, money, and effort later down the road. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Following a plan for affording your first home can save you time, money, and effort down the road.</li><li>A home inspection is a critical part of buying your first house.</li><li>The price of a new house isn't just the home itself. When you buy a home, you will have to pay closing costs, moving expenses, and fees.</li><li>Owning a home comes with a host of expenses you may not have paid for as a renter.  </li><li>Your taxes will change when you purchase your first home. It is essential to learn the tax laws for homeowners or, better yet, hire an accountant who does.</li></ul></div></div></div> <span class="heading-toc" id="toc-dont-overspend-to-personalize"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> Don't Overspend to Personalize </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> You've just handed over a large portion of your life savings for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/down_payment.asp" rel="noopener noreferrer">down payment</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/closingcosts.asp" rel="noopener noreferrer">closing costs</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/movingexpenses.asp" rel="noopener noreferrer">moving expenses</a>. Money is tight for most first-time homeowners. Not only are their savings depleted, but their monthly expenses are also often higher as well, thanks to the new costs that come with homeownership, such as water and trash bills and extra <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance.asp" rel="noopener noreferrer">insurance</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as crucial as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Give yourself time to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/to-rent-or-buy-the-financial-issues/" rel="noopener noreferrer">adjust to homeownership's expenses</a> and rebuild your savings—the cabinets will still be waiting for you when you can more comfortably afford them. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <span class="heading-toc" id="toc-dont-ignore-important-maintenance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-heading__text"> Don't Ignore Important Maintenance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> One of the new expenses that accompany homeownership is making repairs. There's no landlord to call if your roof is leaking or your toilet is clogged. To look at the positive side, there's also no rent increase notice taped to your door on a random Friday afternoon. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could worsen over time. Delay can turn a relatively small problem into a much larger and costlier one. One way to protect yourself against potential maintenance issues is to have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mortgages-real-estate/08/home-inspection.asp" rel="noopener noreferrer">potential home inspected</a> before buying it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-hire-qualified-contractors"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> Hire Qualified Contractors </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Don't try to save money by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mortgages-real-estate/08/diy-home-projects.asp" rel="noopener noreferrer">making improvements and repairs </a>you aren't qualified to make. This may seem to contradict the first point slightly, but it doesn't. Your home is both the place where you live and an investment. It deserves the same level of care and attention you would give to anything else you value highly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric opener in your garage, don't cut a hole in the wall and start playing with copper wiring. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring—or even killing—yourself. Also, be sure to check with the local building authority and pull any necessary permits to complete the work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <span class="heading-toc" id="toc-get-help-with-your-tax-return"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-heading__text"> Get Help With Your Tax Return </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Even if you hate the thought of spending money on an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountant.asp" rel="noopener noreferrer">accountant</a> when you usually do your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mortgages-real-estate/08/diy-home-projects.asp" rel="noopener noreferrer">tax returns </a>yourself, it can pay off. And even if you are feeling broke from buying that house, don't scrimp on tax preparation. Hiring an accountant to ensure you complete your return correctly and maximize your refund is a good idea. Homeownership significantly changes most people's tax situations and the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deduction.asp" rel="noopener noreferrer">deductions</a> they are eligible to claim. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_25-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_26-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Just getting your taxes done by a professional for one year can give you a template to use in future years if you want to continue doing your taxes yourself.</p></div></div></div> <span class="heading-toc" id="toc-keep-receipts-for-improvements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-heading__text"> Keep Receipts for Improvements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> When you sell your home, you can use these costs to increase your home's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/basis.asp" rel="noopener noreferrer">basis</a>, which can help you maximize your tax-free earnings on your home's sale. In 2008, you could have earned up to $250,000 tax-free from the sale of your home if it was your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/principalresidence.asp" rel="noopener noreferrer">primary residence</a> and you had lived there for at least two of five years before you sold it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> This deduction assumes that you owned the home alone—if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Let's say you purchased your home for $150,000 and were able to sell it for $450,000. You've also made $20,000 in home improvements over the years you've lived in the home. If you haven't saved your receipts, your basis in the house, or the amount you originally paid for your investment, it is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxableincome.asp" rel="noopener noreferrer">taxable income</a> on the sale of your home. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> However, if you saved all $20,000 of your receipts, your basis would be $170,000, and you would only pay taxes on $30,000. That's a considerable saving. In this case, it would be $5,000 if your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marginaltaxrate.asp" rel="noopener noreferrer">marginal tax rate</a> is 25%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <span class="heading-toc" id="toc-repairs-vs-improvements"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-heading__text"> Repairs vs. Improvements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Unfortunately, not all home expenses are treated equally to determine your home's basis. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp" rel="noopener noreferrer">IRS</a> considers repairs to be part and parcel of homeownership, which preserves the home's original value but does not enhance its value. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> This may not always seem true. For example, if you bought a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreclosure.asp" rel="noopener noreferrer">foreclosure</a> and had to fix a lot of broken stuff, the home is worth more after you fix those items, but the IRS doesn't care—you did get a discount on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/purchaseprice.asp" rel="noopener noreferrer">purchase price</a> because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> For gray areas (like remodeling your bathroom because you had to bust open the wall to repair some old, failed plumbing), consult <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs-pub-530.asp" rel="noopener noreferrer">IRS Publication 530</a> or your accountant. And on a non-tax-related note, don't trick yourself into thinking it's OK to spend money on something because it's a necessary "repair" when in truth, it's a fun improvement. That isn't good for your finances. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-get-properly-insured"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> Get Properly Insured </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp" rel="noopener noreferrer">mortgage</a> lender requires you not only to purchase <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/homeowners-insurance.asp" rel="noopener noreferrer">homeowners insurance</a> but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance-coverage.asp" rel="noopener noreferrer">insurance coverage</a> you need as a homeowner. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> If you share your home with anyone who relies on your income to pay the mortgage, you'll need <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lifeinsurance.asp" rel="noopener noreferrer">life insurance</a> with that person named as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/beneficiary.asp" rel="noopener noreferrer">beneficiary</a> so that they won't lose the house if you die unexpectedly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Similarly, you'll want to have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diinsurance.asp" rel="noopener noreferrer">disability-income insurance</a> to replace your income if you become so disabled that you can't work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Also, once you own a home, you have more to lose in the event of a lawsuit, so you'll want to make sure you have excellent car insurance coverage. If you are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/self-employed.asp" rel="noopener noreferrer">self-employed</a> as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soleproprietorship.asp" rel="noopener noreferrer">sole proprietor</a>, you may want to consider forming a corporation, which will give you significant legal protection of your assets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> You may also want to purchase an umbrella policy that picks up where your other policies leave off. If you are found at fault in a car accident with a judgment of $1 million against you and your car insurance only covers the first $250,000, an umbrella policy can pick up the rest of the slack. These policies are usually issued in units of $1 million. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> With the great freedom of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/05/011305.asp" rel="noopener noreferrer">owning your own home</a> comes significant responsibilities. It would help if you managed your finances well enough to keep the house and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security. </p></div>

Few things are more exciting than leaping from being a renter to being a first-time [homeowner](https://www.investopedia.com/updates/first-time-home-buyer/). Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn. Following a series of practical steps early in the homeowning experience can save new owners time, money, and effort later down the road. ### Key Takeaways * Following a plan for affording your first home can save you time, money, and effort down the road. * A home inspection is a critical part of buying your first house. * The price of a new house isn't just the home itself. When you buy a home, you will have to pay closing costs, moving expenses, and fees. * Owning a home comes with a host of expenses you may not have paid for as a renter. * Your taxes will change when you purchase your first home. It is essential to learn the tax laws for homeowners or, better yet, hire an accountant who does. ## Don't Overspend to Personalize You've just handed over a large portion of your life savings for a [down payment](https://www.investopedia.com/terms/d/down_payment.asp), [closing costs](https://www.investopedia.com/terms/c/closingcosts.asp), and [moving expenses](https://www.investopedia.com/terms/m/movingexpenses.asp). Money is tight for most first-time homeowners. Not only are their savings depleted, but their monthly expenses are also often higher as well, thanks to the new costs that come with homeownership, such as water and trash bills and extra [insurance](https://www.investopedia.com/terms/i/insurance.asp). Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as crucial as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. Give yourself time to [adjust to homeownership's expenses](https://www.investopedia.com/investing/to-rent-or-buy-the-financial-issues/) and rebuild your savings—the cabinets will still be waiting for you when you can more comfortably afford them. ## Don't Ignore Important Maintenance One of the new expenses that accompany homeownership is making repairs. There's no landlord to call if your roof is leaking or your toilet is clogged. To look at the positive side, there's also no rent increase notice taped to your door on a random Friday afternoon. While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could worsen over time. Delay can turn a relatively small problem into a much larger and costlier one. One way to protect yourself against potential maintenance issues is to have a [potential home inspected](https://www.investopedia.com/articles/mortgages-real-estate/08/home-inspection.asp) before buying it. ## Hire Qualified Contractors Don't try to save money by [making improvements and repairs](https://www.investopedia.com/articles/mortgages-real-estate/08/diy-home-projects.asp) you aren't qualified to make. This may seem to contradict the first point slightly, but it doesn't. Your home is both the place where you live and an investment. It deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric opener in your garage, don't cut a hole in the wall and start playing with copper wiring. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring—or even killing—yourself. Also, be sure to check with the local building authority and pull any necessary permits to complete the work. ## Get Help With Your Tax Return Even if you hate the thought of spending money on an [accountant](https://www.investopedia.com/terms/a/accountant.asp) when you usually do your [tax returns](https://www.investopedia.com/articles/mortgages-real-estate/08/diy-home-projects.asp) yourself, it can pay off. And even if you are feeling broke from buying that house, don't scrimp on tax preparation. Hiring an accountant to ensure you complete your return correctly and maximize your refund is a good idea. Homeownership significantly changes most people's tax situations and the [deductions](https://www.investopedia.com/terms/d/deduction.asp) they are eligible to claim. ### Just getting your taxes done by a professional for one year can give you a template to use in future years if you want to continue doing your taxes yourself. ## Keep Receipts for Improvements When you sell your home, you can use these costs to increase your home's [basis](https://www.investopedia.com/terms/b/basis.asp), which can help you maximize your tax-free earnings on your home's sale. In 2008, you could have earned up to $250,000 tax-free from the sale of your home if it was your [primary residence](https://www.investopedia.com/terms/p/principalresidence.asp) and you had lived there for at least two of five years before you sold it. This deduction assumes that you owned the home alone—if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption. Let's say you purchased your home for $150,000 and were able to sell it for $450,000. You've also made $20,000 in home improvements over the years you've lived in the home. If you haven't saved your receipts, your basis in the house, or the amount you originally paid for your investment, it is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of [taxable income](https://www.investopedia.com/terms/t/taxableincome.asp) on the sale of your home. However, if you saved all $20,000 of your receipts, your basis would be $170,000, and you would only pay taxes on $30,000. That's a considerable saving. In this case, it would be $5,000 if your [marginal tax rate](https://www.investopedia.com/terms/m/marginaltaxrate.asp) is 25%. ## Repairs vs. Improvements Unfortunately, not all home expenses are treated equally to determine your home's basis. The [IRS](https://www.investopedia.com/terms/i/irs.asp) considers repairs to be part and parcel of homeownership, which preserves the home's original value but does not enhance its value. This may not always seem true. For example, if you bought a [foreclosure](https://www.investopedia.com/terms/f/foreclosure.asp) and had to fix a lot of broken stuff, the home is worth more after you fix those items, but the IRS doesn't care—you did get a discount on the [purchase price](https://www.investopedia.com/terms/p/purchaseprice.asp) because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home. For gray areas (like remodeling your bathroom because you had to bust open the wall to repair some old, failed plumbing), consult [IRS Publication 530](https://www.investopedia.com/terms/i/irs-pub-530.asp) or your accountant. And on a non-tax-related note, don't trick yourself into thinking it's OK to spend money on something because it's a necessary "repair" when in truth, it's a fun improvement. That isn't good for your finances. ## Get Properly Insured Your [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) lender requires you not only to purchase [homeowners insurance](https://www.investopedia.com/terms/h/homeowners-insurance.asp) but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only [insurance coverage](https://www.investopedia.com/terms/i/insurance-coverage.asp) you need as a homeowner. If you share your home with anyone who relies on your income to pay the mortgage, you'll need [life insurance](https://www.investopedia.com/terms/l/lifeinsurance.asp) with that person named as a [beneficiary](https://www.investopedia.com/terms/b/beneficiary.asp) so that they won't lose the house if you die unexpectedly. Similarly, you'll want to have [disability-income insurance](https://www.investopedia.com/terms/d/diinsurance.asp) to replace your income if you become so disabled that you can't work. Also, once you own a home, you have more to lose in the event of a lawsuit, so you'll want to make sure you have excellent car insurance coverage. If you are [self-employed](https://www.investopedia.com/terms/s/self-employed.asp) as a [sole proprietor](https://www.investopedia.com/terms/s/soleproprietorship.asp), you may want to consider forming a corporation, which will give you significant legal protection of your assets. You may also want to purchase an umbrella policy that picks up where your other policies leave off. If you are found at fault in a car accident with a judgment of $1 million against you and your car insurance only covers the first $250,000, an umbrella policy can pick up the rest of the slack. These policies are usually issued in units of $1 million. ## The Bottom Line With the great freedom of [owning your own home](https://www.investopedia.com/articles/05/011305.asp) comes significant responsibilities. It would help if you managed your finances well enough to keep the house and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.

Few things are more exciting than leaping from being a renter to being a first-time homeowner. Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn. Following a series of practical steps early in the homeowning experience can save new owners time, money, and effort later down the road. Key Takeaways Following a plan for affording your first home can save you time, money, and effort down the road.A home inspection is a critical part of buying your first house.The price of a new house isn't just the home itself. When you buy a home, you will have to pay closing costs, moving expenses, and fees.Owning a home comes with a host of expenses you may not have paid for as a renter.  Your taxes will change when you purchase your first home. It is essential to learn the tax laws for homeowners or, better yet, hire an accountant who does. Don't Overspend to Personalize You've just handed over a large portion of your life savings for a down payment, closing costs, and moving expenses. Money is tight for most first-time homeowners. Not only are their savings depleted, but their monthly expenses are also often higher as well, thanks to the new costs that come with homeownership, such as water and trash bills and extra insurance. Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as crucial as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. Give yourself time to adjust to homeownership's expenses and rebuild your savings—the cabinets will still be waiting for you when you can more comfortably afford them. Don't Ignore Important Maintenance One of the new expenses that accompany homeownership is making repairs. There's no landlord to call if your roof is leaking or your toilet is clogged. To look at the positive side, there's also no rent increase notice taped to your door on a random Friday afternoon. While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could worsen over time. Delay can turn a relatively small problem into a much larger and costlier one. One way to protect yourself against potential maintenance issues is to have a potential home inspected before buying it. Hire Qualified Contractors Don't try to save money by making improvements and repairs you aren't qualified to make. This may seem to contradict the first point slightly, but it doesn't. Your home is both the place where you live and an investment. It deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric opener in your garage, don't cut a hole in the wall and start playing with copper wiring. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring—or even killing—yourself. Also, be sure to check with the local building authority and pull any necessary permits to complete the work. Get Help With Your Tax Return Even if you hate the thought of spending money on an accountant when you usually do your tax returns yourself, it can pay off. And even if you are feeling broke from buying that house, don't scrimp on tax preparation. Hiring an accountant to ensure you complete your return correctly and maximize your refund is a good idea. Homeownership significantly changes most people's tax situations and the deductions they are eligible to claim. Just getting your taxes done by a professional for one year can give you a template to use in future years if you want to continue doing your taxes yourself. Keep Receipts for Improvements When you sell your home, you can use these costs to increase your home's basis, which can help you maximize your tax-free earnings on your home's sale. In 2008, you could have earned up to $250,000 tax-free from the sale of your home if it was your primary residence and you had lived there for at least two of five years before you sold it. This deduction assumes that you owned the home alone—if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption. Let's say you purchased your home for $150,000 and were able to sell it for $450,000. You've also made $20,000 in home improvements over the years you've lived in the home. If you haven't saved your receipts, your basis in the house, or the amount you originally paid for your investment, it is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of taxable income on the sale of your home. However, if you saved all $20,000 of your receipts, your basis would be $170,000, and you would only pay taxes on $30,000. That's a considerable saving. In this case, it would be $5,000 if your marginal tax rate is 25%. Repairs vs. Improvements Unfortunately, not all home expenses are treated equally to determine your home's basis. The IRS considers repairs to be part and parcel of homeownership, which preserves the home's original value but does not enhance its value. This may not always seem true. For example, if you bought a foreclosure and had to fix a lot of broken stuff, the home is worth more after you fix those items, but the IRS doesn't care—you did get a discount on the purchase price because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home. For gray areas (like remodeling your bathroom because you had to bust open the wall to repair some old, failed plumbing), consult IRS Publication 530 or your accountant. And on a non-tax-related note, don't trick yourself into thinking it's OK to spend money on something because it's a necessary "repair" when in truth, it's a fun improvement. That isn't good for your finances. Get Properly Insured Your mortgage lender requires you not only to purchase homeowners insurance but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to pay the mortgage, you'll need life insurance with that person named as a beneficiary so that they won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work. Also, once you own a home, you have more to lose in the event of a lawsuit, so you'll want to make sure you have excellent car insurance coverage. If you are self-employed as a sole proprietor, you may want to consider forming a corporation, which will give you significant legal protection of your assets. You may also want to purchase an umbrella policy that picks up where your other policies leave off. If you are found at fault in a car accident with a judgment of $1 million against you and your car insurance only covers the first $250,000, an umbrella policy can pick up the rest of the slack. These policies are usually issued in units of $1 million. The Bottom Line With the great freedom of owning your own home comes significant responsibilities. It would help if you managed your finances well enough to keep the house and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.

https://www.investopedia.com/us-economy-news-today-may-2-8642297

US Economy News Today: Mortgage Rates Climb During Spring Busy Season

<div class="loc article-content"><div class="comp article__primary-video-container--jw mntl-block" id="article__primary-video-container--jw_1-0"></div> <div class="comp liveblog mntl-block" id="liveblog_1-0"><div class="comp mntl-block article-content__description" id="mntl-block_12-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Today, we got a broad picture of the labor market ahead of tomorrow's employment report and mortgage rates rose. </p></div> <div class="comp liveblog__content mntl-sc-page mntl-block" data-bind-scroll-on-start="true" data-rail-bp="mntl-bp-md" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[1, 3, 6, 9, 12, 15, 18]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="liveblog__content_1-0"><div class="comp finance-liveblog-content mntl-liveblog-content mntl-block" id="finance-liveblog-content_1-0"><div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_1-0"><span class="heading-toc" id="toc-2024-05-02t165059343z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_1-0"><p><strong>Mortgage Rates Continue to Climb Through Busy Home Buying Season</strong><br/></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_1-0">May 02, 2024 12:50 PM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-may-2-8642297#toc-2024-05-02t165059343z" id="mntl-blogpost__copylink_1-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Mortgage rates moved higher for the fifth straight week, coming in the middle of an important buying season for the housing market. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> According to data from Freddie Mac, the 30-year, fixed-rate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage</a> moved up to 7.22%.<span class="ql-inline-citation" data-cite="4"></span> The rise in home borrowing costs comes amid the spring homebuying season, the period between March and June when more than one-third of home sales occur, said Sam Khater, Freddie Mac's chief economist. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> “With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon,” Khater said.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-rates-5184598">Mortgage rates</a> have been <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-25-8638778#toc-2024-04-25t171710557z">on the rise</a> in 2024. While there has been some evidence that the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-may-1-8641676#toc-2024-05-01t124601818z">higher rates are hurting demand</a> in the mortgage industry, there is evidence that some <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-buyers-resigning-themselves-to-high-interest-rates-survey-says-8628562">homebuyers are adjusting their expectations</a> amid the higher borrowing costs.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> “Many seem to have acclimated to these higher rates, as demonstrated by the recently released pending home sales data coming in at the highest level in a year,” Khater said.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> <em>-Terry Lane</em><br/> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="1" id="mntl-sc-block-adslot_1-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_2-0"><span class="heading-toc" id="toc-2024-05-02t151005592z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_2-0"><p><strong>Surge in Aircraft Sales Moves Factory Orders Higher</strong><br/></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_2-0">May 02, 2024 11:10 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-may-2-8642297#toc-2024-05-02t151005592z" id="mntl-blogpost__copylink_2-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Factory orders moved higher for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-2-8623466#toc-2024-04-02t145636858z">second consecutive month</a> in March on a jump in transportation equipment. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Manufacturers reported a $9.1 billion increase in new orders, a 1.6% move up from February’s orders, according to Census Bureau data.<span class="ql-inline-citation" data-cite="3"></span> Factory orders were just below the projections from economists surveyed by the <em>Wall Street Journal</em> and Dow Jones Newswire. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Orders for transportation equipment, primarily reflecting aircraft, jumped in March by 7.8%. The data also showed another month of increased orders for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/durable-goods-orders.asp">durable goods</a>, which includes expensive and long-lasting items that can show whether companies are investing in future growth.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Shipments of goods declined by 0.1%, marking the third time in four months that shipments have moved lower.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <em>-Terry Lane</em><br/> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="2" id="mntl-sc-block-adslot_2-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_3-0"><span class="heading-toc" id="toc-2024-05-02t144915572z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_3-0"><p><strong>Trade Deficit Narrows as Crude Oil Exports Grow</strong><br/></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_3-0">May 02, 2024 10:49 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-may-2-8642297#toc-2024-05-02t144915572z" id="mntl-blogpost__copylink_3-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/trade-deficit-effects-on-stock-market/">trade deficit</a> narrowed slightly in March after <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-4-8624645#toc-2024-04-04t142503190z">growing in February</a>, as both imports and exports moved lower despite crude oil shipments growing. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The goods and services deficit came in at $69.4 billion in March, a 0.1% drop from the previous month, and slightly lower than economists expected. While experts fell by 2.0%, imports were lower by 1.6%.<span class="ql-inline-citation" data-cite="2"></span> </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> For the first three months of 2024, the trade deficit has increased by 3.2% when compared with the same period last year.  The data showed that an increase in crude oil led to U.S. export gains. Additionally, wheat exports also moved higher, while exports of soybeans and corn moved lower.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> China continued to be the largest exporter to the U.S., though the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp">trade deficit</a> between the two countries narrowed in March.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <em>-Terry Lane</em><br/> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="3" id="mntl-sc-block-adslot_3-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_4-0"><span class="heading-toc" id="toc-2024-05-02t140040113z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_4-0"><p><strong>Productivity Growth Slows in First Quarter</strong><br/></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_4-0">May 02, 2024 10:00 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-may-2-8642297#toc-2024-05-02t140040113z" id="mntl-blogpost__copylink_4-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/labor-productivity.asp">Labor productivity</a> growth slowed in the first quarter, as the increase in output from workers was lower than the jump seen last quarter.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Data from the U.S. Bureau of Labor Statistics showed that productivity in the first three months of the year was 0.3% higher than the previous quarter and 2.9% higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/year-over-year.asp">year-over-year</a>.  That’s a drop from last quarter when labor productivity was 3.5% higher in the 2023 fourth quarter than the previous quarter.   </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The data showed that hours worked and output both increased in the first quarter. While business labor productivity was higher by 2.8% than a year ago, manufacturing labor productivity rose a more modest 1.2% over the same period. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <em>-Terry Lane</em><br/> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="4" id="mntl-sc-block-adslot_4-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_5-0"><span class="heading-toc" id="toc-2024-05-02t131746589z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_5-0"><p><strong>Companies Announced Fewer Job Cuts In April</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_5-0">May 02, 2024 09:17 AM EDT</div> <button aria-label="Copy Link" class="comp mntl-blogpost__copylink mntl-copy-link-button mntl-button" data-link="https://www.investopedia.com/us-economy-news-today-may-2-8642297#toc-2024-05-02t131746589z" id="mntl-blogpost__copylink_5-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The job market is in a weird place—companies are hiring fewer people, but layoffs are staying low too.<br/><br/>That impression, created by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-job-market-is-getting-stuck-hiring-firing-and-quitting-all-fell-in-march-8641816">official government reports</a>, was reinforced Thursday by a count of announced job cuts by U.S. firms compiled by consulting firm Challenger, Gray &amp; Christmas, which showed there were 64,789 announced job cuts in April, 28% fewer than in March and down 3.3% from April 2023.<span class="ql-inline-citation" data-cite="1"></span>  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Whether it will stay that way, or whether a wave of layoffs is coming is a matter of speculation by experts. The job market has so far remained resilient against the Federal Reserve’s campaign of anti-inflation interest rate hikes, which has driven up borrowing costs for all kinds of loans, making it harder for both employers and customers to borrow and spend. High interest rates, however, could eventually take a bite out of the labor market. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> “The labor market remains tight. But as labor costs continue to rise, companies will be slower to hire, and we expect further cuts will be needed. This low April figure may be the calm before the storm,” Andrew Challenger, senior vice president of Challenger, Gray &amp; Christmas, said in a press release.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> A few things other than broader economic forces are at work too. A Texas law banning Diversity, Equity, and Inclusion training at colleges was responsible for 80 job losses, and 800 job cuts were traced to artificial intelligence in the Challenger Report.<br> </br></p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="5" id="mntl-sc-block-adslot_5-0"></div></div></div></div> <div class="comp textnote-placeholder mntl-block" id="textnote-placeholder_1-0"></div> <div class="comp textnote mm-ads-gpt-adunit gpt textnote" id="textnote_1-0"> <div class="wrapper" id="textnote"></div> </div> </div>

Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. Today, we got a broad picture of the labor market ahead of tomorrow's employment report and mortgage rates rose. ## **Mortgage Rates Continue to Climb Through Busy Home Buying Season** May 02, 2024 12:50 PM EDT Mortgage rates moved higher for the fifth straight week, coming in the middle of an important buying season for the housing market. According to data from Freddie Mac, the 30-year, fixed-rate [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) moved up to 7.22%. The rise in home borrowing costs comes amid the spring homebuying season, the period between March and June when more than one-third of home sales occur, said Sam Khater, Freddie Mac's chief economist. “With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon,” Khater said.  [Mortgage rates](https://www.investopedia.com/mortgage-rates-5184598) have been [on the rise](https://www.investopedia.com/us-economy-news-today-april-25-8638778#toc-2024-04-25t171710557z) in 2024. While there has been some evidence that the [higher rates are hurting demand](https://www.investopedia.com/us-economy-news-today-may-1-8641676#toc-2024-05-01t124601818z) in the mortgage industry, there is evidence that some [homebuyers are adjusting their expectations](https://www.investopedia.com/home-buyers-resigning-themselves-to-high-interest-rates-survey-says-8628562) amid the higher borrowing costs.  “Many seem to have acclimated to these higher rates, as demonstrated by the recently released pending home sales data coming in at the highest level in a year,” Khater said.  *-Terry Lane* ## **Surge in Aircraft Sales Moves Factory Orders Higher** May 02, 2024 11:10 AM EDT Factory orders moved higher for the [second consecutive month](https://www.investopedia.com/us-economy-news-today-april-2-8623466#toc-2024-04-02t145636858z) in March on a jump in transportation equipment. Manufacturers reported a $9.1 billion increase in new orders, a 1.6% move up from February’s orders, according to Census Bureau data. Factory orders were just below the projections from economists surveyed by the *Wall Street Journal* and Dow Jones Newswire. Orders for transportation equipment, primarily reflecting aircraft, jumped in March by 7.8%. The data also showed another month of increased orders for [durable goods](https://www.investopedia.com/terms/d/durable-goods-orders.asp), which includes expensive and long-lasting items that can show whether companies are investing in future growth.  Shipments of goods declined by 0.1%, marking the third time in four months that shipments have moved lower.  *-Terry Lane* ## **Trade Deficit Narrows as Crude Oil Exports Grow** May 02, 2024 10:49 AM EDT The U.S. [trade deficit](https://www.investopedia.com/ask/answers/trade-deficit-effects-on-stock-market/) narrowed slightly in March after [growing in February](https://www.investopedia.com/us-economy-news-today-april-4-8624645#toc-2024-04-04t142503190z), as both imports and exports moved lower despite crude oil shipments growing. The goods and services deficit came in at $69.4 billion in March, a 0.1% drop from the previous month, and slightly lower than economists expected. While experts fell by 2.0%, imports were lower by 1.6%. For the first three months of 2024, the trade deficit has increased by 3.2% when compared with the same period last year.  The data showed that an increase in crude oil led to U.S. export gains. Additionally, wheat exports also moved higher, while exports of soybeans and corn moved lower.  China continued to be the largest exporter to the U.S., though the [trade deficit](https://www.investopedia.com/articles/investing/051515/pros-cons-trade-deficit.asp) between the two countries narrowed in March.  *-Terry Lane* ## **Productivity Growth Slows in First Quarter** May 02, 2024 10:00 AM EDT [Labor productivity](https://www.investopedia.com/terms/l/labor-productivity.asp) growth slowed in the first quarter, as the increase in output from workers was lower than the jump seen last quarter.  Data from the U.S. Bureau of Labor Statistics showed that productivity in the first three months of the year was 0.3% higher than the previous quarter and 2.9% higher [year-over-year](https://www.investopedia.com/terms/y/year-over-year.asp).  That’s a drop from last quarter when labor productivity was 3.5% higher in the 2023 fourth quarter than the previous quarter.   The data showed that hours worked and output both increased in the first quarter. While business labor productivity was higher by 2.8% than a year ago, manufacturing labor productivity rose a more modest 1.2% over the same period. *-Terry Lane* ## **Companies Announced Fewer Job Cuts In April** May 02, 2024 09:17 AM EDT The job market is in a weird place—companies are hiring fewer people, but layoffs are staying low too. That impression, created by [official government reports](https://www.investopedia.com/the-job-market-is-getting-stuck-hiring-firing-and-quitting-all-fell-in-march-8641816), was reinforced Thursday by a count of announced job cuts by U.S. firms compiled by consulting firm Challenger, Gray & Christmas, which showed there were 64,789 announced job cuts in April, 28% fewer than in March and down 3.3% from April 2023.  Whether it will stay that way, or whether a wave of layoffs is coming is a matter of speculation by experts. The job market has so far remained resilient against the Federal Reserve’s campaign of anti-inflation interest rate hikes, which has driven up borrowing costs for all kinds of loans, making it harder for both employers and customers to borrow and spend. High interest rates, however, could eventually take a bite out of the labor market. “The labor market remains tight. But as labor costs continue to rise, companies will be slower to hire, and we expect further cuts will be needed. This low April figure may be the calm before the storm,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a press release.  A few things other than broader economic forces are at work too. A Texas law banning Diversity, Equity, and Inclusion training at colleges was responsible for 80 job losses, and 800 job cuts were traced to artificial intelligence in the Challenger Report.

Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you. Today, we got a broad picture of the labor market ahead of tomorrow's employment report and mortgage rates rose. Mortgage Rates Continue to Climb Through Busy Home Buying Season May 02, 2024 12:50 PM EDT Mortgage rates moved higher for the fifth straight week, coming in the middle of an important buying season for the housing market. According to data from Freddie Mac, the 30-year, fixed-rate mortgage moved up to 7.22%. The rise in home borrowing costs comes amid the spring homebuying season, the period between March and June when more than one-third of home sales occur, said Sam Khater, Freddie Mac's chief economist. “With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon,” Khater said.  Mortgage rates have been on the rise in 2024. While there has been some evidence that the higher rates are hurting demand in the mortgage industry, there is evidence that some homebuyers are adjusting their expectations amid the higher borrowing costs.  “Many seem to have acclimated to these higher rates, as demonstrated by the recently released pending home sales data coming in at the highest level in a year,” Khater said.  -Terry Lane Surge in Aircraft Sales Moves Factory Orders Higher May 02, 2024 11:10 AM EDT Factory orders moved higher for the second consecutive month in March on a jump in transportation equipment. Manufacturers reported a $9.1 billion increase in new orders, a 1.6% move up from February’s orders, according to Census Bureau data. Factory orders were just below the projections from economists surveyed by the Wall Street Journal and Dow Jones Newswire. Orders for transportation equipment, primarily reflecting aircraft, jumped in March by 7.8%. The data also showed another month of increased orders for durable goods, which includes expensive and long-lasting items that can show whether companies are investing in future growth.  Shipments of goods declined by 0.1%, marking the third time in four months that shipments have moved lower.  -Terry Lane Trade Deficit Narrows as Crude Oil Exports Grow May 02, 2024 10:49 AM EDT The U.S. trade deficit narrowed slightly in March after growing in February, as both imports and exports moved lower despite crude oil shipments growing. The goods and services deficit came in at $69.4 billion in March, a 0.1% drop from the previous month, and slightly lower than economists expected. While experts fell by 2.0%, imports were lower by 1.6%. For the first three months of 2024, the trade deficit has increased by 3.2% when compared with the same period last year.  The data showed that an increase in crude oil led to U.S. export gains. Additionally, wheat exports also moved higher, while exports of soybeans and corn moved lower.  China continued to be the largest exporter to the U.S., though the trade deficit between the two countries narrowed in March.  -Terry Lane Productivity Growth Slows in First Quarter May 02, 2024 10:00 AM EDT Labor productivity growth slowed in the first quarter, as the increase in output from workers was lower than the jump seen last quarter.  Data from the U.S. Bureau of Labor Statistics showed that productivity in the first three months of the year was 0.3% higher than the previous quarter and 2.9% higher year-over-year.  That’s a drop from last quarter when labor productivity was 3.5% higher in the 2023 fourth quarter than the previous quarter.   The data showed that hours worked and output both increased in the first quarter. While business labor productivity was higher by 2.8% than a year ago, manufacturing labor productivity rose a more modest 1.2% over the same period. -Terry Lane Companies Announced Fewer Job Cuts In April May 02, 2024 09:17 AM EDT The job market is in a weird place—companies are hiring fewer people, but layoffs are staying low too.That impression, created by official government reports, was reinforced Thursday by a count of announced job cuts by U.S. firms compiled by consulting firm Challenger, Gray & Christmas, which showed there were 64,789 announced job cuts in April, 28% fewer than in March and down 3.3% from April 2023.  Whether it will stay that way, or whether a wave of layoffs is coming is a matter of speculation by experts. The job market has so far remained resilient against the Federal Reserve’s campaign of anti-inflation interest rate hikes, which has driven up borrowing costs for all kinds of loans, making it harder for both employers and customers to borrow and spend. High interest rates, however, could eventually take a bite out of the labor market. “The labor market remains tight. But as labor costs continue to rise, companies will be slower to hire, and we expect further cuts will be needed. This low April figure may be the calm before the storm,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a press release.  A few things other than broader economic forces are at work too. A Texas law banning Diversity, Equity, and Inclusion training at colleges was responsible for 80 job losses, and 800 job cuts were traced to artificial intelligence in the Challenger Report.

https://www.investopedia.com/12-financial-tips-for-military-families-5194431

12 Financial Tips for Military Families

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Whether you're a recent recruit, about to leave the service, or somewhere in between, you know that military service creates unique financial challenges for military families. Unexpected or frequent moves, difficulty spouses have obtaining employment, and transitions to civilian life or retirement are just a few of the roadblocks to a stable, financially sound family life. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Fortunately, there are solutions both in and out of the military infrastructure. Here are a dozen helpful financial tips for members of the military and their families. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Resources to help military families with their finances are widely available both inside and outside the government.</li><li>Access to most resources must be initiated by the service member, although some such as spousal employment assistance can be initiated by the family member.</li><li>The Servicemembers Civil Relief Act is a wide-ranging law that provides numerous legal and financial protections for service members and their families.</li><li>Newer policies, including the right to share GI Bill education benefits with family members, are less well known.</li><li>Separating or retiring from military service, though stressful for service members and their families, is well covered by various agencies.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-use-available-tools-to-help-deal-with-the-pandemics-economic-impact"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> 1. Use Available Tools to Help Deal With the Pandemic's Economic Impact </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Civilians were urged to hunker down during the worst part of the pandemic. Military personnel and their families were different. Deployment, relocation, and other factors created both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance-guide-for-military-service-members-and-families-5194899">personal and financial risks</a> for service members and their families. Many of those problems remain. Fortunately, there are some helpful tools available. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The following applies to members of the military or family members of someone who serves: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>The military provides hardship duty pay in increments of $50, $100, or $150 depending on the location.<span class="ql-inline-citation" data-cite="56"></span><span class="ql-inline-citation" data-cite="55"></span> The rate went up to as high as $1,500 per month for service members forced to self-isolate away from home during the pandemic.<span class="ql-inline-citation" data-cite="36"></span></li> <li>Basic housing allowance for dependents who moved while you stayed behind or vice versa<span class="ql-inline-citation" data-cite="38"></span></li> <li>Emergency family financial relief for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://www.aerhq.org/" rel="nofollow">Army</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="http://www.nmcrs.org/">Navy, Marines</a>, or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="http://www.afas.org/">Air Force</a> including interest-free loans or grants<span class="ql-inline-citation" data-cite="45"></span></li> <li><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/army-emergency-relief-aer-fund-5225124">Interest-free loans</a> for members of the <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="externalLink" href="https://eangus-wcfa.org/covid-19-loan-information/" rel="nofollow">National Guard</a> and their families<span class="ql-inline-citation" data-cite="47"></span><span class="ql-inline-citation" data-cite="46"></span></li> <li>Financial counseling to help with personal finance basics, credit problems, debt repayment, and emergency financial assistance through <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="externalLink" href="https://www.militaryonesource.mil/confidential-help/interactive-tools-services/financial-counseling/financial-counseling-services-for-a-secure-future/">Military OneSource</a>.<span class="ql-inline-citation" data-cite="48"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-2-take-advantage-of-the-servicemembers-civil-relief-act-scra"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> 2. Take Advantage of the Servicemembers Civil Relief Act (SCRA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/servicemembers-civil-relief-act-scra-5192850">Servicemembers Civil Relief Act (SCRA)</a> provides special financial and legal benefits for service members, including a 6% interest rate cap on any loans you took out before you began active duty. You must apply for this benefit through the lender. This is especially helpful to members of the Reserve or National Guard who may take a significant pay cut when activated. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The SCRA also gives you as a service member additional rights, including postponement of foreclosure and civil court matters, deferred income taxes, eviction, and default judgment protection, protection of small business assets, and the right to terminate a residential lease, automobile lease, or phone service. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Other provisions include protection from repossession of property, life insurance coverage protection, the ability to suspend professional liability insurance, and protection of voting rights in your home state. All this is contingent on orders for a permanent change of station or temporary deployment of 90 days or more.<span class="ql-inline-citation" data-cite="50"></span><span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Credit monitoring is not the same as the annual access to free credit reports available to everyone. Credit monitoring provides continuous surveillance of your credit files and alerts you if anything is amiss.</p></div></div></div> <span class="heading-toc" id="toc-3-sign-up-for-free-credit-monitoring"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> 3. Sign Up for Free Credit Monitoring </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> If you are in the National Guard or on active duty, a recent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ftc.asp">Federal Trade Commission (FTC)</a> rule lets you receive free credit monitoring to provide protection from fraud or identity theft. To enroll in the program, go to the military monitoring webpage at one of the three major credit agencies, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.equifax.com/personal/military-credit-monitoring/" rel="nofollow">Equifax</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.experian.com/lp/military.html" rel="nofollow">Experian</a>, or <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.transunion.com/active-duty-military-credit-center">TransUnion</a>.<span class="ql-inline-citation" data-cite="51"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> When you sign up, you will be notified by mobile app, email, or text if certain changes occur in your credit file, including a change of address, payments that are more than 30 days late, bankruptcy information, foreclosure, liens, or new accounts opened in your name.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-4-get-help-finding-employment-as-a-military-spouse"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> 4. Get Help Finding Employment As a Military Spouse </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> The Department of Defense (DOD) <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://myseco.militaryonesource.mil/portal/getting-started">Spouse Education &amp; Career Opportunities (SECO)</a> program and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://myseco.militaryonesource.mil/portal/msep">Military Spouse Employment Partnership</a> offer educational and job placement opportunities for military spouses to help overcome many of the obstacles your spouse may face finding and retaining employment as well as pursuing a career path of their choosing given the rigors of military family life.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-5-know-and-use-available-housing-resources"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> 5. Know and Use Available Housing Resources </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> In addition to protections provided by the SCRA (see No.2 above), you have access to additional help with housing issues. These include a tax-free housing allowance and the ability to take out a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valoan.asp">Veterans Administration (VA) loan</a>, which lets you borrow with no down payment and no <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/mortgage-guide/mortgage-insurance/">private mortgage insurance (PMI)</a>.<span class="ql-inline-citation" data-cite="52"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> If you are having trouble paying your mortgage, you may qualify for military hardship. This could apply if you received PCS orders, are currently on active duty, or you or your spouse were injured on active duty.<span class="ql-inline-citation" data-cite="53"></span> Finally, consult the National Resource Directory for a list of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/retirement/101816/can-retirees-live-military-housing.asp">housing resources for members of the military</a>.<span class="ql-inline-citation" data-cite="30"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_36-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_37-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">$31</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The monthly premium for $500,000 in SGLI life insurance for active-duty service members.<span class="ql-inline-citation" data-cite="60"></span></p></div></div></div> <span class="heading-toc" id="toc-6-take-advantage-of-inexpensive-life-insurance-and-survivor-benefits"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-heading__text"> 6. Take Advantage of Inexpensive Life Insurance and Survivor Benefits. </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Active-duty service members and family members have access to low-cost life insurance through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.va.gov/life-insurance/options-eligibility/sgli/">Servicemembers’ Group Life Insurance (SGLI)</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.va.gov/life-insurance/options-eligibility/fsgli/">Family Servicemembers’ Group Life Insurance (FSGLI)</a> respectively. Coverage of up to $500,000 for service members, $100,000 for spouses, and $10,000 per dependent child is available at low monthly rates or, in the case of dependent children, free.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> When you separate from service, you may be eligible to switch to Veterans' Group Life Insurance (VGLI) and keep it as long as you pay the premiums. Your spouse, covered under FSGLI, can convert their FSGLI policy to a permanent individual life insurance policy when you separate or retire. Some veterans and family members may also be entitled to burial benefits, death benefits, and memorial items.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="12"></span> The rules are complicated, but a phone call to USA.gov at 1-844-872-4681 (8 a.m. to 8 p.m.) Eastern, Monday through Friday, can get you an answer.<span class="ql-inline-citation" data-cite="32"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-7-learn-about-low-cost-investment-opportunities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> 7. Learn About Low-Cost Investment Opportunities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/thrift_savings_plan.asp">Thrift Savings Plan</a> lets active-duty service members invest at low cost and choose from among short-term U.S. Treasury securities, index funds made up of domestic and international stocks, and several target-date (lifecycle) funds, each of which becomes more conservative as you age.<span class="ql-inline-citation" data-cite="16"></span><span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Contribution limits for 2023 are $22,500 ($23,000 in 2024) in elective deferrals with an additional $7,500 ($8,000 in 2024) catch-up limit if you are 50 or older.<span class="ql-inline-citation" data-cite="43"></span> You automatically receive 1% of your basic pay even if you don’t contribute. You can receive up to 3% matching with up to 3% in contributions and 50% of the next 1% in contributions. There is no agency/service matching after 5%. Contributions can be traditional or Roth. Your spouse cannot contribute to a TSP unless they are also eligible through government employment or are active-duty service members themselves.<span class="ql-inline-citation" data-cite="19"></span><span class="ql-inline-citation" data-cite="18"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <span class="heading-toc" id="toc-8-earn-10-in-a-high-interest-savings-account"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-heading__text"> 8. Earn 10% in a High-Interest Savings Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/special-savings-plans-for-military-5193105">DOD Savings Deposit Program</a> pays 10% interest, compounded quarterly, on invested amounts of up to $10,000 while you are deployed to a designated combat zone. You must be receiving Hostile Fire Pay and be deployed for at least 30 consecutive days (or one day in each of three consecutive months) in order to participate in the program. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> You can close your account after you leave the combat zone, but interest will continue to accrue for 90 days after you return from deployment, so you might want to leave the money where it is. Your spouse (with power of attorney) can initiate and change savings amounts in your account.<span class="ql-inline-citation" data-cite="33"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <span class="heading-toc" id="toc-9-leverage-tax-free-residency-for-longer"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_53-0"> <span class="mntl-sc-block-heading__text"> 9. Leverage Tax-Free Residency for Longer </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> You can maintain legal residence in one state, even if you are transferred to another. This could help if, for example, you are stationed in and have established residence in a tax-free state such as Florida or Texas and move to another state where you would be subject to state income taxes. The SCRA protects you and your spouse from being forced to change legal residence when either of you move.<span class="ql-inline-citation" data-cite="34"></span> Yours (and your spouse’s) state of legal residence is typically where you: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> <li>Maintain voter registration</li><li>File and pay state income taxes (if applicable)</li><li>Maintain a driver’s license</li><li>Register vehicles</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> This applies only to your military income. If you have other work or income outside the military, that income must be reported to the state where it is earned. For your spouse, SCRA applies to any income they earn in the state where you are stationed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> The provisions of SCRA do not apply to military-dependent children. If your child is required to file state income taxes, they need to file where they physically reside.<span class="ql-inline-citation" data-cite="22"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <span class="heading-toc" id="toc-10-transfer-your-gi-bill-benefits-to-your-family"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> 10. Transfer Your GI Bill Benefits to Your Family </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> If you have served for at least 36 months since Sept. 11, 2001, you have access to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/post911-gi-bill.asp">Post-9/11 GI Bill</a>.<span class="ql-inline-citation" data-cite="35"></span> This can cover the cost of in-state tuition and fees for a public college for up to four academic years or up to $27,120.05 per year for a private college or foreign school.<span class="ql-inline-citation" data-cite="44"></span> Further, you can transfer your benefits to your spouse or children provided the following are true:<span class="ql-inline-citation" data-cite="24"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <li>You've completed at least six years of service on the date your request is approved, and</li> <li>You agree to add four more years of service, and</li> <li>The person getting benefits has enrolled in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.tricare.mil/DEERS">Defense Enrollment Eligibility Reporting System (DEERS)</a></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-11-dont-forget-military-discounts"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> 11. Don’t Forget Military Discounts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> This one is simple: Just about everywhere you spend money, ask if there is a military discount. Some places advertise; others do not. The only way to find out for sure is to ask. To save time, go online and search for military or veteran discounts by store or brand name. Most businesses that offer a discount require a military ID or proof of military service. Family members may or may not be able to take advantage of the discount, depending on the individual policy of the business. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <span class="heading-toc" id="toc-12-make-the-most-of-resources-for-life-after-the-military"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_70-0"> <span class="mntl-sc-block-heading__text"> 12. Make the Most of Resources for Life After the Military </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> At some point you will ETS, otherwise known as expiration term of service. Some will separate and move on to another career. Others will retire and begin collecting their military retirement annuity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> You and your family need not transition alone. Some people find it difficult to translate their military skills to the civilian job market. Others are unsure where they want to live post-retirement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> For veterans seeking post-separation employment, USA.gov lists several <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usa.gov/veteran-employment#item-35582">job and training</a> resources for veterans. You should also check out the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.vba.va.gov/pubs/forms/VBA-27-0501-ARE.pdf">Veterans Benefits Timetable</a>, which lists important dates and deadlines for various VA benefits as well as where to go to get them.<span class="ql-inline-citation" data-cite="54"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_77-0"> If you are retiring from military service, refer to the Military OneSource's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.militaryonesource.mil/military-life-cycle/separation-transition/military-separation-retirement/military-retirement-do-you-have-this-covered/">Military Retirement: Do You Have This Covered?</a> page, which lists important retirement actions and when they need to be completed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_79-0"><span class="heading-toc" id="toc-how-can-i-grow-my-money-while-im-in-the-military"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can I Grow my Money While I'm in the Military?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Saving money is a principle that shouldn't change whether you're a civilian or in the military. Make sure you have a budget and a spending plan so you can see how much you have at the end of the month. Take advantage of retirement plan benefits that you may get through the military. You also have the option of putting your money in an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ira.asp">individual retirement account (IRA)</a> in addition to military-sponsored retirement plans. And remember to keep your debts in check. Consult a financial professional if you need help managing your money. You can get <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.militaryonesource.mil/financial-legal/personal-finance/financial-counseling-services-for-a-secure-future/">free financial advice</a> through Military OneSource as an active service member.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_80-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_81-0"><span class="heading-toc" id="toc-does-the-military-have-a-401k-for-service-members"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does the Military Have a 401(k) for Service Members?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No, the military doesn't have 401(k) plans. These plans are designed for employees of corporations. But this doesn't mean that you can't save for retirement as you have several other options available as a member of the military:</p><ul><li>You can invest up to the maximum annual contribution limit in an IRA plus the catch-up contribution if you are 50 or older.</li><li>You can invest in the Legacy Retirement System if you enlisted on or before Dec. 31, 2017, or the Blended Retirement System if you enlisted on or after Jan. 1, 2018. The first is like a defined-benefit plan while the second is a hybrid of a defined-benefit pension and a defined contribution plan.<span class="ql-inline-citation" data-cite="58"></span><span class="ql-inline-citation" data-cite="57"></span></li><li>You can set aside a portion of your pay on a pre- or after-tax basis to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/thrift_savings_plan.asp">Thrift Savings Plan (TSP)</a> if you qualify.</li></ul></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_83-0"><span class="heading-toc" id="toc-what-is-the-military-lending-act"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Military Lending Act?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Military Lending Act is a federal law that provides a series of protections for active-duty service members. It includes caps on interest rates and no prepayment penalties. The law extends protection to the spouses of qualifying military members as well as certain dependents. The MLA covers different types of loans, including certain student loans and overdraft lines of credit. It does not extend to various secured loans, such as residential mortgages and auto loans. Lenders that violate the rules of the law may be subject to fines and penalties.<span class="ql-inline-citation" data-cite="59"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_84-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_85-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> Financial hurdles are common for anyone. If you're serving in the military, you may face some unique challenges when it comes to your finances. But there are certain resources that you can use to help you overcome these speedbumps. Following the 12 steps we've laid out above may help you smooth things out and ensure that your personal financial situation is in check. </p></div>

Whether you're a recent recruit, about to leave the service, or somewhere in between, you know that military service creates unique financial challenges for military families. Unexpected or frequent moves, difficulty spouses have obtaining employment, and transitions to civilian life or retirement are just a few of the roadblocks to a stable, financially sound family life. Fortunately, there are solutions both in and out of the military infrastructure. Here are a dozen helpful financial tips for members of the military and their families. ### Key Takeaways * Resources to help military families with their finances are widely available both inside and outside the government. * Access to most resources must be initiated by the service member, although some such as spousal employment assistance can be initiated by the family member. * The Servicemembers Civil Relief Act is a wide-ranging law that provides numerous legal and financial protections for service members and their families. * Newer policies, including the right to share GI Bill education benefits with family members, are less well known. * Separating or retiring from military service, though stressful for service members and their families, is well covered by various agencies. ## 1. Use Available Tools to Help Deal With the Pandemic's Economic Impact Civilians were urged to hunker down during the worst part of the pandemic. Military personnel and their families were different. Deployment, relocation, and other factors created both [personal and financial risks](https://www.investopedia.com/personal-finance-guide-for-military-service-members-and-families-5194899) for service members and their families. Many of those problems remain. Fortunately, there are some helpful tools available. The following applies to members of the military or family members of someone who serves: * The military provides hardship duty pay in increments of $50, $100, or $150 depending on the location. The rate went up to as high as $1,500 per month for service members forced to self-isolate away from home during the pandemic. * Basic housing allowance for dependents who moved while you stayed behind or vice versa * Emergency family financial relief for [Army](http://www.aerhq.org/), [Navy, Marines](http://www.nmcrs.org/), or [Air Force](http://www.afas.org/) including interest-free loans or grants * [Interest-free loans](https://www.investopedia.com/army-emergency-relief-aer-fund-5225124) for members of the [National Guard](https://eangus-wcfa.org/covid-19-loan-information/) and their families * Financial counseling to help with personal finance basics, credit problems, debt repayment, and emergency financial assistance through [Military OneSource](https://www.militaryonesource.mil/confidential-help/interactive-tools-services/financial-counseling/financial-counseling-services-for-a-secure-future/). ## 2. Take Advantage of the Servicemembers Civil Relief Act (SCRA) The [Servicemembers Civil Relief Act (SCRA)](https://www.investopedia.com/servicemembers-civil-relief-act-scra-5192850) provides special financial and legal benefits for service members, including a 6% interest rate cap on any loans you took out before you began active duty. You must apply for this benefit through the lender. This is especially helpful to members of the Reserve or National Guard who may take a significant pay cut when activated. The SCRA also gives you as a service member additional rights, including postponement of foreclosure and civil court matters, deferred income taxes, eviction, and default judgment protection, protection of small business assets, and the right to terminate a residential lease, automobile lease, or phone service. Other provisions include protection from repossession of property, life insurance coverage protection, the ability to suspend professional liability insurance, and protection of voting rights in your home state. All this is contingent on orders for a permanent change of station or temporary deployment of 90 days or more. ### Credit monitoring is not the same as the annual access to free credit reports available to everyone. Credit monitoring provides continuous surveillance of your credit files and alerts you if anything is amiss. ## 3. Sign Up for Free Credit Monitoring If you are in the National Guard or on active duty, a recent [Federal Trade Commission (FTC)](https://www.investopedia.com/terms/f/ftc.asp) rule lets you receive free credit monitoring to provide protection from fraud or identity theft. To enroll in the program, go to the military monitoring webpage at one of the three major credit agencies, [Equifax](https://www.equifax.com/personal/military-credit-monitoring/), [Experian](https://www.experian.com/lp/military.html), or [TransUnion](https://www.transunion.com/active-duty-military-credit-center). When you sign up, you will be notified by mobile app, email, or text if certain changes occur in your credit file, including a change of address, payments that are more than 30 days late, bankruptcy information, foreclosure, liens, or new accounts opened in your name. ## 4. Get Help Finding Employment As a Military Spouse The Department of Defense (DOD) [Spouse Education & Career Opportunities (SECO)](https://myseco.militaryonesource.mil/portal/getting-started) program and the [Military Spouse Employment Partnership](https://myseco.militaryonesource.mil/portal/msep) offer educational and job placement opportunities for military spouses to help overcome many of the obstacles your spouse may face finding and retaining employment as well as pursuing a career path of their choosing given the rigors of military family life. ## 5. Know and Use Available Housing Resources In addition to protections provided by the SCRA (see No.2 above), you have access to additional help with housing issues. These include a tax-free housing allowance and the ability to take out a [Veterans Administration (VA) loan](https://www.investopedia.com/terms/v/valoan.asp), which lets you borrow with no down payment and no [private mortgage insurance (PMI)](https://www.investopedia.com/mortgage/mortgage-guide/mortgage-insurance/). If you are having trouble paying your mortgage, you may qualify for military hardship. This could apply if you received PCS orders, are currently on active duty, or you or your spouse were injured on active duty. Finally, consult the National Resource Directory for a list of [housing resources for members of the military](https://www.investopedia.com/articles/retirement/101816/can-retirees-live-military-housing.asp). ### $31 The monthly premium for $500,000 in SGLI life insurance for active-duty service members. ## 6. Take Advantage of Inexpensive Life Insurance and Survivor Benefits. Active-duty service members and family members have access to low-cost life insurance through [Servicemembers’ Group Life Insurance (SGLI)](https://www.va.gov/life-insurance/options-eligibility/sgli/) and [Family Servicemembers’ Group Life Insurance (FSGLI)](https://www.va.gov/life-insurance/options-eligibility/fsgli/) respectively. Coverage of up to $500,000 for service members, $100,000 for spouses, and $10,000 per dependent child is available at low monthly rates or, in the case of dependent children, free. When you separate from service, you may be eligible to switch to Veterans' Group Life Insurance (VGLI) and keep it as long as you pay the premiums. Your spouse, covered under FSGLI, can convert their FSGLI policy to a permanent individual life insurance policy when you separate or retire. Some veterans and family members may also be entitled to burial benefits, death benefits, and memorial items. The rules are complicated, but a phone call to USA.gov at 1-844-872-4681 (8 a.m. to 8 p.m.) Eastern, Monday through Friday, can get you an answer. ## 7. Learn About Low-Cost Investment Opportunities The [Thrift Savings Plan](https://www.investopedia.com/terms/t/thrift_savings_plan.asp) lets active-duty service members invest at low cost and choose from among short-term U.S. Treasury securities, index funds made up of domestic and international stocks, and several target-date (lifecycle) funds, each of which becomes more conservative as you age. Contribution limits for 2023 are $22,500 ($23,000 in 2024) in elective deferrals with an additional $7,500 ($8,000 in 2024) catch-up limit if you are 50 or older. You automatically receive 1% of your basic pay even if you don’t contribute. You can receive up to 3% matching with up to 3% in contributions and 50% of the next 1% in contributions. There is no agency/service matching after 5%. Contributions can be traditional or Roth. Your spouse cannot contribute to a TSP unless they are also eligible through government employment or are active-duty service members themselves. ## 8. Earn 10% in a High-Interest Savings Account The [DOD Savings Deposit Program](https://www.investopedia.com/special-savings-plans-for-military-5193105) pays 10% interest, compounded quarterly, on invested amounts of up to $10,000 while you are deployed to a designated combat zone. You must be receiving Hostile Fire Pay and be deployed for at least 30 consecutive days (or one day in each of three consecutive months) in order to participate in the program. You can close your account after you leave the combat zone, but interest will continue to accrue for 90 days after you return from deployment, so you might want to leave the money where it is. Your spouse (with power of attorney) can initiate and change savings amounts in your account. ## 9. Leverage Tax-Free Residency for Longer You can maintain legal residence in one state, even if you are transferred to another. This could help if, for example, you are stationed in and have established residence in a tax-free state such as Florida or Texas and move to another state where you would be subject to state income taxes. The SCRA protects you and your spouse from being forced to change legal residence when either of you move. Yours (and your spouse’s) state of legal residence is typically where you: * Maintain voter registration * File and pay state income taxes (if applicable) * Maintain a driver’s license * Register vehicles This applies only to your military income. If you have other work or income outside the military, that income must be reported to the state where it is earned. For your spouse, SCRA applies to any income they earn in the state where you are stationed. The provisions of SCRA do not apply to military-dependent children. If your child is required to file state income taxes, they need to file where they physically reside. ## 10. Transfer Your GI Bill Benefits to Your Family If you have served for at least 36 months since Sept. 11, 2001, you have access to the [Post-9/11 GI Bill](https://www.investopedia.com/terms/p/post911-gi-bill.asp). This can cover the cost of in-state tuition and fees for a public college for up to four academic years or up to $27,120.05 per year for a private college or foreign school. Further, you can transfer your benefits to your spouse or children provided the following are true: * You've completed at least six years of service on the date your request is approved, and * You agree to add four more years of service, and * The person getting benefits has enrolled in the [Defense Enrollment Eligibility Reporting System (DEERS)](https://www.tricare.mil/DEERS) ## 11. Don’t Forget Military Discounts This one is simple: Just about everywhere you spend money, ask if there is a military discount. Some places advertise; others do not. The only way to find out for sure is to ask. To save time, go online and search for military or veteran discounts by store or brand name. Most businesses that offer a discount require a military ID or proof of military service. Family members may or may not be able to take advantage of the discount, depending on the individual policy of the business. ## 12. Make the Most of Resources for Life After the Military At some point you will ETS, otherwise known as expiration term of service. Some will separate and move on to another career. Others will retire and begin collecting their military retirement annuity. You and your family need not transition alone. Some people find it difficult to translate their military skills to the civilian job market. Others are unsure where they want to live post-retirement. For veterans seeking post-separation employment, USA.gov lists several [job and training](https://www.usa.gov/veteran-employment#item-35582) resources for veterans. You should also check out the [Veterans Benefits Timetable](https://www.vba.va.gov/pubs/forms/VBA-27-0501-ARE.pdf), which lists important dates and deadlines for various VA benefits as well as where to go to get them. If you are retiring from military service, refer to the Military OneSource's [Military Retirement: Do You Have This Covered?](https://www.militaryonesource.mil/military-life-cycle/separation-transition/military-separation-retirement/military-retirement-do-you-have-this-covered/) page, which lists important retirement actions and when they need to be completed. ## How Can I Grow my Money While I'm in the Military? Saving money is a principle that shouldn't change whether you're a civilian or in the military. Make sure you have a budget and a spending plan so you can see how much you have at the end of the month. Take advantage of retirement plan benefits that you may get through the military. You also have the option of putting your money in an [individual retirement account (IRA)](https://www.investopedia.com/terms/i/ira.asp) in addition to military-sponsored retirement plans. And remember to keep your debts in check. Consult a financial professional if you need help managing your money. You can get [free financial advice](https://www.militaryonesource.mil/financial-legal/personal-finance/financial-counseling-services-for-a-secure-future/) through Military OneSource as an active service member. ## Does the Military Have a 401(k) for Service Members? No, the military doesn't have 401(k) plans. These plans are designed for employees of corporations. But this doesn't mean that you can't save for retirement as you have several other options available as a member of the military: * You can invest up to the maximum annual contribution limit in an IRA plus the catch-up contribution if you are 50 or older. * You can invest in the Legacy Retirement System if you enlisted on or before Dec. 31, 2017, or the Blended Retirement System if you enlisted on or after Jan. 1, 2018. The first is like a defined-benefit plan while the second is a hybrid of a defined-benefit pension and a defined contribution plan. * You can set aside a portion of your pay on a pre- or after-tax basis to a [Thrift Savings Plan (TSP)](https://www.investopedia.com/terms/t/thrift_savings_plan.asp) if you qualify. ## What Is the Military Lending Act? The Military Lending Act is a federal law that provides a series of protections for active-duty service members. It includes caps on interest rates and no prepayment penalties. The law extends protection to the spouses of qualifying military members as well as certain dependents. The MLA covers different types of loans, including certain student loans and overdraft lines of credit. It does not extend to various secured loans, such as residential mortgages and auto loans. Lenders that violate the rules of the law may be subject to fines and penalties. ## The Bottom Line Financial hurdles are common for anyone. If you're serving in the military, you may face some unique challenges when it comes to your finances. But there are certain resources that you can use to help you overcome these speedbumps. Following the 12 steps we've laid out above may help you smooth things out and ensure that your personal financial situation is in check.

Whether you're a recent recruit, about to leave the service, or somewhere in between, you know that military service creates unique financial challenges for military families. Unexpected or frequent moves, difficulty spouses have obtaining employment, and transitions to civilian life or retirement are just a few of the roadblocks to a stable, financially sound family life. Fortunately, there are solutions both in and out of the military infrastructure. Here are a dozen helpful financial tips for members of the military and their families. Key Takeaways Resources to help military families with their finances are widely available both inside and outside the government.Access to most resources must be initiated by the service member, although some such as spousal employment assistance can be initiated by the family member.The Servicemembers Civil Relief Act is a wide-ranging law that provides numerous legal and financial protections for service members and their families.Newer policies, including the right to share GI Bill education benefits with family members, are less well known.Separating or retiring from military service, though stressful for service members and their families, is well covered by various agencies. 1. Use Available Tools to Help Deal With the Pandemic's Economic Impact Civilians were urged to hunker down during the worst part of the pandemic. Military personnel and their families were different. Deployment, relocation, and other factors created both personal and financial risks for service members and their families. Many of those problems remain. Fortunately, there are some helpful tools available. The following applies to members of the military or family members of someone who serves: The military provides hardship duty pay in increments of $50, $100, or $150 depending on the location. The rate went up to as high as $1,500 per month for service members forced to self-isolate away from home during the pandemic. Basic housing allowance for dependents who moved while you stayed behind or vice versa Emergency family financial relief for Army, Navy, Marines, or Air Force including interest-free loans or grants Interest-free loans for members of the National Guard and their families Financial counseling to help with personal finance basics, credit problems, debt repayment, and emergency financial assistance through Military OneSource. 2. Take Advantage of the Servicemembers Civil Relief Act (SCRA) The Servicemembers Civil Relief Act (SCRA) provides special financial and legal benefits for service members, including a 6% interest rate cap on any loans you took out before you began active duty. You must apply for this benefit through the lender. This is especially helpful to members of the Reserve or National Guard who may take a significant pay cut when activated. The SCRA also gives you as a service member additional rights, including postponement of foreclosure and civil court matters, deferred income taxes, eviction, and default judgment protection, protection of small business assets, and the right to terminate a residential lease, automobile lease, or phone service. Other provisions include protection from repossession of property, life insurance coverage protection, the ability to suspend professional liability insurance, and protection of voting rights in your home state. All this is contingent on orders for a permanent change of station or temporary deployment of 90 days or more. Credit monitoring is not the same as the annual access to free credit reports available to everyone. Credit monitoring provides continuous surveillance of your credit files and alerts you if anything is amiss. 3. Sign Up for Free Credit Monitoring If you are in the National Guard or on active duty, a recent Federal Trade Commission (FTC) rule lets you receive free credit monitoring to provide protection from fraud or identity theft. To enroll in the program, go to the military monitoring webpage at one of the three major credit agencies, Equifax, Experian, or TransUnion. When you sign up, you will be notified by mobile app, email, or text if certain changes occur in your credit file, including a change of address, payments that are more than 30 days late, bankruptcy information, foreclosure, liens, or new accounts opened in your name. 4. Get Help Finding Employment As a Military Spouse The Department of Defense (DOD) Spouse Education & Career Opportunities (SECO) program and the Military Spouse Employment Partnership offer educational and job placement opportunities for military spouses to help overcome many of the obstacles your spouse may face finding and retaining employment as well as pursuing a career path of their choosing given the rigors of military family life. 5. Know and Use Available Housing Resources In addition to protections provided by the SCRA (see No.2 above), you have access to additional help with housing issues. These include a tax-free housing allowance and the ability to take out a Veterans Administration (VA) loan, which lets you borrow with no down payment and no private mortgage insurance (PMI). If you are having trouble paying your mortgage, you may qualify for military hardship. This could apply if you received PCS orders, are currently on active duty, or you or your spouse were injured on active duty. Finally, consult the National Resource Directory for a list of housing resources for members of the military. $31 The monthly premium for $500,000 in SGLI life insurance for active-duty service members. 6. Take Advantage of Inexpensive Life Insurance and Survivor Benefits. Active-duty service members and family members have access to low-cost life insurance through Servicemembers’ Group Life Insurance (SGLI) and Family Servicemembers’ Group Life Insurance (FSGLI) respectively. Coverage of up to $500,000 for service members, $100,000 for spouses, and $10,000 per dependent child is available at low monthly rates or, in the case of dependent children, free. When you separate from service, you may be eligible to switch to Veterans' Group Life Insurance (VGLI) and keep it as long as you pay the premiums. Your spouse, covered under FSGLI, can convert their FSGLI policy to a permanent individual life insurance policy when you separate or retire. Some veterans and family members may also be entitled to burial benefits, death benefits, and memorial items. The rules are complicated, but a phone call to USA.gov at 1-844-872-4681 (8 a.m. to 8 p.m.) Eastern, Monday through Friday, can get you an answer. 7. Learn About Low-Cost Investment Opportunities The Thrift Savings Plan lets active-duty service members invest at low cost and choose from among short-term U.S. Treasury securities, index funds made up of domestic and international stocks, and several target-date (lifecycle) funds, each of which becomes more conservative as you age. Contribution limits for 2023 are $22,500 ($23,000 in 2024) in elective deferrals with an additional $7,500 ($8,000 in 2024) catch-up limit if you are 50 or older. You automatically receive 1% of your basic pay even if you don’t contribute. You can receive up to 3% matching with up to 3% in contributions and 50% of the next 1% in contributions. There is no agency/service matching after 5%. Contributions can be traditional or Roth. Your spouse cannot contribute to a TSP unless they are also eligible through government employment or are active-duty service members themselves. 8. Earn 10% in a High-Interest Savings Account The DOD Savings Deposit Program pays 10% interest, compounded quarterly, on invested amounts of up to $10,000 while you are deployed to a designated combat zone. You must be receiving Hostile Fire Pay and be deployed for at least 30 consecutive days (or one day in each of three consecutive months) in order to participate in the program. You can close your account after you leave the combat zone, but interest will continue to accrue for 90 days after you return from deployment, so you might want to leave the money where it is. Your spouse (with power of attorney) can initiate and change savings amounts in your account. 9. Leverage Tax-Free Residency for Longer You can maintain legal residence in one state, even if you are transferred to another. This could help if, for example, you are stationed in and have established residence in a tax-free state such as Florida or Texas and move to another state where you would be subject to state income taxes. The SCRA protects you and your spouse from being forced to change legal residence when either of you move. Yours (and your spouse’s) state of legal residence is typically where you: Maintain voter registrationFile and pay state income taxes (if applicable)Maintain a driver’s licenseRegister vehicles This applies only to your military income. If you have other work or income outside the military, that income must be reported to the state where it is earned. For your spouse, SCRA applies to any income they earn in the state where you are stationed. The provisions of SCRA do not apply to military-dependent children. If your child is required to file state income taxes, they need to file where they physically reside. 10. Transfer Your GI Bill Benefits to Your Family If you have served for at least 36 months since Sept. 11, 2001, you have access to the Post-9/11 GI Bill. This can cover the cost of in-state tuition and fees for a public college for up to four academic years or up to $27,120.05 per year for a private college or foreign school. Further, you can transfer your benefits to your spouse or children provided the following are true: You've completed at least six years of service on the date your request is approved, and You agree to add four more years of service, and The person getting benefits has enrolled in the Defense Enrollment Eligibility Reporting System (DEERS) 11. Don’t Forget Military Discounts This one is simple: Just about everywhere you spend money, ask if there is a military discount. Some places advertise; others do not. The only way to find out for sure is to ask. To save time, go online and search for military or veteran discounts by store or brand name. Most businesses that offer a discount require a military ID or proof of military service. Family members may or may not be able to take advantage of the discount, depending on the individual policy of the business. 12. Make the Most of Resources for Life After the Military At some point you will ETS, otherwise known as expiration term of service. Some will separate and move on to another career. Others will retire and begin collecting their military retirement annuity. You and your family need not transition alone. Some people find it difficult to translate their military skills to the civilian job market. Others are unsure where they want to live post-retirement. For veterans seeking post-separation employment, USA.gov lists several job and training resources for veterans. You should also check out the Veterans Benefits Timetable, which lists important dates and deadlines for various VA benefits as well as where to go to get them. If you are retiring from military service, refer to the Military OneSource's Military Retirement: Do You Have This Covered? page, which lists important retirement actions and when they need to be completed. How Can I Grow my Money While I'm in the Military? Saving money is a principle that shouldn't change whether you're a civilian or in the military. Make sure you have a budget and a spending plan so you can see how much you have at the end of the month. Take advantage of retirement plan benefits that you may get through the military. You also have the option of putting your money in an individual retirement account (IRA) in addition to military-sponsored retirement plans. And remember to keep your debts in check. Consult a financial professional if you need help managing your money. You can get free financial advice through Military OneSource as an active service member. Does the Military Have a 401(k) for Service Members? No, the military doesn't have 401(k) plans. These plans are designed for employees of corporations. But this doesn't mean that you can't save for retirement as you have several other options available as a member of the military:You can invest up to the maximum annual contribution limit in an IRA plus the catch-up contribution if you are 50 or older.You can invest in the Legacy Retirement System if you enlisted on or before Dec. 31, 2017, or the Blended Retirement System if you enlisted on or after Jan. 1, 2018. The first is like a defined-benefit plan while the second is a hybrid of a defined-benefit pension and a defined contribution plan.You can set aside a portion of your pay on a pre- or after-tax basis to a Thrift Savings Plan (TSP) if you qualify. What Is the Military Lending Act? The Military Lending Act is a federal law that provides a series of protections for active-duty service members. It includes caps on interest rates and no prepayment penalties. The law extends protection to the spouses of qualifying military members as well as certain dependents. The MLA covers different types of loans, including certain student loans and overdraft lines of credit. It does not extend to various secured loans, such as residential mortgages and auto loans. Lenders that violate the rules of the law may be subject to fines and penalties. The Bottom Line Financial hurdles are common for anyone. If you're serving in the military, you may face some unique challenges when it comes to your finances. But there are certain resources that you can use to help you overcome these speedbumps. Following the 12 steps we've laid out above may help you smooth things out and ensure that your personal financial situation is in check.

https://www.investopedia.com/terms/g/growthfund.asp

Growth Fund: Definition, Types, and Performance

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-growth-fund"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Growth Fund? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A growth fund is a diversified portfolio of stocks that has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalappreciation.asp">capital appreciation</a> as its primary goal, with little or no dividend payouts. The portfolio mainly consists of companies with above-average growth that reinvest their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnings.asp">earnings</a> into expansion, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/acquisition.asp">acquisitions</a>, or <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/randd.asp">research and development (R&amp;D)</a>. Most growth funds offer higher potential capital appreciation but usually at above-average risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A growth fund is a mutual fund or exchange-traded fund (ETF) that includes companies primed for revenue or earnings growth at a pace that is faster than that of either industry peers or the market overall.</li><li>Growth funds are separated by market capitalization into small-, mid-, and large-cap.</li><li>Most growth funds are high-risk, high-reward, and are therefore best suited to market participants with a long-term investment horizon and a healthy risk tolerance.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-a-growth-fund-works"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How a Growth Fund Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The high-risk, high-reward mantra of growth funds can make them ideal for those not retiring anytime soon. Typically, investors need a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/risk_tolerance.asp">tolerance for risk</a> and a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/holdingperiod.asp">holding period</a> with a time horizon of five to ten years. Growth fund holdings often have high <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">price-to-earnings (P/E)</a> and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-to-salesratio.asp">price-to-sales (P/S)</a> multiples. This trade-off from investors is the above-average <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> and earnings gains these companies produce. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <span class="heading-toc" id="toc-types-of-growth-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Types of Growth Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Growth funds, along with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuefund.asp">value funds</a> and blend funds, are one of the main types of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp">mutual funds</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange traded funds (ETFs)</a> They are more volatile than funds in the value and blend categories. Growth funds are typically split by <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">market capitalization</a>, with funds representing small-cap, mid-cap, and large-cap groupings. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Large-cap growth mutual funds are one of the largest types of mutual funds in terms of market share. Large-blend funds, which offer investors value and growth, are also very popular. Foreign large-cap growth funds are much lower in terms of market share. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Foreign growth funds are becoming more common for investors who want to take advantage of global growth. These funds invest in international stocks posting strong revenue and earnings growth. For international growth funds, technology and consumer sectors are the most common. Large internet names such as Tencent (TCTZF), Baidu (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BIDU">BIDU</a>), and Alibaba (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA">BABA</a>) can be found among the top ten holdings for many international growth funds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-largest-growth-fund"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Largest Growth Fund </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> One of the largest growth funds is the Growth Fund of America (AGTHX) from American Funds. This mutual fund has over $253 billion in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aum.asp">assets under management</a> (AUM) as of March 2022 and the stock price is up 10% over the last year, despite the market <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a>. The fund's average annual return has been 14.28% over the last ten years, as of Feb. 28, 2022.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The Growth Fund of America has Tesla, as its largest holding, representing 7.1% of assets. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technology_sector.asp">Technology</a> stocks represent the largest sector weighting at 34.9%. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumer-discretionary.asp">Consumer Discretionary</a> stocks follow closely behind with 24.3% of assets.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_21-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_22-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Technology stocks are a major part of growth funds. With high growth and high P/E and P/S ratios, technology stocks fit the criteria perfectly for growth funds.</p></div></div></div> <span class="heading-toc" id="toc-performance-of-growth-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Performance of Growth Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The majority of the best performing large-company stock funds over the last decade have been growth funds. For example, the Morgan Stanley Multi Cap Growth A (CPOAX) is the best performing large-company stock fund over the last ten years, with an annualized return of 23.3%. Currently, its top three holdings include Snowflake, Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW">SNOW</a>), Cloudflare, Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NET">NET</a>), and The Trade Desk (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TTD">TTD</a>).<span class="ql-inline-citation" data-cite="2"></span> </p></div>

## What Is a Growth Fund? A growth fund is a diversified portfolio of stocks that has [capital appreciation](https://www.investopedia.com/terms/c/capitalappreciation.asp) as its primary goal, with little or no dividend payouts. The portfolio mainly consists of companies with above-average growth that reinvest their [earnings](https://www.investopedia.com/terms/e/earnings.asp) into expansion, [acquisitions](https://www.investopedia.com/terms/a/acquisition.asp), or [research and development (R&D)](https://www.investopedia.com/terms/r/randd.asp). Most growth funds offer higher potential capital appreciation but usually at above-average risk. ### Key Takeaways * A growth fund is a mutual fund or exchange-traded fund (ETF) that includes companies primed for revenue or earnings growth at a pace that is faster than that of either industry peers or the market overall. * Growth funds are separated by market capitalization into small-, mid-, and large-cap. * Most growth funds are high-risk, high-reward, and are therefore best suited to market participants with a long-term investment horizon and a healthy risk tolerance. ## How a Growth Fund Works The high-risk, high-reward mantra of growth funds can make them ideal for those not retiring anytime soon. Typically, investors need a [tolerance for risk](https://www.investopedia.com/articles/pf/07/risk_tolerance.asp) and a [holding period](https://www.investopedia.com/terms/h/holdingperiod.asp) with a time horizon of five to ten years. Growth fund holdings often have high [price-to-earnings (P/E)](https://www.investopedia.com/terms/p/price-earningsratio.asp) and [price-to-sales (P/S)](https://www.investopedia.com/terms/p/price-to-salesratio.asp) multiples. This trade-off from investors is the above-average [revenue](https://www.investopedia.com/terms/r/revenue.asp) and earnings gains these companies produce. ## Types of Growth Funds Growth funds, along with [value funds](https://www.investopedia.com/terms/v/valuefund.asp) and blend funds, are one of the main types of [mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) and [exchange traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp) They are more volatile than funds in the value and blend categories. Growth funds are typically split by [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp), with funds representing small-cap, mid-cap, and large-cap groupings. Large-cap growth mutual funds are one of the largest types of mutual funds in terms of market share. Large-blend funds, which offer investors value and growth, are also very popular. Foreign large-cap growth funds are much lower in terms of market share. Foreign growth funds are becoming more common for investors who want to take advantage of global growth. These funds invest in international stocks posting strong revenue and earnings growth. For international growth funds, technology and consumer sectors are the most common. Large internet names such as Tencent (TCTZF), Baidu ([BIDU](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BIDU)), and Alibaba ([BABA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA)) can be found among the top ten holdings for many international growth funds. ## Largest Growth Fund One of the largest growth funds is the Growth Fund of America (AGTHX) from American Funds. This mutual fund has over $253 billion in [assets under management](https://www.investopedia.com/terms/a/aum.asp) (AUM) as of March 2022 and the stock price is up 10% over the last year, despite the market [volatility](https://www.investopedia.com/terms/v/volatility.asp). The fund's average annual return has been 14.28% over the last ten years, as of Feb. 28, 2022. The Growth Fund of America has Tesla, as its largest holding, representing 7.1% of assets. [Technology](https://www.investopedia.com/terms/t/technology_sector.asp) stocks represent the largest sector weighting at 34.9%. [Consumer Discretionary](https://www.investopedia.com/terms/c/consumer-discretionary.asp) stocks follow closely behind with 24.3% of assets. ### Technology stocks are a major part of growth funds. With high growth and high P/E and P/S ratios, technology stocks fit the criteria perfectly for growth funds. ## Performance of Growth Funds The majority of the best performing large-company stock funds over the last decade have been growth funds. For example, the Morgan Stanley Multi Cap Growth A (CPOAX) is the best performing large-company stock fund over the last ten years, with an annualized return of 23.3%. Currently, its top three holdings include Snowflake, Inc. ([SNOW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SNOW)), Cloudflare, Inc. ([NET](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NET)), and The Trade Desk ([TTD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TTD)).

What Is a Growth Fund? A growth fund is a diversified portfolio of stocks that has capital appreciation as its primary goal, with little or no dividend payouts. The portfolio mainly consists of companies with above-average growth that reinvest their earnings into expansion, acquisitions, or research and development (R&D). Most growth funds offer higher potential capital appreciation but usually at above-average risk. Key Takeaways A growth fund is a mutual fund or exchange-traded fund (ETF) that includes companies primed for revenue or earnings growth at a pace that is faster than that of either industry peers or the market overall.Growth funds are separated by market capitalization into small-, mid-, and large-cap.Most growth funds are high-risk, high-reward, and are therefore best suited to market participants with a long-term investment horizon and a healthy risk tolerance. How a Growth Fund Works The high-risk, high-reward mantra of growth funds can make them ideal for those not retiring anytime soon. Typically, investors need a tolerance for risk and a holding period with a time horizon of five to ten years. Growth fund holdings often have high price-to-earnings (P/E) and price-to-sales (P/S) multiples. This trade-off from investors is the above-average revenue and earnings gains these companies produce. Types of Growth Funds Growth funds, along with value funds and blend funds, are one of the main types of mutual funds and exchange traded funds (ETFs) They are more volatile than funds in the value and blend categories. Growth funds are typically split by market capitalization, with funds representing small-cap, mid-cap, and large-cap groupings. Large-cap growth mutual funds are one of the largest types of mutual funds in terms of market share. Large-blend funds, which offer investors value and growth, are also very popular. Foreign large-cap growth funds are much lower in terms of market share. Foreign growth funds are becoming more common for investors who want to take advantage of global growth. These funds invest in international stocks posting strong revenue and earnings growth. For international growth funds, technology and consumer sectors are the most common. Large internet names such as Tencent (TCTZF), Baidu (BIDU), and Alibaba (BABA) can be found among the top ten holdings for many international growth funds. Largest Growth Fund One of the largest growth funds is the Growth Fund of America (AGTHX) from American Funds. This mutual fund has over $253 billion in assets under management (AUM) as of March 2022 and the stock price is up 10% over the last year, despite the market volatility. The fund's average annual return has been 14.28% over the last ten years, as of Feb. 28, 2022. The Growth Fund of America has Tesla, as its largest holding, representing 7.1% of assets. Technology stocks represent the largest sector weighting at 34.9%. Consumer Discretionary stocks follow closely behind with 24.3% of assets. Technology stocks are a major part of growth funds. With high growth and high P/E and P/S ratios, technology stocks fit the criteria perfectly for growth funds. Performance of Growth Funds The majority of the best performing large-company stock funds over the last decade have been growth funds. For example, the Morgan Stanley Multi Cap Growth A (CPOAX) is the best performing large-company stock fund over the last ten years, with an annualized return of 23.3%. Currently, its top three holdings include Snowflake, Inc. (SNOW), Cloudflare, Inc. (NET), and The Trade Desk (TTD).

https://www.investopedia.com/medicare-premiums-deductibles-and-coinsurance-amounts-released-for-2022-5209933

Medicare Premiums to Go up in 2022

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The Centers for Medicare &amp; Medicaid Services has announced increases in premiums, deductibles, and coinsurance for Medicare Parts A and B in 2022, as well as new income-related adjustments for Medicare Part D drug coverage. Here's a quick summary of what to expect if you participate in these programs.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Premiums, deductibles, and coinsurance for Medicare Parts A and B will increase in 2022. </li><li>The income-related adjustments for some Medicare Part D participants are rising too.</li><li>The Centers for Medicare &amp; Medicaid Services blames rising healthcare costs and other factors.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-medicare-costs-will-rise-in-2022"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> How Medicare Costs Will Rise in 2022 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Each year, the Centers for Medicare and Medicaid Services adjusts the costs that Medicare recipients must pay in the form of premiums, deductibles, and coinsurance. Here's a breakdown of the new numbers for 2022.<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-subheading__text"> Medicare Part A </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicare-part-hospital-insurance.asp">Medicare Part A</a> covers inpatient hospital, skilled nursing facility, hospice, and inpatient rehabilitation care, as well as some home healthcare services. According to the federal government, roughly 99% of Medicare beneficiaries don't have to pay a premium for Part A coverage because they meet the employment requirement (meaning that they paid Medicare payroll taxes for a sufficient number of years). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> For those who don't meet that requirement and must pay for Part A, here's what to expect: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> <li>Individuals who are age 65 or older and have at least 30 quarters of coverage, or are married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium of $274 in 2022. That's a $15 increase from 2021.<span class="ql-inline-citation" data-cite="1"></span></li><li>Certain older individuals who have less than 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlement must pay the full premium of $499 a month in 2022, a $28 increase from 2021.<span class="ql-inline-citation" data-cite="1"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Additionally, Part A deductibles and coinsurance will be higher than in 2021, as the following table indicates:<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_17-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Part A Deductibles and Coinsurance for 2021 vs. 2022</th> </tr> </thead> <tbody data-check="-1"> <tr> <td></td> <td> 2021</td> <td>2022</td> </tr> <tr> <td>Inpatient hospital deductible</td> <td>$1,484</td> <td>$1,556</td> </tr> <tr> <td>Daily coinsurance for the 61st to 90th day</td> <td>$371</td> <td>$389</td> </tr> <tr> <td>Daily coinsurance for lifetime reserve days</td> <td>$742</td> <td>$778</td> </tr> <tr> <td>Skilled nursing facility coinsurance</td> <td>$185.50</td> <td>$194.50</td> </tr> </tbody> </table> <figcaption>Source: CMS.gov</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-subheading__text"> Medicare Part B </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicare-part-b-premiums.asp">Medicare Part B</a> covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services that aren't covered by Medicare Part A.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The Centers for Medicare &amp; Medicaid Services attributes increased costs related to Part B to rising prices and utilization across the U.S. healthcare system. among other factors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The standard monthly premium for Medicare Part B will be $170.10 in 2022, an increase of $21.60 from 2021. The annual deductible will be $233, an increase of $30.<span class="ql-inline-citation" data-cite="1"></span> After meeting the annual deductible, Part B recipients typically pay coinsurance equal to 20% of the Medicare-approved amount for most services.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> While many Part B recipients pay the standard monthly premium, those with higher incomes pay more. The following table shows premiums for 2022, based on modified adjusted gross income (MAGI) and tax-filing status:<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_28-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Medicare Part B Monthly Premiums for 2022</th> </tr> </thead> <tbody data-check="-1"> <tr> <td>Individual Tax Return</td> <td>Joint Tax Return</td> <td>Monthly Premium</td> </tr> <tr> <td>$0 - $91,000</td> <td>$0 - $182,000</td> <td>$170.10</td> </tr> <tr> <td>$91,001 - $114,000</td> <td>$182,001 - $228,000</td> <td>$238.10</td> </tr> <tr> <td>$114,001 - $142,000</td> <td>$228,001 - $284,000</td> <td>$340.20</td> </tr> <tr> <td>$142,001 - $170,000</td> <td>$284,001 - $340,000</td> <td>$442.30</td> </tr> <tr> <td>$170,001 - $499,999</td> <td>$340,001 - $749,999</td> <td>$544.30</td> </tr> <tr> <td>$500,000 or more</td> <td> $750,000 or more</td> <td>$578.30</td> </tr> </tbody> </table> <figcaption>Source: CMS.gov</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> For Medicare Part B enrollees who are married but file separate returns, the premium is $170.10 for those with a modified adjusted gross income of $91,000 or less, $544.30 for those with a MAGI greater than $91,000 and less than $409,000, and $578.30 for those with a MAGI of $409,000 or more.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Medicare Part D </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Medicare Part D provides coverage for prescription medications. For 2022, the Centers for Medicare &amp; Medicaid Services announced changes to the income-related monthly adjustments that will affect about 8% of enrollees. (The premiums themselves will vary from plan to plan.) Again, the numbers in the following table are based on your modified adjusted gross income:<span class="ql-inline-citation" data-cite="1"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_35-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Medicare Part D Income-Related Monthly Adjustment Amounts</th> </tr> </thead> <tbody data-check="-1"> <tr> <td> Individual Tax Return</td> <td>Joint Tax Return</td> <td>Monthly Adjustment</td> </tr> <tr> <td> $0 - $91,000</td> <td>$0 - $182,000</td> <td>$0</td> </tr> <tr> <td>$91,001 - $114,000</td> <td>$182,001 - $228,000</td> <td>$12.40</td> </tr> <tr> <td>$114,001 - $142,000</td> <td>$228,001 - $284,000</td> <td>$32.10</td> </tr> <tr> <td>$142,001 - $170,000</td> <td>$284,001 - $340,000</td> <td>$51.70</td> </tr> <tr> <td>$170,001 - $499,999</td> <td>$340,001 - $749,999</td> <td>$71.30</td> </tr> <tr> <td>$500,000 or more</td> <td>$750,000 or more</td> <td>$77.90</td> </tr> </tbody> </table> <figcaption>Source: CMS.gov</figcaption> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> For enrollees who are married but file separate tax returns, the adjustment is $0 for those with a MAGI of $91,000 or less, $71.30 for those with a MAGI greater than $91,000 and less than $409,000, and $77.90 for those with a MAGI of $409,000 or more.<br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

The Centers for Medicare & Medicaid Services has announced increases in premiums, deductibles, and coinsurance for Medicare Parts A and B in 2022, as well as new income-related adjustments for Medicare Part D drug coverage. Here's a quick summary of what to expect if you participate in these programs. ### Key Takeaways * Premiums, deductibles, and coinsurance for Medicare Parts A and B will increase in 2022. * The income-related adjustments for some Medicare Part D participants are rising too. * The Centers for Medicare & Medicaid Services blames rising healthcare costs and other factors. ## How Medicare Costs Will Rise in 2022 Each year, the Centers for Medicare and Medicaid Services adjusts the costs that Medicare recipients must pay in the form of premiums, deductibles, and coinsurance. Here's a breakdown of the new numbers for 2022. ### Medicare Part A [Medicare Part A](https://www.investopedia.com/terms/m/medicare-part-hospital-insurance.asp) covers inpatient hospital, skilled nursing facility, hospice, and inpatient rehabilitation care, as well as some home healthcare services. According to the federal government, roughly 99% of Medicare beneficiaries don't have to pay a premium for Part A coverage because they meet the employment requirement (meaning that they paid Medicare payroll taxes for a sufficient number of years). For those who don't meet that requirement and must pay for Part A, here's what to expect: * Individuals who are age 65 or older and have at least 30 quarters of coverage, or are married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium of $274 in 2022. That's a $15 increase from 2021. * Certain older individuals who have less than 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlement must pay the full premium of $499 a month in 2022, a $28 increase from 2021. Additionally, Part A deductibles and coinsurance will be higher than in 2021, as the following table indicates: | Part A Deductibles and Coinsurance for 2021 vs. 2022 | | | | --- | --- | --- | | | 2021 | 2022 | | Inpatient hospital deductible | $1,484 | $1,556 | | Daily coinsurance for the 61st to 90th day | $371 | $389 | | Daily coinsurance for lifetime reserve days | $742 | $778 | | Skilled nursing facility coinsurance | $185.50 | $194.50 | Source: CMS.gov ### Medicare Part B [Medicare Part B](https://www.investopedia.com/terms/m/medicare-part-b-premiums.asp) covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services that aren't covered by Medicare Part A.  The Centers for Medicare & Medicaid Services attributes increased costs related to Part B to rising prices and utilization across the U.S. healthcare system. among other factors. The standard monthly premium for Medicare Part B will be $170.10 in 2022, an increase of $21.60 from 2021. The annual deductible will be $233, an increase of $30. After meeting the annual deductible, Part B recipients typically pay coinsurance equal to 20% of the Medicare-approved amount for most services. While many Part B recipients pay the standard monthly premium, those with higher incomes pay more. The following table shows premiums for 2022, based on modified adjusted gross income (MAGI) and tax-filing status: | Medicare Part B Monthly Premiums for 2022 | | | | --- | --- | --- | | Individual Tax Return | Joint Tax Return | Monthly Premium | | $0 - $91,000 | $0 - $182,000 | $170.10 | | $91,001 - $114,000 | $182,001 - $228,000 | $238.10 | | $114,001 - $142,000 | $228,001 - $284,000 | $340.20 | | $142,001 - $170,000 | $284,001 - $340,000 | $442.30 | | $170,001 - $499,999 | $340,001 - $749,999 | $544.30 | | $500,000 or more | $750,000 or more | $578.30 | Source: CMS.gov For Medicare Part B enrollees who are married but file separate returns, the premium is $170.10 for those with a modified adjusted gross income of $91,000 or less, $544.30 for those with a MAGI greater than $91,000 and less than $409,000, and $578.30 for those with a MAGI of $409,000 or more. ### Medicare Part D Medicare Part D provides coverage for prescription medications. For 2022, the Centers for Medicare & Medicaid Services announced changes to the income-related monthly adjustments that will affect about 8% of enrollees. (The premiums themselves will vary from plan to plan.) Again, the numbers in the following table are based on your modified adjusted gross income: | Medicare Part D Income-Related Monthly Adjustment Amounts | | | | --- | --- | --- | | Individual Tax Return | Joint Tax Return | Monthly Adjustment | | $0 - $91,000 | $0 - $182,000 | $0 | | $91,001 - $114,000 | $182,001 - $228,000 | $12.40 | | $114,001 - $142,000 | $228,001 - $284,000 | $32.10 | | $142,001 - $170,000 | $284,001 - $340,000 | $51.70 | | $170,001 - $499,999 | $340,001 - $749,999 | $71.30 | | $500,000 or more | $750,000 or more | $77.90 | Source: CMS.gov For enrollees who are married but file separate tax returns, the adjustment is $0 for those with a MAGI of $91,000 or less, $71.30 for those with a MAGI greater than $91,000 and less than $409,000, and $77.90 for those with a MAGI of $409,000 or more. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

The Centers for Medicare & Medicaid Services has announced increases in premiums, deductibles, and coinsurance for Medicare Parts A and B in 2022, as well as new income-related adjustments for Medicare Part D drug coverage. Here's a quick summary of what to expect if you participate in these programs. Key Takeaways Premiums, deductibles, and coinsurance for Medicare Parts A and B will increase in 2022. The income-related adjustments for some Medicare Part D participants are rising too.The Centers for Medicare & Medicaid Services blames rising healthcare costs and other factors. How Medicare Costs Will Rise in 2022 Each year, the Centers for Medicare and Medicaid Services adjusts the costs that Medicare recipients must pay in the form of premiums, deductibles, and coinsurance. Here's a breakdown of the new numbers for 2022. Medicare Part A Medicare Part A covers inpatient hospital, skilled nursing facility, hospice, and inpatient rehabilitation care, as well as some home healthcare services. According to the federal government, roughly 99% of Medicare beneficiaries don't have to pay a premium for Part A coverage because they meet the employment requirement (meaning that they paid Medicare payroll taxes for a sufficient number of years). For those who don't meet that requirement and must pay for Part A, here's what to expect: Individuals who are age 65 or older and have at least 30 quarters of coverage, or are married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium of $274 in 2022. That's a $15 increase from 2021.Certain older individuals who have less than 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlement must pay the full premium of $499 a month in 2022, a $28 increase from 2021. Additionally, Part A deductibles and coinsurance will be higher than in 2021, as the following table indicates: Part A Deductibles and Coinsurance for 2021 vs. 2022  2021 2022 Inpatient hospital deductible $1,484 $1,556 Daily coinsurance for the 61st to 90th day $371 $389 Daily coinsurance for lifetime reserve days $742 $778 Skilled nursing facility coinsurance $185.50 $194.50 Source: CMS.gov Medicare Part B Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services that aren't covered by Medicare Part A.  The Centers for Medicare & Medicaid Services attributes increased costs related to Part B to rising prices and utilization across the U.S. healthcare system. among other factors. The standard monthly premium for Medicare Part B will be $170.10 in 2022, an increase of $21.60 from 2021. The annual deductible will be $233, an increase of $30. After meeting the annual deductible, Part B recipients typically pay coinsurance equal to 20% of the Medicare-approved amount for most services. While many Part B recipients pay the standard monthly premium, those with higher incomes pay more. The following table shows premiums for 2022, based on modified adjusted gross income (MAGI) and tax-filing status: Medicare Part B Monthly Premiums for 2022 Individual Tax Return Joint Tax Return Monthly Premium $0 - $91,000 $0 - $182,000 $170.10 $91,001 - $114,000 $182,001 - $228,000 $238.10 $114,001 - $142,000 $228,001 - $284,000 $340.20 $142,001 - $170,000 $284,001 - $340,000 $442.30 $170,001 - $499,999 $340,001 - $749,999 $544.30 $500,000 or more  $750,000 or more $578.30 Source: CMS.gov For Medicare Part B enrollees who are married but file separate returns, the premium is $170.10 for those with a modified adjusted gross income of $91,000 or less, $544.30 for those with a MAGI greater than $91,000 and less than $409,000, and $578.30 for those with a MAGI of $409,000 or more. Medicare Part D Medicare Part D provides coverage for prescription medications. For 2022, the Centers for Medicare & Medicaid Services announced changes to the income-related monthly adjustments that will affect about 8% of enrollees. (The premiums themselves will vary from plan to plan.) Again, the numbers in the following table are based on your modified adjusted gross income: Medicare Part D Income-Related Monthly Adjustment Amounts  Individual Tax Return Joint Tax Return Monthly Adjustment  $0 - $91,000 $0 - $182,000 $0 $91,001 - $114,000 $182,001 - $228,000 $12.40 $114,001 - $142,000 $228,001 - $284,000 $32.10 $142,001 - $170,000 $284,001 - $340,000 $51.70 $170,001 - $499,999 $340,001 - $749,999 $71.30 $500,000 or more $750,000 or more $77.90 Source: CMS.gov For enrollees who are married but file separate tax returns, the adjustment is $0 for those with a MAGI of $91,000 or less, $71.30 for those with a MAGI greater than $91,000 and less than $409,000, and $77.90 for those with a MAGI of $409,000 or more. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/green-dot-bank-review-4847194

Green Dot Bank Review

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="comp product-review-content product-review-content--finance product-review--base" id="product-review-content--finance_1-0"> <div class="comp js-toc-appear article-container article-intro mntl-block" id="article-intro_1-0"> <div class="comp product-card" data-tracking-container="true" data-tracking-id="product-card" id="product-card_1-0" style="--imgWidth: 860px"> <div class="product-card__content"> <div class="product-card__intro expert-content"> <figure class="comp figure-article figure-3x2 upscaleImg product-card__image litho-figure-article mntl-universal-primary-image primary-image" id="product-card__image_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Green Dot" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/VFTpXRoeD4SwvLQAg9M1plCcdkM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCAAIAPMAAEO9Nk3CQE7BQk/CQ0/BRVHBQ33SdYzVg6Hem/7+/v/+/////0O9NkO9NkO9NkO9NiwAAAAACAAIAEMILAAXCBwwQOACggQXEAgwIEEBAAcICDAwEGHCgxYLDni4AIGAgwoQDjSI0WBAADs=')" width="1500"/> <noscript> <img alt="Green Dot" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" src="https://www.investopedia.com/thmb/VFTpXRoeD4SwvLQAg9M1plCcdkM=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Green Dot</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-article figure-3x2 upscaleImg product-card__image litho-figure-article mntl-universal-primary-image primary-image --> <div class="comp js-sticky-riser-show product-card__cta commerce-block mntl-block" id="product-card__cta_1-0"> <a class="commerce-button mntl-text-link" data-tracking-container="false" href="https://www.greendot.com/" id="commerce-button_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: commerce-button mntl-text-link --> </div><!-- end: comp js-sticky-riser-show product-card__cta commerce-block mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> Green Dot Bank is an online bank that offers competitive rates through its high-yield savings account and unlimited cash-back rewards via its spending account. Founded in 1999, Green Dot is part of the Green Dot Corporation.<span class="ql-inline-citation" data-cite="19"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block" data-click-action="Product Tab Click" data-tracking-container="true" data-tracking-id="Full Product Review"> <ul class="tabbed-sc-block__tabs"> <li class="tabbed-sc-block__tab js-tabbed-tab is-active is-initial-load" data-tab-index="1"><span class="tabbed-sc-block__title">Pros &amp; Cons</span></li> <li class="tabbed-sc-block__tab js-tabbed-tab" data-tab-index="2"><span class="tabbed-sc-block__title">Company Overview</span></li> </ul> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_1-0-2"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Competitive APY on high yield savings account</p></li> <li><p>Online and mobile purchases earn 2% cash back</p></li> <li><p>Early access to direct deposited paychecks</p></li> <li><p>No overdraft fees</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Monthly fee if you don't meet minimum</p></li> <li><p>Out-of-network ATM fee</p></li> <li><p>Steep fee for paper checks</p></li> <li><p>No joint accounts</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="2"> <div class="comp mntl-sc-block--product-spec-tool mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block" id="mntl-sc-block_1-0-4"> <div class="comp product-spec-tool definition-list" id="product-spec-tool_1-0"> <ul class="definition-list__container"> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Year Founded</span> <span class="definition-list__item-content definition-list__item-content-0"> 1978 </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Official Website</span> <span class="definition-list__item-content definition-list__item-content-1"> www.greendot.com </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Banking Products Offered</span> <span class="definition-list__item-content definition-list__item-content-2"> Savings, cash back banking, credit card </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Customer Service</span> <span class="definition-list__item-content definition-list__item-content-3"> Phone: 866-795-7597. Account access online or via app 24/7. </span> </span> </li> </ul> </div><!-- end: comp product-spec-tool definition-list --> </div><!-- end: comp mntl-sc-block--product-spec-tool mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block --> </div> </div> </div> </div><!-- end: comp product-card --> </div><!-- end: comp js-toc-appear article-container article-intro mntl-block --> <div class="loc body-content article-container"> <div class="comp article-body article-content mntl-block" id="article-content_1-0"> <div class="comp left-nav js-sticky-container product-review__left-nav mntl-block" id="product-review__left-nav_1-0"> <div class="comp mntl-sticky-toc product-review__toc--finance product-review__toc sticky-toc-widget mntl-block" data-desktop-bp="54em" data-tracking-container="true" id="product-review__toc_1-0"> <div class="comp sticky-toc-widget__product-container mntl-block" id="sticky-toc-widget__product-container_1-0"> <figure class="comp figure-article sticky-toc-widget__image litho-figure-article mntl-universal-primary-image primary-image" id="sticky-toc-widget__image_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Green Dot" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/Ci8ViQjo_Kpo_v8FJKwxeyVBpTQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCAAIAPMAAEO9Nk3CQE7BQk/CQ0/BRVHBQ33SdYzVg6Hem/7+/v/+/////0O9NkO9NkO9NkO9NiwAAAAACAAIAEMILAAXCBwwQOACggQXEAgwIEEBAAcICDAwEGHCgxYLDni4AIGAgwoQDjSI0WBAADs=')" width="1500"/> <noscript> <img alt="Green Dot" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/Ci8ViQjo_Kpo_v8FJKwxeyVBpTQ=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_2-0"> <span class="figure-article-caption-owner"><p>Green Dot</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-article sticky-toc-widget__image litho-figure-article mntl-universal-primary-image primary-image --> <div class="comp sticky-toc-widget__cta commerce-block mntl-block" id="sticky-toc-widget__cta_1-0"> <a class="commerce-button mntl-text-link" data-tracking-container="false" href="https://www.greendot.com/" id="commerce-button_2-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: commerce-button mntl-text-link --> </div><!-- end: comp sticky-toc-widget__cta commerce-block mntl-block --> </div><!-- end: comp sticky-toc-widget__product-container mntl-block --> <div class="comp sticky-toc-widget sticky-toc-widget__toc sticky-toc--finance sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="sticky-toc-widget__toc_3-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_3-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_3-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_3-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_5-0"> Table of Contents</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_3-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="View All" id="mntl-toc-toggle__btn_3-0"> View All</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-Green Dot Bank Review" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_3-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_6-0"> Green Dot Bank Review</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_3-0"> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Pros Explained" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-explained" id="mntl-toc__list-item-link_3-0" rel="nocaes"><span class="link__wrapper">Pros Explained</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Cons Explained" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-cons-explained" id="mntl-toc__list-item-link_3-0-1" rel="nocaes"><span class="link__wrapper">Cons Explained</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Best For" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-who-is-green-dot-bank-best-for" id="mntl-toc__list-item-link_3-0-2" rel="nocaes"><span class="link__wrapper">Best For</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bank Offerings" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-does-green-dot-bank-offer" id="mntl-toc__list-item-link_3-0-3" rel="nocaes"><span class="link__wrapper">Bank Offerings</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Customer Service" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-green-dot-bank-customer-service" id="mntl-toc__list-item-link_3-0-4" rel="nocaes"><span class="link__wrapper">Customer Service</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-bank-with-green-dot" id="mntl-toc__list-item-link_3-0-5" rel="nocaes"><span class="link__wrapper">How to Bank</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Verdict" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-final-verdict" id="mntl-toc__list-item-link_3-0-6" rel="nocaes"><span class="link__wrapper">Final Verdict</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-7"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-7"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-frequently-asked-questions" id="mntl-toc__list-item-link_3-0-7" rel="nocaes"><span class="link__wrapper">FAQs</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-8"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-8"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_3-0-8" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc-widget__toc sticky-toc--finance sticky-toc--base mntl-sticky-toc mntl-block --> </div><!-- end: comp mntl-sticky-toc product-review__toc--finance product-review__toc sticky-toc-widget mntl-block --> </div><!-- end: comp left-nav js-sticky-container product-review__left-nav mntl-block --> <div class="comp mntl-sc-page--commerce expert-content product-review__content prm-sc-page mntl-sc-page mntl-block" data-tracking-container="true" id="product-review__content_1-0"> <span class="heading-toc" id="toc-pros-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0"> <span class="mntl-sc-block-heading__text"> Pros Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-1"> <li><strong>Competitive APY on high-yield savings account:</strong> Green Dot's high-yield savings feature linked to the Cash Back Visa Debit Card earns a 2% <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apy.asp">annual percentage yield (APY)</a> on balances of up to $10,000. The Go2bank Visa Debit Card earns a quarterly 4.5% APY on balances up to $5,000.<span class="ql-inline-citation" data-cite="12"></span></li> <li><strong>Online and mobile purchases earn 2% cash back:</strong> The Cash Back Visa Debit Card earns unlimited 2% cash back on online purchases, including in-app purchases and other mobile purchases. There is no cap on cash-back earnings.<span class="ql-inline-citation" data-cite="10"></span></li> <li><strong>Early access to direct deposited paychecks:</strong> You can get your paycheck up to two days early with Green Dot's ASAP Direct Deposit. Eligibility for early access depends on your employer's payment processing.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>No overdraft fees:</strong> You are protected from fees on overdrafts of up to $200, with eligible direct deposits. If you don't have funds to cover a purchase, the transaction may be declined.<span class="ql-inline-citation" data-cite="11"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-cons-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-2"> <span class="mntl-sc-block-heading__text"> Cons Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-3"> <li><strong>Monthly fees:</strong> Green Dot charges a $7.95 monthly fee for its Visa Debit Card account unless you direct deposit $500 or more in the previous month. Go2bank Visa Debit Card's monthly fee can also be waived with an eligible direct deposit. The $9.95 monthly fee for the Cash Back Visa Debit Card cannot be waived.<span class="ql-inline-citation" data-cite="14"></span> The Pay As You Go Visa Debit Card has no monthly fee.<span class="ql-inline-citation" data-cite="13"></span></li> <li><strong>Out-of-network ATM fee</strong>: Green Dot's ATM network is free for the Cash Back Visa Debit Card and the Go2bank Visa Debit Card. However, if you have to use one that's out of network, the bank charges a $3 fee on top of any charges from the ATM operator.<span class="ql-inline-citation" data-cite="15"></span></li> <li><strong>Limited cash-back access:</strong> Restricted to a deposit of earnings once a year, on the account's anniversary.</li> <li><strong>No joint accounts</strong>: There are no joint or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/custodialaccount.asp">custodial account</a> options.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-who-is-green-dot-bank-best-for"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-4"> <span class="mntl-sc-block-heading__text"> Who Is Green Dot Bank Best For? </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-5"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/" rel="sponsored nofollow">Green Dot</a> is best for people who do most of their banking online or through mobile access. It may be a good fit for those who want: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-6"> <li>A competitive interest rate on savings</li><li>Unlimited 2% cash-back rewards on most spending</li><li>No minimum balance requirements</li><li>Monthly fees that can be waived with direct deposits</li><li>Cash deposits at retail stores</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-what-does-green-dot-bank-offer"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-7"> <span class="mntl-sc-block-heading__text"> What Does Green Dot Bank Offer? </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-8"> Green Dot is not a full-service online bank, but it offers debit cards that feature online banking services and attractive returns on savings. Here are the Cash Back Visa Debit Card and the high-yield savings account, as examples. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-9"> <span class="mntl-sc-block-subheading__text"> Cash Back Visa Debit Card </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-10"> The Cash Back Account is a spending account that earns rewards for card purchases. It's not technically a checking account but acts similar to one. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-11"> The main draw is the unlimited 2% cash back that's earned on select online purchases. Not all spending earns cash back, such as airline tickets, gift cards, and bill payments.<span class="ql-inline-citation" data-cite="16"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-12"> Besides a complimentary debit card, customers also get access to services including: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-13"> <li>Free cash deposits at select retail locations</li><li>No overdraft fees with eligible direct deposit</li><li>Mobile banking</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-14"> A major drawback of the unlimited Cash Back Visa Debit Card Account is the $9.95 monthly fee.<span class="ql-inline-citation" data-cite="18"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0-15"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>To access your cash-back rewards balance, you need to keep your account open at least 12 months and it needs to be in good standing at the time. Accrued rewards are deposited only once a year on the account anniversary.<span class="ql-inline-citation" data-cite="17"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-16"> <span class="mntl-sc-block-subheading__text"> High-Yield Savings Account </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-17"> When you open a Cash Back Visa Debit Card or the Go2bank Visa Debit Card, you also get access to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp">high-yield savings account</a>. The first has no monthly fee and currently earns 2% APY on all balances of $10,000 or less, which is more than the current national average. The Go2bank Visa Debit Card earns 4.5% APY on balances up to $5,000 and pays quarterly.<span class="ql-inline-citation" data-cite="12"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-18"> However, interest is calculated differently than it is at most banks and is only applied to your account once at the end of a 12-month period. Take the Cash Back Visa Debit Card. Interest is calculated by taking the average daily balance of your savings account for each day over a 12-month period, starting when you opened the account, and multiplying that by 2%.<span class="ql-inline-citation" data-cite="17"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-19"> Like all banks covered by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corporation (FDIC)</a>, money held in Green Dot accounts is FDIC-insured up to $250,000 per depositor. Keep in mind the $250,000 is for all accounts, including any you may have with Green Dot Corporation's other banking subsidiaries.<span class="ql-inline-citation" data-cite="20"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-green-dot-bank-customer-service"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-20"> <span class="mntl-sc-block-heading__text"> Green Dot Bank Customer Service </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-21"> For help, customers can call 866-795-7597. For disputes on unauthorized charges on accounts, you need to submit a dispute form. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-22"> Green Dot has no physical bank branches, but customers can access their accounts 24/7 online or through its mobile app, which is available for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://apps.apple.com/us/app/green-dot-mobile-banking/id437092808" rel="sponsored nofollow">iOS</a> (3.6 stars) or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://play.google.com/store/apps/details?id=com.cardinalcommerce.greendot" rel="sponsored nofollow">Android</a> (4.1 stars). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-bank-with-green-dot"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-23"> <span class="mntl-sc-block-heading__text"> How To Bank With Green Dot </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-24"> To open an account with Green Dot, go to its website or download the app and fill out the account application. You also have the option to open an account in-store at participating retailers, which include Walmart, 7-Eleven, and Rite Aid, among others. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-25"> Similar to other banks, you'll need to provide personal information to open an account. This includes your mailing address, phone number, Social Security number, and date of birth. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-final-verdict"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-26"> <span class="mntl-sc-block-heading__text"> Final Verdict </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-27"> If you're in search of an online bank that pays competitive interest rates and cash-back earnings, Green Dot might be a good fit. Keep in mind that your Cash Back Visa Debit Card interest/rewards are only accessible once every 12 months. Moreover, if you plan to keep more than $10,000 in savings, other online banks may pay greater interest in the long run. With a $9.95 monthly fee for the Cash Back card, consider opening a Green Dot account only if you think your earnings will outweigh the total for monthly fees. Be sure to check for updates to the APY, fees, and other account details before opening an account.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-frequently-asked-questions"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-28"> <span class="mntl-sc-block-heading__text"> Frequently Asked Questions </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-29"> <span class="mntl-sc-block-subheading__text"> Is Green Dot Bank Owned by Walmart? </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-30"> No, Green Dot Bank is owned by Green Dot Corporation, not Walmart. However, Walmart owns shares in Green Dot and is a retail distributor of some of its products, including the Go2bank Visa Debit Card. Green Dot and Walmart also partnered to launch the Walmart MoneyCard. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-31"> <span class="mntl-sc-block-subheading__text"> What Are Green Dot's ATM Limits and Fees? </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-32"> With the Green Dot Cash Back Visa Debit Card, you can make 4 withdrawals per month at in-network ATMs for free. Beyond that, you'll be charged $3.00 per withdrawal (plus potential charges by the ATM owner).<span class="ql-inline-citation" data-cite="7"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-33"> <span class="mntl-sc-block-subheading__text"> Does Green Dot Have a Physical Bank Location? </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-34"> Green Dot has no brick-and-mortar branches. Its service is focused on online and mobile accounts and the use of ATMs for withdrawals. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-35"> <span class="mntl-sc-block-subheading__text"> What Is Green Dot Corporation? </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-36"> It's a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fintech.asp">fintech</a> and bank holding company that creates financial tools for individual customers and corporate partners such as Apple, Amazon, CVS Pharmacy, and Walmart. It functions on cloud-based technology and has 67 million accounts. Green Dot Bank is a subsidiary.<span class="ql-inline-citation" data-cite="8"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-37"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-38"> Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks including products available, interest rates, fees, and accessibility to ensure that our content helps users make the right decision for their savings and banking needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp review-content js-sticky-riser-hide mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="false" data-link-closest-header="false" data-tracking-container="true" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_2-0-39"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-retailer-type="none" data-tracking-container="true" href="https://www.greendot.com/" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp review-content js-sticky-riser-hide mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div><!-- end: comp mntl-sc-page--commerce expert-content product-review__content prm-sc-page mntl-sc-page mntl-block --> </div><!-- end: comp article-body article-content mntl-block --> </div> </div><!-- end: comp product-review-content product-review-content--finance product-review--base --> </span> </div><div class="loc content-bottom"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-19"><p>Green Dot. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/meet-green-dot" rel="nofollow sponsored">Meet Green Dot</a>."</p></li> <li class="mntl-sources__source" id="citation-12"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/personal-banking/our-products" rel="nofollow sponsored">Choose the Right Card for You</a>."</p></li> <li class="mntl-sources__source" id="citation-10"><p>Green Dot Bank. 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"<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/helpcenter/product-comparison/which-debit-cards-offer-no-monthly-fees-or-monthly-fee-waivers" rel="nofollow sponsored">Which Debit Cards Offer No Monthly Fees or Monthly Fee Waivers?</a>"</p></li> <li class="mntl-sources__source" id="citation-15"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/helpcenter/product-comparison/which-debit-cards-offer-free-atm-networks" rel="nofollow sponsored">Which Debit Cards Offer Free ATM Networks?</a>"</p></li> <li class="mntl-sources__source" id="citation-16"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/products/cash-back-debit-card" rel="nofollow sponsored">Cash Back Visa Debit Card</a>."</p></li> <li class="mntl-sources__source" id="citation-18"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/content/dam/greendot/legal/about/docs/gdCashbackod2daav2cash.pdf" rel="nofollow sponsored">Reloadable Cash Back Visa Debit Card Deposit Account Agreement</a>," Pages 4, 56.</p></li> <li class="mntl-sources__source" id="citation-17"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/content/dam/greendot/legal/about/docs/gdCashbackod2daav2cash.pdf" rel="nofollow sponsored">Reloadable Cash Back Visa Debit Card Deposit Account Agreement</a>," Page 39.</p></li> <li class="mntl-sources__source" id="citation-20"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/" rel="nofollow sponsored">Mobile Bank Accounts &amp; Debit Cards</a>."</p></li> <li class="mntl-sources__source" id="citation-7"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/helpcenter/use-your-card/atms/what-are-the-atm-fees-and-limits" rel="nofollow sponsored">What Are the ATM Fees and Limits?</a>"</p></li> <li class="mntl-sources__source" id="citation-8"><p>Green Dot Bank. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.greendot.com/meet-green-dot" rel="nofollow sponsored">Meet Green Dot</a>."</p></li> </ol> </div> </div></div> <div class="comp prm-recirc related-recirc-section--articles mntl-block" data-tracking-container="true" id="prm-recirc_1-0"><section class="comp related-articles" data-tracking-container="true" id="related-articles_1-0"> <span class="related-articles__header type--camel"> Related Articles </span> <div class="loc recirc-content"><div class="comp related-articles__card-list-1 card-list--related-articles mntl-document-card-list mntl-card-list mntl-block" data-chunk="36" id="related-articles__card-list-1_1-0"><a class="comp mntl-card-list-items mntl-document-card mntl-card related-articles__link card" data-cta="Read Now ▸" data-doc-id="8644041" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/regions-bank-review-8644041" id="mntl-card-list-items_1-0"> 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:fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg) :fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg) Green Dot [Open Account](https://www.greendot.com/) Green Dot Bank is an online bank that offers competitive rates through its high-yield savings account and unlimited cash-back rewards via its spending account. Founded in 1999, Green Dot is part of the Green Dot Corporation. * Pros & Cons * Company Overview Pros & Cons Pros * Competitive APY on high yield savings account * Online and mobile purchases earn 2% cash back * Early access to direct deposited paychecks * No overdraft fees Cons * Monthly fee if you don't meet minimum * Out-of-network ATM fee * Steep fee for paper checks * No joint accounts Company Overview * Year Founded 1978 * Official Website www.greendot.com * Banking Products Offered Savings, cash back banking, credit card * Customer Service Phone: 866-795-7597. Account access online or via app 24/7. :fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg) :fill(white):max_bytes(150000):strip_icc()/Green-dot-255692e43402455ea211f7fa1e5cf1ff.jpg) Green Dot [Open Account](https://www.greendot.com/) Table of Contents View All Green Dot Bank Review * [Pros Explained](#toc-pros-explained) * [Cons Explained](#toc-cons-explained) * [Best For](#toc-who-is-green-dot-bank-best-for) * [Bank Offerings](#toc-what-does-green-dot-bank-offer) * [Customer Service](#toc-green-dot-bank-customer-service) * [How to Bank](#toc-how-to-bank-with-green-dot) * [Final Verdict](#toc-final-verdict) * [FAQs](#toc-frequently-asked-questions) * [Methodology](#toc-methodology) ## Pros Explained * **Competitive APY on high-yield savings account:** Green Dot's high-yield savings feature linked to the Cash Back Visa Debit Card earns a 2% [annual percentage yield (APY)](https://www.investopedia.com/terms/a/apy.asp) on balances of up to $10,000. The Go2bank Visa Debit Card earns a quarterly 4.5% APY on balances up to $5,000. * **Online and mobile purchases earn 2% cash back:** The Cash Back Visa Debit Card earns unlimited 2% cash back on online purchases, including in-app purchases and other mobile purchases. There is no cap on cash-back earnings. * **Early access to direct deposited paychecks:** You can get your paycheck up to two days early with Green Dot's ASAP Direct Deposit. Eligibility for early access depends on your employer's payment processing. * **No overdraft fees:** You are protected from fees on overdrafts of up to $200, with eligible direct deposits. If you don't have funds to cover a purchase, the transaction may be declined. ## Cons Explained * **Monthly fees:** Green Dot charges a $7.95 monthly fee for its Visa Debit Card account unless you direct deposit $500 or more in the previous month. Go2bank Visa Debit Card's monthly fee can also be waived with an eligible direct deposit. The $9.95 monthly fee for the Cash Back Visa Debit Card cannot be waived. The Pay As You Go Visa Debit Card has no monthly fee. * **Out-of-network ATM fee**: Green Dot's ATM network is free for the Cash Back Visa Debit Card and the Go2bank Visa Debit Card. However, if you have to use one that's out of network, the bank charges a $3 fee on top of any charges from the ATM operator. * **Limited cash-back access:** Restricted to a deposit of earnings once a year, on the account's anniversary. * **No joint accounts**: There are no joint or [custodial account](https://www.investopedia.com/terms/c/custodialaccount.asp) options. ## Who Is Green Dot Bank Best For? [Green Dot](https://www.greendot.com/) is best for people who do most of their banking online or through mobile access. It may be a good fit for those who want: * A competitive interest rate on savings * Unlimited 2% cash-back rewards on most spending * No minimum balance requirements * Monthly fees that can be waived with direct deposits * Cash deposits at retail stores ## What Does Green Dot Bank Offer? Green Dot is not a full-service online bank, but it offers debit cards that feature online banking services and attractive returns on savings. Here are the Cash Back Visa Debit Card and the high-yield savings account, as examples. ### Cash Back Visa Debit Card The Cash Back Account is a spending account that earns rewards for card purchases. It's not technically a checking account but acts similar to one. The main draw is the unlimited 2% cash back that's earned on select online purchases. Not all spending earns cash back, such as airline tickets, gift cards, and bill payments. Besides a complimentary debit card, customers also get access to services including: * Free cash deposits at select retail locations * No overdraft fees with eligible direct deposit * Mobile banking A major drawback of the unlimited Cash Back Visa Debit Card Account is the $9.95 monthly fee. To access your cash-back rewards balance, you need to keep your account open at least 12 months and it needs to be in good standing at the time. Accrued rewards are deposited only once a year on the account anniversary. ### High-Yield Savings Account When you open a Cash Back Visa Debit Card or the Go2bank Visa Debit Card, you also get access to a [high-yield savings account](https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp). The first has no monthly fee and currently earns 2% APY on all balances of $10,000 or less, which is more than the current national average. The Go2bank Visa Debit Card earns 4.5% APY on balances up to $5,000 and pays quarterly. However, interest is calculated differently than it is at most banks and is only applied to your account once at the end of a 12-month period. Take the Cash Back Visa Debit Card. Interest is calculated by taking the average daily balance of your savings account for each day over a 12-month period, starting when you opened the account, and multiplying that by 2%. Like all banks covered by the [Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/terms/f/fdic.asp), money held in Green Dot accounts is FDIC-insured up to $250,000 per depositor. Keep in mind the $250,000 is for all accounts, including any you may have with Green Dot Corporation's other banking subsidiaries. ## Green Dot Bank Customer Service For help, customers can call 866-795-7597. For disputes on unauthorized charges on accounts, you need to submit a dispute form. Green Dot has no physical bank branches, but customers can access their accounts 24/7 online or through its mobile app, which is available for [iOS](https://apps.apple.com/us/app/green-dot-mobile-banking/id437092808) (3.6 stars) or [Android](https://play.google.com/store/apps/details?id=com.cardinalcommerce.greendot) (4.1 stars). ## How To Bank With Green Dot To open an account with Green Dot, go to its website or download the app and fill out the account application. You also have the option to open an account in-store at participating retailers, which include Walmart, 7-Eleven, and Rite Aid, among others. Similar to other banks, you'll need to provide personal information to open an account. This includes your mailing address, phone number, Social Security number, and date of birth. ## Final Verdict If you're in search of an online bank that pays competitive interest rates and cash-back earnings, Green Dot might be a good fit. Keep in mind that your Cash Back Visa Debit Card interest/rewards are only accessible once every 12 months. Moreover, if you plan to keep more than $10,000 in savings, other online banks may pay greater interest in the long run. With a $9.95 monthly fee for the Cash Back card, consider opening a Green Dot account only if you think your earnings will outweigh the total for monthly fees. Be sure to check for updates to the APY, fees, and other account details before opening an account. ## Frequently Asked Questions ### Is Green Dot Bank Owned by Walmart? No, Green Dot Bank is owned by Green Dot Corporation, not Walmart. However, Walmart owns shares in Green Dot and is a retail distributor of some of its products, including the Go2bank Visa Debit Card. Green Dot and Walmart also partnered to launch the Walmart MoneyCard. ### What Are Green Dot's ATM Limits and Fees? With the Green Dot Cash Back Visa Debit Card, you can make 4 withdrawals per month at in-network ATMs for free. Beyond that, you'll be charged $3.00 per withdrawal (plus potential charges by the ATM owner). ### Does Green Dot Have a Physical Bank Location? Green Dot has no brick-and-mortar branches. Its service is focused on online and mobile accounts and the use of ATMs for withdrawals. ### What Is Green Dot Corporation? It's a [fintech](https://www.investopedia.com/terms/f/fintech.asp) and bank holding company that creates financial tools for individual customers and corporate partners such as Apple, Amazon, CVS Pharmacy, and Walmart. It functions on cloud-based technology and has 67 million accounts. Green Dot Bank is a subsidiary. ## Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks including products available, interest rates, fees, and accessibility to ensure that our content helps users make the right decision for their savings and banking needs. [Open Account](https://www.greendot.com/) Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Green Dot. "[Meet Green Dot](https://www.greendot.com/meet-green-dot)." 2. Green Dot Bank. "[Choose the Right Card for You](https://www.greendot.com/personal-banking/our-products)." 3. Green Dot Bank. "[Cash Back Visa Debit Card](https://www.greendot.com/products/cash-back-debit-card)." 4. Green Dot Bank. “[How Can I Get My Pay up to 2 Days Early or My Government Benefits up to 4 Days Early?](https://www.greendot.com/helpcenter/direct-deposit/how-can-i-get-my-pay-up-to-2-days-early-or-my-government-benefits-up-to-4-days-early)” 5. Green Dot Bank. "[What Fees Are Charged for Overdraft Protection?](https://www.greendot.com/helpcenter/use-your-card/overdraft-protection/what-fees-are-charged-for-overdraft-protection)" 6. Green Dot Bank. "[Reloadable Cash Back Visa Debit Card Deposit Account Agreement](https://www.greendot.com/content/dam/greendot/legal/about/docs/gdCashbackod2daav2cash.pdf)," Page 4. 7. Green Dot Bank. "[Which Debit Cards Offer No Monthly Fees or Monthly Fee Waivers?](https://www.greendot.com/helpcenter/product-comparison/which-debit-cards-offer-no-monthly-fees-or-monthly-fee-waivers)" 8. Green Dot Bank. "[Which Debit Cards Offer Free ATM Networks?](https://www.greendot.com/helpcenter/product-comparison/which-debit-cards-offer-free-atm-networks)" 9. Green Dot Bank. "[Cash Back Visa Debit Card](https://www.greendot.com/products/cash-back-debit-card)." 10. Green Dot Bank. "[Reloadable Cash Back Visa Debit Card Deposit Account Agreement](https://www.greendot.com/content/dam/greendot/legal/about/docs/gdCashbackod2daav2cash.pdf)," Pages 4, 56. 11. Green Dot Bank. "[Reloadable Cash Back Visa Debit Card Deposit Account Agreement](https://www.greendot.com/content/dam/greendot/legal/about/docs/gdCashbackod2daav2cash.pdf)," Page 39. 12. Green Dot Bank. "[Mobile Bank Accounts & Debit Cards](https://www.greendot.com/)." 13. Green Dot Bank. "[What Are the ATM Fees and Limits?](https://www.greendot.com/helpcenter/use-your-card/atms/what-are-the-atm-fees-and-limits)" 14. Green Dot Bank. "[Meet Green Dot](https://www.greendot.com/meet-green-dot)." Related Articles [![Regions Bank]() :max_bytes(150000):strip_icc()/regions-bank-260ece120ed749a2a89d384e566304dd.jpg) Regions Bank Review 2024](https://www.investopedia.com/regions-bank-review-8644041) [![KeyBank]() :max_bytes(150000):strip_icc()/Key_Bank-4e1550638a7b42548bcad15989a517a5.jpg) KeyBank Review 2024](https://www.investopedia.com/keybank-review-8638216) [![M&T Bank]() :max_bytes(150000):strip_icc()/MT_Bank-7840092bc5e1499aad776f1203f5eb56.jpg) M&T Bank Review 2024](https://www.investopedia.com/m-and-t-bank-review-8639263) [![Close Up of a Fountain Pen Writing on a Check]() :max_bytes(150000):strip_icc()/Primary-Image-best-free-checking-accounts-of-2023-7153155-de0ede33b150478c9969e1873132aef1.jpg) Best Free Checking Accounts](https://www.investopedia.com/best-free-checking-accounts-7153155) [![Varo Money Review]() :max_bytes(150000):strip_icc()/Varo_Recirc-0958fce480cd45218006bf424d9dd14f.jpg) Varo Money Review](https://www.investopedia.com/varo-money-review-4846225) [![Man checking out his prepaid card options]() :max_bytes(150000):strip_icc()/ArePrepaidCardsRightforYou-c8b48a6fbebc4e52a27b69a81c03c37e.jpg) Are Prepaid Cards Right for You?](https://www.investopedia.com/are-prepaid-cards-right-for-you-4590082)

Green Dot Open Account Green Dot Bank is an online bank that offers competitive rates through its high-yield savings account and unlimited cash-back rewards via its spending account. Founded in 1999, Green Dot is part of the Green Dot Corporation. Pros & Cons Company Overview Pros & Cons Pros Competitive APY on high yield savings account Online and mobile purchases earn 2% cash back Early access to direct deposited paychecks No overdraft fees Cons Monthly fee if you don't meet minimum Out-of-network ATM fee Steep fee for paper checks No joint accounts Company Overview Year Founded 1978 Official Website www.greendot.com Banking Products Offered Savings, cash back banking, credit card Customer Service Phone: 866-795-7597. Account access online or via app 24/7. Green Dot Open Account Table of Contents View All Green Dot Bank Review Pros Explained Cons Explained Best For Bank Offerings Customer Service How to Bank Final Verdict FAQs Methodology Pros Explained Competitive APY on high-yield savings account: Green Dot's high-yield savings feature linked to the Cash Back Visa Debit Card earns a 2% annual percentage yield (APY) on balances of up to $10,000. The Go2bank Visa Debit Card earns a quarterly 4.5% APY on balances up to $5,000. Online and mobile purchases earn 2% cash back: The Cash Back Visa Debit Card earns unlimited 2% cash back on online purchases, including in-app purchases and other mobile purchases. There is no cap on cash-back earnings. Early access to direct deposited paychecks: You can get your paycheck up to two days early with Green Dot's ASAP Direct Deposit. Eligibility for early access depends on your employer's payment processing. No overdraft fees: You are protected from fees on overdrafts of up to $200, with eligible direct deposits. If you don't have funds to cover a purchase, the transaction may be declined. Cons Explained Monthly fees: Green Dot charges a $7.95 monthly fee for its Visa Debit Card account unless you direct deposit $500 or more in the previous month. Go2bank Visa Debit Card's monthly fee can also be waived with an eligible direct deposit. The $9.95 monthly fee for the Cash Back Visa Debit Card cannot be waived. The Pay As You Go Visa Debit Card has no monthly fee. Out-of-network ATM fee: Green Dot's ATM network is free for the Cash Back Visa Debit Card and the Go2bank Visa Debit Card. However, if you have to use one that's out of network, the bank charges a $3 fee on top of any charges from the ATM operator. Limited cash-back access: Restricted to a deposit of earnings once a year, on the account's anniversary. No joint accounts: There are no joint or custodial account options. Who Is Green Dot Bank Best For? Green Dot is best for people who do most of their banking online or through mobile access. It may be a good fit for those who want: A competitive interest rate on savingsUnlimited 2% cash-back rewards on most spendingNo minimum balance requirementsMonthly fees that can be waived with direct depositsCash deposits at retail stores What Does Green Dot Bank Offer? Green Dot is not a full-service online bank, but it offers debit cards that feature online banking services and attractive returns on savings. Here are the Cash Back Visa Debit Card and the high-yield savings account, as examples. Cash Back Visa Debit Card The Cash Back Account is a spending account that earns rewards for card purchases. It's not technically a checking account but acts similar to one. The main draw is the unlimited 2% cash back that's earned on select online purchases. Not all spending earns cash back, such as airline tickets, gift cards, and bill payments. Besides a complimentary debit card, customers also get access to services including: Free cash deposits at select retail locationsNo overdraft fees with eligible direct depositMobile banking A major drawback of the unlimited Cash Back Visa Debit Card Account is the $9.95 monthly fee. To access your cash-back rewards balance, you need to keep your account open at least 12 months and it needs to be in good standing at the time. Accrued rewards are deposited only once a year on the account anniversary. High-Yield Savings Account When you open a Cash Back Visa Debit Card or the Go2bank Visa Debit Card, you also get access to a high-yield savings account. The first has no monthly fee and currently earns 2% APY on all balances of $10,000 or less, which is more than the current national average. The Go2bank Visa Debit Card earns 4.5% APY on balances up to $5,000 and pays quarterly. However, interest is calculated differently than it is at most banks and is only applied to your account once at the end of a 12-month period. Take the Cash Back Visa Debit Card. Interest is calculated by taking the average daily balance of your savings account for each day over a 12-month period, starting when you opened the account, and multiplying that by 2%. Like all banks covered by the Federal Deposit Insurance Corporation (FDIC), money held in Green Dot accounts is FDIC-insured up to $250,000 per depositor. Keep in mind the $250,000 is for all accounts, including any you may have with Green Dot Corporation's other banking subsidiaries. Green Dot Bank Customer Service For help, customers can call 866-795-7597. For disputes on unauthorized charges on accounts, you need to submit a dispute form. Green Dot has no physical bank branches, but customers can access their accounts 24/7 online or through its mobile app, which is available for iOS (3.6 stars) or Android (4.1 stars). How To Bank With Green Dot To open an account with Green Dot, go to its website or download the app and fill out the account application. You also have the option to open an account in-store at participating retailers, which include Walmart, 7-Eleven, and Rite Aid, among others. Similar to other banks, you'll need to provide personal information to open an account. This includes your mailing address, phone number, Social Security number, and date of birth. Final Verdict If you're in search of an online bank that pays competitive interest rates and cash-back earnings, Green Dot might be a good fit. Keep in mind that your Cash Back Visa Debit Card interest/rewards are only accessible once every 12 months. Moreover, if you plan to keep more than $10,000 in savings, other online banks may pay greater interest in the long run. With a $9.95 monthly fee for the Cash Back card, consider opening a Green Dot account only if you think your earnings will outweigh the total for monthly fees. Be sure to check for updates to the APY, fees, and other account details before opening an account. Frequently Asked Questions Is Green Dot Bank Owned by Walmart? No, Green Dot Bank is owned by Green Dot Corporation, not Walmart. However, Walmart owns shares in Green Dot and is a retail distributor of some of its products, including the Go2bank Visa Debit Card. Green Dot and Walmart also partnered to launch the Walmart MoneyCard. What Are Green Dot's ATM Limits and Fees? With the Green Dot Cash Back Visa Debit Card, you can make 4 withdrawals per month at in-network ATMs for free. Beyond that, you'll be charged $3.00 per withdrawal (plus potential charges by the ATM owner). Does Green Dot Have a Physical Bank Location? Green Dot has no brick-and-mortar branches. Its service is focused on online and mobile accounts and the use of ATMs for withdrawals. What Is Green Dot Corporation? It's a fintech and bank holding company that creates financial tools for individual customers and corporate partners such as Apple, Amazon, CVS Pharmacy, and Walmart. It functions on cloud-based technology and has 67 million accounts. Green Dot Bank is a subsidiary. Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks including products available, interest rates, fees, and accessibility to ensure that our content helps users make the right decision for their savings and banking needs. Open Account Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Green Dot. "Meet Green Dot." Green Dot Bank. "Choose the Right Card for You." Green Dot Bank. "Cash Back Visa Debit Card." Green Dot Bank. “How Can I Get My Pay up to 2 Days Early or My Government Benefits up to 4 Days Early?” Green Dot Bank. "What Fees Are Charged for Overdraft Protection?" Green Dot Bank. "Reloadable Cash Back Visa Debit Card Deposit Account Agreement," Page 4. Green Dot Bank. "Which Debit Cards Offer No Monthly Fees or Monthly Fee Waivers?" Green Dot Bank. "Which Debit Cards Offer Free ATM Networks?" Green Dot Bank. "Cash Back Visa Debit Card." Green Dot Bank. "Reloadable Cash Back Visa Debit Card Deposit Account Agreement," Pages 4, 56. Green Dot Bank. "Reloadable Cash Back Visa Debit Card Deposit Account Agreement," Page 39. Green Dot Bank. "Mobile Bank Accounts & Debit Cards." Green Dot Bank. "What Are the ATM Fees and Limits?" Green Dot Bank. "Meet Green Dot." Related Articles Regions Bank Review 2024 KeyBank Review 2024 M&T Bank Review 2024 Best Free Checking Accounts Varo Money Review Are Prepaid Cards Right for You?

https://www.investopedia.com/why-have-forecasters-underestimated-the-us-economy-lately-8633636

Why Have Forecasters Underestimated The US Economy Lately?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Forecasters have consistently underestimated how willing U.S. consumers are to spend their money regardless of high prices and interest rates pressuring household budgets.<br/></li><li>Hotter-than-expected consumer spending has kept the economy growing, boosted the job market, and stoked inflation beyond expectations. </li><li>Consumers are apparently not cutting back on things like dining out, defying the expectations built into economic models that people will behave rationally.<br/></li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> The U.S. economy keeps defying expectations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> In the past month, employers have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/employers-hired-far-more-than-expected-in-march-8625280">added more jobs</a> than forecasters expected, consumers <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/consumers-spent-heavily-in-march-fueling-an-already-hot-economy-8631449">have spent more</a>, the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-march-28-8621483">economy has grown more</a>, and businesses have <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">raised prices more</a>. Report after report shows the economy running hotter than expected, with people generally spending more money and doing more stuff than economists thought they would.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> While it’s not unusual for economic forecasts to be wrong—predicting the future in any arena is extremely difficult—the forecasts have consistently been off in the same direction, underestimating how willing people have been to part with their money.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> One of the most prominent examples of this phenomenon is inflation. A key monthly inflation report, the Consumer Price Index, came in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">hotter than expected</a> last week for the third month in a row, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-high-march-inflation-reading-means-for-you-8629759">sending shockwaves through financial markets</a> as investors are no longer convinced the Federal Reserve will roll back its anti-inflation interest rate hikes any time soon.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> What are the forecasters missing? It all comes down to the behavior of consumers, said Kurt Rankin, senior economist at PNC Financial Services Group<br/><br/>For example, Rankin’s models predicted that as prices for necessities rose, U.S. consumers would cut back on luxuries like dining out. That would reduce demand at restaurants and cause a key measure of restaurant prices called “food away from home” in the CPI, to fall. Instead, grocery prices have remained relatively stable while prices at restaurants have shot up, suggesting that more people are dining out, budget be damned.<span class="ql-inline-citation" data-cite="1"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_13-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/tTmbl/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Restaurant Prices Are Growing Faster Than Groceries"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> "You can only generate forecasts for inflation based on what rational behavior would dictate,” Rankin told Investopedia. Consumers continue to defy economists' conventional wisdom by spending through their income and savings as well as accumulating credit card debt without cutting back on spending, Rankin said. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Indeed, data on consumer finances shows people are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-card-debt-put-more-pressure-on-households-in-the-fourth-quarter-8559521">putting more purchases on plastic</a> to maintain their lifestyles as prices rise. And with interest rates for credit cards at multi-decade highs, alternatives, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/more-black-friday-shoppers-used-buy-now-pay-later-even-as-they-shunned-big-ticket-gifts-8406912">buy-now-pay-later</a> plans, have grown more popular.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> And because all of that data is connected—consumer spending can power economic growth as measured by the Gross Domestic Product, which can encourage businesses to hire more, which can stoke inflation—one assumption being off can throw many forecasts out of whack.<br/><br/>“All these things, month after month, are defying economic convention,” Rankin said. “It's a vicious cycle of one number coming in stronger than expected and then it’s the domino effect, where everything else including inflation consistently overshoots expectations.”<br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### * Forecasters have consistently underestimated how willing U.S. consumers are to spend their money regardless of high prices and interest rates pressuring household budgets. * Hotter-than-expected consumer spending has kept the economy growing, boosted the job market, and stoked inflation beyond expectations. * Consumers are apparently not cutting back on things like dining out, defying the expectations built into economic models that people will behave rationally. The U.S. economy keeps defying expectations. In the past month, employers have [added more jobs](https://www.investopedia.com/employers-hired-far-more-than-expected-in-march-8625280) than forecasters expected, consumers [have spent more](https://www.investopedia.com/consumers-spent-heavily-in-march-fueling-an-already-hot-economy-8631449), the [economy has grown more](https://www.investopedia.com/us-economy-news-today-march-28-8621483), and businesses have [raised prices more](https://www.investopedia.com/inflation-heated-up-in-march-8629363). Report after report shows the economy running hotter than expected, with people generally spending more money and doing more stuff than economists thought they would.  While it’s not unusual for economic forecasts to be wrong—predicting the future in any arena is extremely difficult—the forecasts have consistently been off in the same direction, underestimating how willing people have been to part with their money.  One of the most prominent examples of this phenomenon is inflation. A key monthly inflation report, the Consumer Price Index, came in [hotter than expected](https://www.investopedia.com/inflation-heated-up-in-march-8629363) last week for the third month in a row, [sending shockwaves through financial markets](https://www.investopedia.com/what-high-march-inflation-reading-means-for-you-8629759) as investors are no longer convinced the Federal Reserve will roll back its anti-inflation interest rate hikes any time soon.  What are the forecasters missing? It all comes down to the behavior of consumers, said Kurt Rankin, senior economist at PNC Financial Services Group For example, Rankin’s models predicted that as prices for necessities rose, U.S. consumers would cut back on luxuries like dining out. That would reduce demand at restaurants and cause a key measure of restaurant prices called “food away from home” in the CPI, to fall. Instead, grocery prices have remained relatively stable while prices at restaurants have shot up, suggesting that more people are dining out, budget be damned.  "You can only generate forecasts for inflation based on what rational behavior would dictate,” Rankin told Investopedia. Consumers continue to defy economists' conventional wisdom by spending through their income and savings as well as accumulating credit card debt without cutting back on spending, Rankin said. Indeed, data on consumer finances shows people are [putting more purchases on plastic](https://www.investopedia.com/credit-card-debt-put-more-pressure-on-households-in-the-fourth-quarter-8559521) to maintain their lifestyles as prices rise. And with interest rates for credit cards at multi-decade highs, alternatives, such as [buy-now-pay-later](https://www.investopedia.com/more-black-friday-shoppers-used-buy-now-pay-later-even-as-they-shunned-big-ticket-gifts-8406912) plans, have grown more popular.  And because all of that data is connected—consumer spending can power economic growth as measured by the Gross Domestic Product, which can encourage businesses to hire more, which can stoke inflation—one assumption being off can throw many forecasts out of whack. “All these things, month after month, are defying economic convention,” Rankin said. “It's a vicious cycle of one number coming in stronger than expected and then it’s the domino effect, where everything else including inflation consistently overshoots expectations.” Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Forecasters have consistently underestimated how willing U.S. consumers are to spend their money regardless of high prices and interest rates pressuring household budgets.Hotter-than-expected consumer spending has kept the economy growing, boosted the job market, and stoked inflation beyond expectations. Consumers are apparently not cutting back on things like dining out, defying the expectations built into economic models that people will behave rationally. The U.S. economy keeps defying expectations. In the past month, employers have added more jobs than forecasters expected, consumers have spent more, the economy has grown more, and businesses have raised prices more. Report after report shows the economy running hotter than expected, with people generally spending more money and doing more stuff than economists thought they would.  While it’s not unusual for economic forecasts to be wrong—predicting the future in any arena is extremely difficult—the forecasts have consistently been off in the same direction, underestimating how willing people have been to part with their money.  One of the most prominent examples of this phenomenon is inflation. A key monthly inflation report, the Consumer Price Index, came in hotter than expected last week for the third month in a row, sending shockwaves through financial markets as investors are no longer convinced the Federal Reserve will roll back its anti-inflation interest rate hikes any time soon.  What are the forecasters missing? It all comes down to the behavior of consumers, said Kurt Rankin, senior economist at PNC Financial Services GroupFor example, Rankin’s models predicted that as prices for necessities rose, U.S. consumers would cut back on luxuries like dining out. That would reduce demand at restaurants and cause a key measure of restaurant prices called “food away from home” in the CPI, to fall. Instead, grocery prices have remained relatively stable while prices at restaurants have shot up, suggesting that more people are dining out, budget be damned.  "You can only generate forecasts for inflation based on what rational behavior would dictate,” Rankin told Investopedia. Consumers continue to defy economists' conventional wisdom by spending through their income and savings as well as accumulating credit card debt without cutting back on spending, Rankin said. Indeed, data on consumer finances shows people are putting more purchases on plastic to maintain their lifestyles as prices rise. And with interest rates for credit cards at multi-decade highs, alternatives, such as buy-now-pay-later plans, have grown more popular.  And because all of that data is connected—consumer spending can power economic growth as measured by the Gross Domestic Product, which can encourage businesses to hire more, which can stoke inflation—one assumption being off can throw many forecasts out of whack.“All these things, month after month, are defying economic convention,” Rankin said. “It's a vicious cycle of one number coming in stronger than expected and then it’s the domino effect, where everything else including inflation consistently overshoots expectations.” Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/news/brexit-winners-and-losers/

Brexit: The Winners and Losers Following the Deal

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The United Kingdom officially left the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/europeanunion.asp">European Union (EU)</a> on Jan. 31, 2020. A June 2016 referendum marked the beginning of the end of their 47-year relationship.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="43"></span> But there were a lot of details to sort through before the deadline. When both parties announced <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-in-the-brexit-deal-5093948">their trade agreement</a> on Dec. 24, 2020, officials, business leaders, and private citizens were relieved. This meant they avoided the worst possible outcome: a no-deal Brexit in which the U.K. departed the EU without a trade deal. But like any other deal, some come out on top while others end up struggling. The following is a list of some of the winners and losers of Brexit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_3-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_4-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The United Kingdom left the European Union in January 2020 after a 2016 referendum.</li><li>The two regions came up with a trade deal in December 2020.</li><li>Specialized parts manufacturers and U.S. banks are among the winners while the food and agriculture and financial services industries struggled post-Brexit.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-happened-post-brexit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-heading__text"> What Happened Post-Brexit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brexit.asp">Brexit</a> certainly presented challenges for the British and EU economies as both jurisdictions faced new administrative burdens and uncertainty due to unresolved issues.<span class="ql-inline-citation" data-cite="5"></span> When the deal was announced, the pound rose on the U.K. market by approximately 0.47% against the U.S. dollar and 0.46% against the Japanese yen.<span class="ql-inline-citation" data-cite="8"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> But markets already took the expected cost of Brexit to the British <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/031015/how-economy-formed-and-why-does-it-grow.asp">economy</a> into account. To some extent, this included the possibility of a no-deal outcome. This was less a bullish rally than markets partially rebounding after having expected the worst. It is expected that it will take years for the British markets to overcome Brexit’s adverse economic effects.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The economic impact of the COVID-19 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/special-economic-impact-of-pandemics-4800597">pandemic</a> and its accompanying restrictions on trade in the U.K. and the EU likely outweighed Brexit. This means determining the actual impact of Brexit on different sectors of the British economy may be difficult. However, some sectors are definitely likely to be more or less affected by Brexit. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The deal between the U.K. and EU is called the Trade and Cooperation Agreement.<span class="ql-inline-citation" data-cite="41"></span></p></div></div></div> <span class="heading-toc" id="toc-the-winners"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> The Winners </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The overall upshot is that there are few winners from Brexit, and not all them are in the U.K. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> Specialized Machine Part Manufacturers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Certain <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/manufacturing.asp">manufacturers</a>, including automakers, rely heavily on other regions of the world for parts to finish their products. Requirements for new product origin (or content source) for qualifying as U.K. or EU products meant certain manufacturers had to make some adjustments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> These businesses were likely to seek alternative European or British sources for such parts so that their products contain the mandatory content-source percentages for treaty benefits. With some companies, such as Nissan and Toyota, likely looking for qualified sources for parts from Asian countries, local U.K. and EU manufacturers might enjoy new sales opportunities.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> But nothing about the rules means that the manufacturers need to be specifically British, so it is ambiguous whether these rules of origin will help the U.K. or the EU more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_24-0"> <span class="mntl-sc-block-subheading__text"> U.S. Bankers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Losing free access to the EU market meant London-based banks had to decide whether to establish new branches or offices in the region to continue their operations. But because U.S. banks never had that free access, they already have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passporting.asp">passporting</a> rights. Some also operate registered companies that have offices in the U.K. and EU. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> This situation leaves U.K.-based <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/030315/what-financial-services-sector.asp">financial services</a> firms at a disadvantage until they can fully re-establish themselves in EU markets. As such, U.S. financial firms may be able to draw away business and clients from U.K. firms in the meantime.<span class="ql-inline-citation" data-cite="13"></span>     </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_29-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_30-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The trade agreement wanted a level playing field to ensure fair and open competition and to prevent businesses from undercutting others.<span class="ql-inline-citation" data-cite="15"></span> This provision requires that the two jurisdictions have similar rules relating to workers’ rights, social and environmental protection, taxation, and government subsidies for business. But the rules only need to be similar, not identical. As such, the U.K. is unlikely to reap substantial competitive advantages but will still suffer from the increased administrative burdens of two sets of rules.<span class="ql-inline-citation" data-cite="16"></span></p></div></div></div> <span class="heading-toc" id="toc-the-losers"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> The Losers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Brexit certainly impacts U.K.-EU cross-border relationships in every sector with new administrative and regulatory burdens. New requirements, such as local licenses, visas, border checkpoints, and personnel relocation, among other things, affect all types of businesses ranging from agriculture to finance. Many sectors of the economy found themselves unprepared for the new regulations and are concerned about the costs of compliance.<span class="ql-inline-citation" data-cite="14"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-subheading__text"> Fishing Industry </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Despite only making up 0.1% of the U.K. economy, negotiations around the U.K. fishing industry were one of the largest obstacles to reaching a trade deal. On the surface, the trade deal seems to be a win for the U.K. fishing industry. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> According to the U.K. government, the quotas for British fishermen increase over five years by an amount equal to 25% of the value of the EU catch in U.K. waters, which is estimated to be worth £146 million ($205 million). However, to call this an unalloyed victory ignores two major factors:<span class="ql-inline-citation" data-cite="37"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>The U.K. fishing industry expected far greater concessions from the EU. Industry representatives said the deal cannot be considered a success because its relatively modest gains fall so far short of what the pro-Brexit campaign promised them. The National Federation of Fishermen’s Organizations, a fishing industry group, published a letter to Prime Minister Boris Johnson saying that they considered the trade deal to be a failure as far as fishing is concerned.<span class="ql-inline-citation" data-cite="38"></span></li> <li>The second factor is that the majority of seafood caught in the U.K. is exported to the EU, and the new <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nontariff-barrier.asp">nontariff barriers</a> that have sprung up in the wake of Brexit make things especially hard for exporters of perishable goods.<span class="ql-inline-citation" data-cite="36"></span></li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-subheading__text"> Food and Agriculture </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Regulations and border controls affecting agricultural <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100813/interesting-facts-about-imports-and-exports.asp">imports and exports</a> create issues for everyone in the EU and the U.K. This includes farmers, distributors, grocery store chains, restaurants, and consumers. In advance of Brexit, retailers and consumers in the U.S. stockpiled food, resulting in shortages and supply chain problems. This prompted warnings about panic buying.<span class="ql-inline-citation" data-cite="18"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Because the U.K. relies on deliveries of fresh food from or via the EU in the winter, delivery delays immediately created problems. Scottish exporters complained about delays in the transport of fresh seafood at border controls in Scotland and France.<span class="ql-inline-citation" data-cite="19"></span><span class="ql-inline-citation" data-cite="20"></span> Sainsbury’s supermarkets blamed the new and complex arrangements affecting Ireland for their need to obtain alternative sources of goods. Tesco supermarkets ran into shortages, leaving shelves empty.<span class="ql-inline-citation" data-cite="40"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> One thing to keep in mind, though, is that supply chain and logistics challenges extend beyond agriculture to all industries.<span class="ql-inline-citation" data-cite="21"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-subheading__text"> Manufacturing Sector  </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/logistics.asp">Logistical</a> challenges also affect the manufacturing sector. Because modern manufacturing uses complex supply chains that stretch across different nations, even nontariff barriers to goods can significantly complicate manufacturing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Even before the deal was concluded and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tariff.asp">tariffs</a> were officially avoided, significant companies in automobiles, aerospace, and industrial supplies had to cut jobs and close plants in the U.K., including Honda, Nissan, BMW, Toyota, and Jaguar Land Rover. Panasonic and Sony planned to move their European headquarters from London to Amsterdam. Almost two years earlier, Dutch <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/conglomerate.asp">conglomerate</a> Phillips closed its only U.K. factory.<span class="ql-inline-citation" data-cite="22"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> The agreement imposes substantial controls on goods transported between the EU and the U.K. It establishes rules of origin mandating that goods generally contain more than 50% of locally sourced content to qualify for free <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trade.asp">trade</a> and other benefits of the deal. Larger manufacturers with complex products containing parts acquired from other areas of the world likely will need to make sourcing adjustments.<span class="ql-inline-citation" data-cite="23"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> While this may potentially benefit some specific local manufacturers down the road, sorting out rules of origin placed enormous administrative burdens on businesses in both regions, which have not made sufficient preparation and auditing to establish the origin of goods. This emerged as one of the largest impediments to trade post-Brexit.<span class="ql-inline-citation" data-cite="39"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-subheading__text"> Financial Services Industry </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Financial services companies recognized that Brexit likely would require the relocation of significant operations and personnel from London to EU locations and would mandate local registration and licensing to conduct business in the EU.<span class="ql-inline-citation" data-cite="25"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/122315/worlds-top-10-banks-jpm-wfc.asp">Major banks</a>, including JPMorgan, Morgan Stanley, NatWest, Goldman Sachs, Bank of America, UBS, and Credit Suisse, moved hundreds of employees and large quantities of assets from London to other European cities before the deadline for a trade deal. London-based insurers also set up EU locations, including Lloyd’s of London in Brussels and Aviva in Ireland.<span class="ql-inline-citation" data-cite="26"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Brexit ended the passporting rights of U.K. investment houses, which permitted companies registered in one EU market to operate in others. To conduct EU business following Brexit, U.K. investment banks require equivalence rulings that recognize regulations in a company’s home country as sufficiently similar to those of the EU. European firms can use London <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/clearinghouse.asp">clearinghouses</a> until June 2025. This was extended from the original June 2022 deadline. The European Commission also agreed to consult on clearing activities in the EU.<span class="ql-inline-citation" data-cite="42"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Most core banking businesses, such as deposit-taking, retail investment services, and other lending services, are not included in the equivalence system. This means U.K. banks must establish EU offices to continue these activities with EU clients.<span class="ql-inline-citation" data-cite="29"></span> While London will always be a major financial center, its status may be affected, especially if equivalence rulings are not forthcoming and clients turn to institutions in other countries that already have the rights and ability to operate in the EU.   </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_66-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_67-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Approximately £1.2 trillion ($1.6 trillion) in financial sector assets left London between the 2016 Brexit vote and the end of 2020.<span class="ql-inline-citation" data-cite="27"></span> More than 7,500 financial sector jobs were relocated from London to other European cities.<span class="ql-inline-citation" data-cite="28"></span>  </p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-subheading__text"> Pharmaceutical Industry </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/06/drugmarket.asp">Pharmaceutical companies</a> are concerned about potential differences in EU and U.K. standards for medicines. In anticipation of diverging rules, U.K. pharmaceutical firms AstraZeneca and GlaxoSmithKline established parallel labs in the EU. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> For medicine, the imposition of border checks and dispersion of manufacturing will likely cause delays in distribution. Both the EU and the U.K. reported drug stockpiling in advance of Brexit because of concerns about prompt access to medications.<span class="ql-inline-citation" data-cite="19"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-subheading__text"> Transit, Transport, and Freight Industries </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> There are also legal and logistical challenges for travel and shipping post-Brexit. Both the EU and the U.K. allowed a six-month grace period for flights between and within the two areas under licensing and safety qualifications. After that period, flights within the EU, across and within member states’ borders, became restricted. Only airlines that are majority-controlled by the EU, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/european-economic-area-eea-agreement.asp">European Economic Area (EEA)</a>, and/or Swiss nationals will be allowed to fly between EU airports.<span class="ql-inline-citation" data-cite="30"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> But a special provision allows U.K. airlines that are controlled by a combination of EU and U.K. shareholders—for example, the Madrid-based International Airlines Group that owns British Airways—to continue to operate in the EU.<span class="ql-inline-citation" data-cite="21"></span>  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> The movement of people and goods, whether by air, water, or Channel Tunnel, entails time-consuming procedures.<span class="ql-inline-citation" data-cite="33"></span> Passport requirements apply to travelers between the EU and the U.K., and business personnel, students, and others who stay abroad for a period of time will need visas. For instance, the EU only authorized 2,000 permits for 2021 while 10,000 were needed—a challenge for many U.K. freight haulers wanting to operate on EU roads. Furthermore, permits and border checks require copious amounts of paperwork each year and thousands of customs agents.<span class="ql-inline-citation" data-cite="34"></span>    </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_80-0"><span class="heading-toc" id="toc-what-was-brexit"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Was Brexit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The term Brexit refers to the United Kingdom's official exit from the European Union, which took place on Jan. 31, 2020. The U.K. joined the European Economic Community in 1973.<span class="ql-inline-citation" data-cite="43"></span> In a June 2016 referendum, the majority of people voted in favor of leaving the union, citing immigration as a key issue. A trade deal was reached between the U.K. and the EU in December 2020.<span class="ql-inline-citation" data-cite="15"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_82-0"><span class="heading-toc" id="toc-why-did-brexit-happen"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Did Brexit Happen?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The vote for the U.K. to leave the European Union took place in June 2016. There were several reasons why the majority of voters wanted to leave the union. Among them were immigration and the economy.<span class="ql-inline-citation" data-cite="44"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_84-0"><span class="heading-toc" id="toc-did-brexit-hurt-or-help-the-uk"></span> <h2 class="mntl-sc-block-questionandanswer__question">Did Brexit Hurt or Help the U.K.?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It's been difficult to measure the exact impact Brexit has on the U.K. and its economy. This is largely due to the COVID-19 pandemic and Russia's invasion of Ukraine. However, studies have tried to isolate how Britain's departure from the union has fared. Most show that there has been some degree of slowdown in the nation's economy, notably through trade and investment. Some of the research also shows that Brexit resulted in the loss of as many as 330,000 workers in the U.K.<span class="ql-inline-citation" data-cite="45"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_85-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_86-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_87-0"> Britain officially left the European Union in January 2020. Known commonly as Brexit, the country's departure left a lot of uncertainty. Some of these issues were smoothed out after the two regions struck up a trade deal. Even with the agreement, there are clear winners and losers that arose following the move. But only time can tell just how deep the impact will go. </p></div>

The United Kingdom officially left the [European Union (EU)](https://www.investopedia.com/terms/e/europeanunion.asp) on Jan. 31, 2020. A June 2016 referendum marked the beginning of the end of their 47-year relationship. But there were a lot of details to sort through before the deadline. When both parties announced [their trade agreement](https://www.investopedia.com/what-is-in-the-brexit-deal-5093948) on Dec. 24, 2020, officials, business leaders, and private citizens were relieved. This meant they avoided the worst possible outcome: a no-deal Brexit in which the U.K. departed the EU without a trade deal. But like any other deal, some come out on top while others end up struggling. The following is a list of some of the winners and losers of Brexit. ### Key Takeaways * The United Kingdom left the European Union in January 2020 after a 2016 referendum. * The two regions came up with a trade deal in December 2020. * Specialized parts manufacturers and U.S. banks are among the winners while the food and agriculture and financial services industries struggled post-Brexit. ## What Happened Post-Brexit? [Brexit](https://www.investopedia.com/terms/b/brexit.asp) certainly presented challenges for the British and EU economies as both jurisdictions faced new administrative burdens and uncertainty due to unresolved issues. When the deal was announced, the pound rose on the U.K. market by approximately 0.47% against the U.S. dollar and 0.46% against the Japanese yen.  But markets already took the expected cost of Brexit to the British [economy](https://www.investopedia.com/ask/answers/031015/how-economy-formed-and-why-does-it-grow.asp) into account. To some extent, this included the possibility of a no-deal outcome. This was less a bullish rally than markets partially rebounding after having expected the worst. It is expected that it will take years for the British markets to overcome Brexit’s adverse economic effects. The economic impact of the COVID-19 [pandemic](https://www.investopedia.com/special-economic-impact-of-pandemics-4800597) and its accompanying restrictions on trade in the U.K. and the EU likely outweighed Brexit. This means determining the actual impact of Brexit on different sectors of the British economy may be difficult. However, some sectors are definitely likely to be more or less affected by Brexit. ### The deal between the U.K. and EU is called the Trade and Cooperation Agreement. ## The Winners The overall upshot is that there are few winners from Brexit, and not all them are in the U.K. ### Specialized Machine Part Manufacturers Certain [manufacturers](https://www.investopedia.com/terms/m/manufacturing.asp), including automakers, rely heavily on other regions of the world for parts to finish their products. Requirements for new product origin (or content source) for qualifying as U.K. or EU products meant certain manufacturers had to make some adjustments. These businesses were likely to seek alternative European or British sources for such parts so that their products contain the mandatory content-source percentages for treaty benefits. With some companies, such as Nissan and Toyota, likely looking for qualified sources for parts from Asian countries, local U.K. and EU manufacturers might enjoy new sales opportunities. But nothing about the rules means that the manufacturers need to be specifically British, so it is ambiguous whether these rules of origin will help the U.K. or the EU more. ### U.S. Bankers Losing free access to the EU market meant London-based banks had to decide whether to establish new branches or offices in the region to continue their operations. But because U.S. banks never had that free access, they already have [passporting](https://www.investopedia.com/terms/p/passporting.asp) rights. Some also operate registered companies that have offices in the U.K. and EU. This situation leaves U.K.-based [financial services](https://www.investopedia.com/ask/answers/030315/what-financial-services-sector.asp) firms at a disadvantage until they can fully re-establish themselves in EU markets. As such, U.S. financial firms may be able to draw away business and clients from U.K. firms in the meantime.     ### The trade agreement wanted a level playing field to ensure fair and open competition and to prevent businesses from undercutting others. This provision requires that the two jurisdictions have similar rules relating to workers’ rights, social and environmental protection, taxation, and government subsidies for business. But the rules only need to be similar, not identical. As such, the U.K. is unlikely to reap substantial competitive advantages but will still suffer from the increased administrative burdens of two sets of rules. ## The Losers Brexit certainly impacts U.K.-EU cross-border relationships in every sector with new administrative and regulatory burdens. New requirements, such as local licenses, visas, border checkpoints, and personnel relocation, among other things, affect all types of businesses ranging from agriculture to finance. Many sectors of the economy found themselves unprepared for the new regulations and are concerned about the costs of compliance. ### Fishing Industry Despite only making up 0.1% of the U.K. economy, negotiations around the U.K. fishing industry were one of the largest obstacles to reaching a trade deal. On the surface, the trade deal seems to be a win for the U.K. fishing industry. According to the U.K. government, the quotas for British fishermen increase over five years by an amount equal to 25% of the value of the EU catch in U.K. waters, which is estimated to be worth £146 million ($205 million). However, to call this an unalloyed victory ignores two major factors: 1. The U.K. fishing industry expected far greater concessions from the EU. Industry representatives said the deal cannot be considered a success because its relatively modest gains fall so far short of what the pro-Brexit campaign promised them. The National Federation of Fishermen’s Organizations, a fishing industry group, published a letter to Prime Minister Boris Johnson saying that they considered the trade deal to be a failure as far as fishing is concerned. 2. The second factor is that the majority of seafood caught in the U.K. is exported to the EU, and the new [nontariff barriers](https://www.investopedia.com/terms/n/nontariff-barrier.asp) that have sprung up in the wake of Brexit make things especially hard for exporters of perishable goods. ### Food and Agriculture Regulations and border controls affecting agricultural [imports and exports](https://www.investopedia.com/articles/investing/100813/interesting-facts-about-imports-and-exports.asp) create issues for everyone in the EU and the U.K. This includes farmers, distributors, grocery store chains, restaurants, and consumers. In advance of Brexit, retailers and consumers in the U.S. stockpiled food, resulting in shortages and supply chain problems. This prompted warnings about panic buying.  Because the U.K. relies on deliveries of fresh food from or via the EU in the winter, delivery delays immediately created problems. Scottish exporters complained about delays in the transport of fresh seafood at border controls in Scotland and France. Sainsbury’s supermarkets blamed the new and complex arrangements affecting Ireland for their need to obtain alternative sources of goods. Tesco supermarkets ran into shortages, leaving shelves empty. One thing to keep in mind, though, is that supply chain and logistics challenges extend beyond agriculture to all industries. ### Manufacturing Sector [Logistical](https://www.investopedia.com/terms/l/logistics.asp) challenges also affect the manufacturing sector. Because modern manufacturing uses complex supply chains that stretch across different nations, even nontariff barriers to goods can significantly complicate manufacturing. Even before the deal was concluded and [tariffs](https://www.investopedia.com/terms/t/tariff.asp) were officially avoided, significant companies in automobiles, aerospace, and industrial supplies had to cut jobs and close plants in the U.K., including Honda, Nissan, BMW, Toyota, and Jaguar Land Rover. Panasonic and Sony planned to move their European headquarters from London to Amsterdam. Almost two years earlier, Dutch [conglomerate](https://www.investopedia.com/terms/c/conglomerate.asp) Phillips closed its only U.K. factory.  The agreement imposes substantial controls on goods transported between the EU and the U.K. It establishes rules of origin mandating that goods generally contain more than 50% of locally sourced content to qualify for free [trade](https://www.investopedia.com/terms/t/trade.asp) and other benefits of the deal. Larger manufacturers with complex products containing parts acquired from other areas of the world likely will need to make sourcing adjustments. While this may potentially benefit some specific local manufacturers down the road, sorting out rules of origin placed enormous administrative burdens on businesses in both regions, which have not made sufficient preparation and auditing to establish the origin of goods. This emerged as one of the largest impediments to trade post-Brexit. ### Financial Services Industry Financial services companies recognized that Brexit likely would require the relocation of significant operations and personnel from London to EU locations and would mandate local registration and licensing to conduct business in the EU.  [Major banks](https://www.investopedia.com/articles/investing/122315/worlds-top-10-banks-jpm-wfc.asp), including JPMorgan, Morgan Stanley, NatWest, Goldman Sachs, Bank of America, UBS, and Credit Suisse, moved hundreds of employees and large quantities of assets from London to other European cities before the deadline for a trade deal. London-based insurers also set up EU locations, including Lloyd’s of London in Brussels and Aviva in Ireland.  Brexit ended the passporting rights of U.K. investment houses, which permitted companies registered in one EU market to operate in others. To conduct EU business following Brexit, U.K. investment banks require equivalence rulings that recognize regulations in a company’s home country as sufficiently similar to those of the EU. European firms can use London [clearinghouses](https://www.investopedia.com/terms/c/clearinghouse.asp) until June 2025. This was extended from the original June 2022 deadline. The European Commission also agreed to consult on clearing activities in the EU. Most core banking businesses, such as deposit-taking, retail investment services, and other lending services, are not included in the equivalence system. This means U.K. banks must establish EU offices to continue these activities with EU clients. While London will always be a major financial center, its status may be affected, especially if equivalence rulings are not forthcoming and clients turn to institutions in other countries that already have the rights and ability to operate in the EU.   ### Approximately £1.2 trillion ($1.6 trillion) in financial sector assets left London between the 2016 Brexit vote and the end of 2020. More than 7,500 financial sector jobs were relocated from London to other European cities.   ### Pharmaceutical Industry [Pharmaceutical companies](https://www.investopedia.com/articles/06/drugmarket.asp) are concerned about potential differences in EU and U.K. standards for medicines. In anticipation of diverging rules, U.K. pharmaceutical firms AstraZeneca and GlaxoSmithKline established parallel labs in the EU. For medicine, the imposition of border checks and dispersion of manufacturing will likely cause delays in distribution. Both the EU and the U.K. reported drug stockpiling in advance of Brexit because of concerns about prompt access to medications. ### Transit, Transport, and Freight Industries There are also legal and logistical challenges for travel and shipping post-Brexit. Both the EU and the U.K. allowed a six-month grace period for flights between and within the two areas under licensing and safety qualifications. After that period, flights within the EU, across and within member states’ borders, became restricted. Only airlines that are majority-controlled by the EU, the [European Economic Area (EEA)](https://www.investopedia.com/terms/e/european-economic-area-eea-agreement.asp), and/or Swiss nationals will be allowed to fly between EU airports.  But a special provision allows U.K. airlines that are controlled by a combination of EU and U.K. shareholders—for example, the Madrid-based International Airlines Group that owns British Airways—to continue to operate in the EU.  The movement of people and goods, whether by air, water, or Channel Tunnel, entails time-consuming procedures. Passport requirements apply to travelers between the EU and the U.K., and business personnel, students, and others who stay abroad for a period of time will need visas. For instance, the EU only authorized 2,000 permits for 2021 while 10,000 were needed—a challenge for many U.K. freight haulers wanting to operate on EU roads. Furthermore, permits and border checks require copious amounts of paperwork each year and thousands of customs agents.    ## What Was Brexit? The term Brexit refers to the United Kingdom's official exit from the European Union, which took place on Jan. 31, 2020. The U.K. joined the European Economic Community in 1973. In a June 2016 referendum, the majority of people voted in favor of leaving the union, citing immigration as a key issue. A trade deal was reached between the U.K. and the EU in December 2020. ## Why Did Brexit Happen? The vote for the U.K. to leave the European Union took place in June 2016. There were several reasons why the majority of voters wanted to leave the union. Among them were immigration and the economy. ## Did Brexit Hurt or Help the U.K.? It's been difficult to measure the exact impact Brexit has on the U.K. and its economy. This is largely due to the COVID-19 pandemic and Russia's invasion of Ukraine. However, studies have tried to isolate how Britain's departure from the union has fared. Most show that there has been some degree of slowdown in the nation's economy, notably through trade and investment. Some of the research also shows that Brexit resulted in the loss of as many as 330,000 workers in the U.K. ## The Bottom Line Britain officially left the European Union in January 2020. Known commonly as Brexit, the country's departure left a lot of uncertainty. Some of these issues were smoothed out after the two regions struck up a trade deal. Even with the agreement, there are clear winners and losers that arose following the move. But only time can tell just how deep the impact will go.

The United Kingdom officially left the European Union (EU) on Jan. 31, 2020. A June 2016 referendum marked the beginning of the end of their 47-year relationship. But there were a lot of details to sort through before the deadline. When both parties announced their trade agreement on Dec. 24, 2020, officials, business leaders, and private citizens were relieved. This meant they avoided the worst possible outcome: a no-deal Brexit in which the U.K. departed the EU without a trade deal. But like any other deal, some come out on top while others end up struggling. The following is a list of some of the winners and losers of Brexit. Key Takeaways The United Kingdom left the European Union in January 2020 after a 2016 referendum.The two regions came up with a trade deal in December 2020.Specialized parts manufacturers and U.S. banks are among the winners while the food and agriculture and financial services industries struggled post-Brexit. What Happened Post-Brexit? Brexit certainly presented challenges for the British and EU economies as both jurisdictions faced new administrative burdens and uncertainty due to unresolved issues. When the deal was announced, the pound rose on the U.K. market by approximately 0.47% against the U.S. dollar and 0.46% against the Japanese yen.  But markets already took the expected cost of Brexit to the British economy into account. To some extent, this included the possibility of a no-deal outcome. This was less a bullish rally than markets partially rebounding after having expected the worst. It is expected that it will take years for the British markets to overcome Brexit’s adverse economic effects. The economic impact of the COVID-19 pandemic and its accompanying restrictions on trade in the U.K. and the EU likely outweighed Brexit. This means determining the actual impact of Brexit on different sectors of the British economy may be difficult. However, some sectors are definitely likely to be more or less affected by Brexit. The deal between the U.K. and EU is called the Trade and Cooperation Agreement. The Winners The overall upshot is that there are few winners from Brexit, and not all them are in the U.K. Specialized Machine Part Manufacturers Certain manufacturers, including automakers, rely heavily on other regions of the world for parts to finish their products. Requirements for new product origin (or content source) for qualifying as U.K. or EU products meant certain manufacturers had to make some adjustments. These businesses were likely to seek alternative European or British sources for such parts so that their products contain the mandatory content-source percentages for treaty benefits. With some companies, such as Nissan and Toyota, likely looking for qualified sources for parts from Asian countries, local U.K. and EU manufacturers might enjoy new sales opportunities. But nothing about the rules means that the manufacturers need to be specifically British, so it is ambiguous whether these rules of origin will help the U.K. or the EU more. U.S. Bankers Losing free access to the EU market meant London-based banks had to decide whether to establish new branches or offices in the region to continue their operations. But because U.S. banks never had that free access, they already have passporting rights. Some also operate registered companies that have offices in the U.K. and EU. This situation leaves U.K.-based financial services firms at a disadvantage until they can fully re-establish themselves in EU markets. As such, U.S. financial firms may be able to draw away business and clients from U.K. firms in the meantime.     The trade agreement wanted a level playing field to ensure fair and open competition and to prevent businesses from undercutting others. This provision requires that the two jurisdictions have similar rules relating to workers’ rights, social and environmental protection, taxation, and government subsidies for business. But the rules only need to be similar, not identical. As such, the U.K. is unlikely to reap substantial competitive advantages but will still suffer from the increased administrative burdens of two sets of rules. The Losers Brexit certainly impacts U.K.-EU cross-border relationships in every sector with new administrative and regulatory burdens. New requirements, such as local licenses, visas, border checkpoints, and personnel relocation, among other things, affect all types of businesses ranging from agriculture to finance. Many sectors of the economy found themselves unprepared for the new regulations and are concerned about the costs of compliance. Fishing Industry Despite only making up 0.1% of the U.K. economy, negotiations around the U.K. fishing industry were one of the largest obstacles to reaching a trade deal. On the surface, the trade deal seems to be a win for the U.K. fishing industry. According to the U.K. government, the quotas for British fishermen increase over five years by an amount equal to 25% of the value of the EU catch in U.K. waters, which is estimated to be worth £146 million ($205 million). However, to call this an unalloyed victory ignores two major factors: The U.K. fishing industry expected far greater concessions from the EU. Industry representatives said the deal cannot be considered a success because its relatively modest gains fall so far short of what the pro-Brexit campaign promised them. The National Federation of Fishermen’s Organizations, a fishing industry group, published a letter to Prime Minister Boris Johnson saying that they considered the trade deal to be a failure as far as fishing is concerned. The second factor is that the majority of seafood caught in the U.K. is exported to the EU, and the new nontariff barriers that have sprung up in the wake of Brexit make things especially hard for exporters of perishable goods. Food and Agriculture Regulations and border controls affecting agricultural imports and exports create issues for everyone in the EU and the U.K. This includes farmers, distributors, grocery store chains, restaurants, and consumers. In advance of Brexit, retailers and consumers in the U.S. stockpiled food, resulting in shortages and supply chain problems. This prompted warnings about panic buying.  Because the U.K. relies on deliveries of fresh food from or via the EU in the winter, delivery delays immediately created problems. Scottish exporters complained about delays in the transport of fresh seafood at border controls in Scotland and France. Sainsbury’s supermarkets blamed the new and complex arrangements affecting Ireland for their need to obtain alternative sources of goods. Tesco supermarkets ran into shortages, leaving shelves empty. One thing to keep in mind, though, is that supply chain and logistics challenges extend beyond agriculture to all industries. Manufacturing Sector  Logistical challenges also affect the manufacturing sector. Because modern manufacturing uses complex supply chains that stretch across different nations, even nontariff barriers to goods can significantly complicate manufacturing. Even before the deal was concluded and tariffs were officially avoided, significant companies in automobiles, aerospace, and industrial supplies had to cut jobs and close plants in the U.K., including Honda, Nissan, BMW, Toyota, and Jaguar Land Rover. Panasonic and Sony planned to move their European headquarters from London to Amsterdam. Almost two years earlier, Dutch conglomerate Phillips closed its only U.K. factory.  The agreement imposes substantial controls on goods transported between the EU and the U.K. It establishes rules of origin mandating that goods generally contain more than 50% of locally sourced content to qualify for free trade and other benefits of the deal. Larger manufacturers with complex products containing parts acquired from other areas of the world likely will need to make sourcing adjustments. While this may potentially benefit some specific local manufacturers down the road, sorting out rules of origin placed enormous administrative burdens on businesses in both regions, which have not made sufficient preparation and auditing to establish the origin of goods. This emerged as one of the largest impediments to trade post-Brexit. Financial Services Industry Financial services companies recognized that Brexit likely would require the relocation of significant operations and personnel from London to EU locations and would mandate local registration and licensing to conduct business in the EU.  Major banks, including JPMorgan, Morgan Stanley, NatWest, Goldman Sachs, Bank of America, UBS, and Credit Suisse, moved hundreds of employees and large quantities of assets from London to other European cities before the deadline for a trade deal. London-based insurers also set up EU locations, including Lloyd’s of London in Brussels and Aviva in Ireland.  Brexit ended the passporting rights of U.K. investment houses, which permitted companies registered in one EU market to operate in others. To conduct EU business following Brexit, U.K. investment banks require equivalence rulings that recognize regulations in a company’s home country as sufficiently similar to those of the EU. European firms can use London clearinghouses until June 2025. This was extended from the original June 2022 deadline. The European Commission also agreed to consult on clearing activities in the EU. Most core banking businesses, such as deposit-taking, retail investment services, and other lending services, are not included in the equivalence system. This means U.K. banks must establish EU offices to continue these activities with EU clients. While London will always be a major financial center, its status may be affected, especially if equivalence rulings are not forthcoming and clients turn to institutions in other countries that already have the rights and ability to operate in the EU.   Approximately £1.2 trillion ($1.6 trillion) in financial sector assets left London between the 2016 Brexit vote and the end of 2020. More than 7,500 financial sector jobs were relocated from London to other European cities.   Pharmaceutical Industry Pharmaceutical companies are concerned about potential differences in EU and U.K. standards for medicines. In anticipation of diverging rules, U.K. pharmaceutical firms AstraZeneca and GlaxoSmithKline established parallel labs in the EU. For medicine, the imposition of border checks and dispersion of manufacturing will likely cause delays in distribution. Both the EU and the U.K. reported drug stockpiling in advance of Brexit because of concerns about prompt access to medications. Transit, Transport, and Freight Industries There are also legal and logistical challenges for travel and shipping post-Brexit. Both the EU and the U.K. allowed a six-month grace period for flights between and within the two areas under licensing and safety qualifications. After that period, flights within the EU, across and within member states’ borders, became restricted. Only airlines that are majority-controlled by the EU, the European Economic Area (EEA), and/or Swiss nationals will be allowed to fly between EU airports.  But a special provision allows U.K. airlines that are controlled by a combination of EU and U.K. shareholders—for example, the Madrid-based International Airlines Group that owns British Airways—to continue to operate in the EU.  The movement of people and goods, whether by air, water, or Channel Tunnel, entails time-consuming procedures. Passport requirements apply to travelers between the EU and the U.K., and business personnel, students, and others who stay abroad for a period of time will need visas. For instance, the EU only authorized 2,000 permits for 2021 while 10,000 were needed—a challenge for many U.K. freight haulers wanting to operate on EU roads. Furthermore, permits and border checks require copious amounts of paperwork each year and thousands of customs agents.    What Was Brexit? The term Brexit refers to the United Kingdom's official exit from the European Union, which took place on Jan. 31, 2020. The U.K. joined the European Economic Community in 1973. In a June 2016 referendum, the majority of people voted in favor of leaving the union, citing immigration as a key issue. A trade deal was reached between the U.K. and the EU in December 2020. Why Did Brexit Happen? The vote for the U.K. to leave the European Union took place in June 2016. There were several reasons why the majority of voters wanted to leave the union. Among them were immigration and the economy. Did Brexit Hurt or Help the U.K.? It's been difficult to measure the exact impact Brexit has on the U.K. and its economy. This is largely due to the COVID-19 pandemic and Russia's invasion of Ukraine. However, studies have tried to isolate how Britain's departure from the union has fared. Most show that there has been some degree of slowdown in the nation's economy, notably through trade and investment. Some of the research also shows that Brexit resulted in the loss of as many as 330,000 workers in the U.K. The Bottom Line Britain officially left the European Union in January 2020. Known commonly as Brexit, the country's departure left a lot of uncertainty. Some of these issues were smoothed out after the two regions struck up a trade deal. Even with the agreement, there are clear winners and losers that arose following the move. But only time can tell just how deep the impact will go.

https://www.investopedia.com/terms/m/money-markey-investor-funding-facility-mmiff.asp

Money Market Investor Funding Facility (MMIFF)

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-was-the-money-market-investor-funding-facility"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Was the Money Market Investor Funding Facility? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Money Market Investor Funding Facility (MMIFF) was a financial entity created by the Federal Reserve during the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-crisis.asp">financial crisis</a> of 2008 to raise the liquidity available for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymarket.asp">money market</a> investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <span class="heading-toc" id="toc-understanding-the-mmiff"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0"> <span class="mntl-sc-block-heading__text"> Understanding the MMIFF </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The Money Market Investor Funding Facility (MMIFF) existed from November 24, 2008, through October 30, 2009. During that time, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-reserve-bank-of-new-york.asp">Federal Reserve Bank of New York</a> authorized five <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spv.asp">special purpose vehicles (SPVs)</a> to purchase up to $600 billion in short-term debt instruments from private-sector financial institutions. Eligible assets included highly rated money market instruments with maturities between seven and 90 days held in U.S. money market mutual funds and valued at no less than $250,000.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The Federal Reserve Bank supported the SPVs by loaning 90% of the purchase price of each asset to the SPVs, which issued <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset_backed_commercial_paper.asp">asset-backed commercial paper</a> to cover the remainder of the cost. As the debt matured, the MMIFF used the proceeds to repay both the Federal Reserve Bank and the MMIFF's outstanding ABCP debts. Funding from the SPVs supported 50 designated financial institutions covering a broad geographic distribution and identified by industry leaders as high-quality issuers of short-term debt with which the money market funds already did business.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The Federal Reserve took these actions in response to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquidity</a> fears among money market investors and mutual funds, which flooded the short-term debt markets. By establishing the MMIFF, the Federal Reserve sought to expand <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/secondarymarket.asp">secondary-market</a> sales of medium-term instruments such as certificates of deposits, bank notes, and highly rated commercial paper. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-liquidity-in-money-markets"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> Liquidity in Money Markets </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Money market funds typically represent a stable, low-risk investment. They seek to hold <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value (NAV)</a> of deposited funds at $1, but since the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">Federal Deposit Insurance Corporation (FDIC)</a> does not insure money market funds, investors can theoretically lose money by investing in them. During the financial crisis of 2008, the collapse of Lehman Brothers drove one money market fund’s NAV down to $0.97 after writing off debt. The United States Treasury eventually stepped in to insure consumer protection for funds that fell beneath $1, staving off a potential cash run.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Institutions wary of runs on their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/money-marketfund.asp">money market funds</a> increased their liquidity positions by investing more of their holdings in very short-term assets, especially overnight positions. The Federal Reserve Bank established the MMIFF to offer additional sources of liquidity to money market funds at longer durations. This helped the funds to maintain appropriate liquidity conditions while at the same time relieving the short-term debt markets from the strain put on them by the unusually high number of short-duration investments seen from money market investors. </p></div>

## What Was the Money Market Investor Funding Facility? The Money Market Investor Funding Facility (MMIFF) was a financial entity created by the Federal Reserve during the [financial crisis](https://www.investopedia.com/terms/f/financial-crisis.asp) of 2008 to raise the liquidity available for [money market](https://www.investopedia.com/terms/m/moneymarket.asp) investments. ## Understanding the MMIFF The Money Market Investor Funding Facility (MMIFF) existed from November 24, 2008, through October 30, 2009. During that time, the [Federal Reserve Bank of New York](https://www.investopedia.com/terms/f/federal-reserve-bank-of-new-york.asp) authorized five [special purpose vehicles (SPVs)](https://www.investopedia.com/terms/s/spv.asp) to purchase up to $600 billion in short-term debt instruments from private-sector financial institutions. Eligible assets included highly rated money market instruments with maturities between seven and 90 days held in U.S. money market mutual funds and valued at no less than $250,000. The Federal Reserve Bank supported the SPVs by loaning 90% of the purchase price of each asset to the SPVs, which issued [asset-backed commercial paper](https://www.investopedia.com/terms/a/asset_backed_commercial_paper.asp) to cover the remainder of the cost. As the debt matured, the MMIFF used the proceeds to repay both the Federal Reserve Bank and the MMIFF's outstanding ABCP debts. Funding from the SPVs supported 50 designated financial institutions covering a broad geographic distribution and identified by industry leaders as high-quality issuers of short-term debt with which the money market funds already did business. The Federal Reserve took these actions in response to [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) fears among money market investors and mutual funds, which flooded the short-term debt markets. By establishing the MMIFF, the Federal Reserve sought to expand [secondary-market](https://www.investopedia.com/terms/s/secondarymarket.asp) sales of medium-term instruments such as certificates of deposits, bank notes, and highly rated commercial paper. ## Liquidity in Money Markets Money market funds typically represent a stable, low-risk investment. They seek to hold [net asset value (NAV)](https://www.investopedia.com/terms/n/nav.asp) of deposited funds at $1, but since the [Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/terms/f/fdic.asp) does not insure money market funds, investors can theoretically lose money by investing in them. During the financial crisis of 2008, the collapse of Lehman Brothers drove one money market fund’s NAV down to $0.97 after writing off debt. The United States Treasury eventually stepped in to insure consumer protection for funds that fell beneath $1, staving off a potential cash run. Institutions wary of runs on their [money market funds](https://www.investopedia.com/terms/m/money-marketfund.asp) increased their liquidity positions by investing more of their holdings in very short-term assets, especially overnight positions. The Federal Reserve Bank established the MMIFF to offer additional sources of liquidity to money market funds at longer durations. This helped the funds to maintain appropriate liquidity conditions while at the same time relieving the short-term debt markets from the strain put on them by the unusually high number of short-duration investments seen from money market investors.

What Was the Money Market Investor Funding Facility? The Money Market Investor Funding Facility (MMIFF) was a financial entity created by the Federal Reserve during the financial crisis of 2008 to raise the liquidity available for money market investments. Understanding the MMIFF The Money Market Investor Funding Facility (MMIFF) existed from November 24, 2008, through October 30, 2009. During that time, the Federal Reserve Bank of New York authorized five special purpose vehicles (SPVs) to purchase up to $600 billion in short-term debt instruments from private-sector financial institutions. Eligible assets included highly rated money market instruments with maturities between seven and 90 days held in U.S. money market mutual funds and valued at no less than $250,000. The Federal Reserve Bank supported the SPVs by loaning 90% of the purchase price of each asset to the SPVs, which issued asset-backed commercial paper to cover the remainder of the cost. As the debt matured, the MMIFF used the proceeds to repay both the Federal Reserve Bank and the MMIFF's outstanding ABCP debts. Funding from the SPVs supported 50 designated financial institutions covering a broad geographic distribution and identified by industry leaders as high-quality issuers of short-term debt with which the money market funds already did business. The Federal Reserve took these actions in response to liquidity fears among money market investors and mutual funds, which flooded the short-term debt markets. By establishing the MMIFF, the Federal Reserve sought to expand secondary-market sales of medium-term instruments such as certificates of deposits, bank notes, and highly rated commercial paper. Liquidity in Money Markets Money market funds typically represent a stable, low-risk investment. They seek to hold net asset value (NAV) of deposited funds at $1, but since the Federal Deposit Insurance Corporation (FDIC) does not insure money market funds, investors can theoretically lose money by investing in them. During the financial crisis of 2008, the collapse of Lehman Brothers drove one money market fund’s NAV down to $0.97 after writing off debt. The United States Treasury eventually stepped in to insure consumer protection for funds that fell beneath $1, staving off a potential cash run. Institutions wary of runs on their money market funds increased their liquidity positions by investing more of their holdings in very short-term assets, especially overnight positions. The Federal Reserve Bank established the MMIFF to offer additional sources of liquidity to money market funds at longer durations. This helped the funds to maintain appropriate liquidity conditions while at the same time relieving the short-term debt markets from the strain put on them by the unusually high number of short-duration investments seen from money market investors.

https://www.investopedia.com/terms/c/comprehensive-glass-policy.asp

Comprehensive Glass Policy: What it Means, How it Works, FAQs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-comprehensive-glass-policy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Comprehensive Glass Policy? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A comprehensive glass policy is an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance.asp">insurance policy</a> that covers different kinds of glass (or similar) products that can be broken or damaged. A comprehensive glass policy covers a broader range of manufactured glass products than a standard glass policy, which typically only covers plate glass. It also provides <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/insurance-coverage.asp">coverage</a> whether the glass was damaged or destroyed accidentally or deliberately. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The policy can cover decorative glass displays and signs as well as windows and doors. Comprehensive auto coverage may include glass. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A comprehensive glass policy covers a broader range of glass products than a standard policy, which usually covers only plate glass.</li><li>A comprehensive policy provides coverage whether the glass was damaged accidentally or deliberately.</li><li>The policy covers windows, doors, decorative glass displays, and signs.</li><li>While windshield coverage is standard in auto insurance, adding a comprehensive glass policy can save out-of-pocket costs against headlamps and door window glass damage.</li><li>Glass claims generally do not increase your insurance premiums by very much, if at all.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-comprehensive-glass-policies"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Understanding Comprehensive Glass Policies </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Homeowners and businesses often underestimate the cost of replacing broken or damaged glass windows and doors. Unlike some types of cosmetic building repairs that can wait until a later time, repairing a window that separates the outside elements from the inside of the building needs quick attention. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Many windows are specially cut and made to fit a specific space and are unlikely to be found at a local store. Some items, like display cases and curved or colored glass, are special-ordered items and require manufacturing time. Any specialization can add to the expense of replacing a broken piece of glass. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Comprehensive glass policies cover both intentional or accidental damaged or broken glass coverings. For example, a glass door may shatter when a heavy object accidentally bumps it, or a glass display window may break when a robber intentionally smashes to reach the contents inside. Because the policy is all-inclusive, it covers the replacement costs in both instances mentioned. A comprehensive policy will include a variety of glass types, not just the plate glass covered in the typical standard <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/property-insurance.asp">property insurance</a> policy. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> As with other types of insurance, the policyholder has to identify the different pieces of glass that will have coverage under the policy. The policyholder, for example, may only wish to cover externally facing windows and display cases, but not lamps or glass signs. In some cases, businesses that lease building space may be asked to share the cost of a comprehensive glass policy with the building owner. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Most insurance policies do not automatically cover every <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/090815/what-difference-between-peril-and-hazard.asp">peril</a>, though comprehensive glass policies come close. They may contain exclusions for specific causes of damage, such as damage deliberately caused by the policyholder. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_19-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_20-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>If you have a chip or crack on a window or windshield that is smaller than a dollar bill, it could be repairable.</p></div></div></div> <span class="heading-toc" id="toc-automobile-comprehensive-glass-coverage"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> Automobile Comprehensive Glass Coverage </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Most collision coverage insurance policies do not cover any type of glass damage outside of an accident. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/comprehensive-insurance.asp">Comprehensive auto insurance</a> policies, though, do often include coverage for auto windshield glass replacement, even if it was caused by something else (like a falling tree branch). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> There may not be a deductible for windshield repair or replacement because insurers see the windshield as necessary for vehicle operation. In certain states, state law will require that glass be covered with zero deductible (e.g., Kentucky and South Carolina, and Florida) or have a zero-deductible glass option (e.g., Connecticut, Arizona, Massachusetts, Minnesota, and New York). Drivers who do not have a comprehensive coverage policy may, however, need to pay a deductible in addition to their premium. Also, in some cases, the glass may be safely repaired, rather than replaced. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Insurance providers see damage to the windshield as typical and therefore anticipated. But the damage to other auto glass may not have the same coverage. Items like headlamps and door window glass and the rear window will probably be subject to the full policy <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deductible.asp">deductible</a> amount. Adding full glass coverage to a comprehensive auto insurance policy will usually avoid the out-of-pocket payment costs in the event of damage. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_29-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_3-0">$210–$230</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The average price for a windshield repair costs between $100 to more than $1,000 depending on the car and the scope of the damage—and this doesn't include the cost of labor for the repair.<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-example-of-a-comprehensive-glass-policy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_30-0"> <span class="mntl-sc-block-heading__text"> Example of a Comprehensive Glass Policy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Say that you are driving on the highway and debris from a truck in front of you strikes your windshield, causing a spider crack. While nobody was injured, you want to get your windshield fixed. Many insurance companies now have specific glass-claims departments, so first find out if you have glass coverage in your policy and then call that hotline to report the damage and file a claim. Your insurer will also be able to tell you if they can waive the deductible. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> You will then be instructed to take your car to a qualified repair facility. They will then charge your insurance, and you will only be responsible for your deductible (if you have any). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-how-much-does-it-cost-to-repair-broken-glass-for-a-home"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does It Cost to Repair Broken Glass for a Home?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>.Replacing a broken window will cost around $350 on average, with most people spending between $200 and $500. For more complicated repairs or custom windows, you can expect to pay as much as $2,000. Labor costs to repair a broken window range between $30 to $50 an hour.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-what-does-a-comprehensive-policy-cover"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does a Comprehensive Policy Cover?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Comprehensive insurance helps cover damages to a vehicle when you're involved in a collision. Comprehensive policies usually cover things like theft, vandalism, wind damage, hail, and animal strikes.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-does-filing-a-windshield-claim-increase-insurance-premiums"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does Filing a Windshield Claim Increase Insurance Premiums?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Typically, filing a glass claim with an insurer will not result in an increase in your premium. If, however, multiple similar claims are made over a short period of time, your premiums may go up.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div></div>

## What Is a Comprehensive Glass Policy? A comprehensive glass policy is an [insurance policy](https://www.investopedia.com/terms/i/insurance.asp) that covers different kinds of glass (or similar) products that can be broken or damaged. A comprehensive glass policy covers a broader range of manufactured glass products than a standard glass policy, which typically only covers plate glass. It also provides [coverage](https://www.investopedia.com/terms/i/insurance-coverage.asp) whether the glass was damaged or destroyed accidentally or deliberately. The policy can cover decorative glass displays and signs as well as windows and doors. Comprehensive auto coverage may include glass. ### Key Takeaways * A comprehensive glass policy covers a broader range of glass products than a standard policy, which usually covers only plate glass. * A comprehensive policy provides coverage whether the glass was damaged accidentally or deliberately. * The policy covers windows, doors, decorative glass displays, and signs. * While windshield coverage is standard in auto insurance, adding a comprehensive glass policy can save out-of-pocket costs against headlamps and door window glass damage. * Glass claims generally do not increase your insurance premiums by very much, if at all. ## Understanding Comprehensive Glass Policies Homeowners and businesses often underestimate the cost of replacing broken or damaged glass windows and doors. Unlike some types of cosmetic building repairs that can wait until a later time, repairing a window that separates the outside elements from the inside of the building needs quick attention. Many windows are specially cut and made to fit a specific space and are unlikely to be found at a local store. Some items, like display cases and curved or colored glass, are special-ordered items and require manufacturing time. Any specialization can add to the expense of replacing a broken piece of glass. Comprehensive glass policies cover both intentional or accidental damaged or broken glass coverings. For example, a glass door may shatter when a heavy object accidentally bumps it, or a glass display window may break when a robber intentionally smashes to reach the contents inside. Because the policy is all-inclusive, it covers the replacement costs in both instances mentioned. A comprehensive policy will include a variety of glass types, not just the plate glass covered in the typical standard [property insurance](https://www.investopedia.com/terms/p/property-insurance.asp) policy. As with other types of insurance, the policyholder has to identify the different pieces of glass that will have coverage under the policy. The policyholder, for example, may only wish to cover externally facing windows and display cases, but not lamps or glass signs. In some cases, businesses that lease building space may be asked to share the cost of a comprehensive glass policy with the building owner. Most insurance policies do not automatically cover every [peril](https://www.investopedia.com/ask/answers/090815/what-difference-between-peril-and-hazard.asp), though comprehensive glass policies come close. They may contain exclusions for specific causes of damage, such as damage deliberately caused by the policyholder. ### If you have a chip or crack on a window or windshield that is smaller than a dollar bill, it could be repairable. ## Automobile Comprehensive Glass Coverage Most collision coverage insurance policies do not cover any type of glass damage outside of an accident. [Comprehensive auto insurance](https://www.investopedia.com/terms/c/comprehensive-insurance.asp) policies, though, do often include coverage for auto windshield glass replacement, even if it was caused by something else (like a falling tree branch). There may not be a deductible for windshield repair or replacement because insurers see the windshield as necessary for vehicle operation. In certain states, state law will require that glass be covered with zero deductible (e.g., Kentucky and South Carolina, and Florida) or have a zero-deductible glass option (e.g., Connecticut, Arizona, Massachusetts, Minnesota, and New York). Drivers who do not have a comprehensive coverage policy may, however, need to pay a deductible in addition to their premium. Also, in some cases, the glass may be safely repaired, rather than replaced. Insurance providers see damage to the windshield as typical and therefore anticipated. But the damage to other auto glass may not have the same coverage. Items like headlamps and door window glass and the rear window will probably be subject to the full policy [deductible](https://www.investopedia.com/terms/d/deductible.asp) amount. Adding full glass coverage to a comprehensive auto insurance policy will usually avoid the out-of-pocket payment costs in the event of damage. ### $210–$230 The average price for a windshield repair costs between $100 to more than $1,000 depending on the car and the scope of the damage—and this doesn't include the cost of labor for the repair. ## Example of a Comprehensive Glass Policy Say that you are driving on the highway and debris from a truck in front of you strikes your windshield, causing a spider crack. While nobody was injured, you want to get your windshield fixed. Many insurance companies now have specific glass-claims departments, so first find out if you have glass coverage in your policy and then call that hotline to report the damage and file a claim. Your insurer will also be able to tell you if they can waive the deductible. You will then be instructed to take your car to a qualified repair facility. They will then charge your insurance, and you will only be responsible for your deductible (if you have any). ## How Much Does It Cost to Repair Broken Glass for a Home? .Replacing a broken window will cost around $350 on average, with most people spending between $200 and $500. For more complicated repairs or custom windows, you can expect to pay as much as $2,000. Labor costs to repair a broken window range between $30 to $50 an hour. ## What Does a Comprehensive Policy Cover? Comprehensive insurance helps cover damages to a vehicle when you're involved in a collision. Comprehensive policies usually cover things like theft, vandalism, wind damage, hail, and animal strikes. ## Does Filing a Windshield Claim Increase Insurance Premiums? Typically, filing a glass claim with an insurer will not result in an increase in your premium. If, however, multiple similar claims are made over a short period of time, your premiums may go up.

What Is a Comprehensive Glass Policy? A comprehensive glass policy is an insurance policy that covers different kinds of glass (or similar) products that can be broken or damaged. A comprehensive glass policy covers a broader range of manufactured glass products than a standard glass policy, which typically only covers plate glass. It also provides coverage whether the glass was damaged or destroyed accidentally or deliberately. The policy can cover decorative glass displays and signs as well as windows and doors. Comprehensive auto coverage may include glass. Key Takeaways A comprehensive glass policy covers a broader range of glass products than a standard policy, which usually covers only plate glass.A comprehensive policy provides coverage whether the glass was damaged accidentally or deliberately.The policy covers windows, doors, decorative glass displays, and signs.While windshield coverage is standard in auto insurance, adding a comprehensive glass policy can save out-of-pocket costs against headlamps and door window glass damage.Glass claims generally do not increase your insurance premiums by very much, if at all. Understanding Comprehensive Glass Policies Homeowners and businesses often underestimate the cost of replacing broken or damaged glass windows and doors. Unlike some types of cosmetic building repairs that can wait until a later time, repairing a window that separates the outside elements from the inside of the building needs quick attention. Many windows are specially cut and made to fit a specific space and are unlikely to be found at a local store. Some items, like display cases and curved or colored glass, are special-ordered items and require manufacturing time. Any specialization can add to the expense of replacing a broken piece of glass. Comprehensive glass policies cover both intentional or accidental damaged or broken glass coverings. For example, a glass door may shatter when a heavy object accidentally bumps it, or a glass display window may break when a robber intentionally smashes to reach the contents inside. Because the policy is all-inclusive, it covers the replacement costs in both instances mentioned. A comprehensive policy will include a variety of glass types, not just the plate glass covered in the typical standard property insurance policy. As with other types of insurance, the policyholder has to identify the different pieces of glass that will have coverage under the policy. The policyholder, for example, may only wish to cover externally facing windows and display cases, but not lamps or glass signs. In some cases, businesses that lease building space may be asked to share the cost of a comprehensive glass policy with the building owner. Most insurance policies do not automatically cover every peril, though comprehensive glass policies come close. They may contain exclusions for specific causes of damage, such as damage deliberately caused by the policyholder. If you have a chip or crack on a window or windshield that is smaller than a dollar bill, it could be repairable. Automobile Comprehensive Glass Coverage Most collision coverage insurance policies do not cover any type of glass damage outside of an accident. Comprehensive auto insurance policies, though, do often include coverage for auto windshield glass replacement, even if it was caused by something else (like a falling tree branch). There may not be a deductible for windshield repair or replacement because insurers see the windshield as necessary for vehicle operation. In certain states, state law will require that glass be covered with zero deductible (e.g., Kentucky and South Carolina, and Florida) or have a zero-deductible glass option (e.g., Connecticut, Arizona, Massachusetts, Minnesota, and New York). Drivers who do not have a comprehensive coverage policy may, however, need to pay a deductible in addition to their premium. Also, in some cases, the glass may be safely repaired, rather than replaced. Insurance providers see damage to the windshield as typical and therefore anticipated. But the damage to other auto glass may not have the same coverage. Items like headlamps and door window glass and the rear window will probably be subject to the full policy deductible amount. Adding full glass coverage to a comprehensive auto insurance policy will usually avoid the out-of-pocket payment costs in the event of damage. $210–$230 The average price for a windshield repair costs between $100 to more than $1,000 depending on the car and the scope of the damage—and this doesn't include the cost of labor for the repair. Example of a Comprehensive Glass Policy Say that you are driving on the highway and debris from a truck in front of you strikes your windshield, causing a spider crack. While nobody was injured, you want to get your windshield fixed. Many insurance companies now have specific glass-claims departments, so first find out if you have glass coverage in your policy and then call that hotline to report the damage and file a claim. Your insurer will also be able to tell you if they can waive the deductible. You will then be instructed to take your car to a qualified repair facility. They will then charge your insurance, and you will only be responsible for your deductible (if you have any). How Much Does It Cost to Repair Broken Glass for a Home? .Replacing a broken window will cost around $350 on average, with most people spending between $200 and $500. For more complicated repairs or custom windows, you can expect to pay as much as $2,000. Labor costs to repair a broken window range between $30 to $50 an hour. What Does a Comprehensive Policy Cover? Comprehensive insurance helps cover damages to a vehicle when you're involved in a collision. Comprehensive policies usually cover things like theft, vandalism, wind damage, hail, and animal strikes. Does Filing a Windshield Claim Increase Insurance Premiums? Typically, filing a glass claim with an insurer will not result in an increase in your premium. If, however, multiple similar claims are made over a short period of time, your premiums may go up.

https://www.investopedia.com/terms/a/assetclasses.asp

What Are Asset Classes? More Than Just Stocks and Bonds

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-an-asset-class"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is an Asset Class? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An asset class is a grouping of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment.asp">investments</a> that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are thus made up of instruments that often behave similarly to one another in the marketplace. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Examples of common asset classes include equities, fixed income, commodities, and real estate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li>An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations.</li> <li>Equities (e.g., stocks), fixed income (e.g., bonds), cash and cash equivalents, real estate, commodities, and currencies are common examples of asset classes.</li> <li>There is usually very little correlation and sometimes a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/040815/how-should-i-interpret-negative-correlation.asp">negative correlation</a> among different asset classes.</li> <li>Financial advisors focus on asset class as a way to help investors diversify their portfolios.</li> </ul></div></div></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt=" Asset Class" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/3yGWdVlWDk3urG49UWEhGSiIYkI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/3yGWdVlWDk3urG49UWEhGSiIYkI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg" data-srcset="https://www.investopedia.com/thmb/kyVuKUff_EsrRAYQhPPGsruwh_g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt=" Asset Class" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/3yGWdVlWDk3urG49UWEhGSiIYkI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg" srcset="https://www.investopedia.com/thmb/kyVuKUff_EsrRAYQhPPGsruwh_g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg 750w" width="1500"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>NoNo Flores / Investopedia</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-asset-classes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> Understanding Asset Classes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Simply put, an asset class is a grouping of comparable financial securities. For example, IBM, MSFT, and AAPL are a grouping of stocks. Asset classes and asset class categories are often mixed together. There is usually very little correlation and sometimes a negative correlation among different asset classes. This characteristic is important in the field of investing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Historically, the three main <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">asset</a> classes have been <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity.asp">equities</a> (stocks), <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedincome.asp">fixed income</a> (bonds), and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cashequivalents.asp">cash equivalent</a> or money market instruments. Currently, most investment professionals include real estate, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodities</a>, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a>, other financial <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a>, and even <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrencies</a> in the asset class mix. Investment assets include both tangible and intangible instruments that <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investors</a> buy and sell for the purposes of generating additional income, on either a <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shortterm.asp">short-</a> or <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/longtermassets.asp">long-term basis</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Financial advisors view <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investmentvehicle.asp">investment vehicles</a> as asset-class categories that are used for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> purposes. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. Investors interested in maximizing return often do so by reducing portfolio <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialrisk.asp">risk</a> through asset class diversification. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Financial advisors will help investors diversify their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolios</a> by combining assets from different asset classes that have different cash flow streams and varying degrees of risk. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Diversification reduces risk and increases your probability of making a positive return. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_18-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_19-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>The main asset classes are equities, fixed income, cash or marketable securities, and commodities.</p></div></div></div> <span class="heading-toc" id="toc-types-of-asset-classes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Types of Asset Classes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The most common asset classes are: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-subheading__text"> Cash and Cash Equivalents </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Cash and cash equivalents represent actual cash on hand and securities that are similar to cash. This type of investment is considered very low risk since there is little to no chance of losing your money. That peace of mind means the <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a> are also lower than other asset classes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Examples of cash and cash equivalents include cash parked in a <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savingsaccount.asp">savings account</a> as well as U.S. government <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybill.asp">Treasury bills (T-bills)</a>, <a class="pseudoStyle" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/guaranteedinvestmentcontract.asp">guaranteed investment certificates (GICs)</a>, and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/money-marketfund.asp">money market funds</a>. Generally, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskreturntradeoff.asp">the greater the risk of losing money, the greater the prospective return</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-subheading__text"> Fixed Income </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Fixed income is an investment that pays a fixed income. Basically, you lend money to an entity and, in return, they pay you a fixed amount until the <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity date</a>, which is the date when the money you initially invested (the loan) is paid back to you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Government and corporate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond.asp">bonds</a> are the most common types of fixed-income products. The government or company will pay you <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a> for the life of the loan, with rates varying depending on <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a> and the perceived risk that they won’t make good on the loan. The risk of certain governments <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/default2.asp">defaulting</a> on their bonds is very unlikely, so they pay out less. Conversely, some companies risk going bust and need to pay investors more to convince them to part with their money.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_33-0"> <span class="mntl-sc-block-subheading__text"> Equities  </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> When people talk about equities, they are usually speaking about owning <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shares.asp">shares</a> in a company. For companies to expand and meet their objectives, they often resort to selling slices of ownership in exchange for cash to the general public. Buying these shares represents a great way to profit from the success of a company. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> There are two ways to make money from investing in companies: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li>If the company pays a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividend</a></li> <li>If you sell the shares for more than you paid for them</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The market can be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatile</a>, though. Share prices are known to fluctuate, and some companies may even go bust. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> Commodities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Commodities are basic goods that can be transformed into other goods and services. Examples include metals, energy resources, and agricultural goods. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Commodities are crucial to the economy and, in some cases, are viewed as a good <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedge</a> against inflation.<span class="ql-inline-citation" data-cite="5"></span> Their return is based on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/law-of-supply-demand.asp">supply and demand</a> dynamics rather than profitability. Many investors invest indirectly in commodities by buying shares in companies that produce them. However, there is also a huge market for investing directly, whether that is actually buying a physical commodity with the view of eventually selling it for a profit or investing in futures.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_47-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_48-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Each asset class carries a different level of risk and return and tends to perform differently in a given environment.</p></div></div></div> <span class="heading-toc" id="toc-alternative-asset-classes"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-heading__text"> Alternative Asset Classes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Equities (stocks), bonds (fixed-income securities), cash or marketable securities, and commodities are the most <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidasset.asp">liquid asset</a> classes and, therefore, the most quoted asset classes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> There are also alternative asset classes, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/real-estate-investing-guide/">real estate</a>, and valuable inventory, such as artwork, stamps, and other tradable collectibles. Some analysts also refer to an investment in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp">hedge funds</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/venturecapital.asp">venture capital</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crowdsourcing.asp">crowdsourcing</a>, or cryptocurrencies as examples of alternative investments. That said, an asset’s <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/illiquid.asp">illiquidity</a> does not speak to its return potential; it only means that it may take more time to find a buyer to convert the asset to cash. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <span class="heading-toc" id="toc-asset-class-and-investing-strategy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> Asset Class and Investing Strategy </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Investors looking for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alpha.asp">alpha</a> employ investment strategies focused on achieving alpha returns. Investment strategies can be tied to growth, value, income, or a variety of other factors that help to identify and categorize investment options according to a specific set of criteria. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Some analysts link criteria to performance and/or valuation <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/metrics.asp">metrics</a> such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp">earnings-per-share (EPS)</a> growth or the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">price-to-earnings (P/E) ratio</a>. Other analysts are less concerned with performance and more concerned with the asset type or class. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_59-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_60-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>Investors are often advised not to put all their eggs into one basket and invest in different asset classes to spread their bets and reduce risk.</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_61-0"><span class="heading-toc" id="toc-what-are-the-most-popular-asset-classes"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are the most popular asset classes?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-teens-need-to-know-about-cryptocurrency-7152233">cryptocurrencies in the asset class mix</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_63-0"><span class="heading-toc" id="toc-which-asset-class-has-the-best-historical-returns"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which asset class has the best historical returns?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockmarket.asp">stock market</a> has proven to produce the highest returns over extended periods of time. Since the late 1920s, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cagr.asp">compound annual growth rate (CAGR)</a> for the S&amp;P 500 is about 6.6%, assuming that all dividends were reinvested and adjusted for inflation.</p><p>In other words, $100 invested in the S&amp;P 500 on Jan. 1, 1928, would have been worth about $46,833 (in 1928 dollars) by Dec. 31, 2023, without adjusting for inflation. The total would have grown to $836,206 in 2023 dollars. By comparison, the same $100 invested in five-year Treasuries would have been worth only about $7,278 in today’s dollars.<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_65-0"><span class="heading-toc" id="toc-why-are-asset-classes-useful"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why are asset classes useful?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Financial advisors focus on asset class as a way to help investors diversify their portfolios to maximize returns. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> An asset class is a grouping of investments that exhibit similar characteristics and that may be subject to the same rules and regulations. Equities, fixed income, commodities, and real estate are common examples of asset classes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> Asset classes can be used to diversify portfolios and reduce risk, as they are expected to reflect different risk and return characteristics. For instance, if stocks are falling, bond prices may be rising, and vice versa. Building a portfolio with asset classes that are not highly correlated with one another is an important concept for diversification. </p></div>

## What Is an Asset Class? An asset class is a grouping of [investments](https://www.investopedia.com/terms/i/investment.asp) that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are thus made up of instruments that often behave similarly to one another in the marketplace. Examples of common asset classes include equities, fixed income, commodities, and real estate. ### Key Takeaways * An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. * Equities (e.g., stocks), fixed income (e.g., bonds), cash and cash equivalents, real estate, commodities, and currencies are common examples of asset classes. * There is usually very little correlation and sometimes a [negative correlation](https://www.investopedia.com/ask/answers/040815/how-should-i-interpret-negative-correlation.asp) among different asset classes. * Financial advisors focus on asset class as a way to help investors diversify their portfolios. ![ Asset Class]() :max_bytes(150000):strip_icc()/assetclass_sourcefile-Final-718dadc60705471094ea684bec0cee1d.jpg) NoNo Flores / Investopedia ## Understanding Asset Classes Simply put, an asset class is a grouping of comparable financial securities. For example, IBM, MSFT, and AAPL are a grouping of stocks. Asset classes and asset class categories are often mixed together. There is usually very little correlation and sometimes a negative correlation among different asset classes. This characteristic is important in the field of investing. Historically, the three main [asset](https://www.investopedia.com/terms/a/asset.asp) classes have been [equities](https://www.investopedia.com/terms/e/equity.asp) (stocks), [fixed income](https://www.investopedia.com/terms/f/fixedincome.asp) (bonds), and [cash equivalent](https://www.investopedia.com/terms/c/cashequivalents.asp) or money market instruments. Currently, most investment professionals include real estate, [commodities](https://www.investopedia.com/terms/c/commodity.asp), [futures](https://www.investopedia.com/terms/f/futures.asp), other financial [derivatives](https://www.investopedia.com/terms/d/derivative.asp), and even [cryptocurrencies](https://www.investopedia.com/terms/c/cryptocurrency.asp) in the asset class mix. Investment assets include both tangible and intangible instruments that [investors](https://www.investopedia.com/terms/i/investor.asp) buy and sell for the purposes of generating additional income, on either a [short-](https://www.investopedia.com/terms/s/shortterm.asp) or [long-term basis](https://www.investopedia.com/terms/l/longtermassets.asp). Financial advisors view [investment vehicles](https://www.investopedia.com/terms/i/investmentvehicle.asp) as asset-class categories that are used for [diversification](https://www.investopedia.com/terms/d/diversification.asp) purposes. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. Investors interested in maximizing return often do so by reducing portfolio [risk](https://www.investopedia.com/terms/f/financialrisk.asp) through asset class diversification. Financial advisors will help investors diversify their [portfolios](https://www.investopedia.com/terms/p/portfolio.asp) by combining assets from different asset classes that have different cash flow streams and varying degrees of risk. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Diversification reduces risk and increases your probability of making a positive return. ### The main asset classes are equities, fixed income, cash or marketable securities, and commodities. ## Types of Asset Classes The most common asset classes are: ### Cash and Cash Equivalents Cash and cash equivalents represent actual cash on hand and securities that are similar to cash. This type of investment is considered very low risk since there is little to no chance of losing your money. That peace of mind means the [returns](https://www.investopedia.com/terms/r/return.asp) are also lower than other asset classes. Examples of cash and cash equivalents include cash parked in a [savings account](https://www.investopedia.com/terms/s/savingsaccount.asp) as well as U.S. government [Treasury bills (T-bills)](https://www.investopedia.com/terms/t/treasurybill.asp), [guaranteed investment certificates (GICs)](https://www.investopedia.com/terms/g/guaranteedinvestmentcontract.asp), and [money market funds](https://www.investopedia.com/terms/m/money-marketfund.asp). Generally, [the greater the risk of losing money, the greater the prospective return](https://www.investopedia.com/terms/r/riskreturntradeoff.asp). ### Fixed Income Fixed income is an investment that pays a fixed income. Basically, you lend money to an entity and, in return, they pay you a fixed amount until the [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp), which is the date when the money you initially invested (the loan) is paid back to you. Government and corporate [bonds](https://www.investopedia.com/terms/b/bond.asp) are the most common types of fixed-income products. The government or company will pay you [interest](https://www.investopedia.com/terms/i/interest.asp) for the life of the loan, with rates varying depending on [inflation](https://www.investopedia.com/terms/i/inflation.asp) and the perceived risk that they won’t make good on the loan. The risk of certain governments [defaulting](https://www.investopedia.com/terms/d/default2.asp) on their bonds is very unlikely, so they pay out less. Conversely, some companies risk going bust and need to pay investors more to convince them to part with their money. ### Equities When people talk about equities, they are usually speaking about owning [shares](https://www.investopedia.com/terms/s/shares.asp) in a company. For companies to expand and meet their objectives, they often resort to selling slices of ownership in exchange for cash to the general public. Buying these shares represents a great way to profit from the success of a company. There are two ways to make money from investing in companies: * If the company pays a [dividend](https://www.investopedia.com/terms/d/dividend.asp) * If you sell the shares for more than you paid for them The market can be [volatile](https://www.investopedia.com/terms/v/volatility.asp), though. Share prices are known to fluctuate, and some companies may even go bust. ### Commodities Commodities are basic goods that can be transformed into other goods and services. Examples include metals, energy resources, and agricultural goods. Commodities are crucial to the economy and, in some cases, are viewed as a good [hedge](https://www.investopedia.com/terms/h/hedge.asp) against inflation. Their return is based on [supply and demand](https://www.investopedia.com/terms/l/law-of-supply-demand.asp) dynamics rather than profitability. Many investors invest indirectly in commodities by buying shares in companies that produce them. However, there is also a huge market for investing directly, whether that is actually buying a physical commodity with the view of eventually selling it for a profit or investing in futures. ### Each asset class carries a different level of risk and return and tends to perform differently in a given environment. ## Alternative Asset Classes Equities (stocks), bonds (fixed-income securities), cash or marketable securities, and commodities are the most [liquid asset](https://www.investopedia.com/terms/l/liquidasset.asp) classes and, therefore, the most quoted asset classes. There are also alternative asset classes, such as [real estate](https://www.investopedia.com/mortgage/real-estate-investing-guide/), and valuable inventory, such as artwork, stamps, and other tradable collectibles. Some analysts also refer to an investment in [hedge funds](https://www.investopedia.com/terms/h/hedgefund.asp), [venture capital](https://www.investopedia.com/terms/v/venturecapital.asp), [crowdsourcing](https://www.investopedia.com/terms/c/crowdsourcing.asp), or cryptocurrencies as examples of alternative investments. That said, an asset’s [illiquidity](https://www.investopedia.com/terms/i/illiquid.asp) does not speak to its return potential; it only means that it may take more time to find a buyer to convert the asset to cash. ## Asset Class and Investing Strategy Investors looking for [alpha](https://www.investopedia.com/terms/a/alpha.asp) employ investment strategies focused on achieving alpha returns. Investment strategies can be tied to growth, value, income, or a variety of other factors that help to identify and categorize investment options according to a specific set of criteria. Some analysts link criteria to performance and/or valuation [metrics](https://www.investopedia.com/terms/m/metrics.asp) such as [earnings-per-share (EPS)](https://www.investopedia.com/terms/e/eps.asp) growth or the [price-to-earnings (P/E) ratio](https://www.investopedia.com/terms/p/price-earningsratio.asp). Other analysts are less concerned with performance and more concerned with the asset type or class. ### Investors are often advised not to put all their eggs into one basket and invest in different asset classes to spread their bets and reduce risk. ## What are the most popular asset classes? Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even [cryptocurrencies in the asset class mix](https://www.investopedia.com/what-teens-need-to-know-about-cryptocurrency-7152233). ## Which asset class has the best historical returns? The [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) has proven to produce the highest returns over extended periods of time. Since the late 1920s, the [compound annual growth rate (CAGR)](https://www.investopedia.com/terms/c/cagr.asp) for the S&P 500 is about 6.6%, assuming that all dividends were reinvested and adjusted for inflation. In other words, $100 invested in the S&P 500 on Jan. 1, 1928, would have been worth about $46,833 (in 1928 dollars) by Dec. 31, 2023, without adjusting for inflation. The total would have grown to $836,206 in 2023 dollars. By comparison, the same $100 invested in five-year Treasuries would have been worth only about $7,278 in today’s dollars. ## Why are asset classes useful? Financial advisors focus on asset class as a way to help investors diversify their portfolios to maximize returns. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. ## The Bottom Line An asset class is a grouping of investments that exhibit similar characteristics and that may be subject to the same rules and regulations. Equities, fixed income, commodities, and real estate are common examples of asset classes. Asset classes can be used to diversify portfolios and reduce risk, as they are expected to reflect different risk and return characteristics. For instance, if stocks are falling, bond prices may be rising, and vice versa. Building a portfolio with asset classes that are not highly correlated with one another is an important concept for diversification.

What Is an Asset Class? An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset classes are thus made up of instruments that often behave similarly to one another in the marketplace. Examples of common asset classes include equities, fixed income, commodities, and real estate. Key Takeaways An asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Equities (e.g., stocks), fixed income (e.g., bonds), cash and cash equivalents, real estate, commodities, and currencies are common examples of asset classes. There is usually very little correlation and sometimes a negative correlation among different asset classes. Financial advisors focus on asset class as a way to help investors diversify their portfolios. NoNo Flores / Investopedia Understanding Asset Classes Simply put, an asset class is a grouping of comparable financial securities. For example, IBM, MSFT, and AAPL are a grouping of stocks. Asset classes and asset class categories are often mixed together. There is usually very little correlation and sometimes a negative correlation among different asset classes. This characteristic is important in the field of investing. Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even cryptocurrencies in the asset class mix. Investment assets include both tangible and intangible instruments that investors buy and sell for the purposes of generating additional income, on either a short- or long-term basis. Financial advisors view investment vehicles as asset-class categories that are used for diversification purposes. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. Investors interested in maximizing return often do so by reducing portfolio risk through asset class diversification. Financial advisors will help investors diversify their portfolios by combining assets from different asset classes that have different cash flow streams and varying degrees of risk. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Diversification reduces risk and increases your probability of making a positive return. The main asset classes are equities, fixed income, cash or marketable securities, and commodities. Types of Asset Classes The most common asset classes are: Cash and Cash Equivalents Cash and cash equivalents represent actual cash on hand and securities that are similar to cash. This type of investment is considered very low risk since there is little to no chance of losing your money. That peace of mind means the returns are also lower than other asset classes. Examples of cash and cash equivalents include cash parked in a savings account as well as U.S. government Treasury bills (T-bills), guaranteed investment certificates (GICs), and money market funds. Generally, the greater the risk of losing money, the greater the prospective return. Fixed Income Fixed income is an investment that pays a fixed income. Basically, you lend money to an entity and, in return, they pay you a fixed amount until the maturity date, which is the date when the money you initially invested (the loan) is paid back to you. Government and corporate bonds are the most common types of fixed-income products. The government or company will pay you interest for the life of the loan, with rates varying depending on inflation and the perceived risk that they won’t make good on the loan. The risk of certain governments defaulting on their bonds is very unlikely, so they pay out less. Conversely, some companies risk going bust and need to pay investors more to convince them to part with their money. Equities  When people talk about equities, they are usually speaking about owning shares in a company. For companies to expand and meet their objectives, they often resort to selling slices of ownership in exchange for cash to the general public. Buying these shares represents a great way to profit from the success of a company. There are two ways to make money from investing in companies: If the company pays a dividend If you sell the shares for more than you paid for them The market can be volatile, though. Share prices are known to fluctuate, and some companies may even go bust. Commodities Commodities are basic goods that can be transformed into other goods and services. Examples include metals, energy resources, and agricultural goods. Commodities are crucial to the economy and, in some cases, are viewed as a good hedge against inflation. Their return is based on supply and demand dynamics rather than profitability. Many investors invest indirectly in commodities by buying shares in companies that produce them. However, there is also a huge market for investing directly, whether that is actually buying a physical commodity with the view of eventually selling it for a profit or investing in futures. Each asset class carries a different level of risk and return and tends to perform differently in a given environment. Alternative Asset Classes Equities (stocks), bonds (fixed-income securities), cash or marketable securities, and commodities are the most liquid asset classes and, therefore, the most quoted asset classes. There are also alternative asset classes, such as real estate, and valuable inventory, such as artwork, stamps, and other tradable collectibles. Some analysts also refer to an investment in hedge funds, venture capital, crowdsourcing, or cryptocurrencies as examples of alternative investments. That said, an asset’s illiquidity does not speak to its return potential; it only means that it may take more time to find a buyer to convert the asset to cash. Asset Class and Investing Strategy Investors looking for alpha employ investment strategies focused on achieving alpha returns. Investment strategies can be tied to growth, value, income, or a variety of other factors that help to identify and categorize investment options according to a specific set of criteria. Some analysts link criteria to performance and/or valuation metrics such as earnings-per-share (EPS) growth or the price-to-earnings (P/E) ratio. Other analysts are less concerned with performance and more concerned with the asset type or class. Investors are often advised not to put all their eggs into one basket and invest in different asset classes to spread their bets and reduce risk. What are the most popular asset classes? Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments. Currently, most investment professionals include real estate, commodities, futures, other financial derivatives, and even cryptocurrencies in the asset class mix. Which asset class has the best historical returns? The stock market has proven to produce the highest returns over extended periods of time. Since the late 1920s, the compound annual growth rate (CAGR) for the S&P 500 is about 6.6%, assuming that all dividends were reinvested and adjusted for inflation.In other words, $100 invested in the S&P 500 on Jan. 1, 1928, would have been worth about $46,833 (in 1928 dollars) by Dec. 31, 2023, without adjusting for inflation. The total would have grown to $836,206 in 2023 dollars. By comparison, the same $100 invested in five-year Treasuries would have been worth only about $7,278 in today’s dollars. Why are asset classes useful? Financial advisors focus on asset class as a way to help investors diversify their portfolios to maximize returns. Investing in several different asset classes ensures a certain amount of diversity in investment selections. Each asset class is expected to reflect different risk and return investment characteristics and perform differently in any given market environment. The Bottom Line An asset class is a grouping of investments that exhibit similar characteristics and that may be subject to the same rules and regulations. Equities, fixed income, commodities, and real estate are common examples of asset classes. Asset classes can be used to diversify portfolios and reduce risk, as they are expected to reflect different risk and return characteristics. For instance, if stocks are falling, bond prices may be rising, and vice versa. Building a portfolio with asset classes that are not highly correlated with one another is an important concept for diversification.

https://www.investopedia.com/best-4-year-cd-rates-5272503

Best 4-Year CD Rates for May 2024

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content list-sc" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <span class="comp external-content mntl-external-component" id="external-content_1-0"><article class="comp article list-sc list-sc-content--finance list-sc--base mntl-block" id="list-sc-content--finance_1-0"> <div class="comp expert-content article-content mntl-block" id="article-content_1-0"> <div class="comp article-content__description article-container expert-content article-intro prm-sc-page mntl-sc-page mntl-block" id="article-intro_1-0"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> The best 4-year CD rate is 4.86% APY from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.wellbyfinancial.com/savings/certificates/" rel="nofollow">Wellby Financial</a>. To find you the highest 4-year CD rates nationwide, we review CD rates from hundreds of banks and credit unions every day. CD terms of 42–53 months are eligible for our 4-year rankings, with minimum deposit requirements of up to $25,000. Below are the top CD rates available from our partners, followed by the best CD rates that we've found from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816">our research</a> that are available to U.S. customers everywhere. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block--ma-rate-table--finance-mma mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block" id="mntl-sc-block_1-0-1"> <div class="comp ma-rate-table--finance-mma mntl-block" id="ma-rate-table--finance-mma_1-0"></div><!-- end: comp ma-rate-table--finance-mma mntl-block --> </div><!-- end: comp mntl-sc-block--ma-rate-table--finance-mma mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block --> <div class="comp theme-whatyouneedtoknow mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_1-0-2"> <h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> In the News</h3><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>The Fed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952">held rates steady for a sixth consecutive time</a> at its meeting ending on May 1. The 5.25% to 5.50% range is the highest it has been since 2001, and Fed officials noted in a statement that there has been a lack of recent progress toward the committee's goal of lowering inflation. Consumer prices rose 3.5% over the year in March. Officials don't foresee reducing the target range until they are confident inflation is moving toward 2%.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="9"></span></p> <p>CD yields closely follow the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federalfundsrate.asp">fed funds rate</a>. Back in October, CD rates reached peaks not seen in more than 20 years. But now, the Fed’s holding pattern has caused CD rates to plateau. Once it appears the Fed is ready to make a rate cut, rates on new CDs will fall.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-whatyouneedtoknow mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-3"> You can find our ranking of the highest CD rates with terms of 42–53 months below. In cases where more than one institution pays the same annual percentage yield, we've prioritized CDs by the shortest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/term.asp">term</a>, then the CD requiring a smaller <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/minimum_deposit.asp">minimum deposit</a>, and if still a tie, alphabetically by institution name. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-best-4-year-cd-rates"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0-4"> <span class="mntl-sc-block-heading__text"> Best 4-Year CD Rates </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-5"> <li>Wellby Financial – <strong>4.86% APY</strong></li><li>BMO Alto – <strong>4.70% APY</strong></li><li>Credit Human – <strong>4.65% APY</strong></li><li>Department of Commerce Federal Credit Union – <strong>4.60% APY</strong><br/></li><li>Seattle Bank – <strong>4.55% APY</strong><br/></li><li>NASA Federal Credit Union – <strong>4.55% APY</strong><br/></li><li>Pima Federal Credit Union – <strong>4.50% APY</strong></li><li>Dow Credit Union – <strong>4.50% APY</strong></li><li>Securityplus Federal Credit Union – <strong>4.50% APY</strong><br/></li><li>First National Bank of America – <strong>4.50% APY</strong></li><li>First Internet Bank – <strong>4.45% APY</strong></li><li>Main Street Bank – <strong>4.45% APY</strong><br/></li><li>NexBank – <strong>4.45% APY</strong><br/></li><li>Lafayette Federal Credit Union – <strong>4.42% APY</strong></li><li>CoVantage Credit Union – <strong>4.35% APY</strong></li><li>BMO – <strong>4.30% APY</strong><br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp sc-block-iframe--datawrapper mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_1-0-6"> <iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp lazyload mntl-sc-block-iframe__uri mntl-block" data-src="https://datawrapper.dwcdn.net/Np73L/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Top 4-Year CD Rate - October 2021 to Present"></iframe><!-- end: comp lazyload mntl-sc-block-iframe__uri mntl-block --> </div><!-- end: comp sc-block-iframe--datawrapper mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-7"> Detailed information on the top-paying four-year CDs available nationwide is provided below, including specifics about minimum deposits and early-withdrawal penalties. For credit union CDs, information is also provided on how anyone can become a member. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_1-0-8"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Looking for a wider selection of CDs? See our picks for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">best CD rates</a> to see terms ranging from three months to 10 years.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-tip mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> </div><!-- end: comp article-content__description article-container expert-content article-intro prm-sc-page mntl-sc-page mntl-block --> <div class="comp article-body mntl-block" id="article-body_1-0"> <div class="comp left-nav article-body__left-nav mntl-block" id="article-body__left-nav_1-0"></div><!-- end: comp left-nav article-body__left-nav mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0"> <span class="heading-toc" id="toc-wellby-financial--486-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0"> <a class="mntl-sc-block-heading__link" href="https://www.wellbyfinancial.com/savings/certificates/" rel="noopener nofollow nocaes" target="_blank">Wellby Financial – 4.86% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-1"> <li><strong>Term (months)</strong>: 48</li><li><strong>Minimum deposit</strong>: $1,000</li><li><strong>Early withdrawal penalty</strong>: 12 months of interest</li><li><strong>Membership</strong>: Anyone is eligible to join the credit union through membership in the American Consumer Council.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-1"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-1"> <span class="heading-toc" id="toc-bmo-alto--470-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-2"> <a class="mntl-sc-block-heading__link" href="https://alto.bmo.com/en-us/high-yield-cd/" rel="noopener nocaes" target="_blank">BMO Alto – 4.70% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-3"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> Any amount</li><li><strong>Early withdrawal penalty:</strong> 6 months of interest</li><li><strong>About:</strong> BMO Alto is an online-only division of BMO, which is a U.S. subsidiary of Bank of Montreal. In addition to CDs, it offers an online savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-2"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-2"> <span class="heading-toc" id="toc-credit-human--465-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-4"> <a class="mntl-sc-block-heading__link" href="https://www.credithuman.com/Checking-Savings/Share-Certificate" rel="noopener nofollow nocaes" target="_blank">Credit Human – 4.65% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-5"> <li><strong>Term (months):</strong> 36–59</li><li><strong>Minimum deposit:</strong> $500</li><li><strong>Early withdrawal penalty:</strong> 12 months of interest ($50 minimum)</li><li><strong>Membership:</strong> Anyone can join Credit Human by agreeing to a complimentary membership in the nonprofit American Consumer Council and keeping at least $5 in a member savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-3"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-3"> <span class="heading-toc" id="toc-department-of-commerce-federal-credit-union--460-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-6"> <a class="mntl-sc-block-heading__link" href="https://www.docfcu.org/cds-savings/" rel="noopener nofollow nocaes" target="_blank">Department of Commerce Federal Credit Union – 4.60% APY*</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-7"> <li><strong>Term (months):</strong> 36–47</li><li><strong>Minimum deposit:</strong> $25,000</li><li><strong>Early-withdrawal penalty:</strong> 6 months of interest</li><li><strong>Membership:</strong> Anyone can join the DCFCU by agreeing to a free membership in the nonprofit American Consumer Council.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-8"> <em>*Rates listed in DCFCU's rate charts are 0.10% lower than what's listed here, for a minimum deposit amount of $500. But the fine print indicates that for deposits of $25,000, a 0.10% premium applies.</em> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-4"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-4"> <span class="heading-toc" id="toc-seattle-bank--455-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-9"> <a class="mntl-sc-block-heading__link" href="https://www.seattlebank.com/personal/personal-banking/certificates-of-deposit-cd.html" rel="noopener nofollow nocaes" target="_blank">Seattle Bank – 4.55% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-10"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early-withdrawal penalty:</strong> 6 months of interest</li><li><strong>About:</strong> Established in 1999, Seattle Bank serves online customers across the country and operates a branch in downtown Seattle.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-5"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-5"> <span class="heading-toc" id="toc-nasa-federal-credit-union--455-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-11"> <a class="mntl-sc-block-heading__link" href="https://www.nasafcu.com/personal/checking-savings/certificates/certificates---rates" rel="noopener nofollow sponsored nocaes" target="_blank">NASA Federal Credit Union – 4.55% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-12"> <li><strong>Term (months):</strong> 49</li><li><strong>Minimum deposit:</strong> $10,000</li><li><strong>Early-withdrawal penalty:</strong> 12 months of interest</li><li><strong>Membership:</strong> Anyone can join NASA FCU by signing up for a free membership in the National Space Society and holding $5 or more in a savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-6"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-6"> <span class="heading-toc" id="toc-pima-federal-credit-union--450-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-13"> <a class="mntl-sc-block-heading__link" href="https://www.pimafederal.org/deposit/money-market-certificates" rel="noopener nofollow nocaes" target="_blank">Pima Federal Credit Union – 4.50% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-14"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $250</li><li><strong>Early withdrawal penalty:</strong> 50% of the interest left to be earned through the end of the term</li><li><strong>Membership:</strong> Anyone can join Pima by making a $20 donation to one of their affiliated nonprofits and keeping at least $5 in a Pima savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-7"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-7"> <span class="heading-toc" id="toc-dow-credit-union--450-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-15"> <a class="mntl-sc-block-heading__link" href="https://dowcreditunion.org/account/certificates-of-deposit" rel="noopener nofollow nocaes" target="_blank">Dow Credit Union – 4.50% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-16"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $500</li><li><strong>Early withdrawal penalty:</strong> 12 months of interest</li><li><strong>Overview:</strong> Based out of Midland, Michigan, anyone can join Dow Credit Union by making a $10 donation to the Midland Area Community Foundation scholarship fund during the membership application process. Dow Credit Union dates back to 1937 when it was founded to serve employees of Dow Chemical Company.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-8"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-8"> <span class="heading-toc" id="toc-securityplus-federal-credit-union--450-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-17"> <a class="mntl-sc-block-heading__link" href="https://www.securityplusfcu.org/personal/bank/share-certificates.aspx" rel="noopener nofollow nocaes" target="_blank">Securityplus Federal Credit Union – 4.50% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-18"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early withdrawal penalty:</strong> 3 months of interest</li><li><strong>Overview:</strong> Anyone is eligible to join Securityplus by paying the $15 fee to become a member of the American Consumer Council and opening a savings account with a minimum deposit of $5. Founded in 1938, Securityplus has physical branches in Maryland and over 34,000 members.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-9"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-9"> <span class="heading-toc" id="toc-first-national-bank-of-america--450-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-19"> <a class="mntl-sc-block-heading__link" href="https://www.fnba.com/online-banking/online-cd-rates/" rel="noopener nofollow sponsored nocaes" target="_blank">First National Bank of America – 4.50% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-20"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early-withdrawal penalty:</strong> 18 months of interest</li><li><strong>About:</strong> First National Bank of America is a Michigan-based community bank established in 1955. In addition to three branches in the state, FNBA offers online banking products to customers nationwide.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-10"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-10"> <span class="heading-toc" id="toc-first-internet-bank--445-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-21"> <a class="mntl-sc-block-heading__link" href="https://www.firstib.com/personal/bank/cds/" rel="noopener nofollow sponsored nocaes" target="_blank">First Internet Bank – 4.45% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-22"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early-withdrawal penalty:</strong> 12 months of interest</li><li><strong>About:</strong> First Internet Bank takes its name from its status as the first FDIC-insured bank to operate exclusively online. Founded in 1999, it is based in the Indianapolis suburb of Fishers, Ind.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-11"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-11"> <span class="heading-toc" id="toc-main-street-bank--445-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-23"> <a class="mntl-sc-block-heading__link" href="https://www.bankmainstreet.com/personal/deposit-rates/" rel="noopener nofollow nocaes" target="_blank">Main Street Bank – 4.45% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-24"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early withdrawal penalty:</strong> 50% of interest</li><li><strong>Overview:</strong> Main Street Bank is the result of a 2017 merger of Marlborough Savings Bank and North Middlesex Savings Bank, two institutions that date back to 1860 and 1885 respectively. Main Street Bank is headquartered in Marlborough, Massachusetts.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-12"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-12"> <span class="heading-toc" id="toc-nexbank--445-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-25"> <a class="mntl-sc-block-heading__link" href="https://www.nexbankpersonal.com/certificates-deposit.htm" rel="noopener nofollow sponsored nocaes" target="_blank">NexBank – 4.45% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-26"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $10,000</li><li><strong>Early withdrawal penalty:</strong> 6 months of interest</li><li><strong>About:</strong> NexBank is the fourth-largest bank in Dallas, founded in 1922.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-13"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-13"> <span class="heading-toc" id="toc-lafayette-federal-credit-union--442-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-27"> <a class="mntl-sc-block-heading__link" href="https://www.lfcu.org/rates/dividend-rates.aspx" rel="noopener nofollow sponsored nocaes" target="_blank">Lafayette Federal Credit Union – 4.42% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-28"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $500</li><li><strong>Early withdrawal penalty:</strong> 16 months of interest</li><li><strong>Membership:</strong> Anyone can join Lafayette Federal with a $10 membership in the Home Ownership Financial Literacy Council and $50 or more held in a savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-14"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-14"> <span class="heading-toc" id="toc-covantage-credit-union--435-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-29"> <a class="mntl-sc-block-heading__link" href="https://www.covantagecu.org/Save-Spend/Personal/Savings-Accounts/Share-Certificates" rel="noopener nofollow nocaes" target="_blank">CoVantage Credit Union – 4.35% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-30"> <li><strong>Term (months):</strong> 48</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early withdrawal penalty:</strong> 3 months of interest</li><li><strong>Membership:</strong> Anyone is eligible for membership by joining the CoVantage Cares Foundation for a one-time fee of $10 and keeping at least $10 in a member savings account.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp mntl-sc-list-item list-sc-item mntl-block" id="list-sc-item_1-0-15"> <div class="comp article-content__description article-container list-sc-item__container mntl-block" id="list-sc-item__container_1-0-15"> <span class="heading-toc" id="toc-bmo--430-apy"></span> <h2 class="comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading" id="mntl-sc-block_2-0-31"> <a class="mntl-sc-block-heading__link" href="https://www.bmo.com/en-us/main/personal/savings-and-cds/certificates-of-deposit/" rel="noopener nocaes" target="_blank">BMO – 4.30% APY</a><!-- end: mntl-sc-block-heading__link --> </h2><!-- end: comp mntl-sc-list-item-title finance-sc-block-heading mntl-sc-block mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-32"> <li><strong>Term (months):</strong> 45</li><li><strong>Minimum deposit:</strong> $1,000</li><li><strong>Early withdrawal penalty:</strong> 18 months of interest</li><li><strong>Overview:</strong> BMO is a U.S. subsidiary of the Canadian multinational Bank of Montreal, and is one of the 25 largest U.S. banks. In addition to online products, BMO operates branches in eight states.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-33"> <em>*This rate may differ for those residing in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, or Wisconsin (states where BMO operates physical branches).</em> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp article-content__description article-container list-sc-item__container mntl-block --> </div><!-- end: comp mntl-sc-list-item list-sc-item mntl-block --> <div class="comp article-container article-outro mntl-block" id="article-outro_1-0"> <div class="comp left-nav article-outro__left-nav mntl-block" id="article-outro__left-nav_1-0"></div><!-- end: comp left-nav article-outro__left-nav mntl-block --> <div class="comp expert-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <div class="comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0"> <h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0-1"> Fast Fact</h3><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>When asked in late April what they would invest in if they had an extra $10,000, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investors-aren-t-worried-right-now-but-they-re-not-buying-either-8642075">12% of Investopedia readers</a> said they would open a CD. Back in December and January, 11% and 9% of readers (respectively) said they’d invest extra funds in CDs, with that share dipping even further to 8% in March. While CDs sit below individual stocks as the top response (at 19%), CDs are always a good option for those looking for safer investments.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-note mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <div class="comp sc-block-iframe--datawrapper mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_3-0-1"> <iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp lazyload mntl-sc-block-iframe__uri mntl-block" data-src="https://datawrapper.dwcdn.net/rEleD/2/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0-1" title="12% of Readers Would Open a CD if They Had an Extra $10,000"></iframe><!-- end: comp lazyload mntl-sc-block-iframe__uri mntl-block --> </div><!-- end: comp sc-block-iframe--datawrapper mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-2"> Though not as common as their three-year and five-year siblings, four-year CDs are offered by banks and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit unions</a> across the country. Not only might a four-year certificate offer the perfect time horizon for your financial plans, but it is also important to anyone establishing a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cd-ladder.asp">CD ladder</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-pros-and-cons-of-a-4-year-cd"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-3"> <span class="mntl-sc-block-heading__text"> Pros and Cons of a 4-Year CD </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-4"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Guaranteed yield for four years</p></li> <li><p>Entirely predictable earnings</p></li> <li><p>Potentially higher APY than alternatives</p></li> <li><p>Spending deterrent</p></li> <li><p>Safe and virtually risk-free</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Incurs penalty if withdrawn early</p></li> <li><p>Only allows you to make a single deposit</p></li> <li><p>If rates rise, you might wish you'd chosen a shorter CD</p></li> <li><p>If rates drop, you might wish you'd chosen a longer CD</p></li> <li><p>Future rate environment can't be predicted</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <span class="heading-toc" id="toc-pros-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-5"> <span class="mntl-sc-block-heading__text"> Pros Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-6"> <li><strong>Guaranteed yield for four years</strong>: A CD's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apy.asp">annual percentage yield (APY)</a> is presented to you before you open it, and once you make your deposit, you'll be locking in that return for the full duration of the CD. The bank cannot change the rate.</li> <li><strong>Entirely predictable earnings</strong>: Because you'll know the rate, and because it's locked, you can calculate exactly how much your CD will be worth on its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity date</a>. Changes in financial markets or other factors in the news will have no bearing on your earnings.</li> <li><strong>Potentially higher APY than alternatives</strong>: In some rate environments, you can earn a higher interest rate the longer you're willing to commit your funds. So when shopping around, check if stretching to a four-year CD can increase your rate.</li> <li><strong>Spending deterrent</strong>: Because you can't make withdrawals from a CD without paying a penalty, you may be dissuaded from spending your savings on unplanned purchases.</li> <li><strong>Safe and virtually risk-free</strong>: If you open your CD at an <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic-insured-account.asp">FDIC-insured bank</a> or <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua.asp">NCUA-insured credit union</a>, your CD deposits of up to $250,000 per person and per institution are protected, even if the institution fails.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-cons-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-7"> <span class="mntl-sc-block-heading__text"> Cons Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> <li><strong>Incurs penalty if withdrawn early</strong>: If you need to cash out your CD before maturity, you can do so, but you'll be charged an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cd-early-withdrawal-penalty-5225111">early withdrawal penalty</a>. The amount of that penalty will be spelled out in your CD agreement, which you should review <em>before</em> committing your funds, as penalty policies can vary widely across institutions.<span class="ql-inline-citation" data-cite="7"></span></li> <li><strong>Only allows you to make a single deposit</strong>: The vast majority of CDs are designed to take one initial deposit that is kept on hold through the CD's term. Only niche <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169">"add-on" CDs</a> offer the ability to deposit additional funds.</li> <li><strong>If rates rise, you might wish you'd chosen a shorter CD</strong>: If you lock in your 4-year CD rate and then rates climb higher, you may wish you had opted for a shorter CD so you could have gotten out of your current rate sooner and opened a new CD at a higher rate.</li> <li><strong>If rates drop, you might wish you'd chosen a longer CD</strong>: If rates go down after you lock in a 4-year CD, you may wish you'd gone for a 5-year term instead, to retain your rate further into the future.</li> <li><strong>Future rate environment can't be predicted</strong>: Only very occasionally is it clear where interest rates are headed. Most of the time, anything is possible months or years down the road, making it difficult to gauge what the best CD moves are at any given time.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-4-year-cds"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-9"> <span class="mntl-sc-block-heading__text"> Compare the Best 4-Year CDs<br/> </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_3-0-10"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th>Institution</th> <th>Rate (APY)</th> <th>Term</th> <th>Minimum Deposit</th> <th>Early Withdrawal Penalty</th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.wellbyfinancial.com/savings/certificates/" rel="nofollow">Wellby Financial</a></td> <td>4.86%</td> <td>48 months</td> <td>$1,000</td> <td>12 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://alto.bmo.com/en-us/high-yield-cd/" rel="noopener noreferrer">BMO Alto</a></td> <td>4.70%</td> <td>48 months</td> <td>Any amount</td> <td>6 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.credithuman.com/Checking-Savings/Share-Certificate" rel="nofollow">Credit Human</a></td> <td>4.65%</td> <td>36–59 months</td> <td>$500</td> <td>12 months of interest ($50 minimum)</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.docfcu.org/cds-savings/" rel="nofollow">Department of Commerce Federal Credit Union</a></td> <td>4.60%</td> <td>36–47 months</td> <td>$25,000</td> <td>6 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.seattlebank.com/personal/personal-banking/certificates-of-deposit-cd.html" rel="nofollow">Seattle Bank</a></td> <td>4.55%</td> <td>48 months</td> <td>$1,000</td> <td>6 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nasafcu.com/personal/checking-savings/certificates/certificates---rates" rel="sponsored nofollow">NASA Federal Credit Union</a></td> <td>4.55%</td> <td>49 months</td> <td>$10,000</td> <td>12 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.pimafederal.org/deposit/money-market-certificates" rel="nofollow">Pima Federal Credit Union</a></td> <td>4.50%</td> <td>48 months</td> <td>$250</td> <td>50% of the interest left to be earned through the end of the term</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://dowcreditunion.org/account/certificates-of-deposit" rel="nofollow">Dow Credit Union</a></td> <td>4.50%</td> <td>48 months</td> <td>$500</td> <td>12 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.securityplusfcu.org/personal/bank/share-certificates.aspx" rel="nofollow">Securityplus Federal Credit Union</a></td> <td>4.50%</td> <td>48 months</td> <td>$1,000</td> <td>3 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.fnba.com/online-banking/online-cd-rates/" rel="sponsored nofollow">First National Bank of America</a></td> <td>4.50%</td> <td>48 months</td> <td>$1,000</td> <td>18 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.firstib.com/personal/bank/cds/" rel="sponsored nofollow">First Internet Bank</a></td> <td>4.45%</td> <td>48 months</td> <td>$1,000</td> <td>12 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bankmainstreet.com/personal/deposit-rates/" rel="noopener noreferrer nofollow">Main Street Bank</a></td> <td>4.45%</td> <td>48 months</td> <td>$1,000</td> <td>50% of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nexbankpersonal.com/certificates-deposit.htm" rel="sponsored nofollow">NexBank</a></td> <td>4.45%</td> <td>48 months</td> <td>$10,000</td> <td>6 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.lfcu.org/rates/dividend-rates.aspx" rel="sponsored nofollow">Lafayette Federal Credit Union</a></td> <td>4.42%</td> <td>48 months</td> <td>$500</td> <td>16 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.covantagecu.org/Save-Spend/Personal/Savings-Accounts/Share-Certificates" rel="noopener noreferrer nofollow">CoVantage Credit Union</a></td> <td>4.35%</td> <td>48 months</td> <td>$1,000</td> <td>3 months of interest</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bmo.com/en-us/main/personal/savings-and-cds/certificates-of-deposit/">BMO</a></td> <td>4.30%</td> <td>45 months</td> <td>$1,000</td> <td>18 months of interest</td> </tr> </tbody> </table> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <span class="heading-toc" id="toc-alternatives-to-a-4-year-cd"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-11"> <span class="mntl-sc-block-heading__text"> Alternatives to a 4-Year CD </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_3-0-12"> <span class="mntl-sc-block-subheading__text"> Shorter-Term CDs<br/> </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-13"> Opening a certificate with a shorter term may be a better choice if you're not entirely confident you can leave the funds on deposit for a full four years. Also, sometimes you can score a higher rate on a shorter CD than on a longer one. It depends on the current rate environment, and also what promotional CDs might be available in the marketplace. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-14"> If you open a shorter-term CD, you can always cash it in when it matures and open a new CD. But you may find that rates have dropped. If rates are now higher, it's great news. But if rates are lower than when you opened your initial CD, you may wish you'd locked in your rate for four years instead of the shorter term. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_3-0-15"> <span class="mntl-sc-block-subheading__text"> High-Yield Savings and Money Market Accounts<br/> </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> Keeping your cash in a savings or money market account offers much more flexibility than a CD, with no risk of an early withdrawal penalty. You'll be able to add and withdraw funds more or less as often as you like. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-17"> The trade-off, however, is that your interest rate on a liquid account can change at any time. So if rates are declining, the annual percentage yield on your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-savings-accounts-4770633">high-yield savings</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-money-market-accounts-5096917">money market account</a> will almost certainly go down, while any rate on a CD will hold. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-18"> In addition, liquid accounts typically don't offer as high a return as CDs. By committing your funds to a certain CD term, you can usually boost your earnings, and sometimes quite substantially. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_3-0-19"> <span class="mntl-sc-block-subheading__text"> Bond Products<br/> </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-20"> Various types of bonds are also possibilities for your cash savings. Some, like U.S. Treasury savings bonds and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurynote.asp">Treasury notes</a>, are very similar to CDs in that the rate is typically predictable if you hold the bond until maturity. They are also backed by the federal government, so like CDs, they are exceptionally safe.<span class="ql-inline-citation" data-cite="5"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-21"> U.S. Treasury <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seriesibond.asp">I bonds</a>, however, only have a fixed rate for six months at a time. Twice a year, the rate is adjusted based on the current inflation rate (hence the name I bond). Like a CD, I bonds have an early withdrawal penalty, but it's a mild three months' worth of interest. Also, unlike a CD, you cannot for any reason cash in an I bond during its first 12 months.<span class="ql-inline-citation" data-cite="6"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-22"> Other bond options are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/municipalbond.asp">municipal</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporatebond.asp">corporate bonds</a> of various lengths. But the easiest way for most people to buy these is through a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bondfund.asp">bond mutual fund</a> or <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond-etf.asp">bond ETF</a> (exchange-traded fund) that bundles many bonds together. Some of these even include hundreds or thousands of bonds in a certain category, making them an <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indexfund.asp">index fund</a> of bonds. By going this route, you can make investments and withdrawals at will, rather than having to be concerned with maturity dates. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_3-0-23"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>When CD shopping, stay open-minded about the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturity.asp">maturity</a> term you're seeking. Not only do some institutions offer odd-term CDs with better rates (think 35 months or 49 months), but it's also true that some banks will offer a promotional CD that, despite having a much shorter term, actually offers a higher rate than the term you're looking to open.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_3-0-24"> <span class="mntl-sc-block-subheading__text"> The Stock Market<br/> </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> If you know you won't need your funds for four years, you could consider investing in stocks instead. The upside is that you could potentially earn quite a bit more in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockmarket.asp">stock market</a> than with a fixed four-year CD rate. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-26"> The notable downside, of course, is that you can always lose money in the stock market, including scenarios where you lose most of your investment. So while CDs won't return as much as equities in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bullmarket.asp">bullish stock market</a> period, on the flip side they are <em>guaranteed</em> to grow, with no risk of you losing your initial principal. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_3-0-27"> <span class="heading-toc" id="toc-frequently-asked-questions-0b02bce5-0d0c-4ee9-acc9-2432f8ca597a"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Is a 4-Year CD?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-0"> <div class="faq-accordion__item-answer"> <p>A certificate of deposit is a special type of bank account that involves advance commitments from both the individual and the bank or credit union. Your commitment is to hold a lump-sum deposit in the account for a certain period of time, usually measured in months or years. In turn, the financial institution commits to paying you a fixed and known <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rate</a> for the full duration of the CD.<br/></p><p>Because the bank can count on having access to the funds for an extended period, it will generally pay you a higher interest rate on your balance than if the funds were in a savings or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymarketaccount.asp">money market account</a>, where unpredictable withdrawals and deposits are allowed.</p><p>A four-year CD is simply a certificate of deposit that has a maturity term of about four years or 48 months, though you'll sometimes encounter CDs with odd terms, such as 45 months or 49 months. Those that qualify for our four-year rankings have terms ranging from 42 to 53 months.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">When Is a 4-Year CD a Good Idea?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>There are two main reasons to consider a CD that's four years in length. The first is based on your personal timeline. If you know you can lock up the funds for a number of years, but five years is a bit too long because you'll need the funds sooner than that, a four-year term can get you close to those five-year yields while shortening the time until you can access the funds.<br/></p><p>The second reason to buy a four-year CD is if you are building a five-year <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cd-ladder.asp">CD ladder</a>. This is explained in more depth below, but in short, it involves buying an array of different CD terms, in yearly durations of up to five years. Hence, you'll need one four-year CD to complete the group.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">What If I Need My Money Before Maturity?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>You can typically withdraw your money from a CD at just about any time, but it may take up to a week to get your money and it will come at a price.<br/></p><p>Since the entire premise of a CD is that the bank is paying you a better interest rate in exchange for your agreement that you'll keep the funds on deposit until maturity, cashing the CD in early means you are breaking your end of the deal. The result is called an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earlywithdrawal.asp">early-withdrawal penalty</a>, and like rates, the penalties vary tremendously across institutions.</p><p>Most types of penalties make you forfeit some months of earned interest. This can be as few as one month or as long as 24 months. Generally, the longer the CD term, the more months of interest you'll be penalized.</p><p>Even worse are early withdrawal policies that calculate the penalty as a percentage of your balance because these can dip into your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/principal.asp">principal</a>. You should always avoid any CD with a penalty that can reduce your principal.</p><p>Be sure to look into the early withdrawal policy for any CD you're considering. If you find yourself trying to decide between two fairly similar CDs, it's wise to go with the one assessing a milder penalty, just in case an emergency arises and you find yourself needing to withdraw.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Is a CD Ladder?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>The term <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cd-ladder.asp">CD ladder</a> refers to a strategy designed to maximize the amount of interest you can earn over a long period of time, while still giving you access to a portion of the funds every year. For a five-year CD ladder, you'll invest one-fifth of the total funds into five different CD durations (e.g., the rungs of the ladder) and eventually use the proceeds of each maturing CD into a five-year CD, since those certificates typically pay the highest rates.<br/></p><p>Let's say you want to keep $50,000 invested in safe, reliable CDs for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preservationofcapital.asp">capital preservation</a>. Instead of investing it all in a single five-year CD and having no access to the full amount for that time, you can build a five-year CD ladder by putting $10,000 into a one-year CD, $10,000 into a two-year CD, and so forth, until you have five $10,000 CDs all maturing a year apart.</p><p>Each year, when one of the CDs matures, those funds are used to buy a new five-year CD to earn a higher yield and continue the ladder. After the fourth maturity, you'll still have five certificates, but they will now comprise a portfolio of only five-year CDs, with one available for withdrawal every year.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">How Do Banks and Credit Unions Differ?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-4"> <div class="faq-accordion__item-answer"> <p>You can open a certificate of deposit at almost any bank or credit union. And for the most part, there is little difference between CDs from these different institution types. Indeed, both banks and credit unions offer the same level of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fdic-rules-for-cds-5271560">deposit insurance</a> ($250,000 per individual) should the institution fail.</p><p>The biggest difference is that opening any account at a credit union requires you to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-join-a-credit-union-7495339">first become a member</a> since credit unions are member-owned not-for-profit organizations. Further, you'll find that the rules of eligibility for membership are unique to each credit union, with some based on where you live, while others are based on where you work.</p><p>All of the credit union CDs in our rankings are from credit unions that allow anyone nationwide to join regardless of where you live or work. However, doing so sometimes requires a small donation or fee.</p><p>Still, joining a particular credit union can be worth it, as many credit unions make up the top ranks in various CD terms. In particular, the longer the term you're shopping for, the better served you'll be by staying open-minded to a credit union CD.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">Financial Institutions We Review</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>We researched and reviewed more than 250 banks, credit unions, and financial institutions to find the best CD rates you see above on this list. While we write individual reviews for most, we do not always write reviews for those we would not recommend. Below are the banks, credit unions, and financial institutions we researched along with links to individual company reviews to help you learn more before making a decision:<br/></p><p>1st Source Bank, 5star Bank, ableBanking, Abound Credit Union, Achieva Credit Union, Affinity Federal Credit Union, Affinity Plus Federal Credit Union, Air Force Federal Credit Union, Alabama Credit Union, Allegacy Federal Credit Union, Alliant Credit Union, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ally-bank-cd-rates-7483690">Ally Bank</a>, Amerant Bank, American 1 Credit Union, American Express, American Heritage Credit Union, Andrews Federal Credit Union, Apple Federal Credit Union, Banco do Brasil Americas, Banesco USA, Bank of Baroda, Bank5 Connect, Bank7, Texas Capital Bank, bankESB (Easthampton Savings Bank), BankUnitedDirect, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/barclays-bank-cd-rates-7481049">Barclays</a>, BBVA Bank, Bellco Credit Union, Blue Federal Credit Union, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bmo-bank-cd-rates-7500022">BMO</a>, BMO Alto, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/briodirect-bank-review-5069892">BrioDirect</a>, Cadets Federal Credit Union, California Coast Credit Union, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/capital-one-cd-rates-7480645">Capital One</a>, Capitol Federal Savings Bank, CD Bank, CFG Bank, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chase-cd-rates-7480360">Chase Bank</a>, Chevron Federal Credit Union, CIBC (Agility Banking), <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cit-bank-cd-rates-7480633">CIT Bank</a>, <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/citibank-cd-rates-7482684">Citibank</a>, Citizens Access, Citizens Trust Bank, Colorado Federal Savings Bank, <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bread-savings-cd-rates-7488944">Bread Savings</a>, Communitywide Federal Credit Union, ConnectOne Bank, Connexus Credit Union, Consumers Credit Union, Corporate America Federal Credit Union (CAFCU), Credit Union of Denver, Credit Union of the Rockies, Digital, Federal Credit Union, <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/discover-bank-review-5069129">Discover Bank</a>, DollarSavingsDirect, Dover Federal Credit Union, Dow Credit Union, Evergreen Bank Group, RocklandTrust Bank, Elements Financial, EmigrantDirect.com, Liberty Federal Credit Union, <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fidelity-cd-rates-7496602">Fidelity Investments</a>, Financial Partners Credit Union, Financial Resources Federal Credit Union, First Financial Credit Union, First Financial Northwest Bank, First Internet Bank, First National Bank of America, First Technology Federal Credit Union, Fort Bragg Federal Credit Union, Garden Savings Federal Credit Union, Georgia Banking Company, Georgia's Own Credit Union, GreenState Credit Union, Greenwood Credit Union, Grow Financial Federal Credit Union, GTE Financial, Gulf Coast Bank &amp; Trust Company, Hanscom Federal Credit Union, Heritage Bank, Hiway Federal Credit Union, Home Loan Investment Bank, Home Savings Bank, Hope Credit Union, HSBC Direct, Hughes Federal Credit Union, Hyperion Bank, Ideal Credit Union, iGObanking, Interior Federal Credit Union, Justice Federal Credit Union, Kinecta Federal Credit Union, KS State Bank, La Capitol Federal Credit Union, Lafayette Federal Credit Union, Lake Michigan Credit Union, Langley Federal Credit Union, Latino Community Credit Union, Limelight Bank, Live Oak Bank, Luther Burbank Savings, MYSB Direct, MAC Federal Credit Union, Main Street Bank, MainStreet Bank, MapleMark Bank, Marcus by Goldman Sachs, Market USA Federal Credit Union, Matadors Community Credit Union, MECU Credit Union, Merrick Bank, Michigan State University Federal Credit Union, Mills42 Federal Credit Union, Mountain America Credit Union, MTC Federal Credit Union, MutualOne Bank, My Banking Direct, My eBanc, My Savings Direct, NASA Federal Credit Union, Nationwide by <a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/axos-bank-review-4802090">Axos Bank</a>, <a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/navy-federal-cd-rates-7499476">Navy Federal Credit Union</a>, nbkc, NexBank, North Country Savings Bank, Northern Bank Direct, Northfield Bank, Northpointe Bank, Nuvision Federal Credit Union, Oklahoma Central Credit Union, One American Bank, OneUnited Bank, Pacific National Bank, Paramount Bank, PARDA Federal Credit Union, Partner Colorado Credit Union, Patelco Credit Union, Pen Air Federal Credit Union, <a data-component="link" data-ordinal="14" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/penfed-cd-rates-7497239">PenFed Credit Union</a>, People's Credit Union, First Service Credit Union, Pinnacle Federal Credit Union, <a data-component="link" data-ordinal="15" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/popular-direct-bank-review-5072550">Popular Direct</a>, Premier America Credit Union, Presidential Bank, FSB, Prime Alliance Bank, PSECU (Pennsylvania State Employees Credit Union), Quontic Bank, Quorum Federal Credit Union, Rising Bank, Merrimack Valley Credit Union, Salal Credit Union, <a data-component="link" data-ordinal="16" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sallie-mae-bank-cd-rates-7485414">Sallie Mae Bank</a>, Santa Clara County Federal Credit Union, Signature Federal Credit Union, Spectrum Credit Union, SRP Federal Credit Union, State Bank of India Chicago, State Bank of India New York, State Bank of Texas, State Department Federal Credit Union, Summit Credit Union, Sun East Federal Credit Union, Superior Choice Credit Union, <a data-component="link" data-ordinal="17" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/synchrony-bank-cd-rates-7482657">Synchrony Bank</a>, TAB Bank, Teachers Federal Credit Union, Technology Credit Union, The Federal Savings Bank, <a data-component="link" data-ordinal="18" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/third-federal-cd-rates-7498126">Third Federal Savings &amp; Loan</a>, <a data-component="link" data-ordinal="19" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/everbank-cd-rates-7483667">EverBank</a>, TotalDirectBank, Transportation Federal Credit Union, TruStone Financial Credit Union, UNIFY Financial Credit Union, Expedition Credit Union, United States Senate Federal Credit Union, United Texas Bank, University Federal Credit Union, <a data-component="link" data-ordinal="20" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-bank-cd-rates-7497336">US Bank</a>, USAlliance Financial, USPS Federal Credit Union, Velocity Credit Union, VeraBank, <a data-component="link" data-ordinal="21" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/vio-bank-review-4842261">Vio Bank</a>, Virtual Bank, WebBank, Webster Bank, <a data-component="link" data-ordinal="22" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/wells-fargo-cd-rates-7483593">Wells Fargo</a>, Western Vista Credit Union, Wings Financial Credit Union, XCEL Federal Credit Union, BankPurely, Umbrella Bank, giantbank.com, CapEd Credit Union, Zeal Credit Union, Finworth, Coastal1 Credit Union, Service Credit Union, National Cooperative Bank, Premier Members Credit Union, <a data-component="link" data-ordinal="23" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bank-of-america-cd-rates-7498115">Bank of America</a>, Flagstar Bank, 1st MidAmerica Credit Union, INOVA Federal Credit Union, Genisys Credit Union, Ivy Bank, Heartland Credit Union, Luana Savings Bank, Spectra Credit Union, Workers Credit Union, Credit Human, EFCU Financial, Poppy Bank, Credit One Bank, Vibrant Credit Union, CFBank, Department of Commerce Federal Credit Union, Seattle Bank, Crescent Bank, Pima Federal Credit Union, Cross River Bank, <a data-component="link" data-ordinal="24" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/usaa-bank-cd-rates-7483875">USAA</a>, Great River Federal Credit Union, Brilliant Bank, Merchants Bank of Indiana, <a data-component="link" data-ordinal="25" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lendingclub-banking-review-5071446">LendingClub</a>, Chartway Credit Union, First Central Savings Bank, AgFed Credit Union, North American Savings Bank, Pelican State Credit Union, First Community Credit Union, Bask Bank, Skyla Credit Union, SkyOne Federal Credit Union, 3Rivers Federal Credit Union, Utah First Credit Union, Pasadena Federal Credit Union, Magnifi Financial, AloStar, Primis Bank, Farmers Insurance Federal Credit Union, Tampa Bay Federal Credit Union, Veridian Credit Union, Republic Bank, Salem Five Direct, All In Credit Union, Bethpage Federal Credit Union, Self-Help Federal Credit Union, Forbright Bank, Jovia Financial Credit Union, Sun Canyon Bank, Fortera Credit Union, Partners 1st Federal Credit Union, SouthEast Bank, American Bank, Newtek Bank, CBC Federal Credit Union, <a data-component="link" data-ordinal="26" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/vanguard-cd-rates-7496300">Vanguard</a>, All America Bank, Amalgamated Bank, Citizens State Bank, AmBoy Direct, Republic Bank of Chicago, Oklahoma Community Credit Union, BluPeak Credit Union, Valley Direct, Bayer Heritage Federal Credit Union, First Harvest Credit Union, Orion Federal Credit Union, Wellby Financial, FedChoice Federal Credit Union, CoVantage Credit Union, Choice First Bank, Sandia Area Federal Credit Union, OMB Bank, Minnequa Works Credit Union, Securityplus Federal Credit Union, Bank of South Texas, T Bank</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> </ul><!-- end: comp mntl-sc-block-faq__content mntl-accordion --> <!--end accordion --> </div><!-- end: comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block --> <span class="heading-toc" id="toc-how-we-find-the-best-4-year-cd-rates"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_3-0-28"> <span class="mntl-sc-block-heading__text"> How We Find the Best 4-Year CD Rates </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic-insured-account.asp">FDIC</a> for banks, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua-insured-institution.asp">NCUA</a> for credit unions), and the CD's minimum initial deposit must not exceed $25,000. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-30"> Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816">read our full methodology</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div><!-- end: comp expert-content article-outro__content prm-sc-page mntl-sc-page mntl-block --> <figure class="comp figure-landscape primary-image--listsc primary-image mntl-universal-primary-image primary-image" id="primary-image--listsc_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Investopedia custom visual assets shows a certificate and piles of change with the title Best 4-Year CD Rates" class="primary-image__image mntl-primary-image--blurry" height="4167" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/dMH2qlyMoAhwtrRCROFw7U4WJvE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg" srcset="https://www.investopedia.com/thmb/RJ4n7PEkhuufpibcjYeCwyY_nA4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPQAABokPiIqQCErRC43VCk3Wiw+XzA/YSxEZi5GaC9HaTJDZjVGZzRFaC9XooKi4M3Z+PLy/////xokPhokPhokPhokPhokPhokPhokPhokPhokPhokPhokPhokPhokPhokPiwAAAAACgAHAEQIMgAjCIwwAMCAgwgVPFhIEOEAAxAiNHBQgIHDgwkQHIgQYGBDhwUWDFj44OPFkgMEEAgIADs=')" width="6250"/> <noscript> <img alt="Investopedia custom visual assets shows a certificate and piles of change with the title Best 4-Year CD Rates" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="4167" sizes="750px" src="https://www.investopedia.com/thmb/dMH2qlyMoAhwtrRCROFw7U4WJvE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg" srcset="https://www.investopedia.com/thmb/RJ4n7PEkhuufpibcjYeCwyY_nA4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg 750w" width="6250"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>Investopedia / Alice Morgan</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-landscape primary-image--listsc primary-image mntl-universal-primary-image primary-image --> </div><!-- end: comp article-container article-outro mntl-block --> </div><!-- end: comp article-body mntl-block --> </div><!-- end: comp expert-content article-content mntl-block --> </article><!-- end: comp article list-sc list-sc-content--finance list-sc--base mntl-block --> </span> </div><div class="loc content-bottom"><div class="comp article-container mntl-block" id="article-container_1-0"><div class="comp prm-article-sources article-sources mntl-article-sources mntl-expandable-block" data-scroll-offset="100" id="prm-article-sources_1-0"><div class="loc toggle-content"><div class="comp mntl-article-sources__wrapper mntl-block article-sources__wrapper" data-click-tracked="true" id="mntl-article-sources__wrapper_1-0"><div class="comp mntl-article-sources__heading mntl-text-block article-sources__heading" id="mntl-article-sources__heading_1-0">Article Sources</div> <div class="comp mntl-article-sources__icon-wrapper mntl-block article-sources__icon-wrapper" id="mntl-article-sources__icon-wrapper_1-0"><div class="comp article-sources__show-icon mntl-block" id="article-sources__show-icon_1-0"></div> <div class="comp article-sources__hide-icon mntl-block" id="article-sources__hide-icon_1-0"></div></div></div> </div><div class="loc expandable-content"> <div class="comp article-sources__disclaimer mntl-block" id="article-sources__disclaimer_1-0">Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our <a class="article-sources__disclaimer-text-link mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/legal-4768893#EditorialPolicy" id="article-sources__disclaimer-text-link_1-0" rel="nocaes"><span class="link__wrapper">editorial policy.</span></a></div> <div class="comp mntl-article-sources__citation-sources-1 mntl-citation-sources mntl-sources" data-tracking-container="true" id="mntl-article-sources__citation-sources-1_1-0"> <ol class="mntl-sources__content"> <li class="mntl-sources__source" id="citation-8"><p>Federal Reserve. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.federalreserve.gov/newsevents/pressreleases/monetary20240501a.htm">Federal Reserve Issues FOMC Statement</a>."</p></li> <li class="mntl-sources__source" id="citation-9"><p>Bureau of Labor Statistics. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bls.gov/news.release/cpi.nr0.htm">Consumer Price Index</a>."</p></li> <li class="mntl-sources__source" id="citation-7"><p>Office of the Comptroller of the Currency, HelpwithMyBank.gov. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.helpwithmybank.gov/help-topics/bank-accounts/certificates-of-deposit/cd-penalties.html">What Are the Penalties for Withdrawing Money Early From a Certificate of Deposit (CD)?</a>"</p></li> <li class="mntl-sources__source" id="citation-5"><p>TreasuryDirect. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.treasurydirect.gov/savings-bonds/" rel="nofollow sponsored">About U.S. Savings Bonds</a>."</p></li> <li class="mntl-sources__source" id="citation-6"><p>TreasuryDirect. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.treasurydirect.gov/savings-bonds/i-bonds/" rel="nofollow sponsored">I Bonds</a>."</p></li> </ol> </div> </div></div> <div class="comp related-recirc-section--terms mntl-block" data-tracking-container="true" id="related-recirc-section--terms_1-0"><div class="comp related-terms mntl-block" id="related-terms_1-0"><div class="comp related-terms__heading mntl-text-block" id="related-terms__heading_1-0">Related Terms</div> <div class="comp related-terms__list mntl-block" id="related-terms__list_1-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_1-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp" id="related-terms__title_1-0" rel="nocaes"><span class="link__wrapper">What Is a Certificate of Deposit (CD) and What Can It Do for You?</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_1-0">A certificate of deposit (CD) is a type of savings account offered by banks and credit unions that pays a fixed interest rate on money held for an agreed upon period of time.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp" id="related-terms__read-more_1-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_2-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_2-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/c/cd-ladder.asp" id="related-terms__title_2-0" rel="nocaes"><span class="link__wrapper">CD Ladder: How to Make One, Benefits, FAQ</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_2-0">A CD ladder is a strategy in which an investor divides a sum of money into equal amounts and invests them in certificates of deposit (CDs) with different maturity dates.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/c/cd-ladder.asp" id="related-terms__read-more_2-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_3-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_3-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169" id="related-terms__title_3-0" rel="nocaes"><span class="link__wrapper">Add-On CDs: Meaning, Pros and Cons, Example</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_3-0">Add-on CDs are specialty CDs that allow you to add more funds to your CD after the initial deposit. Learn whether an add-on or standard CD is a better choice for you.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169" id="related-terms__read-more_3-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_4-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_4-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/what-are-the-different-types-of-specialty-certificates-of-deposit-cd-5525646" id="related-terms__title_4-0" rel="nocaes"><span class="link__wrapper">Types of Specialty Certificates of Deposit (CDs) Explained</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_4-0">Specialty CDs offer features such as the ability to add to the principal or avoid early withdrawal fees. Some options offer more flexibility but may have lower rates than standard CDs.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/what-are-the-different-types-of-specialty-certificates-of-deposit-cd-5525646" id="related-terms__read-more_4-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_5-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_5-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/cd-early-withdrawal-penalty-5225111" id="related-terms__title_5-0" rel="nocaes"><span class="link__wrapper">CD Early Withdrawal Penalty </span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_5-0">You may have to pay an early withdrawal penalty to take money out of a certificate of deposit before its term ends. Here's what you need to know.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/cd-early-withdrawal-penalty-5225111" id="related-terms__read-more_5-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div> <div class="comp related-terms__list mntl-block" id="related-terms__list_6-0"><div class="comp relates-terms__content mntl-block" id="relates-terms__content_6-0"><a class="related-terms__title mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/p/promotional-cd-rate-bonus-cd-rate.asp" id="related-terms__title_6-0" rel="nocaes"><span class="link__wrapper">Promotional Certificate of Deposit (CD) Rate: Everything You Need to Know</span></a> <div class="comp related-terms__description mntl-text-block" id="related-terms__description_6-0">A promotional certificate of deposit (CD) rate is a higher rate of return on a CD offered by banks and credit unions to attract new deposits.</div> <a class="related-terms__read-more mntl-text-link" data-tracking-container="true" href="https://www.investopedia.com/terms/p/promotional-cd-rate-bonus-cd-rate.asp" id="related-terms__read-more_6-0" rel="nocaes"><span class="link__wrapper">more</span></a></div></div></div></div></div> </div></div>

The best 4-year CD rate is 4.86% APY from [Wellby Financial](https://www.wellbyfinancial.com/savings/certificates/). To find you the highest 4-year CD rates nationwide, we review CD rates from hundreds of banks and credit unions every day. CD terms of 42–53 months are eligible for our 4-year rankings, with minimum deposit requirements of up to $25,000. Below are the top CD rates available from our partners, followed by the best CD rates that we've found from [our research](https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816) that are available to U.S. customers everywhere. ### In the News The Fed [held rates steady for a sixth consecutive time](https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952) at its meeting ending on May 1. The 5.25% to 5.50% range is the highest it has been since 2001, and Fed officials noted in a statement that there has been a lack of recent progress toward the committee's goal of lowering inflation. Consumer prices rose 3.5% over the year in March. Officials don't foresee reducing the target range until they are confident inflation is moving toward 2%. CD yields closely follow the [fed funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp). Back in October, CD rates reached peaks not seen in more than 20 years. But now, the Fed’s holding pattern has caused CD rates to plateau. Once it appears the Fed is ready to make a rate cut, rates on new CDs will fall. You can find our ranking of the highest CD rates with terms of 42–53 months below. In cases where more than one institution pays the same annual percentage yield, we've prioritized CDs by the shortest [term](https://www.investopedia.com/terms/t/term.asp), then the CD requiring a smaller [minimum deposit](https://www.investopedia.com/terms/m/minimum_deposit.asp), and if still a tie, alphabetically by institution name. ## Best 4-Year CD Rates * Wellby Financial – **4.86% APY** * BMO Alto – **4.70% APY** * Credit Human – **4.65% APY** * Department of Commerce Federal Credit Union – **4.60% APY** * Seattle Bank – **4.55% APY** * NASA Federal Credit Union – **4.55% APY** * Pima Federal Credit Union – **4.50% APY** * Dow Credit Union – **4.50% APY** * Securityplus Federal Credit Union – **4.50% APY** * First National Bank of America – **4.50% APY** * First Internet Bank – **4.45% APY** * Main Street Bank – **4.45% APY** * NexBank – **4.45% APY** * Lafayette Federal Credit Union – **4.42% APY** * CoVantage Credit Union – **4.35% APY** * BMO – **4.30% APY** Detailed information on the top-paying four-year CDs available nationwide is provided below, including specifics about minimum deposits and early-withdrawal penalties. For credit union CDs, information is also provided on how anyone can become a member. Looking for a wider selection of CDs? See our picks for the [best CD rates](https://www.investopedia.com/best-cd-rates-4770214) to see terms ranging from three months to 10 years. ## [Wellby Financial – 4.86% APY](https://www.wellbyfinancial.com/savings/certificates/) * **Term (months)**: 48 * **Minimum deposit**: $1,000 * **Early withdrawal penalty**: 12 months of interest * **Membership**: Anyone is eligible to join the credit union through membership in the American Consumer Council. ## [BMO Alto – 4.70% APY](https://alto.bmo.com/en-us/high-yield-cd/) * **Term (months):** 48 * **Minimum deposit:** Any amount * **Early withdrawal penalty:** 6 months of interest * **About:** BMO Alto is an online-only division of BMO, which is a U.S. subsidiary of Bank of Montreal. In addition to CDs, it offers an online savings account. ## [Credit Human – 4.65% APY](https://www.credithuman.com/Checking-Savings/Share-Certificate) * **Term (months):** 36–59 * **Minimum deposit:** $500 * **Early withdrawal penalty:** 12 months of interest ($50 minimum) * **Membership:** Anyone can join Credit Human by agreeing to a complimentary membership in the nonprofit American Consumer Council and keeping at least $5 in a member savings account. ## [Department of Commerce Federal Credit Union – 4.60% APY\*](https://www.docfcu.org/cds-savings/) * **Term (months):** 36–47 * **Minimum deposit:** $25,000 * **Early-withdrawal penalty:** 6 months of interest * **Membership:** Anyone can join the DCFCU by agreeing to a free membership in the nonprofit American Consumer Council. *\*Rates listed in DCFCU's rate charts are 0.10% lower than what's listed here, for a minimum deposit amount of $500. But the fine print indicates that for deposits of $25,000, a 0.10% premium applies.* ## [Seattle Bank – 4.55% APY](https://www.seattlebank.com/personal/personal-banking/certificates-of-deposit-cd.html) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early-withdrawal penalty:** 6 months of interest * **About:** Established in 1999, Seattle Bank serves online customers across the country and operates a branch in downtown Seattle. ## [NASA Federal Credit Union – 4.55% APY](https://www.nasafcu.com/personal/checking-savings/certificates/certificates---rates) * **Term (months):** 49 * **Minimum deposit:** $10,000 * **Early-withdrawal penalty:** 12 months of interest * **Membership:** Anyone can join NASA FCU by signing up for a free membership in the National Space Society and holding $5 or more in a savings account. ## [Pima Federal Credit Union – 4.50% APY](https://www.pimafederal.org/deposit/money-market-certificates) * **Term (months):** 48 * **Minimum deposit:** $250 * **Early withdrawal penalty:** 50% of the interest left to be earned through the end of the term * **Membership:** Anyone can join Pima by making a $20 donation to one of their affiliated nonprofits and keeping at least $5 in a Pima savings account. ## [Dow Credit Union – 4.50% APY](https://dowcreditunion.org/account/certificates-of-deposit) * **Term (months):** 48 * **Minimum deposit:** $500 * **Early withdrawal penalty:** 12 months of interest * **Overview:** Based out of Midland, Michigan, anyone can join Dow Credit Union by making a $10 donation to the Midland Area Community Foundation scholarship fund during the membership application process. Dow Credit Union dates back to 1937 when it was founded to serve employees of Dow Chemical Company. ## [Securityplus Federal Credit Union – 4.50% APY](https://www.securityplusfcu.org/personal/bank/share-certificates.aspx) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early withdrawal penalty:** 3 months of interest * **Overview:** Anyone is eligible to join Securityplus by paying the $15 fee to become a member of the American Consumer Council and opening a savings account with a minimum deposit of $5. Founded in 1938, Securityplus has physical branches in Maryland and over 34,000 members. ## [First National Bank of America – 4.50% APY](https://www.fnba.com/online-banking/online-cd-rates/) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early-withdrawal penalty:** 18 months of interest * **About:** First National Bank of America is a Michigan-based community bank established in 1955. In addition to three branches in the state, FNBA offers online banking products to customers nationwide. ## [First Internet Bank – 4.45% APY](https://www.firstib.com/personal/bank/cds/) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early-withdrawal penalty:** 12 months of interest * **About:** First Internet Bank takes its name from its status as the first FDIC-insured bank to operate exclusively online. Founded in 1999, it is based in the Indianapolis suburb of Fishers, Ind. ## [Main Street Bank – 4.45% APY](https://www.bankmainstreet.com/personal/deposit-rates/) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early withdrawal penalty:** 50% of interest * **Overview:** Main Street Bank is the result of a 2017 merger of Marlborough Savings Bank and North Middlesex Savings Bank, two institutions that date back to 1860 and 1885 respectively. Main Street Bank is headquartered in Marlborough, Massachusetts. ## [NexBank – 4.45% APY](https://www.nexbankpersonal.com/certificates-deposit.htm) * **Term (months):** 48 * **Minimum deposit:** $10,000 * **Early withdrawal penalty:** 6 months of interest * **About:** NexBank is the fourth-largest bank in Dallas, founded in 1922. ## [Lafayette Federal Credit Union – 4.42% APY](https://www.lfcu.org/rates/dividend-rates.aspx) * **Term (months):** 48 * **Minimum deposit:** $500 * **Early withdrawal penalty:** 16 months of interest * **Membership:** Anyone can join Lafayette Federal with a $10 membership in the Home Ownership Financial Literacy Council and $50 or more held in a savings account. ## [CoVantage Credit Union – 4.35% APY](https://www.covantagecu.org/Save-Spend/Personal/Savings-Accounts/Share-Certificates) * **Term (months):** 48 * **Minimum deposit:** $1,000 * **Early withdrawal penalty:** 3 months of interest * **Membership:** Anyone is eligible for membership by joining the CoVantage Cares Foundation for a one-time fee of $10 and keeping at least $10 in a member savings account. ## [BMO – 4.30% APY](https://www.bmo.com/en-us/main/personal/savings-and-cds/certificates-of-deposit/) * **Term (months):** 45 * **Minimum deposit:** $1,000 * **Early withdrawal penalty:** 18 months of interest * **Overview:** BMO is a U.S. subsidiary of the Canadian multinational Bank of Montreal, and is one of the 25 largest U.S. banks. In addition to online products, BMO operates branches in eight states. *\*This rate may differ for those residing in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, or Wisconsin (states where BMO operates physical branches).* ### Fast Fact When asked in late April what they would invest in if they had an extra $10,000, [12% of Investopedia readers](https://www.investopedia.com/investors-aren-t-worried-right-now-but-they-re-not-buying-either-8642075) said they would open a CD. Back in December and January, 11% and 9% of readers (respectively) said they’d invest extra funds in CDs, with that share dipping even further to 8% in March. While CDs sit below individual stocks as the top response (at 19%), CDs are always a good option for those looking for safer investments. Though not as common as their three-year and five-year siblings, four-year CDs are offered by banks and [credit unions](https://www.investopedia.com/terms/c/creditunion.asp) across the country. Not only might a four-year certificate offer the perfect time horizon for your financial plans, but it is also important to anyone establishing a [CD ladder](https://www.investopedia.com/terms/c/cd-ladder.asp). ## Pros and Cons of a 4-Year CD Pros * Guaranteed yield for four years * Entirely predictable earnings * Potentially higher APY than alternatives * Spending deterrent * Safe and virtually risk-free Cons * Incurs penalty if withdrawn early * Only allows you to make a single deposit * If rates rise, you might wish you'd chosen a shorter CD * If rates drop, you might wish you'd chosen a longer CD * Future rate environment can't be predicted ## Pros Explained * **Guaranteed yield for four years**: A CD's [annual percentage yield (APY)](https://www.investopedia.com/terms/a/apy.asp) is presented to you before you open it, and once you make your deposit, you'll be locking in that return for the full duration of the CD. The bank cannot change the rate. * **Entirely predictable earnings**: Because you'll know the rate, and because it's locked, you can calculate exactly how much your CD will be worth on its [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp). Changes in financial markets or other factors in the news will have no bearing on your earnings. * **Potentially higher APY than alternatives**: In some rate environments, you can earn a higher interest rate the longer you're willing to commit your funds. So when shopping around, check if stretching to a four-year CD can increase your rate. * **Spending deterrent**: Because you can't make withdrawals from a CD without paying a penalty, you may be dissuaded from spending your savings on unplanned purchases. * **Safe and virtually risk-free**: If you open your CD at an [FDIC-insured bank](https://www.investopedia.com/terms/f/fdic-insured-account.asp) or [NCUA-insured credit union](https://www.investopedia.com/terms/n/ncua.asp), your CD deposits of up to $250,000 per person and per institution are protected, even if the institution fails. ## Cons Explained * **Incurs penalty if withdrawn early**: If you need to cash out your CD before maturity, you can do so, but you'll be charged an [early withdrawal penalty](https://www.investopedia.com/cd-early-withdrawal-penalty-5225111). The amount of that penalty will be spelled out in your CD agreement, which you should review *before* committing your funds, as penalty policies can vary widely across institutions. * **Only allows you to make a single deposit**: The vast majority of CDs are designed to take one initial deposit that is kept on hold through the CD's term. Only niche ["add-on" CDs](https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169) offer the ability to deposit additional funds. * **If rates rise, you might wish you'd chosen a shorter CD**: If you lock in your 4-year CD rate and then rates climb higher, you may wish you had opted for a shorter CD so you could have gotten out of your current rate sooner and opened a new CD at a higher rate. * **If rates drop, you might wish you'd chosen a longer CD**: If rates go down after you lock in a 4-year CD, you may wish you'd gone for a 5-year term instead, to retain your rate further into the future. * **Future rate environment can't be predicted**: Only very occasionally is it clear where interest rates are headed. Most of the time, anything is possible months or years down the road, making it difficult to gauge what the best CD moves are at any given time. ## Compare the Best 4-Year CDs | Institution | Rate (APY) | Term | Minimum Deposit | Early Withdrawal Penalty | | --- | --- | --- | --- | --- | | [Wellby Financial](https://www.wellbyfinancial.com/savings/certificates/) | 4.86% | 48 months | $1,000 | 12 months of interest | | [BMO Alto](https://alto.bmo.com/en-us/high-yield-cd/) | 4.70% | 48 months | Any amount | 6 months of interest | | [Credit Human](https://www.credithuman.com/Checking-Savings/Share-Certificate) | 4.65% | 36–59 months | $500 | 12 months of interest ($50 minimum) | | [Department of Commerce Federal Credit Union](https://www.docfcu.org/cds-savings/) | 4.60% | 36–47 months | $25,000 | 6 months of interest | | [Seattle Bank](https://www.seattlebank.com/personal/personal-banking/certificates-of-deposit-cd.html) | 4.55% | 48 months | $1,000 | 6 months of interest | | [NASA Federal Credit Union](https://www.nasafcu.com/personal/checking-savings/certificates/certificates---rates) | 4.55% | 49 months | $10,000 | 12 months of interest | | [Pima Federal Credit Union](https://www.pimafederal.org/deposit/money-market-certificates) | 4.50% | 48 months | $250 | 50% of the interest left to be earned through the end of the term | | [Dow Credit Union](https://dowcreditunion.org/account/certificates-of-deposit) | 4.50% | 48 months | $500 | 12 months of interest | | [Securityplus Federal Credit Union](https://www.securityplusfcu.org/personal/bank/share-certificates.aspx) | 4.50% | 48 months | $1,000 | 3 months of interest | | [First National Bank of America](https://www.fnba.com/online-banking/online-cd-rates/) | 4.50% | 48 months | $1,000 | 18 months of interest | | [First Internet Bank](https://www.firstib.com/personal/bank/cds/) | 4.45% | 48 months | $1,000 | 12 months of interest | | [Main Street Bank](https://www.bankmainstreet.com/personal/deposit-rates/) | 4.45% | 48 months | $1,000 | 50% of interest | | [NexBank](https://www.nexbankpersonal.com/certificates-deposit.htm) | 4.45% | 48 months | $10,000 | 6 months of interest | | [Lafayette Federal Credit Union](https://www.lfcu.org/rates/dividend-rates.aspx) | 4.42% | 48 months | $500 | 16 months of interest | | [CoVantage Credit Union](https://www.covantagecu.org/Save-Spend/Personal/Savings-Accounts/Share-Certificates) | 4.35% | 48 months | $1,000 | 3 months of interest | | [BMO](https://www.bmo.com/en-us/main/personal/savings-and-cds/certificates-of-deposit/) | 4.30% | 45 months | $1,000 | 18 months of interest | ## Alternatives to a 4-Year CD ### Shorter-Term CDs Opening a certificate with a shorter term may be a better choice if you're not entirely confident you can leave the funds on deposit for a full four years. Also, sometimes you can score a higher rate on a shorter CD than on a longer one. It depends on the current rate environment, and also what promotional CDs might be available in the marketplace. If you open a shorter-term CD, you can always cash it in when it matures and open a new CD. But you may find that rates have dropped. If rates are now higher, it's great news. But if rates are lower than when you opened your initial CD, you may wish you'd locked in your rate for four years instead of the shorter term. ### High-Yield Savings and Money Market Accounts Keeping your cash in a savings or money market account offers much more flexibility than a CD, with no risk of an early withdrawal penalty. You'll be able to add and withdraw funds more or less as often as you like. The trade-off, however, is that your interest rate on a liquid account can change at any time. So if rates are declining, the annual percentage yield on your [high-yield savings](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) or [money market account](https://www.investopedia.com/best-money-market-accounts-5096917) will almost certainly go down, while any rate on a CD will hold. In addition, liquid accounts typically don't offer as high a return as CDs. By committing your funds to a certain CD term, you can usually boost your earnings, and sometimes quite substantially. ### Bond Products Various types of bonds are also possibilities for your cash savings. Some, like U.S. Treasury savings bonds and [Treasury notes](https://www.investopedia.com/terms/t/treasurynote.asp), are very similar to CDs in that the rate is typically predictable if you hold the bond until maturity. They are also backed by the federal government, so like CDs, they are exceptionally safe. U.S. Treasury [I bonds](https://www.investopedia.com/terms/s/seriesibond.asp), however, only have a fixed rate for six months at a time. Twice a year, the rate is adjusted based on the current inflation rate (hence the name I bond). Like a CD, I bonds have an early withdrawal penalty, but it's a mild three months' worth of interest. Also, unlike a CD, you cannot for any reason cash in an I bond during its first 12 months. Other bond options are [municipal](https://www.investopedia.com/terms/m/municipalbond.asp) and [corporate bonds](https://www.investopedia.com/terms/c/corporatebond.asp) of various lengths. But the easiest way for most people to buy these is through a [bond mutual fund](https://www.investopedia.com/terms/b/bondfund.asp) or [bond ETF](https://www.investopedia.com/terms/b/bond-etf.asp) (exchange-traded fund) that bundles many bonds together. Some of these even include hundreds or thousands of bonds in a certain category, making them an [index fund](https://www.investopedia.com/terms/i/indexfund.asp) of bonds. By going this route, you can make investments and withdrawals at will, rather than having to be concerned with maturity dates. When CD shopping, stay open-minded about the [maturity](https://www.investopedia.com/terms/m/maturity.asp) term you're seeking. Not only do some institutions offer odd-term CDs with better rates (think 35 months or 49 months), but it's also true that some banks will offer a promotional CD that, despite having a much shorter term, actually offers a higher rate than the term you're looking to open. ### The Stock Market If you know you won't need your funds for four years, you could consider investing in stocks instead. The upside is that you could potentially earn quite a bit more in the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) than with a fixed four-year CD rate. The notable downside, of course, is that you can always lose money in the stock market, including scenarios where you lose most of your investment. So while CDs won't return as much as equities in a [bullish stock market](https://www.investopedia.com/terms/b/bullmarket.asp) period, on the flip side they are *guaranteed* to grow, with no risk of you losing your initial principal. ## Frequently Asked Questions * ### What Is a 4-Year CD? A certificate of deposit is a special type of bank account that involves advance commitments from both the individual and the bank or credit union. Your commitment is to hold a lump-sum deposit in the account for a certain period of time, usually measured in months or years. In turn, the financial institution commits to paying you a fixed and known [interest rate](https://www.investopedia.com/terms/i/interestrate.asp) for the full duration of the CD. Because the bank can count on having access to the funds for an extended period, it will generally pay you a higher interest rate on your balance than if the funds were in a savings or [money market account](https://www.investopedia.com/terms/m/moneymarketaccount.asp), where unpredictable withdrawals and deposits are allowed. A four-year CD is simply a certificate of deposit that has a maturity term of about four years or 48 months, though you'll sometimes encounter CDs with odd terms, such as 45 months or 49 months. Those that qualify for our four-year rankings have terms ranging from 42 to 53 months. * ### When Is a 4-Year CD a Good Idea? There are two main reasons to consider a CD that's four years in length. The first is based on your personal timeline. If you know you can lock up the funds for a number of years, but five years is a bit too long because you'll need the funds sooner than that, a four-year term can get you close to those five-year yields while shortening the time until you can access the funds. The second reason to buy a four-year CD is if you are building a five-year [CD ladder](https://www.investopedia.com/terms/c/cd-ladder.asp). This is explained in more depth below, but in short, it involves buying an array of different CD terms, in yearly durations of up to five years. Hence, you'll need one four-year CD to complete the group. * ### What If I Need My Money Before Maturity? You can typically withdraw your money from a CD at just about any time, but it may take up to a week to get your money and it will come at a price. Since the entire premise of a CD is that the bank is paying you a better interest rate in exchange for your agreement that you'll keep the funds on deposit until maturity, cashing the CD in early means you are breaking your end of the deal. The result is called an [early-withdrawal penalty](https://www.investopedia.com/terms/e/earlywithdrawal.asp), and like rates, the penalties vary tremendously across institutions. Most types of penalties make you forfeit some months of earned interest. This can be as few as one month or as long as 24 months. Generally, the longer the CD term, the more months of interest you'll be penalized. Even worse are early withdrawal policies that calculate the penalty as a percentage of your balance because these can dip into your [principal](https://www.investopedia.com/terms/p/principal.asp). You should always avoid any CD with a penalty that can reduce your principal. Be sure to look into the early withdrawal policy for any CD you're considering. If you find yourself trying to decide between two fairly similar CDs, it's wise to go with the one assessing a milder penalty, just in case an emergency arises and you find yourself needing to withdraw. * ### What Is a CD Ladder? The term [CD ladder](https://www.investopedia.com/terms/c/cd-ladder.asp) refers to a strategy designed to maximize the amount of interest you can earn over a long period of time, while still giving you access to a portion of the funds every year. For a five-year CD ladder, you'll invest one-fifth of the total funds into five different CD durations (e.g., the rungs of the ladder) and eventually use the proceeds of each maturing CD into a five-year CD, since those certificates typically pay the highest rates. Let's say you want to keep $50,000 invested in safe, reliable CDs for [capital preservation](https://www.investopedia.com/terms/p/preservationofcapital.asp). Instead of investing it all in a single five-year CD and having no access to the full amount for that time, you can build a five-year CD ladder by putting $10,000 into a one-year CD, $10,000 into a two-year CD, and so forth, until you have five $10,000 CDs all maturing a year apart. Each year, when one of the CDs matures, those funds are used to buy a new five-year CD to earn a higher yield and continue the ladder. After the fourth maturity, you'll still have five certificates, but they will now comprise a portfolio of only five-year CDs, with one available for withdrawal every year. * ### How Do Banks and Credit Unions Differ? You can open a certificate of deposit at almost any bank or credit union. And for the most part, there is little difference between CDs from these different institution types. Indeed, both banks and credit unions offer the same level of [deposit insurance](https://www.investopedia.com/fdic-rules-for-cds-5271560) ($250,000 per individual) should the institution fail. The biggest difference is that opening any account at a credit union requires you to [first become a member](https://www.investopedia.com/how-to-join-a-credit-union-7495339) since credit unions are member-owned not-for-profit organizations. Further, you'll find that the rules of eligibility for membership are unique to each credit union, with some based on where you live, while others are based on where you work. All of the credit union CDs in our rankings are from credit unions that allow anyone nationwide to join regardless of where you live or work. However, doing so sometimes requires a small donation or fee. Still, joining a particular credit union can be worth it, as many credit unions make up the top ranks in various CD terms. In particular, the longer the term you're shopping for, the better served you'll be by staying open-minded to a credit union CD. * ### Financial Institutions We Review We researched and reviewed more than 250 banks, credit unions, and financial institutions to find the best CD rates you see above on this list. While we write individual reviews for most, we do not always write reviews for those we would not recommend. Below are the banks, credit unions, and financial institutions we researched along with links to individual company reviews to help you learn more before making a decision: 1st Source Bank, 5star Bank, ableBanking, Abound Credit Union, Achieva Credit Union, Affinity Federal Credit Union, Affinity Plus Federal Credit Union, Air Force Federal Credit Union, Alabama Credit Union, Allegacy Federal Credit Union, Alliant Credit Union, [Ally Bank](https://www.investopedia.com/ally-bank-cd-rates-7483690), Amerant Bank, American 1 Credit Union, American Express, American Heritage Credit Union, Andrews Federal Credit Union, Apple Federal Credit Union, Banco do Brasil Americas, Banesco USA, Bank of Baroda, Bank5 Connect, Bank7, Texas Capital Bank, bankESB (Easthampton Savings Bank), BankUnitedDirect, [Barclays](https://www.investopedia.com/barclays-bank-cd-rates-7481049), BBVA Bank, Bellco Credit Union, Blue Federal Credit Union, [BMO](https://www.investopedia.com/bmo-bank-cd-rates-7500022), BMO Alto, [BrioDirect](https://www.investopedia.com/briodirect-bank-review-5069892), Cadets Federal Credit Union, California Coast Credit Union, [Capital One](https://www.investopedia.com/capital-one-cd-rates-7480645), Capitol Federal Savings Bank, CD Bank, CFG Bank, [Chase Bank](https://www.investopedia.com/chase-cd-rates-7480360), Chevron Federal Credit Union, CIBC (Agility Banking), [CIT Bank](https://www.investopedia.com/cit-bank-cd-rates-7480633), [Citibank](https://www.investopedia.com/citibank-cd-rates-7482684), Citizens Access, Citizens Trust Bank, Colorado Federal Savings Bank, [Bread Savings](https://www.investopedia.com/bread-savings-cd-rates-7488944), Communitywide Federal Credit Union, ConnectOne Bank, Connexus Credit Union, Consumers Credit Union, Corporate America Federal Credit Union (CAFCU), Credit Union of Denver, Credit Union of the Rockies, Digital, Federal Credit Union, [Discover Bank](https://www.investopedia.com/discover-bank-review-5069129), DollarSavingsDirect, Dover Federal Credit Union, Dow Credit Union, Evergreen Bank Group, RocklandTrust Bank, Elements Financial, EmigrantDirect.com, Liberty Federal Credit Union, [Fidelity Investments](https://www.investopedia.com/fidelity-cd-rates-7496602), Financial Partners Credit Union, Financial Resources Federal Credit Union, First Financial Credit Union, First Financial Northwest Bank, First Internet Bank, First National Bank of America, First Technology Federal Credit Union, Fort Bragg Federal Credit Union, Garden Savings Federal Credit Union, Georgia Banking Company, Georgia's Own Credit Union, GreenState Credit Union, Greenwood Credit Union, Grow Financial Federal Credit Union, GTE Financial, Gulf Coast Bank & Trust Company, Hanscom Federal Credit Union, Heritage Bank, Hiway Federal Credit Union, Home Loan Investment Bank, Home Savings Bank, Hope Credit Union, HSBC Direct, Hughes Federal Credit Union, Hyperion Bank, Ideal Credit Union, iGObanking, Interior Federal Credit Union, Justice Federal Credit Union, Kinecta Federal Credit Union, KS State Bank, La Capitol Federal Credit Union, Lafayette Federal Credit Union, Lake Michigan Credit Union, Langley Federal Credit Union, Latino Community Credit Union, Limelight Bank, Live Oak Bank, Luther Burbank Savings, MYSB Direct, MAC Federal Credit Union, Main Street Bank, MainStreet Bank, MapleMark Bank, Marcus by Goldman Sachs, Market USA Federal Credit Union, Matadors Community Credit Union, MECU Credit Union, Merrick Bank, Michigan State University Federal Credit Union, Mills42 Federal Credit Union, Mountain America Credit Union, MTC Federal Credit Union, MutualOne Bank, My Banking Direct, My eBanc, My Savings Direct, NASA Federal Credit Union, Nationwide by [Axos Bank](https://www.investopedia.com/axos-bank-review-4802090), [Navy Federal Credit Union](https://www.investopedia.com/navy-federal-cd-rates-7499476), nbkc, NexBank, North Country Savings Bank, Northern Bank Direct, Northfield Bank, Northpointe Bank, Nuvision Federal Credit Union, Oklahoma Central Credit Union, One American Bank, OneUnited Bank, Pacific National Bank, Paramount Bank, PARDA Federal Credit Union, Partner Colorado Credit Union, Patelco Credit Union, Pen Air Federal Credit Union, [PenFed Credit Union](https://www.investopedia.com/penfed-cd-rates-7497239), People's Credit Union, First Service Credit Union, Pinnacle Federal Credit Union, [Popular Direct](https://www.investopedia.com/popular-direct-bank-review-5072550), Premier America Credit Union, Presidential Bank, FSB, Prime Alliance Bank, PSECU (Pennsylvania State Employees Credit Union), Quontic Bank, Quorum Federal Credit Union, Rising Bank, Merrimack Valley Credit Union, Salal Credit Union, [Sallie Mae Bank](https://www.investopedia.com/sallie-mae-bank-cd-rates-7485414), Santa Clara County Federal Credit Union, Signature Federal Credit Union, Spectrum Credit Union, SRP Federal Credit Union, State Bank of India Chicago, State Bank of India New York, State Bank of Texas, State Department Federal Credit Union, Summit Credit Union, Sun East Federal Credit Union, Superior Choice Credit Union, [Synchrony Bank](https://www.investopedia.com/synchrony-bank-cd-rates-7482657), TAB Bank, Teachers Federal Credit Union, Technology Credit Union, The Federal Savings Bank, [Third Federal Savings & Loan](https://www.investopedia.com/third-federal-cd-rates-7498126), [EverBank](https://www.investopedia.com/everbank-cd-rates-7483667), TotalDirectBank, Transportation Federal Credit Union, TruStone Financial Credit Union, UNIFY Financial Credit Union, Expedition Credit Union, United States Senate Federal Credit Union, United Texas Bank, University Federal Credit Union, [US Bank](https://www.investopedia.com/us-bank-cd-rates-7497336), USAlliance Financial, USPS Federal Credit Union, Velocity Credit Union, VeraBank, [Vio Bank](https://www.investopedia.com/vio-bank-review-4842261), Virtual Bank, WebBank, Webster Bank, [Wells Fargo](https://www.investopedia.com/wells-fargo-cd-rates-7483593), Western Vista Credit Union, Wings Financial Credit Union, XCEL Federal Credit Union, BankPurely, Umbrella Bank, giantbank.com, CapEd Credit Union, Zeal Credit Union, Finworth, Coastal1 Credit Union, Service Credit Union, National Cooperative Bank, Premier Members Credit Union, [Bank of America](https://www.investopedia.com/bank-of-america-cd-rates-7498115), Flagstar Bank, 1st MidAmerica Credit Union, INOVA Federal Credit Union, Genisys Credit Union, Ivy Bank, Heartland Credit Union, Luana Savings Bank, Spectra Credit Union, Workers Credit Union, Credit Human, EFCU Financial, Poppy Bank, Credit One Bank, Vibrant Credit Union, CFBank, Department of Commerce Federal Credit Union, Seattle Bank, Crescent Bank, Pima Federal Credit Union, Cross River Bank, [USAA](https://www.investopedia.com/usaa-bank-cd-rates-7483875), Great River Federal Credit Union, Brilliant Bank, Merchants Bank of Indiana, [LendingClub](https://www.investopedia.com/lendingclub-banking-review-5071446), Chartway Credit Union, First Central Savings Bank, AgFed Credit Union, North American Savings Bank, Pelican State Credit Union, First Community Credit Union, Bask Bank, Skyla Credit Union, SkyOne Federal Credit Union, 3Rivers Federal Credit Union, Utah First Credit Union, Pasadena Federal Credit Union, Magnifi Financial, AloStar, Primis Bank, Farmers Insurance Federal Credit Union, Tampa Bay Federal Credit Union, Veridian Credit Union, Republic Bank, Salem Five Direct, All In Credit Union, Bethpage Federal Credit Union, Self-Help Federal Credit Union, Forbright Bank, Jovia Financial Credit Union, Sun Canyon Bank, Fortera Credit Union, Partners 1st Federal Credit Union, SouthEast Bank, American Bank, Newtek Bank, CBC Federal Credit Union, [Vanguard](https://www.investopedia.com/vanguard-cd-rates-7496300), All America Bank, Amalgamated Bank, Citizens State Bank, AmBoy Direct, Republic Bank of Chicago, Oklahoma Community Credit Union, BluPeak Credit Union, Valley Direct, Bayer Heritage Federal Credit Union, First Harvest Credit Union, Orion Federal Credit Union, Wellby Financial, FedChoice Federal Credit Union, CoVantage Credit Union, Choice First Bank, Sandia Area Federal Credit Union, OMB Bank, Minnequa Works Credit Union, Securityplus Federal Credit Union, Bank of South Texas, T Bank ## How We Find the Best 4-Year CD Rates Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured ([FDIC](https://www.investopedia.com/terms/f/fdic-insured-account.asp) for banks, [NCUA](https://www.investopedia.com/terms/n/ncua-insured-institution.asp) for credit unions), and the CD's minimum initial deposit must not exceed $25,000. Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, [read our full methodology](https://www.investopedia.com/methodology-for-savings-accounts-and-certificates-of-deposit-rankings-7255816). :max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg) :max_bytes(150000):strip_icc()/Best4-YearCDRates-5b6612b8550e43a286088bee8a41d2c2.jpg) Investopedia / Alice Morgan Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. Federal Reserve. "[Federal Reserve Issues FOMC Statement](https://www.federalreserve.gov/newsevents/pressreleases/monetary20240501a.htm)." 2. Bureau of Labor Statistics. "[Consumer Price Index](https://www.bls.gov/news.release/cpi.nr0.htm)." 3. Office of the Comptroller of the Currency, HelpwithMyBank.gov. "[What Are the Penalties for Withdrawing Money Early From a Certificate of Deposit (CD)?](https://www.helpwithmybank.gov/help-topics/bank-accounts/certificates-of-deposit/cd-penalties.html)" 4. TreasuryDirect. "[About U.S. Savings Bonds](https://www.treasurydirect.gov/savings-bonds/)." 5. TreasuryDirect. "[I Bonds](https://www.treasurydirect.gov/savings-bonds/i-bonds/)." Related Terms [What Is a Certificate of Deposit (CD) and What Can It Do for You?](https://www.investopedia.com/terms/c/certificateofdeposit.asp) A certificate of deposit (CD) is a type of savings account offered by banks and credit unions that pays a fixed interest rate on money held for an agreed upon period of time. [more](https://www.investopedia.com/terms/c/certificateofdeposit.asp) [CD Ladder: How to Make One, Benefits, FAQ](https://www.investopedia.com/terms/c/cd-ladder.asp) A CD ladder is a strategy in which an investor divides a sum of money into equal amounts and invests them in certificates of deposit (CDs) with different maturity dates. [more](https://www.investopedia.com/terms/c/cd-ladder.asp) [Add-On CDs: Meaning, Pros and Cons, Example](https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169) Add-on CDs are specialty CDs that allow you to add more funds to your CD after the initial deposit. Learn whether an add-on or standard CD is a better choice for you. [more](https://www.investopedia.com/adding-money-to-a-cd-add-on-cds-5184169) [Types of Specialty Certificates of Deposit (CDs) Explained](https://www.investopedia.com/what-are-the-different-types-of-specialty-certificates-of-deposit-cd-5525646) Specialty CDs offer features such as the ability to add to the principal or avoid early withdrawal fees. Some options offer more flexibility but may have lower rates than standard CDs. [more](https://www.investopedia.com/what-are-the-different-types-of-specialty-certificates-of-deposit-cd-5525646) [CD Early Withdrawal Penalty](https://www.investopedia.com/cd-early-withdrawal-penalty-5225111) You may have to pay an early withdrawal penalty to take money out of a certificate of deposit before its term ends. Here's what you need to know. [more](https://www.investopedia.com/cd-early-withdrawal-penalty-5225111) [Promotional Certificate of Deposit (CD) Rate: Everything You Need to Know](https://www.investopedia.com/terms/p/promotional-cd-rate-bonus-cd-rate.asp) A promotional certificate of deposit (CD) rate is a higher rate of return on a CD offered by banks and credit unions to attract new deposits. [more](https://www.investopedia.com/terms/p/promotional-cd-rate-bonus-cd-rate.asp)

The best 4-year CD rate is 4.86% APY from Wellby Financial. To find you the highest 4-year CD rates nationwide, we review CD rates from hundreds of banks and credit unions every day. CD terms of 42–53 months are eligible for our 4-year rankings, with minimum deposit requirements of up to $25,000. Below are the top CD rates available from our partners, followed by the best CD rates that we've found from our research that are available to U.S. customers everywhere. In the News The Fed held rates steady for a sixth consecutive time at its meeting ending on May 1. The 5.25% to 5.50% range is the highest it has been since 2001, and Fed officials noted in a statement that there has been a lack of recent progress toward the committee's goal of lowering inflation. Consumer prices rose 3.5% over the year in March. Officials don't foresee reducing the target range until they are confident inflation is moving toward 2%. CD yields closely follow the fed funds rate. Back in October, CD rates reached peaks not seen in more than 20 years. But now, the Fed’s holding pattern has caused CD rates to plateau. Once it appears the Fed is ready to make a rate cut, rates on new CDs will fall. You can find our ranking of the highest CD rates with terms of 42–53 months below. In cases where more than one institution pays the same annual percentage yield, we've prioritized CDs by the shortest term, then the CD requiring a smaller minimum deposit, and if still a tie, alphabetically by institution name. Best 4-Year CD Rates Wellby Financial – 4.86% APYBMO Alto – 4.70% APYCredit Human – 4.65% APYDepartment of Commerce Federal Credit Union – 4.60% APYSeattle Bank – 4.55% APYNASA Federal Credit Union – 4.55% APYPima Federal Credit Union – 4.50% APYDow Credit Union – 4.50% APYSecurityplus Federal Credit Union – 4.50% APYFirst National Bank of America – 4.50% APYFirst Internet Bank – 4.45% APYMain Street Bank – 4.45% APYNexBank – 4.45% APYLafayette Federal Credit Union – 4.42% APYCoVantage Credit Union – 4.35% APYBMO – 4.30% APY Detailed information on the top-paying four-year CDs available nationwide is provided below, including specifics about minimum deposits and early-withdrawal penalties. For credit union CDs, information is also provided on how anyone can become a member. Looking for a wider selection of CDs? See our picks for the best CD rates to see terms ranging from three months to 10 years. Wellby Financial – 4.86% APY Term (months): 48Minimum deposit: $1,000Early withdrawal penalty: 12 months of interestMembership: Anyone is eligible to join the credit union through membership in the American Consumer Council. BMO Alto – 4.70% APY Term (months): 48Minimum deposit: Any amountEarly withdrawal penalty: 6 months of interestAbout: BMO Alto is an online-only division of BMO, which is a U.S. subsidiary of Bank of Montreal. In addition to CDs, it offers an online savings account. Credit Human – 4.65% APY Term (months): 36–59Minimum deposit: $500Early withdrawal penalty: 12 months of interest ($50 minimum)Membership: Anyone can join Credit Human by agreeing to a complimentary membership in the nonprofit American Consumer Council and keeping at least $5 in a member savings account. Department of Commerce Federal Credit Union – 4.60% APY* Term (months): 36–47Minimum deposit: $25,000Early-withdrawal penalty: 6 months of interestMembership: Anyone can join the DCFCU by agreeing to a free membership in the nonprofit American Consumer Council. *Rates listed in DCFCU's rate charts are 0.10% lower than what's listed here, for a minimum deposit amount of $500. But the fine print indicates that for deposits of $25,000, a 0.10% premium applies. Seattle Bank – 4.55% APY Term (months): 48Minimum deposit: $1,000Early-withdrawal penalty: 6 months of interestAbout: Established in 1999, Seattle Bank serves online customers across the country and operates a branch in downtown Seattle. NASA Federal Credit Union – 4.55% APY Term (months): 49Minimum deposit: $10,000Early-withdrawal penalty: 12 months of interestMembership: Anyone can join NASA FCU by signing up for a free membership in the National Space Society and holding $5 or more in a savings account. Pima Federal Credit Union – 4.50% APY Term (months): 48Minimum deposit: $250Early withdrawal penalty: 50% of the interest left to be earned through the end of the termMembership: Anyone can join Pima by making a $20 donation to one of their affiliated nonprofits and keeping at least $5 in a Pima savings account. Dow Credit Union – 4.50% APY Term (months): 48Minimum deposit: $500Early withdrawal penalty: 12 months of interestOverview: Based out of Midland, Michigan, anyone can join Dow Credit Union by making a $10 donation to the Midland Area Community Foundation scholarship fund during the membership application process. Dow Credit Union dates back to 1937 when it was founded to serve employees of Dow Chemical Company. Securityplus Federal Credit Union – 4.50% APY Term (months): 48Minimum deposit: $1,000Early withdrawal penalty: 3 months of interestOverview: Anyone is eligible to join Securityplus by paying the $15 fee to become a member of the American Consumer Council and opening a savings account with a minimum deposit of $5. Founded in 1938, Securityplus has physical branches in Maryland and over 34,000 members. First National Bank of America – 4.50% APY Term (months): 48Minimum deposit: $1,000Early-withdrawal penalty: 18 months of interestAbout: First National Bank of America is a Michigan-based community bank established in 1955. In addition to three branches in the state, FNBA offers online banking products to customers nationwide. First Internet Bank – 4.45% APY Term (months): 48Minimum deposit: $1,000Early-withdrawal penalty: 12 months of interestAbout: First Internet Bank takes its name from its status as the first FDIC-insured bank to operate exclusively online. Founded in 1999, it is based in the Indianapolis suburb of Fishers, Ind. Main Street Bank – 4.45% APY Term (months): 48Minimum deposit: $1,000Early withdrawal penalty: 50% of interestOverview: Main Street Bank is the result of a 2017 merger of Marlborough Savings Bank and North Middlesex Savings Bank, two institutions that date back to 1860 and 1885 respectively. Main Street Bank is headquartered in Marlborough, Massachusetts. NexBank – 4.45% APY Term (months): 48Minimum deposit: $10,000Early withdrawal penalty: 6 months of interestAbout: NexBank is the fourth-largest bank in Dallas, founded in 1922. Lafayette Federal Credit Union – 4.42% APY Term (months): 48Minimum deposit: $500Early withdrawal penalty: 16 months of interestMembership: Anyone can join Lafayette Federal with a $10 membership in the Home Ownership Financial Literacy Council and $50 or more held in a savings account. CoVantage Credit Union – 4.35% APY Term (months): 48Minimum deposit: $1,000Early withdrawal penalty: 3 months of interestMembership: Anyone is eligible for membership by joining the CoVantage Cares Foundation for a one-time fee of $10 and keeping at least $10 in a member savings account. BMO – 4.30% APY Term (months): 45Minimum deposit: $1,000Early withdrawal penalty: 18 months of interestOverview: BMO is a U.S. subsidiary of the Canadian multinational Bank of Montreal, and is one of the 25 largest U.S. banks. In addition to online products, BMO operates branches in eight states. *This rate may differ for those residing in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, or Wisconsin (states where BMO operates physical branches). Fast Fact When asked in late April what they would invest in if they had an extra $10,000, 12% of Investopedia readers said they would open a CD. Back in December and January, 11% and 9% of readers (respectively) said they’d invest extra funds in CDs, with that share dipping even further to 8% in March. While CDs sit below individual stocks as the top response (at 19%), CDs are always a good option for those looking for safer investments. Though not as common as their three-year and five-year siblings, four-year CDs are offered by banks and credit unions across the country. Not only might a four-year certificate offer the perfect time horizon for your financial plans, but it is also important to anyone establishing a CD ladder. Pros and Cons of a 4-Year CD Pros Guaranteed yield for four years Entirely predictable earnings Potentially higher APY than alternatives Spending deterrent Safe and virtually risk-free Cons Incurs penalty if withdrawn early Only allows you to make a single deposit If rates rise, you might wish you'd chosen a shorter CD If rates drop, you might wish you'd chosen a longer CD Future rate environment can't be predicted Pros Explained Guaranteed yield for four years: A CD's annual percentage yield (APY) is presented to you before you open it, and once you make your deposit, you'll be locking in that return for the full duration of the CD. The bank cannot change the rate. Entirely predictable earnings: Because you'll know the rate, and because it's locked, you can calculate exactly how much your CD will be worth on its maturity date. Changes in financial markets or other factors in the news will have no bearing on your earnings. Potentially higher APY than alternatives: In some rate environments, you can earn a higher interest rate the longer you're willing to commit your funds. So when shopping around, check if stretching to a four-year CD can increase your rate. Spending deterrent: Because you can't make withdrawals from a CD without paying a penalty, you may be dissuaded from spending your savings on unplanned purchases. Safe and virtually risk-free: If you open your CD at an FDIC-insured bank or NCUA-insured credit union, your CD deposits of up to $250,000 per person and per institution are protected, even if the institution fails. Cons Explained Incurs penalty if withdrawn early: If you need to cash out your CD before maturity, you can do so, but you'll be charged an early withdrawal penalty. The amount of that penalty will be spelled out in your CD agreement, which you should review before committing your funds, as penalty policies can vary widely across institutions. Only allows you to make a single deposit: The vast majority of CDs are designed to take one initial deposit that is kept on hold through the CD's term. Only niche "add-on" CDs offer the ability to deposit additional funds. If rates rise, you might wish you'd chosen a shorter CD: If you lock in your 4-year CD rate and then rates climb higher, you may wish you had opted for a shorter CD so you could have gotten out of your current rate sooner and opened a new CD at a higher rate. If rates drop, you might wish you'd chosen a longer CD: If rates go down after you lock in a 4-year CD, you may wish you'd gone for a 5-year term instead, to retain your rate further into the future. Future rate environment can't be predicted: Only very occasionally is it clear where interest rates are headed. Most of the time, anything is possible months or years down the road, making it difficult to gauge what the best CD moves are at any given time. Compare the Best 4-Year CDs Institution Rate (APY) Term Minimum Deposit Early Withdrawal Penalty Wellby Financial 4.86% 48 months $1,000 12 months of interest BMO Alto 4.70% 48 months Any amount 6 months of interest Credit Human 4.65% 36–59 months $500 12 months of interest ($50 minimum) Department of Commerce Federal Credit Union 4.60% 36–47 months $25,000 6 months of interest Seattle Bank 4.55% 48 months $1,000 6 months of interest NASA Federal Credit Union 4.55% 49 months $10,000 12 months of interest Pima Federal Credit Union 4.50% 48 months $250 50% of the interest left to be earned through the end of the term Dow Credit Union 4.50% 48 months $500 12 months of interest Securityplus Federal Credit Union 4.50% 48 months $1,000 3 months of interest First National Bank of America 4.50% 48 months $1,000 18 months of interest First Internet Bank 4.45% 48 months $1,000 12 months of interest Main Street Bank 4.45% 48 months $1,000 50% of interest NexBank 4.45% 48 months $10,000 6 months of interest Lafayette Federal Credit Union 4.42% 48 months $500 16 months of interest CoVantage Credit Union 4.35% 48 months $1,000 3 months of interest BMO 4.30% 45 months $1,000 18 months of interest Alternatives to a 4-Year CD Shorter-Term CDs Opening a certificate with a shorter term may be a better choice if you're not entirely confident you can leave the funds on deposit for a full four years. Also, sometimes you can score a higher rate on a shorter CD than on a longer one. It depends on the current rate environment, and also what promotional CDs might be available in the marketplace. If you open a shorter-term CD, you can always cash it in when it matures and open a new CD. But you may find that rates have dropped. If rates are now higher, it's great news. But if rates are lower than when you opened your initial CD, you may wish you'd locked in your rate for four years instead of the shorter term. High-Yield Savings and Money Market Accounts Keeping your cash in a savings or money market account offers much more flexibility than a CD, with no risk of an early withdrawal penalty. You'll be able to add and withdraw funds more or less as often as you like. The trade-off, however, is that your interest rate on a liquid account can change at any time. So if rates are declining, the annual percentage yield on your high-yield savings or money market account will almost certainly go down, while any rate on a CD will hold. In addition, liquid accounts typically don't offer as high a return as CDs. By committing your funds to a certain CD term, you can usually boost your earnings, and sometimes quite substantially. Bond Products Various types of bonds are also possibilities for your cash savings. Some, like U.S. Treasury savings bonds and Treasury notes, are very similar to CDs in that the rate is typically predictable if you hold the bond until maturity. They are also backed by the federal government, so like CDs, they are exceptionally safe. U.S. Treasury I bonds, however, only have a fixed rate for six months at a time. Twice a year, the rate is adjusted based on the current inflation rate (hence the name I bond). Like a CD, I bonds have an early withdrawal penalty, but it's a mild three months' worth of interest. Also, unlike a CD, you cannot for any reason cash in an I bond during its first 12 months. Other bond options are municipal and corporate bonds of various lengths. But the easiest way for most people to buy these is through a bond mutual fund or bond ETF (exchange-traded fund) that bundles many bonds together. Some of these even include hundreds or thousands of bonds in a certain category, making them an index fund of bonds. By going this route, you can make investments and withdrawals at will, rather than having to be concerned with maturity dates. When CD shopping, stay open-minded about the maturity term you're seeking. Not only do some institutions offer odd-term CDs with better rates (think 35 months or 49 months), but it's also true that some banks will offer a promotional CD that, despite having a much shorter term, actually offers a higher rate than the term you're looking to open. The Stock Market If you know you won't need your funds for four years, you could consider investing in stocks instead. The upside is that you could potentially earn quite a bit more in the stock market than with a fixed four-year CD rate. The notable downside, of course, is that you can always lose money in the stock market, including scenarios where you lose most of your investment. So while CDs won't return as much as equities in a bullish stock market period, on the flip side they are guaranteed to grow, with no risk of you losing your initial principal. Frequently Asked Questions What Is a 4-Year CD? A certificate of deposit is a special type of bank account that involves advance commitments from both the individual and the bank or credit union. Your commitment is to hold a lump-sum deposit in the account for a certain period of time, usually measured in months or years. In turn, the financial institution commits to paying you a fixed and known interest rate for the full duration of the CD.Because the bank can count on having access to the funds for an extended period, it will generally pay you a higher interest rate on your balance than if the funds were in a savings or money market account, where unpredictable withdrawals and deposits are allowed.A four-year CD is simply a certificate of deposit that has a maturity term of about four years or 48 months, though you'll sometimes encounter CDs with odd terms, such as 45 months or 49 months. Those that qualify for our four-year rankings have terms ranging from 42 to 53 months. When Is a 4-Year CD a Good Idea? There are two main reasons to consider a CD that's four years in length. The first is based on your personal timeline. If you know you can lock up the funds for a number of years, but five years is a bit too long because you'll need the funds sooner than that, a four-year term can get you close to those five-year yields while shortening the time until you can access the funds.The second reason to buy a four-year CD is if you are building a five-year CD ladder. This is explained in more depth below, but in short, it involves buying an array of different CD terms, in yearly durations of up to five years. Hence, you'll need one four-year CD to complete the group. What If I Need My Money Before Maturity? You can typically withdraw your money from a CD at just about any time, but it may take up to a week to get your money and it will come at a price.Since the entire premise of a CD is that the bank is paying you a better interest rate in exchange for your agreement that you'll keep the funds on deposit until maturity, cashing the CD in early means you are breaking your end of the deal. The result is called an early-withdrawal penalty, and like rates, the penalties vary tremendously across institutions.Most types of penalties make you forfeit some months of earned interest. This can be as few as one month or as long as 24 months. Generally, the longer the CD term, the more months of interest you'll be penalized.Even worse are early withdrawal policies that calculate the penalty as a percentage of your balance because these can dip into your principal. You should always avoid any CD with a penalty that can reduce your principal.Be sure to look into the early withdrawal policy for any CD you're considering. If you find yourself trying to decide between two fairly similar CDs, it's wise to go with the one assessing a milder penalty, just in case an emergency arises and you find yourself needing to withdraw. What Is a CD Ladder? The term CD ladder refers to a strategy designed to maximize the amount of interest you can earn over a long period of time, while still giving you access to a portion of the funds every year. For a five-year CD ladder, you'll invest one-fifth of the total funds into five different CD durations (e.g., the rungs of the ladder) and eventually use the proceeds of each maturing CD into a five-year CD, since those certificates typically pay the highest rates.Let's say you want to keep $50,000 invested in safe, reliable CDs for capital preservation. Instead of investing it all in a single five-year CD and having no access to the full amount for that time, you can build a five-year CD ladder by putting $10,000 into a one-year CD, $10,000 into a two-year CD, and so forth, until you have five $10,000 CDs all maturing a year apart.Each year, when one of the CDs matures, those funds are used to buy a new five-year CD to earn a higher yield and continue the ladder. After the fourth maturity, you'll still have five certificates, but they will now comprise a portfolio of only five-year CDs, with one available for withdrawal every year. How Do Banks and Credit Unions Differ? You can open a certificate of deposit at almost any bank or credit union. And for the most part, there is little difference between CDs from these different institution types. Indeed, both banks and credit unions offer the same level of deposit insurance ($250,000 per individual) should the institution fail.The biggest difference is that opening any account at a credit union requires you to first become a member since credit unions are member-owned not-for-profit organizations. Further, you'll find that the rules of eligibility for membership are unique to each credit union, with some based on where you live, while others are based on where you work.All of the credit union CDs in our rankings are from credit unions that allow anyone nationwide to join regardless of where you live or work. However, doing so sometimes requires a small donation or fee.Still, joining a particular credit union can be worth it, as many credit unions make up the top ranks in various CD terms. In particular, the longer the term you're shopping for, the better served you'll be by staying open-minded to a credit union CD. Financial Institutions We Review We researched and reviewed more than 250 banks, credit unions, and financial institutions to find the best CD rates you see above on this list. While we write individual reviews for most, we do not always write reviews for those we would not recommend. Below are the banks, credit unions, and financial institutions we researched along with links to individual company reviews to help you learn more before making a decision:1st Source Bank, 5star Bank, ableBanking, Abound Credit Union, Achieva Credit Union, Affinity Federal Credit Union, Affinity Plus Federal Credit Union, Air Force Federal Credit Union, Alabama Credit Union, Allegacy Federal Credit Union, Alliant Credit Union, Ally Bank, Amerant Bank, American 1 Credit Union, American Express, American Heritage Credit Union, Andrews Federal Credit Union, Apple Federal Credit Union, Banco do Brasil Americas, Banesco USA, Bank of Baroda, Bank5 Connect, Bank7, Texas Capital Bank, bankESB (Easthampton Savings Bank), BankUnitedDirect, Barclays, BBVA Bank, Bellco Credit Union, Blue Federal Credit Union, BMO, BMO Alto, BrioDirect, Cadets Federal Credit Union, California Coast Credit Union, Capital One, Capitol Federal Savings Bank, CD Bank, CFG Bank, Chase Bank, Chevron Federal Credit Union, CIBC (Agility Banking), CIT Bank, Citibank, Citizens Access, Citizens Trust Bank, Colorado Federal Savings Bank, Bread Savings, Communitywide Federal Credit Union, ConnectOne Bank, Connexus Credit Union, Consumers Credit Union, Corporate America Federal Credit Union (CAFCU), Credit Union of Denver, Credit Union of the Rockies, Digital, Federal Credit Union, Discover Bank, DollarSavingsDirect, Dover Federal Credit Union, Dow Credit Union, Evergreen Bank Group, RocklandTrust Bank, Elements Financial, EmigrantDirect.com, Liberty Federal Credit Union, Fidelity Investments, Financial Partners Credit Union, Financial Resources Federal Credit Union, First Financial Credit Union, First Financial Northwest Bank, First Internet Bank, First National Bank of America, First Technology Federal Credit Union, Fort Bragg Federal Credit Union, Garden Savings Federal Credit Union, Georgia Banking Company, Georgia's Own Credit Union, GreenState Credit Union, Greenwood Credit Union, Grow Financial Federal Credit Union, GTE Financial, Gulf Coast Bank & Trust Company, Hanscom Federal Credit Union, Heritage Bank, Hiway Federal Credit Union, Home Loan Investment Bank, Home Savings Bank, Hope Credit Union, HSBC Direct, Hughes Federal Credit Union, Hyperion Bank, Ideal Credit Union, iGObanking, Interior Federal Credit Union, Justice Federal Credit Union, Kinecta Federal Credit Union, KS State Bank, La Capitol Federal Credit Union, Lafayette Federal Credit Union, Lake Michigan Credit Union, Langley Federal Credit Union, Latino Community Credit Union, Limelight Bank, Live Oak Bank, Luther Burbank Savings, MYSB Direct, MAC Federal Credit Union, Main Street Bank, MainStreet Bank, MapleMark Bank, Marcus by Goldman Sachs, Market USA Federal Credit Union, Matadors Community Credit Union, MECU Credit Union, Merrick Bank, Michigan State University Federal Credit Union, Mills42 Federal Credit Union, Mountain America Credit Union, MTC Federal Credit Union, MutualOne Bank, My Banking Direct, My eBanc, My Savings Direct, NASA Federal Credit Union, Nationwide by Axos Bank, Navy Federal Credit Union, nbkc, NexBank, North Country Savings Bank, Northern Bank Direct, Northfield Bank, Northpointe Bank, Nuvision Federal Credit Union, Oklahoma Central Credit Union, One American Bank, OneUnited Bank, Pacific National Bank, Paramount Bank, PARDA Federal Credit Union, Partner Colorado Credit Union, Patelco Credit Union, Pen Air Federal Credit Union, PenFed Credit Union, People's Credit Union, First Service Credit Union, Pinnacle Federal Credit Union, Popular Direct, Premier America Credit Union, Presidential Bank, FSB, Prime Alliance Bank, PSECU (Pennsylvania State Employees Credit Union), Quontic Bank, Quorum Federal Credit Union, Rising Bank, Merrimack Valley Credit Union, Salal Credit Union, Sallie Mae Bank, Santa Clara County Federal Credit Union, Signature Federal Credit Union, Spectrum Credit Union, SRP Federal Credit Union, State Bank of India Chicago, State Bank of India New York, State Bank of Texas, State Department Federal Credit Union, Summit Credit Union, Sun East Federal Credit Union, Superior Choice Credit Union, Synchrony Bank, TAB Bank, Teachers Federal Credit Union, Technology Credit Union, The Federal Savings Bank, Third Federal Savings & Loan, EverBank, TotalDirectBank, Transportation Federal Credit Union, TruStone Financial Credit Union, UNIFY Financial Credit Union, Expedition Credit Union, United States Senate Federal Credit Union, United Texas Bank, University Federal Credit Union, US Bank, USAlliance Financial, USPS Federal Credit Union, Velocity Credit Union, VeraBank, Vio Bank, Virtual Bank, WebBank, Webster Bank, Wells Fargo, Western Vista Credit Union, Wings Financial Credit Union, XCEL Federal Credit Union, BankPurely, Umbrella Bank, giantbank.com, CapEd Credit Union, Zeal Credit Union, Finworth, Coastal1 Credit Union, Service Credit Union, National Cooperative Bank, Premier Members Credit Union, Bank of America, Flagstar Bank, 1st MidAmerica Credit Union, INOVA Federal Credit Union, Genisys Credit Union, Ivy Bank, Heartland Credit Union, Luana Savings Bank, Spectra Credit Union, Workers Credit Union, Credit Human, EFCU Financial, Poppy Bank, Credit One Bank, Vibrant Credit Union, CFBank, Department of Commerce Federal Credit Union, Seattle Bank, Crescent Bank, Pima Federal Credit Union, Cross River Bank, USAA, Great River Federal Credit Union, Brilliant Bank, Merchants Bank of Indiana, LendingClub, Chartway Credit Union, First Central Savings Bank, AgFed Credit Union, North American Savings Bank, Pelican State Credit Union, First Community Credit Union, Bask Bank, Skyla Credit Union, SkyOne Federal Credit Union, 3Rivers Federal Credit Union, Utah First Credit Union, Pasadena Federal Credit Union, Magnifi Financial, AloStar, Primis Bank, Farmers Insurance Federal Credit Union, Tampa Bay Federal Credit Union, Veridian Credit Union, Republic Bank, Salem Five Direct, All In Credit Union, Bethpage Federal Credit Union, Self-Help Federal Credit Union, Forbright Bank, Jovia Financial Credit Union, Sun Canyon Bank, Fortera Credit Union, Partners 1st Federal Credit Union, SouthEast Bank, American Bank, Newtek Bank, CBC Federal Credit Union, Vanguard, All America Bank, Amalgamated Bank, Citizens State Bank, AmBoy Direct, Republic Bank of Chicago, Oklahoma Community Credit Union, BluPeak Credit Union, Valley Direct, Bayer Heritage Federal Credit Union, First Harvest Credit Union, Orion Federal Credit Union, Wellby Financial, FedChoice Federal Credit Union, CoVantage Credit Union, Choice First Bank, Sandia Area Federal Credit Union, OMB Bank, Minnequa Works Credit Union, Securityplus Federal Credit Union, Bank of South Texas, T Bank How We Find the Best 4-Year CD Rates Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD's minimum initial deposit must not exceed $25,000. Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology. Investopedia / Alice Morgan Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Federal Reserve. "Federal Reserve Issues FOMC Statement." Bureau of Labor Statistics. "Consumer Price Index." Office of the Comptroller of the Currency, HelpwithMyBank.gov. "What Are the Penalties for Withdrawing Money Early From a Certificate of Deposit (CD)?" TreasuryDirect. "About U.S. Savings Bonds." TreasuryDirect. "I Bonds." Related Terms What Is a Certificate of Deposit (CD) and What Can It Do for You? A certificate of deposit (CD) is a type of savings account offered by banks and credit unions that pays a fixed interest rate on money held for an agreed upon period of time. more CD Ladder: How to Make One, Benefits, FAQ A CD ladder is a strategy in which an investor divides a sum of money into equal amounts and invests them in certificates of deposit (CDs) with different maturity dates. more Add-On CDs: Meaning, Pros and Cons, Example Add-on CDs are specialty CDs that allow you to add more funds to your CD after the initial deposit. Learn whether an add-on or standard CD is a better choice for you. more Types of Specialty Certificates of Deposit (CDs) Explained Specialty CDs offer features such as the ability to add to the principal or avoid early withdrawal fees. Some options offer more flexibility but may have lower rates than standard CDs. more CD Early Withdrawal Penalty You may have to pay an early withdrawal penalty to take money out of a certificate of deposit before its term ends. Here's what you need to know. more Promotional Certificate of Deposit (CD) Rate: Everything You Need to Know A promotional certificate of deposit (CD) rate is a higher rate of return on a CD offered by banks and credit unions to attract new deposits. more

https://www.investopedia.com/terms/short-termloss.asp

Short-Term Loss: Meaning, Examples, and FAQs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-short-term-loss"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Short-Term Loss? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term short-term loss generally refers to a loss taken after the sale or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/disposition.asp">disposition</a> of a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalasset.asp">capital asset</a> that is owned for a year or less. A short-term loss is realized for federal income tax purposes when the asset is sold for less than the original purchase price. This includes assets like stocks, bonds, and real estate investments. As such, it reflects a decline in the value of the asset. You can still realize a loss on assets for personal use like a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/principalresidence.asp">principal residence</a> or automobile but they cannot be claimed for tax purposes.<span class="ql-inline-citation" data-cite="10"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A short-term loss is a loss taken on the sale or disposition of a capital asset held for 12 months or less when the sale price is lower than the purchase price.</li><li>A deductible short-term capital loss is a loss realized on the sale of investment property that has been held for one year or less.</li><li>The amount of a short-term loss is the excess of the adjusted tax basis of the capital asset over the amount received for it. </li><li>Short-term losses offset short-term capital gains first while long-term losses offset long-term gains.</li><li>If the net result of offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-short-term-losses-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> How Short-Term Losses Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> When you sell anything, you can end up with a gain or a loss. If the sale price is greater than the original <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/purchaseprice.asp">purchase price</a>, you end up with a gain. A loss results if the sale price is lower than the original price. Losses (and gains) can be long-term or short-term, where the former is realized on assets held for 12 months or more while the latter is realized for assets held for 12 months or less.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Certain losses are tax <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deductible.asp">deductible</a>, As noted above, you cannot claim deductions on losses for personal property, such as your primary residence or vehicles. But you can on other assets like investments, including stocks, bonds, and real estate investments. These are known as short-term capital losses.<span class="ql-inline-citation" data-cite="5"></span> You can calculate and declare all short-term losses (and gains) on Part II of the IRS <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/scheduled.asp">Schedule D</a> form.<span class="ql-inline-citation" data-cite="12"></span> This means: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> <li>If a taxpayer has long-term capital gains and losses for the year, the long-term losses must be offset against long-term gains.</li><li>Then any short-term losses can offset long-term gains or vice versa.</li><li>Net losses of either type can then be deducted from the other kind of gain.<span class="ql-inline-citation" data-cite="11"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> If the net result of these offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year. A net loss in excess of $3,000 (or $1,500 for those married filing separately) must be deferred until the following year.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> For example, if a taxpayer realizes a net <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalloss.asp">capital loss</a> of $10,000 in 2023, $3,000 of the loss can be deducted in calculating the taxpayer's tax liability for that year, which is the year of the loss. The remaining $7,000 of losses can be carried forward. Assuming no additional capital gains or losses, the taxpayer can deduct $3,000 of the losses in each of the next two years, 2024 and 2025, and can deduct the final $1,000 in 2025, the third year following the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset-sales.asp">sale of the assets</a>.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_17-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_18-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Losses (and gains) can be realized or unrealized. A realized loss occurs when you actually dispose of the asset while an unrealized loss occurs when the asset loses value but isn't sold.</p></div></div></div> <span class="heading-toc" id="toc-special-considerations"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> An unrealized short-term loss refers to the decline in the value of an asset held by a taxpayer for a year or less to an amount below its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/adjustedbasis.asp">adjusted tax basis</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> An asset’s adjusted tax basis is its total acquisition cost (the purchase price plus related costs such as taxes and commissions) increased by the cost of any improvements and reduced by cost recovery deductions. This may come in the form of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/depreciation.asp">depreciation</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/amortization.asp">amortization</a>, if any, claimed in determining income tax liability.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Net capital losses, whether short-term or long-term, are limited to a maximum deduction of $3,000 per year, which can be used against earnings or other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/ordinaryincome.asp">ordinary income</a>.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <span class="heading-toc" id="toc-short-term-loss-vs-long-term-loss"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-heading__text"> Short-Term Loss vs. Long-Term Loss </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> As noted above, losses can be deemed short-term or long-term. Remember, a short-term loss is one that occurs on the sale or disposition of a capital asset that's held for 12 months or less. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/long-term_capital_gain_loss.asp">long-term loss</a>, on the other hand, occurs when there's a loss on a capital asset that is held for 12 months or more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Taking short-term losses offers a greater <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-benefit.asp">tax benefit</a> compared to long-term losses to investors. That's because they are used to offset any short-term gains you may have from the sale of your capital assets. These gains are taxed at a higher rate than others.<span class="ql-inline-citation" data-cite="5"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <span class="heading-toc" id="toc-examples-of-short-term-losses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-heading__text"> Examples of Short-Term Losses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Capital losses can produce tax savings in addition to offsetting <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalgain.asp">capital gains</a> and eliminating the tax <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability.asp">liabilities</a> associated with them. So if you have $1,000 in short-term loss and $500 in short-term gains, the net $500 short-term loss can be deducted against your net long-term gain, should you have one. If you have less than $500 of net long-term gain, the unused excess capital loss can be deducted from ordinary income and thus can wipe out the tax liability on the $500 of ordinary income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> For most taxpayers, the tax savings on long-term capital gains that are offset is either zero or 15% of the gain; for higher-income taxpayers, the savings are 20% of the gain. However, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tax-deductions-6834385">tax deductions</a> for losses offsetting up to $3,000 of ordinary income for a year can result in greater savings for taxpayers whose income falls into the income tax brackets between 22% and 37%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> If you have an overall net capital loss for a year, you can deduct up to $3,000 of that loss against ordinary income, such as your salary and interest income.<span class="ql-inline-citation" data-cite="5"></span> If your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marginaltaxrate.asp">marginal tax rate</a> is 22%, a $3,000 deduction from ordinary income will reduce your tax bill for the year by $660. That saving changes to $1,110 if the marginal rate is 37%. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Because of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/progressivetax.asp">progressive tax</a> rates, the higher your marginal tax rate, the greater the tax savings from such deductions. Taxpayers can carry over any unused excess net capital loss to subsequent years and deduct the excess in the later years. As noted above, when you're married and filing separate returns, the annual net capital loss deduction limit against ordinary income is only $1,500.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_40-0"><span class="heading-toc" id="toc-what-is-a-short-term-capital-loss"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Short-Term Capital Loss?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For tax purposes, a short-term capital loss is loss from the sale or other disposition of a capital asset that has been owned by the taxpayer for one year or less. The amount of the loss is the excess of the asset’s adjusted tax basis over the amount received from the asset’s disposition.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_42-0"><span class="heading-toc" id="toc-can-i-claim-a-tax-deduction-for-a-short-term-capital-loss"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Claim a Tax Deduction for a Short-Term Capital Loss?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Short-term capital losses can be deducted against short-term gains.  Any excess short-term losses can then be deducted against net long-term capital gains. Any remaining net capital losses, whether short-term or long-term, can then offset up to $3,000 of ordinary income, such as earnings and interest income for the year. If the excess net capital losses for the year are more than $3,000, the remaining unused capital losses can be carried forward and deducted in future tax years in accordance with the rules for capital loss deductions.<span class="ql-inline-citation" data-cite="13"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_44-0"><span class="heading-toc" id="toc-can-i-take-a-short-term-loss-deduction-on-any-type-of-capital-asset"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Take a Short-Term Loss Deduction on Any Type of Capital Asset?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No, you cannot take a short-term loss deduction on any type of capital asset. Both short-term and long-term capital loss deductions can be claimed for realized losses on capital assets that were held for investment. This includes assets like stocks, bonds, and investment real estate. Tax code rules on offsetting capital gains and the annual $3,000 limitation on deductions for net capital losses apply.<span class="ql-inline-citation" data-cite="5"></span> However, no tax deductions are allowed for either short-term or long-term losses realized on capital assets that were held for personal use, such as a residence or personal automobile.<span class="ql-inline-citation" data-cite="10"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> All capital losses, including short-term capital losses, can provide taxpayers with tax-savings deductions, subject to the tax code's rules for offsetting calculations and its ceilings on deductions against ordinary income. The calculation of the deductible amount of short-term losses for a year requires netting such losses first against short-term gains and then against net long-term capital gains—if any. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> If unused capital losses remain, a maximum of $3,000 of net capital losses, whether short- or long-term, can be deducted annually to reduce ordinary income. However, married taxpayers who file separate tax returns are subject to an annual ceiling of $1,500 for such losses. Any unused capital losses in excess of the applicable ceiling can be used in future years. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Taxpayers should be aware that losses on some capital assets are not deductible. They can claim deductions for capital losses, whether short-term or long-term, on the sale or other taxable disposition of investment assets held for a year or less. But losses on assets held for personal use, such as a residence or automobile, are not deductible.<br> </br></p></div>

## What Is a Short-Term Loss? The term short-term loss generally refers to a loss taken after the sale or [disposition](https://www.investopedia.com/terms/d/disposition.asp) of a [capital asset](https://www.investopedia.com/terms/c/capitalasset.asp) that is owned for a year or less. A short-term loss is realized for federal income tax purposes when the asset is sold for less than the original purchase price. This includes assets like stocks, bonds, and real estate investments. As such, it reflects a decline in the value of the asset. You can still realize a loss on assets for personal use like a [principal residence](https://www.investopedia.com/terms/p/principalresidence.asp) or automobile but they cannot be claimed for tax purposes. ### Key Takeaways * A short-term loss is a loss taken on the sale or disposition of a capital asset held for 12 months or less when the sale price is lower than the purchase price. * A deductible short-term capital loss is a loss realized on the sale of investment property that has been held for one year or less. * The amount of a short-term loss is the excess of the adjusted tax basis of the capital asset over the amount received for it. * Short-term losses offset short-term capital gains first while long-term losses offset long-term gains. * If the net result of offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year. ## How Short-Term Losses Work When you sell anything, you can end up with a gain or a loss. If the sale price is greater than the original [purchase price](https://www.investopedia.com/terms/p/purchaseprice.asp), you end up with a gain. A loss results if the sale price is lower than the original price. Losses (and gains) can be long-term or short-term, where the former is realized on assets held for 12 months or more while the latter is realized for assets held for 12 months or less. Certain losses are tax [deductible](https://www.investopedia.com/terms/d/deductible.asp), As noted above, you cannot claim deductions on losses for personal property, such as your primary residence or vehicles. But you can on other assets like investments, including stocks, bonds, and real estate investments. These are known as short-term capital losses. You can calculate and declare all short-term losses (and gains) on Part II of the IRS [Schedule D](https://www.investopedia.com/terms/s/scheduled.asp) form. This means: * If a taxpayer has long-term capital gains and losses for the year, the long-term losses must be offset against long-term gains. * Then any short-term losses can offset long-term gains or vice versa. * Net losses of either type can then be deducted from the other kind of gain. If the net result of these offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year. A net loss in excess of $3,000 (or $1,500 for those married filing separately) must be deferred until the following year. For example, if a taxpayer realizes a net [capital loss](https://www.investopedia.com/terms/c/capitalloss.asp) of $10,000 in 2023, $3,000 of the loss can be deducted in calculating the taxpayer's tax liability for that year, which is the year of the loss. The remaining $7,000 of losses can be carried forward. Assuming no additional capital gains or losses, the taxpayer can deduct $3,000 of the losses in each of the next two years, 2024 and 2025, and can deduct the final $1,000 in 2025, the third year following the [sale of the assets](https://www.investopedia.com/terms/a/asset-sales.asp). ### Losses (and gains) can be realized or unrealized. A realized loss occurs when you actually dispose of the asset while an unrealized loss occurs when the asset loses value but isn't sold. ## Special Considerations An unrealized short-term loss refers to the decline in the value of an asset held by a taxpayer for a year or less to an amount below its [adjusted tax basis](https://www.investopedia.com/terms/a/adjustedbasis.asp). An asset’s adjusted tax basis is its total acquisition cost (the purchase price plus related costs such as taxes and commissions) increased by the cost of any improvements and reduced by cost recovery deductions. This may come in the form of [depreciation](https://www.investopedia.com/terms/d/depreciation.asp) or [amortization](https://www.investopedia.com/terms/a/amortization.asp), if any, claimed in determining income tax liability. Net capital losses, whether short-term or long-term, are limited to a maximum deduction of $3,000 per year, which can be used against earnings or other [ordinary income](https://www.investopedia.com/terms/o/ordinaryincome.asp). ## Short-Term Loss vs. Long-Term Loss As noted above, losses can be deemed short-term or long-term. Remember, a short-term loss is one that occurs on the sale or disposition of a capital asset that's held for 12 months or less. A [long-term loss](https://www.investopedia.com/terms/l/long-term_capital_gain_loss.asp), on the other hand, occurs when there's a loss on a capital asset that is held for 12 months or more. Taking short-term losses offers a greater [tax benefit](https://www.investopedia.com/terms/t/tax-benefit.asp) compared to long-term losses to investors. That's because they are used to offset any short-term gains you may have from the sale of your capital assets. These gains are taxed at a higher rate than others. ## Examples of Short-Term Losses Capital losses can produce tax savings in addition to offsetting [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) and eliminating the tax [liabilities](https://www.investopedia.com/terms/l/liability.asp) associated with them. So if you have $1,000 in short-term loss and $500 in short-term gains, the net $500 short-term loss can be deducted against your net long-term gain, should you have one. If you have less than $500 of net long-term gain, the unused excess capital loss can be deducted from ordinary income and thus can wipe out the tax liability on the $500 of ordinary income. For most taxpayers, the tax savings on long-term capital gains that are offset is either zero or 15% of the gain; for higher-income taxpayers, the savings are 20% of the gain. However, [tax deductions](https://www.investopedia.com/tax-deductions-6834385) for losses offsetting up to $3,000 of ordinary income for a year can result in greater savings for taxpayers whose income falls into the income tax brackets between 22% and 37%. If you have an overall net capital loss for a year, you can deduct up to $3,000 of that loss against ordinary income, such as your salary and interest income. If your [marginal tax rate](https://www.investopedia.com/terms/m/marginaltaxrate.asp) is 22%, a $3,000 deduction from ordinary income will reduce your tax bill for the year by $660. That saving changes to $1,110 if the marginal rate is 37%. Because of [progressive tax](https://www.investopedia.com/terms/p/progressivetax.asp) rates, the higher your marginal tax rate, the greater the tax savings from such deductions. Taxpayers can carry over any unused excess net capital loss to subsequent years and deduct the excess in the later years. As noted above, when you're married and filing separate returns, the annual net capital loss deduction limit against ordinary income is only $1,500. ## What Is a Short-Term Capital Loss? For tax purposes, a short-term capital loss is loss from the sale or other disposition of a capital asset that has been owned by the taxpayer for one year or less. The amount of the loss is the excess of the asset’s adjusted tax basis over the amount received from the asset’s disposition. ## Can I Claim a Tax Deduction for a Short-Term Capital Loss? Yes. Short-term capital losses can be deducted against short-term gains.  Any excess short-term losses can then be deducted against net long-term capital gains. Any remaining net capital losses, whether short-term or long-term, can then offset up to $3,000 of ordinary income, such as earnings and interest income for the year. If the excess net capital losses for the year are more than $3,000, the remaining unused capital losses can be carried forward and deducted in future tax years in accordance with the rules for capital loss deductions. ## Can I Take a Short-Term Loss Deduction on Any Type of Capital Asset? No, you cannot take a short-term loss deduction on any type of capital asset. Both short-term and long-term capital loss deductions can be claimed for realized losses on capital assets that were held for investment. This includes assets like stocks, bonds, and investment real estate. Tax code rules on offsetting capital gains and the annual $3,000 limitation on deductions for net capital losses apply. However, no tax deductions are allowed for either short-term or long-term losses realized on capital assets that were held for personal use, such as a residence or personal automobile. ## The Bottom Line All capital losses, including short-term capital losses, can provide taxpayers with tax-savings deductions, subject to the tax code's rules for offsetting calculations and its ceilings on deductions against ordinary income. The calculation of the deductible amount of short-term losses for a year requires netting such losses first against short-term gains and then against net long-term capital gains—if any. If unused capital losses remain, a maximum of $3,000 of net capital losses, whether short- or long-term, can be deducted annually to reduce ordinary income. However, married taxpayers who file separate tax returns are subject to an annual ceiling of $1,500 for such losses. Any unused capital losses in excess of the applicable ceiling can be used in future years. Taxpayers should be aware that losses on some capital assets are not deductible. They can claim deductions for capital losses, whether short-term or long-term, on the sale or other taxable disposition of investment assets held for a year or less. But losses on assets held for personal use, such as a residence or automobile, are not deductible.

What Is a Short-Term Loss? The term short-term loss generally refers to a loss taken after the sale or disposition of a capital asset that is owned for a year or less. A short-term loss is realized for federal income tax purposes when the asset is sold for less than the original purchase price. This includes assets like stocks, bonds, and real estate investments. As such, it reflects a decline in the value of the asset. You can still realize a loss on assets for personal use like a principal residence or automobile but they cannot be claimed for tax purposes. Key Takeaways A short-term loss is a loss taken on the sale or disposition of a capital asset held for 12 months or less when the sale price is lower than the purchase price.A deductible short-term capital loss is a loss realized on the sale of investment property that has been held for one year or less.The amount of a short-term loss is the excess of the adjusted tax basis of the capital asset over the amount received for it. Short-term losses offset short-term capital gains first while long-term losses offset long-term gains.If the net result of offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year. How Short-Term Losses Work When you sell anything, you can end up with a gain or a loss. If the sale price is greater than the original purchase price, you end up with a gain. A loss results if the sale price is lower than the original price. Losses (and gains) can be long-term or short-term, where the former is realized on assets held for 12 months or more while the latter is realized for assets held for 12 months or less. Certain losses are tax deductible, As noted above, you cannot claim deductions on losses for personal property, such as your primary residence or vehicles. But you can on other assets like investments, including stocks, bonds, and real estate investments. These are known as short-term capital losses. You can calculate and declare all short-term losses (and gains) on Part II of the IRS Schedule D form. This means: If a taxpayer has long-term capital gains and losses for the year, the long-term losses must be offset against long-term gains.Then any short-term losses can offset long-term gains or vice versa.Net losses of either type can then be deducted from the other kind of gain. If the net result of these offsetting calculations is a loss, the taxpayer can deduct up to $3,000 of the net capital loss against ordinary income for the year. A net loss in excess of $3,000 (or $1,500 for those married filing separately) must be deferred until the following year. For example, if a taxpayer realizes a net capital loss of $10,000 in 2023, $3,000 of the loss can be deducted in calculating the taxpayer's tax liability for that year, which is the year of the loss. The remaining $7,000 of losses can be carried forward. Assuming no additional capital gains or losses, the taxpayer can deduct $3,000 of the losses in each of the next two years, 2024 and 2025, and can deduct the final $1,000 in 2025, the third year following the sale of the assets. Losses (and gains) can be realized or unrealized. A realized loss occurs when you actually dispose of the asset while an unrealized loss occurs when the asset loses value but isn't sold. Special Considerations An unrealized short-term loss refers to the decline in the value of an asset held by a taxpayer for a year or less to an amount below its adjusted tax basis. An asset’s adjusted tax basis is its total acquisition cost (the purchase price plus related costs such as taxes and commissions) increased by the cost of any improvements and reduced by cost recovery deductions. This may come in the form of depreciation or amortization, if any, claimed in determining income tax liability. Net capital losses, whether short-term or long-term, are limited to a maximum deduction of $3,000 per year, which can be used against earnings or other ordinary income. Short-Term Loss vs. Long-Term Loss As noted above, losses can be deemed short-term or long-term. Remember, a short-term loss is one that occurs on the sale or disposition of a capital asset that's held for 12 months or less. A long-term loss, on the other hand, occurs when there's a loss on a capital asset that is held for 12 months or more. Taking short-term losses offers a greater tax benefit compared to long-term losses to investors. That's because they are used to offset any short-term gains you may have from the sale of your capital assets. These gains are taxed at a higher rate than others. Examples of Short-Term Losses Capital losses can produce tax savings in addition to offsetting capital gains and eliminating the tax liabilities associated with them. So if you have $1,000 in short-term loss and $500 in short-term gains, the net $500 short-term loss can be deducted against your net long-term gain, should you have one. If you have less than $500 of net long-term gain, the unused excess capital loss can be deducted from ordinary income and thus can wipe out the tax liability on the $500 of ordinary income. For most taxpayers, the tax savings on long-term capital gains that are offset is either zero or 15% of the gain; for higher-income taxpayers, the savings are 20% of the gain. However, tax deductions for losses offsetting up to $3,000 of ordinary income for a year can result in greater savings for taxpayers whose income falls into the income tax brackets between 22% and 37%. If you have an overall net capital loss for a year, you can deduct up to $3,000 of that loss against ordinary income, such as your salary and interest income. If your marginal tax rate is 22%, a $3,000 deduction from ordinary income will reduce your tax bill for the year by $660. That saving changes to $1,110 if the marginal rate is 37%. Because of progressive tax rates, the higher your marginal tax rate, the greater the tax savings from such deductions. Taxpayers can carry over any unused excess net capital loss to subsequent years and deduct the excess in the later years. As noted above, when you're married and filing separate returns, the annual net capital loss deduction limit against ordinary income is only $1,500. What Is a Short-Term Capital Loss? For tax purposes, a short-term capital loss is loss from the sale or other disposition of a capital asset that has been owned by the taxpayer for one year or less. The amount of the loss is the excess of the asset’s adjusted tax basis over the amount received from the asset’s disposition. Can I Claim a Tax Deduction for a Short-Term Capital Loss? Yes. Short-term capital losses can be deducted against short-term gains.  Any excess short-term losses can then be deducted against net long-term capital gains. Any remaining net capital losses, whether short-term or long-term, can then offset up to $3,000 of ordinary income, such as earnings and interest income for the year. If the excess net capital losses for the year are more than $3,000, the remaining unused capital losses can be carried forward and deducted in future tax years in accordance with the rules for capital loss deductions. Can I Take a Short-Term Loss Deduction on Any Type of Capital Asset? No, you cannot take a short-term loss deduction on any type of capital asset. Both short-term and long-term capital loss deductions can be claimed for realized losses on capital assets that were held for investment. This includes assets like stocks, bonds, and investment real estate. Tax code rules on offsetting capital gains and the annual $3,000 limitation on deductions for net capital losses apply. However, no tax deductions are allowed for either short-term or long-term losses realized on capital assets that were held for personal use, such as a residence or personal automobile. The Bottom Line All capital losses, including short-term capital losses, can provide taxpayers with tax-savings deductions, subject to the tax code's rules for offsetting calculations and its ceilings on deductions against ordinary income. The calculation of the deductible amount of short-term losses for a year requires netting such losses first against short-term gains and then against net long-term capital gains—if any. If unused capital losses remain, a maximum of $3,000 of net capital losses, whether short- or long-term, can be deducted annually to reduce ordinary income. However, married taxpayers who file separate tax returns are subject to an annual ceiling of $1,500 for such losses. Any unused capital losses in excess of the applicable ceiling can be used in future years. Taxpayers should be aware that losses on some capital assets are not deductible. They can claim deductions for capital losses, whether short-term or long-term, on the sale or other taxable disposition of investment assets held for a year or less. But losses on assets held for personal use, such as a residence or automobile, are not deductible.

https://www.investopedia.com/the-express-podcast-episode-172-8551624

Looking Long Term Inside the Postmodern Economic Cycle for Investing Clues

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block megaphone" id="mntl-sc-block_1-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://playlist.megaphone.fm/?e=MERE4061217868" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Looking Long Term Inside the Postmodern Economic Cycle for Investing Clues"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> <strong>Subscribe Now</strong>: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197" rel="nofollow">Apple Podcasts</a> / <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9" rel="nofollow">Spotify</a> / <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver">Google Podcasts</a> / <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://player.fm/series/2836180">PlayerFM</a><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Peter Oppenheimer, the chief equity global strategist and head of Macro Research at Goldman Sachs in Europe, explains the new postmodern cycle investors are living in, and what it means for our future returns. Plus, we are investing in the land of giants again as Microsoft (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>) tops the $3 trillion in market value, and several other companies join the trillionaires club—but that's not stopping them from cutting jobs at an alarming rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> <strong>Links for Show Notes: </strong><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012624A.pdf" rel="nofollow">https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012624A.pdf</a><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8550235">https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8550235</a><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.goldmansachs.com/media-relations/in-the-news/current/oppenheimer-oped-folder/bio-oppenheimer.pdf" rel="nofollow">https://www.goldmansachs.com/media-relations/in-the-news/current/oppenheimer-oped-folder/bio-oppenheimer.pdf</a><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://www.goldmansachs.com/intelligence/topics/economic-outlooks.html" rel="nofollow">https://www.goldmansachs.com/intelligence/topics/economic-outlooks.html</a><a data-component="amazon" data-ordinal="5" data-source="affiliate" data-type="externalLink" href="https://www.amazon.com/Long-Good-Buy-Analysing-Markets-ebook/dp/B086Z82KRW" rel="nofollow">https://www.amazon.com/Long-Good-Buy-Analysing-Markets-ebook/dp/B086Z82KRW</a><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/idiosyncraticrisk.asp">https://www.investopedia.com/terms/i/idiosyncraticrisk.asp</a> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <strong>Do you have a news tip for Investopedia reporters?</strong> Please email us at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="mailto:[email protected]">[email protected]</a> </p></div>

**Subscribe Now**: [Apple Podcasts](https://podcasts.apple.com/us/podcast/the-investopedia-express-with-caleb-silver/id1529322197) / [Spotify](https://open.spotify.com/show/1TwnoxxgCIGK8mF7szI6j9) / [Google Podcasts](https://podcasts.google.com/search/The%20Investopedia%20Express%20with%20Caleb%20Silver) / [PlayerFM](https://player.fm/series/2836180) Peter Oppenheimer, the chief equity global strategist and head of Macro Research at Goldman Sachs in Europe, explains the new postmodern cycle investors are living in, and what it means for our future returns. Plus, we are investing in the land of giants again as Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) tops the $3 trillion in market value, and several other companies join the trillionaires club—but that's not stopping them from cutting jobs at an alarming rate. **Links for Show Notes:** <https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012624A.pdf><https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8550235><https://www.goldmansachs.com/media-relations/in-the-news/current/oppenheimer-oped-folder/bio-oppenheimer.pdf><https://www.goldmansachs.com/intelligence/topics/economic-outlooks.html><https://www.amazon.com/Long-Good-Buy-Analysing-Markets-ebook/dp/B086Z82KRW><https://www.investopedia.com/terms/i/idiosyncraticrisk.asp> **Do you have a news tip for Investopedia reporters?** Please email us at [[email protected]](mailto:[email protected])

Subscribe Now: Apple Podcasts / Spotify / Google Podcasts / PlayerFM Peter Oppenheimer, the chief equity global strategist and head of Macro Research at Goldman Sachs in Europe, explains the new postmodern cycle investors are living in, and what it means for our future returns. Plus, we are investing in the land of giants again as Microsoft (MSFT) tops the $3 trillion in market value, and several other companies join the trillionaires club—but that's not stopping them from cutting jobs at an alarming rate. Links for Show Notes: https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012624A.pdfhttps://www.investopedia.com/what-to-expect-in-the-markets-this-week-8550235https://www.goldmansachs.com/media-relations/in-the-news/current/oppenheimer-oped-folder/bio-oppenheimer.pdfhttps://www.goldmansachs.com/intelligence/topics/economic-outlooks.htmlhttps://www.amazon.com/Long-Good-Buy-Analysing-Markets-ebook/dp/B086Z82KRWhttps://www.investopedia.com/terms/i/idiosyncraticrisk.asp Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/how-credit-union-auto-loans-work-7484368

How Credit Union Auto Loans Work

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> If you’re looking to finance a car purchase, you can get an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/auto-loans-4689734">auto loan</a> from a variety of places: a car dealership, a bank, or a specialized auto loan financing company. One <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-unions-claim-market-share-with-lower-auto-loan-rates-7090702">increasingly popular</a> option is a credit union.<span class="ql-inline-citation" data-cite="7"></span><br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Using a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditunion.asp">credit union</a> for your car loan can save you money over using a loan from other lenders because credit unions often charge <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-auto-loan-rates-4846394">lower interest rates</a>. However, there can be some disadvantages as well. Credit unions often have membership criteria, and you might not qualify for a loan from every credit union. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Learn more about how credit union auto loans work. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_7-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_8-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Using a loan from a credit union can be more affordable than a loan from a bank or dealership.</li><li>Credit unions can offer lower interest rates because their business model prioritizes members.</li><li>Credit unions may be less convenient than using a bank because of their membership criteria.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-do-auto-loans-from-credit-unions-work"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-heading__text"> How Do Auto Loans from Credit Unions Work? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> In many ways, an auto loan from a credit union works in the same way as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-car-loan-7368513">loan from a bank or dealership</a>. You apply for a loan online or at a branch location. If you are approved, the credit union will provide funds for the car you’ve financed. You will then make regular monthly payments—with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a>—until you’ve paid the loan back, at which point the vehicle is yours. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> There are some differences between auto loans offered by credit unions and those offered by banks and dealerships. Many of these differences are due to their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credit-unions-vs-banks-4590218">different business models</a>. Banks and dealerships offer car loans to make a profit, whereas credit unions are not-for-profit organizations. Credit unions prioritize providing service for their members, which own the credit union like a cooperative, over profits.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-subheading__text"> Advantages of Auto Loans from Credit Unions </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Credit unions’ business model often allows them to offer lower <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> than their commercial competitors. They don’t prioritize making a profit, so they can typically charge less for a car loan.<span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Many people also value the more personalized attention that some credit unions offer. In general, credit unions are much smaller than national banks, so they can often offer more customized customer service. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_19-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_20-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block with-title" id="mntl-sc-block-callout-heading_2-0">How Do You Calculate Interest on a Car Loan?</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Your monthly auto loan payment will depend on the car price, down payment, length of the loan, and interest rate. You can use Investopedia’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/car-loan-calculator-5084761">auto loan calculator</a> to get an idea of your possible monthly payments.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> Disadvantages of Auto Loans from Credit Unions </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The main downside of getting an auto loan from a credit union rather than a bank is that you may not qualify to be a credit union member. Most credit unions will require you to become a member before you can get a car loan, and they each have different criteria for membership. For example, you may have to live in a certain area or have a certain profession like a teacher or government worker.<span class="ql-inline-citation" data-cite="10"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Some credit unions even require you to have held an account with them for a set period of time before applying for loans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> The membership approval process can make applying for a credit union loan less convenient than taking out an auto loan from many banks. Banks typically allow you to apply online and give you a decision instantly. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-how-to-get-an-auto-loan-from-a-credit-union"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> How to Get an Auto Loan from a Credit Union </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> There are four main steps in the process of getting an auto loan from a credit union: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <li><strong>Apply for your loan</strong>: Search for credit unions online and find one that will accept you as a member. Many credit unions also now offer an online application. Once you apply, the credit union will make a decision about whether to accept you as a member.</li> <li><strong>Provide proof of insurance</strong>: If a credit union thinks you’re the right fit for a car loan, they’ll ask you to provide financial information related to the loan. This will generally include providing proof of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/auto-insurance.asp">insurance for the car</a> you want to purchase. You should be prepared to provide your insurance agency’s name, phone number, and address, as well as your policy number.</li> <li><strong>Provide proof of income</strong>: Just like a bank, a credit union will ask you to prove that you can pay back the loan by providing proof of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/income.asp">income</a>. They may ask for copies of your pay stubs if you’re an employee, tax returns if you’re self-employed, and other information, such as recurring monthly expenses like rent or mortgage payments.</li> <li><strong>Finalize the loan</strong>: If you’re approved, the credit union will tell you how much you can borrow, what the interest rate will be, the terms of the loan, and any other pertinent information. If you decide to go ahead with the loan, you can sign the loan agreement.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-how-long-does-it-take-to-get-approved-for-a-car-loan-from-a-credit-union"></span> <h2 class="mntl-sc-block-questionandanswer__question">How long does it take to get approved for a car loan from a credit union?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Getting approved for a car loan from a credit union can take anywhere from a few minutes to a few weeks, depending on the credit union. It’s generally slower than applying for an auto loan at a bank, but you may be offered a better interest rate.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-can-i-get-pre-approved-for-an-auto-loan-with-a-credit-union"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I get pre-approved for an auto loan with a credit union?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Many credit unions will pre-approve you for a loan just like a bank will, and you can use this pre-approval to negotiate a better price with a car dealer. Pre-approvals are a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/soft-inquiry.asp">soft pull</a> on your credit history, so they do not affect your credit score.<span class="ql-inline-citation" data-cite="11"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-can-i-get-a-credit-union-auto-loan-with-bad-credit"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I get a credit union auto loan with bad credit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Whether you can get a credit union auto loan with bad credit will depend on a number of factors, including the lending criteria of the credit union. If your credit score is very low, a credit union might ask you to include a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/co_sign.asp">co-signer</a> or require a larger <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/down_payment.asp">down payment</a>. Like banks, they will likely charge higher interest rates if you have a poor <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-history.asp">credit history</a>.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-will-a-credit-union-refinance-an-auto-loan"></span> <h2 class="mntl-sc-block-questionandanswer__question">Will a credit union refinance an auto loan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/refinance.asp">refinance</a> your auto loan with a credit union. If you can get approved for a new auto loan with a credit union, you can use those funds to pay off your old loan.<span class="ql-inline-citation" data-cite="4"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_41-0"><span class="heading-toc" id="toc-does-an-auto-loan-increase-your-credit-score"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does an auto loan increase your credit score?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An auto loan’s effect on your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit score</a> will depend on whether you are responsible with paying the loan. If you make on-time loan repayments, this can improve your credit score as you build a history of timely payments. But if you miss payments, this can harm your credit score. Having <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt.asp">debt</a> can lower your credit score, but as you pay it down, your credit score improves.<span class="ql-inline-citation" data-cite="5"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_43-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Credit union auto loans are an increasingly popular choice. They often offer lower interest rates than comparable loans from banks, though they can also be less convenient to apply for. Since you’ll be probably be paying back your auto loan for a few years, it’s worth shopping around for the best deal—which might very well be with a credit union.<br> </br></p></div>

If you’re looking to finance a car purchase, you can get an [auto loan](https://www.investopedia.com/auto-loans-4689734) from a variety of places: a car dealership, a bank, or a specialized auto loan financing company. One [increasingly popular](https://www.investopedia.com/credit-unions-claim-market-share-with-lower-auto-loan-rates-7090702) option is a credit union. Using a [credit union](https://www.investopedia.com/terms/c/creditunion.asp) for your car loan can save you money over using a loan from other lenders because credit unions often charge [lower interest rates](https://www.investopedia.com/best-auto-loan-rates-4846394). However, there can be some disadvantages as well. Credit unions often have membership criteria, and you might not qualify for a loan from every credit union. Learn more about how credit union auto loans work. ### Key Takeaways * Using a loan from a credit union can be more affordable than a loan from a bank or dealership. * Credit unions can offer lower interest rates because their business model prioritizes members. * Credit unions may be less convenient than using a bank because of their membership criteria. ## How Do Auto Loans from Credit Unions Work? In many ways, an auto loan from a credit union works in the same way as a [loan from a bank or dealership](https://www.investopedia.com/how-to-get-a-car-loan-7368513). You apply for a loan online or at a branch location. If you are approved, the credit union will provide funds for the car you’ve financed. You will then make regular monthly payments—with [interest](https://www.investopedia.com/terms/i/interest.asp)—until you’ve paid the loan back, at which point the vehicle is yours. There are some differences between auto loans offered by credit unions and those offered by banks and dealerships. Many of these differences are due to their [different business models](https://www.investopedia.com/credit-unions-vs-banks-4590218). Banks and dealerships offer car loans to make a profit, whereas credit unions are not-for-profit organizations. Credit unions prioritize providing service for their members, which own the credit union like a cooperative, over profits. ### Advantages of Auto Loans from Credit Unions Credit unions’ business model often allows them to offer lower [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) than their commercial competitors. They don’t prioritize making a profit, so they can typically charge less for a car loan. Many people also value the more personalized attention that some credit unions offer. In general, credit unions are much smaller than national banks, so they can often offer more customized customer service. ### How Do You Calculate Interest on a Car Loan? Your monthly auto loan payment will depend on the car price, down payment, length of the loan, and interest rate. You can use Investopedia’s [auto loan calculator](https://www.investopedia.com/car-loan-calculator-5084761) to get an idea of your possible monthly payments. ### Disadvantages of Auto Loans from Credit Unions The main downside of getting an auto loan from a credit union rather than a bank is that you may not qualify to be a credit union member. Most credit unions will require you to become a member before you can get a car loan, and they each have different criteria for membership. For example, you may have to live in a certain area or have a certain profession like a teacher or government worker. Some credit unions even require you to have held an account with them for a set period of time before applying for loans. The membership approval process can make applying for a credit union loan less convenient than taking out an auto loan from many banks. Banks typically allow you to apply online and give you a decision instantly. ## How to Get an Auto Loan from a Credit Union There are four main steps in the process of getting an auto loan from a credit union: 1. **Apply for your loan**: Search for credit unions online and find one that will accept you as a member. Many credit unions also now offer an online application. Once you apply, the credit union will make a decision about whether to accept you as a member. 2. **Provide proof of insurance**: If a credit union thinks you’re the right fit for a car loan, they’ll ask you to provide financial information related to the loan. This will generally include providing proof of [insurance for the car](https://www.investopedia.com/terms/a/auto-insurance.asp) you want to purchase. You should be prepared to provide your insurance agency’s name, phone number, and address, as well as your policy number. 3. **Provide proof of income**: Just like a bank, a credit union will ask you to prove that you can pay back the loan by providing proof of [income](https://www.investopedia.com/terms/i/income.asp). They may ask for copies of your pay stubs if you’re an employee, tax returns if you’re self-employed, and other information, such as recurring monthly expenses like rent or mortgage payments. 4. **Finalize the loan**: If you’re approved, the credit union will tell you how much you can borrow, what the interest rate will be, the terms of the loan, and any other pertinent information. If you decide to go ahead with the loan, you can sign the loan agreement. ## How long does it take to get approved for a car loan from a credit union? Getting approved for a car loan from a credit union can take anywhere from a few minutes to a few weeks, depending on the credit union. It’s generally slower than applying for an auto loan at a bank, but you may be offered a better interest rate. ## Can I get pre-approved for an auto loan with a credit union? Many credit unions will pre-approve you for a loan just like a bank will, and you can use this pre-approval to negotiate a better price with a car dealer. Pre-approvals are a [soft pull](https://www.investopedia.com/terms/s/soft-inquiry.asp) on your credit history, so they do not affect your credit score. ## Can I get a credit union auto loan with bad credit? Whether you can get a credit union auto loan with bad credit will depend on a number of factors, including the lending criteria of the credit union. If your credit score is very low, a credit union might ask you to include a [co-signer](https://www.investopedia.com/terms/c/co_sign.asp) or require a larger [down payment](https://www.investopedia.com/terms/d/down_payment.asp). Like banks, they will likely charge higher interest rates if you have a poor [credit history](https://www.investopedia.com/terms/c/credit-history.asp). ## Will a credit union refinance an auto loan? You can [refinance](https://www.investopedia.com/terms/r/refinance.asp) your auto loan with a credit union. If you can get approved for a new auto loan with a credit union, you can use those funds to pay off your old loan. ## Does an auto loan increase your credit score? An auto loan’s effect on your [credit score](https://www.investopedia.com/terms/c/credit_score.asp) will depend on whether you are responsible with paying the loan. If you make on-time loan repayments, this can improve your credit score as you build a history of timely payments. But if you miss payments, this can harm your credit score. Having [debt](https://www.investopedia.com/terms/d/debt.asp) can lower your credit score, but as you pay it down, your credit score improves. ## The Bottom Line Credit union auto loans are an increasingly popular choice. They often offer lower interest rates than comparable loans from banks, though they can also be less convenient to apply for. Since you’ll be probably be paying back your auto loan for a few years, it’s worth shopping around for the best deal—which might very well be with a credit union.

If you’re looking to finance a car purchase, you can get an auto loan from a variety of places: a car dealership, a bank, or a specialized auto loan financing company. One increasingly popular option is a credit union. Using a credit union for your car loan can save you money over using a loan from other lenders because credit unions often charge lower interest rates. However, there can be some disadvantages as well. Credit unions often have membership criteria, and you might not qualify for a loan from every credit union. Learn more about how credit union auto loans work. Key Takeaways Using a loan from a credit union can be more affordable than a loan from a bank or dealership.Credit unions can offer lower interest rates because their business model prioritizes members.Credit unions may be less convenient than using a bank because of their membership criteria. How Do Auto Loans from Credit Unions Work? In many ways, an auto loan from a credit union works in the same way as a loan from a bank or dealership. You apply for a loan online or at a branch location. If you are approved, the credit union will provide funds for the car you’ve financed. You will then make regular monthly payments—with interest—until you’ve paid the loan back, at which point the vehicle is yours. There are some differences between auto loans offered by credit unions and those offered by banks and dealerships. Many of these differences are due to their different business models. Banks and dealerships offer car loans to make a profit, whereas credit unions are not-for-profit organizations. Credit unions prioritize providing service for their members, which own the credit union like a cooperative, over profits. Advantages of Auto Loans from Credit Unions Credit unions’ business model often allows them to offer lower interest rates than their commercial competitors. They don’t prioritize making a profit, so they can typically charge less for a car loan. Many people also value the more personalized attention that some credit unions offer. In general, credit unions are much smaller than national banks, so they can often offer more customized customer service. How Do You Calculate Interest on a Car Loan? Your monthly auto loan payment will depend on the car price, down payment, length of the loan, and interest rate. You can use Investopedia’s auto loan calculator to get an idea of your possible monthly payments. Disadvantages of Auto Loans from Credit Unions The main downside of getting an auto loan from a credit union rather than a bank is that you may not qualify to be a credit union member. Most credit unions will require you to become a member before you can get a car loan, and they each have different criteria for membership. For example, you may have to live in a certain area or have a certain profession like a teacher or government worker. Some credit unions even require you to have held an account with them for a set period of time before applying for loans. The membership approval process can make applying for a credit union loan less convenient than taking out an auto loan from many banks. Banks typically allow you to apply online and give you a decision instantly. How to Get an Auto Loan from a Credit Union There are four main steps in the process of getting an auto loan from a credit union: Apply for your loan: Search for credit unions online and find one that will accept you as a member. Many credit unions also now offer an online application. Once you apply, the credit union will make a decision about whether to accept you as a member. Provide proof of insurance: If a credit union thinks you’re the right fit for a car loan, they’ll ask you to provide financial information related to the loan. This will generally include providing proof of insurance for the car you want to purchase. You should be prepared to provide your insurance agency’s name, phone number, and address, as well as your policy number. Provide proof of income: Just like a bank, a credit union will ask you to prove that you can pay back the loan by providing proof of income. They may ask for copies of your pay stubs if you’re an employee, tax returns if you’re self-employed, and other information, such as recurring monthly expenses like rent or mortgage payments. Finalize the loan: If you’re approved, the credit union will tell you how much you can borrow, what the interest rate will be, the terms of the loan, and any other pertinent information. If you decide to go ahead with the loan, you can sign the loan agreement. How long does it take to get approved for a car loan from a credit union? Getting approved for a car loan from a credit union can take anywhere from a few minutes to a few weeks, depending on the credit union. It’s generally slower than applying for an auto loan at a bank, but you may be offered a better interest rate. Can I get pre-approved for an auto loan with a credit union? Many credit unions will pre-approve you for a loan just like a bank will, and you can use this pre-approval to negotiate a better price with a car dealer. Pre-approvals are a soft pull on your credit history, so they do not affect your credit score. Can I get a credit union auto loan with bad credit? Whether you can get a credit union auto loan with bad credit will depend on a number of factors, including the lending criteria of the credit union. If your credit score is very low, a credit union might ask you to include a co-signer or require a larger down payment. Like banks, they will likely charge higher interest rates if you have a poor credit history. Will a credit union refinance an auto loan? You can refinance your auto loan with a credit union. If you can get approved for a new auto loan with a credit union, you can use those funds to pay off your old loan. Does an auto loan increase your credit score? An auto loan’s effect on your credit score will depend on whether you are responsible with paying the loan. If you make on-time loan repayments, this can improve your credit score as you build a history of timely payments. But if you miss payments, this can harm your credit score. Having debt can lower your credit score, but as you pay it down, your credit score improves. The Bottom Line Credit union auto loans are an increasingly popular choice. They often offer lower interest rates than comparable loans from banks, though they can also be less convenient to apply for. Since you’ll be probably be paying back your auto loan for a few years, it’s worth shopping around for the best deal—which might very well be with a credit union.

https://www.investopedia.com/tyson-stock-slips-as-ceo-warns-of-macroeconomic-headwinds-8643800

Tyson Stock Slips as CEO Warns of Macroeconomic Headwinds

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Tyson Foods shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit.</li><li>Tyson's shuttering of some chicken-processing plants to cut costs helped buoy profits.</li><li>The company, however, is forecasting adjusted operating losses of between $100 million and $400 million for its beef unit this year.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Tyson Foods (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSN">TSN</a>) shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Tyson reported adjusted <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp">earnings per share (EPS</a>) of 62 cents for its fiscal second quarter, nearly double the consensus estimate compiled by Visible Alpha, and a turnaround from the loss per share of 4 cents it registered in the same period last year. Revenue declined over the year by 0.5% to $13.07 billion, just short of forecasts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <span class="heading-toc" id="toc-macro-environment-concerns"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> 'Macro Environment' Concerns </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The company, however, forecast an adjusted operating loss of between $100 million and $400 million for its beef unit this fiscal year. Last quarter, it projected the unit to range from breakeven to a $400 million adjusted operating loss in fiscal 2024.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> It also expects its pork division to post adjusted operating income of $50 million to $150 million in fiscal 2024 and its chicken unit to report adjusted operating income of $700 million to $900 million. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/ceo.asp">Chief Executive Officer (CEO</a>) Donnie King said Tyson is "not immune to the macro environment" in the company's earnings call Monday.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The company has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tyson-misses-estimates-as-sales-slump-and-plans-to-shut-more-plants-to-cut-costs-7570431">shuttered</a> six chicken processing facilities since last year. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Tyson shares were down 7% to $57.54 as of about 1 p.m. ET.<br/> </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Tyson Foods shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit. * Tyson's shuttering of some chicken-processing plants to cut costs helped buoy profits. * The company, however, is forecasting adjusted operating losses of between $100 million and $400 million for its beef unit this year. Tyson Foods ([TSN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSN)) shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit. Tyson reported adjusted [earnings per share (EPS](https://www.investopedia.com/terms/e/eps.asp)) of 62 cents for its fiscal second quarter, nearly double the consensus estimate compiled by Visible Alpha, and a turnaround from the loss per share of 4 cents it registered in the same period last year. Revenue declined over the year by 0.5% to $13.07 billion, just short of forecasts. ## 'Macro Environment' Concerns The company, however, forecast an adjusted operating loss of between $100 million and $400 million for its beef unit this fiscal year. Last quarter, it projected the unit to range from breakeven to a $400 million adjusted operating loss in fiscal 2024. It also expects its pork division to post adjusted operating income of $50 million to $150 million in fiscal 2024 and its chicken unit to report adjusted operating income of $700 million to $900 million. [Chief Executive Officer (CEO](https://www.investopedia.com/terms/c/ceo.asp)) Donnie King said Tyson is "not immune to the macro environment" in the company's earnings call Monday. The company has [shuttered](https://www.investopedia.com/tyson-misses-estimates-as-sales-slump-and-plans-to-shut-more-plants-to-cut-costs-7570431) six chicken processing facilities since last year. Tyson shares were down 7% to $57.54 as of about 1 p.m. ET. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Tyson Foods shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit.Tyson's shuttering of some chicken-processing plants to cut costs helped buoy profits.The company, however, is forecasting adjusted operating losses of between $100 million and $400 million for its beef unit this year. Tyson Foods (TSN) shares slumped in intraday trading Monday as "macro environment" concerns raised by its chief executive in its earnings call offset higher-than-forecast quarterly profit. Tyson reported adjusted earnings per share (EPS) of 62 cents for its fiscal second quarter, nearly double the consensus estimate compiled by Visible Alpha, and a turnaround from the loss per share of 4 cents it registered in the same period last year. Revenue declined over the year by 0.5% to $13.07 billion, just short of forecasts. 'Macro Environment' Concerns The company, however, forecast an adjusted operating loss of between $100 million and $400 million for its beef unit this fiscal year. Last quarter, it projected the unit to range from breakeven to a $400 million adjusted operating loss in fiscal 2024. It also expects its pork division to post adjusted operating income of $50 million to $150 million in fiscal 2024 and its chicken unit to report adjusted operating income of $700 million to $900 million. Chief Executive Officer (CEO) Donnie King said Tyson is "not immune to the macro environment" in the company's earnings call Monday. The company has shuttered six chicken processing facilities since last year. Tyson shares were down 7% to $57.54 as of about 1 p.m. ET. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/articles/pf/10/credit-card-debit-card.asp

10 Reasons to Use Your Credit Card

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-responsible-credit-card-uses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Responsible Credit Card Uses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Personal finance experts spend a lot of energy trying to prevent us from using <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp">credit cards</a>—and with good reason. Many of us use credit cards irresponsibly and end up in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dti.asp">debt</a>. However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/050214/credit-vs-debit-cards-which-better.asp">paying with a credit card than with a debit card</a> and keeping cash transactions to a minimum. Let's examine why your trusty credit card comes out on top, and certain credit card uses and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-advisors/060815/comparison-bucket-strategy-vs-systematic-withdrawals.asp">strategies</a> to employ. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A credit card used irresponsibly will leave the cardholder in debt. But used in a responsible way, a credit card can be a more effective means of paying than using a debit card or cash.</li><li>Credit cards typically offer all kinds of perks and benefits, including a one-time signing bonus for a new cardholder, cash back for purchases, rewards points, and frequent-flyer miles.</li><li>Credit cards provide a level of safety for the user that a debit card and cash can't: fraud protection. If a thief uses your card, you can let your credit card company know and avoid being charged. Meanwhile, the company will resolve the issue. </li><li>Credit cards enable the user to have a grace period in between when a purchase is made and when the buyer needs to pay for the purchase, as opposed to a debit card or cash, which are both immediate.</li><li>Credit cards are also good for new users looking to build up their credit, for keeping vendors honest if a product you bought should fall apart, and for providing additional insurance on travel and other purchases.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-one-time-bonuses"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> 1. One-Time Bonuses </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> There's nothing like an initial bonus opportunity when <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582" rel="noopener noreferrer">getting a new credit card</a>. Often times, applicants with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/good-credit.asp" rel="noopener noreferrer">good credit</a> or excellent credit can get approved for credit cards that offer bonuses worth $150 or more (sometimes much more) in exchange for spending a certain amount (anywhere from $500 to several thousands of dollars) in the first several months the account is open. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Other cards entice applicants with bonus reward points or miles that can be redeemed for travel, gifts cards, merchandise, statement credits, or checks (more on those below). In contrast, a standard <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debitcard.asp" rel="noopener noreferrer">debit card</a> that comes with a bank checking account generally offers no initial bonus or ongoing opportunity to earn rewards. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <span class="heading-toc" id="toc-2-cash-back"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-heading__text"> 2. Cash Back </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The cash-back credit card was first popularized in the United States by Discover, and the idea was simple: Use the card and get 1% of your purchases rebated in the form of cash back. Today, the concept has grown and matured. Now, some cards now offer 2%, 3% or even as much as 6% cash back on selected purchases, though such lucrative offers involve quarterly or annual spending caps.<span class="ql-inline-citation" data-cite="2"></span> The best cash-back cards are those that charge minimal fees and interest, while offering a high rewards rate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Some cards, like the Fidelity Rewards card, offer a high 2% rate of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cash-back.asp">cash back</a> rewards on all spending but you must deposit your cash directly into a Fidelity investment account.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_16-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/GuX8B/3/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Capital One Announces Agreement to Acquire Discover Financial Services"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-3-rewards-points"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> 3. Rewards Points </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Credit cards are set up to allow cardholders to earn one or more points per dollar in spending. Many reward credit cards provide <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/092215/debit-vs-credit-card-paying-gas.asp">bonus points for certain categories</a> of spending like restaurants, groceries or gasoline. When certain earnings thresholds are reached, points can be redeemed for travel, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gift-card.asp">gift cards</a> from retailers and restaurants, or for merchandise items through the credit card company's online rewards portal. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Your credit card rewards options are almost endless. Get a co-branded card offered in partnership with a hotel chain, clothing retailer or even a nonprofit organization like AARP, and you can leverage your everyday spending to earn valuable rewards day in and day out.<span class="ql-inline-citation" data-cite="3"></span> The trick is to find the card that best fits with your spending patterns. Doing the inverse—altering your spending patterns to fit with a particular card—can be counterproductive. But if you're already spending money on a regular basis with a certain retailer or have an affinity for a certain hotel, why not use the card that will encourage your continued patronage by offering you enhanced rewards, discounts and perks? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-4-frequent-flyer-miles"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> 4. Frequent-Flyer Miles </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> This perk predates almost all the rest. Back in the early 1980s, American Airlines began offering their consumers a novel way to earn frequent-flyer miles even when they weren't flying, by forming a partnership with credit card giant Citibank.<span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="11"></span> Now, all domestic and international airlines have at least one credit card offered, in a similar partnership, by major credit card issuers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Cardholders generally earn miles at a rate of one mile per dollar in net purchases, or sometimes one mile per two dollars spent for lower-end cards that have no annual fee. How valuable this reward actually is, depends on the type of airline ticket you purchase with your points or miles. Many <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/090916/are-travel-rewards-credit-cards-worth-it.asp">frequent flyer cards are made immensely more valuable</a> by their mileage-based introductory bonuses. These are often enough to put you 50–100% of the way toward an award flight after meeting the card's initial spending requirement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-5-safety"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> 5. Safety </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> Paying with a credit card makes it easier to avoid losses from fraud. When your debit card is used by a thief, the money is missing from your account instantly. Legitimate expenses for which you've scheduled online payments or mailed checks may bounce, triggering insufficient funds fees and affecting your credit. Even if not your fault, these late or missed payments can lower your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp" rel="noopener noreferrer">credit score</a>.<span class="ql-inline-citation" data-cite="5"></span> It can take time for fraudulent transactions to be reversed and money restored to your account while the bank investigates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> By contrast, when your credit card is used fraudulently, you aren't out any money—you just notify your credit card company of the fraud and don't pay for the transactions you didn't make while the credit card company resolves the matter.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Credit card networks like Visa and Mastercard provide zero liability coverage for unauthorized purchases as a way to encourage usage of their cards over cash or check.<span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_35-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-tip" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_36-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0">Help With Purchase Refunds</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Credit card companies can also help resolve refund issues when consumers are unable to resolve merchant disputes on their own.</p></div></div></div> <span class="heading-toc" id="toc-6-keeping-vendors-honest"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> 6. Keeping Vendors Honest </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Say you hire a tile setter to set some flooring in your entryway. Workers spend the weekend cutting, measuring, grouting, placing the spacers and tiles and letting the whole thing set. They then charge you $4,000 for their troubles. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> You draw upon your savings account and write a check. But what do you do when, 72 hours later, the tile starts to shift and the grout still hasn't set? Your entryway is now a complete mess, and that vein in your forehead won't stop throbbing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> You can take up the issue with your state licensing board, but that process could take months and the contractor still has your money. That's why, if you can, you should pay for a big-ticket item like this with a credit card. The issuer has an incentive to discourage fraud among its vendors, and if there is a problem, they have a mechanism to try to resolve it. More important, if you dispute the charge, the card issuer withholds the funds from the tile setter, and not only will you get your money back, you might even get help finding a new contractor.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-7-grace-period"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> 7. Grace Period </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> When you make a debit card purchase, your money is gone right away. When you make a credit card purchase, your money remains in your checking account until you pay your credit card bill. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Hanging on to your funds for this extra time can be helpful in two ways. First, the time value of money, however infinitesimal, will save you money. Delaying eventual payment makes your purchase a tiny bit cheaper than it would be otherwise. Beyond that, by paying with a credit card versus your debit card, cash, or check, your cash will spend more time in your bank account. And if you pay your credit card from an interest-bearing checking account, you will earn money during the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/grace_period.asp" rel="noopener noreferrer">grace period</a>. The extra cash will eventually add up to a meaningful amount. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Second, when you consistently pay with a credit card you don't have to watch your bank <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountbalance.asp" rel="noopener noreferrer">account balance</a> as closely. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-8-insurance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> 8. Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Most credit cards automatically come with a number of consumer protections that people don't even realize they have, such as rental car insurance (though often secondary to your personal auto insurance), <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/travel-insurance.asp" rel="noopener noreferrer">travel insurance</a>, and product warranties that may exceed the manufacturer's <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warranty.asp" rel="noopener noreferrer">warranty</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <span class="heading-toc" id="toc-9-universal-acceptance"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-heading__text"> 9. Universal Acceptance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you'll almost certainly have an easier time if you have a credit card. Rental car companies and hotels want customers to pay with credit cards because it makes it easier to charge customers for any damage they cause to a room or a car. Another reason is that, unless you have prepaid for your rental or hotel stay, the merchant doesn't know the final amount of your transaction. The merchant, therefore, needs to block out a certain amount of your available credit line to protect themselves from potential charges they didn't anticipate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> So if you want to pay for one of these items with a debit card, the company may insist on putting a hold of several hundred dollars on your account.<span class="ql-inline-citation" data-cite="7"></span> Also, when you're traveling in a foreign country, merchants won't always accept your debit card—even when it has a major bank logo on it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <span class="heading-toc" id="toc-10-building-credit"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_59-0"> <span class="mntl-sc-block-heading__text"> 10. Building Credit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> If you have no credit or are trying to improve your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp" rel="noopener noreferrer">credit score</a>, using a credit card responsibly will help because credit card companies will report your payment activity to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditbureau.asp" rel="noopener noreferrer">credit bureaus</a>. However, debit card use doesn't appear anywhere on your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp" rel="noopener noreferrer">credit report</a>, so it can't help you build or improve your credit. Even if you need to deposit some funds to get a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582" rel="noopener noreferrer">secured credit card</a>, this can help you build your credit history and eventually qualify for unsecured cards or larger loans. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <span class="heading-toc" id="toc-when-not-to-use-a-credit-card"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-heading__text"> When Not to Use a Credit Card </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Paying with credit cards isn't always better than paying with cash. Retailers honor credit cards because they want to make it easy for you to shop there. But the merchants still have to pay the major credit card companies a portion of every sale in the form of a transaction fee. Since a cash sale means more to the retailer's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bottomline.asp" rel="noopener noreferrer">bottom line</a> than an equivalent credit sale, some retailers give discounts for the privilege of immediately taking your cash. On a big item, like a furniture set, for instance, the difference could be substantial. However, you'll forego the consumer protections offered by credit cards. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> There are other reasons when paying with credit isn't better, and they have to do with you and your spending habits. Using a credit card may not be right for you if: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> <li><strong>You can't pay your credit card balance in full and on time: </strong>If this tends to happen, stick with the debit card (or cash) to avoid falling into credit card debt and incurring <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retroactive-interest-rate-increase.asp" rel="noopener noreferrer">interest</a> charges.</li> <li><strong>You tend to spend more than you can afford: </strong>Paying with debit will limit you to spending money already earned.</li> <li><strong>You can only get a credit card with a low credit limit and you have a hard time staying under the balance: </strong>Exceeding your credit limit results in costly fees, and doing this can also put a dent in your credit score.<span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_69-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-cards-4801582">Credit cards</a> are best enjoyed by the disciplined, who can remain cognizant of their ability to pay the monthly bill (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deadbeat.asp">preferably in full</a>) on or before the due date. If you already know <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/credit-card-donts.asp">how to use a credit card responsibly</a>, shift as many of your purchases as possible to your credit card, and don't use your debit card for anything other than ATM access. If you do, the combination of rewards, buyer protection, and the value of cash-in-hand will put you ahead of those who pay with a debit card, check, or cash.  </p></div>

## Responsible Credit Card Uses Personal finance experts spend a lot of energy trying to prevent us from using [credit cards](https://www.investopedia.com/terms/c/creditcard.asp)—and with good reason. Many of us use credit cards irresponsibly and end up in [debt](https://www.investopedia.com/terms/d/dti.asp). However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off [paying with a credit card than with a debit card](https://www.investopedia.com/articles/personal-finance/050214/credit-vs-debit-cards-which-better.asp) and keeping cash transactions to a minimum. Let's examine why your trusty credit card comes out on top, and certain credit card uses and [strategies](https://www.investopedia.com/articles/financial-advisors/060815/comparison-bucket-strategy-vs-systematic-withdrawals.asp) to employ. ### Key Takeaways * A credit card used irresponsibly will leave the cardholder in debt. But used in a responsible way, a credit card can be a more effective means of paying than using a debit card or cash. * Credit cards typically offer all kinds of perks and benefits, including a one-time signing bonus for a new cardholder, cash back for purchases, rewards points, and frequent-flyer miles. * Credit cards provide a level of safety for the user that a debit card and cash can't: fraud protection. If a thief uses your card, you can let your credit card company know and avoid being charged. Meanwhile, the company will resolve the issue. * Credit cards enable the user to have a grace period in between when a purchase is made and when the buyer needs to pay for the purchase, as opposed to a debit card or cash, which are both immediate. * Credit cards are also good for new users looking to build up their credit, for keeping vendors honest if a product you bought should fall apart, and for providing additional insurance on travel and other purchases. ## 1. One-Time Bonuses There's nothing like an initial bonus opportunity when [getting a new credit card](https://www.investopedia.com/best-credit-cards-4801582). Often times, applicants with [good credit](https://www.investopedia.com/terms/g/good-credit.asp) or excellent credit can get approved for credit cards that offer bonuses worth $150 or more (sometimes much more) in exchange for spending a certain amount (anywhere from $500 to several thousands of dollars) in the first several months the account is open. Other cards entice applicants with bonus reward points or miles that can be redeemed for travel, gifts cards, merchandise, statement credits, or checks (more on those below). In contrast, a standard [debit card](https://www.investopedia.com/terms/d/debitcard.asp) that comes with a bank checking account generally offers no initial bonus or ongoing opportunity to earn rewards. ## 2. Cash Back The cash-back credit card was first popularized in the United States by Discover, and the idea was simple: Use the card and get 1% of your purchases rebated in the form of cash back. Today, the concept has grown and matured. Now, some cards now offer 2%, 3% or even as much as 6% cash back on selected purchases, though such lucrative offers involve quarterly or annual spending caps. The best cash-back cards are those that charge minimal fees and interest, while offering a high rewards rate. Some cards, like the Fidelity Rewards card, offer a high 2% rate of [cash back](https://www.investopedia.com/terms/c/cash-back.asp) rewards on all spending but you must deposit your cash directly into a Fidelity investment account. ## 3. Rewards Points Credit cards are set up to allow cardholders to earn one or more points per dollar in spending. Many reward credit cards provide [bonus points for certain categories](https://www.investopedia.com/articles/investing/092215/debit-vs-credit-card-paying-gas.asp) of spending like restaurants, groceries or gasoline. When certain earnings thresholds are reached, points can be redeemed for travel, [gift cards](https://www.investopedia.com/terms/g/gift-card.asp) from retailers and restaurants, or for merchandise items through the credit card company's online rewards portal. Your credit card rewards options are almost endless. Get a co-branded card offered in partnership with a hotel chain, clothing retailer or even a nonprofit organization like AARP, and you can leverage your everyday spending to earn valuable rewards day in and day out. The trick is to find the card that best fits with your spending patterns. Doing the inverse—altering your spending patterns to fit with a particular card—can be counterproductive. But if you're already spending money on a regular basis with a certain retailer or have an affinity for a certain hotel, why not use the card that will encourage your continued patronage by offering you enhanced rewards, discounts and perks? ## 4. Frequent-Flyer Miles This perk predates almost all the rest. Back in the early 1980s, American Airlines began offering their consumers a novel way to earn frequent-flyer miles even when they weren't flying, by forming a partnership with credit card giant Citibank. Now, all domestic and international airlines have at least one credit card offered, in a similar partnership, by major credit card issuers. Cardholders generally earn miles at a rate of one mile per dollar in net purchases, or sometimes one mile per two dollars spent for lower-end cards that have no annual fee. How valuable this reward actually is, depends on the type of airline ticket you purchase with your points or miles. Many [frequent flyer cards are made immensely more valuable](https://www.investopedia.com/ask/answers/090916/are-travel-rewards-credit-cards-worth-it.asp) by their mileage-based introductory bonuses. These are often enough to put you 50–100% of the way toward an award flight after meeting the card's initial spending requirement. ## 5. Safety Paying with a credit card makes it easier to avoid losses from fraud. When your debit card is used by a thief, the money is missing from your account instantly. Legitimate expenses for which you've scheduled online payments or mailed checks may bounce, triggering insufficient funds fees and affecting your credit. Even if not your fault, these late or missed payments can lower your [credit score](https://www.investopedia.com/terms/c/credit_score.asp). It can take time for fraudulent transactions to be reversed and money restored to your account while the bank investigates. By contrast, when your credit card is used fraudulently, you aren't out any money—you just notify your credit card company of the fraud and don't pay for the transactions you didn't make while the credit card company resolves the matter. Credit card networks like Visa and Mastercard provide zero liability coverage for unauthorized purchases as a way to encourage usage of their cards over cash or check. ### Help With Purchase Refunds Credit card companies can also help resolve refund issues when consumers are unable to resolve merchant disputes on their own. ## 6. Keeping Vendors Honest Say you hire a tile setter to set some flooring in your entryway. Workers spend the weekend cutting, measuring, grouting, placing the spacers and tiles and letting the whole thing set. They then charge you $4,000 for their troubles. You draw upon your savings account and write a check. But what do you do when, 72 hours later, the tile starts to shift and the grout still hasn't set? Your entryway is now a complete mess, and that vein in your forehead won't stop throbbing. You can take up the issue with your state licensing board, but that process could take months and the contractor still has your money. That's why, if you can, you should pay for a big-ticket item like this with a credit card. The issuer has an incentive to discourage fraud among its vendors, and if there is a problem, they have a mechanism to try to resolve it. More important, if you dispute the charge, the card issuer withholds the funds from the tile setter, and not only will you get your money back, you might even get help finding a new contractor. ## 7. Grace Period When you make a debit card purchase, your money is gone right away. When you make a credit card purchase, your money remains in your checking account until you pay your credit card bill. Hanging on to your funds for this extra time can be helpful in two ways. First, the time value of money, however infinitesimal, will save you money. Delaying eventual payment makes your purchase a tiny bit cheaper than it would be otherwise. Beyond that, by paying with a credit card versus your debit card, cash, or check, your cash will spend more time in your bank account. And if you pay your credit card from an interest-bearing checking account, you will earn money during the [grace period](https://www.investopedia.com/terms/g/grace_period.asp). The extra cash will eventually add up to a meaningful amount. Second, when you consistently pay with a credit card you don't have to watch your bank [account balance](https://www.investopedia.com/terms/a/accountbalance.asp) as closely. ## 8. Insurance Most credit cards automatically come with a number of consumer protections that people don't even realize they have, such as rental car insurance (though often secondary to your personal auto insurance), [travel insurance](https://www.investopedia.com/terms/t/travel-insurance.asp), and product warranties that may exceed the manufacturer's [warranty](https://www.investopedia.com/terms/w/warranty.asp). ## 9. Universal Acceptance Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you'll almost certainly have an easier time if you have a credit card. Rental car companies and hotels want customers to pay with credit cards because it makes it easier to charge customers for any damage they cause to a room or a car. Another reason is that, unless you have prepaid for your rental or hotel stay, the merchant doesn't know the final amount of your transaction. The merchant, therefore, needs to block out a certain amount of your available credit line to protect themselves from potential charges they didn't anticipate. So if you want to pay for one of these items with a debit card, the company may insist on putting a hold of several hundred dollars on your account. Also, when you're traveling in a foreign country, merchants won't always accept your debit card—even when it has a major bank logo on it. ## 10. Building Credit If you have no credit or are trying to improve your [credit score](https://www.investopedia.com/terms/c/credit_score.asp), using a credit card responsibly will help because credit card companies will report your payment activity to the [credit bureaus](https://www.investopedia.com/terms/c/creditbureau.asp). However, debit card use doesn't appear anywhere on your [credit report](https://www.investopedia.com/terms/c/creditreport.asp), so it can't help you build or improve your credit. Even if you need to deposit some funds to get a [secured credit card](https://www.investopedia.com/best-credit-cards-4801582), this can help you build your credit history and eventually qualify for unsecured cards or larger loans. ## When Not to Use a Credit Card Paying with credit cards isn't always better than paying with cash. Retailers honor credit cards because they want to make it easy for you to shop there. But the merchants still have to pay the major credit card companies a portion of every sale in the form of a transaction fee. Since a cash sale means more to the retailer's [bottom line](https://www.investopedia.com/terms/b/bottomline.asp) than an equivalent credit sale, some retailers give discounts for the privilege of immediately taking your cash. On a big item, like a furniture set, for instance, the difference could be substantial. However, you'll forego the consumer protections offered by credit cards. There are other reasons when paying with credit isn't better, and they have to do with you and your spending habits. Using a credit card may not be right for you if: * **You can't pay your credit card balance in full and on time:** If this tends to happen, stick with the debit card (or cash) to avoid falling into credit card debt and incurring [interest](https://www.investopedia.com/terms/r/retroactive-interest-rate-increase.asp) charges. * **You tend to spend more than you can afford:** Paying with debit will limit you to spending money already earned. * **You can only get a credit card with a low credit limit and you have a hard time staying under the balance:** Exceeding your credit limit results in costly fees, and doing this can also put a dent in your credit score. ## The Bottom Line [Credit cards](https://www.investopedia.com/best-credit-cards-4801582) are best enjoyed by the disciplined, who can remain cognizant of their ability to pay the monthly bill ([preferably in full](https://www.investopedia.com/terms/d/deadbeat.asp)) on or before the due date. If you already know [how to use a credit card responsibly](https://www.investopedia.com/articles/pf/07/credit-card-donts.asp), shift as many of your purchases as possible to your credit card, and don't use your debit card for anything other than ATM access. If you do, the combination of rewards, buyer protection, and the value of cash-in-hand will put you ahead of those who pay with a debit card, check, or cash. 

Responsible Credit Card Uses Personal finance experts spend a lot of energy trying to prevent us from using credit cards—and with good reason. Many of us use credit cards irresponsibly and end up in debt. However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum. Let's examine why your trusty credit card comes out on top, and certain credit card uses and strategies to employ. Key Takeaways A credit card used irresponsibly will leave the cardholder in debt. But used in a responsible way, a credit card can be a more effective means of paying than using a debit card or cash.Credit cards typically offer all kinds of perks and benefits, including a one-time signing bonus for a new cardholder, cash back for purchases, rewards points, and frequent-flyer miles.Credit cards provide a level of safety for the user that a debit card and cash can't: fraud protection. If a thief uses your card, you can let your credit card company know and avoid being charged. Meanwhile, the company will resolve the issue. Credit cards enable the user to have a grace period in between when a purchase is made and when the buyer needs to pay for the purchase, as opposed to a debit card or cash, which are both immediate.Credit cards are also good for new users looking to build up their credit, for keeping vendors honest if a product you bought should fall apart, and for providing additional insurance on travel and other purchases. 1. One-Time Bonuses There's nothing like an initial bonus opportunity when getting a new credit card. Often times, applicants with good credit or excellent credit can get approved for credit cards that offer bonuses worth $150 or more (sometimes much more) in exchange for spending a certain amount (anywhere from $500 to several thousands of dollars) in the first several months the account is open. Other cards entice applicants with bonus reward points or miles that can be redeemed for travel, gifts cards, merchandise, statement credits, or checks (more on those below). In contrast, a standard debit card that comes with a bank checking account generally offers no initial bonus or ongoing opportunity to earn rewards. 2. Cash Back The cash-back credit card was first popularized in the United States by Discover, and the idea was simple: Use the card and get 1% of your purchases rebated in the form of cash back. Today, the concept has grown and matured. Now, some cards now offer 2%, 3% or even as much as 6% cash back on selected purchases, though such lucrative offers involve quarterly or annual spending caps. The best cash-back cards are those that charge minimal fees and interest, while offering a high rewards rate. Some cards, like the Fidelity Rewards card, offer a high 2% rate of cash back rewards on all spending but you must deposit your cash directly into a Fidelity investment account. 3. Rewards Points Credit cards are set up to allow cardholders to earn one or more points per dollar in spending. Many reward credit cards provide bonus points for certain categories of spending like restaurants, groceries or gasoline. When certain earnings thresholds are reached, points can be redeemed for travel, gift cards from retailers and restaurants, or for merchandise items through the credit card company's online rewards portal. Your credit card rewards options are almost endless. Get a co-branded card offered in partnership with a hotel chain, clothing retailer or even a nonprofit organization like AARP, and you can leverage your everyday spending to earn valuable rewards day in and day out. The trick is to find the card that best fits with your spending patterns. Doing the inverse—altering your spending patterns to fit with a particular card—can be counterproductive. But if you're already spending money on a regular basis with a certain retailer or have an affinity for a certain hotel, why not use the card that will encourage your continued patronage by offering you enhanced rewards, discounts and perks? 4. Frequent-Flyer Miles This perk predates almost all the rest. Back in the early 1980s, American Airlines began offering their consumers a novel way to earn frequent-flyer miles even when they weren't flying, by forming a partnership with credit card giant Citibank. Now, all domestic and international airlines have at least one credit card offered, in a similar partnership, by major credit card issuers. Cardholders generally earn miles at a rate of one mile per dollar in net purchases, or sometimes one mile per two dollars spent for lower-end cards that have no annual fee. How valuable this reward actually is, depends on the type of airline ticket you purchase with your points or miles. Many frequent flyer cards are made immensely more valuable by their mileage-based introductory bonuses. These are often enough to put you 50–100% of the way toward an award flight after meeting the card's initial spending requirement. 5. Safety Paying with a credit card makes it easier to avoid losses from fraud. When your debit card is used by a thief, the money is missing from your account instantly. Legitimate expenses for which you've scheduled online payments or mailed checks may bounce, triggering insufficient funds fees and affecting your credit. Even if not your fault, these late or missed payments can lower your credit score. It can take time for fraudulent transactions to be reversed and money restored to your account while the bank investigates. By contrast, when your credit card is used fraudulently, you aren't out any money—you just notify your credit card company of the fraud and don't pay for the transactions you didn't make while the credit card company resolves the matter. Credit card networks like Visa and Mastercard provide zero liability coverage for unauthorized purchases as a way to encourage usage of their cards over cash or check. Help With Purchase Refunds Credit card companies can also help resolve refund issues when consumers are unable to resolve merchant disputes on their own. 6. Keeping Vendors Honest Say you hire a tile setter to set some flooring in your entryway. Workers spend the weekend cutting, measuring, grouting, placing the spacers and tiles and letting the whole thing set. They then charge you $4,000 for their troubles. You draw upon your savings account and write a check. But what do you do when, 72 hours later, the tile starts to shift and the grout still hasn't set? Your entryway is now a complete mess, and that vein in your forehead won't stop throbbing. You can take up the issue with your state licensing board, but that process could take months and the contractor still has your money. That's why, if you can, you should pay for a big-ticket item like this with a credit card. The issuer has an incentive to discourage fraud among its vendors, and if there is a problem, they have a mechanism to try to resolve it. More important, if you dispute the charge, the card issuer withholds the funds from the tile setter, and not only will you get your money back, you might even get help finding a new contractor. 7. Grace Period When you make a debit card purchase, your money is gone right away. When you make a credit card purchase, your money remains in your checking account until you pay your credit card bill. Hanging on to your funds for this extra time can be helpful in two ways. First, the time value of money, however infinitesimal, will save you money. Delaying eventual payment makes your purchase a tiny bit cheaper than it would be otherwise. Beyond that, by paying with a credit card versus your debit card, cash, or check, your cash will spend more time in your bank account. And if you pay your credit card from an interest-bearing checking account, you will earn money during the grace period. The extra cash will eventually add up to a meaningful amount. Second, when you consistently pay with a credit card you don't have to watch your bank account balance as closely. 8. Insurance Most credit cards automatically come with a number of consumer protections that people don't even realize they have, such as rental car insurance (though often secondary to your personal auto insurance), travel insurance, and product warranties that may exceed the manufacturer's warranty. 9. Universal Acceptance Certain purchases are difficult to make with a debit card. When you want to rent a car or stay in a hotel room, you'll almost certainly have an easier time if you have a credit card. Rental car companies and hotels want customers to pay with credit cards because it makes it easier to charge customers for any damage they cause to a room or a car. Another reason is that, unless you have prepaid for your rental or hotel stay, the merchant doesn't know the final amount of your transaction. The merchant, therefore, needs to block out a certain amount of your available credit line to protect themselves from potential charges they didn't anticipate. So if you want to pay for one of these items with a debit card, the company may insist on putting a hold of several hundred dollars on your account. Also, when you're traveling in a foreign country, merchants won't always accept your debit card—even when it has a major bank logo on it. 10. Building Credit If you have no credit or are trying to improve your credit score, using a credit card responsibly will help because credit card companies will report your payment activity to the credit bureaus. However, debit card use doesn't appear anywhere on your credit report, so it can't help you build or improve your credit. Even if you need to deposit some funds to get a secured credit card, this can help you build your credit history and eventually qualify for unsecured cards or larger loans. When Not to Use a Credit Card Paying with credit cards isn't always better than paying with cash. Retailers honor credit cards because they want to make it easy for you to shop there. But the merchants still have to pay the major credit card companies a portion of every sale in the form of a transaction fee. Since a cash sale means more to the retailer's bottom line than an equivalent credit sale, some retailers give discounts for the privilege of immediately taking your cash. On a big item, like a furniture set, for instance, the difference could be substantial. However, you'll forego the consumer protections offered by credit cards. There are other reasons when paying with credit isn't better, and they have to do with you and your spending habits. Using a credit card may not be right for you if: You can't pay your credit card balance in full and on time: If this tends to happen, stick with the debit card (or cash) to avoid falling into credit card debt and incurring interest charges. You tend to spend more than you can afford: Paying with debit will limit you to spending money already earned. You can only get a credit card with a low credit limit and you have a hard time staying under the balance: Exceeding your credit limit results in costly fees, and doing this can also put a dent in your credit score. The Bottom Line Credit cards are best enjoyed by the disciplined, who can remain cognizant of their ability to pay the monthly bill (preferably in full) on or before the due date. If you already know how to use a credit card responsibly, shift as many of your purchases as possible to your credit card, and don't use your debit card for anything other than ATM access. If you do, the combination of rewards, buyer protection, and the value of cash-in-hand will put you ahead of those who pay with a debit card, check, or cash. 

https://www.investopedia.com/largest-mid-cap-etfs-5225571

A Dive Into the Largest Mid-Cap ETFs

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The term net assets refers to the amount of capital invested into an <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded fund (ETF)</a> and is a good measure for investors to use as a gauge of relative popularity when comparing funds. Those ETFs with only a few million dollars invested are relatively under-followed and tend to be rather illiquid. On the other hand, ETFs with many millions invested tend to be held by <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/institutionalinvestor.asp">institutional investors</a> and carry an added level of stability. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> In this article, we'll look at the largest ETFs that focus on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/midcapstock.asp">mid-cap</a> stocks, ranking the funds by their net assets. This article will also focus on the similarities and differences between the mid-cap ETFs when it comes to fundamentals from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratios</a> to portfolio holdings. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The iShares Core S&amp;P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="2"></span></li><li>The breakdown of the holdings of the five most popular mid-cap ETFs when ranked by net assets differs slightly which is due to the differences in the underlying benchmarks.</li><li>Research-driven investors can identify interesting investment candidates by analyzing the top holdings of popular mid-cap ETFs.</li></ul></div></div></div> <span class="heading-toc" id="toc-ishares-core-sp-mid-cap-etf-ijh"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> iShares Core S&amp;P Mid-Cap ETF (IJH) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The iShares Core S&amp;P Mid-Cap ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ijh">IJH</a>), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/top-companies-in-mid-cap-etfs-5225505">mid-cap segment</a>. The fund's managers seek to provide investors with a low-cost and tax-efficient method for gaining exposure to U.S. mid-cap stocks.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Fundamentally, the fund comprises 404 holdings and carries an expense ratio of 0.05%. The fund has a 12-month trailing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividendyield.asp">dividend yield</a> of 1.74%. As you can see from the list of the top five holdings below, this fund has a bit more exposure toward industrials and materials relative to other mid-cap-focused funds.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li>Hubbell Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=hubb">HUBB</a>)</li> <li>Builders First Source Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLDR">BLDR</a>)</li> <li>Reliance Steel &amp; Aluminum (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=RS">RS</a>)<br/></li> <li>Jabil Inc. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=JBL">JBL</a>)<br/></li> <li>Graco Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GGG">GGG</a>)<span class="ql-inline-citation" data-cite="2"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-vanguard-mid-cap-etf-vo"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Vanguard Mid-Cap ETF (VO) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> The Vanguard Mid-Cap ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=vo">VO</a>) has net assets of $49.9 billion and carries an expense ratio of 0.04%, which is slightly below the IJH ETF discussed above. Again, this fund seeks to provide investors with low-cost exposure to U.S. mid-cap equity. The VO ETF employs a passively managed, full-replication strategy that seeks to minimize <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trackingerror.asp">tracking error</a> with its CRSP U.S. Mid Cap Index benchmark.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Fundamentally, the fund comprises 341 holdings and carries a 1.68% dividend yield. Based on the top five holdings shown below, investors can expect to find a slightly greater level of exposure to sectors such as information technology and healthcare.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>Motorola Solutions Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSI">MSI</a>)</li> <li>Dexcom Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DXCM">DXCM</a>)</li> <li>Amphenol Corp. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=APH">APH</a>)</li> <li>Arthur J Gallagher &amp; Co. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AJG">AJG</a>)</li> <li>Microchip Technology Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP">MCHP</a>)<span class="ql-inline-citation" data-cite="3"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <span class="heading-toc" id="toc-ishares-russell-mid-cap-etf-iwr"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-heading__text"> iShares Russell Mid-Cap ETF (IWR) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The iShares Russell Mid-Cap ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=iwr">IWR</a>) is another targeted ETF that looks to provide U.S. investors with domestic exposure to the mid-cap segment of the market. The fund carries an expense ratio of 0.18%, which is higher than previous ETFs, but it also provides a larger view of the segment, with 814 total holdings.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> With total net assets of $28.7 billion, the fund is very popular and it has a 12-month trailing dividend yield of 1.65%. Looking at the top holdings below, you'll notice that IWR's top constituents have a tilt toward sectors such as technology and energy.<span class="ql-inline-citation" data-cite="4"></span><br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li>Marvell Technology Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=mrvl">MRVL</a>)</li> <li>Parker-Hannifin Corp (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PH">PH</a>)</li> <li>Dexcom Inc. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DXCM">DXCM</a>)</li> <li>Amphenol Corp. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=APH">APH</a>)</li> <li>Microchip Technology Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP">MCHP</a>)<span class="ql-inline-citation" data-cite="4"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-spdr-sp-midcap-400-etf-trust-mdy"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> SPDR S&amp;P MidCap 400 ETF Trust (MDY) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> As the name suggests, the SPDR S&amp;P MidCap 400 ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=mdy">MDY</a>) seeks to track the S&amp;P MidCap 400 Index, which is similar in nature to the iShares Core S&amp;P Mid-Cap ETF discussed above. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Fundamentally, the fund comprises 401 holdings with a near identical sector allocation as IJH. In the case of MDY, the fund carries a higher expense ratio of 0.23% and has total net assets of $19.43 billion.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> <li>Hubbell Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=hubb">HUBB</a>)</li> <li>Builders First Source Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLDR">BLDR</a>)</li> <li>Reliance Steel &amp; Aluminum (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=RS">RS</a>)</li> <li>Jabil Inc. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=JBL">JBL</a>)</li> <li>Graco Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GGG">GGG</a>)<span class="ql-inline-citation" data-cite="5"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_35-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_36-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>As of July 2023, there are more than 50 mid-cap ETFs that trade in the United States, excluding <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inverse-etf.asp">inverse</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leveraged-etf.asp">leveraged</a> funds as well as those with less than $50 million in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aum.asp">assets under management (AUM)</a>.<span class="ql-inline-citation" data-cite="8"></span></p></div></div></div> <span class="heading-toc" id="toc-vanguard-mid-cap-value-etf-voe"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-heading__text"> Vanguard Mid-Cap Value ETF (VOE) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> With total net assets of $15 billion, the Vanguard Mid-Cap Value ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=voe">VOE</a>) is a popular mid-cap-focused ETF that seeks to provide investors with targeted exposure to the U.S. mid-cap equity segment through a lens of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valueinvesting.asp">value investor</a>. This means that the fund's managers look to add positions that are attractive from a valuation perspective compared to their underlying fundamentals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The fund has a dividend yield of 2.51%, which is slightly higher than other mid-cap ETFs mentioned and carries a relatively low expense ratio of 0.07%. Here is a look at the fund's top five holdings, which are slightly more focused on basic materials relative to the funds mentioned above.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> <li>Arthur J Gallagher &amp; Co. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AJG">AJG</a>)</li> <li>Corteva Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ctva">CTVA</a>)</li> <li>PG&amp;E Corp. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PCG">PCG</a>)</li> <li>PACCAR Inc. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PCAR">PCAR</a>)<br/></li> <li>Centene Corp. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CNC">CNC</a>)<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_44-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> When investors look to gain exposure to the mid-cap segment of the market, they often turn to low-cost, targeted ETFs, such as the ones mentioned above. As of July 2023, these funds are the most popular based on net assets, which are subject to change.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Fundamentally, the holdings vary slightly depending on the underlying benchmark that the fund's managers are seeking to track, which is something to consider when choosing a mid-cap ETF as a candidate for a diversified portfolio. Mid-cap investors who want an even more targeted approach may wish to examine the top holdings of these types of ETFs as a method for identifying potential investment candidates.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_49-0"><span class="heading-toc" id="toc-why-do-some-large-caps-appear-as-holdings-of-a-mid-cap-etf"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Do Some Large-Caps Appear as Holdings of a Mid-Cap ETF?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Generally, a large-cap is regarded as a company with a market capitalization of more than $10 billion.<span class="ql-inline-citation" data-cite="9"></span> Sometimes companies of large-cap scale are found within mid-cap ETFs because they were considered mid-cap at the time they were added to the fund and still have certain characteristics of a mid-cap. However, due to strong performance, some of these holdings may now actually be akin to a large-cap.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_51-0"><span class="heading-toc" id="toc-what-is-the-largest-mid-cap-etf-based-on-net-assets"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Largest Mid-Cap ETF Based on Net Assets?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>As of early July 2023, the iShares Core S&amp;P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="2"></span></p></div> </div></div>

The term net assets refers to the amount of capital invested into an [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) and is a good measure for investors to use as a gauge of relative popularity when comparing funds. Those ETFs with only a few million dollars invested are relatively under-followed and tend to be rather illiquid. On the other hand, ETFs with many millions invested tend to be held by [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) and carry an added level of stability. In this article, we'll look at the largest ETFs that focus on [mid-cap](https://www.investopedia.com/terms/m/midcapstock.asp) stocks, ranking the funds by their net assets. This article will also focus on the similarities and differences between the mid-cap ETFs when it comes to fundamentals from [expense ratios](https://www.investopedia.com/terms/e/expenseratio.asp) to portfolio holdings. ### Key Takeaways * The iShares Core S&P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment. * The breakdown of the holdings of the five most popular mid-cap ETFs when ranked by net assets differs slightly which is due to the differences in the underlying benchmarks. * Research-driven investors can identify interesting investment candidates by analyzing the top holdings of popular mid-cap ETFs. ## iShares Core S&P Mid-Cap ETF (IJH) The iShares Core S&P Mid-Cap ETF ([IJH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ijh)), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the [mid-cap segment](https://www.investopedia.com/top-companies-in-mid-cap-etfs-5225505). The fund's managers seek to provide investors with a low-cost and tax-efficient method for gaining exposure to U.S. mid-cap stocks. Fundamentally, the fund comprises 404 holdings and carries an expense ratio of 0.05%. The fund has a 12-month trailing [dividend yield](https://www.investopedia.com/terms/d/dividendyield.asp) of 1.74%. As you can see from the list of the top five holdings below, this fund has a bit more exposure toward industrials and materials relative to other mid-cap-focused funds. * Hubbell Inc. ([HUBB](https://www.investopedia.com/markets/quote?tvwidgetsymbol=hubb)) * Builders First Source Inc. ([BLDR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLDR)) * Reliance Steel & Aluminum ([RS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=RS)) * Jabil Inc. ([JBL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JBL)) * Graco Inc. ([GGG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GGG)) ## Vanguard Mid-Cap ETF (VO) The Vanguard Mid-Cap ETF ([VO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=vo)) has net assets of $49.9 billion and carries an expense ratio of 0.04%, which is slightly below the IJH ETF discussed above. Again, this fund seeks to provide investors with low-cost exposure to U.S. mid-cap equity. The VO ETF employs a passively managed, full-replication strategy that seeks to minimize [tracking error](https://www.investopedia.com/terms/t/trackingerror.asp) with its CRSP U.S. Mid Cap Index benchmark. Fundamentally, the fund comprises 341 holdings and carries a 1.68% dividend yield. Based on the top five holdings shown below, investors can expect to find a slightly greater level of exposure to sectors such as information technology and healthcare. * Motorola Solutions Inc. ([MSI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSI)) * Dexcom Inc. ([DXCM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DXCM)) * Amphenol Corp. ([APH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=APH)) * Arthur J Gallagher & Co. ([AJG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AJG)) * Microchip Technology Inc. ([MCHP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP)) ## iShares Russell Mid-Cap ETF (IWR) The iShares Russell Mid-Cap ETF ([IWR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=iwr)) is another targeted ETF that looks to provide U.S. investors with domestic exposure to the mid-cap segment of the market. The fund carries an expense ratio of 0.18%, which is higher than previous ETFs, but it also provides a larger view of the segment, with 814 total holdings. With total net assets of $28.7 billion, the fund is very popular and it has a 12-month trailing dividend yield of 1.65%. Looking at the top holdings below, you'll notice that IWR's top constituents have a tilt toward sectors such as technology and energy. * Marvell Technology Inc. ([MRVL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=mrvl)) * Parker-Hannifin Corp ([PH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PH)) * Dexcom Inc. ([DXCM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DXCM)) * Amphenol Corp. ([APH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=APH)) * Microchip Technology Inc. ([MCHP](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MCHP)) ## SPDR S&P MidCap 400 ETF Trust (MDY) As the name suggests, the SPDR S&P MidCap 400 ETF ([MDY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=mdy)) seeks to track the S&P MidCap 400 Index, which is similar in nature to the iShares Core S&P Mid-Cap ETF discussed above. Fundamentally, the fund comprises 401 holdings with a near identical sector allocation as IJH. In the case of MDY, the fund carries a higher expense ratio of 0.23% and has total net assets of $19.43 billion. * Hubbell Inc. ([HUBB](https://www.investopedia.com/markets/quote?tvwidgetsymbol=hubb)) * Builders First Source Inc. ([BLDR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BLDR)) * Reliance Steel & Aluminum ([RS](https://www.investopedia.com/markets/quote?tvwidgetsymbol=RS)) * Jabil Inc. ([JBL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=JBL)) * Graco Inc. ([GGG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GGG)) ### As of July 2023, there are more than 50 mid-cap ETFs that trade in the United States, excluding [inverse](https://www.investopedia.com/terms/i/inverse-etf.asp) and [leveraged](https://www.investopedia.com/terms/l/leveraged-etf.asp) funds as well as those with less than $50 million in [assets under management (AUM)](https://www.investopedia.com/terms/a/aum.asp). ## Vanguard Mid-Cap Value ETF (VOE) With total net assets of $15 billion, the Vanguard Mid-Cap Value ETF ([VOE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=voe)) is a popular mid-cap-focused ETF that seeks to provide investors with targeted exposure to the U.S. mid-cap equity segment through a lens of the [value investor](https://www.investopedia.com/terms/v/valueinvesting.asp). This means that the fund's managers look to add positions that are attractive from a valuation perspective compared to their underlying fundamentals. The fund has a dividend yield of 2.51%, which is slightly higher than other mid-cap ETFs mentioned and carries a relatively low expense ratio of 0.07%. Here is a look at the fund's top five holdings, which are slightly more focused on basic materials relative to the funds mentioned above. * Arthur J Gallagher & Co. ([AJG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AJG)) * Corteva Inc. ([CTVA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ctva)) * PG&E Corp. ([PCG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PCG)) * PACCAR Inc. ([PCAR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PCAR)) * Centene Corp. ([CNC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CNC)) ## The Bottom Line When investors look to gain exposure to the mid-cap segment of the market, they often turn to low-cost, targeted ETFs, such as the ones mentioned above. As of July 2023, these funds are the most popular based on net assets, which are subject to change. Fundamentally, the holdings vary slightly depending on the underlying benchmark that the fund's managers are seeking to track, which is something to consider when choosing a mid-cap ETF as a candidate for a diversified portfolio. Mid-cap investors who want an even more targeted approach may wish to examine the top holdings of these types of ETFs as a method for identifying potential investment candidates. ## Why Do Some Large-Caps Appear as Holdings of a Mid-Cap ETF? Generally, a large-cap is regarded as a company with a market capitalization of more than $10 billion. Sometimes companies of large-cap scale are found within mid-cap ETFs because they were considered mid-cap at the time they were added to the fund and still have certain characteristics of a mid-cap. However, due to strong performance, some of these holdings may now actually be akin to a large-cap. ## What Is the Largest Mid-Cap ETF Based on Net Assets? As of early July 2023, the iShares Core S&P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment.

The term net assets refers to the amount of capital invested into an exchange-traded fund (ETF) and is a good measure for investors to use as a gauge of relative popularity when comparing funds. Those ETFs with only a few million dollars invested are relatively under-followed and tend to be rather illiquid. On the other hand, ETFs with many millions invested tend to be held by institutional investors and carry an added level of stability. In this article, we'll look at the largest ETFs that focus on mid-cap stocks, ranking the funds by their net assets. This article will also focus on the similarities and differences between the mid-cap ETFs when it comes to fundamentals from expense ratios to portfolio holdings. Key Takeaways The iShares Core S&P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment.The breakdown of the holdings of the five most popular mid-cap ETFs when ranked by net assets differs slightly which is due to the differences in the underlying benchmarks.Research-driven investors can identify interesting investment candidates by analyzing the top holdings of popular mid-cap ETFs. iShares Core S&P Mid-Cap ETF (IJH) The iShares Core S&P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment. The fund's managers seek to provide investors with a low-cost and tax-efficient method for gaining exposure to U.S. mid-cap stocks. Fundamentally, the fund comprises 404 holdings and carries an expense ratio of 0.05%. The fund has a 12-month trailing dividend yield of 1.74%. As you can see from the list of the top five holdings below, this fund has a bit more exposure toward industrials and materials relative to other mid-cap-focused funds. Hubbell Inc. (HUBB) Builders First Source Inc. (BLDR) Reliance Steel & Aluminum (RS) Jabil Inc. (JBL) Graco Inc. (GGG) Vanguard Mid-Cap ETF (VO) The Vanguard Mid-Cap ETF (VO) has net assets of $49.9 billion and carries an expense ratio of 0.04%, which is slightly below the IJH ETF discussed above. Again, this fund seeks to provide investors with low-cost exposure to U.S. mid-cap equity. The VO ETF employs a passively managed, full-replication strategy that seeks to minimize tracking error with its CRSP U.S. Mid Cap Index benchmark. Fundamentally, the fund comprises 341 holdings and carries a 1.68% dividend yield. Based on the top five holdings shown below, investors can expect to find a slightly greater level of exposure to sectors such as information technology and healthcare. Motorola Solutions Inc. (MSI) Dexcom Inc. (DXCM) Amphenol Corp. (APH) Arthur J Gallagher & Co. (AJG) Microchip Technology Inc. (MCHP) iShares Russell Mid-Cap ETF (IWR) The iShares Russell Mid-Cap ETF (IWR) is another targeted ETF that looks to provide U.S. investors with domestic exposure to the mid-cap segment of the market. The fund carries an expense ratio of 0.18%, which is higher than previous ETFs, but it also provides a larger view of the segment, with 814 total holdings. With total net assets of $28.7 billion, the fund is very popular and it has a 12-month trailing dividend yield of 1.65%. Looking at the top holdings below, you'll notice that IWR's top constituents have a tilt toward sectors such as technology and energy. Marvell Technology Inc. (MRVL) Parker-Hannifin Corp (PH) Dexcom Inc. (DXCM) Amphenol Corp. (APH) Microchip Technology Inc. (MCHP) SPDR S&P MidCap 400 ETF Trust (MDY) As the name suggests, the SPDR S&P MidCap 400 ETF (MDY) seeks to track the S&P MidCap 400 Index, which is similar in nature to the iShares Core S&P Mid-Cap ETF discussed above. Fundamentally, the fund comprises 401 holdings with a near identical sector allocation as IJH. In the case of MDY, the fund carries a higher expense ratio of 0.23% and has total net assets of $19.43 billion. Hubbell Inc. (HUBB) Builders First Source Inc. (BLDR) Reliance Steel & Aluminum (RS) Jabil Inc. (JBL) Graco Inc. (GGG) As of July 2023, there are more than 50 mid-cap ETFs that trade in the United States, excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). Vanguard Mid-Cap Value ETF (VOE) With total net assets of $15 billion, the Vanguard Mid-Cap Value ETF (VOE) is a popular mid-cap-focused ETF that seeks to provide investors with targeted exposure to the U.S. mid-cap equity segment through a lens of the value investor. This means that the fund's managers look to add positions that are attractive from a valuation perspective compared to their underlying fundamentals. The fund has a dividend yield of 2.51%, which is slightly higher than other mid-cap ETFs mentioned and carries a relatively low expense ratio of 0.07%. Here is a look at the fund's top five holdings, which are slightly more focused on basic materials relative to the funds mentioned above. Arthur J Gallagher & Co. (AJG) Corteva Inc. (CTVA) PG&E Corp. (PCG) PACCAR Inc. (PCAR) Centene Corp. (CNC) The Bottom Line When investors look to gain exposure to the mid-cap segment of the market, they often turn to low-cost, targeted ETFs, such as the ones mentioned above. As of July 2023, these funds are the most popular based on net assets, which are subject to change. Fundamentally, the holdings vary slightly depending on the underlying benchmark that the fund's managers are seeking to track, which is something to consider when choosing a mid-cap ETF as a candidate for a diversified portfolio. Mid-cap investors who want an even more targeted approach may wish to examine the top holdings of these types of ETFs as a method for identifying potential investment candidates. Why Do Some Large-Caps Appear as Holdings of a Mid-Cap ETF? Generally, a large-cap is regarded as a company with a market capitalization of more than $10 billion. Sometimes companies of large-cap scale are found within mid-cap ETFs because they were considered mid-cap at the time they were added to the fund and still have certain characteristics of a mid-cap. However, due to strong performance, some of these holdings may now actually be akin to a large-cap. What Is the Largest Mid-Cap ETF Based on Net Assets? As of early July 2023, the iShares Core S&P Mid-Cap ETF (IJH), with net assets of $69.5 billion, is the largest publicly traded ETF that is focused on the mid-cap segment.

https://www.investopedia.com/articles/investing/021916/etfs-vs-mutual-funds-which-better-young-investors.asp

ETFs vs. Mutual Funds: Which Is Better for Young Investors?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-etfs-vs-mutual-funds-for-young-investors-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> ETFs vs. Mutual Funds for Young Investors: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Which is better for young investors, exchange-traded funds (ETFs) or mutual funds? That depends on a number of factors. They include how much a young investor has to invest, how actively involved they want to be with their investments, and their understanding of the advantages and disadvantages of each option.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Both types of funds offer instant diversification and professional management of fund assets. They both involve less risk (and greater convenience) than investing in individual securities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> ETFs are a newer option for investors and they were originally known for having far lower fees than comparable mutual funds. That gap has closed in recent years as mutual funds work to attract new investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_8-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_9-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Many mutual funds are actively managed while most ETFs are passive investments that track the performance of a particular index.</li><li>ETFs can be more tax-efficient than actively managed funds due to their lower turnover and fewer transactions that produce capital gains.</li><li>ETFs are bought and sold on an exchange throughout the day while mutual funds can be bought or sold only once a day at the latest closing price.</li><li>Many online brokers offer commission-free ETFs regardless of the size of the account. Some mutual funds require a minimum initial investment.</li><li>It is generally cheaper to buy mutual funds directly through a fund family than through a broker.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-investor-goals-and-preferences"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_10-0"> <span class="mntl-sc-block-heading__text"> Understanding Investor Goals and Preferences </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Before we dig into ETFs versus mutual funds, there are a few important things to cover. First, young investors must identify their investment goals. The financial targets they set may play a factor in what investment vehicle they choose. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Another factor to consider related to this is an investor's appetite for risk. Investors may intentionally choose to invest in something riskier or less tax-advantaged for specific reasons; they may prioritize certain types of investment growth or other investment strategies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> As you read more about ETFs and mutual funds, take care in thinking through what type of investor you are, what your long-term goals are, and what financial priorities (i.e. reduce taxes, maximize gains, etc) are on your list. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <span class="heading-toc" id="toc-etfs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-heading__text"> ETFs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> While mutual funds have been around since the 1920s, ETFs are the newer kid on the investing block. They started trading in 1993 and have grown rapidly in popularity since then.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> You can buy ETFs through virtually any online broker, while not all mutual funds are available through brokers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> ETFs don't require a minimum initial investment because they trade as individual shares. You can buy a single share if you choose to.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> ETFs can be either actively or passively managed. However, most are passive investments that mimic the contents of an index. The return should be nearly identical to the return of the index. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> As such, they can be appropriate for investors with a long-term <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buyandhold.asp">buy-and-hold</a> investment strategy who prefer passive over active management. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> ETFs are generally lower than those that are charged by actively managed mutual funds because their managers are merely mimicking the contents of an index rather than making regular buy and sell decisions, </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> For some investors, the design of a passive ETF is a negative. The stated purpose of the ETF is not to beat an index but to match it. Investors who want to maximize their returns and beat the indices are not best served by ETFs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_32-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-important" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_33-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Young investors must decide how actively they'll buy and sell ETFs. Active trading increases fees and decreases returns.</p></div></div></div> <span class="heading-toc" id="toc-mutual-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_34-0"> <span class="mntl-sc-block-heading__text"> Mutual Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> While not as hip as ETFs, mutual funds can be a great investment option. You can purchase them directly from the company that issues the fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Most companies make it easy to invest money at set intervals, which is a great feature for young investors trying to establish a consistent investing pattern. It's also an opportunity to take advantage of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dollarcostaveraging.asp">dollar-cost averaging</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> "They can go to a low-cost fund company like Vanguard and set up an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/automaticinvestmentplan.asp">automatic investment program</a> where perhaps $100 is pulled from their checking account every two weeks and invested in a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rothira.asp">Roth IRA</a>. They can set this up with a few minutes of work and then simply let the investment program happen,” says Jason Lina, Chartered Financial Advisor (CFA), CFP, and founder of Golden Bell Financial Planning. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> Mutual funds are still more expensive than ETFs, but there is a reason for that. They include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/12b-1fees.asp">12b-1 fees</a>, which essentially are compensation for advisors' efforts to sell a given fund.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_42-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Mutual funds can be either actively or passively managed. For investors who seek an investment that attempts to outperform the market, an actively managed fund may be the way to go. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Actively managed mutual funds can be attractive to those targeting inefficient markets or emerging markets. In such circumstances, active managers try to take advantage of price inefficiencies to boost the fund's returns. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Bear in mind that active management results in added costs and an annual performance that may fall short of the overall market. An actively managed fund is also typically less tax-efficient due to the capital gains generated as a manager buys and sells securities to try to outperform the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Many, but not all, mutual funds require minimum amounts to open an account. You may see a range of $100 to $3,000 depending on the fund. Extremely popular funds are often closed to new investors because their vast size can make them inefficient. Rest assured, comparable funds are available from the company or its competitors.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-quick-reference-comparison"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> Quick Reference Comparison </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> All investors, whether they're just starting out or highly experienced, should be sure to read fund materials carefully for all pertinent details about a potential investment and to compare one to another. In the meantime, here's a summary of ETF and mutual fund basics that highlights their similarities and differences. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_54-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th> </th> <th>ETFs </th> <th>Mutual Funds</th> </tr> </thead> <tbody data-check="0"> <tr> <td>Passive or Active Management</td> <td>Both are available, but primarily passive</td> <td>Both are available, but primarily active</td> </tr> <tr> <td>Structure</td> <td>Funds that purchase and manage portfolios of securities</td> <td>Funds that purchase and manage portfolios of securities </td> </tr> <tr> <td>Professionally managed</td> <td>Yes</td> <td>Yes</td> </tr> <tr> <td>Diversification</td> <td>Broad exposure to variety of assets/asset classes</td> <td>Broad exposure to variety of assets/asset classes</td> </tr> <tr> <td>Liquidity</td> <td>Generally, highly liquid due to availability on exchanges but some ETFs can be thinly traded</td> <td>Generally, highly liquid but can take several days to receive proceeds from sales</td> </tr> <tr> <td>How To Trade</td> <td>Buy and sell shares at different prices on an exchange any time during open hours</td> <td>Buy and sell once a day at end of day, at one price </td> </tr> <tr> <td>Minimum Required Investment</td> <td>Limited to cost of shares and how many are bought</td> <td>Varies, e.g., from $0 to $500 to $3,000</td> </tr> <tr> <td>Costs</td> <td>May include operating expense ratio, broker's trade commissions, bid/ask spread</td> <td>May include operating expense ratio, loads, 12b-1 fee</td> </tr> <tr> <td>Expense Ratio</td> <td>Usually lower than actively managed funds</td> <td>Usually higher than passively managed funds</td> </tr> <tr> <td>Pricing</td> <td>Determined by market</td> <td>Net asset value (NAV)</td> </tr> <tr> <td>Tax Efficiency</td> <td>Usually tax efficient due to less turnover and fewer capital gains</td> <td>Not as tax efficient due to more turnover and greater capital gains</td> </tr> <tr> <td>Automatic Investing</td> <td>Not available</td> <td>Yes, for investments and withdrawals</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <span class="heading-toc" id="toc-how-to-decide-on-an-etf-or-a-mutual-fund"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-heading__text"> How To Decide on an ETF or a Mutual Fund </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Which investment to buy depends on your financial needs, investment goals, tolerance for risk, and investment style. Carefully consider those factors, as well as the highlights below, to determine whether an ETF or a mutual fund is right for you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> You may be better suited for an ETF: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> <li>If passive management fits your investment style and you want whatever return the index offers.</li> <li>If you want lower operating <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/091515/comparing-etf-gross-vs-net-expense-ratios.asp">expense ratios</a>.</li> <li>If you plan to trade shares actively and prefer the access and price movements an exchange provides.</li> <li>If tax efficiency is a priority.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> You may be better suited for a mutual fund: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <li>If you seek to outperform the market by having your money actively managed.</li><li>If the potential for higher returns outweighs the higher fees.</li><li>If you want to invest the same dollar amount automatically at regular intervals.</li><li>If your target market is inefficient and may benefit from active managers seeking to capitalize on that characteristic.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-consider-both-etfs-and-mutual-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> Consider Both ETFs and Mutual Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Owning both types of funds may be a smart strategy as each can offer protection and opportunity. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> For example, if you own a passively managed ETF, also buying an actively managed mutual fund may offer you some upside potential beyond that of the index being tracked. If you own an actively managed mutual fund, also buying a passively managed ETF may protect against the downside risk and volatility associated with an actively managed mutual fund. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_72-0"><span class="heading-toc" id="toc-are-mutual-funds-good-for-young-investors"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Mutual Funds Good for Young Investors?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. For young investors with a long-term, buy-and-hold investment strategy, mutual funds can be a smart place to put their money.</p><p>They have been around for many years and have stood the test of time as investments. They offer immediate diversification, professional management, and passive or actively managed fund choices.</p><p>You don't have to buy individual stocks, bonds, or other assets yourself. Plus, they're affordable, with many not setting a required minimum investment.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_74-0"><span class="heading-toc" id="toc-are-etfs-good-for-first-time-investors"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are ETFs Good for First-Time Investors?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ETFs can be a great choice for first-time investors of any age. Most ETFs are funds that pool investor money and then use it to buy individual securities, matching the listings in an index. The returns will be near-identical to the index or other indicator.</p><p>ETFs are professionally managed and traded throughout the day on exchanges. They don't require a minimum investment because they trade as shares.</p><p>A huge variety is available, including ETFs that track the major indexes and specialized indexes for sectors, industries, and regions. The biggest ETF of all is the S&amp;P 500 (SPY) Index.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-what-are-two-disadvantages-of-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Two Disadvantages of ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A passively managed ETF is designed to track an index, not beat it. If your goal is to beat the index, the ETF isn't for you. You need to choose an actively managed fund or pick your own stocks.</p><p>Another disadvantage of some funds, particularly highly specialized ones, is low trading volume. This results in wider bid-ask spreads, meaning you may not be able to buy or sell shares at the price you expect. Wide bid-ask spreads can also represent a hidden cost that you may not realize exists. It's a good idea to check on trading volume before you decide to buy a particular ETF.<span class="ql-inline-citation" data-cite="7"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_78-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> For young investors, ETFs and mutual funds can offer tremendous investment opportunities. Which of the two is the best choice depends on the individual investor's financial goals, investing style, and overall strategy for reaching their financial goals. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_80-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Young investors shouldn't feel limited to selecting one or the other type of fund. They can invest in both if they're targeting different markets, or want to invest passively as well as actively. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> No matter which type you choose, be sure to read a particular fund's prospectus to learn all about it. </p></div>

## ETFs vs. Mutual Funds for Young Investors: An Overview Which is better for young investors, exchange-traded funds (ETFs) or mutual funds? That depends on a number of factors. They include how much a young investor has to invest, how actively involved they want to be with their investments, and their understanding of the advantages and disadvantages of each option. Both types of funds offer instant diversification and professional management of fund assets. They both involve less risk (and greater convenience) than investing in individual securities. ETFs are a newer option for investors and they were originally known for having far lower fees than comparable mutual funds. That gap has closed in recent years as mutual funds work to attract new investors. ### Key Takeaways * Many mutual funds are actively managed while most ETFs are passive investments that track the performance of a particular index. * ETFs can be more tax-efficient than actively managed funds due to their lower turnover and fewer transactions that produce capital gains. * ETFs are bought and sold on an exchange throughout the day while mutual funds can be bought or sold only once a day at the latest closing price. * Many online brokers offer commission-free ETFs regardless of the size of the account. Some mutual funds require a minimum initial investment. * It is generally cheaper to buy mutual funds directly through a fund family than through a broker. ## Understanding Investor Goals and Preferences Before we dig into ETFs versus mutual funds, there are a few important things to cover. First, young investors must identify their investment goals. The financial targets they set may play a factor in what investment vehicle they choose. Another factor to consider related to this is an investor's appetite for risk. Investors may intentionally choose to invest in something riskier or less tax-advantaged for specific reasons; they may prioritize certain types of investment growth or other investment strategies. As you read more about ETFs and mutual funds, take care in thinking through what type of investor you are, what your long-term goals are, and what financial priorities (i.e. reduce taxes, maximize gains, etc) are on your list. ## ETFs While mutual funds have been around since the 1920s, ETFs are the newer kid on the investing block. They started trading in 1993 and have grown rapidly in popularity since then. You can buy ETFs through virtually any online broker, while not all mutual funds are available through brokers. ETFs don't require a minimum initial investment because they trade as individual shares. You can buy a single share if you choose to. ETFs can be either actively or passively managed. However, most are passive investments that mimic the contents of an index. The return should be nearly identical to the return of the index. As such, they can be appropriate for investors with a long-term [buy-and-hold](https://www.investopedia.com/terms/b/buyandhold.asp) investment strategy who prefer passive over active management. ETFs are generally lower than those that are charged by actively managed mutual funds because their managers are merely mimicking the contents of an index rather than making regular buy and sell decisions, For some investors, the design of a passive ETF is a negative. The stated purpose of the ETF is not to beat an index but to match it. Investors who want to maximize their returns and beat the indices are not best served by ETFs. ### Young investors must decide how actively they'll buy and sell ETFs. Active trading increases fees and decreases returns. ## Mutual Funds While not as hip as ETFs, mutual funds can be a great investment option. You can purchase them directly from the company that issues the fund. Most companies make it easy to invest money at set intervals, which is a great feature for young investors trying to establish a consistent investing pattern. It's also an opportunity to take advantage of [dollar-cost averaging](https://www.investopedia.com/terms/d/dollarcostaveraging.asp). "They can go to a low-cost fund company like Vanguard and set up an [automatic investment program](https://www.investopedia.com/terms/a/automaticinvestmentplan.asp) where perhaps $100 is pulled from their checking account every two weeks and invested in a [Roth IRA](https://www.investopedia.com/terms/r/rothira.asp). They can set this up with a few minutes of work and then simply let the investment program happen,” says Jason Lina, Chartered Financial Advisor (CFA), CFP, and founder of Golden Bell Financial Planning. Mutual funds are still more expensive than ETFs, but there is a reason for that. They include [12b-1 fees](https://www.investopedia.com/terms/1/12b-1fees.asp), which essentially are compensation for advisors' efforts to sell a given fund. Mutual funds can be either actively or passively managed. For investors who seek an investment that attempts to outperform the market, an actively managed fund may be the way to go. Actively managed mutual funds can be attractive to those targeting inefficient markets or emerging markets. In such circumstances, active managers try to take advantage of price inefficiencies to boost the fund's returns. Bear in mind that active management results in added costs and an annual performance that may fall short of the overall market. An actively managed fund is also typically less tax-efficient due to the capital gains generated as a manager buys and sells securities to try to outperform the market. Many, but not all, mutual funds require minimum amounts to open an account. You may see a range of $100 to $3,000 depending on the fund. Extremely popular funds are often closed to new investors because their vast size can make them inefficient. Rest assured, comparable funds are available from the company or its competitors. ## Quick Reference Comparison All investors, whether they're just starting out or highly experienced, should be sure to read fund materials carefully for all pertinent details about a potential investment and to compare one to another. In the meantime, here's a summary of ETF and mutual fund basics that highlights their similarities and differences. | | ETFs | Mutual Funds | | --- | --- | --- | | Passive or Active Management | Both are available, but primarily passive | Both are available, but primarily active | | Structure | Funds that purchase and manage portfolios of securities | Funds that purchase and manage portfolios of securities | | Professionally managed | Yes | Yes | | Diversification | Broad exposure to variety of assets/asset classes | Broad exposure to variety of assets/asset classes | | Liquidity | Generally, highly liquid due to availability on exchanges but some ETFs can be thinly traded | Generally, highly liquid but can take several days to receive proceeds from sales | | How To Trade | Buy and sell shares at different prices on an exchange any time during open hours | Buy and sell once a day at end of day, at one price | | Minimum Required Investment | Limited to cost of shares and how many are bought | Varies, e.g., from $0 to $500 to $3,000 | | Costs | May include operating expense ratio, broker's trade commissions, bid/ask spread | May include operating expense ratio, loads, 12b-1 fee | | Expense Ratio | Usually lower than actively managed funds | Usually higher than passively managed funds | | Pricing | Determined by market | Net asset value (NAV) | | Tax Efficiency | Usually tax efficient due to less turnover and fewer capital gains | Not as tax efficient due to more turnover and greater capital gains | | Automatic Investing | Not available | Yes, for investments and withdrawals | ## How To Decide on an ETF or a Mutual Fund Which investment to buy depends on your financial needs, investment goals, tolerance for risk, and investment style. Carefully consider those factors, as well as the highlights below, to determine whether an ETF or a mutual fund is right for you. You may be better suited for an ETF: * If passive management fits your investment style and you want whatever return the index offers. * If you want lower operating [expense ratios](https://www.investopedia.com/articles/investing/091515/comparing-etf-gross-vs-net-expense-ratios.asp). * If you plan to trade shares actively and prefer the access and price movements an exchange provides. * If tax efficiency is a priority. You may be better suited for a mutual fund: * If you seek to outperform the market by having your money actively managed. * If the potential for higher returns outweighs the higher fees. * If you want to invest the same dollar amount automatically at regular intervals. * If your target market is inefficient and may benefit from active managers seeking to capitalize on that characteristic. ## Consider Both ETFs and Mutual Funds Owning both types of funds may be a smart strategy as each can offer protection and opportunity. For example, if you own a passively managed ETF, also buying an actively managed mutual fund may offer you some upside potential beyond that of the index being tracked. If you own an actively managed mutual fund, also buying a passively managed ETF may protect against the downside risk and volatility associated with an actively managed mutual fund. ## Are Mutual Funds Good for Young Investors? Yes. For young investors with a long-term, buy-and-hold investment strategy, mutual funds can be a smart place to put their money. They have been around for many years and have stood the test of time as investments. They offer immediate diversification, professional management, and passive or actively managed fund choices. You don't have to buy individual stocks, bonds, or other assets yourself. Plus, they're affordable, with many not setting a required minimum investment. ## Are ETFs Good for First-Time Investors? ETFs can be a great choice for first-time investors of any age. Most ETFs are funds that pool investor money and then use it to buy individual securities, matching the listings in an index. The returns will be near-identical to the index or other indicator. ETFs are professionally managed and traded throughout the day on exchanges. They don't require a minimum investment because they trade as shares. A huge variety is available, including ETFs that track the major indexes and specialized indexes for sectors, industries, and regions. The biggest ETF of all is the S&P 500 (SPY) Index. ## What Are Two Disadvantages of ETFs? A passively managed ETF is designed to track an index, not beat it. If your goal is to beat the index, the ETF isn't for you. You need to choose an actively managed fund or pick your own stocks. Another disadvantage of some funds, particularly highly specialized ones, is low trading volume. This results in wider bid-ask spreads, meaning you may not be able to buy or sell shares at the price you expect. Wide bid-ask spreads can also represent a hidden cost that you may not realize exists. It's a good idea to check on trading volume before you decide to buy a particular ETF. ## The Bottom Line For young investors, ETFs and mutual funds can offer tremendous investment opportunities. Which of the two is the best choice depends on the individual investor's financial goals, investing style, and overall strategy for reaching their financial goals. Young investors shouldn't feel limited to selecting one or the other type of fund. They can invest in both if they're targeting different markets, or want to invest passively as well as actively. No matter which type you choose, be sure to read a particular fund's prospectus to learn all about it.

ETFs vs. Mutual Funds for Young Investors: An Overview Which is better for young investors, exchange-traded funds (ETFs) or mutual funds? That depends on a number of factors. They include how much a young investor has to invest, how actively involved they want to be with their investments, and their understanding of the advantages and disadvantages of each option. Both types of funds offer instant diversification and professional management of fund assets. They both involve less risk (and greater convenience) than investing in individual securities. ETFs are a newer option for investors and they were originally known for having far lower fees than comparable mutual funds. That gap has closed in recent years as mutual funds work to attract new investors. Key Takeaways Many mutual funds are actively managed while most ETFs are passive investments that track the performance of a particular index.ETFs can be more tax-efficient than actively managed funds due to their lower turnover and fewer transactions that produce capital gains.ETFs are bought and sold on an exchange throughout the day while mutual funds can be bought or sold only once a day at the latest closing price.Many online brokers offer commission-free ETFs regardless of the size of the account. Some mutual funds require a minimum initial investment.It is generally cheaper to buy mutual funds directly through a fund family than through a broker. Understanding Investor Goals and Preferences Before we dig into ETFs versus mutual funds, there are a few important things to cover. First, young investors must identify their investment goals. The financial targets they set may play a factor in what investment vehicle they choose. Another factor to consider related to this is an investor's appetite for risk. Investors may intentionally choose to invest in something riskier or less tax-advantaged for specific reasons; they may prioritize certain types of investment growth or other investment strategies. As you read more about ETFs and mutual funds, take care in thinking through what type of investor you are, what your long-term goals are, and what financial priorities (i.e. reduce taxes, maximize gains, etc) are on your list. ETFs While mutual funds have been around since the 1920s, ETFs are the newer kid on the investing block. They started trading in 1993 and have grown rapidly in popularity since then. You can buy ETFs through virtually any online broker, while not all mutual funds are available through brokers. ETFs don't require a minimum initial investment because they trade as individual shares. You can buy a single share if you choose to. ETFs can be either actively or passively managed. However, most are passive investments that mimic the contents of an index. The return should be nearly identical to the return of the index. As such, they can be appropriate for investors with a long-term buy-and-hold investment strategy who prefer passive over active management. ETFs are generally lower than those that are charged by actively managed mutual funds because their managers are merely mimicking the contents of an index rather than making regular buy and sell decisions, For some investors, the design of a passive ETF is a negative. The stated purpose of the ETF is not to beat an index but to match it. Investors who want to maximize their returns and beat the indices are not best served by ETFs. Young investors must decide how actively they'll buy and sell ETFs. Active trading increases fees and decreases returns. Mutual Funds While not as hip as ETFs, mutual funds can be a great investment option. You can purchase them directly from the company that issues the fund. Most companies make it easy to invest money at set intervals, which is a great feature for young investors trying to establish a consistent investing pattern. It's also an opportunity to take advantage of dollar-cost averaging. "They can go to a low-cost fund company like Vanguard and set up an automatic investment program where perhaps $100 is pulled from their checking account every two weeks and invested in a Roth IRA. They can set this up with a few minutes of work and then simply let the investment program happen,” says Jason Lina, Chartered Financial Advisor (CFA), CFP, and founder of Golden Bell Financial Planning. Mutual funds are still more expensive than ETFs, but there is a reason for that. They include 12b-1 fees, which essentially are compensation for advisors' efforts to sell a given fund. Mutual funds can be either actively or passively managed. For investors who seek an investment that attempts to outperform the market, an actively managed fund may be the way to go. Actively managed mutual funds can be attractive to those targeting inefficient markets or emerging markets. In such circumstances, active managers try to take advantage of price inefficiencies to boost the fund's returns. Bear in mind that active management results in added costs and an annual performance that may fall short of the overall market. An actively managed fund is also typically less tax-efficient due to the capital gains generated as a manager buys and sells securities to try to outperform the market. Many, but not all, mutual funds require minimum amounts to open an account. You may see a range of $100 to $3,000 depending on the fund. Extremely popular funds are often closed to new investors because their vast size can make them inefficient. Rest assured, comparable funds are available from the company or its competitors. Quick Reference Comparison All investors, whether they're just starting out or highly experienced, should be sure to read fund materials carefully for all pertinent details about a potential investment and to compare one to another. In the meantime, here's a summary of ETF and mutual fund basics that highlights their similarities and differences.   ETFs  Mutual Funds Passive or Active Management Both are available, but primarily passive Both are available, but primarily active Structure Funds that purchase and manage portfolios of securities Funds that purchase and manage portfolios of securities  Professionally managed Yes Yes Diversification Broad exposure to variety of assets/asset classes Broad exposure to variety of assets/asset classes Liquidity Generally, highly liquid due to availability on exchanges but some ETFs can be thinly traded Generally, highly liquid but can take several days to receive proceeds from sales How To Trade Buy and sell shares at different prices on an exchange any time during open hours Buy and sell once a day at end of day, at one price  Minimum Required Investment Limited to cost of shares and how many are bought Varies, e.g., from $0 to $500 to $3,000 Costs May include operating expense ratio, broker's trade commissions, bid/ask spread May include operating expense ratio, loads, 12b-1 fee Expense Ratio Usually lower than actively managed funds Usually higher than passively managed funds Pricing Determined by market Net asset value (NAV) Tax Efficiency Usually tax efficient due to less turnover and fewer capital gains Not as tax efficient due to more turnover and greater capital gains Automatic Investing Not available Yes, for investments and withdrawals How To Decide on an ETF or a Mutual Fund Which investment to buy depends on your financial needs, investment goals, tolerance for risk, and investment style. Carefully consider those factors, as well as the highlights below, to determine whether an ETF or a mutual fund is right for you. You may be better suited for an ETF: If passive management fits your investment style and you want whatever return the index offers. If you want lower operating expense ratios. If you plan to trade shares actively and prefer the access and price movements an exchange provides. If tax efficiency is a priority. You may be better suited for a mutual fund: If you seek to outperform the market by having your money actively managed.If the potential for higher returns outweighs the higher fees.If you want to invest the same dollar amount automatically at regular intervals.If your target market is inefficient and may benefit from active managers seeking to capitalize on that characteristic. Consider Both ETFs and Mutual Funds Owning both types of funds may be a smart strategy as each can offer protection and opportunity. For example, if you own a passively managed ETF, also buying an actively managed mutual fund may offer you some upside potential beyond that of the index being tracked. If you own an actively managed mutual fund, also buying a passively managed ETF may protect against the downside risk and volatility associated with an actively managed mutual fund. Are Mutual Funds Good for Young Investors? Yes. For young investors with a long-term, buy-and-hold investment strategy, mutual funds can be a smart place to put their money.They have been around for many years and have stood the test of time as investments. They offer immediate diversification, professional management, and passive or actively managed fund choices.You don't have to buy individual stocks, bonds, or other assets yourself. Plus, they're affordable, with many not setting a required minimum investment. Are ETFs Good for First-Time Investors? ETFs can be a great choice for first-time investors of any age. Most ETFs are funds that pool investor money and then use it to buy individual securities, matching the listings in an index. The returns will be near-identical to the index or other indicator.ETFs are professionally managed and traded throughout the day on exchanges. They don't require a minimum investment because they trade as shares.A huge variety is available, including ETFs that track the major indexes and specialized indexes for sectors, industries, and regions. The biggest ETF of all is the S&P 500 (SPY) Index. What Are Two Disadvantages of ETFs? A passively managed ETF is designed to track an index, not beat it. If your goal is to beat the index, the ETF isn't for you. You need to choose an actively managed fund or pick your own stocks.Another disadvantage of some funds, particularly highly specialized ones, is low trading volume. This results in wider bid-ask spreads, meaning you may not be able to buy or sell shares at the price you expect. Wide bid-ask spreads can also represent a hidden cost that you may not realize exists. It's a good idea to check on trading volume before you decide to buy a particular ETF. The Bottom Line For young investors, ETFs and mutual funds can offer tremendous investment opportunities. Which of the two is the best choice depends on the individual investor's financial goals, investing style, and overall strategy for reaching their financial goals. Young investors shouldn't feel limited to selecting one or the other type of fund. They can invest in both if they're targeting different markets, or want to invest passively as well as actively. No matter which type you choose, be sure to read a particular fund's prospectus to learn all about it.

https://www.investopedia.com/lendingclub-banking-review-5071446

LendingClub Banking Review

<div class="comp mntl-external-basic-sublayout-content sc-ad-container article-content" id="mntl-external-basic-sublayout-content_1-0"><div class="loc content-body"> <span class="comp external-content mntl-external-component" id="external-content_1-0"><div class="comp product-review-content product-review-content--finance product-review--base" id="product-review-content--finance_1-0"> <div class="comp js-toc-appear article-container article-intro mntl-block" id="article-intro_1-0"> <div class="comp product-card" data-tracking-container="true" data-tracking-id="product-card" id="product-card_1-0" style="--imgWidth: 0px"> <div class="product-card__content"> <div class="product-card__intro expert-content"> <figure class="comp figure-article figure-2x1 product-card__image litho-figure-article mntl-universal-primary-image primary-image" id="product-card__image_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="LendingClub" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhFQADAPEAAAAAABI7X+lCIwAAACH5BAEAAAAALAAAAAAVAAMAQQgaAAEIDCCwoMGCBAEkPMiwYUEBCiNGXHiQYEAAOw==')" width="1500"/> <noscript> <img alt="LendingClub" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_1-0"> <span class="figure-article-caption-owner"><p>LendingClub</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-article figure-2x1 product-card__image litho-figure-article mntl-universal-primary-image primary-image --> <div class="comp js-sticky-riser-show product-card__cta commerce-block mntl-block" id="product-card__cta_1-0"> <a class="commerce-button mntl-text-link" data-tracking-container="false" href="https://legacy-bank.lendingclub.com/" id="commerce-button_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: commerce-button mntl-text-link --> </div><!-- end: comp js-sticky-riser-show product-card__cta commerce-block mntl-block --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0"> LendingClub Banking, previously Radius Bank, is a Boston-based <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/onlinebanking.asp">online bank</a> with full-service banking solutions for individuals and businesses. Founded in 1987, LendingClub Banking offers an array of interest-earning deposit accounts that are accessible online and through mobile access.<span class="ql-inline-citation" data-cite="1"></span> This in-depth review will help you decide if its deposit accounts are right for you. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> <div class="tabbed-sc-block" data-click-action="Product Tab Click" data-tracking-container="true" data-tracking-id="Full Product Review"> <ul class="tabbed-sc-block__tabs"> <li class="tabbed-sc-block__tab js-tabbed-tab is-active is-initial-load" data-tab-index="1"><span class="tabbed-sc-block__title">Pros &amp; Cons</span></li> <li class="tabbed-sc-block__tab js-tabbed-tab" data-tab-index="2"><span class="tabbed-sc-block__title">Company Overview</span></li> </ul> <div class="tabbed-sc-block__heading js-tabbed-tab is-active is-initial-load js-single-tab-control" data-tab-index="1"> <span class="tabbed-sc-block__text">Pros &amp; Cons</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content is-active is-initial-load" data-tab-index="1"> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_1-0-2"> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>No monthly fees</p></li> <li><p>No ATM fees</p></li> <li><p>Cash back on debit card purchases</p></li> </ul> </div> <div class="prm-sc-block-comparisonlist__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="prm-sc-block-comparisonlist__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="prm-sc-block-comparisonlist__list mntl-sc-block-comparisonlist__list"> <li><p>Large balance requirements to earn the best rates</p></li> <li><p>Uncompetitive interest rates</p></li> <li><p>No physical branches</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </div> <div class="tabbed-sc-block__heading js-tabbed-tab js-single-tab-control" data-tab-index="2"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="2"> <div class="comp mntl-sc-block--product-spec-tool mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block" id="mntl-sc-block_1-0-4"> <div class="comp product-spec-tool definition-list" id="product-spec-tool_1-0"> <ul class="definition-list__container"> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Year Founded</span> <span class="definition-list__item-content definition-list__item-content-0"> 1987 </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Official Website</span> <span class="definition-list__item-content definition-list__item-content-1"> https://legacy-bank.lendingclub.com/ </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Banking Products Offered</span> <span class="definition-list__item-content definition-list__item-content-2"> Savings, checking, CDs, MMA </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Customer Support</span> <span class="definition-list__item-content definition-list__item-content-3"> Live support and secure messaging responses: Monday–Friday, 8:30 a.m. to 12 a.m. (EST); Saturday–Sunday, 8 a.m. to 8 p.m. (EST): 800-242-0272 </span> </span> </li> </ul> </div><!-- end: comp product-spec-tool definition-list --> </div><!-- end: comp mntl-sc-block--product-spec-tool mntl-sc-block prm-sc-block-tool mntl-sc-block-tool mntl-block --> </div> </div> </div> </div><!-- end: comp product-card --> </div><!-- end: comp js-toc-appear article-container article-intro mntl-block --> <div class="loc body-content article-container"> <div class="comp article-body article-content mntl-block" id="article-content_1-0"> <div class="comp left-nav js-sticky-container product-review__left-nav mntl-block" id="product-review__left-nav_1-0"> <div class="comp mntl-sticky-toc product-review__toc--finance product-review__toc sticky-toc-widget mntl-block" data-desktop-bp="54em" data-tracking-container="true" id="product-review__toc_1-0"> <div class="comp sticky-toc-widget__product-container mntl-block" id="sticky-toc-widget__product-container_1-0"> <figure class="comp figure-article sticky-toc-widget__image litho-figure-article mntl-universal-primary-image primary-image" id="sticky-toc-widget__image_1-0"> <div class="primary-image__media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="LendingClub" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhFQADAPEAAAAAABI7X+lCIwAAACH5BAEAAAAALAAAAAAVAAMAQQgaAAEIDCCwoMGCBAEkPMiwYUEBCiNGXHiQYEAAOw==')" width="1500"/> <noscript> <img alt="LendingClub" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/eEGVC7_OrsKVeweS1Cudf4mrV4A=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png" width="1500"/> </noscript> </div> </div> <figcaption class="comp primary-image__figcap mntl-figure-caption figure-article-caption" id="primary-image__figcap_2-0"> <span class="figure-article-caption-owner"><p>LendingClub</p></span> </figcaption><!-- end: comp primary-image__figcap mntl-figure-caption figure-article-caption --> </figure><!-- end: comp figure-article sticky-toc-widget__image litho-figure-article mntl-universal-primary-image primary-image --> <div class="comp sticky-toc-widget__cta commerce-block mntl-block" id="sticky-toc-widget__cta_1-0"> <a class="commerce-button mntl-text-link" data-tracking-container="false" href="https://legacy-bank.lendingclub.com/" id="commerce-button_2-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: commerce-button mntl-text-link --> </div><!-- end: comp sticky-toc-widget__cta commerce-block mntl-block --> </div><!-- end: comp sticky-toc-widget__product-container mntl-block --> <div class="comp sticky-toc-widget sticky-toc-widget__toc sticky-toc--finance sticky-toc--base mntl-sticky-toc mntl-block" data-chop-desktop="false" data-chop-mobile="false" data-desktop-bp="54em" data-tracking-container="true" id="sticky-toc-widget__toc_3-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_3-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_3-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_3-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_5-0"> Table of Contents</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_3-0"> <button class="comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block" data-collapsed-text="Expand" data-expanded-text="View All" id="mntl-toc-toggle__btn_3-0"> View All</button><!-- end: comp js-mntl-toc-toggle mntl-toc-toggle__btn mntl-text-block --> </div><!-- end: comp mntl-toc-toggle mntl-block --> </div><!-- end: comp js-toc-toggle mntl-toc__heading mntl-block --> <div class="comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block" data-click-action="OnPageClick-LendingClub Banking Review" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_3-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_6-0"> LendingClub Banking Review</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> </div><!-- end: comp js-sticky-toggle mntl-toc__mobile-toggle mntl-block --> <ul class="comp mntl-toc__list-heading expert-content mntl-toc__list" id="mntl-toc__list_3-0"> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Pros Explained" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-explained" id="mntl-toc__list-item-link_3-0" rel="nocaes"><span class="link__wrapper">Pros Explained</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-1"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Cons Explained" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-cons-explained" id="mntl-toc__list-item-link_3-0-1" rel="nocaes"><span class="link__wrapper">Cons Explained</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-2"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Best For" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-who-is-lendingclub-banking-best-for" id="mntl-toc__list-item-link_3-0-2" rel="nocaes"><span class="link__wrapper">Best For</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-3"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Bank Offerings" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-does-lendingclub-banking-offer" id="mntl-toc__list-item-link_3-0-3" rel="nocaes"><span class="link__wrapper">Bank Offerings</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-4"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Other Products" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-other-financial-products-offered-by-lendingclub-banking" id="mntl-toc__list-item-link_3-0-4" rel="nocaes"><span class="link__wrapper">Other Products</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-5"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Customer Service" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-lendingclub-banking-customer-service" id="mntl-toc__list-item-link_3-0-5" rel="nocaes"><span class="link__wrapper">Customer Service</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-6"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-How to Bank" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-bank-with-lendingclub-banking" id="mntl-toc__list-item-link_3-0-6" rel="nocaes"><span class="link__wrapper">How to Bank</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-7"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-7"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_3-0-7" rel="nocaes"><span class="link__wrapper">Methodology</span></a><!-- end: mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link --> </div><!-- end: comp mntl-toc__list-item-heading mntl-block --> </li><!-- end: comp mntl-toc__list-item mntl-block --> </ul><!-- end: comp mntl-toc__list-heading expert-content mntl-toc__list --> </div><!-- end: comp mntl-toc__inner mntl-block --> </div><!-- end: comp toc-wrapper mntl-toc mntl-block --> </div><!-- end: comp sticky-toc-widget sticky-toc-widget__toc sticky-toc--finance sticky-toc--base mntl-sticky-toc mntl-block --> </div><!-- end: comp mntl-sticky-toc product-review__toc--finance product-review__toc sticky-toc-widget mntl-block --> </div><!-- end: comp left-nav js-sticky-container product-review__left-nav mntl-block --> <div class="comp mntl-sc-page--commerce expert-content product-review__content prm-sc-page mntl-sc-page mntl-block" data-tracking-container="true" id="product-review__content_1-0"> <div class="comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"> <span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> Important</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Radius Bank is now <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://bank.lendingclub.com/" rel="sponsored nofollow">LendingClub Banking</a>.<span class="ql-inline-citation" data-cite="1"></span></p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-important mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-pros-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-1"> <span class="mntl-sc-block-heading__text"> Pros Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-2"> <li><strong>No monthly fees:</strong> There are no monthly maintenance fees on any of LendingClub Banking's personal deposit accounts, allowing customers to keep money in their pockets to earn interest.</li><li><strong>No ATM fees:</strong> LendingClub charges no fees at more than 325,000 ATMs across the U.S. through partner ATM networks. Customers also get unlimited ATM fee reimbursements for charges from other banks.</li><li><strong>Cash back on debit card purchases:</strong> Customers earn up to 1% cash back on select purchases made with a LendingClub debit card.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-cons-explained"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-3"> <span class="mntl-sc-block-heading__text"> Cons Explained </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-4"> <li><strong>Large balance requirements to earn the highest rates:</strong> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp">high-yield savings account</a> requires a balance of at least $25,000 to earn the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tiered-rate-account.asp">highest interest tier</a>. Rewards checking requires a $100,000 balance for its top interest tier.</li> <li><strong>Rates aren't competitive with other online banks:</strong> LendingClub Baking's savings rates don’t compare well with what’s currently offered by the top online banks in the market.</li> <li><strong>No physical branches:</strong> Having local bank branches is only a negative if you like the option of in-person banking, which isn’t possible with LendingClub.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-who-is-lendingclub-banking-best-for"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-5"> <span class="mntl-sc-block-heading__text"> Who Is LendingClub Banking Best For? </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-6"> LendingClub Banking should appeal to individuals who are looking for full-service online and mobile banking. LendingClub is a great choice for people who: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-7"> <li>Like banking on the go</li><li>Want to keep multiple accounts at the same bank</li><li>Want to earn cash-back rewards for online and in-person debit card purchases</li><li>Want to earn interest with both savings and checking accounts</li><li>Want a monthly-fee-free banking experience</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-what-does-lendingclub-banking-offer"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-8"> <span class="mntl-sc-block-heading__text"> What Does LendingClub Banking Offer? </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-9"> Even though it’s an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/11/benefits-and-drawbacks-of-internet-banks.asp">online bank</a>, LendingClub Banking offers an array of accounts and services reminiscent of a larger national bank. These include: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-10"> <li>Checking accounts</li> <li>Savings account</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">Certificates of Deposit (CDs)</a></li> <li>Credit cards</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-11"> <span class="mntl-sc-block-subheading__text"> Checking Accounts </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-12"> LendingClub Banking has two main personal checking account offerings—Rewards Checking and Member Rewards Checking. There’s also a third option for customers who don’t meet the requirements for these two accounts. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-13"> <strong>Rewards Checking</strong> is the account that pays back customers in two ways. First, the account earns interest up to a 0.15% <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apy.asp">annual percentage yield (APY)</a>. Account-holders also get money back through cashback rewards. Online debit card and signature-based credit purchases with a LendingClub debit card earn up to 1.5% cash back. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-14"> Besides its earning potential, Rewards Checking gives you a solid checking account with fee-free ATM access and the chance to receive your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">direct deposited</a> paycheck up to two days early. An account can be opened with a $100 initial deposit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-15"> Customers who don’t meet the qualifications for Rewards Checking and Superhero Checking can open an <strong>Essential Checking</strong> account. Designed for individuals with less-than-perfect banking records, Essential Checking accounts have a $9 monthly service fee along with daily account limits: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-16"> <li>$250 daily debit card limit for the first 30 days and $500 thereafter</li><li>$1,000 mobile check deposit limit</li><li>$2,000 mobile check deposit limit per 10 days</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-17"> Accounts have the potential to upgrade to another checking account with 12 months of positive banking history. Essential Checking is not an interest-bearing account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="table-block" id="mntl-sc-block_2-0-18"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">LendingClub Banking Checking Accounts</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Account Name</b></td> <td><b>Minimum Opening Balance</b></td> <td><b>Monthly Fee</b></td> <td><b>Annual Percentage Yield (APY)</b></td> </tr> <tr> <td>Rewards Checking </td> <td>$100</td> <td>$0</td> <td>0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more</td> </tr> <tr> <td>Member Rewards Checking </td> <td>$100</td> <td>$0</td> <td>0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more</td> </tr> </tbody> </table> <figcaption>(As of Mar. 26, 2024)</figcaption> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-19"> <span class="mntl-sc-block-subheading__text"> Savings Account </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-20"> LendingClub has two savings account options, High-Yield Savings and Founder Savings. You can earn 5.00% with High-Yield Savings account currently on balances of $25,000 or more, which is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-high-yield-savings-accounts-4770633">competitive with the best high-yield savings accounts available</a>. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-21"> You can open a high-yield savings account for just $100 with no ongoing balance requirements and no monthly fees. However, you can also open a Founder Savings account for $0. Customers can also request a complimentary ATM card to use with their savings account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="table-block" id="mntl-sc-block_2-0-22"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">LendingClub Banking Savings Accounts</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Account Name</b></td> <td><b>Minimum Opening Deposit </b></td> <td><b>Monthly Fee</b></td> <td><b>Annual Percentage Yield (APY)</b></td> </tr> <tr> <td>LendingClub High-Yield Savings </td> <td>$100</td> <td>$0</td> <td>5.00%</td> </tr> <tr> <td>Founder Savings</td> <td>$0</td> <td>$0</td> <td>5.05%</td> </tr> </tbody> </table> <figcaption>(As of Mar. 26, 2024)</figcaption> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-23"> <span class="mntl-sc-block-subheading__text"> CDs </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-24"> LendingClub Banking also offers CDs with term lengths ranging from six months to five years. Its rates are on par with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">the best CD rates found at other banks</a>, which typically are more than a 3.80% APY. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-25"> The minimum deposit to open a CD is $2,500 for terms less than a year and $500 for terms one year or longer. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="table-block" id="mntl-sc-block_2-0-26"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">LendingClub Banking CD Rates</th> </tr> </thead> <tbody data-check="-1"> <tr> <td><b>Term</b></td> <td><b>Annual Percentage Yield (APY)</b></td> </tr> <tr> <td>6 Months</td> <td>5.00%</td> </tr> <tr> <td>1 Year</td> <td>5.15%</td> </tr> <tr> <td>18 Months</td> <td>5.00%</td> </tr> <tr> <td>2 Years</td> <td>4.50%</td> </tr> <tr> <td>3 Years</td> <td>4.30%</td> </tr> <tr> <td>5 Years</td> <td>4.00%</td> </tr> </tbody> </table> <figcaption>(As of Mar. 26, 2024)</figcaption> </div></figure><!-- end: comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-27"> <span class="mntl-sc-block-subheading__text"> Credit Cards </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-28"> LendingClub Banking offers multiple personal and business credit cards. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-29"> <span class="mntl-sc-block-subheading__text"> Personal Credit Cards </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-30"> <li>Visa Max Cash Preferred Card</li> <li>Visa Real Rewards Card</li> <li>Visa Platinum Card</li> <li>Visa <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securedcard.asp">Secured Card</a></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-31"> <span class="mntl-sc-block-subheading__text"> Business Credit Cards </span> </h3><!-- end: comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-32"> <li>Visa Business Card</li><li>Visa Smart Business Rewards Card</li><li>Visa Business Cash Card</li><li>Visa Business Real Rewards Card</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-other-financial-products-offered-by-lendingclub-banking"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-33"> <span class="mntl-sc-block-heading__text"> Other Financial Products Offered by LendingClub Banking </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-34"> LendingClub Banking also offers a wide range of other products and services: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-35"> <li>Trusts</li><li>Student loans</li><li>Personal loans</li><li>Yacht loans</li><li>Insurance</li><li>Small business solutions</li><li>Commercial solutions</li><li>Institutional solutions</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-lendingclub-banking-customer-service"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-36"> <span class="mntl-sc-block-heading__text"> LendingClub Banking Customer Service </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-37"> Customers can reach LendingClub Banking's support by phone (800-242-0272) or live chat seven days a week: Monday through Friday from 8:30 a.m.–midnight EST and Saturday and Sunday 8 a.m.–8 p.m. EST. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-bank-with-lendingclub-banking"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-38"> <span class="mntl-sc-block-heading__text"> How to Bank With LendingClub Banking </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-39"> To open an account with LendingClub Banking, visit its website or call customer service at 800-242-0272. You must meet the following requirements to open a deposit account through LendingClub: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-40"> <li>Be a U.S. citizen or legal permanent resident</li><li>Be at least 18 years old</li><li>Have a Social Security number</li><li>Have a U.S. street address</li><li>Have a U.S. bank account to fund your account</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-41"> To open an account, you’ll need to provide personal information to verify your identity. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp theme-finalverdict mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0-42"> <span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0-1"> Verdict</span><!-- end: comp mntl-sc-block-callout-heading mntl-text-block --> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>LendingClub Banking offers customers a chance at full-service online banking that fits a variety of needs. While its rates are lower those of competitors, it offers an array of products and services not often seen from online banks.</p><p>If you’re looking to earn the best interest rates, other popular online banks may be a better fit. With some accounts, you’ll need to keep a higher balance to earn interest or earn at the highest APY tier. Make sure you can meet those requirements before opening an account at LendingClub.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-finalverdict mntl-sc-block prm-sc-block-callout--finance prm-sc-block-callout mntl-sc-block-callout mntl-block --> <span class="heading-toc" id="toc-methodology"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-43"> <span class="mntl-sc-block-heading__text"> Methodology </span> </h2><!-- end: comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-44"> Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks—including products available, interest rates, fees, and accessibility—to ensure that our content helps users make the right decision for their savings and banking needs. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp review-content js-sticky-riser-hide mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="false" data-link-closest-header="false" data-tracking-container="true" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_2-0-45"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-retailer-type="none" data-tracking-container="true" href="https://legacy-bank.lendingclub.com/" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Open Account</span></a><!-- end: button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button --> </div><!-- end: comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block --> </div><!-- end: comp review-content js-sticky-riser-hide mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block --> </div><!-- end: comp mntl-sc-page--commerce expert-content product-review__content prm-sc-page mntl-sc-page mntl-block --> </div><!-- end: comp article-body article-content mntl-block --> </div> </div><!-- end: comp product-review-content product-review-content--finance product-review--base --> </span> </div><div class="loc content-bottom"><div class="comp prm-recirc related-recirc-section--articles mntl-block" 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:fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png) :fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png) LendingClub [Open Account](https://legacy-bank.lendingclub.com/) LendingClub Banking, previously Radius Bank, is a Boston-based [online bank](https://www.investopedia.com/terms/o/onlinebanking.asp) with full-service banking solutions for individuals and businesses. Founded in 1987, LendingClub Banking offers an array of interest-earning deposit accounts that are accessible online and through mobile access. This in-depth review will help you decide if its deposit accounts are right for you. * Pros & Cons * Company Overview Pros & Cons Pros * No monthly fees * No ATM fees * Cash back on debit card purchases Cons * Large balance requirements to earn the best rates * Uncompetitive interest rates * No physical branches Company Overview * Year Founded 1987 * Official Website https://legacy-bank.lendingclub.com/ * Banking Products Offered Savings, checking, CDs, MMA * Customer Support Live support and secure messaging responses: Monday–Friday, 8:30 a.m. to 12 a.m. (EST); Saturday–Sunday, 8 a.m. to 8 p.m. (EST): 800-242-0272 :fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png) :fill(white):max_bytes(150000):strip_icc()/lending-club-1b239967668f472f9a89b22c0f89e411.png) LendingClub [Open Account](https://legacy-bank.lendingclub.com/) Table of Contents View All LendingClub Banking Review * [Pros Explained](#toc-pros-explained) * [Cons Explained](#toc-cons-explained) * [Best For](#toc-who-is-lendingclub-banking-best-for) * [Bank Offerings](#toc-what-does-lendingclub-banking-offer) * [Other Products](#toc-other-financial-products-offered-by-lendingclub-banking) * [Customer Service](#toc-lendingclub-banking-customer-service) * [How to Bank](#toc-how-to-bank-with-lendingclub-banking) * [Methodology](#toc-methodology) Important Radius Bank is now [LendingClub Banking](https://bank.lendingclub.com/). ## Pros Explained * **No monthly fees:** There are no monthly maintenance fees on any of LendingClub Banking's personal deposit accounts, allowing customers to keep money in their pockets to earn interest. * **No ATM fees:** LendingClub charges no fees at more than 325,000 ATMs across the U.S. through partner ATM networks. Customers also get unlimited ATM fee reimbursements for charges from other banks. * **Cash back on debit card purchases:** Customers earn up to 1% cash back on select purchases made with a LendingClub debit card. ## Cons Explained * **Large balance requirements to earn the highest rates:** The [high-yield savings account](https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp) requires a balance of at least $25,000 to earn the [highest interest tier](https://www.investopedia.com/terms/t/tiered-rate-account.asp). Rewards checking requires a $100,000 balance for its top interest tier. * **Rates aren't competitive with other online banks:** LendingClub Baking's savings rates don’t compare well with what’s currently offered by the top online banks in the market. * **No physical branches:** Having local bank branches is only a negative if you like the option of in-person banking, which isn’t possible with LendingClub. ## Who Is LendingClub Banking Best For? LendingClub Banking should appeal to individuals who are looking for full-service online and mobile banking. LendingClub is a great choice for people who: * Like banking on the go * Want to keep multiple accounts at the same bank * Want to earn cash-back rewards for online and in-person debit card purchases * Want to earn interest with both savings and checking accounts * Want a monthly-fee-free banking experience ## What Does LendingClub Banking Offer? Even though it’s an [online bank](https://www.investopedia.com/articles/pf/11/benefits-and-drawbacks-of-internet-banks.asp), LendingClub Banking offers an array of accounts and services reminiscent of a larger national bank. These include: * Checking accounts * Savings account * [Certificates of Deposit (CDs)](https://www.investopedia.com/terms/c/certificateofdeposit.asp) * Credit cards ### Checking Accounts LendingClub Banking has two main personal checking account offerings—Rewards Checking and Member Rewards Checking. There’s also a third option for customers who don’t meet the requirements for these two accounts. **Rewards Checking** is the account that pays back customers in two ways. First, the account earns interest up to a 0.15% [annual percentage yield (APY)](https://www.investopedia.com/terms/a/apy.asp). Account-holders also get money back through cashback rewards. Online debit card and signature-based credit purchases with a LendingClub debit card earn up to 1.5% cash back. Besides its earning potential, Rewards Checking gives you a solid checking account with fee-free ATM access and the chance to receive your [direct deposited](https://www.investopedia.com/terms/d/directdeposit.asp) paycheck up to two days early. An account can be opened with a $100 initial deposit. Customers who don’t meet the qualifications for Rewards Checking and Superhero Checking can open an **Essential Checking** account. Designed for individuals with less-than-perfect banking records, Essential Checking accounts have a $9 monthly service fee along with daily account limits: * $250 daily debit card limit for the first 30 days and $500 thereafter * $1,000 mobile check deposit limit * $2,000 mobile check deposit limit per 10 days Accounts have the potential to upgrade to another checking account with 12 months of positive banking history. Essential Checking is not an interest-bearing account. | LendingClub Banking Checking Accounts | | | | | --- | --- | --- | --- | | **Account Name** | **Minimum Opening Balance** | **Monthly Fee** | **Annual Percentage Yield (APY)** | | Rewards Checking | $100 | $0 | 0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more | | Member Rewards Checking | $100 | $0 | 0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more | (As of Mar. 26, 2024) ### Savings Account LendingClub has two savings account options, High-Yield Savings and Founder Savings. You can earn 5.00% with High-Yield Savings account currently on balances of $25,000 or more, which is [competitive with the best high-yield savings accounts available](https://www.investopedia.com/best-high-yield-savings-accounts-4770633). You can open a high-yield savings account for just $100 with no ongoing balance requirements and no monthly fees. However, you can also open a Founder Savings account for $0. Customers can also request a complimentary ATM card to use with their savings account. | LendingClub Banking Savings Accounts | | | | | --- | --- | --- | --- | | **Account Name** | **Minimum Opening Deposit** | **Monthly Fee** | **Annual Percentage Yield (APY)** | | LendingClub High-Yield Savings | $100 | $0 | 5.00% | | Founder Savings | $0 | $0 | 5.05% | (As of Mar. 26, 2024) ### CDs LendingClub Banking also offers CDs with term lengths ranging from six months to five years. Its rates are on par with [the best CD rates found at other banks](https://www.investopedia.com/best-cd-rates-4770214), which typically are more than a 3.80% APY. The minimum deposit to open a CD is $2,500 for terms less than a year and $500 for terms one year or longer. | LendingClub Banking CD Rates | | | --- | --- | | **Term** | **Annual Percentage Yield (APY)** | | 6 Months | 5.00% | | 1 Year | 5.15% | | 18 Months | 5.00% | | 2 Years | 4.50% | | 3 Years | 4.30% | | 5 Years | 4.00% | (As of Mar. 26, 2024) ### Credit Cards LendingClub Banking offers multiple personal and business credit cards. ### Personal Credit Cards * Visa Max Cash Preferred Card * Visa Real Rewards Card * Visa Platinum Card * Visa [Secured Card](https://www.investopedia.com/terms/s/securedcard.asp) ### Business Credit Cards * Visa Business Card * Visa Smart Business Rewards Card * Visa Business Cash Card * Visa Business Real Rewards Card ## Other Financial Products Offered by LendingClub Banking LendingClub Banking also offers a wide range of other products and services: * Trusts * Student loans * Personal loans * Yacht loans * Insurance * Small business solutions * Commercial solutions * Institutional solutions ## LendingClub Banking Customer Service Customers can reach LendingClub Banking's support by phone (800-242-0272) or live chat seven days a week: Monday through Friday from 8:30 a.m.–midnight EST and Saturday and Sunday 8 a.m.–8 p.m. EST. ## How to Bank With LendingClub Banking To open an account with LendingClub Banking, visit its website or call customer service at 800-242-0272. You must meet the following requirements to open a deposit account through LendingClub: * Be a U.S. citizen or legal permanent resident * Be at least 18 years old * Have a Social Security number * Have a U.S. street address * Have a U.S. bank account to fund your account To open an account, you’ll need to provide personal information to verify your identity. Verdict LendingClub Banking offers customers a chance at full-service online banking that fits a variety of needs. While its rates are lower those of competitors, it offers an array of products and services not often seen from online banks. If you’re looking to earn the best interest rates, other popular online banks may be a better fit. With some accounts, you’ll need to keep a higher balance to earn interest or earn at the highest APY tier. Make sure you can meet those requirements before opening an account at LendingClub. ## Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks—including products available, interest rates, fees, and accessibility—to ensure that our content helps users make the right decision for their savings and banking needs. 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LendingClub Open Account LendingClub Banking, previously Radius Bank, is a Boston-based online bank with full-service banking solutions for individuals and businesses. Founded in 1987, LendingClub Banking offers an array of interest-earning deposit accounts that are accessible online and through mobile access. This in-depth review will help you decide if its deposit accounts are right for you. Pros & Cons Company Overview Pros & Cons Pros No monthly fees No ATM fees Cash back on debit card purchases Cons Large balance requirements to earn the best rates Uncompetitive interest rates No physical branches Company Overview Year Founded 1987 Official Website https://legacy-bank.lendingclub.com/ Banking Products Offered Savings, checking, CDs, MMA Customer Support Live support and secure messaging responses: Monday–Friday, 8:30 a.m. to 12 a.m. (EST); Saturday–Sunday, 8 a.m. to 8 p.m. (EST): 800-242-0272 LendingClub Open Account Table of Contents View All LendingClub Banking Review Pros Explained Cons Explained Best For Bank Offerings Other Products Customer Service How to Bank Methodology Important Radius Bank is now LendingClub Banking. Pros Explained No monthly fees: There are no monthly maintenance fees on any of LendingClub Banking's personal deposit accounts, allowing customers to keep money in their pockets to earn interest.No ATM fees: LendingClub charges no fees at more than 325,000 ATMs across the U.S. through partner ATM networks. Customers also get unlimited ATM fee reimbursements for charges from other banks.Cash back on debit card purchases: Customers earn up to 1% cash back on select purchases made with a LendingClub debit card. Cons Explained Large balance requirements to earn the highest rates: The high-yield savings account requires a balance of at least $25,000 to earn the highest interest tier. Rewards checking requires a $100,000 balance for its top interest tier. Rates aren't competitive with other online banks: LendingClub Baking's savings rates don’t compare well with what’s currently offered by the top online banks in the market. No physical branches: Having local bank branches is only a negative if you like the option of in-person banking, which isn’t possible with LendingClub. Who Is LendingClub Banking Best For? LendingClub Banking should appeal to individuals who are looking for full-service online and mobile banking. LendingClub is a great choice for people who: Like banking on the goWant to keep multiple accounts at the same bankWant to earn cash-back rewards for online and in-person debit card purchasesWant to earn interest with both savings and checking accountsWant a monthly-fee-free banking experience What Does LendingClub Banking Offer? Even though it’s an online bank, LendingClub Banking offers an array of accounts and services reminiscent of a larger national bank. These include: Checking accounts Savings account Certificates of Deposit (CDs) Credit cards Checking Accounts LendingClub Banking has two main personal checking account offerings—Rewards Checking and Member Rewards Checking. There’s also a third option for customers who don’t meet the requirements for these two accounts. Rewards Checking is the account that pays back customers in two ways. First, the account earns interest up to a 0.15% annual percentage yield (APY). Account-holders also get money back through cashback rewards. Online debit card and signature-based credit purchases with a LendingClub debit card earn up to 1.5% cash back. Besides its earning potential, Rewards Checking gives you a solid checking account with fee-free ATM access and the chance to receive your direct deposited paycheck up to two days early. An account can be opened with a $100 initial deposit. Customers who don’t meet the qualifications for Rewards Checking and Superhero Checking can open an Essential Checking account. Designed for individuals with less-than-perfect banking records, Essential Checking accounts have a $9 monthly service fee along with daily account limits: $250 daily debit card limit for the first 30 days and $500 thereafter$1,000 mobile check deposit limit$2,000 mobile check deposit limit per 10 days Accounts have the potential to upgrade to another checking account with 12 months of positive banking history. Essential Checking is not an interest-bearing account. LendingClub Banking Checking Accounts Account Name Minimum Opening Balance Monthly Fee Annual Percentage Yield (APY) Rewards Checking  $100 $0 0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more Member Rewards Checking  $100 $0 0% if under $2,500 0.10% if $2,500 to $99,999 0.15% if $100,000 or more (As of Mar. 26, 2024) Savings Account LendingClub has two savings account options, High-Yield Savings and Founder Savings. You can earn 5.00% with High-Yield Savings account currently on balances of $25,000 or more, which is competitive with the best high-yield savings accounts available. You can open a high-yield savings account for just $100 with no ongoing balance requirements and no monthly fees. However, you can also open a Founder Savings account for $0. Customers can also request a complimentary ATM card to use with their savings account. LendingClub Banking Savings Accounts Account Name Minimum Opening Deposit  Monthly Fee Annual Percentage Yield (APY) LendingClub High-Yield Savings  $100 $0 5.00% Founder Savings $0 $0 5.05% (As of Mar. 26, 2024) CDs LendingClub Banking also offers CDs with term lengths ranging from six months to five years. Its rates are on par with the best CD rates found at other banks, which typically are more than a 3.80% APY. The minimum deposit to open a CD is $2,500 for terms less than a year and $500 for terms one year or longer. LendingClub Banking CD Rates Term Annual Percentage Yield (APY) 6 Months 5.00% 1 Year 5.15% 18 Months 5.00% 2 Years 4.50% 3 Years 4.30% 5 Years 4.00% (As of Mar. 26, 2024) Credit Cards LendingClub Banking offers multiple personal and business credit cards. Personal Credit Cards Visa Max Cash Preferred Card Visa Real Rewards Card Visa Platinum Card Visa Secured Card Business Credit Cards Visa Business CardVisa Smart Business Rewards CardVisa Business Cash CardVisa Business Real Rewards Card Other Financial Products Offered by LendingClub Banking LendingClub Banking also offers a wide range of other products and services: TrustsStudent loansPersonal loansYacht loansInsuranceSmall business solutionsCommercial solutionsInstitutional solutions LendingClub Banking Customer Service Customers can reach LendingClub Banking's support by phone (800-242-0272) or live chat seven days a week: Monday through Friday from 8:30 a.m.–midnight EST and Saturday and Sunday 8 a.m.–8 p.m. EST. How to Bank With LendingClub Banking To open an account with LendingClub Banking, visit its website or call customer service at 800-242-0272. You must meet the following requirements to open a deposit account through LendingClub: Be a U.S. citizen or legal permanent residentBe at least 18 years oldHave a Social Security numberHave a U.S. street addressHave a U.S. bank account to fund your account To open an account, you’ll need to provide personal information to verify your identity. Verdict LendingClub Banking offers customers a chance at full-service online banking that fits a variety of needs. While its rates are lower those of competitors, it offers an array of products and services not often seen from online banks.If you’re looking to earn the best interest rates, other popular online banks may be a better fit. With some accounts, you’ll need to keep a higher balance to earn interest or earn at the highest APY tier. Make sure you can meet those requirements before opening an account at LendingClub. Methodology Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of banks. We collected over 20 data points across more than 80 banks—including products available, interest rates, fees, and accessibility—to ensure that our content helps users make the right decision for their savings and banking needs. Open Account Related Articles Regions Bank Review 2024 M&T Bank Review 2024 Best Rewards Checking Accounts of 2024 KeyBank Review 2024 Best Joint Checking Accounts for 2024 Capital One Review

https://www.investopedia.com/fed-fueled-rally-helps-regional-bank-etfs-erase-losses-since-svb-collapse-8416641

Fed-Fueled Rally Helps Regional Bank ETFs Erase Losses Since SVB’s Collapse

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Regional bank stocks surged after the Federal Reserve signaled potential rate cuts next year, boosting regional bank ETFs back to their levels before the collapse of Silicon Valley Bank.</li><li>While higher interest rates can help boost banks’ interest income, they can also weigh on demand for loans as borrowing becomes more expensive.</li><li>Rate cuts would particularly benefit regional banks, as many have been under pressure to offer higher interest on deposits to attract and retain customers.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Regional bank stocks surged this week after the Federal Reserve <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-keeps-interest-rate-unchanged-at-22-year-high-but-signals-cuts-next-year-8414895">signaled</a> it would potentially cut interest rates next year, helping bring regional bank <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded funds (ETFs)</a> back to their levels before the collapse of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676">Silicon Valley Bank</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Zions Bancorp (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ZION">ZION</a>), Western Alliance Bancorp (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=WAL">WAL</a>), and Citizens Financial (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CFG">CFG</a>) were all up more than 14% Friday from Tuesday's close, before the Fed's announcement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> While higher interest rates can help raise <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041015/how-do-interest-rate-changes-affect-profitability-banking-sector.asp">banks’ profitability</a>, they can also weigh on demand for loans as borrowing becomes more expensive, and rate cuts would particularly benefit regional banks, as many have been <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/recent-regional-bank-stock-gains-bely-q3-results-8363943">under pressure to offer higher interest on deposits</a> to attract and retain customers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Falling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasury-yield.asp">Treasury yields</a> following the Fed’s announcement also served to boost regional banks, which tend to rely on a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041015/how-do-interest-rate-changes-affect-profitability-banking-sector.asp">borrow short, lend long business model</a>. High Treasury yields had contributed to the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bank-failures-eclipse-2008-7487280">regional banking crisis in March</a>, as the Fed’s campaign of rate hikes to combat inflation impacted existing bonds, devalued by issuance of debt paying higher interest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The rally for regional bank stocks brought the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/032415/what-are-most-common-etfs-track-banking-sector.asp">SPDR S&amp;P Regional Banking ETF</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=KRE">KRE</a>), which follows the S&amp;P Regional Banks Select Industry Index, up 9% from Tuesday's close before the Fed meeting. The iShares U.S. Regional Banks ETF (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=IAT">IAT</a>), which tracks the Dow Jones U.S. Select Regional Banks Index, gained more than 8% in the same period. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> With these gains, the regional bank ETFs reached just above where they were before Silicon Valley Bank collapsed Thursday before edging below those levels Friday. As of Friday's close, the SPDR S&amp;P Regional Banking ETF was just 0.1% off its level from March 9, before the failure of Silicon Valley Bank, while the iShares U.S. Regional Banks ETF was 2% lower.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_15-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.1%;"> <img alt="SPDR S&amp;P Regional Banking ETF and iShares U.S. Regional Banks ETF movement from March 9, to Dec. 15." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/NvqevoY9mG40WvRngxWBWsdbgEg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/NvqevoY9mG40WvRngxWBWsdbgEg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png" data-srcset="https://www.investopedia.com/thmb/MuPgTyvfXDOdP66_1zbWsKPX__o=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png 750w" data-tracking-container="true" height="1345" id="mntl-sc-block-image_1-0" width="2795"/> <noscript> <img alt="SPDR S&amp;P Regional Banking ETF and iShares U.S. Regional Banks ETF movement from March 9, to Dec. 15." class="img--noscript universal-image__image" height="1345" sizes="750px" src="https://www.investopedia.com/thmb/NvqevoY9mG40WvRngxWBWsdbgEg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png" srcset="https://www.investopedia.com/thmb/MuPgTyvfXDOdP66_1zbWsKPX__o=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png 750w" width="2795"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>TradingView</p></span> </figcaption></figure> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Regional bank stocks surged after the Federal Reserve signaled potential rate cuts next year, boosting regional bank ETFs back to their levels before the collapse of Silicon Valley Bank. * While higher interest rates can help boost banks’ interest income, they can also weigh on demand for loans as borrowing becomes more expensive. * Rate cuts would particularly benefit regional banks, as many have been under pressure to offer higher interest on deposits to attract and retain customers. Regional bank stocks surged this week after the Federal Reserve [signaled](https://www.investopedia.com/fed-keeps-interest-rate-unchanged-at-22-year-high-but-signals-cuts-next-year-8414895) it would potentially cut interest rates next year, helping bring regional bank [exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp) back to their levels before the collapse of [Silicon Valley Bank](https://www.investopedia.com/what-happened-to-silicon-valley-bank-7368676). Zions Bancorp ([ZION](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ZION)), Western Alliance Bancorp ([WAL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=WAL)), and Citizens Financial ([CFG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CFG)) were all up more than 14% Friday from Tuesday's close, before the Fed's announcement. While higher interest rates can help raise [banks’ profitability](https://www.investopedia.com/ask/answers/041015/how-do-interest-rate-changes-affect-profitability-banking-sector.asp), they can also weigh on demand for loans as borrowing becomes more expensive, and rate cuts would particularly benefit regional banks, as many have been [under pressure to offer higher interest on deposits](https://www.investopedia.com/recent-regional-bank-stock-gains-bely-q3-results-8363943) to attract and retain customers. Falling [Treasury yields](https://www.investopedia.com/terms/t/treasury-yield.asp) following the Fed’s announcement also served to boost regional banks, which tend to rely on a [borrow short, lend long business model](https://www.investopedia.com/ask/answers/041015/how-do-interest-rate-changes-affect-profitability-banking-sector.asp). High Treasury yields had contributed to the [regional banking crisis in March](https://www.investopedia.com/bank-failures-eclipse-2008-7487280), as the Fed’s campaign of rate hikes to combat inflation impacted existing bonds, devalued by issuance of debt paying higher interest. The rally for regional bank stocks brought the [SPDR S&P Regional Banking ETF](https://www.investopedia.com/ask/answers/032415/what-are-most-common-etfs-track-banking-sector.asp) ([KRE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=KRE)), which follows the S&P Regional Banks Select Industry Index, up 9% from Tuesday's close before the Fed meeting. The iShares U.S. Regional Banks ETF ([IAT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=IAT)), which tracks the Dow Jones U.S. Select Regional Banks Index, gained more than 8% in the same period. With these gains, the regional bank ETFs reached just above where they were before Silicon Valley Bank collapsed Thursday before edging below those levels Friday. As of Friday's close, the SPDR S&P Regional Banking ETF was just 0.1% off its level from March 9, before the failure of Silicon Valley Bank, while the iShares U.S. Regional Banks ETF was 2% lower. ![SPDR S&P Regional Banking ETF and iShares U.S. Regional Banks ETF movement from March 9, to Dec. 15.]() :max_bytes(150000):strip_icc()/KRE_2023-12-15_16-49-54-737e9684b30845bca95064b90603e420.png) TradingView Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Regional bank stocks surged after the Federal Reserve signaled potential rate cuts next year, boosting regional bank ETFs back to their levels before the collapse of Silicon Valley Bank.While higher interest rates can help boost banks’ interest income, they can also weigh on demand for loans as borrowing becomes more expensive.Rate cuts would particularly benefit regional banks, as many have been under pressure to offer higher interest on deposits to attract and retain customers. Regional bank stocks surged this week after the Federal Reserve signaled it would potentially cut interest rates next year, helping bring regional bank exchange-traded funds (ETFs) back to their levels before the collapse of Silicon Valley Bank. Zions Bancorp (ZION), Western Alliance Bancorp (WAL), and Citizens Financial (CFG) were all up more than 14% Friday from Tuesday's close, before the Fed's announcement. While higher interest rates can help raise banks’ profitability, they can also weigh on demand for loans as borrowing becomes more expensive, and rate cuts would particularly benefit regional banks, as many have been under pressure to offer higher interest on deposits to attract and retain customers. Falling Treasury yields following the Fed’s announcement also served to boost regional banks, which tend to rely on a borrow short, lend long business model. High Treasury yields had contributed to the regional banking crisis in March, as the Fed’s campaign of rate hikes to combat inflation impacted existing bonds, devalued by issuance of debt paying higher interest. The rally for regional bank stocks brought the SPDR S&P Regional Banking ETF (KRE), which follows the S&P Regional Banks Select Industry Index, up 9% from Tuesday's close before the Fed meeting. The iShares U.S. Regional Banks ETF (IAT), which tracks the Dow Jones U.S. Select Regional Banks Index, gained more than 8% in the same period. With these gains, the regional bank ETFs reached just above where they were before Silicon Valley Bank collapsed Thursday before edging below those levels Friday. As of Friday's close, the SPDR S&P Regional Banking ETF was just 0.1% off its level from March 9, before the failure of Silicon Valley Bank, while the iShares U.S. Regional Banks ETF was 2% lower. TradingView Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/10-tiktok-influencers-you-should-know-5224412

10 TikTok Influencers You Should Know

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Many Americans don't learn about personal finance and money management while growing up. Because of that, young people may have to figure out the basics of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/personalfinance.asp">personal finance</a> on their own as adults. All too often, they are confused about how to invest money, live within a budget, or make the most out of a limited income.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> That's one reason why many young Americans turn to social media and TikTok influencers to learn how to manage and earn more money. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-tiktok-6826240">TikTok is a social media platform</a> with influencers who are conversant on many topics, including personal finance.</li> <li>Financial influencers on TikTok provide fun, educational video content.</li> <li>TikTok financial <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/top-lgbtq-financial-influencers-7547444">influencers cover a range of topics</a> including budgeting, investing, real estate, and cryptocurrency.</li> </ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-tiktok-financial-influencer"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> What Is a TikTok Financial Influencer?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-influencers-kids-follow-5219006">financial influencer</a> is someone who shares their knowledge and expertise on specific financial topics, primarily on social media. This article looks at top TikTok financial influencers across various niches in the personal finance and entrepreneurship space, covering content ranging from basic budgeting concepts to more complex topics like investing in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrency</a>. These individuals have established credibility by offering helpful tips to thousands of people around the world. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Influencers are known for creating content that solves problems and is easy for the average person to digest. Successful <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-tiktok-4588933">TikTok</a> influencers know how to present content in an entertaining way that gets them noticed on the huge platform. <br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_12-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-note" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_13-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block no-title" id="mntl-sc-block-callout-heading_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>TikTok influencers make money primarily from partnerships and selling their educational products.</p></div></div></div> <span class="heading-toc" id="toc-top-personal-finance-tiktok-influencers-to-follow"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Top Personal Finance TikTok Influencers to Follow </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Getting <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-influencer-red-flags-5217694">financial advice on TikTok</a> can be confusing if you don't know who to follow. The Investopedia team researched the top financial influencers on this platform, so you know who to follow for various financial topics when starting out. Figures are as of August, 2023. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> Tatiana Londono, @tatlondono  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <li>Tips on real estate investing</li><li>Followers: 2.8 million<span class="ql-inline-citation" data-cite="6"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Tatiana Londono is a real estate investor and the founder and CEO of Londono Realty Group Inc. She shares tips on getting started with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/real-estate-investing-guide/">real estate</a> investing.<span class="ql-inline-citation" data-cite="1"></span> One of Londono's videos focuses on how to buy your first investment property, and another shares how to buy a home with less than a 20% down payment. She also discusses a wide range of personal finance topics beyond real estate. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_22-0"> <span class="mntl-sc-block-subheading__text"> Tori Dunlap, @herfirst100k  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li>Tips on tackling taboo financial topics and helping followers get paid what they're worth</li><li>Followers: 2.4 million<span class="ql-inline-citation" data-cite="7"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Tori Dunlap focuses on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/092315/why-are-so-few-women-finance-its-complicated.asp">helping women become rich</a> and equalizing financial opportunities for men and women. She is a self-declared "financial feminist," who isn't afraid to challenge old ways of thinking, including established experts and financial strategies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_26-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_27-0"> <span class="mntl-sc-block-subheading__text"> Steve Chou, @mywifequitherjob  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <li>Tips on building an ecommerce business</li><li>Followers: 115,200<span class="ql-inline-citation" data-cite="8"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Steve Chou's followers consume his content on building an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ecommerce.asp">ecommerce</a> business. He shares practical tips to help anyone start their own online business, including advice on finding wholesale suppliers.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-subheading__text"> Erika Kullberg, @erikakullberg </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> <li>Tips on financial topics from a legal perspective</li><li>Followers: 9.3 million<span class="ql-inline-citation" data-cite="9"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Erika Kullberg is a lawyer whose content deals with ways to save money through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/terms-and-conditions-credit-card.asp">terms and conditions</a> of popular products.<span class="ql-inline-citation" data-cite="5"></span> One of her most popular clips explains how to get a free pair of Nike shoes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_37-0"> <span class="mntl-sc-block-subheading__text"> Crypto Mason, @cryptomasun  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <li>Tips on crypto investing</li><li>Followers: 1.2 million<span class="ql-inline-citation" data-cite="10"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Crypto Mason is known for his daily <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/crypto-influencers-you-should-follow-5224141">crypto content</a>. He shows his audience numerous ways to make money in cryptocurrency, as well as news and updates from the crypto world. One of his videos explains how a beginner can get started in cryptocurrency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> Chloe Elise, @deeperthanmoney </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li>Tips on building wealth </li><li>Followers: 244,100<span class="ql-inline-citation" data-cite="12"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> Chloe Elise has become popular for her content on building wealth without missing out on life. You can follow her journey as she works toward becoming a millionaire.<span class="ql-inline-citation" data-cite="11"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_47-0"> <span class="mntl-sc-block-subheading__text"> Kenny, @kenny.finance </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> <li>Tips on making money</li><li>Followers: 225,300<span class="ql-inline-citation" data-cite="13"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Kenny produces content discussing how anyone can raise the amount of income they earn and protect their investments. Kenny explains relevant, timely topics, such as real estate investing and battling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_51-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_52-0"> <span class="mntl-sc-block-subheading__text"> Robert Ross, @tik.stocks </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> <li>Tips on the stock market</li><li>Followers: 376,300<span class="ql-inline-citation" data-cite="14"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Robert Ross is a professional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock-analysis.asp">stock analyst</a>, whose content ranges from explaining the math behind meme stocks to the best time for buying stocks in general. If you want to dip a toe into the stock market, Ross is one to follow. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_56-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_57-0"> <span class="mntl-sc-block-subheading__text"> Sara Finance, @sarafinance  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> <li>Tips on investing</li><li>Followers: 740,700<span class="ql-inline-citation" data-cite="15"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> Sara Finance's followers tune in to her advice on investing money and growing a business. As a 20-year-old millionaire, many of her videos are aimed at teens and young adults. One of her most popular videos shows the million-dollar home that she purchased with money she earned. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_62-0"> <span class="mntl-sc-block-subheading__text"> Seth Godwin, @seth.godwin  </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> <li>Tips on saving money</li><li>Followers: 1.8 million<span class="ql-inline-citation" data-cite="19"></span></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Seth Godwin explains the ins and outs of using credit, buying cars, and maintaining investment accounts. Godwin is known for helping his readers save money by being educated in personal finance. One of his videos, for example, explains how to pay less interest on loans.<br> </br></p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <span class="heading-toc" id="toc-the-best-social-media-platforms-for-financial-information"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_67-0"> <span class="mntl-sc-block-heading__text"> The Best Social Media Platforms for Financial Information </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_68-0"> Nearly all <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/social-media.asp">social media platforms</a> include popular personal finance, investing, and entrepreneurship content. Facebook, X (formerly Twitter), TikTok, Instagram, YouTube, Snapchat, Reddit, and LinkedIn may all be worth considering.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_69-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_70-0"><span class="heading-toc" id="toc-what-is-the-legality-of-offering-financial-advice-on-tiktok"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Legality of Offering Financial Advice on TikTok?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Anyone can create content on TikTok, but it takes a lot of effort and consistency to get noticed and become popular on the platform. Influencers must disclose any relationships they have with the companies that make products they promote to avoid scrutiny from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/ftc.asp">Federal Trade Commission</a>.<span class="ql-inline-citation" data-cite="3"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_71-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_72-0"><span class="heading-toc" id="toc-how-do-you-become-a-tiktok-financial-influencer"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Become a TikTok Financial Influencer?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The key to getting noticed is to present a compelling message to users who want to improve their financial situation. The best TikTok influencers present their information in a clear and entertaining way that catches the attention of viewers, all while making sure their messages are accurate. It also helps influencers gain followers if they frequently post content, so there’s something new for them to consume, learn from, and share.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_74-0"><span class="heading-toc" id="toc-what-is-social-media"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Social Media?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Social media is technology that facilitates the sharing of ideas, thoughts, and information through virtual networks and communities. Users engage with social media through web-based software or applications on a computer, tablet, or smartphone. Though social media is ubiquitous in America and Europe, the Philippines tops the list of social media usage.<span class="ql-inline-citation" data-cite="17"></span> About 4.9 billion people worldwide use social media as of 2023.<span class="ql-inline-citation" data-cite="18"></span><br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_76-0"><span class="heading-toc" id="toc-what-is-personal-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Personal Finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Personal finance is a term that covers managing your money as well as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/022516/saving-vs-investing-understanding-key-differences.asp">saving and investing</a>. It encompasses budgeting, banking, insurance, mortgages, investments, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">retirement planning</a>, and tax and estate planning. The term also refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_78-0"><span class="heading-toc" id="toc-what-is-cryptocurrency"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Cryptocurrency?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A cryptocurrency is a digital or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/virtual-currency.asp">virtual currency</a> that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blockchain.asp">blockchain</a> technology—a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/distributed-ledgers.asp">distributed ledger</a> enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them, at least in theory, immune to government interference or manipulation.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Following financial influencers on TikTok can be an approachable way to begin a financial journey. There's almost certainly a personal finance niche on the site that may pique your interest. If you find financial concepts confusing, then speaking with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfp.asp">certified financial planner</a> may be helpful.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> <em>Note: This is not an official endorsement of any mentioned person or brand. Influencers may not be licensed financial professionals.</em> </p></div>

Many Americans don't learn about personal finance and money management while growing up. Because of that, young people may have to figure out the basics of [personal finance](https://www.investopedia.com/terms/p/personalfinance.asp) on their own as adults. All too often, they are confused about how to invest money, live within a budget, or make the most out of a limited income.  That's one reason why many young Americans turn to social media and TikTok influencers to learn how to manage and earn more money. ### Key Takeaways * [TikTok is a social media platform](https://www.investopedia.com/what-is-tiktok-6826240) with influencers who are conversant on many topics, including personal finance. * Financial influencers on TikTok provide fun, educational video content. * TikTok financial [influencers cover a range of topics](https://www.investopedia.com/top-lgbtq-financial-influencers-7547444) including budgeting, investing, real estate, and cryptocurrency. ## What Is a TikTok Financial Influencer? A [financial influencer](https://www.investopedia.com/financial-influencers-kids-follow-5219006) is someone who shares their knowledge and expertise on specific financial topics, primarily on social media. This article looks at top TikTok financial influencers across various niches in the personal finance and entrepreneurship space, covering content ranging from basic budgeting concepts to more complex topics like investing in [cryptocurrency](https://www.investopedia.com/terms/c/cryptocurrency.asp). These individuals have established credibility by offering helpful tips to thousands of people around the world. Influencers are known for creating content that solves problems and is easy for the average person to digest. Successful [TikTok](https://www.investopedia.com/what-is-tiktok-4588933) influencers know how to present content in an entertaining way that gets them noticed on the huge platform.  ### TikTok influencers make money primarily from partnerships and selling their educational products. ## Top Personal Finance TikTok Influencers to Follow Getting [financial advice on TikTok](https://www.investopedia.com/financial-influencer-red-flags-5217694) can be confusing if you don't know who to follow. The Investopedia team researched the top financial influencers on this platform, so you know who to follow for various financial topics when starting out. Figures are as of August, 2023. ### Tatiana Londono, @tatlondono * Tips on real estate investing * Followers: 2.8 million Tatiana Londono is a real estate investor and the founder and CEO of Londono Realty Group Inc. She shares tips on getting started with [real estate](https://www.investopedia.com/mortgage/real-estate-investing-guide/) investing. One of Londono's videos focuses on how to buy your first investment property, and another shares how to buy a home with less than a 20% down payment. She also discusses a wide range of personal finance topics beyond real estate. ### Tori Dunlap, @herfirst100k * Tips on tackling taboo financial topics and helping followers get paid what they're worth * Followers: 2.4 million Tori Dunlap focuses on [helping women become rich](https://www.investopedia.com/articles/investing/092315/why-are-so-few-women-finance-its-complicated.asp) and equalizing financial opportunities for men and women. She is a self-declared "financial feminist," who isn't afraid to challenge old ways of thinking, including established experts and financial strategies. ### Steve Chou, @mywifequitherjob * Tips on building an ecommerce business * Followers: 115,200 Steve Chou's followers consume his content on building an [ecommerce](https://www.investopedia.com/terms/e/ecommerce.asp) business. He shares practical tips to help anyone start their own online business, including advice on finding wholesale suppliers. ### Erika Kullberg, @erikakullberg * Tips on financial topics from a legal perspective * Followers: 9.3 million Erika Kullberg is a lawyer whose content deals with ways to save money through the [terms and conditions](https://www.investopedia.com/terms/t/terms-and-conditions-credit-card.asp) of popular products. One of her most popular clips explains how to get a free pair of Nike shoes. ### Crypto Mason, @cryptomasun * Tips on crypto investing * Followers: 1.2 million Crypto Mason is known for his daily [crypto content](https://www.investopedia.com/crypto-influencers-you-should-follow-5224141). He shows his audience numerous ways to make money in cryptocurrency, as well as news and updates from the crypto world. One of his videos explains how a beginner can get started in cryptocurrency. ### Chloe Elise, @deeperthanmoney * Tips on building wealth * Followers: 244,100 Chloe Elise has become popular for her content on building wealth without missing out on life. You can follow her journey as she works toward becoming a millionaire. ### Kenny, @kenny.finance * Tips on making money * Followers: 225,300 Kenny produces content discussing how anyone can raise the amount of income they earn and protect their investments. Kenny explains relevant, timely topics, such as real estate investing and battling [inflation](https://www.investopedia.com/terms/i/inflation.asp). ### Robert Ross, @tik.stocks * Tips on the stock market * Followers: 376,300 Robert Ross is a professional [stock analyst](https://www.investopedia.com/terms/s/stock-analysis.asp), whose content ranges from explaining the math behind meme stocks to the best time for buying stocks in general. If you want to dip a toe into the stock market, Ross is one to follow. ### Sara Finance, @sarafinance * Tips on investing * Followers: 740,700 Sara Finance's followers tune in to her advice on investing money and growing a business. As a 20-year-old millionaire, many of her videos are aimed at teens and young adults. One of her most popular videos shows the million-dollar home that she purchased with money she earned. ### Seth Godwin, @seth.godwin * Tips on saving money * Followers: 1.8 million Seth Godwin explains the ins and outs of using credit, buying cars, and maintaining investment accounts. Godwin is known for helping his readers save money by being educated in personal finance. One of his videos, for example, explains how to pay less interest on loans. ## The Best Social Media Platforms for Financial Information Nearly all [social media platforms](https://www.investopedia.com/terms/s/social-media.asp) include popular personal finance, investing, and entrepreneurship content. Facebook, X (formerly Twitter), TikTok, Instagram, YouTube, Snapchat, Reddit, and LinkedIn may all be worth considering. ## What Is the Legality of Offering Financial Advice on TikTok? Anyone can create content on TikTok, but it takes a lot of effort and consistency to get noticed and become popular on the platform. Influencers must disclose any relationships they have with the companies that make products they promote to avoid scrutiny from the [Federal Trade Commission](https://www.investopedia.com/terms/f/ftc.asp). ## How Do You Become a TikTok Financial Influencer? The key to getting noticed is to present a compelling message to users who want to improve their financial situation. The best TikTok influencers present their information in a clear and entertaining way that catches the attention of viewers, all while making sure their messages are accurate. It also helps influencers gain followers if they frequently post content, so there’s something new for them to consume, learn from, and share. ## What Is Social Media? Social media is technology that facilitates the sharing of ideas, thoughts, and information through virtual networks and communities. Users engage with social media through web-based software or applications on a computer, tablet, or smartphone. Though social media is ubiquitous in America and Europe, the Philippines tops the list of social media usage. About 4.9 billion people worldwide use social media as of 2023. ## What Is Personal Finance? Personal finance is a term that covers managing your money as well as [saving and investing](https://www.investopedia.com/articles/investing/022516/saving-vs-investing-understanding-key-differences.asp). It encompasses budgeting, banking, insurance, mortgages, investments, [retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp), and tax and estate planning. The term also refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities. ## What Is Cryptocurrency? A cryptocurrency is a digital or [virtual currency](https://www.investopedia.com/terms/v/virtual-currency.asp) that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on [blockchain](https://www.investopedia.com/terms/b/blockchain.asp) technology—a [distributed ledger](https://www.investopedia.com/terms/d/distributed-ledgers.asp) enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them, at least in theory, immune to government interference or manipulation. ## The Bottom Line Following financial influencers on TikTok can be an approachable way to begin a financial journey. There's almost certainly a personal finance niche on the site that may pique your interest. If you find financial concepts confusing, then speaking with a [certified financial planner](https://www.investopedia.com/terms/c/cfp.asp) may be helpful. *Note: This is not an official endorsement of any mentioned person or brand. Influencers may not be licensed financial professionals.*

Many Americans don't learn about personal finance and money management while growing up. Because of that, young people may have to figure out the basics of personal finance on their own as adults. All too often, they are confused about how to invest money, live within a budget, or make the most out of a limited income.  That's one reason why many young Americans turn to social media and TikTok influencers to learn how to manage and earn more money. Key Takeaways TikTok is a social media platform with influencers who are conversant on many topics, including personal finance. Financial influencers on TikTok provide fun, educational video content. TikTok financial influencers cover a range of topics including budgeting, investing, real estate, and cryptocurrency. What Is a TikTok Financial Influencer?  A financial influencer is someone who shares their knowledge and expertise on specific financial topics, primarily on social media. This article looks at top TikTok financial influencers across various niches in the personal finance and entrepreneurship space, covering content ranging from basic budgeting concepts to more complex topics like investing in cryptocurrency. These individuals have established credibility by offering helpful tips to thousands of people around the world. Influencers are known for creating content that solves problems and is easy for the average person to digest. Successful TikTok influencers know how to present content in an entertaining way that gets them noticed on the huge platform.  TikTok influencers make money primarily from partnerships and selling their educational products. Top Personal Finance TikTok Influencers to Follow Getting financial advice on TikTok can be confusing if you don't know who to follow. The Investopedia team researched the top financial influencers on this platform, so you know who to follow for various financial topics when starting out. Figures are as of August, 2023. Tatiana Londono, @tatlondono  Tips on real estate investingFollowers: 2.8 million Tatiana Londono is a real estate investor and the founder and CEO of Londono Realty Group Inc. She shares tips on getting started with real estate investing. One of Londono's videos focuses on how to buy your first investment property, and another shares how to buy a home with less than a 20% down payment. She also discusses a wide range of personal finance topics beyond real estate. Tori Dunlap, @herfirst100k  Tips on tackling taboo financial topics and helping followers get paid what they're worthFollowers: 2.4 million Tori Dunlap focuses on helping women become rich and equalizing financial opportunities for men and women. She is a self-declared "financial feminist," who isn't afraid to challenge old ways of thinking, including established experts and financial strategies. Steve Chou, @mywifequitherjob  Tips on building an ecommerce businessFollowers: 115,200 Steve Chou's followers consume his content on building an ecommerce business. He shares practical tips to help anyone start their own online business, including advice on finding wholesale suppliers. Erika Kullberg, @erikakullberg Tips on financial topics from a legal perspectiveFollowers: 9.3 million Erika Kullberg is a lawyer whose content deals with ways to save money through the terms and conditions of popular products. One of her most popular clips explains how to get a free pair of Nike shoes. Crypto Mason, @cryptomasun  Tips on crypto investingFollowers: 1.2 million Crypto Mason is known for his daily crypto content. He shows his audience numerous ways to make money in cryptocurrency, as well as news and updates from the crypto world. One of his videos explains how a beginner can get started in cryptocurrency. Chloe Elise, @deeperthanmoney Tips on building wealth Followers: 244,100 Chloe Elise has become popular for her content on building wealth without missing out on life. You can follow her journey as she works toward becoming a millionaire. Kenny, @kenny.finance Tips on making moneyFollowers: 225,300 Kenny produces content discussing how anyone can raise the amount of income they earn and protect their investments. Kenny explains relevant, timely topics, such as real estate investing and battling inflation. Robert Ross, @tik.stocks Tips on the stock marketFollowers: 376,300 Robert Ross is a professional stock analyst, whose content ranges from explaining the math behind meme stocks to the best time for buying stocks in general. If you want to dip a toe into the stock market, Ross is one to follow. Sara Finance, @sarafinance  Tips on investingFollowers: 740,700 Sara Finance's followers tune in to her advice on investing money and growing a business. As a 20-year-old millionaire, many of her videos are aimed at teens and young adults. One of her most popular videos shows the million-dollar home that she purchased with money she earned. Seth Godwin, @seth.godwin  Tips on saving moneyFollowers: 1.8 million Seth Godwin explains the ins and outs of using credit, buying cars, and maintaining investment accounts. Godwin is known for helping his readers save money by being educated in personal finance. One of his videos, for example, explains how to pay less interest on loans. The Best Social Media Platforms for Financial Information Nearly all social media platforms include popular personal finance, investing, and entrepreneurship content. Facebook, X (formerly Twitter), TikTok, Instagram, YouTube, Snapchat, Reddit, and LinkedIn may all be worth considering. What Is the Legality of Offering Financial Advice on TikTok? Anyone can create content on TikTok, but it takes a lot of effort and consistency to get noticed and become popular on the platform. Influencers must disclose any relationships they have with the companies that make products they promote to avoid scrutiny from the Federal Trade Commission. How Do You Become a TikTok Financial Influencer? The key to getting noticed is to present a compelling message to users who want to improve their financial situation. The best TikTok influencers present their information in a clear and entertaining way that catches the attention of viewers, all while making sure their messages are accurate. It also helps influencers gain followers if they frequently post content, so there’s something new for them to consume, learn from, and share. What Is Social Media? Social media is technology that facilitates the sharing of ideas, thoughts, and information through virtual networks and communities. Users engage with social media through web-based software or applications on a computer, tablet, or smartphone. Though social media is ubiquitous in America and Europe, the Philippines tops the list of social media usage. About 4.9 billion people worldwide use social media as of 2023. What Is Personal Finance? Personal finance is a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, retirement planning, and tax and estate planning. The term also refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities. What Is Cryptocurrency? A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them, at least in theory, immune to government interference or manipulation. The Bottom Line Following financial influencers on TikTok can be an approachable way to begin a financial journey. There's almost certainly a personal finance niche on the site that may pique your interest. If you find financial concepts confusing, then speaking with a certified financial planner may be helpful. Note: This is not an official endorsement of any mentioned person or brand. Influencers may not be licensed financial professionals.

https://www.investopedia.com/should-you-get-personal-loan-engagement-ring-7970408

Should You Get a Personal Loan for an Engagement Ring?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> With the average cost of engagement rings costing about $6,000, according to The Knot 2022 Jewelry and Engagement Study, there’s a chance you don’t have enough cash on hand to afford such a major purchase.<span class="ql-inline-citation" data-cite="1"></span> There are a few different ways to pay for an engagement ring, including personal loans, credit cards, and cash. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Here’s how to figure out how much you should pay and which way works best for you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The average cost of an engagement ring is $6,000, but that doesn’t mean you need to spend that much.</li><li>Different regions spend different amounts on engagement rings, and there’s no set cost you need to meet when you buy a ring.</li><li>Your budget and your partner’s preferences should be the main priorities in figuring out a ring, not necessarily the one with the most expensive price tag.</li></ul></div></div></div> <span class="heading-toc" id="toc-requirements-to-get-a-personal-loan-for-an-engagement-ring"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Requirements to Get a Personal Loan for an Engagement Ring </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> While buying within budget is ideal, it’s not the case for everyone. As such, you might need to get a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-personal-loans-4773300">personal loan</a> for an engagement ring. A <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-loan-5076027">personal loan</a> is a good financing option for an engagement ring if you’re able to qualify for a low rate and require two or more years to pay off the debt. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> The following is a simple step-by-step guide on what you need to do to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/010516/how-apply-personal-loan.asp">apply for a personal loan</a> and how to use those funds to purchase an engagement ring. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> <li><strong>Compare lenders</strong>:<strong> </strong>See which lenders offer amounts in the range you need. Since there’s no universal standard among lenders, offers vary widely among all of them. Look at the ones with the lowest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp">annual percentage rate (APR)</a> and the best <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/repayment.asp">repayment</a> terms. </li> <li><strong>Get pre-qualified</strong>: If you aren’t sure what your terms could be, see if you can get <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prequalification.asp">pre-qualified</a> with different lenders to determine what types of offers you might receive and what you can expect to pay. If you don’t have great <a class="pseudoStyle" data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit_score.asp">credit</a>, your borrowing power might be less than what someone with good or excellent credit could have. Since there’s no <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hard-inquiry.asp">hard inquiry</a>, pre-qualification doesn’t hurt your credit and can help you narrow down your choices.<span class="ql-inline-citation" data-cite="2"></span></li> <li><strong>Pick an option</strong>:<strong> </strong>Once you have a lender in mind, complete a full application. This triggers a hard credit inquiry, so only go with the one that you expect to get an approval from. You’ll need to have some financial documents on hand, such as <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-read-your-paycheck-5094518">pay stubs</a>, <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxreturn.asp">tax returns</a>, banking information, and proof of residency.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>Get your money</strong>:<strong> </strong>Personal loans can be used for anything. Once you’re approved for a personal loan, your money will be <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/disbursement.asp">disbursed</a> into your bank account—usually within a day or two. </li> <li><strong>Buy your ring</strong>:<strong> </strong>With your funds in your account, you can buy your engagement ring. After disbursement, you’ll likely want to set up automatic monthly payments on your loan until it’s paid in full.</li> </ol> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <span class="heading-toc" id="toc-alternatives-to-finance-an-engagement-ring"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-heading__text"> Alternatives to Finance an Engagement Ring </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> While a personal loan is one way to finance an engagement ring, it isn’t the only option. You may want to look into some alternatives, including: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> <li><strong>Savings</strong>: The best way to avoid another monthly payment (and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</a>) is to save up for a ring and purchase it when you can financially afford to.</li> <li><strong>Credit card</strong>:<strong> </strong>If you currently have 0% APR on a credit card—possibly through an introductory offer—you can use this to pay for your engagement ring. This is an interest-free way to pay for your ring if you don’t have the cash on hand to afford it. You can still use a credit card even if its APR isn’t 0%, but keep in mind that credit card <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestrate.asp">interest rates</a> are typically higher than those of personal loans.<span class="ql-inline-citation" data-cite="3"></span> So you should try to pay off the balance amount you owe for your engagement ring purchase as soon as possible, ideally within a few months.</li> <li><strong>Store credit card or loan</strong>: Many jewelry store chains offer a store credit card to pay for your purchase. Store credit cards only let you use them at that specific store (whereas standard credit cards can be used anywhere that accepts them). They might have a low introductory interest rate offer (or a 0% rate, depending on the card and store), but interest rates tend to be higher after the promotional period ends.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>Buy now, pay later:</strong> If you only have some of the cash on hand needed to afford an engagement ring and not enough time to save up, then <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/buy-now-pay-later-5182291">buy now, pay later (BNPL)</a> might be a good option. Some jewelry retailers offer this type of short-term financing, which lets you pay a portion of the cost of an engagement ring immediately and the rest in <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/installmentdebt.asp">installments</a>, potentially with no interest. Just make certain you understand your repayment terms before you agree—and, as with any loan, be sure not to miss any payments.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-how-do-people-use-personal-loans"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> How Do People Use Personal Loans? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Investopedia commissioned <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investopedia-2023-personal-loan-borrower-survey-8383574">a national survey</a> of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investopedia-2023-personal-loan-borrower-survey-8383574">most common reason people borrowed money</a>, followed by home improvement and other large expenditures.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_22-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/T6dEU/9/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="How People Use Personal Loans"></iframe></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_24-0"><span class="heading-toc" id="toc-can-you-finance-an-engagement-ring-with-bad-credit"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Finance an Engagement Ring with Bad Credit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>How much financing you get with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bad-credit.asp">bad credit</a> depends on where you’re trying to get funding and how much you want to borrow. Some personal loan lenders may offer you a loan, but not always for the amount you need. Others could deny you based on your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-history.asp">credit history</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_26-0"><span class="heading-toc" id="toc-how-much-is-a-down-payment-on-an-engagement-ring"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Is a Down Payment on an Engagement Ring?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>This usually depends on how much the engagement ring is and the type of financing you’re utilizing. If you’re taking out a personal loan, you can pay for the entire ring in full and then make monthly payments on your loan. If you’re getting financing through your jeweler, you may need to put a percentage down.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_28-0"><span class="heading-toc" id="toc-can-you-pay-off-an-engagement-ring-monthly"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Pay Off an Engagement Ring Monthly?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you take out a personal loan for an engagement ring, you’ll make monthly installment payments until your loan is paid in full. If you use a store credit card instead, you’ll also be required to make minimum monthly payments to keep your account in good standing.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_30-0"><span class="heading-toc" id="toc-how-much-do-people-spend-on-average-on-an-engagement-ring"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Do People Spend on Average on an Engagement Ring?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>On average, people spend around $6,000 on an engagement ring—but that is the national average.<span class="ql-inline-citation" data-cite="1"></span> What you spend on a ring depends on your budget, your partner’s taste, and where you buy your ring.<br/></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> An engagement ring is only the beginning of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-build-your-wedding-budget-5195776">wedding costs</a>. Try to budget for a ring that best fits your needs right now, or figure out how to save for the future. The average cost of a wedding in the United States was $30,000 last year, and that doesn’t include the cost of an engagement ring.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> While weddings are a one-day affair, you may not want to bring a lot of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt.asp">debt</a> into your new marriage. Consider the cost of weddings and engagement rings, as well as other costs associated with a ring (such as whether the ring ought to be <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-insure-an-engagement-ring-7198192">insured</a>), when planning for such an event. </p></div>

With the average cost of engagement rings costing about $6,000, according to The Knot 2022 Jewelry and Engagement Study, there’s a chance you don’t have enough cash on hand to afford such a major purchase. There are a few different ways to pay for an engagement ring, including personal loans, credit cards, and cash. Here’s how to figure out how much you should pay and which way works best for you. ### Key Takeaways * The average cost of an engagement ring is $6,000, but that doesn’t mean you need to spend that much. * Different regions spend different amounts on engagement rings, and there’s no set cost you need to meet when you buy a ring. * Your budget and your partner’s preferences should be the main priorities in figuring out a ring, not necessarily the one with the most expensive price tag. ## Requirements to Get a Personal Loan for an Engagement Ring While buying within budget is ideal, it’s not the case for everyone. As such, you might need to get a [personal loan](https://www.investopedia.com/best-personal-loans-4773300) for an engagement ring. A [personal loan](https://www.investopedia.com/personal-loan-5076027) is a good financing option for an engagement ring if you’re able to qualify for a low rate and require two or more years to pay off the debt. The following is a simple step-by-step guide on what you need to do to [apply for a personal loan](https://www.investopedia.com/articles/personal-finance/010516/how-apply-personal-loan.asp) and how to use those funds to purchase an engagement ring. 1. **Compare lenders**:See which lenders offer amounts in the range you need. Since there’s no universal standard among lenders, offers vary widely among all of them. Look at the ones with the lowest [annual percentage rate (APR)](https://www.investopedia.com/terms/a/apr.asp) and the best [repayment](https://www.investopedia.com/terms/r/repayment.asp) terms. 2. **Get pre-qualified**: If you aren’t sure what your terms could be, see if you can get [pre-qualified](https://www.investopedia.com/terms/p/prequalification.asp) with different lenders to determine what types of offers you might receive and what you can expect to pay. If you don’t have great [credit](https://www.investopedia.com/terms/c/credit_score.asp), your borrowing power might be less than what someone with good or excellent credit could have. Since there’s no [hard inquiry](https://www.investopedia.com/terms/h/hard-inquiry.asp), pre-qualification doesn’t hurt your credit and can help you narrow down your choices. 3. **Pick an option**:Once you have a lender in mind, complete a full application. This triggers a hard credit inquiry, so only go with the one that you expect to get an approval from. You’ll need to have some financial documents on hand, such as [pay stubs](https://www.investopedia.com/how-to-read-your-paycheck-5094518), [tax returns](https://www.investopedia.com/terms/t/taxreturn.asp), banking information, and proof of residency. 5. **Get your money**:Personal loans can be used for anything. Once you’re approved for a personal loan, your money will be [disbursed](https://www.investopedia.com/terms/d/disbursement.asp) into your bank account—usually within a day or two. 6. **Buy your ring**:With your funds in your account, you can buy your engagement ring. After disbursement, you’ll likely want to set up automatic monthly payments on your loan until it’s paid in full. ## Alternatives to Finance an Engagement Ring While a personal loan is one way to finance an engagement ring, it isn’t the only option. You may want to look into some alternatives, including: * **Savings**: The best way to avoid another monthly payment (and [interest](https://www.investopedia.com/terms/i/interest.asp)) is to save up for a ring and purchase it when you can financially afford to. * **Credit card**:If you currently have 0% APR on a credit card—possibly through an introductory offer—you can use this to pay for your engagement ring. This is an interest-free way to pay for your ring if you don’t have the cash on hand to afford it. You can still use a credit card even if its APR isn’t 0%, but keep in mind that credit card [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) are typically higher than those of personal loans. So you should try to pay off the balance amount you owe for your engagement ring purchase as soon as possible, ideally within a few months. * **Store credit card or loan**: Many jewelry store chains offer a store credit card to pay for your purchase. Store credit cards only let you use them at that specific store (whereas standard credit cards can be used anywhere that accepts them). They might have a low introductory interest rate offer (or a 0% rate, depending on the card and store), but interest rates tend to be higher after the promotional period ends. * **Buy now, pay later:** If you only have some of the cash on hand needed to afford an engagement ring and not enough time to save up, then [buy now, pay later (BNPL)](https://www.investopedia.com/buy-now-pay-later-5182291) might be a good option. Some jewelry retailers offer this type of short-term financing, which lets you pay a portion of the cost of an engagement ring immediately and the rest in [installments](https://www.investopedia.com/terms/i/installmentdebt.asp), potentially with no interest. Just make certain you understand your repayment terms before you agree—and, as with any loan, be sure not to miss any payments. ## How Do People Use Personal Loans? Investopedia commissioned [a national survey](https://www.investopedia.com/investopedia-2023-personal-loan-borrower-survey-8383574) of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the [most common reason people borrowed money](https://www.investopedia.com/investopedia-2023-personal-loan-borrower-survey-8383574), followed by home improvement and other large expenditures. ## Can You Finance an Engagement Ring with Bad Credit? How much financing you get with [bad credit](https://www.investopedia.com/terms/b/bad-credit.asp) depends on where you’re trying to get funding and how much you want to borrow. Some personal loan lenders may offer you a loan, but not always for the amount you need. Others could deny you based on your [credit history](https://www.investopedia.com/terms/c/credit-history.asp). ## How Much Is a Down Payment on an Engagement Ring? This usually depends on how much the engagement ring is and the type of financing you’re utilizing. If you’re taking out a personal loan, you can pay for the entire ring in full and then make monthly payments on your loan. If you’re getting financing through your jeweler, you may need to put a percentage down. ## Can You Pay Off an Engagement Ring Monthly? If you take out a personal loan for an engagement ring, you’ll make monthly installment payments until your loan is paid in full. If you use a store credit card instead, you’ll also be required to make minimum monthly payments to keep your account in good standing. ## How Much Do People Spend on Average on an Engagement Ring? On average, people spend around $6,000 on an engagement ring—but that is the national average. What you spend on a ring depends on your budget, your partner’s taste, and where you buy your ring. ## The Bottom Line An engagement ring is only the beginning of [wedding costs](https://www.investopedia.com/how-to-build-your-wedding-budget-5195776). Try to budget for a ring that best fits your needs right now, or figure out how to save for the future. The average cost of a wedding in the United States was $30,000 last year, and that doesn’t include the cost of an engagement ring. While weddings are a one-day affair, you may not want to bring a lot of [debt](https://www.investopedia.com/terms/d/debt.asp) into your new marriage. Consider the cost of weddings and engagement rings, as well as other costs associated with a ring (such as whether the ring ought to be [insured](https://www.investopedia.com/how-to-insure-an-engagement-ring-7198192)), when planning for such an event.

With the average cost of engagement rings costing about $6,000, according to The Knot 2022 Jewelry and Engagement Study, there’s a chance you don’t have enough cash on hand to afford such a major purchase. There are a few different ways to pay for an engagement ring, including personal loans, credit cards, and cash. Here’s how to figure out how much you should pay and which way works best for you. Key Takeaways The average cost of an engagement ring is $6,000, but that doesn’t mean you need to spend that much.Different regions spend different amounts on engagement rings, and there’s no set cost you need to meet when you buy a ring.Your budget and your partner’s preferences should be the main priorities in figuring out a ring, not necessarily the one with the most expensive price tag. Requirements to Get a Personal Loan for an Engagement Ring While buying within budget is ideal, it’s not the case for everyone. As such, you might need to get a personal loan for an engagement ring. A personal loan is a good financing option for an engagement ring if you’re able to qualify for a low rate and require two or more years to pay off the debt. The following is a simple step-by-step guide on what you need to do to apply for a personal loan and how to use those funds to purchase an engagement ring. Compare lenders: See which lenders offer amounts in the range you need. Since there’s no universal standard among lenders, offers vary widely among all of them. Look at the ones with the lowest annual percentage rate (APR) and the best repayment terms.  Get pre-qualified: If you aren’t sure what your terms could be, see if you can get pre-qualified with different lenders to determine what types of offers you might receive and what you can expect to pay. If you don’t have great credit, your borrowing power might be less than what someone with good or excellent credit could have. Since there’s no hard inquiry, pre-qualification doesn’t hurt your credit and can help you narrow down your choices. Pick an option: Once you have a lender in mind, complete a full application. This triggers a hard credit inquiry, so only go with the one that you expect to get an approval from. You’ll need to have some financial documents on hand, such as pay stubs, tax returns, banking information, and proof of residency. Get your money: Personal loans can be used for anything. Once you’re approved for a personal loan, your money will be disbursed into your bank account—usually within a day or two.  Buy your ring: With your funds in your account, you can buy your engagement ring. After disbursement, you’ll likely want to set up automatic monthly payments on your loan until it’s paid in full. Alternatives to Finance an Engagement Ring While a personal loan is one way to finance an engagement ring, it isn’t the only option. You may want to look into some alternatives, including: Savings: The best way to avoid another monthly payment (and interest) is to save up for a ring and purchase it when you can financially afford to. Credit card: If you currently have 0% APR on a credit card—possibly through an introductory offer—you can use this to pay for your engagement ring. This is an interest-free way to pay for your ring if you don’t have the cash on hand to afford it. You can still use a credit card even if its APR isn’t 0%, but keep in mind that credit card interest rates are typically higher than those of personal loans. So you should try to pay off the balance amount you owe for your engagement ring purchase as soon as possible, ideally within a few months. Store credit card or loan: Many jewelry store chains offer a store credit card to pay for your purchase. Store credit cards only let you use them at that specific store (whereas standard credit cards can be used anywhere that accepts them). They might have a low introductory interest rate offer (or a 0% rate, depending on the card and store), but interest rates tend to be higher after the promotional period ends. Buy now, pay later: If you only have some of the cash on hand needed to afford an engagement ring and not enough time to save up, then buy now, pay later (BNPL) might be a good option. Some jewelry retailers offer this type of short-term financing, which lets you pay a portion of the cost of an engagement ring immediately and the rest in installments, potentially with no interest. Just make certain you understand your repayment terms before you agree—and, as with any loan, be sure not to miss any payments. How Do People Use Personal Loans? Investopedia commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, to Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures. Can You Finance an Engagement Ring with Bad Credit? How much financing you get with bad credit depends on where you’re trying to get funding and how much you want to borrow. Some personal loan lenders may offer you a loan, but not always for the amount you need. Others could deny you based on your credit history. How Much Is a Down Payment on an Engagement Ring? This usually depends on how much the engagement ring is and the type of financing you’re utilizing. If you’re taking out a personal loan, you can pay for the entire ring in full and then make monthly payments on your loan. If you’re getting financing through your jeweler, you may need to put a percentage down. Can You Pay Off an Engagement Ring Monthly? If you take out a personal loan for an engagement ring, you’ll make monthly installment payments until your loan is paid in full. If you use a store credit card instead, you’ll also be required to make minimum monthly payments to keep your account in good standing. How Much Do People Spend on Average on an Engagement Ring? On average, people spend around $6,000 on an engagement ring—but that is the national average. What you spend on a ring depends on your budget, your partner’s taste, and where you buy your ring. The Bottom Line An engagement ring is only the beginning of wedding costs. Try to budget for a ring that best fits your needs right now, or figure out how to save for the future. The average cost of a wedding in the United States was $30,000 last year, and that doesn’t include the cost of an engagement ring. While weddings are a one-day affair, you may not want to bring a lot of debt into your new marriage. Consider the cost of weddings and engagement rings, as well as other costs associated with a ring (such as whether the ring ought to be insured), when planning for such an event.

https://www.investopedia.com/terms/m/manchester-business-school.asp

Manchester Business School (MBS) Definition

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-the-manchester-business-school-mbs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is the Manchester Business School (MBS)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Manchester Business School is the business school at the University of Manchester in Manchester, England. Also known as the Alliance Manchester Business School, the Manchester Business School offers top-level <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mba.asp">MBA</a> and doctoral programs and undergraduate courses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> The school's doctoral programs have historically been ranked above other prestigious institutions such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wharton.asp">Wharton School of Business</a> and MIT. The school also offers an international exchange program. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>The Manchester Business School, known as the Alliance Manchester Business School, is the business school of Manchester University in the U.K.</li><li>The school offers a wide range of programs, including undergraduate courses, a master's program, an MBA, Ph.D. programs, and a doctoral program.</li><li>The school in its current form was founded in 2004 through the consolidation of various Manchester institutes that date further back.</li><li>MBS is a well-respected and world-renowned school, achieving top rankings across the globe in a variety of categories, including best MBA program rankings, and awards and rankings for corporate social responsibility.</li></ul></div></div></div> <span class="heading-toc" id="toc-history-of-the-manchester-business-school-mbs"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> History of the Manchester Business School (MBS) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The Manchester Business School was founded in 1918 as the Department of Industrial Administration, funded by an endowment from asbestos magnate Sir Samuel Turner. Manchester Business School was one of the first two <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/professionaleducation/08/business-school.asp">business schools</a> in the United Kingdom to offer MBA degrees.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> In 1965, the DIA was renamed the Department of Management Sciences, later becoming the Manchester School of Management. That same year, the Manchester Business School opened under the Victoria University of Manchester.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A new version of the school was reinstituted in 2004. The Alliance Manchester Business School was a result of the merger of the University of Manchester Institute of Science and Technology's Manchester School of Management, the Institute of Innovation Research, the Victoria University of Manchester's School of Accounting and Finance, and the Manchester Business School.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Prior to the merger, the constituent parts of the new MBS formed the Manchester Federal School of Business and Management and occupied nearby buildings on either side of Oxford Road.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The school offers a variety of programs and courses, including undergraduate courses, a master's program, an MBA program, a Ph.D. program, and a doctorate program. The MBA program offers three options: a full-time MBA program, a part-time MBA program, and the Kelley-Manchester Global MBA, which is a joint MBA with the Kelley School of Business at Indiana University.<span class="ql-inline-citation" data-cite="6"></span><span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <span class="heading-toc" id="toc-manchester-business-schools-part-time-global-mba"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_19-0"> <span class="mntl-sc-block-heading__text"> Manchester Business School’s Part-Time Global MBA </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The Manchester Business School offers a unique part-time option for MBA students called the Part-time Global MBA. This program provides online instruction along with the ability for students to study at any of six global centers while receiving the same degree.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Students are able to take classes in Manchester, Sao Paulo, Hong Kong, Shanghai, Singapore, and Dubai. In their second year, they are allowed to take electives in any of the other foreign locations as well.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> The program is completed over two years but there is an 18-month accelerated program and an 18-month accelerated program in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finance.asp">Finance</a> concentration.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> In addition, the school offers a wide variety of other programs and courses suitable for people with varying backgrounds, requirements, and interests.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <span class="heading-toc" id="toc-mbs-rankings"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_28-0"> <span class="mntl-sc-block-heading__text"> MBS Rankings </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> In 2023, the school was ranked 46th in the world, fifth in the U.K., and 13th in Europe amongst business schools for its MBA program by the <em>Financial Times</em> <em>(FT)</em>. The <em>FT</em> also ranked it first in the U.K. and seventh in the world for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp">environmental, social, and corporate governance</a>.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Other 2023 rankings for the school include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_32-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> <li>Fifth in the U.K. for accounting and finance by <em>Times Higher Education</em>.</li><li>First in the U.K. and sixth in the world for operations and project supply chain management by <em>QS</em>.</li><li>Second in the U.K. and 16th in the world for business analytics by <em>QS</em>.<span class="ql-inline-citation" data-cite="2"></span><br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_35-0"><span class="heading-toc" id="toc-what-rank-is-the-manchester-business-school-in-the-uk"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Rank Is the Manchester Business School in the U.K.?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Manchester Business School is ranked differently by different publications. The <em>Financial Times</em> ranked the MBA program 46th in the world, fifth in the U.K., and 13th in Europe.<span class="ql-inline-citation" data-cite="2"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-what-is-the-top-level-university-in-the-uk"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Top-Level University in the U.K.?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The top-level universities in the U.K. as ranked by <em>U.S. News &amp; World Report</em> are:</p><ol><li>University of Oxford</li><li>University of Cambridge</li><li>University College London</li><li>Imperial College London</li><li>King's College London<span class="ql-inline-citation" data-cite="7"></span><br/></li></ol></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_39-0"><span class="heading-toc" id="toc-does-manchester-university-require-gmat"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does Manchester University Require GMAT?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The Manchester Business School at the University of Manchester does require an admissions test, which can be either a GRE or GMAT.<span class="ql-inline-citation" data-cite="8"></span></p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> The Manchester Business School, based in Manchester, U.K., is one of the world's best business schools, offering MBA and doctoral programs as well as undergraduate courses. The school has campuses around the world and is consistently highly ranked in a variety of concentrations. </p></div>

## What Is the Manchester Business School (MBS)? The Manchester Business School is the business school at the University of Manchester in Manchester, England. Also known as the Alliance Manchester Business School, the Manchester Business School offers top-level [MBA](https://www.investopedia.com/terms/m/mba.asp) and doctoral programs and undergraduate courses. The school's doctoral programs have historically been ranked above other prestigious institutions such as the [Wharton School of Business](https://www.investopedia.com/terms/w/wharton.asp) and MIT. The school also offers an international exchange program. ### Key Takeaways * The Manchester Business School, known as the Alliance Manchester Business School, is the business school of Manchester University in the U.K. * The school offers a wide range of programs, including undergraduate courses, a master's program, an MBA, Ph.D. programs, and a doctoral program. * The school in its current form was founded in 2004 through the consolidation of various Manchester institutes that date further back. * MBS is a well-respected and world-renowned school, achieving top rankings across the globe in a variety of categories, including best MBA program rankings, and awards and rankings for corporate social responsibility. ## History of the Manchester Business School (MBS) The Manchester Business School was founded in 1918 as the Department of Industrial Administration, funded by an endowment from asbestos magnate Sir Samuel Turner. Manchester Business School was one of the first two [business schools](https://www.investopedia.com/articles/professionaleducation/08/business-school.asp) in the United Kingdom to offer MBA degrees. In 1965, the DIA was renamed the Department of Management Sciences, later becoming the Manchester School of Management. That same year, the Manchester Business School opened under the Victoria University of Manchester. A new version of the school was reinstituted in 2004. The Alliance Manchester Business School was a result of the merger of the University of Manchester Institute of Science and Technology's Manchester School of Management, the Institute of Innovation Research, the Victoria University of Manchester's School of Accounting and Finance, and the Manchester Business School. Prior to the merger, the constituent parts of the new MBS formed the Manchester Federal School of Business and Management and occupied nearby buildings on either side of Oxford Road. The school offers a variety of programs and courses, including undergraduate courses, a master's program, an MBA program, a Ph.D. program, and a doctorate program. The MBA program offers three options: a full-time MBA program, a part-time MBA program, and the Kelley-Manchester Global MBA, which is a joint MBA with the Kelley School of Business at Indiana University. ## Manchester Business School’s Part-Time Global MBA The Manchester Business School offers a unique part-time option for MBA students called the Part-time Global MBA. This program provides online instruction along with the ability for students to study at any of six global centers while receiving the same degree. Students are able to take classes in Manchester, Sao Paulo, Hong Kong, Shanghai, Singapore, and Dubai. In their second year, they are allowed to take electives in any of the other foreign locations as well. The program is completed over two years but there is an 18-month accelerated program and an 18-month accelerated program in a [Finance](https://www.investopedia.com/terms/f/finance.asp) concentration. In addition, the school offers a wide variety of other programs and courses suitable for people with varying backgrounds, requirements, and interests. ## MBS Rankings In 2023, the school was ranked 46th in the world, fifth in the U.K., and 13th in Europe amongst business schools for its MBA program by the *Financial Times* *(FT)*. The *FT* also ranked it first in the U.K. and seventh in the world for [environmental, social, and corporate governance](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp). Other 2023 rankings for the school include: * Fifth in the U.K. for accounting and finance by *Times Higher Education*. * First in the U.K. and sixth in the world for operations and project supply chain management by *QS*. * Second in the U.K. and 16th in the world for business analytics by *QS*. ## What Rank Is the Manchester Business School in the U.K.? The Manchester Business School is ranked differently by different publications. The *Financial Times* ranked the MBA program 46th in the world, fifth in the U.K., and 13th in Europe. ## What Is the Top-Level University in the U.K.? The top-level universities in the U.K. as ranked by *U.S. News & World Report* are: 1. University of Oxford 2. University of Cambridge 3. University College London 4. Imperial College London 5. King's College London ## Does Manchester University Require GMAT? The Manchester Business School at the University of Manchester does require an admissions test, which can be either a GRE or GMAT. ## The Bottom Line The Manchester Business School, based in Manchester, U.K., is one of the world's best business schools, offering MBA and doctoral programs as well as undergraduate courses. The school has campuses around the world and is consistently highly ranked in a variety of concentrations.

What Is the Manchester Business School (MBS)? The Manchester Business School is the business school at the University of Manchester in Manchester, England. Also known as the Alliance Manchester Business School, the Manchester Business School offers top-level MBA and doctoral programs and undergraduate courses. The school's doctoral programs have historically been ranked above other prestigious institutions such as the Wharton School of Business and MIT. The school also offers an international exchange program. Key Takeaways The Manchester Business School, known as the Alliance Manchester Business School, is the business school of Manchester University in the U.K.The school offers a wide range of programs, including undergraduate courses, a master's program, an MBA, Ph.D. programs, and a doctoral program.The school in its current form was founded in 2004 through the consolidation of various Manchester institutes that date further back.MBS is a well-respected and world-renowned school, achieving top rankings across the globe in a variety of categories, including best MBA program rankings, and awards and rankings for corporate social responsibility. History of the Manchester Business School (MBS) The Manchester Business School was founded in 1918 as the Department of Industrial Administration, funded by an endowment from asbestos magnate Sir Samuel Turner. Manchester Business School was one of the first two business schools in the United Kingdom to offer MBA degrees. In 1965, the DIA was renamed the Department of Management Sciences, later becoming the Manchester School of Management. That same year, the Manchester Business School opened under the Victoria University of Manchester. A new version of the school was reinstituted in 2004. The Alliance Manchester Business School was a result of the merger of the University of Manchester Institute of Science and Technology's Manchester School of Management, the Institute of Innovation Research, the Victoria University of Manchester's School of Accounting and Finance, and the Manchester Business School. Prior to the merger, the constituent parts of the new MBS formed the Manchester Federal School of Business and Management and occupied nearby buildings on either side of Oxford Road. The school offers a variety of programs and courses, including undergraduate courses, a master's program, an MBA program, a Ph.D. program, and a doctorate program. The MBA program offers three options: a full-time MBA program, a part-time MBA program, and the Kelley-Manchester Global MBA, which is a joint MBA with the Kelley School of Business at Indiana University. Manchester Business School’s Part-Time Global MBA The Manchester Business School offers a unique part-time option for MBA students called the Part-time Global MBA. This program provides online instruction along with the ability for students to study at any of six global centers while receiving the same degree. Students are able to take classes in Manchester, Sao Paulo, Hong Kong, Shanghai, Singapore, and Dubai. In their second year, they are allowed to take electives in any of the other foreign locations as well. The program is completed over two years but there is an 18-month accelerated program and an 18-month accelerated program in a Finance concentration. In addition, the school offers a wide variety of other programs and courses suitable for people with varying backgrounds, requirements, and interests. MBS Rankings In 2023, the school was ranked 46th in the world, fifth in the U.K., and 13th in Europe amongst business schools for its MBA program by the Financial Times (FT). The FT also ranked it first in the U.K. and seventh in the world for environmental, social, and corporate governance. Other 2023 rankings for the school include: Fifth in the U.K. for accounting and finance by Times Higher Education.First in the U.K. and sixth in the world for operations and project supply chain management by QS.Second in the U.K. and 16th in the world for business analytics by QS. What Rank Is the Manchester Business School in the U.K.? The Manchester Business School is ranked differently by different publications. The Financial Times ranked the MBA program 46th in the world, fifth in the U.K., and 13th in Europe. What Is the Top-Level University in the U.K.? The top-level universities in the U.K. as ranked by U.S. News & World Report are:University of OxfordUniversity of CambridgeUniversity College LondonImperial College LondonKing's College London Does Manchester University Require GMAT? The Manchester Business School at the University of Manchester does require an admissions test, which can be either a GRE or GMAT. The Bottom Line The Manchester Business School, based in Manchester, U.K., is one of the world's best business schools, offering MBA and doctoral programs as well as undergraduate courses. The school has campuses around the world and is consistently highly ranked in a variety of concentrations.

https://www.investopedia.com/terms/d/dark-pool.asp

What Are Dark Pools? How They Work, Critiques, and Examples

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-a-dark-pool"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is a Dark Pool? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A dark pool is a privately organized financial forum or exchange for trading securities. Dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported. Dark pools are a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alternative-trading-system.asp">alternative trading system</a> (ATS) that gives certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_4-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_5-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Dark pools are private asset exchanges designed to provide additional liquidity and anonymity for trading large blocks of securities away from the public eye.</li><li>Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds, and pension funds, which claim that these benefits ultimately accrue to the retail investors who invest in these funds. </li><li>However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-dark-pool"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_6-0"> <span class="mntl-sc-block-heading__text"> Understanding the Dark Pool </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Dark pools emerged in the 1980s when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">Securities and Exchange Commission</a> (SEC) allowed brokers to transact large blocks of shares. Electronic trading and an SEC ruling in 2005 that was designed to increase competition and cut transaction costs have stimulated an increase in the number of dark pools.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="5"></span> Dark pools can charge lower fees than exchanges because they are often housed within a large firm and not necessarily a bank. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> For example, Bloomberg LP owns the dark pool Bloomberg Tradebook, which is registered with the SEC.<span class="ql-inline-citation" data-cite="2"></span> Dark pools were initially mostly used by institutional investors for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blocktrade.asp">block trades</a> involving a large number of securities. However, dark pools are no longer used only for large orders. A 2013 report by Celent found that as a result of block orders moving to dark pools, the average order size dropped about 50%, from 430 shares in 2009 to approximately 200 shares in four years.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The primary advantage of dark pool trading is that institutional investors making large trades can do so without exposure while finding buyers and sellers. This prevents heavy price devaluation, which would otherwise occur. If it were public knowledge, for example, that an investment bank was trying to sell 500,000 shares of a security, the security would almost certainly have decreased in value by the time the bank found buyers for all of their shares. Devaluation has become an increasingly likely risk, and electronic trading platforms are causing prices to respond much more quickly to market pressures. If the new data is reported only after the trade has been executed, however, the news has much less of an impact on the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <span class="heading-toc" id="toc-dark-pools-and-high-frequency-trading"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_13-0"> <span class="mntl-sc-block-heading__text"> Dark Pools and High-Frequency Trading </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> With the advent of supercomputers capable of executing algorithmic-based programs over the course of just milliseconds, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/high-frequency-trading.asp">high-frequency trading</a> (HFT) has come to dominate daily trading volume. HFT technology allows institutional traders to execute their orders of multimillion-share blocks ahead of other investors, capitalizing on fractional upticks or downticks in share prices. When subsequent orders are executed, profits are instantly obtained by HFT traders who then close out their positions. This form of legal piracy can occur dozens of times a day, reaping huge gains for HFT traders.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Eventually, HFT became so pervasive that it grew increasingly difficult to execute large trades through a single exchange. Because large HFT orders had to be spread among multiple exchanges, it alerted trading competitors who could then get in front of the order and snatch up the inventory, driving up share prices. All of this occurred within milliseconds of the initial order being placed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> To avoid the transparency of public exchanges and ensure liquidity for large block trades, several of the investment banks established private exchanges, which came to be known as dark pools. For traders with large orders who are unable to place them on the public exchanges, or want to avoid telegraphing their intent, dark pools provide a market of buyers and sellers with the liquidity to execute the trade. As of Feb. 28, 2022, there were 64 dark pools operating in the United States, run mostly by investment banks.<span class="ql-inline-citation" data-cite="8"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-critiques-of-dark-pools"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Critiques of Dark Pools </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Although considered legal, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/anonymoustrading.asp">anonymous trading</a> in dark pools is able to operate with little transparency. Those who have denounced HFT as an unfair advantage over other investors have also condemned the lack of transparency in dark pools, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/060915/pros-and-cons-dark-pools-liquidity.asp">which can hide conflicts of interest</a>. Due to complaints, the SEC conducted research and presented their 2015 report, scrutinizing dark pools for illegal front-running when institutional traders place their order in front of a customer’s order to capitalize on the uptick in share prices.<span class="ql-inline-citation" data-cite="9"></span> Advocates of dark pools insist they provide essential liquidity, allowing the markets to operate more efficiently. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <span class="heading-toc" id="toc-examples-of-dark-pools"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <span class="mntl-sc-block-heading__text"> Examples of Dark Pools </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> There are several different types of dark pools: broker or dealer-owned exchanges, such as Morgan Stanley's MS Pool and Goldman Sachs' Sigma X; independently owned exchanges offering private trading to their clients; and private exchange markets operated by public exchanges such as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nyse.asp">New York Stock Exchange's</a> Euronext. A privately-owned market will have <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pricediscovery.asp">price discovery</a> within their own markets, but a dark pool operated by a broker derives its prices from public exchanges. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Because of their sinister name and lack of transparency, dark pools are often considered by the public to be dubious enterprises. In reality, dark pools are tightly regulated by the SEC.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="10"></span> However, there is a real concern that because of the sheer volume of trades conducted on dark markets, the public values of certain securities are increasingly unreliable or inaccurate. There is also mounting concern that dark pool exchanges provide excellent fodder for predatory high-frequency trading. </p></div>

## What Is a Dark Pool? A dark pool is a privately organized financial forum or exchange for trading securities. Dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported. Dark pools are a type of [alternative trading system](https://www.investopedia.com/terms/a/alternative-trading-system.asp) (ATS) that gives certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller. ### Key Takeaways * Dark pools are private asset exchanges designed to provide additional liquidity and anonymity for trading large blocks of securities away from the public eye. * Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds, and pension funds, which claim that these benefits ultimately accrue to the retail investors who invest in these funds. * However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms. ## Understanding the Dark Pool Dark pools emerged in the 1980s when the [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) allowed brokers to transact large blocks of shares. Electronic trading and an SEC ruling in 2005 that was designed to increase competition and cut transaction costs have stimulated an increase in the number of dark pools. Dark pools can charge lower fees than exchanges because they are often housed within a large firm and not necessarily a bank. For example, Bloomberg LP owns the dark pool Bloomberg Tradebook, which is registered with the SEC. Dark pools were initially mostly used by institutional investors for [block trades](https://www.investopedia.com/terms/b/blocktrade.asp) involving a large number of securities. However, dark pools are no longer used only for large orders. A 2013 report by Celent found that as a result of block orders moving to dark pools, the average order size dropped about 50%, from 430 shares in 2009 to approximately 200 shares in four years. The primary advantage of dark pool trading is that institutional investors making large trades can do so without exposure while finding buyers and sellers. This prevents heavy price devaluation, which would otherwise occur. If it were public knowledge, for example, that an investment bank was trying to sell 500,000 shares of a security, the security would almost certainly have decreased in value by the time the bank found buyers for all of their shares. Devaluation has become an increasingly likely risk, and electronic trading platforms are causing prices to respond much more quickly to market pressures. If the new data is reported only after the trade has been executed, however, the news has much less of an impact on the market. ## Dark Pools and High-Frequency Trading With the advent of supercomputers capable of executing algorithmic-based programs over the course of just milliseconds, [high-frequency trading](https://www.investopedia.com/terms/h/high-frequency-trading.asp) (HFT) has come to dominate daily trading volume. HFT technology allows institutional traders to execute their orders of multimillion-share blocks ahead of other investors, capitalizing on fractional upticks or downticks in share prices. When subsequent orders are executed, profits are instantly obtained by HFT traders who then close out their positions. This form of legal piracy can occur dozens of times a day, reaping huge gains for HFT traders. Eventually, HFT became so pervasive that it grew increasingly difficult to execute large trades through a single exchange. Because large HFT orders had to be spread among multiple exchanges, it alerted trading competitors who could then get in front of the order and snatch up the inventory, driving up share prices. All of this occurred within milliseconds of the initial order being placed. To avoid the transparency of public exchanges and ensure liquidity for large block trades, several of the investment banks established private exchanges, which came to be known as dark pools. For traders with large orders who are unable to place them on the public exchanges, or want to avoid telegraphing their intent, dark pools provide a market of buyers and sellers with the liquidity to execute the trade. As of Feb. 28, 2022, there were 64 dark pools operating in the United States, run mostly by investment banks. ## Critiques of Dark Pools Although considered legal, [anonymous trading](https://www.investopedia.com/terms/a/anonymoustrading.asp) in dark pools is able to operate with little transparency. Those who have denounced HFT as an unfair advantage over other investors have also condemned the lack of transparency in dark pools, [which can hide conflicts of interest](https://www.investopedia.com/articles/investing/060915/pros-and-cons-dark-pools-liquidity.asp). Due to complaints, the SEC conducted research and presented their 2015 report, scrutinizing dark pools for illegal front-running when institutional traders place their order in front of a customer’s order to capitalize on the uptick in share prices. Advocates of dark pools insist they provide essential liquidity, allowing the markets to operate more efficiently. ## Examples of Dark Pools There are several different types of dark pools: broker or dealer-owned exchanges, such as Morgan Stanley's MS Pool and Goldman Sachs' Sigma X; independently owned exchanges offering private trading to their clients; and private exchange markets operated by public exchanges such as the [New York Stock Exchange's](https://www.investopedia.com/terms/n/nyse.asp) Euronext. A privately-owned market will have [price discovery](https://www.investopedia.com/terms/p/pricediscovery.asp) within their own markets, but a dark pool operated by a broker derives its prices from public exchanges. Because of their sinister name and lack of transparency, dark pools are often considered by the public to be dubious enterprises. In reality, dark pools are tightly regulated by the SEC. However, there is a real concern that because of the sheer volume of trades conducted on dark markets, the public values of certain securities are increasingly unreliable or inaccurate. There is also mounting concern that dark pool exchanges provide excellent fodder for predatory high-frequency trading.

What Is a Dark Pool? A dark pool is a privately organized financial forum or exchange for trading securities. Dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported. Dark pools are a type of alternative trading system (ATS) that gives certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller. Key Takeaways Dark pools are private asset exchanges designed to provide additional liquidity and anonymity for trading large blocks of securities away from the public eye.Dark pools provide pricing and cost advantages to buy-side institutions such as mutual funds, and pension funds, which claim that these benefits ultimately accrue to the retail investors who invest in these funds. However, dark pools’ lack of transparency makes them susceptible to conflicts of interest by their owners and predatory trading practices by HFT firms. Understanding the Dark Pool Dark pools emerged in the 1980s when the Securities and Exchange Commission (SEC) allowed brokers to transact large blocks of shares. Electronic trading and an SEC ruling in 2005 that was designed to increase competition and cut transaction costs have stimulated an increase in the number of dark pools. Dark pools can charge lower fees than exchanges because they are often housed within a large firm and not necessarily a bank. For example, Bloomberg LP owns the dark pool Bloomberg Tradebook, which is registered with the SEC. Dark pools were initially mostly used by institutional investors for block trades involving a large number of securities. However, dark pools are no longer used only for large orders. A 2013 report by Celent found that as a result of block orders moving to dark pools, the average order size dropped about 50%, from 430 shares in 2009 to approximately 200 shares in four years. The primary advantage of dark pool trading is that institutional investors making large trades can do so without exposure while finding buyers and sellers. This prevents heavy price devaluation, which would otherwise occur. If it were public knowledge, for example, that an investment bank was trying to sell 500,000 shares of a security, the security would almost certainly have decreased in value by the time the bank found buyers for all of their shares. Devaluation has become an increasingly likely risk, and electronic trading platforms are causing prices to respond much more quickly to market pressures. If the new data is reported only after the trade has been executed, however, the news has much less of an impact on the market. Dark Pools and High-Frequency Trading With the advent of supercomputers capable of executing algorithmic-based programs over the course of just milliseconds, high-frequency trading (HFT) has come to dominate daily trading volume. HFT technology allows institutional traders to execute their orders of multimillion-share blocks ahead of other investors, capitalizing on fractional upticks or downticks in share prices. When subsequent orders are executed, profits are instantly obtained by HFT traders who then close out their positions. This form of legal piracy can occur dozens of times a day, reaping huge gains for HFT traders. Eventually, HFT became so pervasive that it grew increasingly difficult to execute large trades through a single exchange. Because large HFT orders had to be spread among multiple exchanges, it alerted trading competitors who could then get in front of the order and snatch up the inventory, driving up share prices. All of this occurred within milliseconds of the initial order being placed. To avoid the transparency of public exchanges and ensure liquidity for large block trades, several of the investment banks established private exchanges, which came to be known as dark pools. For traders with large orders who are unable to place them on the public exchanges, or want to avoid telegraphing their intent, dark pools provide a market of buyers and sellers with the liquidity to execute the trade. As of Feb. 28, 2022, there were 64 dark pools operating in the United States, run mostly by investment banks. Critiques of Dark Pools Although considered legal, anonymous trading in dark pools is able to operate with little transparency. Those who have denounced HFT as an unfair advantage over other investors have also condemned the lack of transparency in dark pools, which can hide conflicts of interest. Due to complaints, the SEC conducted research and presented their 2015 report, scrutinizing dark pools for illegal front-running when institutional traders place their order in front of a customer’s order to capitalize on the uptick in share prices. Advocates of dark pools insist they provide essential liquidity, allowing the markets to operate more efficiently. Examples of Dark Pools There are several different types of dark pools: broker or dealer-owned exchanges, such as Morgan Stanley's MS Pool and Goldman Sachs' Sigma X; independently owned exchanges offering private trading to their clients; and private exchange markets operated by public exchanges such as the New York Stock Exchange's Euronext. A privately-owned market will have price discovery within their own markets, but a dark pool operated by a broker derives its prices from public exchanges. Because of their sinister name and lack of transparency, dark pools are often considered by the public to be dubious enterprises. In reality, dark pools are tightly regulated by the SEC. However, there is a real concern that because of the sheer volume of trades conducted on dark markets, the public values of certain securities are increasingly unreliable or inaccurate. There is also mounting concern that dark pool exchanges provide excellent fodder for predatory high-frequency trading.

https://www.investopedia.com/attribution-bias-7369317

Attribution Bias: What It Is and Why It Is Important in Finance

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-what-is-attribution-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> What Is Attribution Bias?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Attribution bias is a cognitive error described by psychologists that influences how people perceive the causes of events and behaviors, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/self-serving-bias-7369313">particularly their own</a> or others. This bias comes in several forms and can lead people to systematically attribute successes to their own abilities or efforts while attributing failures to external factors. At the same time, people may attribute others’ successes to dumb luck or to external factors and their failures to personal flaws.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Attribution bias can significantly impact decision-making, relationships, and performance in various areas of life, including the workplace, business, and investing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Attribution bias is a psychological phenomenon that affects how individuals perceive the causes of events and behaviors.</li><li>There are various types of attribution bias, including fundamental attribution error, self-serving bias, actor-observer bias, and hostile attribution bias.</li><li>Attribution biases can have significant consequences in the workplace, business, and investing.</li><li>Recognizing and overcoming attribution bias is essential for better decision making and improved interpersonal relationships.</li></ul></div></div></div> <span class="heading-toc" id="toc-examples-of-attribution-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Examples of Attribution Bias </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Attribution bias occurs when the causes that lead to certain outcomes are misattributed in ways that promote one’s self-image or self-esteem. This bias can take on many forms and appear in various contexts. Here are some general examples: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_11-0"> <span class="mntl-sc-block-subheading__text"> Scenario 1 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> A corporate manager receives a report from an employee that contains several mistakes and errors. The manager attributes the errors to the employee’s carelessness and lack of attention to detail, instead of considering external factors such as time pressure, bad data provided to them, or a lack of clear instructions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_14-0"> <span class="mntl-sc-block-subheading__text"> Scenario 2 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> A salesperson closes a large deal and attributes the success solely to their perceived exceptional negotiation skills, disregarding the fact that the client had a pressing need for the product, which made closing the deal far easier. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_16-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_17-0"> <span class="mntl-sc-block-subheading__text"> Scenario 3 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp">investor</a> experiences a significant gain in their stock portfolio and attributes the excess returns to their superior stock-picking ability, while ignoring the fact that the overall market trend has been bullish and has lifted most stocks across all sectors—and that many other investors also experienced similar gains. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <span class="heading-toc" id="toc-types-of-attribution-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-heading__text"> Types of Attribution Bias </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> Fundamental Attribution Error </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Fundamental attribution error occurs when people overestimate the influence of other people’s personality traits and underestimate the impact of situational factors when explaining others’ behaviors.<span class="ql-inline-citation" data-cite="2"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> For example, when a driver cuts someone off in traffic, someone might assume that the driver is reckless or aggressive, rather than considering external factors such as it being an emergency. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_26-0"> <span class="mntl-sc-block-subheading__text"> Self-Serving Bias </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Self-serving bias is the tendency to attribute one’s own successes to personal abilities and efforts while attributing their failures to external factors or by blaming others.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> For instance, an athlete on a baseball team may attribute winning games to their own star performance while blaming their teammates or poor coaching for losses. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_31-0"> <span class="mntl-sc-block-subheading__text"> Actor-Observer Bias </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Actor-observer bias is the tendency to attribute one’s own actions to situational factors, while attributing others’ actions to their personality traits. It can be thought of as taking a piece each from fundamental attribution error and self-serving bias.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> For example, a person might blame their own poor performance on a test to a lack of sleep, while assuming that a peer who also performed poorly is simply not so intelligent. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> Hostile Attribution Bias </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Hostile attribution bias is when people wrongly interpret ambiguous or neutral situations as hostile or threatening, which can result in negative or aggressive responses.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Imagine that a person accidentally bumps into a stranger in a crowded hallway. The person who was bumped into might immediately assume that the other person did it on purpose, out of aggression, or disrespect—even though it was an accident caused by the crowded conditions. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <span class="heading-toc" id="toc-attribution-bias-in-the-workplace-in-business-and-in-investing"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-heading__text"> Attribution Bias in the Workplace, in Business, and in Investing </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_42-0"> <span class="mntl-sc-block-subheading__text"> In the Workplace </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Attribution bias can create misunderstandings, strain relationships, and hinder teamwork and cooperation. For example, if an employee chalks up successes to themselves in an arrogant manner while blaming co-workers’ mistakes as incompetence rather than considering context or situational constraints, this can result in a toxic work environment, where blame is assigned unfairly, and collaborative problem solving is stifled. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_44-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_45-0"> <span class="mntl-sc-block-subheading__text"> In Business </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Business leaders who fall prey to attribution bias may make poor decisions based on faulty assumptions about the causes of success or failure of the business. For example, a company might attribute declining sales to poor marketing efforts, while ignoring broader market <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trend.asp">trends</a> or shifting consumer preferences. Or, a surge in profits might be misattributed to stellar leadership, when it really had to do with an unexpected increase in demand for products in that sector. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_47-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_48-0"> <span class="mntl-sc-block-subheading__text"> In Investing </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Attribution bias can lead investors to make suboptimal decisions by mistaking the true causes of trading gains or losses. Investors might chase returns, assuming that past performance is solely due to the skill of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a> managers, but neglect the role of luck or broader market and macroeconomic conditions. Likewise, a fund’s poor performance may be blamed on a fund manager’s negligence or ineptitude rather than prevailing bearish pressures.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <span class="heading-toc" id="toc-how-to-overcome-attribution-bias"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_51-0"> <span class="mntl-sc-block-heading__text"> How to Overcome Attribution Bias </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> While attribution bias is common and has the potential to affect any of us in a range of situations, steps can be taken to minimize its effects. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> <li><strong>Increase self-awareness</strong>: The first step in overcoming attribution bias is being self-aware of one’s own actual skills, knowledge, and abilities. Understand that luck and external forces may also be at play.</li><li><strong>Consider alternative explanations</strong>: Be willing to consider alternative explanations for events or actions, some of which may be quite nuanced or complex, rather than defaulting to simplistic or self-serving attributions.<strong> </strong>Analyze situations objectively, and weigh various factors that may have contributed to an outcome. Avoid jumping to conclusions based on limited information.</li><li><strong>Seek feedback from others</strong>: Ask for input from others, especially from experts in a particular field, to gain a more comprehensive understanding of events or actions, and to challenge your own assumptions.</li><li><strong>Empathy</strong>: Practice putting yourself in other people’s shoes to better understand their motivations, circumstances, and perspectives.</li><li><strong>Develop a growth mindset</strong>: Embrace the idea that failure and setbacks can be opportunities for learning and growth, rather than solely attributing them to external factors.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span><li><strong>Review and reflect upon past decisions</strong>: Regularly assess your decision-making processes and outcomes to identify patterns of attribution bias and make adjustments accordingly.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_56-0"><span class="heading-toc" id="toc-what-are-the-main-types-of-attribution-bias"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are the main types of attribution bias?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The four main types of attribution bias are fundamental attribution error, self-serving bias, hostile attribution bias, and actor-observer bias.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_58-0"><span class="heading-toc" id="toc-what-might-attribution-bias-imply-about-managers-performance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What might attribution bias imply about managers’ performance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Attribution bias implies that managers may make incorrect assumptions about the causes of success or failure, which can lead to poor decision making. It could lead managers to believe that their own abilities led to successes while dismissing the hard work of employees or the role of good luck. Likewise, poor outcomes might instead be blamed squarely on employees.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-how-can-you-avoid-attribution-bias-in-the-workplace"></span> <h2 class="mntl-sc-block-questionandanswer__question">How can you avoid attribution bias in the workplace?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Companies can encourage greater awareness, open-mindedness, critical thinking, empathy, and soliciting feedback from others. Fostering a culture of open communication, transparency, and continuous learning can lead to more accurate assessments of situations, improved decision making, enhanced teamwork, and a more inclusive work environment. Implementing training programs focused on identifying and overcoming cognitive biases, as well as promoting diversity and inclusion, may further contribute to reducing the impact of attribution bias within the organization.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_61-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_62-0"><span class="heading-toc" id="toc-what-are-other-common-types-of-bias-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What are other common types of bias in finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Other common biases found in behavioral finance include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/recency-availability-bias-5206686">recency bias</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/confirmation-bias.asp">confirmation bias</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp#toc-1-overconfidence">overconfidence</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loss-psychology.asp">loss aversion</a>, <a class="pseudoStyle" data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/anchoring-and-adjustment.asp">anchoring and adjustment</a>, and <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/herdinstinct.asp">herding behavior</a>, among several others.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_63-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_64-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> Attribution bias occurs when the causes and effects of certain behaviors or events are misattributed. This is often done subconsciously in an effort to maintain a positive self-image or boost self-esteem. This means chalking up successes to your own abilities but blaming others or external factors for failures. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> This bias comes in several forms and can significantly impact decision-making processes in the workplace, business, and investing, often leading to suboptimal outcomes. By recognizing and actively working to overcome attribution bias, individuals can make more informed decisions, improve relationships, and enhance overall performance. </p></div>

## What Is Attribution Bias? Attribution bias is a cognitive error described by psychologists that influences how people perceive the causes of events and behaviors, [particularly their own](https://www.investopedia.com/self-serving-bias-7369313) or others. This bias comes in several forms and can lead people to systematically attribute successes to their own abilities or efforts while attributing failures to external factors. At the same time, people may attribute others’ successes to dumb luck or to external factors and their failures to personal flaws. Attribution bias can significantly impact decision-making, relationships, and performance in various areas of life, including the workplace, business, and investing. ### Key Takeaways * Attribution bias is a psychological phenomenon that affects how individuals perceive the causes of events and behaviors. * There are various types of attribution bias, including fundamental attribution error, self-serving bias, actor-observer bias, and hostile attribution bias. * Attribution biases can have significant consequences in the workplace, business, and investing. * Recognizing and overcoming attribution bias is essential for better decision making and improved interpersonal relationships. ## Examples of Attribution Bias Attribution bias occurs when the causes that lead to certain outcomes are misattributed in ways that promote one’s self-image or self-esteem. This bias can take on many forms and appear in various contexts. Here are some general examples: ### Scenario 1 A corporate manager receives a report from an employee that contains several mistakes and errors. The manager attributes the errors to the employee’s carelessness and lack of attention to detail, instead of considering external factors such as time pressure, bad data provided to them, or a lack of clear instructions. ### Scenario 2 A salesperson closes a large deal and attributes the success solely to their perceived exceptional negotiation skills, disregarding the fact that the client had a pressing need for the product, which made closing the deal far easier. ### Scenario 3 An [investor](https://www.investopedia.com/terms/i/investor.asp) experiences a significant gain in their stock portfolio and attributes the excess returns to their superior stock-picking ability, while ignoring the fact that the overall market trend has been bullish and has lifted most stocks across all sectors—and that many other investors also experienced similar gains. ## Types of Attribution Bias ### Fundamental Attribution Error Fundamental attribution error occurs when people overestimate the influence of other people’s personality traits and underestimate the impact of situational factors when explaining others’ behaviors. For example, when a driver cuts someone off in traffic, someone might assume that the driver is reckless or aggressive, rather than considering external factors such as it being an emergency. ### Self-Serving Bias Self-serving bias is the tendency to attribute one’s own successes to personal abilities and efforts while attributing their failures to external factors or by blaming others. For instance, an athlete on a baseball team may attribute winning games to their own star performance while blaming their teammates or poor coaching for losses. ### Actor-Observer Bias Actor-observer bias is the tendency to attribute one’s own actions to situational factors, while attributing others’ actions to their personality traits. It can be thought of as taking a piece each from fundamental attribution error and self-serving bias. For example, a person might blame their own poor performance on a test to a lack of sleep, while assuming that a peer who also performed poorly is simply not so intelligent. ### Hostile Attribution Bias Hostile attribution bias is when people wrongly interpret ambiguous or neutral situations as hostile or threatening, which can result in negative or aggressive responses. Imagine that a person accidentally bumps into a stranger in a crowded hallway. The person who was bumped into might immediately assume that the other person did it on purpose, out of aggression, or disrespect—even though it was an accident caused by the crowded conditions. ## Attribution Bias in the Workplace, in Business, and in Investing ### In the Workplace Attribution bias can create misunderstandings, strain relationships, and hinder teamwork and cooperation. For example, if an employee chalks up successes to themselves in an arrogant manner while blaming co-workers’ mistakes as incompetence rather than considering context or situational constraints, this can result in a toxic work environment, where blame is assigned unfairly, and collaborative problem solving is stifled. ### In Business Business leaders who fall prey to attribution bias may make poor decisions based on faulty assumptions about the causes of success or failure of the business. For example, a company might attribute declining sales to poor marketing efforts, while ignoring broader market [trends](https://www.investopedia.com/terms/t/trend.asp) or shifting consumer preferences. Or, a surge in profits might be misattributed to stellar leadership, when it really had to do with an unexpected increase in demand for products in that sector. ### In Investing Attribution bias can lead investors to make suboptimal decisions by mistaking the true causes of trading gains or losses. Investors might chase returns, assuming that past performance is solely due to the skill of [portfolio](https://www.investopedia.com/terms/p/portfolio.asp) managers, but neglect the role of luck or broader market and macroeconomic conditions. Likewise, a fund’s poor performance may be blamed on a fund manager’s negligence or ineptitude rather than prevailing bearish pressures. ## How to Overcome Attribution Bias While attribution bias is common and has the potential to affect any of us in a range of situations, steps can be taken to minimize its effects. * **Increase self-awareness**: The first step in overcoming attribution bias is being self-aware of one’s own actual skills, knowledge, and abilities. Understand that luck and external forces may also be at play. * **Consider alternative explanations**: Be willing to consider alternative explanations for events or actions, some of which may be quite nuanced or complex, rather than defaulting to simplistic or self-serving attributions.Analyze situations objectively, and weigh various factors that may have contributed to an outcome. Avoid jumping to conclusions based on limited information. * **Seek feedback from others**: Ask for input from others, especially from experts in a particular field, to gain a more comprehensive understanding of events or actions, and to challenge your own assumptions. * **Empathy**: Practice putting yourself in other people’s shoes to better understand their motivations, circumstances, and perspectives. * **Develop a growth mindset**: Embrace the idea that failure and setbacks can be opportunities for learning and growth, rather than solely attributing them to external factors. * **Review and reflect upon past decisions**: Regularly assess your decision-making processes and outcomes to identify patterns of attribution bias and make adjustments accordingly. ## What are the main types of attribution bias? The four main types of attribution bias are fundamental attribution error, self-serving bias, hostile attribution bias, and actor-observer bias. ## What might attribution bias imply about managers’ performance? Attribution bias implies that managers may make incorrect assumptions about the causes of success or failure, which can lead to poor decision making. It could lead managers to believe that their own abilities led to successes while dismissing the hard work of employees or the role of good luck. Likewise, poor outcomes might instead be blamed squarely on employees. ## How can you avoid attribution bias in the workplace? Companies can encourage greater awareness, open-mindedness, critical thinking, empathy, and soliciting feedback from others. Fostering a culture of open communication, transparency, and continuous learning can lead to more accurate assessments of situations, improved decision making, enhanced teamwork, and a more inclusive work environment. Implementing training programs focused on identifying and overcoming cognitive biases, as well as promoting diversity and inclusion, may further contribute to reducing the impact of attribution bias within the organization. ## What are other common types of bias in finance? Other common biases found in behavioral finance include [recency bias](https://www.investopedia.com/recency-availability-bias-5206686), [confirmation bias](https://www.investopedia.com/terms/c/confirmation-bias.asp), [overconfidence](https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp#toc-1-overconfidence), [loss aversion](https://www.investopedia.com/terms/l/loss-psychology.asp), [anchoring and adjustment](https://www.investopedia.com/terms/a/anchoring-and-adjustment.asp), and [herding behavior](https://www.investopedia.com/terms/h/herdinstinct.asp), among several others. ## The Bottom Line Attribution bias occurs when the causes and effects of certain behaviors or events are misattributed. This is often done subconsciously in an effort to maintain a positive self-image or boost self-esteem. This means chalking up successes to your own abilities but blaming others or external factors for failures. This bias comes in several forms and can significantly impact decision-making processes in the workplace, business, and investing, often leading to suboptimal outcomes. By recognizing and actively working to overcome attribution bias, individuals can make more informed decisions, improve relationships, and enhance overall performance.

What Is Attribution Bias?  Attribution bias is a cognitive error described by psychologists that influences how people perceive the causes of events and behaviors, particularly their own or others. This bias comes in several forms and can lead people to systematically attribute successes to their own abilities or efforts while attributing failures to external factors. At the same time, people may attribute others’ successes to dumb luck or to external factors and their failures to personal flaws. Attribution bias can significantly impact decision-making, relationships, and performance in various areas of life, including the workplace, business, and investing. Key Takeaways Attribution bias is a psychological phenomenon that affects how individuals perceive the causes of events and behaviors.There are various types of attribution bias, including fundamental attribution error, self-serving bias, actor-observer bias, and hostile attribution bias.Attribution biases can have significant consequences in the workplace, business, and investing.Recognizing and overcoming attribution bias is essential for better decision making and improved interpersonal relationships. Examples of Attribution Bias Attribution bias occurs when the causes that lead to certain outcomes are misattributed in ways that promote one’s self-image or self-esteem. This bias can take on many forms and appear in various contexts. Here are some general examples: Scenario 1 A corporate manager receives a report from an employee that contains several mistakes and errors. The manager attributes the errors to the employee’s carelessness and lack of attention to detail, instead of considering external factors such as time pressure, bad data provided to them, or a lack of clear instructions. Scenario 2 A salesperson closes a large deal and attributes the success solely to their perceived exceptional negotiation skills, disregarding the fact that the client had a pressing need for the product, which made closing the deal far easier. Scenario 3 An investor experiences a significant gain in their stock portfolio and attributes the excess returns to their superior stock-picking ability, while ignoring the fact that the overall market trend has been bullish and has lifted most stocks across all sectors—and that many other investors also experienced similar gains. Types of Attribution Bias Fundamental Attribution Error Fundamental attribution error occurs when people overestimate the influence of other people’s personality traits and underestimate the impact of situational factors when explaining others’ behaviors. For example, when a driver cuts someone off in traffic, someone might assume that the driver is reckless or aggressive, rather than considering external factors such as it being an emergency. Self-Serving Bias Self-serving bias is the tendency to attribute one’s own successes to personal abilities and efforts while attributing their failures to external factors or by blaming others. For instance, an athlete on a baseball team may attribute winning games to their own star performance while blaming their teammates or poor coaching for losses. Actor-Observer Bias Actor-observer bias is the tendency to attribute one’s own actions to situational factors, while attributing others’ actions to their personality traits. It can be thought of as taking a piece each from fundamental attribution error and self-serving bias. For example, a person might blame their own poor performance on a test to a lack of sleep, while assuming that a peer who also performed poorly is simply not so intelligent. Hostile Attribution Bias Hostile attribution bias is when people wrongly interpret ambiguous or neutral situations as hostile or threatening, which can result in negative or aggressive responses. Imagine that a person accidentally bumps into a stranger in a crowded hallway. The person who was bumped into might immediately assume that the other person did it on purpose, out of aggression, or disrespect—even though it was an accident caused by the crowded conditions. Attribution Bias in the Workplace, in Business, and in Investing In the Workplace Attribution bias can create misunderstandings, strain relationships, and hinder teamwork and cooperation. For example, if an employee chalks up successes to themselves in an arrogant manner while blaming co-workers’ mistakes as incompetence rather than considering context or situational constraints, this can result in a toxic work environment, where blame is assigned unfairly, and collaborative problem solving is stifled. In Business Business leaders who fall prey to attribution bias may make poor decisions based on faulty assumptions about the causes of success or failure of the business. For example, a company might attribute declining sales to poor marketing efforts, while ignoring broader market trends or shifting consumer preferences. Or, a surge in profits might be misattributed to stellar leadership, when it really had to do with an unexpected increase in demand for products in that sector. In Investing Attribution bias can lead investors to make suboptimal decisions by mistaking the true causes of trading gains or losses. Investors might chase returns, assuming that past performance is solely due to the skill of portfolio managers, but neglect the role of luck or broader market and macroeconomic conditions. Likewise, a fund’s poor performance may be blamed on a fund manager’s negligence or ineptitude rather than prevailing bearish pressures. How to Overcome Attribution Bias While attribution bias is common and has the potential to affect any of us in a range of situations, steps can be taken to minimize its effects. Increase self-awareness: The first step in overcoming attribution bias is being self-aware of one’s own actual skills, knowledge, and abilities. Understand that luck and external forces may also be at play.Consider alternative explanations: Be willing to consider alternative explanations for events or actions, some of which may be quite nuanced or complex, rather than defaulting to simplistic or self-serving attributions. Analyze situations objectively, and weigh various factors that may have contributed to an outcome. Avoid jumping to conclusions based on limited information.Seek feedback from others: Ask for input from others, especially from experts in a particular field, to gain a more comprehensive understanding of events or actions, and to challenge your own assumptions.Empathy: Practice putting yourself in other people’s shoes to better understand their motivations, circumstances, and perspectives.Develop a growth mindset: Embrace the idea that failure and setbacks can be opportunities for learning and growth, rather than solely attributing them to external factors.Review and reflect upon past decisions: Regularly assess your decision-making processes and outcomes to identify patterns of attribution bias and make adjustments accordingly. What are the main types of attribution bias? The four main types of attribution bias are fundamental attribution error, self-serving bias, hostile attribution bias, and actor-observer bias. What might attribution bias imply about managers’ performance? Attribution bias implies that managers may make incorrect assumptions about the causes of success or failure, which can lead to poor decision making. It could lead managers to believe that their own abilities led to successes while dismissing the hard work of employees or the role of good luck. Likewise, poor outcomes might instead be blamed squarely on employees. How can you avoid attribution bias in the workplace? Companies can encourage greater awareness, open-mindedness, critical thinking, empathy, and soliciting feedback from others. Fostering a culture of open communication, transparency, and continuous learning can lead to more accurate assessments of situations, improved decision making, enhanced teamwork, and a more inclusive work environment. Implementing training programs focused on identifying and overcoming cognitive biases, as well as promoting diversity and inclusion, may further contribute to reducing the impact of attribution bias within the organization. What are other common types of bias in finance? Other common biases found in behavioral finance include recency bias, confirmation bias, overconfidence, loss aversion, anchoring and adjustment, and herding behavior, among several others. The Bottom Line Attribution bias occurs when the causes and effects of certain behaviors or events are misattributed. This is often done subconsciously in an effort to maintain a positive self-image or boost self-esteem. This means chalking up successes to your own abilities but blaming others or external factors for failures. This bias comes in several forms and can significantly impact decision-making processes in the workplace, business, and investing, often leading to suboptimal outcomes. By recognizing and actively working to overcome attribution bias, individuals can make more informed decisions, improve relationships, and enhance overall performance.

https://www.investopedia.com/articles/forex/11/degrees-you-need-for-forex-trading.asp

Forex Careers: 5 Professional Designations

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Prospective personal finance and portfolio management professionals have an assortment of designations that can improve their expertise in their respective fields. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreign-exchange.asp" rel="noopener noreferrer">Foreign exchange</a> traders, on the other hand, do not always have similar access to the same types of comprehensive skills improving programs, such as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfp.asp" rel="noopener noreferrer">Certified Financial Planner</a> and Chartered Market Analyst designations. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Nonetheless, there are several advanced education alternatives that forex traders can take advantage of to improve their efficiency in the field. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_5-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_6-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Several educational programs help forex traders enhance their skills and broaden their knowledge within their field.</li><li>The Chartered Financial Analyst program includes learning objectives focused on forex topics.</li><li>The CMT program emphasizes practical applications of chart patterns, which most forex traders understand.</li><li>The Commodities Futures Trading Commission requires that certain traders pass the Series 34 Retail Off-Exchange Forex exam.</li></ul></div></div></div> <span class="heading-toc" id="toc-chartered-financial-analyst-cfa"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_7-0"> <span class="mntl-sc-block-heading__text"> Chartered Financial Analyst (CFA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Although the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cfa.asp" rel="noopener noreferrer">CFA</a> program is primarily focused on equity valuation and portfolio management, some of the most important learning objectives are dependent on a working knowledge of forex-related concepts. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> For example, CFA candidates must learn how to consolidate the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-statements.asp" rel="noopener noreferrer">financial statements</a> of a corporation which generates income in foreign markets, how currency movements affect equity risk, forecasting exchange rates, and the basics fundamentals which drive the forex market.<span class="ql-inline-citation" data-cite="2"></span><span class="ql-inline-citation" data-cite="1"></span> Based on its difficulty and diverse objectives of the CFA program, charter holders have proved their ability to learn complex financial material and hold a solid understanding of the overall industry. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Managing forex exposure is an integral component of the portfolio management process. While some managers may take a passive approach to foreign exchange rate risk optimization, major institutions will often actively employ a qualified manager to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp" rel="noopener noreferrer">hedge</a> the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currencyrisk.asp" rel="noopener noreferrer">currency risk</a> associated with holding international investments. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> As international diversification becomes a growing component of the portfolio management process, the CFA program addresses many of the key issues investors must be familiar with. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <span class="heading-toc" id="toc-financial-risk-manager-frm"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_16-0"> <span class="mntl-sc-block-heading__text"> Financial Risk Manager (FRM) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The FRM program also covers a diverse spectrum of quantitative topics, such as valuation and risk modeling, risk management, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrisk.asp">credit risk</a> measurements, and market risk measurement.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Those who <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-frm-exam-prep-courses-5085430">obtain the Financial Risk Manager designation</a> become exposed to a wide variety of career opportunities, such as investment risk management and risk analysis. Bank, government, and hedge fund operations are heavily impacted by the forex market and thus require experts in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskmanagement.asp">risk management</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Almost every major multinational organization devotes efforts to mitigate the effects of adverse foreign exchange fluctuations. Wal-Mart, for example, might buy its inputs from China in yuan and sell those goods to Mexican buyers, receiving pesos. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> If the yuan appreciates while the peso depreciates relative to the US dollar, Wal-Mart would experience a double foreign exchange loss on the purchase and subsequent sale. Firstly, more dollars would have to be spent to buy the Chinese goods, and less would be received from Mexican buyers. Since such fluctuation would significantly hinder the performance of the company, the risk exposure must be hedged appropriately. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-chartered-market-technician-cmt"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Chartered Market Technician (CMT) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Being able to understand <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fibonacciretracement.asp" rel="noopener noreferrer">Fibonacci</a> patterns, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bollingerbands.asp" rel="noopener noreferrer">Bollinger Bands®</a>, pivot points, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/candlestick.asp" rel="noopener noreferrer">candlestick</a> formations, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/elliottwavetheory.asp" rel="noopener noreferrer">Elliott Waves</a>, and other charting patterns is a common trait among successful forex traders. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Speculators, who typically implement such <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technicalanalysis.asp" rel="noopener noreferrer">technical analysis</a> strategies, comprise the largest component of daily forex trading volumes. The Chartered Market Technician program aims to improve the technical analysis skills of those who hold the designation. Similar to the CFA and FRM programs, the CMT exams place a heavy emphasis on understanding practical applications of chart patterns.<span class="ql-inline-citation" data-cite="4"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Technical analysis can be used either for personal portfolio purposes or for complimenting the fundamental strategies of institutions. Charts may often help analysts understand the unique behavioral components of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currencypair.asp" rel="noopener noreferrer">currency pairs</a>, which can be used to predict and forecast future forex movements. After learning how to integrate charting patterns with various economic signals, charter holders gain a strong competitive edge when implementing complex <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading-strategy.asp" rel="noopener noreferrer">trading strategies</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <span class="heading-toc" id="toc-doctor-of-philosophy-phd"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_32-0"> <span class="mntl-sc-block-heading__text"> Doctor of Philosophy (Ph.D.) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> A Ph.D. in almost any quantitative discipline, such as mathematics, statistics, finance, or economics, can prove to be extremely useful for forex traders. Many forex risk management models rely heavily on an excessive number of calculations and sensitivity inputs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/montecarlosimulation.asp" rel="noopener noreferrer">Monte Carlo simulation</a>, for example, often requires thousands of possible variable manipulations to most effectively model the performance of a position. Even fully understanding more basic analysis tools, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/var.asp" rel="noopener noreferrer">value at risk</a> models, requires a strong mathematical foundation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Those who obtained a Ph.D. in economics will often be familiar with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/econometrics.asp" rel="noopener noreferrer">econometrics</a> and economic trend forecasting. These skills are transferable to improving one's abilities in the forex market due to the close correlation between economic policy and exchange rates. If, for example, an economist predicts that European <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp" rel="noopener noreferrer">inflation</a> is likely to fall due to strict <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/monetarypolicy.asp" rel="noopener noreferrer">monetary policy</a>, the appropriate position can easily be determined. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <span class="heading-toc" id="toc-series-34"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_39-0"> <span class="mntl-sc-block-heading__text"> Series 34 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Passing the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/series-34.asp" rel="noopener noreferrer">Series 34</a> Retail Off-Exchange Forex exam is nowhere near as difficult as obtaining any one of the three aforementioned designations or completing a Ph.D. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Series 34 comprises 40 multiple choice questions that cover topics such as forex trading calculations, forex regulatory requirements, and basic forex indicators.<span class="ql-inline-citation" data-cite="5"></span> Although this exam covers only the basics of the forex market, it is a requirement for those working with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retailinvestor.asp" rel="noopener noreferrer">retail customers</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cftc.asp" rel="noopener noreferrer">Commodities Futures Trading Commission</a> (CFTC) requires that individuals who sell forex products to retail customers need to pass the Series 34 exam. This includes "persons who solicit orders, exercise discretionary trading authority, and operate pools with respect to off-exchange retail forex."<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> The forex market offers many diverse career opportunities that will often dictate the required extra credentials to break into the field. Brokers will typically seek the series 34, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp" rel="noopener noreferrer">hedge fund</a> quants are likely to hold PhDs, risk managers tend to pursue the FRM designation, institutional investors are likely to benefit from the CFA designation, and traders frequently take the CMT path. Ambitious finance individuals may even combine numerous designations and programs to best suit their needs. </p></div>

Prospective personal finance and portfolio management professionals have an assortment of designations that can improve their expertise in their respective fields. [Foreign exchange](https://www.investopedia.com/terms/f/foreign-exchange.asp) traders, on the other hand, do not always have similar access to the same types of comprehensive skills improving programs, such as the [Certified Financial Planner](https://www.investopedia.com/terms/c/cfp.asp) and Chartered Market Analyst designations. Nonetheless, there are several advanced education alternatives that forex traders can take advantage of to improve their efficiency in the field. ### Key Takeaways * Several educational programs help forex traders enhance their skills and broaden their knowledge within their field. * The Chartered Financial Analyst program includes learning objectives focused on forex topics. * The CMT program emphasizes practical applications of chart patterns, which most forex traders understand. * The Commodities Futures Trading Commission requires that certain traders pass the Series 34 Retail Off-Exchange Forex exam. ## Chartered Financial Analyst (CFA) Although the [CFA](https://www.investopedia.com/terms/c/cfa.asp) program is primarily focused on equity valuation and portfolio management, some of the most important learning objectives are dependent on a working knowledge of forex-related concepts. For example, CFA candidates must learn how to consolidate the [financial statements](https://www.investopedia.com/terms/f/financial-statements.asp) of a corporation which generates income in foreign markets, how currency movements affect equity risk, forecasting exchange rates, and the basics fundamentals which drive the forex market. Based on its difficulty and diverse objectives of the CFA program, charter holders have proved their ability to learn complex financial material and hold a solid understanding of the overall industry. Managing forex exposure is an integral component of the portfolio management process. While some managers may take a passive approach to foreign exchange rate risk optimization, major institutions will often actively employ a qualified manager to [hedge](https://www.investopedia.com/terms/h/hedge.asp) the [currency risk](https://www.investopedia.com/terms/c/currencyrisk.asp) associated with holding international investments. As international diversification becomes a growing component of the portfolio management process, the CFA program addresses many of the key issues investors must be familiar with. ## Financial Risk Manager (FRM) The FRM program also covers a diverse spectrum of quantitative topics, such as valuation and risk modeling, risk management, [credit risk](https://www.investopedia.com/terms/c/creditrisk.asp) measurements, and market risk measurement. Those who [obtain the Financial Risk Manager designation](https://www.investopedia.com/best-frm-exam-prep-courses-5085430) become exposed to a wide variety of career opportunities, such as investment risk management and risk analysis. Bank, government, and hedge fund operations are heavily impacted by the forex market and thus require experts in [risk management](https://www.investopedia.com/terms/r/riskmanagement.asp). Almost every major multinational organization devotes efforts to mitigate the effects of adverse foreign exchange fluctuations. Wal-Mart, for example, might buy its inputs from China in yuan and sell those goods to Mexican buyers, receiving pesos. If the yuan appreciates while the peso depreciates relative to the US dollar, Wal-Mart would experience a double foreign exchange loss on the purchase and subsequent sale. Firstly, more dollars would have to be spent to buy the Chinese goods, and less would be received from Mexican buyers. Since such fluctuation would significantly hinder the performance of the company, the risk exposure must be hedged appropriately. ## Chartered Market Technician (CMT) Being able to understand [Fibonacci](https://www.investopedia.com/terms/f/fibonacciretracement.asp) patterns, [Bollinger Bands®](https://www.investopedia.com/terms/b/bollingerbands.asp), pivot points, [candlestick](https://www.investopedia.com/terms/c/candlestick.asp) formations, [Elliott Waves](https://www.investopedia.com/terms/e/elliottwavetheory.asp), and other charting patterns is a common trait among successful forex traders. Speculators, who typically implement such [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) strategies, comprise the largest component of daily forex trading volumes. The Chartered Market Technician program aims to improve the technical analysis skills of those who hold the designation. Similar to the CFA and FRM programs, the CMT exams place a heavy emphasis on understanding practical applications of chart patterns. Technical analysis can be used either for personal portfolio purposes or for complimenting the fundamental strategies of institutions. Charts may often help analysts understand the unique behavioral components of [currency pairs](https://www.investopedia.com/terms/c/currencypair.asp), which can be used to predict and forecast future forex movements. After learning how to integrate charting patterns with various economic signals, charter holders gain a strong competitive edge when implementing complex [trading strategies](https://www.investopedia.com/terms/t/trading-strategy.asp). ## Doctor of Philosophy (Ph.D.) A Ph.D. in almost any quantitative discipline, such as mathematics, statistics, finance, or economics, can prove to be extremely useful for forex traders. Many forex risk management models rely heavily on an excessive number of calculations and sensitivity inputs. A [Monte Carlo simulation](https://www.investopedia.com/terms/m/montecarlosimulation.asp), for example, often requires thousands of possible variable manipulations to most effectively model the performance of a position. Even fully understanding more basic analysis tools, such as [value at risk](https://www.investopedia.com/terms/v/var.asp) models, requires a strong mathematical foundation. Those who obtained a Ph.D. in economics will often be familiar with [econometrics](https://www.investopedia.com/terms/e/econometrics.asp) and economic trend forecasting. These skills are transferable to improving one's abilities in the forex market due to the close correlation between economic policy and exchange rates. If, for example, an economist predicts that European [inflation](https://www.investopedia.com/terms/i/inflation.asp) is likely to fall due to strict [monetary policy](https://www.investopedia.com/terms/m/monetarypolicy.asp), the appropriate position can easily be determined. ## Series 34 Passing the [Series 34](https://www.investopedia.com/terms/s/series-34.asp) Retail Off-Exchange Forex exam is nowhere near as difficult as obtaining any one of the three aforementioned designations or completing a Ph.D. Series 34 comprises 40 multiple choice questions that cover topics such as forex trading calculations, forex regulatory requirements, and basic forex indicators. Although this exam covers only the basics of the forex market, it is a requirement for those working with [retail customers](https://www.investopedia.com/terms/r/retailinvestor.asp). The [Commodities Futures Trading Commission](https://www.investopedia.com/terms/c/cftc.asp) (CFTC) requires that individuals who sell forex products to retail customers need to pass the Series 34 exam. This includes "persons who solicit orders, exercise discretionary trading authority, and operate pools with respect to off-exchange retail forex." ## The Bottom Line The forex market offers many diverse career opportunities that will often dictate the required extra credentials to break into the field. Brokers will typically seek the series 34, [hedge fund](https://www.investopedia.com/terms/h/hedgefund.asp) quants are likely to hold PhDs, risk managers tend to pursue the FRM designation, institutional investors are likely to benefit from the CFA designation, and traders frequently take the CMT path. Ambitious finance individuals may even combine numerous designations and programs to best suit their needs.

Prospective personal finance and portfolio management professionals have an assortment of designations that can improve their expertise in their respective fields. Foreign exchange traders, on the other hand, do not always have similar access to the same types of comprehensive skills improving programs, such as the Certified Financial Planner and Chartered Market Analyst designations. Nonetheless, there are several advanced education alternatives that forex traders can take advantage of to improve their efficiency in the field. Key Takeaways Several educational programs help forex traders enhance their skills and broaden their knowledge within their field.The Chartered Financial Analyst program includes learning objectives focused on forex topics.The CMT program emphasizes practical applications of chart patterns, which most forex traders understand.The Commodities Futures Trading Commission requires that certain traders pass the Series 34 Retail Off-Exchange Forex exam. Chartered Financial Analyst (CFA) Although the CFA program is primarily focused on equity valuation and portfolio management, some of the most important learning objectives are dependent on a working knowledge of forex-related concepts. For example, CFA candidates must learn how to consolidate the financial statements of a corporation which generates income in foreign markets, how currency movements affect equity risk, forecasting exchange rates, and the basics fundamentals which drive the forex market. Based on its difficulty and diverse objectives of the CFA program, charter holders have proved their ability to learn complex financial material and hold a solid understanding of the overall industry. Managing forex exposure is an integral component of the portfolio management process. While some managers may take a passive approach to foreign exchange rate risk optimization, major institutions will often actively employ a qualified manager to hedge the currency risk associated with holding international investments. As international diversification becomes a growing component of the portfolio management process, the CFA program addresses many of the key issues investors must be familiar with. Financial Risk Manager (FRM) The FRM program also covers a diverse spectrum of quantitative topics, such as valuation and risk modeling, risk management, credit risk measurements, and market risk measurement. Those who obtain the Financial Risk Manager designation become exposed to a wide variety of career opportunities, such as investment risk management and risk analysis. Bank, government, and hedge fund operations are heavily impacted by the forex market and thus require experts in risk management. Almost every major multinational organization devotes efforts to mitigate the effects of adverse foreign exchange fluctuations. Wal-Mart, for example, might buy its inputs from China in yuan and sell those goods to Mexican buyers, receiving pesos. If the yuan appreciates while the peso depreciates relative to the US dollar, Wal-Mart would experience a double foreign exchange loss on the purchase and subsequent sale. Firstly, more dollars would have to be spent to buy the Chinese goods, and less would be received from Mexican buyers. Since such fluctuation would significantly hinder the performance of the company, the risk exposure must be hedged appropriately. Chartered Market Technician (CMT) Being able to understand Fibonacci patterns, Bollinger Bands®, pivot points, candlestick formations, Elliott Waves, and other charting patterns is a common trait among successful forex traders. Speculators, who typically implement such technical analysis strategies, comprise the largest component of daily forex trading volumes. The Chartered Market Technician program aims to improve the technical analysis skills of those who hold the designation. Similar to the CFA and FRM programs, the CMT exams place a heavy emphasis on understanding practical applications of chart patterns. Technical analysis can be used either for personal portfolio purposes or for complimenting the fundamental strategies of institutions. Charts may often help analysts understand the unique behavioral components of currency pairs, which can be used to predict and forecast future forex movements. After learning how to integrate charting patterns with various economic signals, charter holders gain a strong competitive edge when implementing complex trading strategies. Doctor of Philosophy (Ph.D.) A Ph.D. in almost any quantitative discipline, such as mathematics, statistics, finance, or economics, can prove to be extremely useful for forex traders. Many forex risk management models rely heavily on an excessive number of calculations and sensitivity inputs. A Monte Carlo simulation, for example, often requires thousands of possible variable manipulations to most effectively model the performance of a position. Even fully understanding more basic analysis tools, such as value at risk models, requires a strong mathematical foundation. Those who obtained a Ph.D. in economics will often be familiar with econometrics and economic trend forecasting. These skills are transferable to improving one's abilities in the forex market due to the close correlation between economic policy and exchange rates. If, for example, an economist predicts that European inflation is likely to fall due to strict monetary policy, the appropriate position can easily be determined. Series 34 Passing the Series 34 Retail Off-Exchange Forex exam is nowhere near as difficult as obtaining any one of the three aforementioned designations or completing a Ph.D. Series 34 comprises 40 multiple choice questions that cover topics such as forex trading calculations, forex regulatory requirements, and basic forex indicators. Although this exam covers only the basics of the forex market, it is a requirement for those working with retail customers. The Commodities Futures Trading Commission (CFTC) requires that individuals who sell forex products to retail customers need to pass the Series 34 exam. This includes "persons who solicit orders, exercise discretionary trading authority, and operate pools with respect to off-exchange retail forex." The Bottom Line The forex market offers many diverse career opportunities that will often dictate the required extra credentials to break into the field. Brokers will typically seek the series 34, hedge fund quants are likely to hold PhDs, risk managers tend to pursue the FRM designation, institutional investors are likely to benefit from the CFA designation, and traders frequently take the CMT path. Ambitious finance individuals may even combine numerous designations and programs to best suit their needs.

https://www.investopedia.com/equity-funds-vs-income-funds-8612541

Equity Funds vs. Income Funds: Which Is Better?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-equity-funds-vs-income-funds-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Equity Funds vs. Income Funds: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> When investing money, you’re faced with many choices. Two well-known categories of investments are equity and income funds. But what exactly are they, and which one is right for you? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Let’s start by defining them. Equity funds are pooled investments that primarily invest in stocks and offer the potential for higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a>, but they have more <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risk</a>. Income funds, meanwhile, focus on generating regular income through investments in fixed-income securities like bonds or the money market.<span class="ql-inline-citation" data-cite="1"></span> They are also used to mitigate risk. Both are among the many available mutual and exchange-traded funds (ETFs). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> So, how do you decide between the two? Peter Lazaroff, an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inv-100-top-financial-advisors-7556227">Investopedia top-10 financial advisor</a>, cautions against thinking that income funds provide regular payments while equity funds are purely for growth or capital appreciation. He suggests that this classic financial information doesn’t fit a market with far more resources and options for investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> “I am more interested in total returns than the income of any given product because you give me a dollar, it’s a dollar no matter what,” says <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/peter-lazaroff-7552540">Lazaroff</a>.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_9-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_10-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_11-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Equity funds primarily hold stocks and offer the potential for higher returns and risks.</li><li>Income funds can generate regular income through investments in fixed-income securities but also help lower a portfolio’s overall risk.</li><li>When choosing between equity and income funds, consider the risk and return profiles and your investment goals.</li><li>Given the diversity of offerings now available, there isn’t the hard-and-fast distinction between income and equity funds that there once was.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Traditionally, equity funds focused on stocks for growth or capital appreciation, while income funds prioritized bonds or dividend-paying stocks for steady cash flow. However, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/modernportfoliotheory.asp">modern portfolio theory</a> and the emergence of blended or hybrid funds offer investors approaches that balance growth and income according to their individual risk tolerances and goals. As such, the split between income and equity funds isn’t rigid, with many investors choosing funds offering equity growth potential and income generation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Lazaroff recommends considering your investment goals and risk tolerance before choosing different funds. “If you need current income” and “like the certainty of a dividend,” you might steer toward income funds, he says. However, he adds, “Dividends get cut in recessions, too. The range of retirement outcomes is better and broader when you take a total return approach than when you use just an income-focused approach to investing.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Looking at the total returns means understanding the characteristics and risks of each investment, along with their tax implications—all to better inform your decisions while you build out your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a>.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <span class="heading-toc" id="toc-equity-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <span class="mntl-sc-block-heading__text"> Equity Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equityfund.asp">Equity funds</a> primarily invest in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock.asp">stocks</a>, which represent fractional ownership in a company. Equity funds can be actively managed by those who select stocks based on research and analysis or passively manage to track a specific stock market index like the S&amp;P 500.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_21-0"> <span class="mntl-sc-block-subheading__text"> Equity Fund Types </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Equity fund managers choose their strategies based on their investors’ needs. Growth fund managers focus on companies with the potential to grow their earnings and expand their market share. Meanwhile, value fund managers search for undervalued stocks trading below their intrinsic worth, expecting them to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/appreciation.asp">appreciate</a> over time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Let’s break down the equity fund types. First, the distinction between growth and value investing is based on the characteristics of the companies in which the funds invest rather than their size: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_25-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li><strong>Growth funds</strong>: These focus on companies expected to grow faster than the overall market, often in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sector.asp">sectors</a> like technology or healthcare. They carry greater risk in return for more potential rewards.</li> <li><strong>Value funds</strong>: These look for companies with solid fundamentals trading at a price lower than their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/intrinsicvalue.asp">intrinsic value</a>.</li> <li><strong>Blend funds</strong>: These channel money into a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blendfund.asp">mix</a> of growth and value stocks, giving a portfolio more balance.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Equity funds are also organized by the size of the companies in which they invest: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> <li><strong>Large-cap funds</strong>: These hold the stocks of large, well-established companies with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">market capitalizations</a> typically exceeding $10 billion, though this figure changes over time.</li> <li><strong>Midcap funds</strong>: These hold the stock of medium-sized companies, generally with market capitalizations of $2 billion to $10 billion.</li> <li><strong>Small-cap funds</strong>: These invest in smaller companies with market capitalizations typically under $2 billion. Small caps usually have more growth potential but carry more risk.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Investors can combine investments in growth and value funds with different market capitalizations to align with their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/figure-out-your-investment-goals/">investment goals</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a>.<span class="ql-inline-citation" data-cite="3"></span> For example, an investor might choose a large-cap value fund for stability and a small-cap growth fund for potential higher returns, understanding that the small-cap fund may have more volatility. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Equity funds often focus on particular segments of the market to cater to different investor strategies and risk profiles: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> <li><strong>Sector funds</strong>: These focus on specific parts of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economy.asp">economy</a>, such as technology, healthcare, energy, or financial services.</li> <li><strong>International funds</strong>: These put money into stocks of companies based outside the investor’s home country, providing exposure to global markets and potentially benefiting from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a>.</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emergingmarketfund.asp"><strong>Emerging market funds</strong></a>: These invest in stocks of companies based in developing economies, such as China, India, or Brazil. These markets have more growth potential but also come with greater risks.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_38-0"> <span class="mntl-sc-block-subheading__text"> Index Funds </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Given their popularity and success—S&amp;P 500 Index funds frequently outperform their actively managed peers—it’s worth setting out these equity funds on their own.<span class="ql-inline-citation" data-cite="5"></span> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indexfund.asp">Index funds</a> are designed to mirror the performance of a specific equity index like the S&amp;P 500 or Russell 2000. They provide broad market exposure and diversification at a lower cost than other funds. The advantage of index funds lies in their broad market exposure, making them a go-to investment for both novice and experienced investors alike. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_40-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_41-0"> <span class="mntl-sc-block-subheading__text"> Risk and Return </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Equity funds generally carry higher risk compared with income funds because of the inherent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> of the stock market. However, they also offer the potential for higher returns over the long term. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> The precise risk and return of an equity fund will depend on the underlying stocks in its portfolio and overall market conditions. Factors that can affect the risk and return of an equity fund thus include investment style or focus, economic conditions, market sentiment, company-specific events, and geopolitical risks. Equity funds holding <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-cap.asp">small-cap</a> or emerging market stocks often have more risk than those investing in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/large-cap.asp">large-cap</a> or developed-market stocks. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_45-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_46-0"> <span class="mntl-sc-block-subheading__text"> How to Analyze Equity Fund Performance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Historically, equity funds have, on average, outperformed fixed-income investments over the long term. However, this depends on the time frame. In addition, past performance does not guarantee future results, and investors should carefully assess a fund’s track record and management before investing. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Here are the key metrics to review: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_50-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jensensmeasure.asp"><strong>Alpha</strong></a>: This instead measures the fund’s excess return relative to its benchmark, indicating the manager’s skill in selecting stocks.</li> <li><strong>Benchmarks</strong>: These are comparable indexes used to gauge a fund’s performance.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/010815/what-good-sharpe-ratio.asp"><strong>Sharpe ratio</strong></a>: This helps you assess risk-adjusted returns. Generally, a higher Sharpe ratio is preferred.</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/totalreturn.asp"><strong>Total returns</strong></a>: This measures the fund’s overall performance, including capital appreciation and dividends.<br/></li> <li><strong>Volatility</strong>: This measures the fund’s average price fluctuations.<br/></li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_52-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> These can all be found on many investor and brokerage platforms, including Investopedia. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_54-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_55-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_56-0"> <h3 class="mntl-sc-block__comparison-list-heading mntl-sc-block-comparisonlist__comparison-list-heading">Equity Fund Pros and Cons</h3> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Potential for higher returns</p></li> <li><p>Often managed by professional fund managers</p></li> <li><p>Diversified portfolio of stocks</p></li> <li><p>Highly liquid (transferable into cash)</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Subject to greater risk than income funds</p></li> <li><p>Actively managed equity funds can charge high fees</p></li> <li><p>No control over the fund’s portfolio</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_57-0"></div> <span class="heading-toc" id="toc-income-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_58-0"> <span class="mntl-sc-block-heading__text"> Income Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incomefund.asp">Income funds</a> generate regular income for investors by investing in fixed-income securities such as bonds, Treasurys, certificates of deposit (CDs), <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preference-shares.asp">preferred shares</a>, and money market instruments. Many use these funds to provide a steady income through interest and dividends while preserving their capital. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> However, Lazaroff, host of the education podcast The Long Term Investor, says it’s a bit of a misnomer when these funds are labeled “fixed-income.”<span class="ql-inline-citation" data-cite="6"></span> “I am a big believer that the role of bonds in a portfolio is to reduce the overall volatility of the portfolio,” he says, pointing to the major asset found in most income funds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> By putting a part of your savings into funds with bonds, CDs, and so on, you’re balancing out the heightened risks of the part of your portfolio in equities. “The fact that they’re called fixed income creates this image in our head that it should be all about the income where it’s just descriptive,” Lazaroff says. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> In other words, despite the name, it’s wise to think of “income funds” as helping to keep your portfolio balanced rather than solely as a source of regular income. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Putting part of your portfolio into income funds can smooth out the stock market’s ups and downs to create a more stable investment mix. This approach can be essential for investors nearing retirement or those with a lower risk tolerance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> Lazaroff has written in Investopedia about a popular way to balance income and equity funds through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fa-one-thing-60-40-portfolio-8610197">60/40 portfolio structure</a>. Ultimately, he says, the key is to create a well-rounded portfolio that aligns with your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/">financial goals</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timehorizon.asp">time horizon</a>, and risk tolerance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_71-0"> <span class="mntl-sc-block-subheading__text"> Income Fund Types </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_72-0"> Income funds often hold a diversified portfolio of bonds and similar securities with varying maturities and credit qualities, which helps mitigate risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> One common strategy that income funds employ is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/laddering.asp">laddering</a>, where the fund invests in bonds with different maturity dates. This approach enables the fund to manage interest rate risk (potential losses from changes in interest rates) effectively and ensure more consistency since the bonds mature at different times and can be reinvested at prevailing rates. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_75-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_76-0"> In addition, income fund managers pay close attention to the credit quality of the underlying securities. They may opt for investment-grade bonds with a lower risk of default or venture into high-yield bonds, also known as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/junkbond.asp">junk bonds</a>, which offer higher income potential but come with increased risk. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_78-0"> Income funds also manage the duration of their holdings to adjust the fund’s sensitivity to interest rate changes. In addition, some income funds specialize in specific sectors. For example, they may focus on tax-advantaged municipal bonds, which offer tax-free income to investors, or emerging market debt, which can provide higher yields but carries higher risk. Others invest across various sectors and geographies to spread risk and improve the chances of improved returns. This diversification helps mitigate sector-specific risks and capitalize on prospects in different markets. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_79-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_80-0"> <span class="mntl-sc-block-subheading__text"> Risk and Return </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Income funds generally have less risk than equity funds since they primarily hold fixed-income securities. However, they also offer lower potential returns. An income fund’s risk and return mix depends on the underlying securities’ credit quality, interest rate changes, and the fund’s management. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_83-0"> Income funds are naturally exposed to a certain degree of risk, and the bond issuer may default on interest or principal payments. There’s also <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestraterisk.asp">interest rate risk</a>, where bond prices may fall when interest rates rise. Income funds investing in high-yield (junk) or emerging market bonds tend to carry higher credit risk than those investing in investment-grade or developed-market bonds.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="9"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_84-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_85-0"> <span class="mntl-sc-block-subheading__text"> How to Analyze Income Fund Performance </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> Income funds typically provide more stable returns in the form of regular interest payments. However, their performance will be influenced by interest rate changes and the credit quality of their securities. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> While interest rates are rising, the value of existing bonds may decrease, affecting the fund’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nav.asp">net asset value</a>. Conversely, bond prices may increase during periods of falling interest rates, providing capital appreciation and regular income.<span class="ql-inline-citation" data-cite="1"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_90-0"> Some metrics can significantly help with your assessment of different income funds. As with equity funds, there are metrics for total return and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/092613/pay-attention-your-funds-expense-ratio.asp">expense ratio</a>, which is the fund’s operating costs given as a percentage of assets.<span class="ql-inline-citation" data-cite="13"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_91-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> Noteworthy, too, are the measures of yield, which indicate the fund’s ability to generate income.<span class="ql-inline-citation" data-cite="7"></span> There are several types: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_93-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_94-0"> <li><strong>Distribution yield</strong>: This is based on the income distributed by the fund in the most recent annualized period. It indicates the income generated by the fund but is also backward-looking.</li><li><strong>SEC (Securities and Exchange Commission) yield</strong>: A standardized 30-day yield that reflects the interest earned by the fund’s investments minus the fund’s expenses.</li><li><strong>Yield to maturity (YTM)</strong>: This represents the estimated return of all securities in the fund if held to maturity. YTM is forward-looking and considered more comprehensive than other metrics.</li><li><strong>Yield to worst (YTW)</strong>: This measures the lowest potential yield that can be received on the bond of bond funds without issuers defaulting on payments. It accounts for bond provisions that allow the issuer to close out the position before maturity and provides a scenario analysis tool.</li> </ul> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_95-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_96-0"> YTM “is going to be the most useful of all the metrics you’re going to see,” Lazaroff says. “What makes the yield to maturity great is that it’s forward-looking,” unlike other metrics that only tell you about past performance. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_97-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_98-0"> If you’re assessing your worst-case scenario when investing, Lazaroff suggests you look for the YTW. “It’s great for scenario analysis that you can do easily on your own because it’s measuring the lowest potential yield that can be received from the bond fund without issuers defaulting,” he says. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></div> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_100-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_101-0"> <h3 class="mntl-sc-block__comparison-list-heading mntl-sc-block-comparisonlist__comparison-list-heading">Income Fund Pros and Cons</h3> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Pros</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Regular income generation</p></li> <li><p>Less risk than equity funds</p></li> <li><p>Diversified fixed-income holdings</p></li> <li><p>May have lower investment minimums than individual bonds</p></li> </ul> </div> <div class="mntl-sc-block__wrapper mntl-sc-block-comparisonlist__wrapper"> <span class="mntl-sc-block__heading mntl-sc-block-comparisonlist__heading">Cons</span> <ul class="mntl-sc-block__list mntl-sc-block-comparisonlist__list"> <li><p>Lower potential return compared with equity funds</p></li> <li><p>Interest rate risk</p></li> <li><p>Credit risk</p></li> <li><p>No control over the fund’s portfolio</p></li> </ul> </div> </div></div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_102-0"></div> <span class="heading-toc" id="toc-key-differences-between-equity-and-income-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_103-0"> <span class="mntl-sc-block-heading__text"> Key Differences Between Equity and Income Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_104-0"> While, as Lazaroff notes, it’s truer every day that investors are putting their money into funds with many gradations between those simply in equities and those in bonds, it’s helpful to set out their major differences. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_106-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Equity vs. Income Funds</th> </tr> <tr> <th></th> <th>Equity Funds</th> <th>Income Funds</th> </tr> </thead> <tbody data-check="0"> <tr> <th>Primary Objective</th> <td>Capital appreciation</td> <td>Regular income generation; balancing portfolio risk</td> </tr> <tr> <th>Investment Focus</th> <td>Stocks of various companies</td> <td>Fixed-income securities (bonds, Treasurys, preferreds, money market)</td> </tr> <tr> <th>Comparative Risk Profile</th> <td>Higher</td> <td>Lower</td> </tr> <tr> <th>Return Potential</th> <td>Higher over the long term</td> <td>Lower, mainly from interest income</td> </tr> <tr> <th>Market Sensitivity</th> <td>Exposed to stock market fluctuations and economic conditions</td> <td>Sensitive to interest rate changes and credit quality</td> </tr> <tr> <th>Portfolio Diversification</th> <td>Diversified across various stocks, sectors, and market caps</td> <td>Diversified across fixed-income securities with varying maturities and credit qualities</td> </tr> <tr> <th>Income Generation</th> <td>Dividends from stocks (not guaranteed); increase in stock value</td> <td>Regular interest payments from fixed-income securities</td> </tr> <tr> <th>Capital Preservation</th> <td>No guarantee of capital preservation because of market risk</td> <td>Aims to preserve capital through principal return at maturity</td> </tr> <tr> <th>Liquidity</th> <td>Generally high liquidity</td> <td>Generally high liquidity, but may depend on the fund and market conditions</td> </tr> <tr> <th>Investor Risk Tolerance</th> <td>Suitable for investors with higher risk tolerance</td> <td>Suitable for investors with low to moderate risk tolerance</td> </tr> <tr> <th>Fees and Expenses</th> <td>Higher fees for actively managed funds, lower for index funds</td> <td>Generally lower fees compared with actively managed equity funds</td> </tr> <tr> <th>Taxation</th> <td>Capital gains tax on profits, dividend tax on distributions</td> <td>Taxed as ordinary income</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div> <span class="heading-toc" id="toc-tax-implications-of-equity-vs-income-funds"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_108-0"> <span class="mntl-sc-block-heading__text"> Tax Implications of Equity vs. Income Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_109-0"> Lazaroff says investors should review how equity and income funds might be treated on their taxes, which can make a major difference in how they invest. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_110-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_111-0"> <strong>Equity funds</strong>: Since equity funds are primarily invested in stocks, they are subject to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital_gains_tax.asp">capital gains taxes</a>.<span class="ql-inline-citation" data-cite="11"></span> When an equity fund sells a stock at a profit, it’s passed on to investors as capital gains distributions. These are taxed at the long-term capital gains rate if the stock is held for more than a year, which is generally lower than the ordinary income tax rate you pay annually. However, if the stock was held for a shorter period, the gains are considered short-term and are taxed at the investor’s ordinary income tax rate. Dividends passed on to investors are taxed at the qualified dividend rate, usually lower than the ordinary income tax rate.<span class="ql-inline-citation" data-cite="12"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_112-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_113-0"> <strong>Income funds</strong>: Meanwhile, the interest income generated by bonds is typically taxed at the investor’s ordinary <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incometax.asp">income tax</a> rate. Nevertheless, certain types of bonds, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/municipalbond.asp">municipal bonds</a>, may offer tax-exempt interest income, making them attractive for investors in higher tax brackets. As such, there could be a big difference between one bond income fund and another. In addition to interest income, income funds can also generate capital gains from the sale of bonds, which are taxed like sales in equity funds, and the rate again depends on the holding period. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_114-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_115-0"><span class="heading-toc" id="toc-who-is-an-income-fund-most-suitable-for"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Is an Income Fund Most Suitable for?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Income funds prioritize current income over capital gains or price appreciation through interest or dividend-paying investments. Therefore, they are usually best suited for lower-risk investors who need income flows. These may include older individuals who need retirement income or those who live on fixed incomes and cannot risk stock market volatility.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_116-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_117-0"><span class="heading-toc" id="toc-is-a-bond-fund-the-same-as-an-income-fund"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is a Bond Fund the Same as an Income Fund?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Not necessarily. While both may invest in a portfolio of bonds, an income fund’s goal is primarily to generate current income, while a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bondfund.asp">bond fund</a>, more broadly, may also seek capital returns by finding underpriced bonds, speculating on interest rate changes, or trading spreads between specific categories of bonds.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_118-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_119-0"><span class="heading-toc" id="toc-what-role-do-equity-funds-and-income-funds-play-in-retirement-planning"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Role Do Equity Funds and Income Funds Play in Retirement Planning?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Both equity funds and income funds can play important roles in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">retirement planning</a>. Younger investors with longer time horizons are often advised to allocate a larger part of their retirement portfolio to equity funds to benefit from their long-term growth potential. As investors approach retirement age, they may gradually shift their asset allocation toward income funds to prioritize capital preservation and regular income generation. In retirement, income funds can provide a steady stream of income to supplement other sources such as pensions or Social Security benefits.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_120-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_121-0"><span class="heading-toc" id="toc-can-an-investor-hold-both-equity-funds-and-income-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can an Investor Hold Both Equity Funds and Income Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Of course. Investors frequently hold both equity and fixed-income investments in their portfolios in different proportions to achieve diversification and balance risk and return. This strategy, known as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/financial-analysis/090316/asset-allocation-vs-security-selection-main-differences.asp">asset allocation</a>, can help optimize a portfolio’s performance by combining the growth potential of equity funds with the stable income generation of income funds.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_122-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_123-0"><span class="heading-toc" id="toc-how-do-equity-funds-vs-income-funds-perform-during-recessions"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Equity Funds vs. Income Funds Perform During Recessions?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Equity funds, which are more sensitive to market conditions, may experience significant declines during <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/recession.asp">recessions</a> as company earnings and stock prices fall. While generally more stable than equity funds, income funds may also face challenges during recessions. If interest rates are lowered to stimulate the economy, then the value of bond holdings may rise, but the income flows generated by income funds may decrease at the same time.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_124-0"></div> <span class="heading-toc" id="toc-the-bottom-line"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_125-0"> <span class="mntl-sc-block-heading__text"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_126-0"> Equity and income funds cater to different investment goals and risk tolerances. Equity funds invest in publicly traded corporation shares and are more suitable for investors seeking capital appreciation and willing to accept higher risk. Income funds hold fixed-income securities like bonds and are often more appropriate for investors prioritizing regular income and capital preservation. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_127-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_128-0"> Lazaroff suggests reviewing potential total returns for either kind of fund rather than just looking at dividends or interest income. “A dollar is a dollar, no matter where it comes from,” he says. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_129-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_130-0"> Most importantly, ensure that any investment meets your financial goals, risk tolerance, and investment horizon. </p></div>

## Equity Funds vs. Income Funds: An Overview When investing money, you’re faced with many choices. Two well-known categories of investments are equity and income funds. But what exactly are they, and which one is right for you? Let’s start by defining them. Equity funds are pooled investments that primarily invest in stocks and offer the potential for higher [returns](https://www.investopedia.com/terms/r/return.asp), but they have more [risk](https://www.investopedia.com/terms/r/risk.asp). Income funds, meanwhile, focus on generating regular income through investments in fixed-income securities like bonds or the money market. They are also used to mitigate risk. Both are among the many available mutual and exchange-traded funds (ETFs). So, how do you decide between the two? Peter Lazaroff, an [Investopedia top-10 financial advisor](https://www.investopedia.com/inv-100-top-financial-advisors-7556227), cautions against thinking that income funds provide regular payments while equity funds are purely for growth or capital appreciation. He suggests that this classic financial information doesn’t fit a market with far more resources and options for investors. “I am more interested in total returns than the income of any given product because you give me a dollar, it’s a dollar no matter what,” says [Lazaroff](https://www.investopedia.com/peter-lazaroff-7552540). ### Key Takeaways * Equity funds primarily hold stocks and offer the potential for higher returns and risks. * Income funds can generate regular income through investments in fixed-income securities but also help lower a portfolio’s overall risk. * When choosing between equity and income funds, consider the risk and return profiles and your investment goals. * Given the diversity of offerings now available, there isn’t the hard-and-fast distinction between income and equity funds that there once was. Traditionally, equity funds focused on stocks for growth or capital appreciation, while income funds prioritized bonds or dividend-paying stocks for steady cash flow. However, [modern portfolio theory](https://www.investopedia.com/terms/m/modernportfoliotheory.asp) and the emergence of blended or hybrid funds offer investors approaches that balance growth and income according to their individual risk tolerances and goals. As such, the split between income and equity funds isn’t rigid, with many investors choosing funds offering equity growth potential and income generation. Lazaroff recommends considering your investment goals and risk tolerance before choosing different funds. “If you need current income” and “like the certainty of a dividend,” you might steer toward income funds, he says. However, he adds, “Dividends get cut in recessions, too. The range of retirement outcomes is better and broader when you take a total return approach than when you use just an income-focused approach to investing.” Looking at the total returns means understanding the characteristics and risks of each investment, along with their tax implications—all to better inform your decisions while you build out your [portfolio](https://www.investopedia.com/terms/p/portfolio.asp). ## Equity Funds [Equity funds](https://www.investopedia.com/terms/e/equityfund.asp) primarily invest in [stocks](https://www.investopedia.com/terms/s/stock.asp), which represent fractional ownership in a company. Equity funds can be actively managed by those who select stocks based on research and analysis or passively manage to track a specific stock market index like the S&P 500. ### Equity Fund Types Equity fund managers choose their strategies based on their investors’ needs. Growth fund managers focus on companies with the potential to grow their earnings and expand their market share. Meanwhile, value fund managers search for undervalued stocks trading below their intrinsic worth, expecting them to [appreciate](https://www.investopedia.com/terms/a/appreciation.asp) over time. Let’s break down the equity fund types. First, the distinction between growth and value investing is based on the characteristics of the companies in which the funds invest rather than their size: * **Growth funds**: These focus on companies expected to grow faster than the overall market, often in [sectors](https://www.investopedia.com/terms/s/sector.asp) like technology or healthcare. They carry greater risk in return for more potential rewards. * **Value funds**: These look for companies with solid fundamentals trading at a price lower than their [intrinsic value](https://www.investopedia.com/terms/i/intrinsicvalue.asp). * **Blend funds**: These channel money into a [mix](https://www.investopedia.com/terms/b/blendfund.asp) of growth and value stocks, giving a portfolio more balance. Equity funds are also organized by the size of the companies in which they invest: * **Large-cap funds**: These hold the stocks of large, well-established companies with [market capitalizations](https://www.investopedia.com/terms/m/marketcapitalization.asp) typically exceeding $10 billion, though this figure changes over time. * **Midcap funds**: These hold the stock of medium-sized companies, generally with market capitalizations of $2 billion to $10 billion. * **Small-cap funds**: These invest in smaller companies with market capitalizations typically under $2 billion. Small caps usually have more growth potential but carry more risk. Investors can combine investments in growth and value funds with different market capitalizations to align with their [investment goals](https://www.investopedia.com/investing/figure-out-your-investment-goals/) and [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp). For example, an investor might choose a large-cap value fund for stability and a small-cap growth fund for potential higher returns, understanding that the small-cap fund may have more volatility. Equity funds often focus on particular segments of the market to cater to different investor strategies and risk profiles: * **Sector funds**: These focus on specific parts of the [economy](https://www.investopedia.com/terms/e/economy.asp), such as technology, healthcare, energy, or financial services. * **International funds**: These put money into stocks of companies based outside the investor’s home country, providing exposure to global markets and potentially benefiting from [diversification](https://www.investopedia.com/terms/d/diversification.asp). * [**Emerging market funds**](https://www.investopedia.com/terms/e/emergingmarketfund.asp): These invest in stocks of companies based in developing economies, such as China, India, or Brazil. These markets have more growth potential but also come with greater risks. ### Index Funds Given their popularity and success—S&P 500 Index funds frequently outperform their actively managed peers—it’s worth setting out these equity funds on their own. [Index funds](https://www.investopedia.com/terms/i/indexfund.asp) are designed to mirror the performance of a specific equity index like the S&P 500 or Russell 2000. They provide broad market exposure and diversification at a lower cost than other funds. The advantage of index funds lies in their broad market exposure, making them a go-to investment for both novice and experienced investors alike. ### Risk and Return Equity funds generally carry higher risk compared with income funds because of the inherent [volatility](https://www.investopedia.com/terms/v/volatility.asp) of the stock market. However, they also offer the potential for higher returns over the long term. The precise risk and return of an equity fund will depend on the underlying stocks in its portfolio and overall market conditions. Factors that can affect the risk and return of an equity fund thus include investment style or focus, economic conditions, market sentiment, company-specific events, and geopolitical risks. Equity funds holding [small-cap](https://www.investopedia.com/terms/s/small-cap.asp) or emerging market stocks often have more risk than those investing in [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) or developed-market stocks. ### How to Analyze Equity Fund Performance Historically, equity funds have, on average, outperformed fixed-income investments over the long term. However, this depends on the time frame. In addition, past performance does not guarantee future results, and investors should carefully assess a fund’s track record and management before investing. Here are the key metrics to review: * [**Alpha**](https://www.investopedia.com/terms/j/jensensmeasure.asp): This instead measures the fund’s excess return relative to its benchmark, indicating the manager’s skill in selecting stocks. * **Benchmarks**: These are comparable indexes used to gauge a fund’s performance. * [**Sharpe ratio**](https://www.investopedia.com/ask/answers/010815/what-good-sharpe-ratio.asp): This helps you assess risk-adjusted returns. Generally, a higher Sharpe ratio is preferred. * [**Total returns**](https://www.investopedia.com/terms/t/totalreturn.asp): This measures the fund’s overall performance, including capital appreciation and dividends. * **Volatility**: This measures the fund’s average price fluctuations. These can all be found on many investor and brokerage platforms, including Investopedia. ### Equity Fund Pros and Cons Pros * Potential for higher returns * Often managed by professional fund managers * Diversified portfolio of stocks * Highly liquid (transferable into cash) Cons * Subject to greater risk than income funds * Actively managed equity funds can charge high fees * No control over the fund’s portfolio ## Income Funds [Income funds](https://www.investopedia.com/terms/i/incomefund.asp) generate regular income for investors by investing in fixed-income securities such as bonds, Treasurys, certificates of deposit (CDs), [preferred shares](https://www.investopedia.com/terms/p/preference-shares.asp), and money market instruments. Many use these funds to provide a steady income through interest and dividends while preserving their capital. However, Lazaroff, host of the education podcast The Long Term Investor, says it’s a bit of a misnomer when these funds are labeled “fixed-income.” “I am a big believer that the role of bonds in a portfolio is to reduce the overall volatility of the portfolio,” he says, pointing to the major asset found in most income funds. By putting a part of your savings into funds with bonds, CDs, and so on, you’re balancing out the heightened risks of the part of your portfolio in equities. “The fact that they’re called fixed income creates this image in our head that it should be all about the income where it’s just descriptive,” Lazaroff says. In other words, despite the name, it’s wise to think of “income funds” as helping to keep your portfolio balanced rather than solely as a source of regular income. Putting part of your portfolio into income funds can smooth out the stock market’s ups and downs to create a more stable investment mix. This approach can be essential for investors nearing retirement or those with a lower risk tolerance. Lazaroff has written in Investopedia about a popular way to balance income and equity funds through the [60/40 portfolio structure](https://www.investopedia.com/fa-one-thing-60-40-portfolio-8610197). Ultimately, he says, the key is to create a well-rounded portfolio that aligns with your [financial goals](https://www.investopedia.com/articles/personal-finance/100516/setting-financial-goals/), [time horizon](https://www.investopedia.com/terms/t/timehorizon.asp), and risk tolerance. ### Income Fund Types Income funds often hold a diversified portfolio of bonds and similar securities with varying maturities and credit qualities, which helps mitigate risk. One common strategy that income funds employ is [laddering](https://www.investopedia.com/terms/l/laddering.asp), where the fund invests in bonds with different maturity dates. This approach enables the fund to manage interest rate risk (potential losses from changes in interest rates) effectively and ensure more consistency since the bonds mature at different times and can be reinvested at prevailing rates. In addition, income fund managers pay close attention to the credit quality of the underlying securities. They may opt for investment-grade bonds with a lower risk of default or venture into high-yield bonds, also known as [junk bonds](https://www.investopedia.com/terms/j/junkbond.asp), which offer higher income potential but come with increased risk. Income funds also manage the duration of their holdings to adjust the fund’s sensitivity to interest rate changes. In addition, some income funds specialize in specific sectors. For example, they may focus on tax-advantaged municipal bonds, which offer tax-free income to investors, or emerging market debt, which can provide higher yields but carries higher risk. Others invest across various sectors and geographies to spread risk and improve the chances of improved returns. This diversification helps mitigate sector-specific risks and capitalize on prospects in different markets. ### Risk and Return Income funds generally have less risk than equity funds since they primarily hold fixed-income securities. However, they also offer lower potential returns. An income fund’s risk and return mix depends on the underlying securities’ credit quality, interest rate changes, and the fund’s management. Income funds are naturally exposed to a certain degree of risk, and the bond issuer may default on interest or principal payments. There’s also [interest rate risk](https://www.investopedia.com/terms/i/interestraterisk.asp), where bond prices may fall when interest rates rise. Income funds investing in high-yield (junk) or emerging market bonds tend to carry higher credit risk than those investing in investment-grade or developed-market bonds. ### How to Analyze Income Fund Performance Income funds typically provide more stable returns in the form of regular interest payments. However, their performance will be influenced by interest rate changes and the credit quality of their securities. While interest rates are rising, the value of existing bonds may decrease, affecting the fund’s [net asset value](https://www.investopedia.com/terms/n/nav.asp). Conversely, bond prices may increase during periods of falling interest rates, providing capital appreciation and regular income. Some metrics can significantly help with your assessment of different income funds. As with equity funds, there are metrics for total return and [expense ratio](https://www.investopedia.com/articles/personal-finance/092613/pay-attention-your-funds-expense-ratio.asp), which is the fund’s operating costs given as a percentage of assets. Noteworthy, too, are the measures of yield, which indicate the fund’s ability to generate income. There are several types: * **Distribution yield**: This is based on the income distributed by the fund in the most recent annualized period. It indicates the income generated by the fund but is also backward-looking. * **SEC (Securities and Exchange Commission) yield**: A standardized 30-day yield that reflects the interest earned by the fund’s investments minus the fund’s expenses. * **Yield to maturity (YTM)**: This represents the estimated return of all securities in the fund if held to maturity. YTM is forward-looking and considered more comprehensive than other metrics. * **Yield to worst (YTW)**: This measures the lowest potential yield that can be received on the bond of bond funds without issuers defaulting on payments. It accounts for bond provisions that allow the issuer to close out the position before maturity and provides a scenario analysis tool. YTM “is going to be the most useful of all the metrics you’re going to see,” Lazaroff says. “What makes the yield to maturity great is that it’s forward-looking,” unlike other metrics that only tell you about past performance. If you’re assessing your worst-case scenario when investing, Lazaroff suggests you look for the YTW. “It’s great for scenario analysis that you can do easily on your own because it’s measuring the lowest potential yield that can be received from the bond fund without issuers defaulting,” he says. ### Income Fund Pros and Cons Pros * Regular income generation * Less risk than equity funds * Diversified fixed-income holdings * May have lower investment minimums than individual bonds Cons * Lower potential return compared with equity funds * Interest rate risk * Credit risk * No control over the fund’s portfolio ## Key Differences Between Equity and Income Funds While, as Lazaroff notes, it’s truer every day that investors are putting their money into funds with many gradations between those simply in equities and those in bonds, it’s helpful to set out their major differences. | Equity vs. Income Funds | | | | --- | --- | --- | | | Equity Funds | Income Funds | | Primary Objective | Capital appreciation | Regular income generation; balancing portfolio risk | | Investment Focus | Stocks of various companies | Fixed-income securities (bonds, Treasurys, preferreds, money market) | | Comparative Risk Profile | Higher | Lower | | Return Potential | Higher over the long term | Lower, mainly from interest income | | Market Sensitivity | Exposed to stock market fluctuations and economic conditions | Sensitive to interest rate changes and credit quality | | Portfolio Diversification | Diversified across various stocks, sectors, and market caps | Diversified across fixed-income securities with varying maturities and credit qualities | | Income Generation | Dividends from stocks (not guaranteed); increase in stock value | Regular interest payments from fixed-income securities | | Capital Preservation | No guarantee of capital preservation because of market risk | Aims to preserve capital through principal return at maturity | | Liquidity | Generally high liquidity | Generally high liquidity, but may depend on the fund and market conditions | | Investor Risk Tolerance | Suitable for investors with higher risk tolerance | Suitable for investors with low to moderate risk tolerance | | Fees and Expenses | Higher fees for actively managed funds, lower for index funds | Generally lower fees compared with actively managed equity funds | | Taxation | Capital gains tax on profits, dividend tax on distributions | Taxed as ordinary income | ## Tax Implications of Equity vs. Income Funds Lazaroff says investors should review how equity and income funds might be treated on their taxes, which can make a major difference in how they invest. **Equity funds**: Since equity funds are primarily invested in stocks, they are subject to [capital gains taxes](https://www.investopedia.com/terms/c/capital_gains_tax.asp). When an equity fund sells a stock at a profit, it’s passed on to investors as capital gains distributions. These are taxed at the long-term capital gains rate if the stock is held for more than a year, which is generally lower than the ordinary income tax rate you pay annually. However, if the stock was held for a shorter period, the gains are considered short-term and are taxed at the investor’s ordinary income tax rate. Dividends passed on to investors are taxed at the qualified dividend rate, usually lower than the ordinary income tax rate. **Income funds**: Meanwhile, the interest income generated by bonds is typically taxed at the investor’s ordinary [income tax](https://www.investopedia.com/terms/i/incometax.asp) rate. Nevertheless, certain types of bonds, such as [municipal bonds](https://www.investopedia.com/terms/m/municipalbond.asp), may offer tax-exempt interest income, making them attractive for investors in higher tax brackets. As such, there could be a big difference between one bond income fund and another. In addition to interest income, income funds can also generate capital gains from the sale of bonds, which are taxed like sales in equity funds, and the rate again depends on the holding period. ## Who Is an Income Fund Most Suitable for? Income funds prioritize current income over capital gains or price appreciation through interest or dividend-paying investments. Therefore, they are usually best suited for lower-risk investors who need income flows. These may include older individuals who need retirement income or those who live on fixed incomes and cannot risk stock market volatility. ## Is a Bond Fund the Same as an Income Fund? Not necessarily. While both may invest in a portfolio of bonds, an income fund’s goal is primarily to generate current income, while a [bond fund](https://www.investopedia.com/terms/b/bondfund.asp), more broadly, may also seek capital returns by finding underpriced bonds, speculating on interest rate changes, or trading spreads between specific categories of bonds. ## What Role Do Equity Funds and Income Funds Play in Retirement Planning? Both equity funds and income funds can play important roles in [retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp). Younger investors with longer time horizons are often advised to allocate a larger part of their retirement portfolio to equity funds to benefit from their long-term growth potential. As investors approach retirement age, they may gradually shift their asset allocation toward income funds to prioritize capital preservation and regular income generation. In retirement, income funds can provide a steady stream of income to supplement other sources such as pensions or Social Security benefits. ## Can an Investor Hold Both Equity Funds and Income Funds? Of course. Investors frequently hold both equity and fixed-income investments in their portfolios in different proportions to achieve diversification and balance risk and return. This strategy, known as [asset allocation](https://www.investopedia.com/articles/financial-analysis/090316/asset-allocation-vs-security-selection-main-differences.asp), can help optimize a portfolio’s performance by combining the growth potential of equity funds with the stable income generation of income funds. ## How Do Equity Funds vs. Income Funds Perform During Recessions? Equity funds, which are more sensitive to market conditions, may experience significant declines during [recessions](https://www.investopedia.com/terms/r/recession.asp) as company earnings and stock prices fall. While generally more stable than equity funds, income funds may also face challenges during recessions. If interest rates are lowered to stimulate the economy, then the value of bond holdings may rise, but the income flows generated by income funds may decrease at the same time. ## The Bottom Line Equity and income funds cater to different investment goals and risk tolerances. Equity funds invest in publicly traded corporation shares and are more suitable for investors seeking capital appreciation and willing to accept higher risk. Income funds hold fixed-income securities like bonds and are often more appropriate for investors prioritizing regular income and capital preservation. Lazaroff suggests reviewing potential total returns for either kind of fund rather than just looking at dividends or interest income. “A dollar is a dollar, no matter where it comes from,” he says. Most importantly, ensure that any investment meets your financial goals, risk tolerance, and investment horizon.

Equity Funds vs. Income Funds: An Overview When investing money, you’re faced with many choices. Two well-known categories of investments are equity and income funds. But what exactly are they, and which one is right for you? Let’s start by defining them. Equity funds are pooled investments that primarily invest in stocks and offer the potential for higher returns, but they have more risk. Income funds, meanwhile, focus on generating regular income through investments in fixed-income securities like bonds or the money market. They are also used to mitigate risk. Both are among the many available mutual and exchange-traded funds (ETFs). So, how do you decide between the two? Peter Lazaroff, an Investopedia top-10 financial advisor, cautions against thinking that income funds provide regular payments while equity funds are purely for growth or capital appreciation. He suggests that this classic financial information doesn’t fit a market with far more resources and options for investors. “I am more interested in total returns than the income of any given product because you give me a dollar, it’s a dollar no matter what,” says Lazaroff. Key Takeaways Equity funds primarily hold stocks and offer the potential for higher returns and risks.Income funds can generate regular income through investments in fixed-income securities but also help lower a portfolio’s overall risk.When choosing between equity and income funds, consider the risk and return profiles and your investment goals.Given the diversity of offerings now available, there isn’t the hard-and-fast distinction between income and equity funds that there once was. Traditionally, equity funds focused on stocks for growth or capital appreciation, while income funds prioritized bonds or dividend-paying stocks for steady cash flow. However, modern portfolio theory and the emergence of blended or hybrid funds offer investors approaches that balance growth and income according to their individual risk tolerances and goals. As such, the split between income and equity funds isn’t rigid, with many investors choosing funds offering equity growth potential and income generation. Lazaroff recommends considering your investment goals and risk tolerance before choosing different funds. “If you need current income” and “like the certainty of a dividend,” you might steer toward income funds, he says. However, he adds, “Dividends get cut in recessions, too. The range of retirement outcomes is better and broader when you take a total return approach than when you use just an income-focused approach to investing.” Looking at the total returns means understanding the characteristics and risks of each investment, along with their tax implications—all to better inform your decisions while you build out your portfolio. Equity Funds Equity funds primarily invest in stocks, which represent fractional ownership in a company. Equity funds can be actively managed by those who select stocks based on research and analysis or passively manage to track a specific stock market index like the S&P 500. Equity Fund Types Equity fund managers choose their strategies based on their investors’ needs. Growth fund managers focus on companies with the potential to grow their earnings and expand their market share. Meanwhile, value fund managers search for undervalued stocks trading below their intrinsic worth, expecting them to appreciate over time. Let’s break down the equity fund types. First, the distinction between growth and value investing is based on the characteristics of the companies in which the funds invest rather than their size: Growth funds: These focus on companies expected to grow faster than the overall market, often in sectors like technology or healthcare. They carry greater risk in return for more potential rewards. Value funds: These look for companies with solid fundamentals trading at a price lower than their intrinsic value. Blend funds: These channel money into a mix of growth and value stocks, giving a portfolio more balance. Equity funds are also organized by the size of the companies in which they invest: Large-cap funds: These hold the stocks of large, well-established companies with market capitalizations typically exceeding $10 billion, though this figure changes over time. Midcap funds: These hold the stock of medium-sized companies, generally with market capitalizations of $2 billion to $10 billion. Small-cap funds: These invest in smaller companies with market capitalizations typically under $2 billion. Small caps usually have more growth potential but carry more risk. Investors can combine investments in growth and value funds with different market capitalizations to align with their investment goals and risk tolerance. For example, an investor might choose a large-cap value fund for stability and a small-cap growth fund for potential higher returns, understanding that the small-cap fund may have more volatility. Equity funds often focus on particular segments of the market to cater to different investor strategies and risk profiles: Sector funds: These focus on specific parts of the economy, such as technology, healthcare, energy, or financial services. International funds: These put money into stocks of companies based outside the investor’s home country, providing exposure to global markets and potentially benefiting from diversification. Emerging market funds: These invest in stocks of companies based in developing economies, such as China, India, or Brazil. These markets have more growth potential but also come with greater risks. Index Funds Given their popularity and success—S&P 500 Index funds frequently outperform their actively managed peers—it’s worth setting out these equity funds on their own. Index funds are designed to mirror the performance of a specific equity index like the S&P 500 or Russell 2000. They provide broad market exposure and diversification at a lower cost than other funds. The advantage of index funds lies in their broad market exposure, making them a go-to investment for both novice and experienced investors alike. Risk and Return Equity funds generally carry higher risk compared with income funds because of the inherent volatility of the stock market. However, they also offer the potential for higher returns over the long term. The precise risk and return of an equity fund will depend on the underlying stocks in its portfolio and overall market conditions. Factors that can affect the risk and return of an equity fund thus include investment style or focus, economic conditions, market sentiment, company-specific events, and geopolitical risks. Equity funds holding small-cap or emerging market stocks often have more risk than those investing in large-cap or developed-market stocks. How to Analyze Equity Fund Performance Historically, equity funds have, on average, outperformed fixed-income investments over the long term. However, this depends on the time frame. In addition, past performance does not guarantee future results, and investors should carefully assess a fund’s track record and management before investing. Here are the key metrics to review: Alpha: This instead measures the fund’s excess return relative to its benchmark, indicating the manager’s skill in selecting stocks. Benchmarks: These are comparable indexes used to gauge a fund’s performance. Sharpe ratio: This helps you assess risk-adjusted returns. Generally, a higher Sharpe ratio is preferred. Total returns: This measures the fund’s overall performance, including capital appreciation and dividends. Volatility: This measures the fund’s average price fluctuations. These can all be found on many investor and brokerage platforms, including Investopedia. Equity Fund Pros and Cons Pros Potential for higher returns Often managed by professional fund managers Diversified portfolio of stocks Highly liquid (transferable into cash) Cons Subject to greater risk than income funds Actively managed equity funds can charge high fees No control over the fund’s portfolio Income Funds Income funds generate regular income for investors by investing in fixed-income securities such as bonds, Treasurys, certificates of deposit (CDs), preferred shares, and money market instruments. Many use these funds to provide a steady income through interest and dividends while preserving their capital. However, Lazaroff, host of the education podcast The Long Term Investor, says it’s a bit of a misnomer when these funds are labeled “fixed-income.” “I am a big believer that the role of bonds in a portfolio is to reduce the overall volatility of the portfolio,” he says, pointing to the major asset found in most income funds. By putting a part of your savings into funds with bonds, CDs, and so on, you’re balancing out the heightened risks of the part of your portfolio in equities. “The fact that they’re called fixed income creates this image in our head that it should be all about the income where it’s just descriptive,” Lazaroff says. In other words, despite the name, it’s wise to think of “income funds” as helping to keep your portfolio balanced rather than solely as a source of regular income. Putting part of your portfolio into income funds can smooth out the stock market’s ups and downs to create a more stable investment mix. This approach can be essential for investors nearing retirement or those with a lower risk tolerance. Lazaroff has written in Investopedia about a popular way to balance income and equity funds through the 60/40 portfolio structure. Ultimately, he says, the key is to create a well-rounded portfolio that aligns with your financial goals, time horizon, and risk tolerance. Income Fund Types Income funds often hold a diversified portfolio of bonds and similar securities with varying maturities and credit qualities, which helps mitigate risk. One common strategy that income funds employ is laddering, where the fund invests in bonds with different maturity dates. This approach enables the fund to manage interest rate risk (potential losses from changes in interest rates) effectively and ensure more consistency since the bonds mature at different times and can be reinvested at prevailing rates. In addition, income fund managers pay close attention to the credit quality of the underlying securities. They may opt for investment-grade bonds with a lower risk of default or venture into high-yield bonds, also known as junk bonds, which offer higher income potential but come with increased risk. Income funds also manage the duration of their holdings to adjust the fund’s sensitivity to interest rate changes. In addition, some income funds specialize in specific sectors. For example, they may focus on tax-advantaged municipal bonds, which offer tax-free income to investors, or emerging market debt, which can provide higher yields but carries higher risk. Others invest across various sectors and geographies to spread risk and improve the chances of improved returns. This diversification helps mitigate sector-specific risks and capitalize on prospects in different markets. Risk and Return Income funds generally have less risk than equity funds since they primarily hold fixed-income securities. However, they also offer lower potential returns. An income fund’s risk and return mix depends on the underlying securities’ credit quality, interest rate changes, and the fund’s management. Income funds are naturally exposed to a certain degree of risk, and the bond issuer may default on interest or principal payments. There’s also interest rate risk, where bond prices may fall when interest rates rise. Income funds investing in high-yield (junk) or emerging market bonds tend to carry higher credit risk than those investing in investment-grade or developed-market bonds. How to Analyze Income Fund Performance Income funds typically provide more stable returns in the form of regular interest payments. However, their performance will be influenced by interest rate changes and the credit quality of their securities. While interest rates are rising, the value of existing bonds may decrease, affecting the fund’s net asset value. Conversely, bond prices may increase during periods of falling interest rates, providing capital appreciation and regular income. Some metrics can significantly help with your assessment of different income funds. As with equity funds, there are metrics for total return and expense ratio, which is the fund’s operating costs given as a percentage of assets. Noteworthy, too, are the measures of yield, which indicate the fund’s ability to generate income. There are several types: Distribution yield: This is based on the income distributed by the fund in the most recent annualized period. It indicates the income generated by the fund but is also backward-looking.SEC (Securities and Exchange Commission) yield: A standardized 30-day yield that reflects the interest earned by the fund’s investments minus the fund’s expenses.Yield to maturity (YTM): This represents the estimated return of all securities in the fund if held to maturity. YTM is forward-looking and considered more comprehensive than other metrics.Yield to worst (YTW): This measures the lowest potential yield that can be received on the bond of bond funds without issuers defaulting on payments. It accounts for bond provisions that allow the issuer to close out the position before maturity and provides a scenario analysis tool. YTM “is going to be the most useful of all the metrics you’re going to see,” Lazaroff says. “What makes the yield to maturity great is that it’s forward-looking,” unlike other metrics that only tell you about past performance. If you’re assessing your worst-case scenario when investing, Lazaroff suggests you look for the YTW. “It’s great for scenario analysis that you can do easily on your own because it’s measuring the lowest potential yield that can be received from the bond fund without issuers defaulting,” he says. Income Fund Pros and Cons Pros Regular income generation Less risk than equity funds Diversified fixed-income holdings May have lower investment minimums than individual bonds Cons Lower potential return compared with equity funds Interest rate risk Credit risk No control over the fund’s portfolio Key Differences Between Equity and Income Funds While, as Lazaroff notes, it’s truer every day that investors are putting their money into funds with many gradations between those simply in equities and those in bonds, it’s helpful to set out their major differences. Equity vs. Income Funds Equity Funds Income Funds Primary Objective Capital appreciation Regular income generation; balancing portfolio risk Investment Focus Stocks of various companies Fixed-income securities (bonds, Treasurys, preferreds, money market) Comparative Risk Profile Higher Lower Return Potential Higher over the long term Lower, mainly from interest income Market Sensitivity Exposed to stock market fluctuations and economic conditions Sensitive to interest rate changes and credit quality Portfolio Diversification Diversified across various stocks, sectors, and market caps Diversified across fixed-income securities with varying maturities and credit qualities Income Generation Dividends from stocks (not guaranteed); increase in stock value Regular interest payments from fixed-income securities Capital Preservation No guarantee of capital preservation because of market risk Aims to preserve capital through principal return at maturity Liquidity Generally high liquidity Generally high liquidity, but may depend on the fund and market conditions Investor Risk Tolerance Suitable for investors with higher risk tolerance Suitable for investors with low to moderate risk tolerance Fees and Expenses Higher fees for actively managed funds, lower for index funds Generally lower fees compared with actively managed equity funds Taxation Capital gains tax on profits, dividend tax on distributions Taxed as ordinary income Tax Implications of Equity vs. Income Funds Lazaroff says investors should review how equity and income funds might be treated on their taxes, which can make a major difference in how they invest. Equity funds: Since equity funds are primarily invested in stocks, they are subject to capital gains taxes. When an equity fund sells a stock at a profit, it’s passed on to investors as capital gains distributions. These are taxed at the long-term capital gains rate if the stock is held for more than a year, which is generally lower than the ordinary income tax rate you pay annually. However, if the stock was held for a shorter period, the gains are considered short-term and are taxed at the investor’s ordinary income tax rate. Dividends passed on to investors are taxed at the qualified dividend rate, usually lower than the ordinary income tax rate. Income funds: Meanwhile, the interest income generated by bonds is typically taxed at the investor’s ordinary income tax rate. Nevertheless, certain types of bonds, such as municipal bonds, may offer tax-exempt interest income, making them attractive for investors in higher tax brackets. As such, there could be a big difference between one bond income fund and another. In addition to interest income, income funds can also generate capital gains from the sale of bonds, which are taxed like sales in equity funds, and the rate again depends on the holding period. Who Is an Income Fund Most Suitable for? Income funds prioritize current income over capital gains or price appreciation through interest or dividend-paying investments. Therefore, they are usually best suited for lower-risk investors who need income flows. These may include older individuals who need retirement income or those who live on fixed incomes and cannot risk stock market volatility. Is a Bond Fund the Same as an Income Fund? Not necessarily. While both may invest in a portfolio of bonds, an income fund’s goal is primarily to generate current income, while a bond fund, more broadly, may also seek capital returns by finding underpriced bonds, speculating on interest rate changes, or trading spreads between specific categories of bonds. What Role Do Equity Funds and Income Funds Play in Retirement Planning? Both equity funds and income funds can play important roles in retirement planning. Younger investors with longer time horizons are often advised to allocate a larger part of their retirement portfolio to equity funds to benefit from their long-term growth potential. As investors approach retirement age, they may gradually shift their asset allocation toward income funds to prioritize capital preservation and regular income generation. In retirement, income funds can provide a steady stream of income to supplement other sources such as pensions or Social Security benefits. Can an Investor Hold Both Equity Funds and Income Funds? Of course. Investors frequently hold both equity and fixed-income investments in their portfolios in different proportions to achieve diversification and balance risk and return. This strategy, known as asset allocation, can help optimize a portfolio’s performance by combining the growth potential of equity funds with the stable income generation of income funds. How Do Equity Funds vs. Income Funds Perform During Recessions? Equity funds, which are more sensitive to market conditions, may experience significant declines during recessions as company earnings and stock prices fall. While generally more stable than equity funds, income funds may also face challenges during recessions. If interest rates are lowered to stimulate the economy, then the value of bond holdings may rise, but the income flows generated by income funds may decrease at the same time. The Bottom Line Equity and income funds cater to different investment goals and risk tolerances. Equity funds invest in publicly traded corporation shares and are more suitable for investors seeking capital appreciation and willing to accept higher risk. Income funds hold fixed-income securities like bonds and are often more appropriate for investors prioritizing regular income and capital preservation. Lazaroff suggests reviewing potential total returns for either kind of fund rather than just looking at dividends or interest income. “A dollar is a dollar, no matter where it comes from,” he says. Most importantly, ensure that any investment meets your financial goals, risk tolerance, and investment horizon.

https://www.investopedia.com/these-4-crypto-related-stocks-beat-magnificent-7-tech-returns-so-far-this-year-8411955

These 4 Crypto-Related Stocks Beat Magnificent 7 Tech Returns So Far This Year

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_1-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_2-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Four crypto-focused companies - Riot Platforms Inc., Coinbase Global Inc., MicroStrategy Inc. and Marathon Digital Holdings Inc. - have more than quadrupled so far this year amid the broader crypto market rally.</li><li>These crypto-related companies have outpaced the growth of even the fastest-climbing Magnificent 7 stocks, such as Apple Inc., Alphabet Inc., and Nvidia Corp.</li><li>The fastest-rising Magnificent 7 stocks in the past year are Nvidia and Meta Platforms Inc., which have risen by 232% and 164%, respectively, amid a wider tech-sector rally following 2022's slump.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> A group of cryptocurrency-focused stocks have racked up notable price surges in the last year, handily outpacing the growth of the "Magnificent 7," a collection of widely held leading technology firms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The tech giants have been credited with lifting the markets this year, particularly by capitalizing on growing interest in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/generative-ai-7497939">generative artificial intelligence</a> (AI) and large language models (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/large-language-model-7563532">LLMs</a>). However, the resurgence in cryptocurrency has fueled some of the fastest-growing stock prices amid renewed hope that a bitcoin exchange-traded fund will be approved. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Bitcoin mining and infrastructure company Riot Platforms Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=RIOT">RIOT</a>) has seen its shares skyrocket 364% in the year, while virtual currency exchange Coinbase Global's (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=COIN">COIN</a>) stock has climbed 325% in the same time frame. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blockchain.asp">Blockchain</a> ecosystem and crypto mining company Marathon Digital Holdings Inc. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MARA">MARA</a>) has surged by 378%. MicroStrategy Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSTR">MSTR</a>), a <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cloud-computing.asp">cloud services</a> and mobile software company that has invested heavily in Bitcoin in recent years, is up 306%.<strong><span class="ql-inline-citation" data-cite="2"></span></strong> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <figure class="comp mntl-sc-block finance-sc-block-image mntl-sc-block-universal-image mntl-sc-block-image--no-theme no-theme mntl-sc-block-image inline-image figure-landscape figure-high-res" id="mntl-sc-block_9-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:61.0%;"> <img alt='A chart shows the returns on top crypto-related companies and the "Magnificent 7" technology firms.' class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/ZQA5J50fTbWWqPUenHN0oG3-7bo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/ZQA5J50fTbWWqPUenHN0oG3-7bo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png" data-srcset="https://www.investopedia.com/thmb/n4TmQbhQBDS3M6Skvw8eHFB_aRo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png 750w" data-tracking-container="true" height="1286" id="mntl-sc-block-image_1-0" width="2108"/> <noscript> <img alt='A chart shows the returns on top crypto-related companies and the "Magnificent 7" technology firms.' class="img--noscript universal-image__image" height="1286" sizes="750px" src="https://www.investopedia.com/thmb/ZQA5J50fTbWWqPUenHN0oG3-7bo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png" srcset="https://www.investopedia.com/thmb/n4TmQbhQBDS3M6Skvw8eHFB_aRo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png 750w" width="2108"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_1-0"> <span class="figure-article-caption-owner"><p>Investopedia</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Key to the crypto-firm rally has been a broader increase in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/are-bitcoin-price-and-equity-markets-returns-correlated/">cryptocurrency prices</a> in the last year. Bitcoin was trading at around $44,000 on Friday, up from below $17,000 at the start of the year.<span class="ql-inline-citation" data-cite="6"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Crypto skeptics had entered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/short.asp">short positions</a> against firms like Riot Platforms and Marathon Digital. These companies' stocks may have rallied both because of investors forced to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buytocover.asp">buy to cover</a> as well as new long positions from investors hoping to capitalize on the hot crypto market.<span class="ql-inline-citation" data-cite="5"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> The Magnificent 7 comprises some of the largest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/megacap.asp">mega-cap</a> tech firms: Apple Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>), Amazon.com Inc. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN">AMZN</a>), Microsoft Corp. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>), Meta Platforms Inc. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=META">META</a>), Google parent Alphabet Inc. (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL">GOOGL</a>), Tesla Inc. (<a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA">TSLA</a>), and Nvidia Corp. (<a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> These companies, with already massive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuation.asp">valuations</a>, have experienced surging share prices in the past 12 months after declines throughout 2022.<span class="ql-inline-citation" data-cite="1"></span> Still, none of the Magnificent 7 stocks have matched the performance of the four crypto-focused firms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The best-performing Magnificent 7 companies this year are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/nvidia-could-be-impacted-by-expanded-us-export-controls-on-ai-chips-to-china-8358382">Nvidia</a> and Meta, which have risen by 232% and 164%, respectively. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/economic-impact-of-generative-ai-7976252">Generative artificial intelligence (AI)</a> projects drove demand for Nvidia's graphics processing units (GPUs), tripling revenue year-over-year in the most recent quarter reported.<span class="ql-inline-citation" data-cite="4"></span> <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp">Meta</a> has outperformed analyst earnings expectations, trimmed costs, and raised guidance in recent quarters.<span class="ql-inline-citation" data-cite="3"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The Magnificent 7 largely comprises some of the largest companies in the world, so comparing it to smaller, more focused companies with much smaller <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/market-capitalization-defined/">market capitalizations</a> can be tricky. However, the stock price often reflects demand and is less reliant on the size of companies. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> While Nvidia and Meta come closest to the gains of the hottest-trading crypto companies, most other big-name tech stocks have produced rallies that seem paltry by comparison. Amazon has climbed by 71% in the last year, and Microsoft by 56%. The lowest-performing Magnificent 7 companies are Apple, with a 56% stock increase, and Google, rising 52% year-to-date. </p> <div class="comp news-tip mntl-block" id="news-tip_1-0"><div class="comp news-tip__text mntl-text-block" id="news-tip__text_1-0">Do you have a news tip for Investopedia reporters? Please email us at</div> <a class="news-tip__email mntl-text-link" data-tracking-container="true" href="mailto:[email protected]" id="news-tip__email_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">[email protected]</span></a></div></div>

### Key Takeaways * Four crypto-focused companies - Riot Platforms Inc., Coinbase Global Inc., MicroStrategy Inc. and Marathon Digital Holdings Inc. - have more than quadrupled so far this year amid the broader crypto market rally. * These crypto-related companies have outpaced the growth of even the fastest-climbing Magnificent 7 stocks, such as Apple Inc., Alphabet Inc., and Nvidia Corp. * The fastest-rising Magnificent 7 stocks in the past year are Nvidia and Meta Platforms Inc., which have risen by 232% and 164%, respectively, amid a wider tech-sector rally following 2022's slump. A group of cryptocurrency-focused stocks have racked up notable price surges in the last year, handily outpacing the growth of the "Magnificent 7," a collection of widely held leading technology firms. The tech giants have been credited with lifting the markets this year, particularly by capitalizing on growing interest in [generative artificial intelligence](https://www.investopedia.com/generative-ai-7497939) (AI) and large language models ([LLMs](https://www.investopedia.com/large-language-model-7563532)). However, the resurgence in cryptocurrency has fueled some of the fastest-growing stock prices amid renewed hope that a bitcoin exchange-traded fund will be approved. Bitcoin mining and infrastructure company Riot Platforms Inc. ([RIOT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=RIOT)) has seen its shares skyrocket 364% in the year, while virtual currency exchange Coinbase Global's ([COIN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=COIN)) stock has climbed 325% in the same time frame. [Blockchain](https://www.investopedia.com/terms/b/blockchain.asp) ecosystem and crypto mining company Marathon Digital Holdings Inc. ([MARA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MARA)) has surged by 378%. MicroStrategy Inc. ([MSTR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSTR)), a [cloud services](https://www.investopedia.com/terms/c/cloud-computing.asp) and mobile software company that has invested heavily in Bitcoin in recent years, is up 306%. ![A chart shows the returns on top crypto-related companies and the "Magnificent 7" technology firms.]() :max_bytes(150000):strip_icc()/TSLA_2023-12-08_12-43-41-d61daa4beab042ce8177895339ce6abd.png) Investopedia Key to the crypto-firm rally has been a broader increase in [cryptocurrency prices](https://www.investopedia.com/news/are-bitcoin-price-and-equity-markets-returns-correlated/) in the last year. Bitcoin was trading at around $44,000 on Friday, up from below $17,000 at the start of the year. Crypto skeptics had entered [short positions](https://www.investopedia.com/terms/s/short.asp) against firms like Riot Platforms and Marathon Digital. These companies' stocks may have rallied both because of investors forced to [buy to cover](https://www.investopedia.com/terms/b/buytocover.asp) as well as new long positions from investors hoping to capitalize on the hot crypto market. The Magnificent 7 comprises some of the largest [mega-cap](https://www.investopedia.com/terms/m/megacap.asp) tech firms: Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)), Amazon.com Inc. ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN)), Microsoft Corp. ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)), Meta Platforms Inc. ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)), Google parent Alphabet Inc. ([GOOGL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GOOGL)), Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)), and Nvidia Corp. ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)). These companies, with already massive [valuations](https://www.investopedia.com/terms/v/valuation.asp), have experienced surging share prices in the past 12 months after declines throughout 2022. Still, none of the Magnificent 7 stocks have matched the performance of the four crypto-focused firms. The best-performing Magnificent 7 companies this year are [Nvidia](https://www.investopedia.com/nvidia-could-be-impacted-by-expanded-us-export-controls-on-ai-chips-to-china-8358382) and Meta, which have risen by 232% and 164%, respectively. [Generative artificial intelligence (AI)](https://www.investopedia.com/economic-impact-of-generative-ai-7976252) projects drove demand for Nvidia's graphics processing units (GPUs), tripling revenue year-over-year in the most recent quarter reported. [Meta](https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp) has outperformed analyst earnings expectations, trimmed costs, and raised guidance in recent quarters. The Magnificent 7 largely comprises some of the largest companies in the world, so comparing it to smaller, more focused companies with much smaller [market capitalizations](https://www.investopedia.com/investing/market-capitalization-defined/) can be tricky. However, the stock price often reflects demand and is less reliant on the size of companies. While Nvidia and Meta come closest to the gains of the hottest-trading crypto companies, most other big-name tech stocks have produced rallies that seem paltry by comparison. Amazon has climbed by 71% in the last year, and Microsoft by 56%. The lowest-performing Magnificent 7 companies are Apple, with a 56% stock increase, and Google, rising 52% year-to-date. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Four crypto-focused companies - Riot Platforms Inc., Coinbase Global Inc., MicroStrategy Inc. and Marathon Digital Holdings Inc. - have more than quadrupled so far this year amid the broader crypto market rally.These crypto-related companies have outpaced the growth of even the fastest-climbing Magnificent 7 stocks, such as Apple Inc., Alphabet Inc., and Nvidia Corp.The fastest-rising Magnificent 7 stocks in the past year are Nvidia and Meta Platforms Inc., which have risen by 232% and 164%, respectively, amid a wider tech-sector rally following 2022's slump. A group of cryptocurrency-focused stocks have racked up notable price surges in the last year, handily outpacing the growth of the "Magnificent 7," a collection of widely held leading technology firms. The tech giants have been credited with lifting the markets this year, particularly by capitalizing on growing interest in generative artificial intelligence (AI) and large language models (LLMs). However, the resurgence in cryptocurrency has fueled some of the fastest-growing stock prices amid renewed hope that a bitcoin exchange-traded fund will be approved. Bitcoin mining and infrastructure company Riot Platforms Inc. (RIOT) has seen its shares skyrocket 364% in the year, while virtual currency exchange Coinbase Global's (COIN) stock has climbed 325% in the same time frame. Blockchain ecosystem and crypto mining company Marathon Digital Holdings Inc. (MARA) has surged by 378%. MicroStrategy Inc. (MSTR), a cloud services and mobile software company that has invested heavily in Bitcoin in recent years, is up 306%. Investopedia Key to the crypto-firm rally has been a broader increase in cryptocurrency prices in the last year. Bitcoin was trading at around $44,000 on Friday, up from below $17,000 at the start of the year. Crypto skeptics had entered short positions against firms like Riot Platforms and Marathon Digital. These companies' stocks may have rallied both because of investors forced to buy to cover as well as new long positions from investors hoping to capitalize on the hot crypto market. The Magnificent 7 comprises some of the largest mega-cap tech firms: Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Meta Platforms Inc. (META), Google parent Alphabet Inc. (GOOGL), Tesla Inc. (TSLA), and Nvidia Corp. (NVDA). These companies, with already massive valuations, have experienced surging share prices in the past 12 months after declines throughout 2022. Still, none of the Magnificent 7 stocks have matched the performance of the four crypto-focused firms. The best-performing Magnificent 7 companies this year are Nvidia and Meta, which have risen by 232% and 164%, respectively. Generative artificial intelligence (AI) projects drove demand for Nvidia's graphics processing units (GPUs), tripling revenue year-over-year in the most recent quarter reported. Meta has outperformed analyst earnings expectations, trimmed costs, and raised guidance in recent quarters. The Magnificent 7 largely comprises some of the largest companies in the world, so comparing it to smaller, more focused companies with much smaller market capitalizations can be tricky. However, the stock price often reflects demand and is less reliant on the size of companies. While Nvidia and Meta come closest to the gains of the hottest-trading crypto companies, most other big-name tech stocks have produced rallies that seem paltry by comparison. Amazon has climbed by 71% in the last year, and Microsoft by 56%. The lowest-performing Magnificent 7 companies are Apple, with a 56% stock increase, and Google, rising 52% year-to-date. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/ask/answers/06/brokerandmarketmaker.asp

Broker vs. Market Maker: What's the Difference?

<div class="comp mntl-sc-page mntl-block article-body-content" data-bind-scroll-on-start="true" data-sc-ad-label-height="0" data-sc-ad-track-spacing="90" data-sc-breakpoint="50em" data-sc-content-positions="[300, 1, 1, 1250, 1, 1, 1, 1]" data-sc-load-immediate="2" data-sc-max-track-height="600" data-sc-min-track-height="250" data-sc-sticky-offset="80" id="mntl-sc-page_1-0"><span class="heading-toc" id="toc-broker-vs-market-maker-an-overview"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_1-0"> <span class="mntl-sc-block-heading__text"> Broker vs. Market Maker: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> There are many different players that take part in the market. These include buyers, sellers, dealers, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker.asp" rel="noopener noreferrer">brokers</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketmaker.asp" rel="noopener noreferrer">market makers</a>. Some help to facilitate sales between two parties, while others help create liquidity or the availability to buy and sell in the market. A broker makes money by bringing together assets to buyers and sellers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> On the other hand, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketmaker.asp" rel="noopener noreferrer">market maker</a> helps create a market for investors to buy or sell securities. In this article, we'll outline the differences between brokers and market makers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_6-0"><div class="comp mntl-sc-block mntl-sc-block-callout mntl-block theme-whatyouneedtoknow" data-tracking-container="true" data-tracking-id="mntl-sc-block-callout" id="mntl-sc-block_7-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0">Key Takeaways</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf.</li><li>There are full service and discount brokers depending on the level of service a client needs.</li><li>Market makers are typically large banks or financial institutions.</li><li>Market makers help to ensure there's enough volume of trading so trades can be done seamlessly.</li></ul></div></div></div> <span class="heading-toc" id="toc-broker"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_8-0"> <span class="mntl-sc-block-heading__text"> Broker </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> In the financial world, brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf. The investments that brokers offer include securities, stocks, mutual funds, exchange-traded funds (ETFs), and even real estate. Mutual funds and ETFs are similar products in that they both contain a basket of securities such as stocks and bonds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Brokers are regulated and licensed. Brokers must register with the Financial Industry Regulatory Authority (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">FINRA</a>) while investment advisers register through the U.S. Securities and Exchange Commission (SEC) as Registered Investment Advisors or RIAs.<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="9"></span> Brokers have an obligation to act in the best interests of their clients. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Many brokers can also offer advice on which stocks, mutual funds, and other securities to buy. And with the availability of online trading platforms, many investors can initiate transactions with little or no contact with their personal broker. Although there are various types of brokers, they can be broken down into two categories. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_14-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_15-0"> <span class="mntl-sc-block-subheading__text"> Full-Service Brokers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fullservicebroker.asp" rel="noopener noreferrer">Full-service brokers</a> provide their clients with more value-added services. These services may include consulting, research, investment advice, and retirement planning. Many brokers provide trading platforms, trade execution services, and customized speculative and hedging solutions with the use of options contracts. Options contracts are derivatives meaning they derive their value from an underlying asset. Options give investors the right, but not the obligation to buy or sell securities at a preset price where the contract expires in the future. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> For all of these services, investors usually pay higher commissions for their trades. Brokers also get compensation based on the number of new accounts they bring in and their clients' trading volume. Brokers also charge fees for investment products as well as managed investment accounts. Some brokers cater to high-net-worth clients with assets of $1 million or more. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_20-0"> <span class="mntl-sc-block-subheading__text"> Discount Brokers </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> With advancements in technology and the internet, online brokerage firms have experienced an explosion of growth. These discount brokers allow investors to trade at a lower cost, but there's a catch; investors don't receive the personalized investment advice that's offered by full-service brokers. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The reduced <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commission.asp" rel="noopener noreferrer">commission</a> can range from approximately $5 to $15 per trade. The low fees are based on trading volume, and since there's no investment advice, employees of online brokers are usually compensated by salary instead of commission. Many discount brokers offer online trading platforms, which are ideal for self-directed traders and investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <span class="heading-toc" id="toc-market-maker"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_25-0"> <span class="mntl-sc-block-heading__text"> Market Maker </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Market makers are typically large banks or financial institutions. They help to ensure there's enough liquidity in the markets, meaning there's enough volume of trading so trades can be done seamlessly. Without market makers, there would likely be little liquidity. In other words, investors who want to sell securities would be unable to unwind their positions due to a lack of buyers in the market. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Market makers help keep the market functioning, meaning if you want to sell a bond, they are there to buy it. Similarly, if you want to buy a stock, they are there to have that stock available to sell to you. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Market makers are useful because they are always ready to buy and sell as long as the investor is willing to pay a specific price. Market makers essentially act as wholesalers by buying and selling securities to satisfy the market—the prices they set reflect market <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/11/intro-supply-demand.asp" rel="noopener noreferrer">supply and demand</a>. When the demand for a security is low, and supply is high, the price of the security will be low. If the demand is high and supply is low, the price of the security will be high. Market makers are obligated to sell and buy at the price and size they have quoted. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Sometimes a market maker is also a broker, which can create an incentive for a broker to recommend securities for which the firm also makes a market. Investors should thus perform due diligence to make sure that there is a clear separation between a broker and a market maker. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Some examples of the bigger market makers in the industry include BNP Paribas, Deutsche Bank, Morgan Stanley, and UBS. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_35-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_36-0"> <span class="mntl-sc-block-subheading__text"> How Market Makers Make Money </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Market makers charge a spread on the buy and sell price, and transact on both sides of the market. Market makers establish <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quote.asp" rel="noopener noreferrer">quotes</a> for the bid and ask prices, or buy and sell prices. Investors who want to sell a security would get the bid price, which would be slightly lower than the actual price. If an investor wanted to buy a security, they would get charged the ask price, which is set slightly higher than the market price. The spreads between the price investors receive and the market prices are the profits for the market makers. Market makers also earn commissions by providing liquidity to their clients' firms. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Brokers and market makers are two very important players in the market. Brokers are typically firms that facilitate the sale of an asset to a buyer or seller. Market makers are typically large investment firms or financial institutions that create liquidity in the market. </p></div>

## Broker vs. Market Maker: An Overview There are many different players that take part in the market. These include buyers, sellers, dealers, [brokers](https://www.investopedia.com/terms/b/broker.asp), and [market makers](https://www.investopedia.com/terms/m/marketmaker.asp). Some help to facilitate sales between two parties, while others help create liquidity or the availability to buy and sell in the market. A broker makes money by bringing together assets to buyers and sellers. On the other hand, a [market maker](https://www.investopedia.com/terms/m/marketmaker.asp) helps create a market for investors to buy or sell securities. In this article, we'll outline the differences between brokers and market makers. ### Key Takeaways * Brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf. * There are full service and discount brokers depending on the level of service a client needs. * Market makers are typically large banks or financial institutions. * Market makers help to ensure there's enough volume of trading so trades can be done seamlessly. ## Broker In the financial world, brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf. The investments that brokers offer include securities, stocks, mutual funds, exchange-traded funds (ETFs), and even real estate. Mutual funds and ETFs are similar products in that they both contain a basket of securities such as stocks and bonds. Brokers are regulated and licensed. Brokers must register with the Financial Industry Regulatory Authority ([FINRA](https://www.investopedia.com/terms/f/finra.asp)) while investment advisers register through the U.S. Securities and Exchange Commission (SEC) as Registered Investment Advisors or RIAs. Brokers have an obligation to act in the best interests of their clients. Many brokers can also offer advice on which stocks, mutual funds, and other securities to buy. And with the availability of online trading platforms, many investors can initiate transactions with little or no contact with their personal broker. Although there are various types of brokers, they can be broken down into two categories. ### Full-Service Brokers [Full-service brokers](https://www.investopedia.com/terms/f/fullservicebroker.asp) provide their clients with more value-added services. These services may include consulting, research, investment advice, and retirement planning. Many brokers provide trading platforms, trade execution services, and customized speculative and hedging solutions with the use of options contracts. Options contracts are derivatives meaning they derive their value from an underlying asset. Options give investors the right, but not the obligation to buy or sell securities at a preset price where the contract expires in the future. For all of these services, investors usually pay higher commissions for their trades. Brokers also get compensation based on the number of new accounts they bring in and their clients' trading volume. Brokers also charge fees for investment products as well as managed investment accounts. Some brokers cater to high-net-worth clients with assets of $1 million or more. ### Discount Brokers With advancements in technology and the internet, online brokerage firms have experienced an explosion of growth. These discount brokers allow investors to trade at a lower cost, but there's a catch; investors don't receive the personalized investment advice that's offered by full-service brokers. The reduced [commission](https://www.investopedia.com/terms/c/commission.asp) can range from approximately $5 to $15 per trade. The low fees are based on trading volume, and since there's no investment advice, employees of online brokers are usually compensated by salary instead of commission. Many discount brokers offer online trading platforms, which are ideal for self-directed traders and investors. ## Market Maker Market makers are typically large banks or financial institutions. They help to ensure there's enough liquidity in the markets, meaning there's enough volume of trading so trades can be done seamlessly. Without market makers, there would likely be little liquidity. In other words, investors who want to sell securities would be unable to unwind their positions due to a lack of buyers in the market. Market makers help keep the market functioning, meaning if you want to sell a bond, they are there to buy it. Similarly, if you want to buy a stock, they are there to have that stock available to sell to you. Market makers are useful because they are always ready to buy and sell as long as the investor is willing to pay a specific price. Market makers essentially act as wholesalers by buying and selling securities to satisfy the market—the prices they set reflect market [supply and demand](https://www.investopedia.com/articles/economics/11/intro-supply-demand.asp). When the demand for a security is low, and supply is high, the price of the security will be low. If the demand is high and supply is low, the price of the security will be high. Market makers are obligated to sell and buy at the price and size they have quoted. Sometimes a market maker is also a broker, which can create an incentive for a broker to recommend securities for which the firm also makes a market. Investors should thus perform due diligence to make sure that there is a clear separation between a broker and a market maker. Some examples of the bigger market makers in the industry include BNP Paribas, Deutsche Bank, Morgan Stanley, and UBS. ### How Market Makers Make Money Market makers charge a spread on the buy and sell price, and transact on both sides of the market. Market makers establish [quotes](https://www.investopedia.com/terms/q/quote.asp) for the bid and ask prices, or buy and sell prices. Investors who want to sell a security would get the bid price, which would be slightly lower than the actual price. If an investor wanted to buy a security, they would get charged the ask price, which is set slightly higher than the market price. The spreads between the price investors receive and the market prices are the profits for the market makers. Market makers also earn commissions by providing liquidity to their clients' firms. Brokers and market makers are two very important players in the market. Brokers are typically firms that facilitate the sale of an asset to a buyer or seller. Market makers are typically large investment firms or financial institutions that create liquidity in the market.

Broker vs. Market Maker: An Overview There are many different players that take part in the market. These include buyers, sellers, dealers, brokers, and market makers. Some help to facilitate sales between two parties, while others help create liquidity or the availability to buy and sell in the market. A broker makes money by bringing together assets to buyers and sellers. On the other hand, a market maker helps create a market for investors to buy or sell securities. In this article, we'll outline the differences between brokers and market makers. Key Takeaways Brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf.There are full service and discount brokers depending on the level of service a client needs.Market makers are typically large banks or financial institutions.Market makers help to ensure there's enough volume of trading so trades can be done seamlessly. Broker In the financial world, brokers are intermediaries who have the authorization and expertise to buy securities on an investor's behalf. The investments that brokers offer include securities, stocks, mutual funds, exchange-traded funds (ETFs), and even real estate. Mutual funds and ETFs are similar products in that they both contain a basket of securities such as stocks and bonds. Brokers are regulated and licensed. Brokers must register with the Financial Industry Regulatory Authority (FINRA) while investment advisers register through the U.S. Securities and Exchange Commission (SEC) as Registered Investment Advisors or RIAs. Brokers have an obligation to act in the best interests of their clients. Many brokers can also offer advice on which stocks, mutual funds, and other securities to buy. And with the availability of online trading platforms, many investors can initiate transactions with little or no contact with their personal broker. Although there are various types of brokers, they can be broken down into two categories. Full-Service Brokers Full-service brokers provide their clients with more value-added services. These services may include consulting, research, investment advice, and retirement planning. Many brokers provide trading platforms, trade execution services, and customized speculative and hedging solutions with the use of options contracts. Options contracts are derivatives meaning they derive their value from an underlying asset. Options give investors the right, but not the obligation to buy or sell securities at a preset price where the contract expires in the future. For all of these services, investors usually pay higher commissions for their trades. Brokers also get compensation based on the number of new accounts they bring in and their clients' trading volume. Brokers also charge fees for investment products as well as managed investment accounts. Some brokers cater to high-net-worth clients with assets of $1 million or more. Discount Brokers With advancements in technology and the internet, online brokerage firms have experienced an explosion of growth. These discount brokers allow investors to trade at a lower cost, but there's a catch; investors don't receive the personalized investment advice that's offered by full-service brokers. The reduced commission can range from approximately $5 to $15 per trade. The low fees are based on trading volume, and since there's no investment advice, employees of online brokers are usually compensated by salary instead of commission. Many discount brokers offer online trading platforms, which are ideal for self-directed traders and investors. Market Maker Market makers are typically large banks or financial institutions. They help to ensure there's enough liquidity in the markets, meaning there's enough volume of trading so trades can be done seamlessly. Without market makers, there would likely be little liquidity. In other words, investors who want to sell securities would be unable to unwind their positions due to a lack of buyers in the market. Market makers help keep the market functioning, meaning if you want to sell a bond, they are there to buy it. Similarly, if you want to buy a stock, they are there to have that stock available to sell to you. Market makers are useful because they are always ready to buy and sell as long as the investor is willing to pay a specific price. Market makers essentially act as wholesalers by buying and selling securities to satisfy the market—the prices they set reflect market supply and demand. When the demand for a security is low, and supply is high, the price of the security will be low. If the demand is high and supply is low, the price of the security will be high. Market makers are obligated to sell and buy at the price and size they have quoted. Sometimes a market maker is also a broker, which can create an incentive for a broker to recommend securities for which the firm also makes a market. Investors should thus perform due diligence to make sure that there is a clear separation between a broker and a market maker. Some examples of the bigger market makers in the industry include BNP Paribas, Deutsche Bank, Morgan Stanley, and UBS. How Market Makers Make Money Market makers charge a spread on the buy and sell price, and transact on both sides of the market. Market makers establish quotes for the bid and ask prices, or buy and sell prices. Investors who want to sell a security would get the bid price, which would be slightly lower than the actual price. If an investor wanted to buy a security, they would get charged the ask price, which is set slightly higher than the market price. The spreads between the price investors receive and the market prices are the profits for the market makers. Market makers also earn commissions by providing liquidity to their clients' firms. Brokers and market makers are two very important players in the market. Brokers are typically firms that facilitate the sale of an asset to a buyer or seller. Market makers are typically large investment firms or financial institutions that create liquidity in the market.