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https://www.investopedia.com/terms/t/tax-free.asp

Tax-Free: Meaning, Overview, Formulas in Taxes

<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-tax-free"></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 Tax Free? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Tax free refers to certain types of goods and financial securities (such as municipal bonds) that are not taxed. It also refers to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/062716/types-income-irs-cant-touch.asp">earnings that are not taxed</a>. The tax free status of these goods, investments, and income may incentivize individuals and business entities to increase spending or investing, resulting in economic stimulus. Tax free may also be known as tax-exempt. </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-tax-free"></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 Tax Free </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Tax free purchases and investments do not incur the typical tax consequence of other purchases and investments. For instance, tax free weekends occur in many states where, once or twice a year, store purchases are not taxed, thereby, reducing the overall cost to the consumer. Frequently these sales <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-holiday.asp">tax holidays</a> occur before school starts in the Fall to incentivize spending on school supplies, clothes, computers, calculators, etc. </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"> Governments will often provide a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-break.asp">tax break</a> to investors purchasing <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-bond.asp">government bonds</a> to ensure that enough funding will be available for expenditure projects. Tax free investments such as tax-exempt <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/municipalbondfund.asp">municipal bonds</a> (or munis) allow investors to earn interest income tax free.<span class="ql-inline-citation" data-cite="2"></span> Interest may only be tax free at the federal level if, for example, a California resident buys a New York municipal bond. These tax laws, however, vary by state. For instance, some states such as Wisconsin and Illinois tax interest earned on all muni bonds, including their own, subject to a few exceptions.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="3"></span> Meanwhile, states such as California and Arizona exempt interest from taxes only if the investor resides in the issuing state.<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_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, assume a local government in California issues a municipal bond to finance a recreational park. An investor, John Smith, who resides in the state of issuance purchases the $5,000 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/parvalue.asp">par value bond</a> which matures in two years and has a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coupon-rate.asp">coupon rate</a> of 3% to be paid annually. At the end of each of the two years, the investor receives interest income of 3% x $5,000 = $150. This income will not be taxed by both the federal and state government. After the bond matures, John Smith will receive his original principal investment back from the local government. </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"> Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming don't have a state-level income tax, so they naturally exempt interest on all muni bonds.<span class="ql-inline-citation" data-cite="12"></span> Treasury securities issued by the U.S. government, namely the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/ussavingsbonds.asp">U.S. Savings Bond</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tips.asp">Treasury Inflation Protected Securities (TIPSs)</a>, pay interest that is tax free at the state and local levels, but not the federal level.<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"> According to the Internal Revenue Service (IRS), interest on a state or local government obligation may be tax free even if the obligation is not a bond.<span class="ql-inline-citation" data-cite="7"></span> For example, interest on a debt evidenced only by an ordinary written agreement of purchase and sale may be tax free. Also, interest paid by an insurer on default by the state or political subdivision may be exempted from tax. <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> that hold a mix of stocks and municipal bonds will have the portion of earnings derived from the bonds tax-exempt under federal income tax guidelines and possibly free from state taxes depending on the location from which the bonds originated and/or the taxpayer's state of residence. </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"> Since tax free interest is not subject to income taxes, it is not included in the calculation of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/agi.asp">adjusted gross income (AGI)</a> for taxation purposes. Issuers or lenders that pay more than $10 in tax free interest must report the interest income to both taxpayers and the IRS on Form 1099-INT.<span class="ql-inline-citation" data-cite="8"></span> Taxpayers or borrowers, in turn, must report this tax-exempt interest on <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/1040.asp">Form 1040</a>.<span class="ql-inline-citation" data-cite="9"></span> The amount received as tax-exempt interest is used by the IRS to determine what amount of the taxpayer's Social Security benefits are taxable.<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_16-0"></div> <span class="heading-toc" id="toc-tax-free-and-the-tax-equivalent-yield"></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"> Tax Free and the Tax-Equivalent Yield </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The higher an investor’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marginaltaxrate.asp">marginal tax bracket</a>, the more valuable and beneficial tax free securities are for the investor. A tax free investment will carry a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxequivalentyield.asp">tax-equivalent yield</a> that is often higher than the current yield, as determined by the investor's tax bracket. The tax-equivalent yield is the taxable interest rate that would be required to provide the same after-tax interest rate. The tax equivalent yield of a tax-exempt bond can be calculated as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_19-0"></div> <blockquote class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Tax-Equivalent Yield = Tax-Exempt Yield/(1 – Marginal Tax Rate) </blockquote> <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"> For example, if John Smith in the example above falls in the 35% tax bracket, the 3% muni yield is equivalent to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxablebond.asp">taxable bond</a> with a yield of: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_23-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <li>= 0.03/(1 – 0.35)</li><li>= 0.03/0.65</li><li>= 0.046, or 4.6%</li> </ul> <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"> What if John Smith was in the 22% tax bracket? The tax-equivalent yield will be: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <li>= 0.03/0.78</li><li>= 0.038, or 3.8%</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"> The higher your tax rate, the higher the tax-equivalent yield—this shows how tax free securities are best suited to those in higher tax brackets. </p></div>

## What Is Tax Free? Tax free refers to certain types of goods and financial securities (such as municipal bonds) that are not taxed. It also refers to [earnings that are not taxed](https://www.investopedia.com/articles/personal-finance/062716/types-income-irs-cant-touch.asp). The tax free status of these goods, investments, and income may incentivize individuals and business entities to increase spending or investing, resulting in economic stimulus. Tax free may also be known as tax-exempt. ## Understanding Tax Free Tax free purchases and investments do not incur the typical tax consequence of other purchases and investments. For instance, tax free weekends occur in many states where, once or twice a year, store purchases are not taxed, thereby, reducing the overall cost to the consumer. Frequently these sales [tax holidays](https://www.investopedia.com/terms/t/tax-holiday.asp) occur before school starts in the Fall to incentivize spending on school supplies, clothes, computers, calculators, etc. Governments will often provide a [tax break](https://www.investopedia.com/terms/t/tax-break.asp) to investors purchasing [government bonds](https://www.investopedia.com/terms/g/government-bond.asp) to ensure that enough funding will be available for expenditure projects. Tax free investments such as tax-exempt [municipal bonds](https://www.investopedia.com/terms/m/municipalbondfund.asp) (or munis) allow investors to earn interest income tax free. Interest may only be tax free at the federal level if, for example, a California resident buys a New York municipal bond. These tax laws, however, vary by state. For instance, some states such as Wisconsin and Illinois tax interest earned on all muni bonds, including their own, subject to a few exceptions. Meanwhile, states such as California and Arizona exempt interest from taxes only if the investor resides in the issuing state. For example, assume a local government in California issues a municipal bond to finance a recreational park. An investor, John Smith, who resides in the state of issuance purchases the $5,000 [par value bond](https://www.investopedia.com/terms/p/parvalue.asp) which matures in two years and has a [coupon rate](https://www.investopedia.com/terms/c/coupon-rate.asp) of 3% to be paid annually. At the end of each of the two years, the investor receives interest income of 3% x $5,000 = $150. This income will not be taxed by both the federal and state government. After the bond matures, John Smith will receive his original principal investment back from the local government. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming don't have a state-level income tax, so they naturally exempt interest on all muni bonds. Treasury securities issued by the U.S. government, namely the [U.S. Savings Bond](https://www.investopedia.com/terms/u/ussavingsbonds.asp) and [Treasury Inflation Protected Securities (TIPSs)](https://www.investopedia.com/terms/t/tips.asp), pay interest that is tax free at the state and local levels, but not the federal level. According to the Internal Revenue Service (IRS), interest on a state or local government obligation may be tax free even if the obligation is not a bond. For example, interest on a debt evidenced only by an ordinary written agreement of purchase and sale may be tax free. Also, interest paid by an insurer on default by the state or political subdivision may be exempted from tax. [Mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) that hold a mix of stocks and municipal bonds will have the portion of earnings derived from the bonds tax-exempt under federal income tax guidelines and possibly free from state taxes depending on the location from which the bonds originated and/or the taxpayer's state of residence. Since tax free interest is not subject to income taxes, it is not included in the calculation of [adjusted gross income (AGI)](https://www.investopedia.com/terms/a/agi.asp) for taxation purposes. Issuers or lenders that pay more than $10 in tax free interest must report the interest income to both taxpayers and the IRS on Form 1099-INT. Taxpayers or borrowers, in turn, must report this tax-exempt interest on [Form 1040](https://www.investopedia.com/terms/1/1040.asp). The amount received as tax-exempt interest is used by the IRS to determine what amount of the taxpayer's Social Security benefits are taxable. ## Tax Free and the Tax-Equivalent Yield The higher an investor’s [marginal tax bracket](https://www.investopedia.com/terms/m/marginaltaxrate.asp), the more valuable and beneficial tax free securities are for the investor. A tax free investment will carry a [tax-equivalent yield](https://www.investopedia.com/terms/t/taxequivalentyield.asp) that is often higher than the current yield, as determined by the investor's tax bracket. The tax-equivalent yield is the taxable interest rate that would be required to provide the same after-tax interest rate. The tax equivalent yield of a tax-exempt bond can be calculated as: > Tax-Equivalent Yield = Tax-Exempt Yield/(1 – Marginal Tax Rate) For example, if John Smith in the example above falls in the 35% tax bracket, the 3% muni yield is equivalent to a [taxable bond](https://www.investopedia.com/terms/t/taxablebond.asp) with a yield of: * = 0.03/(1 – 0.35) * = 0.03/0.65 * = 0.046, or 4.6% What if John Smith was in the 22% tax bracket? The tax-equivalent yield will be: * = 0.03/0.78 * = 0.038, or 3.8% The higher your tax rate, the higher the tax-equivalent yield—this shows how tax free securities are best suited to those in higher tax brackets.

What Is Tax Free? Tax free refers to certain types of goods and financial securities (such as municipal bonds) that are not taxed. It also refers to earnings that are not taxed. The tax free status of these goods, investments, and income may incentivize individuals and business entities to increase spending or investing, resulting in economic stimulus. Tax free may also be known as tax-exempt. Understanding Tax Free Tax free purchases and investments do not incur the typical tax consequence of other purchases and investments. For instance, tax free weekends occur in many states where, once or twice a year, store purchases are not taxed, thereby, reducing the overall cost to the consumer. Frequently these sales tax holidays occur before school starts in the Fall to incentivize spending on school supplies, clothes, computers, calculators, etc. Governments will often provide a tax break to investors purchasing government bonds to ensure that enough funding will be available for expenditure projects. Tax free investments such as tax-exempt municipal bonds (or munis) allow investors to earn interest income tax free. Interest may only be tax free at the federal level if, for example, a California resident buys a New York municipal bond. These tax laws, however, vary by state. For instance, some states such as Wisconsin and Illinois tax interest earned on all muni bonds, including their own, subject to a few exceptions. Meanwhile, states such as California and Arizona exempt interest from taxes only if the investor resides in the issuing state. For example, assume a local government in California issues a municipal bond to finance a recreational park. An investor, John Smith, who resides in the state of issuance purchases the $5,000 par value bond which matures in two years and has a coupon rate of 3% to be paid annually. At the end of each of the two years, the investor receives interest income of 3% x $5,000 = $150. This income will not be taxed by both the federal and state government. After the bond matures, John Smith will receive his original principal investment back from the local government. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming don't have a state-level income tax, so they naturally exempt interest on all muni bonds. Treasury securities issued by the U.S. government, namely the U.S. Savings Bond and Treasury Inflation Protected Securities (TIPSs), pay interest that is tax free at the state and local levels, but not the federal level. According to the Internal Revenue Service (IRS), interest on a state or local government obligation may be tax free even if the obligation is not a bond. For example, interest on a debt evidenced only by an ordinary written agreement of purchase and sale may be tax free. Also, interest paid by an insurer on default by the state or political subdivision may be exempted from tax. Mutual funds that hold a mix of stocks and municipal bonds will have the portion of earnings derived from the bonds tax-exempt under federal income tax guidelines and possibly free from state taxes depending on the location from which the bonds originated and/or the taxpayer's state of residence. Since tax free interest is not subject to income taxes, it is not included in the calculation of adjusted gross income (AGI) for taxation purposes. Issuers or lenders that pay more than $10 in tax free interest must report the interest income to both taxpayers and the IRS on Form 1099-INT. Taxpayers or borrowers, in turn, must report this tax-exempt interest on Form 1040. The amount received as tax-exempt interest is used by the IRS to determine what amount of the taxpayer's Social Security benefits are taxable. Tax Free and the Tax-Equivalent Yield The higher an investor’s marginal tax bracket, the more valuable and beneficial tax free securities are for the investor. A tax free investment will carry a tax-equivalent yield that is often higher than the current yield, as determined by the investor's tax bracket. The tax-equivalent yield is the taxable interest rate that would be required to provide the same after-tax interest rate. The tax equivalent yield of a tax-exempt bond can be calculated as: Tax-Equivalent Yield = Tax-Exempt Yield/(1 – Marginal Tax Rate) For example, if John Smith in the example above falls in the 35% tax bracket, the 3% muni yield is equivalent to a taxable bond with a yield of: = 0.03/(1 – 0.35)= 0.03/0.65= 0.046, or 4.6% What if John Smith was in the 22% tax bracket? The tax-equivalent yield will be: = 0.03/0.78= 0.038, or 3.8% The higher your tax rate, the higher the tax-equivalent yield—this shows how tax free securities are best suited to those in higher tax brackets.

https://www.investopedia.com/articles/markets/011216/highbeta-stocks-trade.asp

Trading High-Beta Stocks: Risk vs. Reward

<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"> Growth investors and investors with high-risk tolerance may be interested in high-growth, high-beta stocks. High-beta stocks can generate high returns but also have significant downside risks when markets fall. Understanding beta and its uses can be important for growth investors seeking to identify the best-performing stocks. </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>High beta stocks are positively correlated with returns of the S&amp;P 500, but at an amplified magnitude.</li><li>These stocks outperform in bull markets but can underperform in bear markets.</li><li>High beta stocks are often small to mid-cap stocks that are maturing with significant volatility around new announcements and trends. </li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-understanding-beta"></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"> Understanding Beta </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/beta.asp">Beta</a> is a statistical measure of a stock's relative <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> to the broader market, typically the S&amp;P 500, where it can measure risk. A stock's beta is found through <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/regression.asp">regression analysis</a> that infers the correlation in price changes in the stock to the S&amp;P 500. A beta of 1.0 indicates that a stock’s volatility is parallel to the market and will often move in tandem with the index and at the same magnitudes. </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 beta above 1.0 means the stock will have greater volatility than the market, and a beta less than 1.0 indicates lower volatility. Volatility is usually an indicator of risk, and higher betas mean higher risk, while lower betas mean lower risk. Stocks with higher betas may gain more in upward markets but lose more in downward markets. </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-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_10-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Beta=covariance divided by variance" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/EcQc7T9tb_-jyaDmhua1wtNmoZE=/1280x0/filters:no_upscale():max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/Y0tgIfzRFfzEa053F66-J578Yeg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg" data-srcset="https://www.investopedia.com/thmb/X4AVN88yt8OlyzVW7MgMdx8iq6E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg 750w" data-tracking-container="true" height="640" id="mntl-sc-block-image_1-0" width="1280"/> <noscript> <img alt="Beta=covariance divided by variance" class="img--noscript universal-image__image" height="640" sizes="750px" src="https://www.investopedia.com/thmb/Y0tgIfzRFfzEa053F66-J578Yeg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg" srcset="https://www.investopedia.com/thmb/X4AVN88yt8OlyzVW7MgMdx8iq6E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg 750w" width="1280"/> </noscript> </div> </div> </figure> <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/covariance.asp">Covariance</a> is the measure of a stock’s return relative to that of the market. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/variance.asp">Variance</a> is the measure of how the market moves relative to its mean. </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-investing-in-high-beta-stocks"></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"> Investing in High-Beta Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> High-beta stocks can be great investments in bull markets since they are expected to outperform the S&amp;P 500 but require a great deal of active management because of their market sensitivity. These are highly volatile and risky investments in isolation. In a bear market reversal, stocks can be expected to lose the most. High-beta stocks are generally not long-term buy-and-hold investments. </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 growth in a portfolio, an investor will likely choose stocks with a beta above 1, providing a greater chance of a higher return for assuming the higher risk of losing value when the market goes down. Investors can hedge this volatility by adding a variety of stocks close to 1, depending on their risk tolerance. Investors who predict the market to move downward will also look at stocks with negative betas.<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_17-0"></div> <span class="heading-toc" id="toc-examples-of-high-beta-stocks"></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"> Examples of High-Beta Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> As of February 2023, these three stocks have betas around 2.0 and are members of the S&amp;P 500 index.<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_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"> Advanced Micro Devices (AMD) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> AMD is a semiconductor company that makes chipsets and microchips, competing with Intel and Qualcomm. As of February 2023, its market cap was $126.57 billion. The company is riskier than most S&amp;P 500 stocks, with a beta of 1.98.<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_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"> NVIDIA Corporation (NVDA) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Nvidia Corporation is an American multinational technology company founded in 1993, incorporated in Delaware, and based in Santa Clara, California. As of February 2023, its market cap was $532.99 billion, and its beta was 1.79.<span class="ql-inline-citation" data-cite="11"></span><br/> </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"> ETSY, Inc. (ETSY) </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Etsy is the global marketplace for unique and creative goods, connecting buyers and sellers from nearly every country. As of February 2023, Etsy's market cap was $16.3 billion and had a beta of 1.86.<span class="ql-inline-citation" data-cite="12"></span><br/> </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-limitations-and-risks-of-high-beta-stocks"></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"> Limitations and Risks of High-Beta Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> An investor will need more information than beta to assess whether a stock belongs in the portfolio. Beta does not account for trends or news events that may impact a stock. Stocks with high betas are more volatile than the overall market, and beta does not predict the direction of a stock's price or consider the company's strength.<span class="ql-inline-citation" data-cite="13"></span><br/> </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_33-0"><span class="heading-toc" id="toc-what-does-a-high-beta-tell-investors"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does a High Beta Tell Investors?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A stock that moves more than the market over time has a beta greater than 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks tend to be riskier but provide the potential for higher returns. Low-beta stocks pose less risk but typically yield lower returns.</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-how-does-beta-measure-risk"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Beta Measure Risk?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Beta is often used as a risk-reward measure, meaning it helps investors determine how much risk they are willing to take to achieve a return for taking on that risk. </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-how-does-beta-correspond-to-the-sp-500-index"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Does Beta Correspond to the S&amp;P 500 Index?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The beta of the S&amp;P 500 is 1. A stock that is highly correlated to the S&amp;P 500 will also have a beta of 1. If the S&amp;P 500 index is up in daily trading, the stock is most likely going to be up for that day.<span class="ql-inline-citation" data-cite="14"></span></p></div> </div> <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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> High-beta stocks require active management. They are also often small to mid-cap stocks maturing with significant <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> around new announcements and trends. Investing in high-growth, high-beta stocks come with high risks, so investors often seek to balance them with lower-risk portfolio holdings and cash liquidity. </p></div>

Growth investors and investors with high-risk tolerance may be interested in high-growth, high-beta stocks. High-beta stocks can generate high returns but also have significant downside risks when markets fall. Understanding beta and its uses can be important for growth investors seeking to identify the best-performing stocks. ### Key Takeaways * High beta stocks are positively correlated with returns of the S&P 500, but at an amplified magnitude. * These stocks outperform in bull markets but can underperform in bear markets. * High beta stocks are often small to mid-cap stocks that are maturing with significant volatility around new announcements and trends. ## Understanding Beta [Beta](https://www.investopedia.com/terms/b/beta.asp) is a statistical measure of a stock's relative [volatility](https://www.investopedia.com/terms/v/volatility.asp) to the broader market, typically the S&P 500, where it can measure risk. A stock's beta is found through [regression analysis](https://www.investopedia.com/terms/r/regression.asp) that infers the correlation in price changes in the stock to the S&P 500. A beta of 1.0 indicates that a stock’s volatility is parallel to the market and will often move in tandem with the index and at the same magnitudes. A beta above 1.0 means the stock will have greater volatility than the market, and a beta less than 1.0 indicates lower volatility. Volatility is usually an indicator of risk, and higher betas mean higher risk, while lower betas mean lower risk. Stocks with higher betas may gain more in upward markets but lose more in downward markets. ![Beta=covariance divided by variance]() :max_bytes(150000):strip_icc()/betaformula-5c766a3646e0fb00011bf208.jpg) [Covariance](https://www.investopedia.com/terms/c/covariance.asp) is the measure of a stock’s return relative to that of the market. [Variance](https://www.investopedia.com/terms/v/variance.asp) is the measure of how the market moves relative to its mean. ## Investing in High-Beta Stocks High-beta stocks can be great investments in bull markets since they are expected to outperform the S&P 500 but require a great deal of active management because of their market sensitivity. These are highly volatile and risky investments in isolation. In a bear market reversal, stocks can be expected to lose the most. High-beta stocks are generally not long-term buy-and-hold investments. For growth in a portfolio, an investor will likely choose stocks with a beta above 1, providing a greater chance of a higher return for assuming the higher risk of losing value when the market goes down. Investors can hedge this volatility by adding a variety of stocks close to 1, depending on their risk tolerance. Investors who predict the market to move downward will also look at stocks with negative betas. ## Examples of High-Beta Stocks As of February 2023, these three stocks have betas around 2.0 and are members of the S&P 500 index. ### Advanced Micro Devices (AMD) AMD is a semiconductor company that makes chipsets and microchips, competing with Intel and Qualcomm. As of February 2023, its market cap was $126.57 billion. The company is riskier than most S&P 500 stocks, with a beta of 1.98. ### NVIDIA Corporation (NVDA) Nvidia Corporation is an American multinational technology company founded in 1993, incorporated in Delaware, and based in Santa Clara, California. As of February 2023, its market cap was $532.99 billion, and its beta was 1.79. ### ETSY, Inc. (ETSY) Etsy is the global marketplace for unique and creative goods, connecting buyers and sellers from nearly every country. As of February 2023, Etsy's market cap was $16.3 billion and had a beta of 1.86. ## Limitations and Risks of High-Beta Stocks An investor will need more information than beta to assess whether a stock belongs in the portfolio. Beta does not account for trends or news events that may impact a stock. Stocks with high betas are more volatile than the overall market, and beta does not predict the direction of a stock's price or consider the company's strength. ## What Does a High Beta Tell Investors? A stock that moves more than the market over time has a beta greater than 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks tend to be riskier but provide the potential for higher returns. Low-beta stocks pose less risk but typically yield lower returns. ## How Does Beta Measure Risk? Beta is often used as a risk-reward measure, meaning it helps investors determine how much risk they are willing to take to achieve a return for taking on that risk.  ## How Does Beta Correspond to the S&P 500 Index? The beta of the S&P 500 is 1. A stock that is highly correlated to the S&P 500 will also have a beta of 1. If the S&P 500 index is up in daily trading, the stock is most likely going to be up for that day. ## The Bottom Line High-beta stocks require active management. They are also often small to mid-cap stocks maturing with significant [volatility](https://www.investopedia.com/terms/v/volatility.asp) around new announcements and trends. Investing in high-growth, high-beta stocks come with high risks, so investors often seek to balance them with lower-risk portfolio holdings and cash liquidity.

Growth investors and investors with high-risk tolerance may be interested in high-growth, high-beta stocks. High-beta stocks can generate high returns but also have significant downside risks when markets fall. Understanding beta and its uses can be important for growth investors seeking to identify the best-performing stocks. Key Takeaways High beta stocks are positively correlated with returns of the S&P 500, but at an amplified magnitude.These stocks outperform in bull markets but can underperform in bear markets.High beta stocks are often small to mid-cap stocks that are maturing with significant volatility around new announcements and trends. Understanding Beta Beta is a statistical measure of a stock's relative volatility to the broader market, typically the S&P 500, where it can measure risk. A stock's beta is found through regression analysis that infers the correlation in price changes in the stock to the S&P 500. A beta of 1.0 indicates that a stock’s volatility is parallel to the market and will often move in tandem with the index and at the same magnitudes. A beta above 1.0 means the stock will have greater volatility than the market, and a beta less than 1.0 indicates lower volatility. Volatility is usually an indicator of risk, and higher betas mean higher risk, while lower betas mean lower risk. Stocks with higher betas may gain more in upward markets but lose more in downward markets. Covariance is the measure of a stock’s return relative to that of the market. Variance is the measure of how the market moves relative to its mean. Investing in High-Beta Stocks High-beta stocks can be great investments in bull markets since they are expected to outperform the S&P 500 but require a great deal of active management because of their market sensitivity. These are highly volatile and risky investments in isolation. In a bear market reversal, stocks can be expected to lose the most. High-beta stocks are generally not long-term buy-and-hold investments. For growth in a portfolio, an investor will likely choose stocks with a beta above 1, providing a greater chance of a higher return for assuming the higher risk of losing value when the market goes down. Investors can hedge this volatility by adding a variety of stocks close to 1, depending on their risk tolerance. Investors who predict the market to move downward will also look at stocks with negative betas. Examples of High-Beta Stocks As of February 2023, these three stocks have betas around 2.0 and are members of the S&P 500 index. Advanced Micro Devices (AMD) AMD is a semiconductor company that makes chipsets and microchips, competing with Intel and Qualcomm. As of February 2023, its market cap was $126.57 billion. The company is riskier than most S&P 500 stocks, with a beta of 1.98. NVIDIA Corporation (NVDA) Nvidia Corporation is an American multinational technology company founded in 1993, incorporated in Delaware, and based in Santa Clara, California. As of February 2023, its market cap was $532.99 billion, and its beta was 1.79. ETSY, Inc. (ETSY) Etsy is the global marketplace for unique and creative goods, connecting buyers and sellers from nearly every country. As of February 2023, Etsy's market cap was $16.3 billion and had a beta of 1.86. Limitations and Risks of High-Beta Stocks An investor will need more information than beta to assess whether a stock belongs in the portfolio. Beta does not account for trends or news events that may impact a stock. Stocks with high betas are more volatile than the overall market, and beta does not predict the direction of a stock's price or consider the company's strength. What Does a High Beta Tell Investors? A stock that moves more than the market over time has a beta greater than 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks tend to be riskier but provide the potential for higher returns. Low-beta stocks pose less risk but typically yield lower returns. How Does Beta Measure Risk? Beta is often used as a risk-reward measure, meaning it helps investors determine how much risk they are willing to take to achieve a return for taking on that risk.  How Does Beta Correspond to the S&P 500 Index? The beta of the S&P 500 is 1. A stock that is highly correlated to the S&P 500 will also have a beta of 1. If the S&P 500 index is up in daily trading, the stock is most likely going to be up for that day. The Bottom Line High-beta stocks require active management. They are also often small to mid-cap stocks maturing with significant volatility around new announcements and trends. Investing in high-growth, high-beta stocks come with high risks, so investors often seek to balance them with lower-risk portfolio holdings and cash liquidity.

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<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"> According to our research, LegalShield has the best online legal services due to its cost, support, and 24/7 availability, among other features. </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"> There are some things in life that simply can’t be done without the help of a licensed attorney. Online legal services have made it easier than ever to get the assistance you need right from your own home, a far cry from the days of combing through yellow pages and visiting dreary offices. In fact, you may be surprised by how fast and affordable it is to hire a lawyer virtually. </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"> From estate planning to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-llc-filing-companies-5113499">starting a small business</a>, there’s an online legal service for everyone. We reviewed all the options out there and picked the best of the best based on value, service quality, price, reputation and more. </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 Online Legal Services for 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="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://legalshield.sjv.io/c/2104074/1664427/18194" rel="nofollow noskim noopener nocaes" target="_blank"> LegalShield</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 Free Advice:</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.avvo.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Avvo</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 Self-Service Documents:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.tkqlhce.com/click-100173779-15130443" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> LegalZoom</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 Finding a Lawyer:</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.findlaw.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> FindLaw</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 Complex Needs:</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://tracking.rocketlawyer.com/aff_c?offer_id=190&amp;aff_id=1657&amp;source=BestLegalService" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Rocket Lawyer</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 Startup Businesses:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=1739448&amp;u=2366409&amp;m=53954&amp;urllink=" rel="nofollow noopener sponsored nocaes" target="_blank"> Incfile</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><!-- 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="false" 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 Online Legal Services for 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 Online Legal Services for 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 Online Legal Services for 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-LegalShield" 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-LegalShield" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-legalshield" rel="nocaes"> <span class="link__wrapper">LegalShield</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-Avvo" 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-Avvo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-free-advice-avvo" rel="nocaes"> <span class="link__wrapper">Avvo</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-LegalZoom" 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-LegalZoom" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-self-service-documents-legalzoom" rel="nocaes"> <span class="link__wrapper">LegalZoom</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-FindLaw" 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-FindLaw" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-finding-a-lawyer-findlaw" rel="nocaes"> <span class="link__wrapper">FindLaw</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-Rocket Lawyer" 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-Rocket Lawyer" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-complex-needs-rocket-lawyer" rel="nocaes"> <span class="link__wrapper">Rocket Lawyer</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-Incfile" 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-Incfile" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-startup-businesses-incfile" rel="nocaes"> <span class="link__wrapper">Incfile</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-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-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-providers" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Providers</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-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-can-you-talk-to-a-lawyer-for-free" id="mntl-toc__list-item-link_1-0-2" 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_1-0-3"> <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-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-pick-the-best-online-legal-services" id="mntl-toc__list-item-link_1-0-3" 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-legalshield"></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"> LegalShield</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 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: 60px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="LegalShield" 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/DvE2KVQqQ3kunTIiMENAcDdx14M=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/LSLogo-vert-purple1-f0a7a971712d413994119ed8ed14e359.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="LegalShield" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/DvE2KVQqQ3kunTIiMENAcDdx14M=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/LSLogo-vert-purple1-f0a7a971712d413994119ed8ed14e359.jpg" width="1500"/> </noscript> </div> </div> </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_3-0-1"> <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="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at LegalShield" data-retailer-type="other" data-tracking-container="true" href="https://legalshield.sjv.io/c/2104074/1664427/18194" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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"> LegalShield offers the best online legal service for families and businesses, with reasonable prices, stellar support and 24/7 convenience. </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>Serves both individual and small business needs</p></li> <li><p>Affordable monthly plans</p></li> <li><p>No long-term contracts</p></li> <li><p>Offers live chat and emergency consultations</p></li> <li><p>Available in the United States and Canada</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>Not designed for one-time use</p></li> <li><p>Cost of additional services can vary by location and attorney</p></li> <li><p>Some pre-existing needs may have an added cost</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <div class="comp theme-offer 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_3-0-6"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>LegalShield is offering<strong> </strong>16% off the annual plan for Individuals &amp; Families.</p></div><!-- end: comp mntl-sc-block-callout-body mntl-text-block --> </div><!-- end: comp theme-offer 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">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_3-0-8"> According to LegalShield, a single hour with an attorney can cost anywhere between $150 and $400, which is why the company offers a more affordable option through its all-inclusive plan. Monthly membership fees, which start at $29.95 for individuals and $49 for small businesses, cover many of the basic services you might need from an attorney at just a fraction of the cost. </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"> LegalShield’s individual plan includes unlimited consultations and legal document reviews with a licensed attorney. You’ll also benefit from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/estateplanning.asp">estate planning</a> services; mortgage document preparation; and representation in certain scenarios related to traffic violations, family law, tax audits and more. If you need a lawyer for other reasons, you’ll get a 25% discount on a firm's standard hourly rates. Your spouse and dependent children are also covered at no additional cost. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> Small business owners can also get coverage from LegalShield with three membership tiers ranging from $49 to $169 per month. All plans include consultations and a 25% discount on hourly rates, but vary depending on the number of documents you’d like reviewed and the amount of correspondence you need your attorney to send on your behalf. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> Although LegalShield uses a monthly subscription model, there’s no long-term commitment. Cancel anytime and get a prorated refund for any days not used. However, you should know that certain benefits don’t apply to pre-existing situations; for example, if you sign up for LegalShield the day after you receive a ticket, you won’t be able to use the plan’s traffic violation benefits. </p><!-- 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-free-advice-avvo"></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 Free Advice</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Avvo</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_3-0-12" style="--imgWidth: 220px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Avvo" 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/rzQqIpQV4yF4oc0-lqiQxal_xTY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/avvo-d3fb5ae5abc449a29b3309c3b731631e.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Avvo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/rzQqIpQV4yF4oc0-lqiQxal_xTY=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/avvo-d3fb5ae5abc449a29b3309c3b731631e.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>Avvo</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_3-0-13"> <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 Avvo" data-retailer-type="other" data-tracking-container="true" href="https://www.avvo.com/" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-15"> If you have a simple legal question, Avvo is the best place to get free advice from licensed attorneys. </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_3-0-17"> <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>Post a question and get advice from one or more attorneys</p></li> <li><p>Most questions are answered within 12 hours</p></li> <li><p>No cost for follow-up questions</p></li> <li><p>Provides a nationwide directory of attorneys</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>Questions are public for anyone to see</p></li> <li><p>Limited to general information</p></li> <li><p>Filled with ads of lawyers in your area</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_3-0-19"> Nothing is more frustrating than paying for an attorney’s time only to find out they can’t help you. If you’re faced with a legal issue and just need some guidance, try Avvo, an online directory of lawyers that also acts as the best place for free legal advice on the internet. According to Avvo, someone gets advice every five seconds on the platform’s Q&amp;A board, usually within 12 hours or less. </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"> To submit a question through Avvo, all you need to do is fill out an online form with your question, any relevant details, and your city and state. Within a few hours, at least one attorney in your area should respond. Avvo encourages follow-up questions as needed, which remain free as long as the attorney is willing and able to answer them. </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"> The main caveat: Answers given on the Avvo Q&amp;A board don’t constitute an official <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/privileged-communication.asp">attorney-client relationship</a> and are limited to general legal advice. At some point, you may be advised to hire a lawyer. In this case, you can use the Avvo directory to find a local attorney, or simply contact the one who answered your question. </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"> Since Avvo’s Q&amp;A board is public, you’ll have to keep in mind that any information you post is available for anyone to see. However, this does mean that you can search questions asked by others as an extra source of information. You should also keep an eye out for sponsored lawyer listings. </p><!-- 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-self-service-documents-legalzoom"></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 Self-Service Documents</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> LegalZoom</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-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_3-0-23" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="LegalZoom 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/eIKsT1njquso88L78KrflpuXYTU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Legal-Zoom-Logo-4dc82138b5cb42ad8f07a66457ae1869.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="LegalZoom Logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/eIKsT1njquso88L78KrflpuXYTU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Legal-Zoom-Logo-4dc82138b5cb42ad8f07a66457ae1869.jpg" width="1500"/> </noscript> </div> </div> </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_3-0-24"> <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="sid=${REQUEST_ID}-${DOC_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at LegalZoom" data-retailer-type="other" data-tracking-container="true" href="https://www.tkqlhce.com/click-100173779-15130443" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-26"> LegalZoom makes the use of legal documents painless with simple online forms and low prices starting at just $0 plus state tax. You won’t find a better self-service experience. </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_3-0-28"> <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>Straightforward, flat-rate pricing</p></li> <li><p>Excellent phone support</p></li> <li><p>60-day satisfaction guarantee</p></li> <li><p>Memberships 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>Different pricing options can be confusing</p></li> <li><p>Not all documents are viewable online</p></li> <li><p>Extra cost for filing assistance (depending on state)</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_3-0-30"> Whether you’re planning your estate or renting out a property, LegalZoom makes it fast and painless to get the documents you need. The self-service platform offers customized legal documents starting at as little as $0 plus state tax. Most documents only take a few minutes to fill out online and are then made available for download or sent to you by mail. </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"> LegalZoom also offers full-service packages with access to a licensed attorney for a set period of time. For example, the Premium LLC Package includes hands-on assistance from a lawyer to create your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/what-is-a-will.asp">last will and testament</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-power-attorney.asp">financial power of attorney</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/livingwill.asp">living will</a>, plus one year of ongoing legal guidance related to your estate. The price is $249 for one person. </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"> While many platforms offer comparable services to LegalZoom, the company really shines in customer service. Phone support representatives are available 14 hours per day during the week and nine hours per day on weekends. Many documents include unlimited revisions. If you’re not happy with the final product, simply contact customer service within 60 days for a full refund. </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"> Most documents are delivered by digital download from LegalZoom, although a few can only be sent by mail. If you need help filing a document with the appropriate legal authority, this service is available but comes at an additional cost. </p><!-- 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-finding-a-lawyer-findlaw"></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 Finding a Lawyer</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> FindLaw</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_3-0-34" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="FindLaw" 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/evM9yrQR8A6aGXqYsVgMjpTbh5I=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Find_Law-de8abd6969eb46fdab7711ee2a01355f.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="FindLaw" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/evM9yrQR8A6aGXqYsVgMjpTbh5I=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Find_Law-de8abd6969eb46fdab7711ee2a01355f.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> FindLaw</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_3-0-35"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at FindLaw" data-retailer-type="other" data-tracking-container="true" href="https://www.findlaw.com/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-37"> FindLaw’s directory lists hundreds of attorneys in 119 practice areas, making it one of the best places to find a lawyer online. </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_3-0-39"> <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>Lists attorneys in all 50 states and Puerto Rico</p></li> <li><p>Searchable by location and legal issue</p></li> <li><p>Easy to find free consultations</p></li> <li><p>Free online resources</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 support options</p></li> <li><p>Many attorneys have few or no reviews</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_3-0-41"> Every legal issue requires a different type of attorney and the best place to find them all is FindLaw. The online directory lists hundreds of U.S. attorneys in 119 specific areas of law, making it easy to find the most qualified practitioner for your case. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> To get started with FindLaw, simply enter your legal issue and geographic location and you’ll be presented with a list of qualified attorneys. If you prefer to speak with someone who offers free consultations, FindLaw gives you this option as a search filter. You can also narrow results by language if the person in need of representation doesn't speak English as their primary language. </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"> Aside from their attorney directory, FindLaw also has a free online library of legal resources. You’ll find a state-by-state encyclopedia that explains important laws in simple terms for those without a law degree. FindLaw’s guides on processes like forming an LLC and filing for bankruptcy can help you decide whether hiring an attorney is necessary. </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"> While FindLaw shows client reviews for the attorneys in their directory, you may find that most attorneys have very few reviews or none at all. It’s worth taking the extra step to search each lawyer for reviews on other platforms. FindLaw also recommends checking with your local bar association to make sure the attorney has no disciplinary record. Of course, you should speak with multiple attorneys to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-online-will-makers-4843732">choose the most qualified professional</a> at the best price. </p><!-- 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-complex-needs-rocket-lawyer"></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 Complex Needs</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Rocket Lawyer</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_3-0-45" style="--imgWidth: 547px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Rocket Lawyer" 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/nAfi0UZ_bsfJ9jAIi3EuzbHISKg=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Rocket_Lawyer-decef346673d4ec086ba41960780ca37.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Rocket Lawyer" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/nAfi0UZ_bsfJ9jAIi3EuzbHISKg=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Rocket_Lawyer-decef346673d4ec086ba41960780ca37.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> Rocket Lawyer</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_3-0-46"> <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 Rocket Lawyer" data-retailer-type="other" data-tracking-container="true" href="https://tracking.rocketlawyer.com/aff_c?offer_id=190&amp;aff_id=1657&amp;source=BestLegalService" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-48"> Most online legal services are fairly standardized, but Rocket Lawyer’s on-call attorneys are the best choice for complex matters. </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_3-0-50"> <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>Offers both memberships and à la carte services</p></li> <li><p>Members get up to 40% off fees for hiring an On Call attorney</p></li> <li><p>Available in six countries</p></li> <li><p>Free seven-day trial</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>Too complicated for those with simple needs</p></li> <li><p>Higher membership fees</p></li> <li><p>No weekend support</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_3-0-52"> If your legal needs haven’t been met by standard online services, Rocket Lawyer is the next step. The company offers a wide array of solutions to individual and business customers in the United States, the United Kingdom, France, Spain, Brazil and the Netherlands. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-53"> With Rocket Lawyer, you can choose to purchase services à la carte or sign up for a monthly membership. Memberships cost $39.99 per month and include unlimited documents, answers to legal questions and 30-minute consultations on new issues. This can quickly pay for itself, as fees for non-members range from $39.99 for a single document to $59.99 for a 30-minute consultation. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> Members who aren’t satisfied with the scope of Rocket Lawyer’s listed services can benefit from Rocket Lawyer On Call. Here’s how it works: if your legal issue can’t be answered online, Rocket Lawyer will put you in touch with the right attorney for a 30-minute phone consultation. Those with complex problems that require further legal services can choose to continue working with that attorney at 40% off their hourly 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_3-0-55"> Rocket Lawyer memberships come with a seven-day trial and can be canceled at any time before the next billing cycle. The $39.99 monthly fee is higher than some competitors' prices but may be worth it if you frequently need documents or complex legal help. It’s also worth noting that customer support is unavailable on weekends. </p><!-- 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-startup-businesses-incfile"></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 Startup Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Incfile</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 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_3-0-56" style="--imgWidth: 420px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Incfile" 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/sJay7sfmiqkdLJueftjBngOkR84=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Incfile-3407d5b8f8f946d99b7aea6cca63c57f.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Incfile" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/sJay7sfmiqkdLJueftjBngOkR84=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Incfile-3407d5b8f8f946d99b7aea6cca63c57f.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> Incfile</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_3-0-57"> <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="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Incfile" data-retailer-type="skimlinks" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=1739448&amp;u=2366409&amp;m=53954&amp;urllink=" id="button_1-0-5" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-59"> Starting a business? Get the best legal support from Incfile, beginning with a free LLC filing. </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_3-0-61"> <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>Offers a free LLC filing</p></li> <li><p>Incorporate in any U.S. state</p></li> <li><p>Choose from three packages</p></li> <li><p>Includes lifetime alerts before important filing dates with their Gold plan</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 LLC filing doesn’t include state fees</p></li> <li><p>Limited phone support hours</p></li> <li><p>Fees are higher in some states than others</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_3-0-63"> From choosing a type of legal entity to staying in compliance, Incfile is the best online legal service to guide startups through every stage of growth. Since 2004, the company has helped more than half a million small businesses get started and keep running smoothly. </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"> Incfile offers its customers three packages: Silver, Gold and Platinum. Pricing is determined by adding Incfile’s service fee to state filing fees. This means the total price you’ll pay depends on the type of entity and the state you decide to start your business in. For example, the Gold package costs $194 for an LLC in Arkansas but $354 to start the same business in 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_3-0-65"> Once you’ve started your business, Incfile continues to provide value by guiding you through annual compliance requirements and other necessary procedures. Gold members can take advantage of a business banking account, banking resolutions and tax consultation services; Platinum members also receive contract templates, expedited filing, and a domain name and business email with their fees. </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"> The main downside to Incfile is its customer service. Phone support hours are limited to weekdays between 9 a.m. and 6 p.m. CST, and customers have complained of slow response times in the past. However, Incfile recently addressed these complaints publicly by doubling the size of its customer service team and adding live chat support. </p><!-- 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-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"> Online legal services are often cheaper and more convenient than standard attorneys, although they have their limitations. There’s no need to pay hundreds of dollars for a simple will, for example, when you can create your own online for less than $100. At the very least, online legal services are a great place to get started with free or low-cost advice before committing resources to long-term legal representation. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-2"> <span class="mntl-sc-block-heading__text"> Compare Providers </span> </h2><!-- end: comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading --> <figure class="comp js-table-scroll sc-block-table--base sc-block-table--finance mntl-sc-block prm-sc-block-table--finance prm-sc-block-table mntl-sc-block-table" data-tracking-container="true" data-tracking-id="PRM Roundup | Table Block" id="mntl-sc-block_4-0-3"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Company</b></th> <th><b>Key Benefit</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><b><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://legalshield.sjv.io/c/2104074/1664427/18194" rel="nofollow">LegalShield</a></b> <br/>Best Overall</td> <td>Affordable and convenient service for most legal needs</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.avvo.com/" rel="sponsored nofollow">Avvo</a></b> <br/>Best Free Advice</td> <td>Get answers to legal questions for free</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.legalzoom.com/" rel="sponsored nofollow">LegalZoom</a></b> <br/>Best Self-Service Documents</td> <td>Generate legally binding documents in minutes</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.findlaw.com/" rel="sponsored nofollow">FindLaw</a></b> <br/>Best for Finding a Lawyer</td> <td>Search from a directory of hundreds of licensed attorneys</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://tracking.rocketlawyer.com/aff_c?offer_id=190&amp;aff_id=1657&amp;source=BestLegalService" rel="sponsored nofollow">Rocket Lawyer</a></b> <br/>Best for Complex Needs</td> <td>Discounts up to 40% on legal fees for complex matters</td> </tr> <tr> <td><b><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=1739448&amp;u=2366409&amp;m=53954&amp;urllink=" rel="sponsored nofollow">Incfile</a></b> <br/>Best for Startup Businesses</td> <td>Free LLC filing and affordable ongoing legal support</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 --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-4"> <span class="heading-toc" id="toc-can-you-talk-to-a-lawyer-for-free"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Talk to a Lawyer For Free?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can generally talk to a lawyer for free by using an online Q&amp;A board or scheduling a free consultation. However, you should note that these interactions aren’t considered an official attorney-client relationship. For anything more than general advice, you’ll need to pay the lawyer for their time.</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_4-0-5"> <span class="heading-toc" id="toc-should-i-hire-a-lawyer-to-form-an-llc"></span> <h2 class="mntl-sc-block-questionandanswer__question">Should I Hire a Lawyer to Form an LLC?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Forming an LLC doesn’t require hiring a lawyer, but it may be a good idea in some circumstances. For example, if you’re not certain that an LLC is the right type of entity to form, you should review all your options with an attorney. It’s also worth hiring an unbiased legal representative if the LLC will have multiple members acting as equal partners.</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_4-0-6"> <span class="heading-toc" id="toc-what-should-a-simple-will-cost"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Should a Simple Will Cost?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In short, you shouldn’t pay more than $100 for a simple will through an online legal service. With LegalZoom, a personalized will costs $89. However, if you pay LegalShield’s monthly membership fee of about $40, you’ll get a will written by a licensed attorney at no additional charge.</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-pick-the-best-online-legal-services"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-7"> <span class="mntl-sc-block-heading__text"> How We Pick the Best Online Legal Services </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_4-0-8"> Our list of the best online legal services was selected from a pool of over a dozen providers offering documents, consultations and/or referrals to local attorneys. We carried out our review with the mindset that online legal services should be not just affordable but reliable and trustworthy. In addition to comparing pricing for services, we also heavily weighed customer reviews and complaints for each company. </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-online-legal-services-5113087" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/LxKFcg8kFWuLKTlG3McIut5bv-A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg" srcset="https://www.investopedia.com/thmb/D1YRtGkIJl_NYNL1mihkfvQJVSw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPUAAAwNDw0SFQ8SFw0UGg8UGg0XIAscJgwaIwwdJw4cJwsbKA0dKgweKA4eKwklOhEjNxEkMxAmMxIkMhAnNRIlNBAqNxMpNxEoOBIpOxMqOhEsPRIuPBYpOA8zQxAvQxIvQREwRBIxRRIxRhIyRxMyRhMzSBE3ThQ3TRI7TxM5UBJGXhRBWBVCWRZEWxtPZx9LZhxMYhxSbB5UbhlScBlRdBpZfCNYeCyIoS6IozWYuFSUuEiVw5CeqYWisoSgtfL5/ywAAAAACgAHAEUIUQARLIDwYMKFDg0MDBDhIAMJFTZ0RNiQwAKIEClkmFhRggcBBRwgHKghoQIGAQAkaLjwIYcLHC1mBPAwYgSLHyhi9PBR4AQFCjtewLjBgASNgAA7')" width="1500"/> <noscript> <img alt="Best-online-legal-services-5113087" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/LxKFcg8kFWuLKTlG3McIut5bv-A=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg" srcset="https://www.investopedia.com/thmb/D1YRtGkIJl_NYNL1mihkfvQJVSw=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg 750w" 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>Getty Images / Tanarat Kongchuenjit</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-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="5113499" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-llc-filing-companies-5113499" id="mntl-card-list-items_1-0"> <div class="card__media" data-tag="How to Start a Business"> <img alt="A man and a woman in an office laugh together over something they have seen on a laptop 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According to our research, LegalShield has the best online legal services due to its cost, support, and 24/7 availability, among other features. There are some things in life that simply can’t be done without the help of a licensed attorney. Online legal services have made it easier than ever to get the assistance you need right from your own home, a far cry from the days of combing through yellow pages and visiting dreary offices. In fact, you may be surprised by how fast and affordable it is to hire a lawyer virtually. From estate planning to [starting a small business](https://www.investopedia.com/best-llc-filing-companies-5113499), there’s an online legal service for everyone. We reviewed all the options out there and picked the best of the best based on value, service quality, price, reputation and more. ## Best Online Legal Services for 2024 * **Best Overall:** [LegalShield](https://legalshield.sjv.io/c/2104074/1664427/18194) * **Best Free Advice:** [Avvo](https://www.avvo.com/) * **Best Self-Service Documents:** [LegalZoom](https://www.tkqlhce.com/click-100173779-15130443) * **Best for Finding a Lawyer:** [FindLaw](https://www.findlaw.com/) * **Best for Complex Needs:** [Rocket Lawyer](https://tracking.rocketlawyer.com/aff_c?offer_id=190&aff_id=1657&source=BestLegalService) * **Best for Startup Businesses:** [Incfile](https://shareasale.com/r.cfm?b=1739448&u=2366409&m=53954&urllink=) Best Online Legal Services for 2024 Expand Best Online Legal Services for 2024 * [Our Top Picks](#summary-list) * [LegalShield](#toc-best-overall-legalshield) * [Avvo](#toc-best-free-advice-avvo) * [LegalZoom](#toc-best-self-service-documents-legalzoom) * [FindLaw](#toc-best-for-finding-a-lawyer-findlaw) * [Rocket Lawyer](#toc-best-for-complex-needs-rocket-lawyer) * [Incfile](#toc-best-for-startup-businesses-incfile) * See More (3) * [The Bottom Line](#toc-the-bottom-line) * [Compare Providers](#toc-compare-providers) * [FAQs](#toc-can-you-talk-to-a-lawyer-for-free) * [Methodology](#toc-how-we-pick-the-best-online-legal-services) ### Best Overall : LegalShield --- ![LegalShield]() :fill(white):max_bytes(150000):strip_icc()/LSLogo-vert-purple1-f0a7a971712d413994119ed8ed14e359.jpg) [Learn More](https://legalshield.sjv.io/c/2104074/1664427/18194) Why We Chose It LegalShield offers the best online legal service for families and businesses, with reasonable prices, stellar support and 24/7 convenience. Pros & Cons Pros * Serves both individual and small business needs * Affordable monthly plans * No long-term contracts * Offers live chat and emergency consultations * Available in the United States and Canada Cons * Not designed for one-time use * Cost of additional services can vary by location and attorney * Some pre-existing needs may have an added cost LegalShield is offering16% off the annual plan for Individuals & Families. Overview According to LegalShield, a single hour with an attorney can cost anywhere between $150 and $400, which is why the company offers a more affordable option through its all-inclusive plan. Monthly membership fees, which start at $29.95 for individuals and $49 for small businesses, cover many of the basic services you might need from an attorney at just a fraction of the cost. LegalShield’s individual plan includes unlimited consultations and legal document reviews with a licensed attorney. You’ll also benefit from [estate planning](https://www.investopedia.com/terms/e/estateplanning.asp) services; mortgage document preparation; and representation in certain scenarios related to traffic violations, family law, tax audits and more. If you need a lawyer for other reasons, you’ll get a 25% discount on a firm's standard hourly rates. Your spouse and dependent children are also covered at no additional cost. Small business owners can also get coverage from LegalShield with three membership tiers ranging from $49 to $169 per month. All plans include consultations and a 25% discount on hourly rates, but vary depending on the number of documents you’d like reviewed and the amount of correspondence you need your attorney to send on your behalf. Although LegalShield uses a monthly subscription model, there’s no long-term commitment. Cancel anytime and get a prorated refund for any days not used. However, you should know that certain benefits don’t apply to pre-existing situations; for example, if you sign up for LegalShield the day after you receive a ticket, you won’t be able to use the plan’s traffic violation benefits. ### Best Free Advice : Avvo --- ![Avvo]() :fill(white):max_bytes(150000):strip_icc()/avvo-d3fb5ae5abc449a29b3309c3b731631e.jpg) Avvo [Learn More](https://www.avvo.com/) Why We Chose It If you have a simple legal question, Avvo is the best place to get free advice from licensed attorneys. Pros & Cons Pros * Post a question and get advice from one or more attorneys * Most questions are answered within 12 hours * No cost for follow-up questions * Provides a nationwide directory of attorneys Cons * Questions are public for anyone to see * Limited to general information * Filled with ads of lawyers in your area Overview Nothing is more frustrating than paying for an attorney’s time only to find out they can’t help you. If you’re faced with a legal issue and just need some guidance, try Avvo, an online directory of lawyers that also acts as the best place for free legal advice on the internet. According to Avvo, someone gets advice every five seconds on the platform’s Q&A board, usually within 12 hours or less. To submit a question through Avvo, all you need to do is fill out an online form with your question, any relevant details, and your city and state. Within a few hours, at least one attorney in your area should respond. Avvo encourages follow-up questions as needed, which remain free as long as the attorney is willing and able to answer them. The main caveat: Answers given on the Avvo Q&A board don’t constitute an official [attorney-client relationship](https://www.investopedia.com/terms/p/privileged-communication.asp) and are limited to general legal advice. At some point, you may be advised to hire a lawyer. In this case, you can use the Avvo directory to find a local attorney, or simply contact the one who answered your question. Since Avvo’s Q&A board is public, you’ll have to keep in mind that any information you post is available for anyone to see. However, this does mean that you can search questions asked by others as an extra source of information. You should also keep an eye out for sponsored lawyer listings. ### Best Self-Service Documents : LegalZoom --- ![LegalZoom Logo]() :fill(white):max_bytes(150000):strip_icc()/Legal-Zoom-Logo-4dc82138b5cb42ad8f07a66457ae1869.jpg) [Learn More](https://www.tkqlhce.com/click-100173779-15130443) Why We Chose It LegalZoom makes the use of legal documents painless with simple online forms and low prices starting at just $0 plus state tax. You won’t find a better self-service experience. Pros & Cons Pros * Straightforward, flat-rate pricing * Excellent phone support * 60-day satisfaction guarantee * Memberships available Cons * Different pricing options can be confusing * Not all documents are viewable online * Extra cost for filing assistance (depending on state) Overview Whether you’re planning your estate or renting out a property, LegalZoom makes it fast and painless to get the documents you need. The self-service platform offers customized legal documents starting at as little as $0 plus state tax. Most documents only take a few minutes to fill out online and are then made available for download or sent to you by mail. LegalZoom also offers full-service packages with access to a licensed attorney for a set period of time. For example, the Premium LLC Package includes hands-on assistance from a lawyer to create your [last will and testament](https://www.investopedia.com/articles/pf/08/what-is-a-will.asp), [financial power of attorney](https://www.investopedia.com/terms/f/financial-power-attorney.asp) and [living will](https://www.investopedia.com/terms/l/livingwill.asp), plus one year of ongoing legal guidance related to your estate. The price is $249 for one person. While many platforms offer comparable services to LegalZoom, the company really shines in customer service. Phone support representatives are available 14 hours per day during the week and nine hours per day on weekends. Many documents include unlimited revisions. If you’re not happy with the final product, simply contact customer service within 60 days for a full refund. Most documents are delivered by digital download from LegalZoom, although a few can only be sent by mail. If you need help filing a document with the appropriate legal authority, this service is available but comes at an additional cost. ### Best for Finding a Lawyer : FindLaw --- ![FindLaw]() :fill(white):max_bytes(150000):strip_icc()/Find_Law-de8abd6969eb46fdab7711ee2a01355f.jpg)  FindLaw [Learn More](https://www.findlaw.com/) Why We Chose It FindLaw’s directory lists hundreds of attorneys in 119 practice areas, making it one of the best places to find a lawyer online. Pros & Cons Pros * Lists attorneys in all 50 states and Puerto Rico * Searchable by location and legal issue * Easy to find free consultations * Free online resources Cons * Limited support options * Many attorneys have few or no reviews Overview Every legal issue requires a different type of attorney and the best place to find them all is FindLaw. The online directory lists hundreds of U.S. attorneys in 119 specific areas of law, making it easy to find the most qualified practitioner for your case. To get started with FindLaw, simply enter your legal issue and geographic location and you’ll be presented with a list of qualified attorneys. If you prefer to speak with someone who offers free consultations, FindLaw gives you this option as a search filter. You can also narrow results by language if the person in need of representation doesn't speak English as their primary language. Aside from their attorney directory, FindLaw also has a free online library of legal resources. You’ll find a state-by-state encyclopedia that explains important laws in simple terms for those without a law degree. FindLaw’s guides on processes like forming an LLC and filing for bankruptcy can help you decide whether hiring an attorney is necessary. While FindLaw shows client reviews for the attorneys in their directory, you may find that most attorneys have very few reviews or none at all. It’s worth taking the extra step to search each lawyer for reviews on other platforms. FindLaw also recommends checking with your local bar association to make sure the attorney has no disciplinary record. Of course, you should speak with multiple attorneys to [choose the most qualified professional](https://www.investopedia.com/best-online-will-makers-4843732) at the best price. ### Best for Complex Needs : Rocket Lawyer --- ![Rocket Lawyer]() :fill(white):max_bytes(150000):strip_icc()/Rocket_Lawyer-decef346673d4ec086ba41960780ca37.jpg)  Rocket Lawyer [Learn More](https://tracking.rocketlawyer.com/aff_c?offer_id=190&aff_id=1657&source=BestLegalService) Why We Chose It Most online legal services are fairly standardized, but Rocket Lawyer’s on-call attorneys are the best choice for complex matters. Pros & Cons Pros * Offers both memberships and à la carte services * Members get up to 40% off fees for hiring an On Call attorney * Available in six countries * Free seven-day trial Cons * Too complicated for those with simple needs * Higher membership fees * No weekend support Overview If your legal needs haven’t been met by standard online services, Rocket Lawyer is the next step. The company offers a wide array of solutions to individual and business customers in the United States, the United Kingdom, France, Spain, Brazil and the Netherlands. With Rocket Lawyer, you can choose to purchase services à la carte or sign up for a monthly membership. Memberships cost $39.99 per month and include unlimited documents, answers to legal questions and 30-minute consultations on new issues. This can quickly pay for itself, as fees for non-members range from $39.99 for a single document to $59.99 for a 30-minute consultation. Members who aren’t satisfied with the scope of Rocket Lawyer’s listed services can benefit from Rocket Lawyer On Call. Here’s how it works: if your legal issue can’t be answered online, Rocket Lawyer will put you in touch with the right attorney for a 30-minute phone consultation. Those with complex problems that require further legal services can choose to continue working with that attorney at 40% off their hourly rate. Rocket Lawyer memberships come with a seven-day trial and can be canceled at any time before the next billing cycle. The $39.99 monthly fee is higher than some competitors' prices but may be worth it if you frequently need documents or complex legal help. It’s also worth noting that customer support is unavailable on weekends. ### Best for Startup Businesses : Incfile --- ![Incfile]() :fill(white):max_bytes(150000):strip_icc()/Incfile-3407d5b8f8f946d99b7aea6cca63c57f.jpg)  Incfile [Learn More](https://shareasale.com/r.cfm?b=1739448&u=2366409&m=53954&urllink=) Why We Chose It Starting a business? Get the best legal support from Incfile, beginning with a free LLC filing. Pros & Cons Pros * Offers a free LLC filing * Incorporate in any U.S. state * Choose from three packages * Includes lifetime alerts before important filing dates with their Gold plan Cons * Free LLC filing doesn’t include state fees * Limited phone support hours * Fees are higher in some states than others Overview From choosing a type of legal entity to staying in compliance, Incfile is the best online legal service to guide startups through every stage of growth. Since 2004, the company has helped more than half a million small businesses get started and keep running smoothly. Incfile offers its customers three packages: Silver, Gold and Platinum. Pricing is determined by adding Incfile’s service fee to state filing fees. This means the total price you’ll pay depends on the type of entity and the state you decide to start your business in. For example, the Gold package costs $194 for an LLC in Arkansas but $354 to start the same business in New York. Once you’ve started your business, Incfile continues to provide value by guiding you through annual compliance requirements and other necessary procedures. Gold members can take advantage of a business banking account, banking resolutions and tax consultation services; Platinum members also receive contract templates, expedited filing, and a domain name and business email with their fees. The main downside to Incfile is its customer service. Phone support hours are limited to weekdays between 9 a.m. and 6 p.m. CST, and customers have complained of slow response times in the past. However, Incfile recently addressed these complaints publicly by doubling the size of its customer service team and adding live chat support. ## The Bottom Line Online legal services are often cheaper and more convenient than standard attorneys, although they have their limitations. There’s no need to pay hundreds of dollars for a simple will, for example, when you can create your own online for less than $100. At the very least, online legal services are a great place to get started with free or low-cost advice before committing resources to long-term legal representation. ## Compare Providers | **Company** | **Key Benefit** | | --- | --- | | **[LegalShield](https://legalshield.sjv.io/c/2104074/1664427/18194)** Best Overall | Affordable and convenient service for most legal needs | | **[Avvo](https://www.avvo.com/)** Best Free Advice | Get answers to legal questions for free | | **[LegalZoom](https://www.legalzoom.com/)** Best Self-Service Documents | Generate legally binding documents in minutes | | **[FindLaw](https://www.findlaw.com/)** Best for Finding a Lawyer | Search from a directory of hundreds of licensed attorneys | | **[Rocket Lawyer](https://tracking.rocketlawyer.com/aff_c?offer_id=190&aff_id=1657&source=BestLegalService)** Best for Complex Needs | Discounts up to 40% on legal fees for complex matters | | **[Incfile](https://shareasale.com/r.cfm?b=1739448&u=2366409&m=53954&urllink=)** Best for Startup Businesses | Free LLC filing and affordable ongoing legal support | ## Can You Talk to a Lawyer For Free? You can generally talk to a lawyer for free by using an online Q&A board or scheduling a free consultation. However, you should note that these interactions aren’t considered an official attorney-client relationship. For anything more than general advice, you’ll need to pay the lawyer for their time. ## Should I Hire a Lawyer to Form an LLC? Forming an LLC doesn’t require hiring a lawyer, but it may be a good idea in some circumstances. For example, if you’re not certain that an LLC is the right type of entity to form, you should review all your options with an attorney. It’s also worth hiring an unbiased legal representative if the LLC will have multiple members acting as equal partners. ## What Should a Simple Will Cost? In short, you shouldn’t pay more than $100 for a simple will through an online legal service. With LegalZoom, a personalized will costs $89. However, if you pay LegalShield’s monthly membership fee of about $40, you’ll get a will written by a licensed attorney at no additional charge. ## How We Pick the Best Online Legal Services Our list of the best online legal services was selected from a pool of over a dozen providers offering documents, consultations and/or referrals to local attorneys. We carried out our review with the mindset that online legal services should be not just affordable but reliable and trustworthy. In addition to comparing pricing for services, we also heavily weighed customer reviews and complaints for each company. :max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg) :max_bytes(150000):strip_icc()/OnlineLegal_Tanarat-Kongchuenjit-a4ef9e0e35e3492d97f9edc92d72e517.jpg) Getty Images / Tanarat Kongchuenjit Related Articles [![A man and a woman in an office laugh together over something they have seen on a laptop screen.]() :max_bytes(150000):strip_icc()/GettyImages-904536858-c089bc26f4fd4025b23f536345ba73ae.jpg) Best LLC Services for May 2024](https://www.investopedia.com/best-llc-filing-companies-5113499) [![The 6 Best Online Will Makers of May 2024]() :max_bytes(150000):strip_icc()/best-online-will-makers-4843732-final-b33a7a050b4647beacf27dff6a1f175e.png) Best Online Will Makers of May 2024](https://www.investopedia.com/best-online-will-makers-4843732) [![Tax Preparation]() :max_bytes(150000):strip_icc()/_TaxPreparation_NatalyaBurova-fcc0a6b886d54dfb85d289d233973ce3.jpg) Best Tax Software and Tax Preparation of 2024](https://www.investopedia.com/best-tax-preparation-services-5089924) [![]() :max_bytes(150000):strip_icc()/home_equity__rental_gowth_shutterstock_582996238-5bfc33374cedfd0026c27e4a.jpg) What Does a Real Estate Attorney Do?](https://www.investopedia.com/ask/answers/101314/what-do-real-estate-attorneys-do.asp) [![Tax Relief Companies]() :max_bytes(150000):strip_icc()/GettyImages-1332230003-793d9594ed6c4ca792ecc547939319d5.jpg) Best Tax Relief Companies for May 2024](https://www.investopedia.com/best-tax-relief-companies-4847222) [![Best Online Divorce Service]() :max_bytes(150000):strip_icc()/GettyImages-1345165144-9de12a3aa5154137b66f3a30a8d2bd95.jpg) Best Online Divorce Services](https://www.investopedia.com/best-online-divorce-services-5071506) Related Terms [Last Will and Testament: Definition, Types, and How to Write One](https://www.investopedia.com/terms/l/last-will-and-testament.asp) A last will and testament is a legal document detailing your wishes regarding assets and dependents after your death. Find out how to make a will. [more](https://www.investopedia.com/terms/l/last-will-and-testament.asp) [Power of Attorney (POA): Meaning, Types, and How and Why to Set One Up](https://www.investopedia.com/terms/p/powerofattorney.asp) A power of attorney (POA) is legal authorization for a designated person to make decisions about another person's property, finances, or medical care. [more](https://www.investopedia.com/terms/p/powerofattorney.asp) [What Is a Living Trust?](https://www.investopedia.com/terms/l/living-trust.asp) A living trust is a legal arrangement established during an individual's lifetime that contains assets to be distributed after death and that bypasses probate. [more](https://www.investopedia.com/terms/l/living-trust.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) [Testamentary Will: What it is, How it Works, FAQ](https://www.investopedia.com/terms/t/testamentary-will.asp) A testamentary will, aka a traditional last will and testament, is a legal document used to transfer a person's assets to beneficiaries after death. [more](https://www.investopedia.com/terms/t/testamentary-will.asp) [Background Check: Definition, Types, and Examples](https://www.investopedia.com/background-check-definition-types-examples-8643863) Employers and others want to know all about you. Learn why and how background checks are done, and what information about you they uncover. [more](https://www.investopedia.com/background-check-definition-types-examples-8643863)

According to our research, LegalShield has the best online legal services due to its cost, support, and 24/7 availability, among other features. There are some things in life that simply can’t be done without the help of a licensed attorney. Online legal services have made it easier than ever to get the assistance you need right from your own home, a far cry from the days of combing through yellow pages and visiting dreary offices. In fact, you may be surprised by how fast and affordable it is to hire a lawyer virtually. From estate planning to starting a small business, there’s an online legal service for everyone. We reviewed all the options out there and picked the best of the best based on value, service quality, price, reputation and more. Best Online Legal Services for 2024 Best Overall: LegalShield Best Free Advice: Avvo Best Self-Service Documents: LegalZoom Best for Finding a Lawyer: FindLaw Best for Complex Needs: Rocket Lawyer Best for Startup Businesses: Incfile Best Online Legal Services for 2024 Expand Best Online Legal Services for 2024 Our Top Picks LegalShield Avvo LegalZoom FindLaw Rocket Lawyer Incfile See More (3) The Bottom Line Compare Providers FAQs Methodology Best Overall : LegalShield Learn More Why We Chose It LegalShield offers the best online legal service for families and businesses, with reasonable prices, stellar support and 24/7 convenience. Pros & Cons Pros Serves both individual and small business needs Affordable monthly plans No long-term contracts Offers live chat and emergency consultations Available in the United States and Canada Cons Not designed for one-time use Cost of additional services can vary by location and attorney Some pre-existing needs may have an added cost LegalShield is offering 16% off the annual plan for Individuals & Families. Overview According to LegalShield, a single hour with an attorney can cost anywhere between $150 and $400, which is why the company offers a more affordable option through its all-inclusive plan. Monthly membership fees, which start at $29.95 for individuals and $49 for small businesses, cover many of the basic services you might need from an attorney at just a fraction of the cost. LegalShield’s individual plan includes unlimited consultations and legal document reviews with a licensed attorney. You’ll also benefit from estate planning services; mortgage document preparation; and representation in certain scenarios related to traffic violations, family law, tax audits and more. If you need a lawyer for other reasons, you’ll get a 25% discount on a firm's standard hourly rates. Your spouse and dependent children are also covered at no additional cost. Small business owners can also get coverage from LegalShield with three membership tiers ranging from $49 to $169 per month. All plans include consultations and a 25% discount on hourly rates, but vary depending on the number of documents you’d like reviewed and the amount of correspondence you need your attorney to send on your behalf. Although LegalShield uses a monthly subscription model, there’s no long-term commitment. Cancel anytime and get a prorated refund for any days not used. However, you should know that certain benefits don’t apply to pre-existing situations; for example, if you sign up for LegalShield the day after you receive a ticket, you won’t be able to use the plan’s traffic violation benefits. Best Free Advice : Avvo Avvo Learn More Why We Chose It If you have a simple legal question, Avvo is the best place to get free advice from licensed attorneys. Pros & Cons Pros Post a question and get advice from one or more attorneys Most questions are answered within 12 hours No cost for follow-up questions Provides a nationwide directory of attorneys Cons Questions are public for anyone to see Limited to general information Filled with ads of lawyers in your area Overview Nothing is more frustrating than paying for an attorney’s time only to find out they can’t help you. If you’re faced with a legal issue and just need some guidance, try Avvo, an online directory of lawyers that also acts as the best place for free legal advice on the internet. According to Avvo, someone gets advice every five seconds on the platform’s Q&A board, usually within 12 hours or less. To submit a question through Avvo, all you need to do is fill out an online form with your question, any relevant details, and your city and state. Within a few hours, at least one attorney in your area should respond. Avvo encourages follow-up questions as needed, which remain free as long as the attorney is willing and able to answer them. The main caveat: Answers given on the Avvo Q&A board don’t constitute an official attorney-client relationship and are limited to general legal advice. At some point, you may be advised to hire a lawyer. In this case, you can use the Avvo directory to find a local attorney, or simply contact the one who answered your question. Since Avvo’s Q&A board is public, you’ll have to keep in mind that any information you post is available for anyone to see. However, this does mean that you can search questions asked by others as an extra source of information. You should also keep an eye out for sponsored lawyer listings. Best Self-Service Documents : LegalZoom Learn More Why We Chose It LegalZoom makes the use of legal documents painless with simple online forms and low prices starting at just $0 plus state tax. You won’t find a better self-service experience. Pros & Cons Pros Straightforward, flat-rate pricing Excellent phone support 60-day satisfaction guarantee Memberships available Cons Different pricing options can be confusing Not all documents are viewable online Extra cost for filing assistance (depending on state) Overview Whether you’re planning your estate or renting out a property, LegalZoom makes it fast and painless to get the documents you need. The self-service platform offers customized legal documents starting at as little as $0 plus state tax. Most documents only take a few minutes to fill out online and are then made available for download or sent to you by mail. LegalZoom also offers full-service packages with access to a licensed attorney for a set period of time. For example, the Premium LLC Package includes hands-on assistance from a lawyer to create your last will and testament, financial power of attorney and living will, plus one year of ongoing legal guidance related to your estate. The price is $249 for one person. While many platforms offer comparable services to LegalZoom, the company really shines in customer service. Phone support representatives are available 14 hours per day during the week and nine hours per day on weekends. Many documents include unlimited revisions. If you’re not happy with the final product, simply contact customer service within 60 days for a full refund. Most documents are delivered by digital download from LegalZoom, although a few can only be sent by mail. If you need help filing a document with the appropriate legal authority, this service is available but comes at an additional cost. Best for Finding a Lawyer : FindLaw  FindLaw Learn More Why We Chose It FindLaw’s directory lists hundreds of attorneys in 119 practice areas, making it one of the best places to find a lawyer online. Pros & Cons Pros Lists attorneys in all 50 states and Puerto Rico Searchable by location and legal issue Easy to find free consultations Free online resources Cons Limited support options Many attorneys have few or no reviews Overview Every legal issue requires a different type of attorney and the best place to find them all is FindLaw. The online directory lists hundreds of U.S. attorneys in 119 specific areas of law, making it easy to find the most qualified practitioner for your case. To get started with FindLaw, simply enter your legal issue and geographic location and you’ll be presented with a list of qualified attorneys. If you prefer to speak with someone who offers free consultations, FindLaw gives you this option as a search filter. You can also narrow results by language if the person in need of representation doesn't speak English as their primary language. Aside from their attorney directory, FindLaw also has a free online library of legal resources. You’ll find a state-by-state encyclopedia that explains important laws in simple terms for those without a law degree. FindLaw’s guides on processes like forming an LLC and filing for bankruptcy can help you decide whether hiring an attorney is necessary. While FindLaw shows client reviews for the attorneys in their directory, you may find that most attorneys have very few reviews or none at all. It’s worth taking the extra step to search each lawyer for reviews on other platforms. FindLaw also recommends checking with your local bar association to make sure the attorney has no disciplinary record. Of course, you should speak with multiple attorneys to choose the most qualified professional at the best price. Best for Complex Needs : Rocket Lawyer  Rocket Lawyer Learn More Why We Chose It Most online legal services are fairly standardized, but Rocket Lawyer’s on-call attorneys are the best choice for complex matters. Pros & Cons Pros Offers both memberships and à la carte services Members get up to 40% off fees for hiring an On Call attorney Available in six countries Free seven-day trial Cons Too complicated for those with simple needs Higher membership fees No weekend support Overview If your legal needs haven’t been met by standard online services, Rocket Lawyer is the next step. The company offers a wide array of solutions to individual and business customers in the United States, the United Kingdom, France, Spain, Brazil and the Netherlands. With Rocket Lawyer, you can choose to purchase services à la carte or sign up for a monthly membership. Memberships cost $39.99 per month and include unlimited documents, answers to legal questions and 30-minute consultations on new issues. This can quickly pay for itself, as fees for non-members range from $39.99 for a single document to $59.99 for a 30-minute consultation. Members who aren’t satisfied with the scope of Rocket Lawyer’s listed services can benefit from Rocket Lawyer On Call. Here’s how it works: if your legal issue can’t be answered online, Rocket Lawyer will put you in touch with the right attorney for a 30-minute phone consultation. Those with complex problems that require further legal services can choose to continue working with that attorney at 40% off their hourly rate. Rocket Lawyer memberships come with a seven-day trial and can be canceled at any time before the next billing cycle. The $39.99 monthly fee is higher than some competitors' prices but may be worth it if you frequently need documents or complex legal help. It’s also worth noting that customer support is unavailable on weekends. Best for Startup Businesses : Incfile  Incfile Learn More Why We Chose It Starting a business? Get the best legal support from Incfile, beginning with a free LLC filing. Pros & Cons Pros Offers a free LLC filing Incorporate in any U.S. state Choose from three packages Includes lifetime alerts before important filing dates with their Gold plan Cons Free LLC filing doesn’t include state fees Limited phone support hours Fees are higher in some states than others Overview From choosing a type of legal entity to staying in compliance, Incfile is the best online legal service to guide startups through every stage of growth. Since 2004, the company has helped more than half a million small businesses get started and keep running smoothly. Incfile offers its customers three packages: Silver, Gold and Platinum. Pricing is determined by adding Incfile’s service fee to state filing fees. This means the total price you’ll pay depends on the type of entity and the state you decide to start your business in. For example, the Gold package costs $194 for an LLC in Arkansas but $354 to start the same business in New York. Once you’ve started your business, Incfile continues to provide value by guiding you through annual compliance requirements and other necessary procedures. Gold members can take advantage of a business banking account, banking resolutions and tax consultation services; Platinum members also receive contract templates, expedited filing, and a domain name and business email with their fees. The main downside to Incfile is its customer service. Phone support hours are limited to weekdays between 9 a.m. and 6 p.m. CST, and customers have complained of slow response times in the past. However, Incfile recently addressed these complaints publicly by doubling the size of its customer service team and adding live chat support. The Bottom Line Online legal services are often cheaper and more convenient than standard attorneys, although they have their limitations. There’s no need to pay hundreds of dollars for a simple will, for example, when you can create your own online for less than $100. At the very least, online legal services are a great place to get started with free or low-cost advice before committing resources to long-term legal representation. Compare Providers Company Key Benefit LegalShield Best Overall Affordable and convenient service for most legal needs Avvo Best Free Advice Get answers to legal questions for free LegalZoom Best Self-Service Documents Generate legally binding documents in minutes FindLaw Best for Finding a Lawyer Search from a directory of hundreds of licensed attorneys Rocket Lawyer Best for Complex Needs Discounts up to 40% on legal fees for complex matters Incfile Best for Startup Businesses Free LLC filing and affordable ongoing legal support Can You Talk to a Lawyer For Free? You can generally talk to a lawyer for free by using an online Q&A board or scheduling a free consultation. However, you should note that these interactions aren’t considered an official attorney-client relationship. For anything more than general advice, you’ll need to pay the lawyer for their time. Should I Hire a Lawyer to Form an LLC? Forming an LLC doesn’t require hiring a lawyer, but it may be a good idea in some circumstances. For example, if you’re not certain that an LLC is the right type of entity to form, you should review all your options with an attorney. It’s also worth hiring an unbiased legal representative if the LLC will have multiple members acting as equal partners. What Should a Simple Will Cost? In short, you shouldn’t pay more than $100 for a simple will through an online legal service. With LegalZoom, a personalized will costs $89. However, if you pay LegalShield’s monthly membership fee of about $40, you’ll get a will written by a licensed attorney at no additional charge. How We Pick the Best Online Legal Services Our list of the best online legal services was selected from a pool of over a dozen providers offering documents, consultations and/or referrals to local attorneys. We carried out our review with the mindset that online legal services should be not just affordable but reliable and trustworthy. In addition to comparing pricing for services, we also heavily weighed customer reviews and complaints for each company. Getty Images / Tanarat Kongchuenjit Related Articles Best LLC Services for May 2024 Best Online Will Makers of May 2024 Best Tax Software and Tax Preparation of 2024 What Does a Real Estate Attorney Do? Best Tax Relief Companies for May 2024 Best Online Divorce Services Related Terms Last Will and Testament: Definition, Types, and How to Write One A last will and testament is a legal document detailing your wishes regarding assets and dependents after your death. Find out how to make a will. more Power of Attorney (POA): Meaning, Types, and How and Why to Set One Up A power of attorney (POA) is legal authorization for a designated person to make decisions about another person's property, finances, or medical care. more What Is a Living Trust? A living trust is a legal arrangement established during an individual's lifetime that contains assets to be distributed after death and that bypasses probate. 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 Testamentary Will: What it is, How it Works, FAQ A testamentary will, aka a traditional last will and testament, is a legal document used to transfer a person's assets to beneficiaries after death. more Background Check: Definition, Types, and Examples Employers and others want to know all about you. Learn why and how background checks are done, and what information about you they uncover. more

https://www.investopedia.com/30-year-mortgage-rates-inch-down-again-8622111

30-Year Mortgage Rates Inch Down Again

<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 purchase mortgages continued to ease on Thursday to 7.15%, shedding a single basis point after rising 7 basis points earlier this week. Also notable was the FHA 30-year mortgage rate average, which rose 7 basis points to 7.05% after dropping 15 basis points the day prior, marking the first time it had been below 7.00% in seven weeks. Other <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage-rates-5094943">new purchase mortgage rates</a> were mixed on Thursday.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_2-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_3-0"> <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 Averages of Lenders' Best Mortgage Rates</th> </tr> <tr> <th><b>Loan Type</b></th> <th><b>New Purchase</b></th> <th><b>Refinance</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.15%</td> <td>7.47%</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.05%</td> <td>7.54%</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.82%</td> <td>6.83%</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.40%</td> <td>6.71%</td> </tr> <tr> <td>5/6 ARM</td> <td>7.77%</td> <td>7.86%</td> </tr> </tbody> </table> <figcaption>National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points.</figcaption> </div></figure> <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"> Rates vary widely across lenders, so 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_6-0"></div> <div class="comp mntl-sc-block mntl-sc-block-tool mntl-block mntl-sc-block--credible-rate-table--mortgage" id="mntl-sc-block_7-0"><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_8-0"></div> <div class="comp mntl-sc-block mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_10-0"><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 - March 29, 2024</span></a></div> <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-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_12-0"> <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_13-0"> Rates on 30-year new purchase mortgages shed a single basis point on Thursday, continuing a moderate downward trend initiated the day before. The flagship rate is now 7.15%, 30 basis points lower than its recent high of 7.45% on Friday, March 15. </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"> The 30-year rate average is still far from its recent drop into 6.00% territory, which we saw at the start of February. Nevertheless, mortgage rates are still well off the records seen in October, when the 30-year average notched a historic 23-year peak of 8.45%. </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_17-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/4uQhl/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_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The biggest rate mover on Thursday was the VA 30-year fixed rate mortgage, which sank 9 basis points.<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"> The jumbo 30-year fixed rate averages were flat on Thursday. Although daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached last October was the most expensive jumbo 30-year average in more than 20 years. </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"> All other new purchase mortgage rates moved up and down by single-digit increments on Thursday. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_25-0"> <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 Averages of Lenders' Best Rates - New Purchase</th> </tr> <tr> <th>Loan Type</th> <th><b>New Purchase Rates</b></th> <th><b>Daily Change</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.15%</td> <td>-0.01</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.05%</td> <td>+0.07</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>6.77%</td> <td>-0.09</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.82%</td> <td>No Change</td> </tr> <tr> <td>20-Year Fixed</td> <td>6.95%</td> <td>No Change</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.40%</td> <td>-0.06</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>6.78%</td> <td>-0.01</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.78%</td> <td>No Change</td> </tr> <tr> <td>10-Year Fixed</td> <td>6.34%</td> <td>-0.05</td> </tr> <tr> <td>10/6 ARM</td> <td>7.50%</td> <td>+0.01</td> </tr> <tr> <td>7/6 ARM</td> <td>7.59%</td> <td>-0.02</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>6.45%</td> <td>No Change</td> </tr> <tr> <td>5/6 ARM</td> <td>7.77%</td> <td>+0.02</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>6.55%</td> <td>No Change</td> </tr> </tbody> </table> </div></figure> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_27-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/LjLND/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_28-0"></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_29-0"> <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_30-0"> Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates. This week's reading slipped 8 basis points to 6.79%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its highest level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January.<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_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a <em>weekly</em> average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discountpoints.asp">discount points</a>, while Investopedia’s averages only include zero-point loans. </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-todays-mortgage-rate-averages-refinancing"></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"> Today's Mortgage Rate Averages: Refinancing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Mortgage refinancing rates also showed mixed results on Thursday, with some inching up, some dropping back, and others unchanged. While the 30-year refi rate marched in place along with jumbo rates, the most notable movers were the VA 30-year and 10-year refi rates, which dropped by 8 and 9 basis points, respectively. Other loan types saw slight increases or decreases. </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"> The spread between 30-year new purchase and refi rates widened slightly to 32 basis points. The biggest spread on Thursday was between VA 30-year rates: the difference between the average new purchase rate and the refi rate for VA loans was over half a percentage point for a second day (52 basis points). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_39-0"> <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 Averages of Lenders' Best Rates - Refinance</th> </tr> <tr> <th>Loan Type</th> <th><b>Refinance Rates</b></th> <th>Daily Change</th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.47%</td> <td>No Change</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.54%</td> <td>+0.03</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>7.29%</td> <td>-0.08</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.83%</td> <td>No Change</td> </tr> <tr> <td>20-Year Fixed</td> <td>7.27%</td> <td>+0.02</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.71%</td> <td>-0.03</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>6.87%</td> <td>-0.06</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.78%</td> <td>+0.01</td> </tr> <tr> <td>10-Year Fixed</td> <td>6.56%</td> <td>-0.09</td> </tr> <tr> <td>10/6 ARM</td> <td>7.75%</td> <td>No Change</td> </tr> <tr> <td>7/6 ARM</td> <td>7.77%</td> <td>-0.01</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>6.55%</td> <td>No Change</td> </tr> <tr> <td>5/6 ARM</td> <td>7.86%</td> <td>+0.02</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>6.55%</td> <td>No Change</td> </tr> </tbody> </table> </div></figure> <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"> 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_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_43-0"><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_44-0"><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>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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than 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_45-0"><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_46-0"></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_47-0"> <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_48-0"> 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_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The states with the cheapest 30-year new purchase rates on Thursday were Rhode Island, Vermont, and Hawaii. The states with the highest average mortgage rates were Minnesota, Kentucky, Arizona, Arkansas, and Nevada. </p> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_52-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/xmgag/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_53-0"></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_54-0"> <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_55-0"> 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_56-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> <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_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> 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_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> 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_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> 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_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> 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_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> 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_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> The Fed has been maintaining the federal funds rate at its current level since July, with a fifth consecutive rate hold announced on March 20.<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 reliably, it has said it is hesitant to start cutting rates. </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"> Still, Fed committee members do collectively expect to reduce rates in 2024. The March 20 meeting included the latest installment of the Fed's "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/dot-plot-4581755">dot plot</a>" forecast, which showed that the median expectation among the 19 Fed members is for three rate decreases—totaling 0.75 percentage points—by year's end. The dot plot also shows similar expected rate cuts in 2025 and 2026.<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_72-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_73-0"> The Fed will hold six more meetings this year, with the next scheduled for April 30 to May 1.<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_74-0"></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_75-0"> <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_76-0"> The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, 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 ratio (LTV)</a> of 80% and an applicant with a FICO credit score in the 700–760 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. </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"> For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760. </p></div>

Rates on 30-year purchase mortgages continued to ease on Thursday to 7.15%, shedding a single basis point after rising 7 basis points earlier this week. Also notable was the FHA 30-year mortgage rate average, which rose 7 basis points to 7.05% after dropping 15 basis points the day prior, marking the first time it had been below 7.00% in seven weeks. Other [new purchase mortgage rates](https://www.investopedia.com/mortgage-rates-5094943) were mixed on Thursday. | National Averages of Lenders' Best Mortgage Rates | | | | --- | --- | --- | | **Loan Type** | **New Purchase** | **Refinance** | | 30-Year Fixed | 7.15% | 7.47% | | FHA 30-Year Fixed | 7.05% | 7.54% | | Jumbo 30-Year Fixed | 6.82% | 6.83% | | 15-Year Fixed | 6.40% | 6.71% | | 5/6 ARM | 7.77% | 7.86% | National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points. Rates vary widely across lenders, so 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 - March 29, 2024](https://www.investopedia.com/mortgage-rates-5094943) ## Today's Mortgage Rate Averages: New Purchase Rates on 30-year new purchase mortgages shed a single basis point on Thursday, continuing a moderate downward trend initiated the day before. The flagship rate is now 7.15%, 30 basis points lower than its recent high of 7.45% on Friday, March 15. The 30-year rate average is still far from its recent drop into 6.00% territory, which we saw at the start of February. Nevertheless, mortgage rates are still well off the records seen in October, when the 30-year average notched a historic 23-year peak of 8.45%. The biggest rate mover on Thursday was the VA 30-year fixed rate mortgage, which sank 9 basis points. The jumbo 30-year fixed rate averages were flat on Thursday. Although daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached last October was the most expensive jumbo 30-year average in more than 20 years. All other new purchase mortgage rates moved up and down by single-digit increments on Thursday. | National Averages of Lenders' Best Rates - New Purchase | | | | --- | --- | --- | | Loan Type | **New Purchase Rates** | **Daily Change** | | 30-Year Fixed | 7.15% | -0.01 | | FHA 30-Year Fixed | 7.05% | +0.07 | | VA 30-Year Fixed | 6.77% | -0.09 | | Jumbo 30-Year Fixed | 6.82% | No Change | | 20-Year Fixed | 6.95% | No Change | | 15-Year Fixed | 6.40% | -0.06 | | FHA 15-Year Fixed | 6.78% | -0.01 | | Jumbo 15-Year Fixed | 6.78% | No Change | | 10-Year Fixed | 6.34% | -0.05 | | 10/6 ARM | 7.50% | +0.01 | | 7/6 ARM | 7.59% | -0.02 | | Jumbo 7/6 ARM | 6.45% | No Change | | 5/6 ARM | 7.77% | +0.02 | | Jumbo 5/6 ARM | 6.55% | No Change | ## The Weekly Freddie Mac Average Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates. This week's reading slipped 8 basis points to 6.79%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its highest level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January. Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a *weekly* average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with [discount points](https://www.investopedia.com/terms/d/discountpoints.asp), while Investopedia’s averages only include zero-point loans. ## Today's Mortgage Rate Averages: Refinancing Mortgage refinancing rates also showed mixed results on Thursday, with some inching up, some dropping back, and others unchanged. While the 30-year refi rate marched in place along with jumbo rates, the most notable movers were the VA 30-year and 10-year refi rates, which dropped by 8 and 9 basis points, respectively. Other loan types saw slight increases or decreases. The spread between 30-year new purchase and refi rates widened slightly to 32 basis points. The biggest spread on Thursday was between VA 30-year rates: the difference between the average new purchase rate and the refi rate for VA loans was over half a percentage point for a second day (52 basis points). | National Averages of Lenders' Best Rates - Refinance | | | | --- | --- | --- | | Loan Type | **Refinance Rates** | Daily Change | | 30-Year Fixed | 7.47% | No Change | | FHA 30-Year Fixed | 7.54% | +0.03 | | VA 30-Year Fixed | 7.29% | -0.08 | | Jumbo 30-Year Fixed | 6.83% | No Change | | 20-Year Fixed | 7.27% | +0.02 | | 15-Year Fixed | 6.71% | -0.03 | | FHA 15-Year Fixed | 6.87% | -0.06 | | Jumbo 15-Year Fixed | 6.78% | +0.01 | | 10-Year Fixed | 6.56% | -0.09 | | 10/6 ARM | 7.75% | No Change | | 7/6 ARM | 7.77% | -0.01 | | Jumbo 7/6 ARM | 6.55% | No Change | | 5/6 ARM | 7.86% | +0.02 | | Jumbo 5/6 ARM | 6.55% | No Change | 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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than 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 on Thursday were Rhode Island, Vermont, and Hawaii. The states with the highest average mortgage rates were Minnesota, Kentucky, Arizona, Arkansas, and Nevada. ## 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 fifth consecutive rate hold announced on March 20. 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 reliably, it has said it is hesitant to start cutting rates. Still, Fed committee members do collectively expect to reduce rates in 2024. The March 20 meeting included the latest installment of the Fed's "[dot plot](https://www.investopedia.com/dot-plot-4581755)" forecast, which showed that the median expectation among the 19 Fed members is for three rate decreases—totaling 0.75 percentage points—by year's end. The dot plot also shows similar expected rate cuts in 2025 and 2026. The Fed will hold six more meetings this year, with the next scheduled for April 30 to May 1. ## How We Track Mortgage Rates The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a [loan-to-value ratio (LTV)](https://www.investopedia.com/terms/l/loantovalue.asp) of 80% and an applicant with a FICO credit score in the 700–760 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. For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.

Rates on 30-year purchase mortgages continued to ease on Thursday to 7.15%, shedding a single basis point after rising 7 basis points earlier this week. Also notable was the FHA 30-year mortgage rate average, which rose 7 basis points to 7.05% after dropping 15 basis points the day prior, marking the first time it had been below 7.00% in seven weeks. Other new purchase mortgage rates were mixed on Thursday. National Averages of Lenders' Best Mortgage Rates Loan Type New Purchase Refinance 30-Year Fixed 7.15% 7.47% FHA 30-Year Fixed 7.05% 7.54% Jumbo 30-Year Fixed 6.82% 6.83% 15-Year Fixed 6.40% 6.71% 5/6 ARM 7.77% 7.86% National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points. Rates vary widely across lenders, so 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 - March 29, 2024 Today's Mortgage Rate Averages: New Purchase Rates on 30-year new purchase mortgages shed a single basis point on Thursday, continuing a moderate downward trend initiated the day before. The flagship rate is now 7.15%, 30 basis points lower than its recent high of 7.45% on Friday, March 15. The 30-year rate average is still far from its recent drop into 6.00% territory, which we saw at the start of February. Nevertheless, mortgage rates are still well off the records seen in October, when the 30-year average notched a historic 23-year peak of 8.45%. The biggest rate mover on Thursday was the VA 30-year fixed rate mortgage, which sank 9 basis points. The jumbo 30-year fixed rate averages were flat on Thursday. Although daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached last October was the most expensive jumbo 30-year average in more than 20 years. All other new purchase mortgage rates moved up and down by single-digit increments on Thursday. National Averages of Lenders' Best Rates - New Purchase Loan Type New Purchase Rates Daily Change 30-Year Fixed 7.15% -0.01 FHA 30-Year Fixed 7.05% +0.07 VA 30-Year Fixed 6.77% -0.09 Jumbo 30-Year Fixed 6.82% No Change 20-Year Fixed 6.95% No Change 15-Year Fixed 6.40% -0.06 FHA 15-Year Fixed 6.78% -0.01 Jumbo 15-Year Fixed 6.78% No Change 10-Year Fixed 6.34% -0.05 10/6 ARM 7.50% +0.01 7/6 ARM 7.59% -0.02 Jumbo 7/6 ARM 6.45% No Change 5/6 ARM 7.77% +0.02 Jumbo 5/6 ARM 6.55% No Change The Weekly Freddie Mac Average Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates. This week's reading slipped 8 basis points to 6.79%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its highest level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January. Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a weekly average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with discount points, while Investopedia’s averages only include zero-point loans. Today's Mortgage Rate Averages: Refinancing Mortgage refinancing rates also showed mixed results on Thursday, with some inching up, some dropping back, and others unchanged. While the 30-year refi rate marched in place along with jumbo rates, the most notable movers were the VA 30-year and 10-year refi rates, which dropped by 8 and 9 basis points, respectively. Other loan types saw slight increases or decreases. The spread between 30-year new purchase and refi rates widened slightly to 32 basis points. The biggest spread on Thursday was between VA 30-year rates: the difference between the average new purchase rate and the refi rate for VA loans was over half a percentage point for a second day (52 basis points). National Averages of Lenders' Best Rates - Refinance Loan Type Refinance Rates Daily Change 30-Year Fixed 7.47% No Change FHA 30-Year Fixed 7.54% +0.03 VA 30-Year Fixed 7.29% -0.08 Jumbo 30-Year Fixed 6.83% No Change 20-Year Fixed 7.27% +0.02 15-Year Fixed 6.71% -0.03 FHA 15-Year Fixed 6.87% -0.06 Jumbo 15-Year Fixed 6.78% +0.01 10-Year Fixed 6.56% -0.09 10/6 ARM 7.75% No Change 7/6 ARM 7.77% -0.01 Jumbo 7/6 ARM 6.55% No Change 5/6 ARM 7.86% +0.02 Jumbo 5/6 ARM 6.55% No Change 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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than 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 on Thursday were Rhode Island, Vermont, and Hawaii. The states with the highest average mortgage rates were Minnesota, Kentucky, Arizona, Arkansas, and Nevada. 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 fifth consecutive rate hold announced on March 20. 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 reliably, it has said it is hesitant to start cutting rates. Still, Fed committee members do collectively expect to reduce rates in 2024. The March 20 meeting included the latest installment of the Fed's "dot plot" forecast, which showed that the median expectation among the 19 Fed members is for three rate decreases—totaling 0.75 percentage points—by year's end. The dot plot also shows similar expected rate cuts in 2025 and 2026. The Fed will hold six more meetings this year, with the next scheduled for April 30 to May 1. How We Track Mortgage Rates The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 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. For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.

https://www.investopedia.com/best-medicare-advantage-plans-5075394

Best Medicare Advantage Plans

<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="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="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"> UnitedHealthcare has the best Medicare Advantage (MA) plans overall, according to Investopedia research. The company offers the largest provider network nationwide and has an excellent rating from the National Committee for Quality Assurance (NCQA), an independent organization that measures health plan quality and patient satisfaction. </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicare-advantage.asp">Medicare Advantage plans</a> replace <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/original-medicare-vs-medicare-advantage-7486531">Original Medicare</a> (Part A and B, and often D). Benefits extend beyond Original Medicare, including an annual out-of-pocket expense limit and dental, vision, and hearing coverage. In exchange (and unlike Original Medicare), you generally must use in-network providers and 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_1-0-2"> Commercial insurance companies administer MA plans. Costs and benefits differ, so shopping around and comparing plans is essential.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-3"> To choose the best Medicare Advantage companies, we evaluated nine major health insurance companies for 22 criteria that fall into categories including plan and care quality, cost, Medicare drug gap coverage, and state availability. <br/> </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 Medicare Advantage Plans </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="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://myhn.com/p/JzYdNkv8" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> AARP/UnitedHealthcare</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">Lowest Cost:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://myhn.com/p/wx3xEHfp" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Cigna</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 Nationwide Coverage:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://myhn.com/p/efeMq6rv" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Humana</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 Additional Drug Coverage in the Gap:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://myhn.com/p/ee2FN52q" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Aetna</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 Patient Quality and Customer Satisfaction:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://myhn.com/p/I4Xgk2zm" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Kaiser Permanente</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><!-- 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="false" 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 Medicare Advantage Plans </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 Medicare Advantage Plans " 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 Medicare Advantage Plans </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-AARP/UnitedHealthcare" 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-AARP/UnitedHealthcare" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-aarpunitedhealthcare" rel="nocaes"> <span class="link__wrapper">AARP/UnitedHealthcare</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-Cigna" 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-Cigna" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-lowest-cost-cigna" rel="nocaes"> <span class="link__wrapper">Cigna</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-Humana" 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-Humana" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-great-for-nationwide-coverage-humana" rel="nocaes"> <span class="link__wrapper">Humana</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-Aetna" 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-Aetna" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-additional-drug-coverage-in-the-gap-aetna" rel="nocaes"> <span class="link__wrapper">Aetna</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-Kaiser Permanente" 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-Kaiser Permanente" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-patient-quality-and-customer-satisfaction-kaiser-permanente" rel="nocaes"> <span class="link__wrapper">Kaiser Permanente</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 (2)</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-Bottom Line" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-bottom-line" id="mntl-toc__list-item-link_1-0" rel="nocaes"><span class="link__wrapper">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-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-44828655-d8f0-4e55-8cae-d092670ab463" id="mntl-toc__list-item-link_1-0-1" 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 --> <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-How We Chose the Best Medicare Advantage Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-the-best-medicare-advantage-providers" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">How We Chose the Best Medicare Advantage Providers</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-aarpunitedhealthcare"></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"> AARP/UnitedHealthcare</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="4.7 out of 5 stars" class="comp star-rating" id="star-rating_5-0"> <span class="star-rating__label">4.7</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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-5 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></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"/><!-- 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 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:50.0%;"> <img alt="United Healthcare" 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/pgzakL5D-8fuXFVtaGjVGH_Sybk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/united-healthcare-6b8b4e57956841e8b3189b86f492ecad.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="United Healthcare" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/pgzakL5D-8fuXFVtaGjVGH_Sybk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/united-healthcare-6b8b4e57956841e8b3189b86f492ecad.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>United Healthcare</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_3-0-1"> <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="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Medicare Enrollment" data-retailer-type="other" data-tracking-container="true" href="https://myhn.com/p/JzYdNkv8" id="button_1-0" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</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_3-0-3"> <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>Available in most states and Washington D.C.</p></li> <li><p>Largest provider network nationwide</p></li> <li><p>Offers additional drug coverage in the gap</p></li> <li><p>Free home visits</p></li> <li><p>$0 copays for primary care provider (PCP), specialist, and lab charges</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>Below-average J.D. Power score in some regions</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_3-0-5"> AARP's UHC plans are our pick for the best overall Medicare Advantage plans. These plans feature high Medicare star ratings, the largest provider network of all MA plan providers, and a broad array of options. </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">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"> UnitedHealthcare (UHC) is the largest provider of Medicare Advantage plans. UnitedHealthcare’s MA plans—co-branded with AARP—earn high marks for plan quality and member 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_3-0-8"> On average, UHC Medicare Advantage plans with drug coverage have a 3.94 Medicare star rating, which is on par with the national average of 3.94.  </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"> The National Committee for Quality Assurance (NCQA) gives UHC MA plans a 3.8-star average rating, putting it about third in the list of companies we evaluated. Both NCQA and Medicare score on a five-star scale. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> While UnitedHealthcare scored well in the J.D. Power 2023 Medicare Advantage Study for Florida and Texas, it scored below average in California, Pennsylvania, and New York.<span class="ql-inline-citation" data-cite="30"></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_3-0-11"> The company offers a range of plan types, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hmo.asp">HMO</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preferred-provider-organization.asp">PPO</a>, and PFFS (private-fee-for-service) plans. Coverage is available 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_3-0-12"> <li>Vision, hearing, and dental care</li><li>Non-emergency transportation for Medicare-Medicaid recipients</li><li>Worldwide emergencies</li><li>No-cost in-home care visits</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_3-0-13"> Most plans offer additional drug coverage during the Medicare donut hole, which can save money if your drugs cost more than $5,030 in 2024.<span class="ql-inline-citation" data-cite="31"></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_3-0-14"> UHC outperforms its peers in key metrics, but the average out-of-pocket expense is $5,579 in 2024. This amount is higher than some competitors’ but lower than the average across major insurers. </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"> Read more in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/unitedhealthcare-medicare-review-5096755">UnitedHealthcare Medicare review</a>. </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_3-0-16"> <span class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_1-0"> 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"> <p>UnitedHealthcare Group is being sued for allegedly using a flawed artificial intelligence algorithm that denies rehabilitation care for Medicare Advantage patients, despite knowing that the algorithm has a 90% error rate.<span class="ql-inline-citation" data-cite="34"></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><!-- 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-lowest-cost-cigna"></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">Lowest Cost</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Cigna</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_1-0-1"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4 out of 5 stars" class="comp star-rating" id="star-rating_5-0-1"> <span class="star-rating__label">4.0</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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__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_1-0-1"/><!-- 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_3-0-17" style="--imgWidth: 524px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Cigna" 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/g5g0jVJyAY_QeaWlN59ZB_KPfh4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/cigna-8cf2e15426834f3e93664853aef17666.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Cigna" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/g5g0jVJyAY_QeaWlN59ZB_KPfh4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/cigna-8cf2e15426834f3e93664853aef17666.png" 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>Cigna</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_3-0-18"> <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="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Medicare Enrollment" data-retailer-type="other" data-tracking-container="true" href="https://myhn.com/p/wx3xEHfp" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</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_3-0-20"> <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 overall-cost plans compared to the largest providers</p></li> <li><p>Lowest average premium compared to the largest providers</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 PFFS plans</p></li> <li><p>Limited drug coverage in the Medicare coverage gap</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_3-0-22"> Cigna Medicare Advantage plans are the cheapest nationwide of all major insurers offering Medicare Advantage plans. </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">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_3-0-24"> Cigna has the lowest-cost Medicare Advantage plans when considering premiums, deductibles, and maximum out-of-pocket costs across all 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_3-0-25"> In particular, Cigna has the lowest average premium at $6.81 per month and the second-lowest average drug deductible at $23.96 (Kaiser has the lowest).  </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"> However, Cigna’s plans are only available in 26 states. And the provider’s average Medicare star rating is 3.66, below the national average of 3.94.  </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"> Learn more in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cigna-medicare-review-5094942">Cigna Medicare review</a>. </p><!-- 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-great-for-nationwide-coverage-humana"></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">Great for Nationwide Coverage</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Humana</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_1-0-2"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4.1 out of 5 stars" class="comp star-rating" id="star-rating_5-0-2"> <span class="star-rating__label">4.1</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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_5-0-2" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="20%" stop-color="#333e8b"></stop> <stop offset="20%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-full star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-2);"> <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></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_1-0-2"/><!-- 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-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_3-0-28" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Humana" 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/M0NLX2cOUOGvSkRkGHZ-jExRFLw=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Humana-e0d401d45e4d430bb6067db481a8d01f.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Humana" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/M0NLX2cOUOGvSkRkGHZ-jExRFLw=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Humana-e0d401d45e4d430bb6067db481a8d01f.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>Humana</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_3-0-29"> <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="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Medicare Enrollment" data-retailer-type="other" data-tracking-container="true" href="https://myhn.com/p/efeMq6rv" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</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>Available in 49 states</p></li> <li><p>Benefits for over-the-counter drugs</p></li> <li><p>Wide plan type range available</p></li> <li><p>Good Medicare star 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>Not available in Alaska</p></li> <li><p>Pharmacy network may be limited in some areas</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"> Humana is the second-largest Medicare Advantage provider in the country and is available in most states. </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">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_3-0-35"> Humana is the second-largest provider of Medicare Advantage plans nationwide, with plans in 49 states. Alaska is the sole exception. Depending on where you live, HMO, PPO, and PFFS plans may be available.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> But only about half of Humana’s Medicare Advantage plans with drug coverage offer additional coverage in the coverage gap. If your prescription drug costs add up to more than $5,030 in 2024, you could be on the hook for 25% of their cost in the coverage gap.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-37"> Humana has a limited number of preferred cost-share pharmacies in urban areas of 25 states and suburban areas of 14 states. These are key to saving money on medications. Since access to cost-share pharmacies varies quite a bit, ensure there’s one convenient to you before signing up.   </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-38"> Read more in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/humana-medicare-review-5093665">Humana Medicare review</a>. </p><!-- 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-additional-drug-coverage-in-the-gap-aetna"></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 Additional Drug Coverage in the Gap</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Aetna</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_1-0-3"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4.5 out of 5 stars" class="comp star-rating" id="star-rating_5-0-3"> <span class="star-rating__label">4.5</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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_5-0-3" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="50%" stop-color="#333e8b"></stop> <stop offset="50%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__half-full star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_5-0-3);"> <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></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_1-0-3"/><!-- 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_3-0-39" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Aetna" 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/c_qpy1qMcbCoYGjLa9S-W8VTwDU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/aetna-ea6eec2a716445ffaa5f686db5cdde5c.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Aetna" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/c_qpy1qMcbCoYGjLa9S-W8VTwDU=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/aetna-ea6eec2a716445ffaa5f686db5cdde5c.png" 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>Aetna</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_3-0-40"> <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="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Medicare Enrollment" data-retailer-type="other" data-tracking-container="true" href="https://myhn.com/p/ee2FN52q" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</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_3-0-42"> <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>Offers additional drug coverage in the gap</p></li> <li><p>Well-priced plans</p></li> <li><p>Home health visits with all MA plans</p></li> <li><p>$0 PCP and specialist copays</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>MA plans unavailable in Alaska, Hawaii, Montana, and Vermont</p></li> <li><p>No private-fee-for-service MA plans</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_3-0-44"> Aetna offers more MA plans across the U.S. that provide additional drug coverage in the Medicare donut hole than any of the other largest MA plan providers, making it an excellent choice if you spend a lot on prescription drugs. </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">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_3-0-46"> Aetna has more MA plans that offer additional drug coverage in the Medicare gap phase than any other major provider. Some Aetna plans have $0 copays for generic drugs in the gap. </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"> This is important because once you and your plan spend $5,030 on drugs in 2024, you’ll pay up to 25% on brand-name drugs and generics. Then, after you spend $8,000 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/outofpocket.asp">out of pocket</a> on drugs, you leave the donut hole.<span class="ql-inline-citation" data-cite="31"></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_3-0-48"> Aetna came in second in our evaluation of nationwide costs for MA plans, which looks at average premiums, drug deductibles, and out-of-pocket 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_3-0-49"> But if you live in Alaska, Hawaii, Montana, or Vermont, or want a PFFS plan (private-fee-for-service), you'll need to consider another Medicare Advantage provider. </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"> Read more in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/aetna-medicare-review-5092006">Aetna Medicare review</a>. </p><!-- 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-patient-quality-and-customer-satisfaction-kaiser-permanente"></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 Patient Quality and Customer Satisfaction</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Kaiser Permanente</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_1-0-4"> <span class="product-rating__rating-label noskim"> Investopedia's Rating </span> <div alt="4 out of 5 stars" class="comp star-rating" id="star-rating_5-0-4"> <span class="star-rating__label">4.0</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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__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_1-0-4"/><!-- 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-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_3-0-51" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Kaiser Permanente" 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/CJLQMB_F8HKLQ0a1ucsSflrL-m8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/kaiser-permanente-a8fa800aea284b1a81a52db52ea15ce3.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Kaiser Permanente" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/CJLQMB_F8HKLQ0a1ucsSflrL-m8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/kaiser-permanente-a8fa800aea284b1a81a52db52ea15ce3.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>Kaiser Permanente</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_3-0-52"> <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-affiliate-link-rewriter="keyword=${DOC_ID}&amp;click_id=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="from Medicare Enrollment" data-retailer-type="other" data-tracking-container="true" href="https://myhn.com/p/I4Xgk2zm" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Get a Quote</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_3-0-54"> <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 average NCQA rating of the major providers</p></li> <li><p>Highest Medicare star rating of the major providers</p></li> <li><p>Lowest deductibles, on average, compared to all other major providers</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>Only available in 8 states and D.C.</p></li> <li><p>Only offers HMO plans</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_3-0-56"> Kaiser Permanente stands out for its excellent plan quality and customer satisfaction. It has the highest star ratings from Medicare the NCQA of the providers we reviewed. </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">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_3-0-58"> Kaiser Permanente isn’t available in many states, but where it is, third parties rate it highly. Kaiser’s average Medicare star rating, which measures plan quality, is 4.77 out of 5. Its NCQA rating, which reflects quality and customer satisfaction, is 4.5 out of 5 stars, making Kaiser Permanente the highest-rated company we reviewed in both of those categories.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> Not only that, but compared to the other largest players, Kaiser Permanente’s drug deductibles are the lowest nationwide—only $3, on average.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-60"> The company keeps member costs low because it only offers HMO plans for Medicare coverage. You’ll need to stay strictly in-network. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> You must reside in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, Washington state, or the District of Columbia to be eligible for coverage. </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"> Read more in our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/kaiser-permanente-medicare-review-5115992">Kaiser Permanente Medicare review</a>. </p><!-- 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-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"> 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"> To <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-choose-a-medicare-plan-7485375">choose the best Medicare Advantage company</a>, consider what you need from a plan. Are you comfortable with an HMO, or do you require additional flexibility? For instance, if you want a PFFS plan, there are a few providers to consider, including UnitedHealthcare and Humana.  </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 cost is your primary concern, consider Cigna. But beware that its Medicare star rating is below average. Or would you rather pay more monthly for a higher level of quality and customer satisfaction? Check out UHC's AARP plans, Aetna, and Kaiser, if it’s available in your area.  </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"> Do you want a plan with drug coverage? If so, how much do you expect to spend on prescription drugs, and which specific drugs do you use? <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.medicare.gov/plan-compare/#/?year=2022&amp;lang=en">Medicare.gov’s plan finder</a> lets you input the drugs you use when comparing plans to see which provides the best coverage. You can also see which specific plans offer additional coverage in the Medicare donut hole. </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"> Individual Medicare Advantage plans have their own Medicare star ratings—we looked at national company averages. So, even if you choose a top-ranked company like UnitedHealthcare, ensure the specific MA plan you’re interested in has a rating you’re comfortable with. That information is also available in the plan finder tool. </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_4-0-5"> <span class="heading-toc" id="toc-faq-44828655-d8f0-4e55-8cae-d092670ab463"></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 the Medicare Donut Hole or Coverage Gap?</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>The Medicare coverage gap or "donut hole" refers to a period when there is a limit on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-medicare-part-d-providers-5078070">prescription drug coverage</a>. It begins once the Medicare Advantage plan member spends $5,030 on covered drugs. During this time, Medicare asks members to be responsible for up to 25% of drug costs. But some plans offer additional coverage in the gap, such as $0 copays on preferred brand name drugs and generics. In 2024, the gap ends once the member spends $8,000 on covered drugs.<span class="ql-inline-citation" data-cite="31"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <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 Is the Highest-Rated Medicare Advantage Plan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-1"> <div class="faq-accordion__item-answer"> <p>Kaiser Permanente’s 2023 Medicare Advantage plans receive 5 stars from the Centers for Medicare and Medicaid Services (CMS) in California, Colorado, Georgia, Hawaii, and Mid-Atlantic states (Maryland, Virginia, and Washington, D.C.).<span class="ql-inline-citation" data-cite="33"></span> The CMS ranks Medicare Advantage and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-medicare-part-d-providers-5078070">prescription drug plans</a> from 1 to 5 stars, with 5 stars being the highest or best rating. A plan’s star rating reflects its performance based on enrolled people’s experiences.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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 Is the Biggest Disadvantage of Medicare Advantage?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>A primary Medicare Advantage plan drawback is that these plans typically require you to use dedicated networks, such as an HMO or PPO. As a result, geographic coverage and provider choice is limited. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/medicare.asp">Original Medicare</a> doesn’t restrict you to a network; you can choose any provider accepting Medicare.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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">Can I Drop My Medicare Advantage Plan and Go Back to Original Medicare?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-3"> <div class="faq-accordion__item-answer"> <p>Yes, you can switch back to Original Medicare during the annual <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/medicare-open-enrollment-guide-5205470">Medicare Open Enrollment period</a> from October 15 to December 7. Your Original Medicare coverage will go into effect on January 1. Or, you can switch during Medicare Advantage Open Enrollment from January 1 to March 31. Your new coverage becomes effective on the first day of the month after joining the plan.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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-chose-the-best-medicare-advantage-providers"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-6"> <span class="mntl-sc-block-heading__text"> How We Chose the Best Medicare Advantage Providers </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_4-0-7"> To identify which Medicare insurance companies to review, we analyzed business and market insight databases including Statistia, Plunkett, and Gale. We also considered user-generated data from Google to determine public interest and trends in Medicare 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_4-0-8"> We collected data from third-party rating agencies like the credit rating agency <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 the National Committee for Quality Assurance (NCQA), an independent organization that rates health insurance plans on quality and customer satisfaction. We also gathered data from government websites and databases provided by the Centers for Medicare and Medicaid Services (CMS) such as CMS.gov and HealthCare.gov, and directly from companies via websites, media contacts, and existing partnerships. The data collection process spanned Sept. 15 to Sept. 29, 2023. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> We then developed a quantitative model that scores each Medicare Advantage provider based on four major categories and 22 criteria that are crucial in evaluating the company's offerings and benefits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> We weighted the four categories as follows for this article: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-11"> <li><strong>Plan features</strong>: 35%</li><li><strong>Plan quality and customer satisfaction</strong>: 30%</li><li><strong>Cost</strong>: 20%</li><li><strong>Availability</strong>: 15%</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_4-0-12"> Read our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/medicare-insurance-review-methodology-6824052">full methodology</a> for reviewing Medicare insurance providers. </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="Medicare Advantage Plans" class="primary-image__image mntl-primary-image--blurry" height="4000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" 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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-30"><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-medicare-advantage-study">For Medicare Advantage Plans, Trust and Problem Resolution Closely Associated With Likelihood to Renew, J.D. Power Finds</a>.”</p></li> <li class="mntl-sources__source" id="citation-31"><p>U.S. Centers for Medicare &amp; Medicaid Services. “<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cms.gov/files/document/2024-announcement-pdf.pdf">Announcement of Calendar Year (CY) 2024 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies</a>.”</p></li> <li class="mntl-sources__source" id="citation-34"><p>United States District Court, District of Minnesota. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fingfx.thomsonreuters.com/gfx/legaldocs/lbvgoerodvq/Lokken%20v%20UnitedHealth%20complaint%2011-14.pdf">The Estate of Gene B. Lokken and The Estate of Dale Henry Tetzloff, individually and on behalf of all others similarly situated, Plaintiffs, vs. UNITEDHEALTH GROUP, INC., UNITEDHEALTHCARE, INC., NAVIHEALTH, INC., and DOES 1-50, inclusive, Defendants</a>." Page 1.</p></li> <li class="mntl-sources__source" id="citation-33"><p>Kaiser Permanente. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://healthy.kaiserpermanente.org/pages/medicare-star-quality-ratings">Our 2023 Medicare Health Plans Have Star Power.</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="5115992" data-ordinal="1" data-tax-levels="" 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UnitedHealthcare has the best Medicare Advantage (MA) plans overall, according to Investopedia research. The company offers the largest provider network nationwide and has an excellent rating from the National Committee for Quality Assurance (NCQA), an independent organization that measures health plan quality and patient satisfaction. [Medicare Advantage plans](https://www.investopedia.com/terms/m/medicare-advantage.asp) replace [Original Medicare](https://www.investopedia.com/original-medicare-vs-medicare-advantage-7486531) (Part A and B, and often D). Benefits extend beyond Original Medicare, including an annual out-of-pocket expense limit and dental, vision, and hearing coverage. In exchange (and unlike Original Medicare), you generally must use in-network providers and services.  Commercial insurance companies administer MA plans. Costs and benefits differ, so shopping around and comparing plans is essential.  To choose the best Medicare Advantage companies, we evaluated nine major health insurance companies for 22 criteria that fall into categories including plan and care quality, cost, Medicare drug gap coverage, and state availability.  ## Best Medicare Advantage Plans * **Best Overall:** [AARP/UnitedHealthcare](https://myhn.com/p/JzYdNkv8) * **Lowest Cost:** [Cigna](https://myhn.com/p/wx3xEHfp) * **Great for Nationwide Coverage:** [Humana](https://myhn.com/p/efeMq6rv) * **Best for Additional Drug Coverage in the Gap:** [Aetna](https://myhn.com/p/ee2FN52q) * **Best for Patient Quality and Customer Satisfaction:** [Kaiser Permanente](https://myhn.com/p/I4Xgk2zm) Best Medicare Advantage Plans Expand Best Medicare Advantage Plans * [Our Top Picks](#summary-list) * [AARP/UnitedHealthcare](#toc-best-overall-aarpunitedhealthcare) * [Cigna](#toc-lowest-cost-cigna) * [Humana](#toc-great-for-nationwide-coverage-humana) * [Aetna](#toc-best-for-additional-drug-coverage-in-the-gap-aetna) * [Kaiser Permanente](#toc-best-for-patient-quality-and-customer-satisfaction-kaiser-permanente) * See More (2) * [Bottom Line](#toc-bottom-line) * [FAQ](#toc-faq-44828655-d8f0-4e55-8cae-d092670ab463) * [How We Chose the Best Medicare Advantage Providers](#toc-how-we-chose-the-best-medicare-advantage-providers) ### Best Overall : AARP/UnitedHealthcare Investopedia's Rating 4.7 --- ![United Healthcare]() :fill(white):max_bytes(150000):strip_icc()/united-healthcare-6b8b4e57956841e8b3189b86f492ecad.jpg) United Healthcare [Get a Quote](https://myhn.com/p/JzYdNkv8) Pros & Cons Pros * Available in most states and Washington D.C. * Largest provider network nationwide * Offers additional drug coverage in the gap * Free home visits * $0 copays for primary care provider (PCP), specialist, and lab charges Cons * Below-average J.D. Power score in some regions Why We Chose It AARP's UHC plans are our pick for the best overall Medicare Advantage plans. These plans feature high Medicare star ratings, the largest provider network of all MA plan providers, and a broad array of options. Overview UnitedHealthcare (UHC) is the largest provider of Medicare Advantage plans. UnitedHealthcare’s MA plans—co-branded with AARP—earn high marks for plan quality and member experience.  On average, UHC Medicare Advantage plans with drug coverage have a 3.94 Medicare star rating, which is on par with the national average of 3.94.  The National Committee for Quality Assurance (NCQA) gives UHC MA plans a 3.8-star average rating, putting it about third in the list of companies we evaluated. Both NCQA and Medicare score on a five-star scale. While UnitedHealthcare scored well in the J.D. Power 2023 Medicare Advantage Study for Florida and Texas, it scored below average in California, Pennsylvania, and New York.  The company offers a range of plan types, including [HMO](https://www.investopedia.com/terms/h/hmo.asp), [PPO](https://www.investopedia.com/terms/p/preferred-provider-organization.asp), and PFFS (private-fee-for-service) plans. Coverage is available for:  * Vision, hearing, and dental care * Non-emergency transportation for Medicare-Medicaid recipients * Worldwide emergencies * No-cost in-home care visits Most plans offer additional drug coverage during the Medicare donut hole, which can save money if your drugs cost more than $5,030 in 2024.  UHC outperforms its peers in key metrics, but the average out-of-pocket expense is $5,579 in 2024. This amount is higher than some competitors’ but lower than the average across major insurers. Read more in our [UnitedHealthcare Medicare review](https://www.investopedia.com/unitedhealthcare-medicare-review-5096755). Note UnitedHealthcare Group is being sued for allegedly using a flawed artificial intelligence algorithm that denies rehabilitation care for Medicare Advantage patients, despite knowing that the algorithm has a 90% error rate. ### Lowest Cost : Cigna Investopedia's Rating 4.0 --- ![Cigna]() :fill(white):max_bytes(150000):strip_icc()/cigna-8cf2e15426834f3e93664853aef17666.png) Cigna [Get a Quote](https://myhn.com/p/wx3xEHfp) Pros & Cons Pros * Lowest overall-cost plans compared to the largest providers * Lowest average premium compared to the largest providers Cons * No PFFS plans * Limited drug coverage in the Medicare coverage gap Why We Chose It Cigna Medicare Advantage plans are the cheapest nationwide of all major insurers offering Medicare Advantage plans. Overview Cigna has the lowest-cost Medicare Advantage plans when considering premiums, deductibles, and maximum out-of-pocket costs across all plans.  In particular, Cigna has the lowest average premium at $6.81 per month and the second-lowest average drug deductible at $23.96 (Kaiser has the lowest).  However, Cigna’s plans are only available in 26 states. And the provider’s average Medicare star rating is 3.66, below the national average of 3.94.  Learn more in our [Cigna Medicare review](https://www.investopedia.com/cigna-medicare-review-5094942). ### Great for Nationwide Coverage : Humana Investopedia's Rating 4.1 --- ![Humana]() :fill(white):max_bytes(150000):strip_icc()/Humana-e0d401d45e4d430bb6067db481a8d01f.png) Humana [Get a Quote](https://myhn.com/p/efeMq6rv) Pros & Cons Pros * Available in 49 states * Benefits for over-the-counter drugs * Wide plan type range available * Good Medicare star rating Cons * Not available in Alaska * Pharmacy network may be limited in some areas Why We Chose It Humana is the second-largest Medicare Advantage provider in the country and is available in most states. Overview Humana is the second-largest provider of Medicare Advantage plans nationwide, with plans in 49 states. Alaska is the sole exception. Depending on where you live, HMO, PPO, and PFFS plans may be available.  But only about half of Humana’s Medicare Advantage plans with drug coverage offer additional coverage in the coverage gap. If your prescription drug costs add up to more than $5,030 in 2024, you could be on the hook for 25% of their cost in the coverage gap.  Humana has a limited number of preferred cost-share pharmacies in urban areas of 25 states and suburban areas of 14 states. These are key to saving money on medications. Since access to cost-share pharmacies varies quite a bit, ensure there’s one convenient to you before signing up.   Read more in our [Humana Medicare review](https://www.investopedia.com/humana-medicare-review-5093665). ### Best for Additional Drug Coverage in the Gap : Aetna Investopedia's Rating 4.5 --- ![Aetna]() :fill(white):max_bytes(150000):strip_icc()/aetna-ea6eec2a716445ffaa5f686db5cdde5c.png) Aetna [Get a Quote](https://myhn.com/p/ee2FN52q) Pros & Cons Pros * Offers additional drug coverage in the gap * Well-priced plans * Home health visits with all MA plans * $0 PCP and specialist copays Cons * MA plans unavailable in Alaska, Hawaii, Montana, and Vermont * No private-fee-for-service MA plans Why We Chose It Aetna offers more MA plans across the U.S. that provide additional drug coverage in the Medicare donut hole than any of the other largest MA plan providers, making it an excellent choice if you spend a lot on prescription drugs. Overview Aetna has more MA plans that offer additional drug coverage in the Medicare gap phase than any other major provider. Some Aetna plans have $0 copays for generic drugs in the gap. This is important because once you and your plan spend $5,030 on drugs in 2024, you’ll pay up to 25% on brand-name drugs and generics. Then, after you spend $8,000 [out of pocket](https://www.investopedia.com/terms/o/outofpocket.asp) on drugs, you leave the donut hole.  Aetna came in second in our evaluation of nationwide costs for MA plans, which looks at average premiums, drug deductibles, and out-of-pocket expenses.  But if you live in Alaska, Hawaii, Montana, or Vermont, or want a PFFS plan (private-fee-for-service), you'll need to consider another Medicare Advantage provider. Read more in our [Aetna Medicare review](https://www.investopedia.com/aetna-medicare-review-5092006). ### Best for Patient Quality and Customer Satisfaction : Kaiser Permanente Investopedia's Rating 4.0 --- ![Kaiser Permanente]() :fill(white):max_bytes(150000):strip_icc()/kaiser-permanente-a8fa800aea284b1a81a52db52ea15ce3.jpg) Kaiser Permanente [Get a Quote](https://myhn.com/p/I4Xgk2zm) Pros & Cons Pros * Highest average NCQA rating of the major providers * Highest Medicare star rating of the major providers * Lowest deductibles, on average, compared to all other major providers Cons * Only available in 8 states and D.C. * Only offers HMO plans Why We Chose It Kaiser Permanente stands out for its excellent plan quality and customer satisfaction. It has the highest star ratings from Medicare the NCQA of the providers we reviewed. Overview Kaiser Permanente isn’t available in many states, but where it is, third parties rate it highly. Kaiser’s average Medicare star rating, which measures plan quality, is 4.77 out of 5. Its NCQA rating, which reflects quality and customer satisfaction, is 4.5 out of 5 stars, making Kaiser Permanente the highest-rated company we reviewed in both of those categories.  Not only that, but compared to the other largest players, Kaiser Permanente’s drug deductibles are the lowest nationwide—only $3, on average.  The company keeps member costs low because it only offers HMO plans for Medicare coverage. You’ll need to stay strictly in-network. You must reside in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, Washington state, or the District of Columbia to be eligible for coverage. Read more in our [Kaiser Permanente Medicare review](https://www.investopedia.com/kaiser-permanente-medicare-review-5115992). ## Bottom Line To [choose the best Medicare Advantage company](https://www.investopedia.com/how-to-choose-a-medicare-plan-7485375), consider what you need from a plan. Are you comfortable with an HMO, or do you require additional flexibility? For instance, if you want a PFFS plan, there are a few providers to consider, including UnitedHealthcare and Humana.  If cost is your primary concern, consider Cigna. But beware that its Medicare star rating is below average. Or would you rather pay more monthly for a higher level of quality and customer satisfaction? Check out UHC's AARP plans, Aetna, and Kaiser, if it’s available in your area.  Do you want a plan with drug coverage? If so, how much do you expect to spend on prescription drugs, and which specific drugs do you use? [Medicare.gov’s plan finder](https://www.medicare.gov/plan-compare/#/?year=2022&lang=en) lets you input the drugs you use when comparing plans to see which provides the best coverage. You can also see which specific plans offer additional coverage in the Medicare donut hole. Individual Medicare Advantage plans have their own Medicare star ratings—we looked at national company averages. So, even if you choose a top-ranked company like UnitedHealthcare, ensure the specific MA plan you’re interested in has a rating you’re comfortable with. That information is also available in the plan finder tool. ## Frequently Asked Questions * ### What Is the Medicare Donut Hole or Coverage Gap? The Medicare coverage gap or "donut hole" refers to a period when there is a limit on [prescription drug coverage](https://www.investopedia.com/best-medicare-part-d-providers-5078070). It begins once the Medicare Advantage plan member spends $5,030 on covered drugs. During this time, Medicare asks members to be responsible for up to 25% of drug costs. But some plans offer additional coverage in the gap, such as $0 copays on preferred brand name drugs and generics. In 2024, the gap ends once the member spends $8,000 on covered drugs. * ### What Is the Highest-Rated Medicare Advantage Plan? Kaiser Permanente’s 2023 Medicare Advantage plans receive 5 stars from the Centers for Medicare and Medicaid Services (CMS) in California, Colorado, Georgia, Hawaii, and Mid-Atlantic states (Maryland, Virginia, and Washington, D.C.). The CMS ranks Medicare Advantage and [prescription drug plans](https://www.investopedia.com/best-medicare-part-d-providers-5078070) from 1 to 5 stars, with 5 stars being the highest or best rating. A plan’s star rating reflects its performance based on enrolled people’s experiences. * ### What Is the Biggest Disadvantage of Medicare Advantage? A primary Medicare Advantage plan drawback is that these plans typically require you to use dedicated networks, such as an HMO or PPO. As a result, geographic coverage and provider choice is limited. [Original Medicare](https://www.investopedia.com/terms/m/medicare.asp) doesn’t restrict you to a network; you can choose any provider accepting Medicare. * ### Can I Drop My Medicare Advantage Plan and Go Back to Original Medicare? Yes, you can switch back to Original Medicare during the annual [Medicare Open Enrollment period](https://www.investopedia.com/medicare-open-enrollment-guide-5205470) from October 15 to December 7. Your Original Medicare coverage will go into effect on January 1. Or, you can switch during Medicare Advantage Open Enrollment from January 1 to March 31. Your new coverage becomes effective on the first day of the month after joining the plan. ## How We Chose the Best Medicare Advantage Providers To identify which Medicare insurance companies to review, we analyzed business and market insight databases including Statistia, Plunkett, and Gale. We also considered user-generated data from Google to determine public interest and trends in Medicare plans. We collected data from third-party rating agencies like the credit rating agency [AM Best](https://www.investopedia.com/terms/a/a-m-best.asp) and the National Committee for Quality Assurance (NCQA), an independent organization that rates health insurance plans on quality and customer satisfaction. We also gathered data from government websites and databases provided by the Centers for Medicare and Medicaid Services (CMS) such as CMS.gov and HealthCare.gov, and directly from companies via websites, media contacts, and existing partnerships. The data collection process spanned Sept. 15 to Sept. 29, 2023. We then developed a quantitative model that scores each Medicare Advantage provider based on four major categories and 22 criteria that are crucial in evaluating the company's offerings and benefits. We weighted the four categories as follows for this article: * **Plan features**: 35% * **Plan quality and customer satisfaction**: 30% * **Cost**: 20% * **Availability**: 15% Read our [full methodology](https://www.investopedia.com/medicare-insurance-review-methodology-6824052) for reviewing Medicare insurance providers. :max_bytes(150000):strip_icc()/GettyImages-1208245030-a63bebaf4c58403494ed360644ee4c5d.jpg) :max_bytes(150000):strip_icc()/GettyImages-1208245030-a63bebaf4c58403494ed360644ee4c5d.jpg) Research and analysis by [Shanker Narayan](https://www.investopedia.com/shanker-narayan-6747648) 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. J.D. Power. “[For Medicare Advantage Plans, Trust and Problem Resolution Closely Associated With Likelihood to Renew, J.D. Power Finds](https://www.jdpower.com/business/press-releases/2023-us-medicare-advantage-study).” 2. U.S. Centers for Medicare & Medicaid Services. “[Announcement of Calendar Year (CY) 2024 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies](https://www.cms.gov/files/document/2024-announcement-pdf.pdf).” 3. United States District Court, District of Minnesota. "[The Estate of Gene B. Lokken and The Estate of Dale Henry Tetzloff, individually and on behalf of all others similarly situated, Plaintiffs, vs. UNITEDHEALTH GROUP, INC., UNITEDHEALTHCARE, INC., NAVIHEALTH, INC., and DOES 1-50, inclusive, Defendants](https://fingfx.thomsonreuters.com/gfx/legaldocs/lbvgoerodvq/Lokken%20v%20UnitedHealth%20complaint%2011-14.pdf)." Page 1. 4. Kaiser Permanente. "[Our 2023 Medicare Health Plans Have Star Power.](https://healthy.kaiserpermanente.org/pages/medicare-star-quality-ratings)" Related Articles [![Kaiser Permanente Review]() :max_bytes(150000):strip_icc()/Kaiser_Permanente_recirc-ad16ccfa35664b2a87ac363f163f29b5.jpg) Kaiser Permanente Medicare Review](https://www.investopedia.com/kaiser-permanente-medicare-review-5115992) [![Anthem]() :max_bytes(150000):strip_icc()/Anthem_recirc_Image-9311ac651e84496a98861bf89a1eac4b.jpg) Anthem Medicare Insurance Review](https://www.investopedia.com/anthem-medicare-review-5112452) [![WellCare Review]() :max_bytes(150000):strip_icc()/Well-Care-Recirc-72321c836ce84d2dbce376505b8a5d47.jpg) Wellcare Medicare Insurance Review](https://www.investopedia.com/wellcare-medicare-review-5094130) [![Aetna Review]() :max_bytes(150000):strip_icc()/Aetna-recirc-9a2473c45fe04f8a9ab71afa0080401f.jpg) Aetna Medicare Review 2024](https://www.investopedia.com/aetna-medicare-review-5092006) [![Humana Medicare Review]() :max_bytes(150000):strip_icc()/Humana-Recirc-4910cc53f1654e52a37bc8fd03a7316f.jpg) Humana Medicare Review](https://www.investopedia.com/humana-medicare-review-5093665) [![Medicare Part D Providers]() :max_bytes(150000):strip_icc()/GettyImages-1337780146-999da4882aae4dc2aeb9a3622c1c3f60.jpg) Best Medicare Part D Providers](https://www.investopedia.com/best-medicare-part-d-providers-5078070) Related Terms [Medicare Advantage: Overview, Types, FAQs](https://www.investopedia.com/terms/m/medicare-advantage.asp) Medicare Advantage, or Medicare Part C, is a type of hospital and medical insurance provided by private companies instead of the federal government. [more](https://www.investopedia.com/terms/m/medicare-advantage.asp) [Medicare Part D: What It is, How It Works, Example](https://www.investopedia.com/terms/m/medicarepartd.asp) Learn more about Medicare Part D, which is a prescription drug benefit program offered as part of Medicare. [more](https://www.investopedia.com/terms/m/medicarepartd.asp) [What Is Medicare Supplement Plan G?](https://www.investopedia.com/what-is-medicare-supplement-plan-g-8606488) Plan G is a popular Medicare supplement plan that helps cover out-of-pocket costs for people with Original Medicare. Learn more about Plan G, including the pros and cons. [more](https://www.investopedia.com/what-is-medicare-supplement-plan-g-8606488) [Medicare Supplement Insurance: What It Is, How It Works](https://www.investopedia.com/terms/m/medicare-supplementary-medical-insurance.asp) Medicare supplement insurance, also known as Medigap, is private insurance sold to complement original Medicare coverage. [more](https://www.investopedia.com/terms/m/medicare-supplementary-medical-insurance.asp) [What Is Medicare? How It Works, Who Qualifies, and How to Enroll](https://www.investopedia.com/terms/m/medicare.asp) Medicare is a U.S. government program providing health insurance mostly to people 65 and older. [more](https://www.investopedia.com/terms/m/medicare.asp) [Medicare Part A: What It Is, How It Works](https://www.investopedia.com/terms/m/medicare-part-hospital-insurance.asp) Medicare Part A, or Medicare hospital coverage, is one of the four parts of Medicare, the government’s health insurance program for older adults. [more](https://www.investopedia.com/terms/m/medicare-part-hospital-insurance.asp)

UnitedHealthcare has the best Medicare Advantage (MA) plans overall, according to Investopedia research. The company offers the largest provider network nationwide and has an excellent rating from the National Committee for Quality Assurance (NCQA), an independent organization that measures health plan quality and patient satisfaction. Medicare Advantage plans replace Original Medicare (Part A and B, and often D). Benefits extend beyond Original Medicare, including an annual out-of-pocket expense limit and dental, vision, and hearing coverage. In exchange (and unlike Original Medicare), you generally must use in-network providers and services.  Commercial insurance companies administer MA plans. Costs and benefits differ, so shopping around and comparing plans is essential.  To choose the best Medicare Advantage companies, we evaluated nine major health insurance companies for 22 criteria that fall into categories including plan and care quality, cost, Medicare drug gap coverage, and state availability.  Best Medicare Advantage Plans Best Overall: AARP/UnitedHealthcare Lowest Cost: Cigna Great for Nationwide Coverage: Humana Best for Additional Drug Coverage in the Gap: Aetna Best for Patient Quality and Customer Satisfaction: Kaiser Permanente Best Medicare Advantage Plans Expand Best Medicare Advantage Plans Our Top Picks AARP/UnitedHealthcare Cigna Humana Aetna Kaiser Permanente See More (2) Bottom Line FAQ How We Chose the Best Medicare Advantage Providers Best Overall : AARP/UnitedHealthcare Investopedia's Rating 4.7 United Healthcare Get a Quote Pros & Cons Pros Available in most states and Washington D.C. Largest provider network nationwide Offers additional drug coverage in the gap Free home visits $0 copays for primary care provider (PCP), specialist, and lab charges Cons Below-average J.D. Power score in some regions Why We Chose It AARP's UHC plans are our pick for the best overall Medicare Advantage plans. These plans feature high Medicare star ratings, the largest provider network of all MA plan providers, and a broad array of options. Overview UnitedHealthcare (UHC) is the largest provider of Medicare Advantage plans. UnitedHealthcare’s MA plans—co-branded with AARP—earn high marks for plan quality and member experience.  On average, UHC Medicare Advantage plans with drug coverage have a 3.94 Medicare star rating, which is on par with the national average of 3.94.  The National Committee for Quality Assurance (NCQA) gives UHC MA plans a 3.8-star average rating, putting it about third in the list of companies we evaluated. Both NCQA and Medicare score on a five-star scale. While UnitedHealthcare scored well in the J.D. Power 2023 Medicare Advantage Study for Florida and Texas, it scored below average in California, Pennsylvania, and New York.  The company offers a range of plan types, including HMO, PPO, and PFFS (private-fee-for-service) plans. Coverage is available for:  Vision, hearing, and dental careNon-emergency transportation for Medicare-Medicaid recipientsWorldwide emergenciesNo-cost in-home care visits Most plans offer additional drug coverage during the Medicare donut hole, which can save money if your drugs cost more than $5,030 in 2024.  UHC outperforms its peers in key metrics, but the average out-of-pocket expense is $5,579 in 2024. This amount is higher than some competitors’ but lower than the average across major insurers. Read more in our UnitedHealthcare Medicare review. Note UnitedHealthcare Group is being sued for allegedly using a flawed artificial intelligence algorithm that denies rehabilitation care for Medicare Advantage patients, despite knowing that the algorithm has a 90% error rate. Lowest Cost : Cigna Investopedia's Rating 4.0 Cigna Get a Quote Pros & Cons Pros Lowest overall-cost plans compared to the largest providers Lowest average premium compared to the largest providers Cons No PFFS plans Limited drug coverage in the Medicare coverage gap Why We Chose It Cigna Medicare Advantage plans are the cheapest nationwide of all major insurers offering Medicare Advantage plans. Overview Cigna has the lowest-cost Medicare Advantage plans when considering premiums, deductibles, and maximum out-of-pocket costs across all plans.  In particular, Cigna has the lowest average premium at $6.81 per month and the second-lowest average drug deductible at $23.96 (Kaiser has the lowest).  However, Cigna’s plans are only available in 26 states. And the provider’s average Medicare star rating is 3.66, below the national average of 3.94.  Learn more in our Cigna Medicare review. Great for Nationwide Coverage : Humana Investopedia's Rating 4.1 Humana Get a Quote Pros & Cons Pros Available in 49 states Benefits for over-the-counter drugs Wide plan type range available Good Medicare star rating Cons Not available in Alaska Pharmacy network may be limited in some areas Why We Chose It Humana is the second-largest Medicare Advantage provider in the country and is available in most states. Overview Humana is the second-largest provider of Medicare Advantage plans nationwide, with plans in 49 states. Alaska is the sole exception. Depending on where you live, HMO, PPO, and PFFS plans may be available.  But only about half of Humana’s Medicare Advantage plans with drug coverage offer additional coverage in the coverage gap. If your prescription drug costs add up to more than $5,030 in 2024, you could be on the hook for 25% of their cost in the coverage gap.  Humana has a limited number of preferred cost-share pharmacies in urban areas of 25 states and suburban areas of 14 states. These are key to saving money on medications. Since access to cost-share pharmacies varies quite a bit, ensure there’s one convenient to you before signing up.   Read more in our Humana Medicare review. Best for Additional Drug Coverage in the Gap : Aetna Investopedia's Rating 4.5 Aetna Get a Quote Pros & Cons Pros Offers additional drug coverage in the gap Well-priced plans Home health visits with all MA plans $0 PCP and specialist copays Cons MA plans unavailable in Alaska, Hawaii, Montana, and Vermont No private-fee-for-service MA plans Why We Chose It Aetna offers more MA plans across the U.S. that provide additional drug coverage in the Medicare donut hole than any of the other largest MA plan providers, making it an excellent choice if you spend a lot on prescription drugs. Overview Aetna has more MA plans that offer additional drug coverage in the Medicare gap phase than any other major provider. Some Aetna plans have $0 copays for generic drugs in the gap. This is important because once you and your plan spend $5,030 on drugs in 2024, you’ll pay up to 25% on brand-name drugs and generics. Then, after you spend $8,000 out of pocket on drugs, you leave the donut hole.  Aetna came in second in our evaluation of nationwide costs for MA plans, which looks at average premiums, drug deductibles, and out-of-pocket expenses.  But if you live in Alaska, Hawaii, Montana, or Vermont, or want a PFFS plan (private-fee-for-service), you'll need to consider another Medicare Advantage provider. Read more in our Aetna Medicare review. Best for Patient Quality and Customer Satisfaction : Kaiser Permanente Investopedia's Rating 4.0 Kaiser Permanente Get a Quote Pros & Cons Pros Highest average NCQA rating of the major providers Highest Medicare star rating of the major providers Lowest deductibles, on average, compared to all other major providers Cons Only available in 8 states and D.C. Only offers HMO plans Why We Chose It Kaiser Permanente stands out for its excellent plan quality and customer satisfaction. It has the highest star ratings from Medicare the NCQA of the providers we reviewed. Overview Kaiser Permanente isn’t available in many states, but where it is, third parties rate it highly. Kaiser’s average Medicare star rating, which measures plan quality, is 4.77 out of 5. Its NCQA rating, which reflects quality and customer satisfaction, is 4.5 out of 5 stars, making Kaiser Permanente the highest-rated company we reviewed in both of those categories.  Not only that, but compared to the other largest players, Kaiser Permanente’s drug deductibles are the lowest nationwide—only $3, on average.  The company keeps member costs low because it only offers HMO plans for Medicare coverage. You’ll need to stay strictly in-network. You must reside in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia, Washington state, or the District of Columbia to be eligible for coverage. Read more in our Kaiser Permanente Medicare review. Bottom Line To choose the best Medicare Advantage company, consider what you need from a plan. Are you comfortable with an HMO, or do you require additional flexibility? For instance, if you want a PFFS plan, there are a few providers to consider, including UnitedHealthcare and Humana.  If cost is your primary concern, consider Cigna. But beware that its Medicare star rating is below average. Or would you rather pay more monthly for a higher level of quality and customer satisfaction? Check out UHC's AARP plans, Aetna, and Kaiser, if it’s available in your area.  Do you want a plan with drug coverage? If so, how much do you expect to spend on prescription drugs, and which specific drugs do you use? Medicare.gov’s plan finder lets you input the drugs you use when comparing plans to see which provides the best coverage. You can also see which specific plans offer additional coverage in the Medicare donut hole. Individual Medicare Advantage plans have their own Medicare star ratings—we looked at national company averages. So, even if you choose a top-ranked company like UnitedHealthcare, ensure the specific MA plan you’re interested in has a rating you’re comfortable with. That information is also available in the plan finder tool. Frequently Asked Questions What Is the Medicare Donut Hole or Coverage Gap? The Medicare coverage gap or "donut hole" refers to a period when there is a limit on prescription drug coverage. It begins once the Medicare Advantage plan member spends $5,030 on covered drugs. During this time, Medicare asks members to be responsible for up to 25% of drug costs. But some plans offer additional coverage in the gap, such as $0 copays on preferred brand name drugs and generics. In 2024, the gap ends once the member spends $8,000 on covered drugs. What Is the Highest-Rated Medicare Advantage Plan? Kaiser Permanente’s 2023 Medicare Advantage plans receive 5 stars from the Centers for Medicare and Medicaid Services (CMS) in California, Colorado, Georgia, Hawaii, and Mid-Atlantic states (Maryland, Virginia, and Washington, D.C.). The CMS ranks Medicare Advantage and prescription drug plans from 1 to 5 stars, with 5 stars being the highest or best rating. A plan’s star rating reflects its performance based on enrolled people’s experiences. What Is the Biggest Disadvantage of Medicare Advantage? A primary Medicare Advantage plan drawback is that these plans typically require you to use dedicated networks, such as an HMO or PPO. As a result, geographic coverage and provider choice is limited. Original Medicare doesn’t restrict you to a network; you can choose any provider accepting Medicare. Can I Drop My Medicare Advantage Plan and Go Back to Original Medicare? Yes, you can switch back to Original Medicare during the annual Medicare Open Enrollment period from October 15 to December 7. Your Original Medicare coverage will go into effect on January 1. Or, you can switch during Medicare Advantage Open Enrollment from January 1 to March 31. Your new coverage becomes effective on the first day of the month after joining the plan. How We Chose the Best Medicare Advantage Providers To identify which Medicare insurance companies to review, we analyzed business and market insight databases including Statistia, Plunkett, and Gale. We also considered user-generated data from Google to determine public interest and trends in Medicare plans. We collected data from third-party rating agencies like the credit rating agency AM Best and the National Committee for Quality Assurance (NCQA), an independent organization that rates health insurance plans on quality and customer satisfaction. We also gathered data from government websites and databases provided by the Centers for Medicare and Medicaid Services (CMS) such as CMS.gov and HealthCare.gov, and directly from companies via websites, media contacts, and existing partnerships. The data collection process spanned Sept. 15 to Sept. 29, 2023. We then developed a quantitative model that scores each Medicare Advantage provider based on four major categories and 22 criteria that are crucial in evaluating the company's offerings and benefits. We weighted the four categories as follows for this article: Plan features: 35%Plan quality and customer satisfaction: 30%Cost: 20%Availability: 15% Read our full methodology for reviewing Medicare insurance providers. Research and analysis by Shanker Narayan 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. J.D. Power. “For Medicare Advantage Plans, Trust and Problem Resolution Closely Associated With Likelihood to Renew, J.D. Power Finds.” U.S. Centers for Medicare & Medicaid Services. “Announcement of Calendar Year (CY) 2024 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies.” United States District Court, District of Minnesota. "The Estate of Gene B. Lokken and The Estate of Dale Henry Tetzloff, individually and on behalf of all others similarly situated, Plaintiffs, vs. UNITEDHEALTH GROUP, INC., UNITEDHEALTHCARE, INC., NAVIHEALTH, INC., and DOES 1-50, inclusive, Defendants." Page 1. Kaiser Permanente. "Our 2023 Medicare Health Plans Have Star Power." Related Articles Kaiser Permanente Medicare Review Anthem Medicare Insurance Review Wellcare Medicare Insurance Review Aetna Medicare Review 2024 Humana Medicare Review Best Medicare Part D Providers Related Terms Medicare Advantage: Overview, Types, FAQs Medicare Advantage, or Medicare Part C, is a type of hospital and medical insurance provided by private companies instead of the federal government. more Medicare Part D: What It is, How It Works, Example Learn more about Medicare Part D, which is a prescription drug benefit program offered as part of Medicare. more What Is Medicare Supplement Plan G? Plan G is a popular Medicare supplement plan that helps cover out-of-pocket costs for people with Original Medicare. Learn more about Plan G, including the pros and cons. more Medicare Supplement Insurance: What It Is, How It Works Medicare supplement insurance, also known as Medigap, is private insurance sold to complement original Medicare coverage. more What Is Medicare? How It Works, Who Qualifies, and How to Enroll Medicare is a U.S. government program providing health insurance mostly to people 65 and older. more Medicare Part A: What It Is, How It Works Medicare Part A, or Medicare hospital coverage, is one of the four parts of Medicare, the government’s health insurance program for older adults. more

https://www.investopedia.com/terms/m/multiplecompression.asp

Multiple Compression: Meaning, Overview, 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-multiple-compression"></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 Multiple Compression? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Multiple compression is an effect that occurs when a company's earnings increase, but its stock price does not move in response. Following this trend, if the company posts flat earnings, the stock price could fall or in some cases, the stock price drops faster than the earnings. The result is that its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pricemultiples.asp">price multiples</a>, such as its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-earningsratio.asp">P/E ratio</a>, are reduced since the denominator increases while the numerator remains the same, even though nothing may be fundamentally wrong with the company. </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 compression of a company's multiple can be interpreted as a company's valuation being called into question or a change in investor expectations. </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>Multiple compression occurs when a company's financial multiple decreases, often representing a change in investor expectations.</li><li>Multiples like the P/E ratio are used to analyze a company's relative valuation in the market.</li><li>Multiple compression can occur if share prices fall while earnings stay flat or if share prices remain the same while earnings increase.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-multiple-compression"></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 Multiple Compression </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A price multiple is any ratio that uses the share price of a company in conjunction with some specific <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/persharebasis.asp" rel="noopener noreferrer">per-share</a> financial metric for a snapshot on relative valuation. The share price is then divided by a chosen per-share metric to form a ratio. Price multiples enable investors to evaluate the market value of a company's stock in relation to a fundamental <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/metrics.asp" rel="noopener noreferrer">metric</a>, such as earnings, cash flow, or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bookvalue.asp" rel="noopener noreferrer">book value</a> (<a class="pseudoStyle" data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/price-to-bookratio.asp" rel="noopener noreferrer">P/B</a>). Compression occurs when these multiples shrink. </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"> Multiples are based on several factors, but most importantly on the future expectations of a company. If a company trades at say, a P/E multiple of 50, this means investors are paying $50 in equity for each $1 of earnings. Generally, an investor would only pay such a high multiple on the expectation that the company will grow significantly faster than its competitors or the stock market in general. </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 the company's growth rates start to slow, investors might start to doubt its growth prospects, and thus not pay as expensive a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/premium.asp" rel="noopener noreferrer">premium</a> as they once did. Expectations about future prospects can be dashed if a company misses earnings or gives negative <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forward-guidance.asp" rel="noopener noreferrer">forward guidance</a>. </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-example-of-multiple-compression"></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"> Example of Multiple Compression </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> In the case above, our hypothetical company begins with a P/E of 50. The company might experience multiple compression if it releases earnings that are double the previous <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eps.asp" rel="noopener noreferrer">earnings per share</a> (EPS). Meanwhile, the stock price remains the same. The P/E will thus be reduced to 25, even though earnings have improved. With the same dollar of earnings, this would mean that the stock's relative value has been cut in half (25/50 = 1/2). </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"> Alternatively, assume the company releases earnings that are exactly the same as the prior earnings, but the stock price falls by 50%. The result would be the same in terms of the P/E. This demonstrates how the stock price could go down when earnings stay the same. </p></div>

## What Is Multiple Compression? Multiple compression is an effect that occurs when a company's earnings increase, but its stock price does not move in response. Following this trend, if the company posts flat earnings, the stock price could fall or in some cases, the stock price drops faster than the earnings. The result is that its [price multiples](https://www.investopedia.com/terms/p/pricemultiples.asp), such as its [P/E ratio](https://www.investopedia.com/terms/p/price-earningsratio.asp), are reduced since the denominator increases while the numerator remains the same, even though nothing may be fundamentally wrong with the company. The compression of a company's multiple can be interpreted as a company's valuation being called into question or a change in investor expectations. ### Key Takeaways * Multiple compression occurs when a company's financial multiple decreases, often representing a change in investor expectations. * Multiples like the P/E ratio are used to analyze a company's relative valuation in the market. * Multiple compression can occur if share prices fall while earnings stay flat or if share prices remain the same while earnings increase. ## Understanding Multiple Compression A price multiple is any ratio that uses the share price of a company in conjunction with some specific [per-share](https://www.investopedia.com/terms/p/persharebasis.asp) financial metric for a snapshot on relative valuation. The share price is then divided by a chosen per-share metric to form a ratio. Price multiples enable investors to evaluate the market value of a company's stock in relation to a fundamental [metric](https://www.investopedia.com/terms/m/metrics.asp), such as earnings, cash flow, or [book value](https://www.investopedia.com/terms/b/bookvalue.asp) ([P/B](https://www.investopedia.com/terms/p/price-to-bookratio.asp)). Compression occurs when these multiples shrink. Multiples are based on several factors, but most importantly on the future expectations of a company. If a company trades at say, a P/E multiple of 50, this means investors are paying $50 in equity for each $1 of earnings. Generally, an investor would only pay such a high multiple on the expectation that the company will grow significantly faster than its competitors or the stock market in general. When the company's growth rates start to slow, investors might start to doubt its growth prospects, and thus not pay as expensive a [premium](https://www.investopedia.com/terms/p/premium.asp) as they once did. Expectations about future prospects can be dashed if a company misses earnings or gives negative [forward guidance](https://www.investopedia.com/terms/f/forward-guidance.asp). ## Example of Multiple Compression In the case above, our hypothetical company begins with a P/E of 50. The company might experience multiple compression if it releases earnings that are double the previous [earnings per share](https://www.investopedia.com/terms/e/eps.asp) (EPS). Meanwhile, the stock price remains the same. The P/E will thus be reduced to 25, even though earnings have improved. With the same dollar of earnings, this would mean that the stock's relative value has been cut in half (25/50 = 1/2). Alternatively, assume the company releases earnings that are exactly the same as the prior earnings, but the stock price falls by 50%. The result would be the same in terms of the P/E. This demonstrates how the stock price could go down when earnings stay the same.

What Is Multiple Compression? Multiple compression is an effect that occurs when a company's earnings increase, but its stock price does not move in response. Following this trend, if the company posts flat earnings, the stock price could fall or in some cases, the stock price drops faster than the earnings. The result is that its price multiples, such as its P/E ratio, are reduced since the denominator increases while the numerator remains the same, even though nothing may be fundamentally wrong with the company. The compression of a company's multiple can be interpreted as a company's valuation being called into question or a change in investor expectations. Key Takeaways Multiple compression occurs when a company's financial multiple decreases, often representing a change in investor expectations.Multiples like the P/E ratio are used to analyze a company's relative valuation in the market.Multiple compression can occur if share prices fall while earnings stay flat or if share prices remain the same while earnings increase. Understanding Multiple Compression A price multiple is any ratio that uses the share price of a company in conjunction with some specific per-share financial metric for a snapshot on relative valuation. The share price is then divided by a chosen per-share metric to form a ratio. Price multiples enable investors to evaluate the market value of a company's stock in relation to a fundamental metric, such as earnings, cash flow, or book value (P/B). Compression occurs when these multiples shrink. Multiples are based on several factors, but most importantly on the future expectations of a company. If a company trades at say, a P/E multiple of 50, this means investors are paying $50 in equity for each $1 of earnings. Generally, an investor would only pay such a high multiple on the expectation that the company will grow significantly faster than its competitors or the stock market in general. When the company's growth rates start to slow, investors might start to doubt its growth prospects, and thus not pay as expensive a premium as they once did. Expectations about future prospects can be dashed if a company misses earnings or gives negative forward guidance. Example of Multiple Compression In the case above, our hypothetical company begins with a P/E of 50. The company might experience multiple compression if it releases earnings that are double the previous earnings per share (EPS). Meanwhile, the stock price remains the same. The P/E will thus be reduced to 25, even though earnings have improved. With the same dollar of earnings, this would mean that the stock's relative value has been cut in half (25/50 = 1/2). Alternatively, assume the company releases earnings that are exactly the same as the prior earnings, but the stock price falls by 50%. The result would be the same in terms of the P/E. This demonstrates how the stock price could go down when earnings stay the same.

https://www.investopedia.com/terms/e/eidv-electronic-identity-verification.asp

eIDV (Electronic Identity Verification)

<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-eidv-electronic-identity-verification"></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 eIDV (Electronic Identity Verification) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> eIDV (Electronic Identity Verification) makes use of publicly available data as well as private databases to quickly verify the identity of an individual. eIDV uses personal information such as name, date of birth, Social Security number, and address among other data fields. The result of an eIDV search on an individual’s identity could result in a match, non-match, or partial match.  </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>eIDV stands for Electronic Identity Verification, which refers broadly to computerized systems for individual ID verification.</li><li>eIDV makes use of both public and private data sources in order to match individuals based on several criteria including name, sex, address, date of birth, and so on.</li><li>eIDV is increasingly used in the financial industry by law enforcement to detect and prevent financial crimes and to combat terrorism. It is also used by the private sector by insurers, realtors, and hiring agents, among others.</li></ul></div></div></div> <span class="heading-toc" id="toc-breaking-down-eidv"></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"> Breaking Down eIDV </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> eIDV is used by banks, brokerage firms, financial advisers, and accountants to minimize fraud and comply with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/k/knowyourclient.asp" rel="noopener noreferrer">know-your-customer laws</a>, privacy laws, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aml.asp" rel="noopener noreferrer">anti-money laundering</a> laws and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/combating-financing-terrorism-cft.asp" rel="noopener noreferrer">Combating the Financing of Terrorism (CFT)</a> laws. eIDV is also used by insurance companies, governments, retailers, casinos, lawyers, employers, job recruiters, and real estate agents as part of their <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/duediligence.asp" rel="noopener noreferrer">due diligence</a> processes. </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-eidv-in-use"></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"> eIDV in Use </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Electronic identity verification matches the data provided by an individual, such as name, date of birth, address, and SSN, against various databases to determine if there is a match. </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>Personal documents that can serve as sources of data for the verification service include driver’s licenses, passports, birth certificates, and citizenship certificates.</li><li>Various types of databases, both public and proprietary, may be used in eIDV, including credit bureau data, police data, and vehicle history data.</li><li>Data that can be used as sources of verification include change of address data, postal data, property ownership data, direct marketing data, credit bureau data, electoral roll data, utility data (e.g., phone, natural gas, electricity and/or water service), telecommunications records, and government data (such as driver’s license, passport, national ID and national insurance numbers).</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-eidv-advantages"></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"> eIDV Advantages </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> While there is a cost associated with verifying an individual’s identity, it can be less expensive in the long run to avoid doing businesses with individuals who are pretending to be someone they aren’t. For example, eIDV can detect potential fraud if a Social Security number provided by a prospective customer comes back as belonging to a deceased individual. eIDV can also be used to identify prospective customers who are on international watchlists as individuals who are politically exposed, on government sanctions lists, or suspected or convicted of financial crimes. </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"> eIDV can be used not only to verify new customers but also to stay up to date on existing customers. Businesses may need to follow different customer verification procedures depending on their line of business and their country of operation. Businesses pay money for eIDV services based on the number and types of databases searched to verify an individual’s identity. </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-other-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"> Other Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> For an eIDV service to be effective, it must rely on the most up-to-date and high-quality database possible. Some databases may be more accurate than others depending on whether they are updated daily, weekly, monthly or quarterly. Further, the success of a search will depend in part on how comprehensive a database is. Even in a best-case scenario, a database may only cover about 80% of a country’s population. </p></div>

## What is eIDV (Electronic Identity Verification) eIDV (Electronic Identity Verification) makes use of publicly available data as well as private databases to quickly verify the identity of an individual. eIDV uses personal information such as name, date of birth, Social Security number, and address among other data fields. The result of an eIDV search on an individual’s identity could result in a match, non-match, or partial match.  ### Key Takeaways * eIDV stands for Electronic Identity Verification, which refers broadly to computerized systems for individual ID verification. * eIDV makes use of both public and private data sources in order to match individuals based on several criteria including name, sex, address, date of birth, and so on. * eIDV is increasingly used in the financial industry by law enforcement to detect and prevent financial crimes and to combat terrorism. It is also used by the private sector by insurers, realtors, and hiring agents, among others. ## Breaking Down eIDV eIDV is used by banks, brokerage firms, financial advisers, and accountants to minimize fraud and comply with [know-your-customer laws](https://www.investopedia.com/terms/k/knowyourclient.asp), privacy laws, [anti-money laundering](https://www.investopedia.com/terms/a/aml.asp) laws and [Combating the Financing of Terrorism (CFT)](https://www.investopedia.com/terms/c/combating-financing-terrorism-cft.asp) laws. eIDV is also used by insurance companies, governments, retailers, casinos, lawyers, employers, job recruiters, and real estate agents as part of their [due diligence](https://www.investopedia.com/terms/d/duediligence.asp) processes. ## eIDV in Use Electronic identity verification matches the data provided by an individual, such as name, date of birth, address, and SSN, against various databases to determine if there is a match. * Personal documents that can serve as sources of data for the verification service include driver’s licenses, passports, birth certificates, and citizenship certificates. * Various types of databases, both public and proprietary, may be used in eIDV, including credit bureau data, police data, and vehicle history data. * Data that can be used as sources of verification include change of address data, postal data, property ownership data, direct marketing data, credit bureau data, electoral roll data, utility data (e.g., phone, natural gas, electricity and/or water service), telecommunications records, and government data (such as driver’s license, passport, national ID and national insurance numbers). ## eIDV Advantages While there is a cost associated with verifying an individual’s identity, it can be less expensive in the long run to avoid doing businesses with individuals who are pretending to be someone they aren’t. For example, eIDV can detect potential fraud if a Social Security number provided by a prospective customer comes back as belonging to a deceased individual. eIDV can also be used to identify prospective customers who are on international watchlists as individuals who are politically exposed, on government sanctions lists, or suspected or convicted of financial crimes. eIDV can be used not only to verify new customers but also to stay up to date on existing customers. Businesses may need to follow different customer verification procedures depending on their line of business and their country of operation. Businesses pay money for eIDV services based on the number and types of databases searched to verify an individual’s identity. ## Other Considerations For an eIDV service to be effective, it must rely on the most up-to-date and high-quality database possible. Some databases may be more accurate than others depending on whether they are updated daily, weekly, monthly or quarterly. Further, the success of a search will depend in part on how comprehensive a database is. Even in a best-case scenario, a database may only cover about 80% of a country’s population.

What is eIDV (Electronic Identity Verification) eIDV (Electronic Identity Verification) makes use of publicly available data as well as private databases to quickly verify the identity of an individual. eIDV uses personal information such as name, date of birth, Social Security number, and address among other data fields. The result of an eIDV search on an individual’s identity could result in a match, non-match, or partial match.  Key Takeaways eIDV stands for Electronic Identity Verification, which refers broadly to computerized systems for individual ID verification.eIDV makes use of both public and private data sources in order to match individuals based on several criteria including name, sex, address, date of birth, and so on.eIDV is increasingly used in the financial industry by law enforcement to detect and prevent financial crimes and to combat terrorism. It is also used by the private sector by insurers, realtors, and hiring agents, among others. Breaking Down eIDV eIDV is used by banks, brokerage firms, financial advisers, and accountants to minimize fraud and comply with know-your-customer laws, privacy laws, anti-money laundering laws and Combating the Financing of Terrorism (CFT) laws. eIDV is also used by insurance companies, governments, retailers, casinos, lawyers, employers, job recruiters, and real estate agents as part of their due diligence processes. eIDV in Use Electronic identity verification matches the data provided by an individual, such as name, date of birth, address, and SSN, against various databases to determine if there is a match. Personal documents that can serve as sources of data for the verification service include driver’s licenses, passports, birth certificates, and citizenship certificates.Various types of databases, both public and proprietary, may be used in eIDV, including credit bureau data, police data, and vehicle history data.Data that can be used as sources of verification include change of address data, postal data, property ownership data, direct marketing data, credit bureau data, electoral roll data, utility data (e.g., phone, natural gas, electricity and/or water service), telecommunications records, and government data (such as driver’s license, passport, national ID and national insurance numbers). eIDV Advantages While there is a cost associated with verifying an individual’s identity, it can be less expensive in the long run to avoid doing businesses with individuals who are pretending to be someone they aren’t. For example, eIDV can detect potential fraud if a Social Security number provided by a prospective customer comes back as belonging to a deceased individual. eIDV can also be used to identify prospective customers who are on international watchlists as individuals who are politically exposed, on government sanctions lists, or suspected or convicted of financial crimes. eIDV can be used not only to verify new customers but also to stay up to date on existing customers. Businesses may need to follow different customer verification procedures depending on their line of business and their country of operation. Businesses pay money for eIDV services based on the number and types of databases searched to verify an individual’s identity. Other Considerations For an eIDV service to be effective, it must rely on the most up-to-date and high-quality database possible. Some databases may be more accurate than others depending on whether they are updated daily, weekly, monthly or quarterly. Further, the success of a search will depend in part on how comprehensive a database is. Even in a best-case scenario, a database may only cover about 80% of a country’s population.

https://www.investopedia.com/top-strategists-on-where-to-invest-now-4843888

Where to Invest Now: Advice from Top Strategists

<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 vicious selloff for global equities over the past few days as the rampant re-spreading of the virus and potential lockdowns have brought back fears of March to investors' animal spirits. The coming election is also adding a heavy dose of uncertainty into the markets, just as earnings from America's biggest companies roll in. While those earnings reports are better than expected, investors are not rewarding performance like they used to. </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"> As always, we turn to two top strategists, Katie Koch of Goldman Sachs Asset Management, and Ryan Detrick of LPL Financial for their insights. </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"> <em>While we are sharing strategists' recommendations, every investor needs to make their own decisions based on their risk tolerance and personal situation. The comments herein are for your perspective, but should not be taken as investing advice.</em> </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>Katie Koch, Co-Head of Fundamental Equity, Goldman Sachs Asset Management</strong><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_8-0"></div> <span class="heading-toc" id="toc-earnings-expectations-and-election-uncertainty"></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"> Earnings Expectations and Election Uncertainty </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> "The biggest news in equity markets this past week were earnings, as roughly 27% of the S&amp;P 500 has reported with the average EPS down 14% YoY. That outcome is better than initially anticipated and we’ve seen 83% of companies beat earnings expectations thus far. As we zoom in to the results, we see three major trends. First, we’re seeing fatigue around companies that were previously hailed as COVID winners – streaming services, for example – which is contributing to lackluster returns. Secondly, we’re seeing cyclical recovery out of sectors like auto and industrials. Lastly, the market is still rewarding companies that can drive disruptive growth. These factors will be important to keep in mind as we move out of earnings season and into the post-election environment. </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-the-election-energy--utilities-on-watch"></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"> The Election: Energy &amp; Utilities on Watch </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> On the election front, it’s important to note that the outcome is tough to predict when looking at market indicators – a lesson we learned in 2016. For example, typically, markets are up when the incumbent is expected to win. As it stands, that would indicate a Trump victory. However, polls are telling us that Biden is ahead. Because of that uncertainty, it’s critical to keep a balanced portfolio going into November 3. On top of that, we think two sectors could potentially become mis-priced depending on the outcome: energy and utilities. If we were to get a Trump victory, energy would likely see a rally as it is currently down nearly 50% on the year and constitutes just 2% of the Russell 1000. Conversely, if Biden were to win, utilities might be an interesting sector to watch as it is currently underperforming and would likely rally on the back of increased infrastructure spending and taxes. Taking a step back, we also acknowledge the possibility of a contested election and the market volatility that could follow." </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"> <strong>[The securities listed below are not recommendations from Katie Koch, GSAM or Investopedia. They are for reference and informational purposes only]</strong> </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-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_17-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:65.4%;"> <img alt="YCharts" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/LXpnMgU_54rjjaEnYwmdJYqfSag=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/LXpnMgU_54rjjaEnYwmdJYqfSag=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png" data-srcset="https://www.investopedia.com/thmb/5F55zHKGPM4W3Apm-Jg52r8xmo4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png 750w" data-tracking-container="true" height="1309" id="mntl-sc-block-image_1-0" width="2000"/> <noscript> <img alt="YCharts" class="img--noscript universal-image__image" height="1309" sizes="750px" src="https://www.investopedia.com/thmb/LXpnMgU_54rjjaEnYwmdJYqfSag=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png" srcset="https://www.investopedia.com/thmb/5F55zHKGPM4W3Apm-Jg52r8xmo4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png 750w" width="2000"/> </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">YCharts.</span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> <strong>Ryan Detrick, LPL Financial Sr. Market Strategist</strong><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_19-0"></div> <span class="heading-toc" id="toc-are-the-polls-wrong-again"></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"> Are The Polls Wrong Again? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> "The race for the White House is down to the homestretch, and although presidential candidate Joe Biden is comfortably ahead in the election polls, various market and economic-based indicators suggest the election may be much closer than many are expecting. </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-support-for-a-biden-victory"></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"> Support for a Biden Victory </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Various polls show former Vice President Joe Biden comfortably in the lead in the 2020 presidential race, although in some battleground states the race appears to be quickly tightening. Influential states like Ohio and Pennsylvania may even be a coin toss at this point. </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"> Not surprisingly, approval ratings can play a large part in forecasting the overall percentage of the votes in an election. Only two presidents have lost reelections since the Great Depression: George H. W. Bush and Jimmy Carter. Not surprisingly, both had low approval ratings leading up to the elections. If the people don’t approve of the job you’re doing, you may not serve a second term. </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"> Recent Gallup polls suggest that President Donald Trump’s approval rating is 43%. Using a regression of previous elections, this equates to less than half of the two-party vote. Of course, Trump received less than half of the popular vote in 2016, but he still won the election because he had more than 270 votes in the Electoral College. Still, the polls currently favor Biden, and this appears to be his race to lose. </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:62.6%;"> <img alt="Approval ratings matter for reelected presidents" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/abkogGY6RUlJR0KTVhMKjTkFbxY=/851x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/aY_cUlE9zu-gjImnsT7VaS5kLFQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png" data-srcset="https://www.investopedia.com/thmb/YqUk57U_AFLi9bMP65lUSoJb4qo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png 750w" data-tracking-container="true" height="533" id="mntl-sc-block-image_2-0" width="851"/> <noscript> <img alt="Approval ratings matter for reelected presidents" class="img--noscript universal-image__image" height="533" sizes="750px" src="https://www.investopedia.com/thmb/aY_cUlE9zu-gjImnsT7VaS5kLFQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png" srcset="https://www.investopedia.com/thmb/YqUk57U_AFLi9bMP65lUSoJb4qo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png 750w" width="851"/> </noscript> </div> </div> </figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> How well specific “Biden stocks” have done could be another clue that a Biden victory may be around the corner. Our friends at Strategas Research Partners created a basket of stocks likely to benefit from either a Trump or Biden presidency, and the Biden portfolio has done extremely well lately. Areas like green energy and solar have experienced huge moves before this election, while defense companies and financials—considered friendly to Trump—have not performed as well.  </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"> Also, recessions have been reelection killers. Since the Great Depression, there have been four recessions within two years of an election, and the incumbent party lost every single time. The 1924 election with President Calvin Coolidge was the last time the incumbent party candidate won when there had been a recession ahead of the election. </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-clues-it-may-be-closer-than-the-polls-suggest"></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"> Clues it May be Closer Than the Polls Suggest </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> The majority of Washington insiders we track think Biden has at least a 60% chance of winning this election, with many thinking the odds are much higher. However, there’s a good chance things could be much closer, and here’s why. </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><strong>Gross domestic product (GDP) is set for a huge surge in the third quarter</strong>, with the Atlanta Federal Reserve GDPNow estimating a jump of 35.3% when the number is released October 29. That would be the largest quarter-over-quarter increase ever and would bring the average for the previous two quarters to a respectable 2.1%. That’s not bad considering GDP was down more than 31% in the second quarter of 2020. Using regression from previous elections, a 2.1% GDP print comes out to 51.9% of the two-party vote, exactly what President Barack Obama received in 2012. Note that the only president who had negative-GDP growth ahead of the election was Carter, who lost his reelection bid in 1980.</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"> As we mentioned above, if the economy is in a recession before the election, reelection odds decline, while here we are demonstrating that a strong economy right before an election is good. This sums up 2020—things are just really confusing! </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></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_42-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:61.1%;"> <img alt="GDP Matters to voters" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/aFe4tPVqsKKBujd7dv7iIDjXV6g=/803x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/cFeIzMDnocTQdjDmzkHKnOAfNrU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png" data-srcset="https://www.investopedia.com/thmb/qJf3N55gmsge3cgdgyU9s6Sj788=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png 750w" data-tracking-container="true" height="491" id="mntl-sc-block-image_3-0" width="803"/> <noscript> <img alt="GDP Matters to voters" class="img--noscript universal-image__image" height="491" sizes="750px" src="https://www.investopedia.com/thmb/cFeIzMDnocTQdjDmzkHKnOAfNrU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png" srcset="https://www.investopedia.com/thmb/qJf3N55gmsge3cgdgyU9s6Sj788=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png 750w" width="803"/> </noscript> </div> </div> </figure> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <li><strong>Stocks are strong. </strong>Historically, the stock market is a great predictor of who will be in the White House. In fact, in 20 of the past 23 elections (87%), the S&amp;P 500 Index has accurately predicted who would win. If stocks have been higher the three months before the election, the incumbent party usually has won, and if they were lower, the incumbent party usually lost. Remember 2016 when nearly everyone thought former Secretary of State Hillary Clinton would win? Well, stocks didn’t buy it, as the S&amp;P 500 fell ahead of the election and signaled a change in party. Since August 3, the S&amp;P 500 is up 5.6%, which would support Trump in this election.</li><li><strong>Incomes are rising. </strong>It also<strong> </strong>turns out that if people are making more money, they tend to reelect presidents. The higher real (inflation-adjusted) per capita disposable income growth has been from January through October of an election year, then the higher the two-party vote an incumbent president has received. This statistic has increased 3.4% so far this year, and a regression analysis suggests this could amount to 57% of the two-party vote based on previous elections. Carter and George H.W. Bush both had weak income growth (less than 1%), and they both lost their reelections, while Presidents Richard Nixon, Lyndon B. Johnson, and Ronald Reagan all saw nice wage growth, and all won comfortably.</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"> The issue with this analysis for the current election is that the CARES Act included stimulus checks to many Americans, as well as enhanced unemployment insurance, which have inflated incomes despite the high unemployment rate. We would put this signal in the favor of Trump, but with an asterisk next to it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_46-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> <li><strong>The US dollar is weak.</strong> A weaker US dollar before the election historically has signaled an incumbent-party victory. Similar to when stocks are higher, a lower dollar tends to occur when things are calm, and in many cases improving. Thus far, we’ve seen a weak dollar ahead of this election, similar to 1988, 2004, and 2012, and in all those cases, the incumbent party won the election.</li> </ul> <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"> What makes 2020 so unique is some believe that Biden’s policies, such as more regulation, higher taxes, and reduced tariffs, may weaken the US dollar, putting the accuracy of this signal in question. </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-lpl-researchs-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"> LPL Research's Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> While Biden may be ahead in the polls, there are several clues that this race could be much closer than many are expecting. This could influence the makeup of Congress as well, where a close race may suggest a greater chance of divided government. Ultimately, we the people determine which signals are right this time around, so get out there and vote!" </p></div>

A vicious selloff for global equities over the past few days as the rampant re-spreading of the virus and potential lockdowns have brought back fears of March to investors' animal spirits. The coming election is also adding a heavy dose of uncertainty into the markets, just as earnings from America's biggest companies roll in. While those earnings reports are better than expected, investors are not rewarding performance like they used to. As always, we turn to two top strategists, Katie Koch of Goldman Sachs Asset Management, and Ryan Detrick of LPL Financial for their insights. *While we are sharing strategists' recommendations, every investor needs to make their own decisions based on their risk tolerance and personal situation. The comments herein are for your perspective, but should not be taken as investing advice.* **Katie Koch, Co-Head of Fundamental Equity, Goldman Sachs Asset Management** ## Earnings Expectations and Election Uncertainty "The biggest news in equity markets this past week were earnings, as roughly 27% of the S&P 500 has reported with the average EPS down 14% YoY. That outcome is better than initially anticipated and we’ve seen 83% of companies beat earnings expectations thus far. As we zoom in to the results, we see three major trends. First, we’re seeing fatigue around companies that were previously hailed as COVID winners – streaming services, for example – which is contributing to lackluster returns. Secondly, we’re seeing cyclical recovery out of sectors like auto and industrials. Lastly, the market is still rewarding companies that can drive disruptive growth. These factors will be important to keep in mind as we move out of earnings season and into the post-election environment. ## The Election: Energy & Utilities on Watch On the election front, it’s important to note that the outcome is tough to predict when looking at market indicators – a lesson we learned in 2016. For example, typically, markets are up when the incumbent is expected to win. As it stands, that would indicate a Trump victory. However, polls are telling us that Biden is ahead. Because of that uncertainty, it’s critical to keep a balanced portfolio going into November 3. On top of that, we think two sectors could potentially become mis-priced depending on the outcome: energy and utilities. If we were to get a Trump victory, energy would likely see a rally as it is currently down nearly 50% on the year and constitutes just 2% of the Russell 1000. Conversely, if Biden were to win, utilities might be an interesting sector to watch as it is currently underperforming and would likely rally on the back of increased infrastructure spending and taxes. Taking a step back, we also acknowledge the possibility of a contested election and the market volatility that could follow." **[The securities listed below are not recommendations from Katie Koch, GSAM or Investopedia. They are for reference and informational purposes only]** ![YCharts]() :max_bytes(150000):strip_icc()/XLE_MSWNTR_XLI_SPY_chart-0bed8222b6aa4144a13d854c07001205.png) YCharts. **Ryan Detrick, LPL Financial Sr. Market Strategist** ## Are The Polls Wrong Again? "The race for the White House is down to the homestretch, and although presidential candidate Joe Biden is comfortably ahead in the election polls, various market and economic-based indicators suggest the election may be much closer than many are expecting. ## Support for a Biden Victory Various polls show former Vice President Joe Biden comfortably in the lead in the 2020 presidential race, although in some battleground states the race appears to be quickly tightening. Influential states like Ohio and Pennsylvania may even be a coin toss at this point. Not surprisingly, approval ratings can play a large part in forecasting the overall percentage of the votes in an election. Only two presidents have lost reelections since the Great Depression: George H. W. Bush and Jimmy Carter. Not surprisingly, both had low approval ratings leading up to the elections. If the people don’t approve of the job you’re doing, you may not serve a second term. Recent Gallup polls suggest that President Donald Trump’s approval rating is 43%. Using a regression of previous elections, this equates to less than half of the two-party vote. Of course, Trump received less than half of the popular vote in 2016, but he still won the election because he had more than 270 votes in the Electoral College. Still, the polls currently favor Biden, and this appears to be his race to lose. ![Approval ratings matter for reelected presidents]() :max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.14PM-9a02495a50cb41e2b25d72e8b696f78a.png) How well specific “Biden stocks” have done could be another clue that a Biden victory may be around the corner. Our friends at Strategas Research Partners created a basket of stocks likely to benefit from either a Trump or Biden presidency, and the Biden portfolio has done extremely well lately. Areas like green energy and solar have experienced huge moves before this election, while defense companies and financials—considered friendly to Trump—have not performed as well.  Also, recessions have been reelection killers. Since the Great Depression, there have been four recessions within two years of an election, and the incumbent party lost every single time. The 1924 election with President Calvin Coolidge was the last time the incumbent party candidate won when there had been a recession ahead of the election. ## Clues it May be Closer Than the Polls Suggest The majority of Washington insiders we track think Biden has at least a 60% chance of winning this election, with many thinking the odds are much higher. However, there’s a good chance things could be much closer, and here’s why. * **Gross domestic product (GDP) is set for a huge surge in the third quarter**, with the Atlanta Federal Reserve GDPNow estimating a jump of 35.3% when the number is released October 29. That would be the largest quarter-over-quarter increase ever and would bring the average for the previous two quarters to a respectable 2.1%. That’s not bad considering GDP was down more than 31% in the second quarter of 2020. Using regression from previous elections, a 2.1% GDP print comes out to 51.9% of the two-party vote, exactly what President Barack Obama received in 2012. Note that the only president who had negative-GDP growth ahead of the election was Carter, who lost his reelection bid in 1980. As we mentioned above, if the economy is in a recession before the election, reelection odds decline, while here we are demonstrating that a strong economy right before an election is good. This sums up 2020—things are just really confusing! ![GDP Matters to voters]() :max_bytes(150000):strip_icc()/ScreenShot2020-10-26at3.50.24PM-40629d1239824b00b622f17b80ee70ba.png) * **Stocks are strong.**Historically, the stock market is a great predictor of who will be in the White House. In fact, in 20 of the past 23 elections (87%), the S&P 500 Index has accurately predicted who would win. If stocks have been higher the three months before the election, the incumbent party usually has won, and if they were lower, the incumbent party usually lost. Remember 2016 when nearly everyone thought former Secretary of State Hillary Clinton would win? Well, stocks didn’t buy it, as the S&P 500 fell ahead of the election and signaled a change in party. Since August 3, the S&P 500 is up 5.6%, which would support Trump in this election. * **Incomes are rising.**It alsoturns out that if people are making more money, they tend to reelect presidents. The higher real (inflation-adjusted) per capita disposable income growth has been from January through October of an election year, then the higher the two-party vote an incumbent president has received. This statistic has increased 3.4% so far this year, and a regression analysis suggests this could amount to 57% of the two-party vote based on previous elections. Carter and George H.W. Bush both had weak income growth (less than 1%), and they both lost their reelections, while Presidents Richard Nixon, Lyndon B. Johnson, and Ronald Reagan all saw nice wage growth, and all won comfortably. The issue with this analysis for the current election is that the CARES Act included stimulus checks to many Americans, as well as enhanced unemployment insurance, which have inflated incomes despite the high unemployment rate. We would put this signal in the favor of Trump, but with an asterisk next to it. * **The US dollar is weak.** A weaker US dollar before the election historically has signaled an incumbent-party victory. Similar to when stocks are higher, a lower dollar tends to occur when things are calm, and in many cases improving. Thus far, we’ve seen a weak dollar ahead of this election, similar to 1988, 2004, and 2012, and in all those cases, the incumbent party won the election. What makes 2020 so unique is some believe that Biden’s policies, such as more regulation, higher taxes, and reduced tariffs, may weaken the US dollar, putting the accuracy of this signal in question. ## LPL Research's Bottom Line While Biden may be ahead in the polls, there are several clues that this race could be much closer than many are expecting. This could influence the makeup of Congress as well, where a close race may suggest a greater chance of divided government. Ultimately, we the people determine which signals are right this time around, so get out there and vote!"

A vicious selloff for global equities over the past few days as the rampant re-spreading of the virus and potential lockdowns have brought back fears of March to investors' animal spirits. The coming election is also adding a heavy dose of uncertainty into the markets, just as earnings from America's biggest companies roll in. While those earnings reports are better than expected, investors are not rewarding performance like they used to. As always, we turn to two top strategists, Katie Koch of Goldman Sachs Asset Management, and Ryan Detrick of LPL Financial for their insights. While we are sharing strategists' recommendations, every investor needs to make their own decisions based on their risk tolerance and personal situation. The comments herein are for your perspective, but should not be taken as investing advice. Katie Koch, Co-Head of Fundamental Equity, Goldman Sachs Asset Management Earnings Expectations and Election Uncertainty "The biggest news in equity markets this past week were earnings, as roughly 27% of the S&P 500 has reported with the average EPS down 14% YoY. That outcome is better than initially anticipated and we’ve seen 83% of companies beat earnings expectations thus far. As we zoom in to the results, we see three major trends. First, we’re seeing fatigue around companies that were previously hailed as COVID winners – streaming services, for example – which is contributing to lackluster returns. Secondly, we’re seeing cyclical recovery out of sectors like auto and industrials. Lastly, the market is still rewarding companies that can drive disruptive growth. These factors will be important to keep in mind as we move out of earnings season and into the post-election environment. The Election: Energy & Utilities on Watch On the election front, it’s important to note that the outcome is tough to predict when looking at market indicators – a lesson we learned in 2016. For example, typically, markets are up when the incumbent is expected to win. As it stands, that would indicate a Trump victory. However, polls are telling us that Biden is ahead. Because of that uncertainty, it’s critical to keep a balanced portfolio going into November 3. On top of that, we think two sectors could potentially become mis-priced depending on the outcome: energy and utilities. If we were to get a Trump victory, energy would likely see a rally as it is currently down nearly 50% on the year and constitutes just 2% of the Russell 1000. Conversely, if Biden were to win, utilities might be an interesting sector to watch as it is currently underperforming and would likely rally on the back of increased infrastructure spending and taxes. Taking a step back, we also acknowledge the possibility of a contested election and the market volatility that could follow." [The securities listed below are not recommendations from Katie Koch, GSAM or Investopedia. They are for reference and informational purposes only] YCharts. Ryan Detrick, LPL Financial Sr. Market Strategist Are The Polls Wrong Again? "The race for the White House is down to the homestretch, and although presidential candidate Joe Biden is comfortably ahead in the election polls, various market and economic-based indicators suggest the election may be much closer than many are expecting. Support for a Biden Victory Various polls show former Vice President Joe Biden comfortably in the lead in the 2020 presidential race, although in some battleground states the race appears to be quickly tightening. Influential states like Ohio and Pennsylvania may even be a coin toss at this point. Not surprisingly, approval ratings can play a large part in forecasting the overall percentage of the votes in an election. Only two presidents have lost reelections since the Great Depression: George H. W. Bush and Jimmy Carter. Not surprisingly, both had low approval ratings leading up to the elections. If the people don’t approve of the job you’re doing, you may not serve a second term. Recent Gallup polls suggest that President Donald Trump’s approval rating is 43%. Using a regression of previous elections, this equates to less than half of the two-party vote. Of course, Trump received less than half of the popular vote in 2016, but he still won the election because he had more than 270 votes in the Electoral College. Still, the polls currently favor Biden, and this appears to be his race to lose. How well specific “Biden stocks” have done could be another clue that a Biden victory may be around the corner. Our friends at Strategas Research Partners created a basket of stocks likely to benefit from either a Trump or Biden presidency, and the Biden portfolio has done extremely well lately. Areas like green energy and solar have experienced huge moves before this election, while defense companies and financials—considered friendly to Trump—have not performed as well.  Also, recessions have been reelection killers. Since the Great Depression, there have been four recessions within two years of an election, and the incumbent party lost every single time. The 1924 election with President Calvin Coolidge was the last time the incumbent party candidate won when there had been a recession ahead of the election. Clues it May be Closer Than the Polls Suggest The majority of Washington insiders we track think Biden has at least a 60% chance of winning this election, with many thinking the odds are much higher. However, there’s a good chance things could be much closer, and here’s why. Gross domestic product (GDP) is set for a huge surge in the third quarter, with the Atlanta Federal Reserve GDPNow estimating a jump of 35.3% when the number is released October 29. That would be the largest quarter-over-quarter increase ever and would bring the average for the previous two quarters to a respectable 2.1%. That’s not bad considering GDP was down more than 31% in the second quarter of 2020. Using regression from previous elections, a 2.1% GDP print comes out to 51.9% of the two-party vote, exactly what President Barack Obama received in 2012. Note that the only president who had negative-GDP growth ahead of the election was Carter, who lost his reelection bid in 1980. As we mentioned above, if the economy is in a recession before the election, reelection odds decline, while here we are demonstrating that a strong economy right before an election is good. This sums up 2020—things are just really confusing! Stocks are strong. Historically, the stock market is a great predictor of who will be in the White House. In fact, in 20 of the past 23 elections (87%), the S&P 500 Index has accurately predicted who would win. If stocks have been higher the three months before the election, the incumbent party usually has won, and if they were lower, the incumbent party usually lost. Remember 2016 when nearly everyone thought former Secretary of State Hillary Clinton would win? Well, stocks didn’t buy it, as the S&P 500 fell ahead of the election and signaled a change in party. Since August 3, the S&P 500 is up 5.6%, which would support Trump in this election.Incomes are rising. It also turns out that if people are making more money, they tend to reelect presidents. The higher real (inflation-adjusted) per capita disposable income growth has been from January through October of an election year, then the higher the two-party vote an incumbent president has received. This statistic has increased 3.4% so far this year, and a regression analysis suggests this could amount to 57% of the two-party vote based on previous elections. Carter and George H.W. Bush both had weak income growth (less than 1%), and they both lost their reelections, while Presidents Richard Nixon, Lyndon B. Johnson, and Ronald Reagan all saw nice wage growth, and all won comfortably. The issue with this analysis for the current election is that the CARES Act included stimulus checks to many Americans, as well as enhanced unemployment insurance, which have inflated incomes despite the high unemployment rate. We would put this signal in the favor of Trump, but with an asterisk next to it. The US dollar is weak. A weaker US dollar before the election historically has signaled an incumbent-party victory. Similar to when stocks are higher, a lower dollar tends to occur when things are calm, and in many cases improving. Thus far, we’ve seen a weak dollar ahead of this election, similar to 1988, 2004, and 2012, and in all those cases, the incumbent party won the election. What makes 2020 so unique is some believe that Biden’s policies, such as more regulation, higher taxes, and reduced tariffs, may weaken the US dollar, putting the accuracy of this signal in question. LPL Research's Bottom Line While Biden may be ahead in the polls, there are several clues that this race could be much closer than many are expecting. This could influence the makeup of Congress as well, where a close race may suggest a greater chance of divided government. Ultimately, we the people determine which signals are right this time around, so get out there and vote!"

https://www.investopedia.com/articles/etfs-mutual-funds/071516/top-3-etfs-tracking-msci-world-index-urth-vt.asp

3 ETFs to Invest Globally

<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"> Globally focused <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 (ETFs)</a> provide a straightforward way to geographically diversify a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a>. The global economy contracted in 2020 due to the impact of the COVID-19 pandemic.<span class="ql-inline-citation" data-cite="28"></span> While it began to recover in 2021, growing an estimated 6.1%, the war in Ukraine, inflation, and recession fears are contributing to a global growth slowdown in 2022. The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/imf.asp">International Monetary Fund (IMF)</a> forecasted in July that the global economy would grow by 3.2% in 2022, which is lower than the 3.6% growth the IMF forecast in April.<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_2-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_3-0"> Individual economies are expected to grow at widely varying rates this year.<span class="ql-inline-citation" data-cite="29"></span> Investors looking for exposure to global economic growth should consider ETFs that invest in companies from a broad range of different countries. </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 global economy is expected to slow in 2022 due to far-reaching economic disruptions stemming from the war in Ukraine, inflation, and other concerns.</li><li>Three exchange-traded funds (ETFs) for investing globally are VWO, IXUS, and SPDW.</li><li>The top holding of the first two funds is Taiwan Semiconductor Manufacturing Co. Ltd. and the top holding of the third is Nestlé S.A.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Three ETFs that provide geographic diversification for globally minded investors are outlined below. These funds are relatively inexpensive and well-suited to 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 investing</a>, but each ETF has a different approach. SPDW invests in developed nations, VWO focuses on emerging markets, and IXUS holds both kinds of stocks but leans toward developed markets with bigger companies. </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"> These funds may be useful for investors with mainly U.S.-based stock portfolios who are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/040716/5-best-dividendpaying-international-equity-etfs-sdiv-lvl.asp">looking for international exposure</a>. Developed markets tend to be less <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatile</a> than emerging ones, but they often have countries with slower-growing economies, akin to investing in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/large-cap.asp">large-cap</a> stocks vs. <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/small-cap.asp">small-cap</a> stocks. Our selection of funds is limited to ones that trade in the U.S., excluding <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leveraged-etf.asp">leveraged</a> and <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inverse-etf.asp">inverse</a> funds as well as those with less than $50 million in <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aum.asp">assets under management (AUM)</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"> Over the past year, the global ex-U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp">benchmark</a> <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/msci-acwi-exus.asp">MSCI All Country World Index</a> ex-USA has underperformed the U.S. market. The index has provided a total return of -25.4% over the past 12 months, below the S&amp;P 500’s -13.2%, as of Sept. 28, 2022.<span class="ql-inline-citation" data-cite="4"></span> The best-performing of the three ETFs listed below is the Vanguard FTSE Emerging Markets ETF (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=VWO">VWO</a>), based on performance over the past year. All numbers below are as of Sept. 28, 2022.<span class="ql-inline-citation" data-cite="30"></span> In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. </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-vanguard-ftse-emerging-markets-etf-vwo"></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/markets/quote?tvwidgetsymbol=VWO" rel="nocaes">Vanguard FTSE Emerging Markets ETF (VWO)</a> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <li>Performance Over One-Year: -23.0%</li><li>Expense Ratio: 0.08%</li><li>Annual Dividend Yield: 2.17%</li><li>Three-Month Average Daily Volume: 12,831,067</li><li>Assets Under Management: $63.8 billion</li><li>Inception Date: March 4, 2005</li><li>Issuer: Vanguard</li> </ul> <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"> VWO seeks to track the FTSE Emerging Markets All Cap China A Inclusion Index, which gauges the performance of stocks issued by companies in emerging markets. The ETF's largest sector allocations are in technology, financials, and consumer discretionary. China, India, and Taiwan are the three countries with the largest geographic exposures within the fund. VWO holds an unusually large number of stocks and is highly diversified. The majority of VWO's holdings are large-cap companies.<span class="ql-inline-citation" data-cite="20"></span> The fund follows a blended strategy, investing in both growth and value stocks. The top three holdings of VMO include Taiwan Semiconductor Manufacturing Co. Ltd. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=2330">2330:TAI</a>), a Taiwan-based semiconductor manufacturing and design company; Tencent Holdings Ltd. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=700">700:HKG</a>), a China-based internet services and technology holding company; and Alibaba Group Holding Ltd. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=9988">9988:HKG</a>), a provider of <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ecommerce.asp">e-commerce</a>, internet infrastructure, online financial, and internet content services.<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_17-0"></div> <span class="heading-toc" id="toc-ishares-core-msci-total-international-stock-etf-ixus"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_18-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=IXUS" rel="nocaes">iShares Core MSCI Total International Stock ETF (IXUS)</a> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> <li>Performance Over One-Year: -24.6%</li><li>Expense Ratio: 0.07%</li><li>Annual Dividend Yield: 2.11%</li><li>Three-Month Average Daily Volume: 2,567,615</li><li>Assets Under Management: $24.3 billion</li><li>Inception Date: Oct. 18, 2012</li><li>Issuer: BlackRock Financial Management</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"> IXUS seeks to track the MSCI ACWI ex USA IMI Index, an index of international developed and emerging market companies across the market capitalization spectrum. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Japan, the U.K. and Canada are the three countries that comprise the fund's largest geographic exposures. IXUS has thousands of holdings, making it highly diversified.<span class="ql-inline-citation" data-cite="25"></span> The fund follows a blended strategy, investing in a mix of value and <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/growthstock.asp">growth stocks</a> of mainly large-cap companies. The top holdings of IXUS include Taiwan Semiconductor Manufacturing; Nestlé S.A. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NESN">NESN:SWX</a>), a Switzerland-based food and drink conglomerate; and dividend right certificates of Roche Holding Ltd. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROG">ROG:SWX</a>), a Switzerland-based healthcare and pharmaceuticals company.<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_22-0"></div> <span class="heading-toc" id="toc-spdr-portfolio-developed-world-ex-us-etf-spdw"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_23-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPDW" rel="nocaes">SPDR Portfolio Developed World ex-US ETF (SPDW)</a> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <li>Performance Over One-Year: -25.2%</li><li>Expense Ratio: 0.04%</li><li>Annual Dividend Yield: 2.21%</li><li>Three-Month Average Daily Volume: 6,822,688</li><li>Assets Under Management: $10.2 billion</li><li>Inception Date: April 20, 2007</li><li>Issuer: State Street</li> </ul> <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"> SPDW is a large-cap fund that tracks the S&amp;P Developed Ex-U.S. BMI index, which is designed to gauge the performance of companies based in developed countries outside of the U.S. The index is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketcapitalization.asp">market capitalization</a>-weighted. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Its largest geographic exposures are Japan, the U.K., and Canada. Like the funds above, SPDW is well-diversified with several thousand holdings.<span class="ql-inline-citation" data-cite="17"></span> It follows a blended strategy of investing in a mix of growth and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/valuestock.asp">value stocks</a>. The top three holdings of SPDW include Nestlé S.A.; dividend right certificates of Roche Holding; and sponsored <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gdr.asp">global depositary receipts (GDRs)</a> of Samsung Electronics Co. Ltd. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SMSN">SMSN:LON</a>), a South Korea-based multinational electronics company.<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_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <em>The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.</em> </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>

Globally focused [exchange-traded funds (ETFs)](https://www.investopedia.com/terms/e/etf.asp) provide a straightforward way to geographically diversify a [portfolio](https://www.investopedia.com/terms/p/portfolio.asp). The global economy contracted in 2020 due to the impact of the COVID-19 pandemic. While it began to recover in 2021, growing an estimated 6.1%, the war in Ukraine, inflation, and recession fears are contributing to a global growth slowdown in 2022. The [International Monetary Fund (IMF)](https://www.investopedia.com/terms/i/imf.asp) forecasted in July that the global economy would grow by 3.2% in 2022, which is lower than the 3.6% growth the IMF forecast in April. Individual economies are expected to grow at widely varying rates this year. Investors looking for exposure to global economic growth should consider ETFs that invest in companies from a broad range of different countries. ### Key Takeaways * The global economy is expected to slow in 2022 due to far-reaching economic disruptions stemming from the war in Ukraine, inflation, and other concerns. * Three exchange-traded funds (ETFs) for investing globally are VWO, IXUS, and SPDW. * The top holding of the first two funds is Taiwan Semiconductor Manufacturing Co. Ltd. and the top holding of the third is Nestlé S.A. Three ETFs that provide geographic diversification for globally minded investors are outlined below. These funds are relatively inexpensive and well-suited to long-term, [buy-and-hold investing](https://www.investopedia.com/terms/b/buyandhold.asp), but each ETF has a different approach. SPDW invests in developed nations, VWO focuses on emerging markets, and IXUS holds both kinds of stocks but leans toward developed markets with bigger companies. These funds may be useful for investors with mainly U.S.-based stock portfolios who are [looking for international exposure](https://www.investopedia.com/articles/investing/040716/5-best-dividendpaying-international-equity-etfs-sdiv-lvl.asp). Developed markets tend to be less [volatile](https://www.investopedia.com/terms/v/volatility.asp) than emerging ones, but they often have countries with slower-growing economies, akin to investing in [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) stocks vs. [small-cap](https://www.investopedia.com/terms/s/small-cap.asp) stocks. Our selection of funds is limited to ones that trade in the U.S., excluding [leveraged](https://www.investopedia.com/terms/l/leveraged-etf.asp) and [inverse](https://www.investopedia.com/terms/i/inverse-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). Over the past year, the global ex-U.S. [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) [MSCI All Country World Index](https://www.investopedia.com/terms/m/msci-acwi-exus.asp) ex-USA has underperformed the U.S. market. The index has provided a total return of -25.4% over the past 12 months, below the S&P 500’s -13.2%, as of Sept. 28, 2022. The best-performing of the three ETFs listed below is the Vanguard FTSE Emerging Markets ETF ([VWO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VWO)), based on performance over the past year. All numbers below are as of Sept. 28, 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. ## [Vanguard FTSE Emerging Markets ETF (VWO)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VWO) * Performance Over One-Year: -23.0% * Expense Ratio: 0.08% * Annual Dividend Yield: 2.17% * Three-Month Average Daily Volume: 12,831,067 * Assets Under Management: $63.8 billion * Inception Date: March 4, 2005 * Issuer: Vanguard VWO seeks to track the FTSE Emerging Markets All Cap China A Inclusion Index, which gauges the performance of stocks issued by companies in emerging markets. The ETF's largest sector allocations are in technology, financials, and consumer discretionary. China, India, and Taiwan are the three countries with the largest geographic exposures within the fund. VWO holds an unusually large number of stocks and is highly diversified. The majority of VWO's holdings are large-cap companies. The fund follows a blended strategy, investing in both growth and value stocks. The top three holdings of VMO include Taiwan Semiconductor Manufacturing Co. Ltd. ([2330:TAI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=2330)), a Taiwan-based semiconductor manufacturing and design company; Tencent Holdings Ltd. ([700:HKG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=700)), a China-based internet services and technology holding company; and Alibaba Group Holding Ltd. ([9988:HKG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=9988)), a provider of [e-commerce](https://www.investopedia.com/terms/e/ecommerce.asp), internet infrastructure, online financial, and internet content services. ## [iShares Core MSCI Total International Stock ETF (IXUS)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=IXUS) * Performance Over One-Year: -24.6% * Expense Ratio: 0.07% * Annual Dividend Yield: 2.11% * Three-Month Average Daily Volume: 2,567,615 * Assets Under Management: $24.3 billion * Inception Date: Oct. 18, 2012 * Issuer: BlackRock Financial Management IXUS seeks to track the MSCI ACWI ex USA IMI Index, an index of international developed and emerging market companies across the market capitalization spectrum. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Japan, the U.K. and Canada are the three countries that comprise the fund's largest geographic exposures. IXUS has thousands of holdings, making it highly diversified. The fund follows a blended strategy, investing in a mix of value and [growth stocks](https://www.investopedia.com/terms/g/growthstock.asp) of mainly large-cap companies. The top holdings of IXUS include Taiwan Semiconductor Manufacturing; Nestlé S.A. ([NESN:SWX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NESN)), a Switzerland-based food and drink conglomerate; and dividend right certificates of Roche Holding Ltd. ([ROG:SWX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ROG)), a Switzerland-based healthcare and pharmaceuticals company. ## [SPDR Portfolio Developed World ex-US ETF (SPDW)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPDW) * Performance Over One-Year: -25.2% * Expense Ratio: 0.04% * Annual Dividend Yield: 2.21% * Three-Month Average Daily Volume: 6,822,688 * Assets Under Management: $10.2 billion * Inception Date: April 20, 2007 * Issuer: State Street SPDW is a large-cap fund that tracks the S&P Developed Ex-U.S. BMI index, which is designed to gauge the performance of companies based in developed countries outside of the U.S. The index is [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp)-weighted. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Its largest geographic exposures are Japan, the U.K., and Canada. Like the funds above, SPDW is well-diversified with several thousand holdings. It follows a blended strategy of investing in a mix of growth and [value stocks](https://www.investopedia.com/terms/v/valuestock.asp). The top three holdings of SPDW include Nestlé S.A.; dividend right certificates of Roche Holding; and sponsored [global depositary receipts (GDRs)](https://www.investopedia.com/terms/g/gdr.asp) of Samsung Electronics Co. Ltd. ([SMSN:LON](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SMSN)), a South Korea-based multinational electronics company. *The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Globally focused exchange-traded funds (ETFs) provide a straightforward way to geographically diversify a portfolio. The global economy contracted in 2020 due to the impact of the COVID-19 pandemic. While it began to recover in 2021, growing an estimated 6.1%, the war in Ukraine, inflation, and recession fears are contributing to a global growth slowdown in 2022. The International Monetary Fund (IMF) forecasted in July that the global economy would grow by 3.2% in 2022, which is lower than the 3.6% growth the IMF forecast in April. Individual economies are expected to grow at widely varying rates this year. Investors looking for exposure to global economic growth should consider ETFs that invest in companies from a broad range of different countries. Key Takeaways The global economy is expected to slow in 2022 due to far-reaching economic disruptions stemming from the war in Ukraine, inflation, and other concerns.Three exchange-traded funds (ETFs) for investing globally are VWO, IXUS, and SPDW.The top holding of the first two funds is Taiwan Semiconductor Manufacturing Co. Ltd. and the top holding of the third is Nestlé S.A. Three ETFs that provide geographic diversification for globally minded investors are outlined below. These funds are relatively inexpensive and well-suited to long-term, buy-and-hold investing, but each ETF has a different approach. SPDW invests in developed nations, VWO focuses on emerging markets, and IXUS holds both kinds of stocks but leans toward developed markets with bigger companies. These funds may be useful for investors with mainly U.S.-based stock portfolios who are looking for international exposure. Developed markets tend to be less volatile than emerging ones, but they often have countries with slower-growing economies, akin to investing in large-cap stocks vs. small-cap stocks. Our selection of funds is limited to ones that trade in the U.S., excluding leveraged and inverse funds as well as those with less than $50 million in assets under management (AUM). Over the past year, the global ex-U.S. benchmark MSCI All Country World Index ex-USA has underperformed the U.S. market. The index has provided a total return of -25.4% over the past 12 months, below the S&P 500’s -13.2%, as of Sept. 28, 2022. The best-performing of the three ETFs listed below is the Vanguard FTSE Emerging Markets ETF (VWO), based on performance over the past year. All numbers below are as of Sept. 28, 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. Vanguard FTSE Emerging Markets ETF (VWO) Performance Over One-Year: -23.0%Expense Ratio: 0.08%Annual Dividend Yield: 2.17%Three-Month Average Daily Volume: 12,831,067Assets Under Management: $63.8 billionInception Date: March 4, 2005Issuer: Vanguard VWO seeks to track the FTSE Emerging Markets All Cap China A Inclusion Index, which gauges the performance of stocks issued by companies in emerging markets. The ETF's largest sector allocations are in technology, financials, and consumer discretionary. China, India, and Taiwan are the three countries with the largest geographic exposures within the fund. VWO holds an unusually large number of stocks and is highly diversified. The majority of VWO's holdings are large-cap companies. The fund follows a blended strategy, investing in both growth and value stocks. The top three holdings of VMO include Taiwan Semiconductor Manufacturing Co. Ltd. (2330:TAI), a Taiwan-based semiconductor manufacturing and design company; Tencent Holdings Ltd. (700:HKG), a China-based internet services and technology holding company; and Alibaba Group Holding Ltd. (9988:HKG), a provider of e-commerce, internet infrastructure, online financial, and internet content services. iShares Core MSCI Total International Stock ETF (IXUS) Performance Over One-Year: -24.6%Expense Ratio: 0.07%Annual Dividend Yield: 2.11%Three-Month Average Daily Volume: 2,567,615Assets Under Management: $24.3 billionInception Date: Oct. 18, 2012Issuer: BlackRock Financial Management IXUS seeks to track the MSCI ACWI ex USA IMI Index, an index of international developed and emerging market companies across the market capitalization spectrum. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Japan, the U.K. and Canada are the three countries that comprise the fund's largest geographic exposures. IXUS has thousands of holdings, making it highly diversified. The fund follows a blended strategy, investing in a mix of value and growth stocks of mainly large-cap companies. The top holdings of IXUS include Taiwan Semiconductor Manufacturing; Nestlé S.A. (NESN:SWX), a Switzerland-based food and drink conglomerate; and dividend right certificates of Roche Holding Ltd. (ROG:SWX), a Switzerland-based healthcare and pharmaceuticals company. SPDR Portfolio Developed World ex-US ETF (SPDW) Performance Over One-Year: -25.2%Expense Ratio: 0.04%Annual Dividend Yield: 2.21%Three-Month Average Daily Volume: 6,822,688Assets Under Management: $10.2 billionInception Date: April 20, 2007Issuer: State Street SPDW is a large-cap fund that tracks the S&P Developed Ex-U.S. BMI index, which is designed to gauge the performance of companies based in developed countries outside of the U.S. The index is market capitalization-weighted. The ETF's largest sector allocations are in financials, industrials, and consumer discretionary. Its largest geographic exposures are Japan, the U.K., and Canada. Like the funds above, SPDW is well-diversified with several thousand holdings. It follows a blended strategy of investing in a mix of growth and value stocks. The top three holdings of SPDW include Nestlé S.A.; dividend right certificates of Roche Holding; and sponsored global depositary receipts (GDRs) of Samsung Electronics Co. Ltd. (SMSN:LON), a South Korea-based multinational electronics company. The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/venmo-vs-paypal-5114030

Venmo vs. PayPal

<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"> When you need to send someone money or accept a payment from them, there’s no shortage of digital options at your disposal. The two giants in the space, however, are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/paypal.asp">PayPal</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/010715/venmo-its-business-model-and-competition.asp">Venmo</a>, to the point that each has come to be used as a verb, as in “PayPal me” or “Venmo me.” </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"> How to wisely choose one over the other largely depends on the kinds of transactions you want to make and the parties with which you want to exchange funds. For instance, personal transactions with people you know, such as paying your babysitter or splitting a restaurant bill with friends, are particularly well-suited to Venmo, where you can also make your payments a more social affair. </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"> Meanwhile, PayPal is the leading choice for transactions that are more purchase-oriented, such as buying from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/merchant-account.asp">merchants</a> or accepting payments from your own customers. In terms of business payments, Venmo is geared more towards peer-to-peer transactions (P2P) and PayPal is more a business-to-consumer platform (B2C). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-3"> But there is a fair bit of overlap between the two payment services. To help you choose between them, we’ve dug into the details on features, fees, speed, and versatility, giving you all the information you need to make your own smart choice. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-paypal-vs-venmo-at-a-glance"></span> <h2 class="comp 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"> PayPal vs. Venmo at a Glance </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_1-0-5"> <em>* An identity verification step is required to access these limits. Until then, the maximum transaction amount is capped at $299.99.</em> </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 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>In 2013, eBay Inc. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/company-insights/082416/top-5-companies-owned-paypal-pypl.asp">acquired Braintree, which owns Venmo</a>. PayPal, also part of eBay, and Venmo remain distinct brands that operate with their own standards and target different customer bases.</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 --> <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_2-0-1"> <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">PayPal vs. Venmo</th> </tr> <tr> <th><b>Feature</b></th> <th><b>PayPal</b></th> <th><b>Venmo</b></th> </tr> </thead> <tbody data-check="0"> <tr> <th>Platforms</th> <td>Web, smartphone, online shopping checkout, in-store checkout</td> <td>Mostly smartphone with limited web, online shopping, and in-store abilities</td> </tr> <tr> <th>Payment methods</th> <td>Bank account, debit card, credit card, PayPal balance</td> <td>Bank account, debit card, credit card, Venmo balance</td> </tr> <tr> <th>Fees on payments</th> <td>Free from bank account; 2.9% plus fixed fee if paid with debit or credit card</td> <td>Free from bank account or debit card; 3% if paid with credit card</td> </tr> <tr> <th>Bank transfers fees &amp; speed</th> <td>Free for 3- to 5-day transfers; 1.75% for instant transfers (25 cents min, $25 max)</td> <td>Free for 1- to 3-day transfers; 1.75% for instant transfers (25 cents min, $25 max)</td> </tr> <tr> <th>Limits</th> <td>Up to $60,000, including $10,000 in a single transaction</td> <td>$6,999.99 for all transactions during the last 7 days*</td> </tr> <tr> <th>Geographic reach</th> <td>Can be used in more than 200 countries, with 25 currencies</td> <td>U.S. users only</td> </tr> <tr> <th>Best for</th> <td>Online shoppers, small business owners, those who sell/buy internationally</td> <td>Making payments to people you personally know</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 --> </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-body__inner article-body__inner head-to-head"> <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-venmo"></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">Venmo</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 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:50.0%;"> <img alt="Venmo" 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/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Venmo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.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> Venmo</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_3-0-1"> <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-click-action="OffPageClick - External" data-retailer-caption="with Venmo" data-retailer-type="other" data-tracking-container="true" href="https://venmo.com/" 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> <div class="comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist" id="mntl-sc-block_3-0-2"> <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>Trusted transactions</p></li> <li><p>Syncs contacts</p></li> <li><p>Free from linked bank accounts</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>U.S. only</p></li> <li><p>Primarily smartphone platform use</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </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-paypal"></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">PayPal</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_3-0-3" style="--imgWidth: 181px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="PayPal" 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/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="PayPal" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.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> PayPal</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_3-0-4"> <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="with PayPal" data-retailer-type="other" data-tracking-container="true" href="https://paypal.prf.hn/click/camref:1101loGcQ" id="button_1-0-1" 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 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 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>Wide platform availability</p></li> <li><p>High transaction limits</p></li> <li><p>Global reach</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 hold funds</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> </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="loc article-left-nav--in-outro 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_2-0"> <div class="comp toc-wrapper mntl-toc mntl-block" data-chop-mobile="true" data-offset="60" data-tracking-container="true" id="toc-wrapper_2-0"> <div class="comp mntl-toc__inner mntl-block" id="mntl-toc__inner_2-0"> <div class="comp js-toc-toggle mntl-toc__heading mntl-block" data-click-tracked="true" id="mntl-toc__heading_2-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_3-0"> Venmo vs. PayPal</span><!-- end: comp mntl-toc__heading-text mntl-text-block --> <div class="comp mntl-toc-toggle mntl-block" id="mntl-toc-toggle_2-0"> <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_2-0"> 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-Venmo vs. PayPal" data-click-tracked="true" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__mobile-toggle_2-0"> <span class="comp mntl-toc__heading-text mntl-text-block" id="mntl-toc__heading-text_4-0"> Venmo vs. PayPal</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_2-0"> <li class="comp nested-toc-item mntl-toc__list-item mntl-toc-list-item mntl-toc__list-item" data-click-action="OnPageClick-Venmo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_4-0"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Venmo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo" rel="nocaes"> <span class="link__wrapper">Venmo</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-PayPal" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" id="mntl-toc__list-item_4-0-1"> <a class="mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-PayPal" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-paypal" rel="nocaes"> <span class="link__wrapper">PayPal</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 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_2-0"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-PayPal vs. Venmo at a Glance" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-paypal-vs-venmo-at-a-glance" id="mntl-toc__list-item-link_2-0" rel="nocaes"><span class="link__wrapper">PayPal vs. Venmo at a Glance</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_2-0-1"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Accessibility" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-accessibility" id="mntl-toc__list-item-link_2-0-1" rel="nocaes"><span class="link__wrapper">Accessibility</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_2-0-2"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Sending Money" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-sending-money" id="mntl-toc__list-item-link_2-0-2" rel="nocaes"><span class="link__wrapper">Sending Money</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_2-0-3"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Requesting Money" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-requesting-money" id="mntl-toc__list-item-link_2-0-3" rel="nocaes"><span class="link__wrapper">Requesting Money</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_2-0-4"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Fees" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-fees" id="mntl-toc__list-item-link_2-0-4" rel="nocaes"><span class="link__wrapper">Fees</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_2-0-5"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Limits" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-limits" id="mntl-toc__list-item-link_2-0-5" rel="nocaes"><span class="link__wrapper">Limits</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_2-0-6"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Additional Features" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-additional-features" id="mntl-toc__list-item-link_2-0-6" rel="nocaes"><span class="link__wrapper">Additional Features</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_2-0-7"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Business Features" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-business-features" id="mntl-toc__list-item-link_2-0-7" rel="nocaes"><span class="link__wrapper">Business Features</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_2-0-8"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Reviews" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-venmo-vs-paypal-reviews" id="mntl-toc__list-item-link_2-0-8" rel="nocaes"><span class="link__wrapper">Reviews</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_3-0-9"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_2-0-9"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Venmo vs. PayPal FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-are-venmo-and-paypal" id="mntl-toc__list-item-link_2-0-9" rel="nocaes"><span class="link__wrapper">Venmo vs. PayPal 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_3-0-10"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_2-0-10"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Final Evaluation" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-evaluated-venmo-vs-paypal" id="mntl-toc__list-item-link_2-0-10" rel="nocaes"><span class="link__wrapper">Final Evaluation</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="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-venmo-vs-paypal-accessibility"></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"> Venmo vs. PayPal: Accessibility </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"> PayPal and Venmo both have their own free apps for iOS and Android, which is where most users will go to use each service. They both also have browser-based desktop versions. However, Venmo payments can only be initiated with the mobile app, whereas PayPal payments can be made through the app or the website. </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"> PayPal can also be used as payment with a wide variety of online merchants, and even for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quick-response-qr-code.asp">QR code</a> purchases in-store. Though Venmo is working to build up this merchant transaction capability among more retailers, its reach is currently very limited compared to PayPal’s very expansive footprint.<span class="ql-inline-citation" data-cite="3"></span><span class="ql-inline-citation" data-cite="2"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-sending-money"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Venmo vs. PayPal: Sending Money </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_4-0-4"> The process to send money to someone is fairly similar across the two apps. Both offer the ability to sync your contacts to the app, enabling it to search for any associated PayPal or Venmo accounts held by your friends and family. But even if the app doesn’t surface the contact you’re looking for, you can send money using their username, email address, or mobile number. </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"> After choosing the recipient and the amount, both PayPal and Venmo will ask you what payment method you’d like to use. If you have a positive balance with either service, you can use those funds for your payment. Otherwise, funds will be drawn from the bank account, debit card, or credit card you identify as your desired payment method for this transaction. </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"> Once you hit "send" on your payment, the amount will hit the user’s PayPal or Venmo balance within a couple of minutes, often even seconds. With both apps, you’ll want to make doubly sure you’re sending money to the right contact, since the companies won’t refund your money if you send it to the wrong person. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-requesting-money"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-7"> <span class="mntl-sc-block-heading__text"> Venmo vs. PayPal: Requesting Money </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_4-0-8"> It‘s also possible with both PayPal and Venmo to receive funds from someone. With Venmo, you can request funds from another person, creating a reminder for someone to pay you, or provide them with easy access to your contact info and the proper amount of the requested payment. With PayPal, you can securely request funds and customize a message before sending. Requests can only be made to other PayPal users. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> Once the person receiving your request for money acts on it by making a payment, the funds will hit your PayPal or Venmo balance almost instantaneously. From there, you can use those funds to make a subsequent payment (or, with PayPal, a merchant purchase), keep them sitting in your account for later use, or transfer them out to your linked bank account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-10"> If you opt to transfer funds to your bank, both PayPal and Venmo give you the further option of how quickly to complete the transfer. Without a fee, you can choose a transfer that will generally be completed the following day, but it can take up to two to three days for either app. If you’re in a rush, both Venmo and PayPal allow you to choose an instant transfer for a small fee. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-fees"></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"> Venmo vs. PayPal: Fees </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"> Fees for the two services are fairly similar. Both offer free payments from <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/linked-transfer-account.asp">linked bank accounts</a>, and both charge about 3% for payments from a credit card. Where they differ slightly is that Venmo extends its no-fee option to payments made from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debitcard.asp">debit cards</a>, while PayPal only allows free payments directly from a bank account. For debit and credit card payments, PayPal’s fee is technically 2.9% plus a fixed fee. See more about Venmo's and PayPal's fees on their website. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> One exception to the fee on payments made with a credit card is on payments made via <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/american-express-card.asp">American Express</a>. Through a very new development, American Express is offering free payments through both PayPal and Venmo, though the payment has to be initiated through the American Express app instead of using the PayPal or Venmo apps. But doing so enables users to pay with a credit card and avoid the roughly 3% fee on that transaction. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-14"> How quickly you want to transfer accumulated money from your PayPal or Venmo balance to your bank account also has free options on both platforms. Both Venmo and PayPal allow you to choose a standard transfer speed of one to three days for free, or to upgrade your transfer to take place within seconds for a fee of 1.75% of the money transferred. Both services cap the transfer fee at $25 and stipulate a minimum charge of 25 cents. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-15"> When using PayPal as a merchant collecting payments from customers, PayPal offers a number of different pricing options. Meanwhile, Venmo is not geared toward merchant business transactions, and it has a transaction limit if it sees users are treating a personal account as a business account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-limits"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-16"> <span class="mntl-sc-block-heading__text"> Venmo vs. PayPal: Limits </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_4-0-17"> For those wanting to make very large transfers, PayPal offers a strong advantage. Single payments are generally allowed up to $10,000 each, with a total cap of $60,000. That’s significantly higher than Venmo’s limit of $6,999.99 per seven-day rolling period. On top of lower limits, Venmo also requires an identity verification step to access these limits. Until then, the maximum transaction amount is capped at $299.99. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-additional-features"></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"> Venmo vs. PayPal: Additional Features </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"> As you can see, the two services present fairly similarly on basic features and fee structures. But there are a few areas in which the two apps differ markedly. For instance, with its strong focus on transactions between people who know each other personally, Venmo hosts a social feed of transactions that have taken place among people you know, as well as those of strangers, if you opt to view the public feed.   </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"> A scroll through the feed of transactions by your Venmo friends will show you who paid who, and with whatever note they shared. The only thing missing is the amount. The feed also supports emojis, which are almost more common than text in the Venmo social feed. When you make your own transactions in the app, sharing them publicly is the default, but you can change this to viewable only by your Venmo friends or only by the recipient, either globally or on a transaction-by-transaction basis. </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"> Where PayPal stands out against Venmo is in its ability to be used by merchant sellers who are accepting payments, as well as shoppers and buyers at online and physical retailers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-22"> PayPal also offers international transactions. Covering more than 200 countries and transacting in about 25 different currencies, PayPal is the app of choice for those who want to pay or accept funds from those outside the U.S. In contrast, Venmo can only be used for U.S. exchanges.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-23"> Lastly, both Venmo and PayPal offer their own credit and debit cards, although Venmo’s offering in this area is nascent. By acquiring a debit or credit card, payments to anyone accepting that card type can be charged directly to your PayPal or Venmo account.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-business-features"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-24"> <span class="mntl-sc-block-heading__text"> Venmo vs. PayPal: Business Features </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_4-0-25"> Further cementing its reputation as the digital payments app of choice for merchants, PayPal offers a plethora of small business tools that are entirely absent in Venmo’s more person-to-person focused business model. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-26"> For instance, merchants who establish a PayPal Business account can use the service to essentially set up the financial transaction side of selling items online, making it easy to accept credit and debit card payments from all over the world. In exchange for this capability, merchants agree to a small percentage fee being subtracted on each transaction. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-27"> But PayPal’s support for small businesses goes far beyond accepting payments. PayPal Business also offers help with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/invoice.asp">invoicing</a>, product shipping, and marketing insights. Some services are included in the basic business package, while others are available to those with a PayPal Payments Pro account, which carries a monthly maintenance fee. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-28"> Growing businesses looking to scale can also benefit from PayPal’s provision of <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/workingcapital.asp">working capital</a> and business loans. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-venmo-vs-paypal-reviews"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-29"> <span class="mntl-sc-block-heading__text"> Venmo vs. PayPal: Reviews </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_4-0-30"> Both the Venmo and PayPal apps receive similarly favorable third-party customer reviews. Reviewers cite their ease of use, design, and ability to make payments and requests with just a few easy clicks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-questionandanswer--finance prm-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_4-0-31"> <span class="heading-toc" id="toc-what-are-venmo-and-paypal"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Venmo and PayPal?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>PayPal and Venmo are both digital payment vehicles, largely operated as smartphone apps. In the same way that writing a check draws funds for a payment from a linked bank account, making a payment with Venmo or PayPal does the same, but with two modern differences. </p><p>First, when making a Venmo or PayPal payment, the user can choose where the funds will be taken from, whether it’s the user’s primary checking account, a secondary savings account, a debit card, or a credit card. Second, the transfer of funds happens essentially instantaneously, unlike checks that must be cashed, and that can bounce for insufficient funds.</p><p>PayPal is the pioneer in this field, having been established in the late 1990s and then soon after becoming the payment tool that facilitated millions of eBay transactions. Venmo, in contrast, is the new kid on the block, though a popular one. Founded in 2009, Venmo was acquired three years later by Braintree in 2012, and then by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/company-insights/082416/top-5-companies-owned-paypal-pypl.asp">PayPal</a>.</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_4-0-32"> <span class="heading-toc" id="toc-how-do-venmo-and-paypal-work"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Venmo and PayPal Work?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The basic functionality and setup of both services are the same. You create a free account with the service, establishing your security credentials. You then link at least one bank account for transfers and optionally add other payment methods, like additional bank accounts or debit and credit cards.</p><p>When you’re ready to pay someone, you enter or search for their contact info, enter the amount to pay, and choose the payment method you’d like to use for the charge. Venmo includes a button to request funds instead of sending them — PayPal does not have a "request" button, but still allows you to receive funds.</p><p>PayPal and Venmo fund your payments by creating <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ach-transfers-what-are-they-and-how-do-they-work-4590120">ACH transfers</a> to and from your linked bank account, while those opting to use a debit or credit card will see the payment amount added to your statement like any other purchase.</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_4-0-33"> <span class="heading-toc" id="toc-who-should-use-venmo-or-paypal"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Should Use Venmo or PayPal?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For those making primarily personal payments to someone they know and trust, Venmo is the ideal choice. With its social interface, making payments with Venmo and seeing exchanges among your contacts feels like a friendly and personable arena.</p><p>PayPal can also be used for paying your friends and family. Whichever platform is best for you will depend on which one more of your contacts are using.</p><p>But if you’re selling products, or are regularly paying for online purchases, a PayPal account will serve you much better. Though Venmo has begun to establish a Venmo Business account, it is still a fledgling service.</p><p>In contrast, PayPal has been serving merchants and small businesses since 1998, and it offers the richest menu of merchant supports of any digital payment app.</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-evaluated-venmo-vs-paypal"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-34"> <span class="mntl-sc-block-heading__text"> How We Evaluated Venmo vs. PayPal </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_4-0-35"> To help you understand when each of the two digital payment apps makes the most sense, we delved into PayPal’s and Venmo’s terms on features, payment transaction fees, bank transfer fees, transaction limits, and business/merchant offerings. By laying out a head-to-head comparison on these aspects, it should be easy to see which app will best serve your different needs, or possibly conclude that the best option is to have an account with each. </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="hand holding smartphone and scanning the barcode for contactless payment at the food truck" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/VGS8wYbqgOMVgFfMuhUJ_qFUZQM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg" srcset="https://www.investopedia.com/thmb/Dq9SkVK90fDhpT-dWV8_RRIHhCs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="hand holding smartphone and scanning the barcode for contactless payment at the food truck" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/VGS8wYbqgOMVgFfMuhUJ_qFUZQM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg" srcset="https://www.investopedia.com/thmb/Dq9SkVK90fDhpT-dWV8_RRIHhCs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg 750w" 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>simonlong / 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-3"><p>BusinessofApps.com. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.businessofapps.com/data/venmo-statistics/">Venmo Revenue and Usage Statistics (2022)</a>.”</p></li> <li class="mntl-sources__source" id="citation-2"><p>BusinessofApps.com. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.businessofapps.com/data/paypal-statistics/">Paypal Revenue and Usage Statistics (2022)</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="8399586" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/venmo-teen-debit-card-review-8399586" id="mntl-card-list-items_1-0"> <div 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When you need to send someone money or accept a payment from them, there’s no shortage of digital options at your disposal. The two giants in the space, however, are [PayPal](https://www.investopedia.com/terms/p/paypal.asp) and [Venmo](https://www.investopedia.com/articles/personal-finance/010715/venmo-its-business-model-and-competition.asp), to the point that each has come to be used as a verb, as in “PayPal me” or “Venmo me.” How to wisely choose one over the other largely depends on the kinds of transactions you want to make and the parties with which you want to exchange funds. For instance, personal transactions with people you know, such as paying your babysitter or splitting a restaurant bill with friends, are particularly well-suited to Venmo, where you can also make your payments a more social affair. Meanwhile, PayPal is the leading choice for transactions that are more purchase-oriented, such as buying from [merchants](https://www.investopedia.com/terms/m/merchant-account.asp) or accepting payments from your own customers. In terms of business payments, Venmo is geared more towards peer-to-peer transactions (P2P) and PayPal is more a business-to-consumer platform (B2C). But there is a fair bit of overlap between the two payment services. To help you choose between them, we’ve dug into the details on features, fees, speed, and versatility, giving you all the information you need to make your own smart choice. ## PayPal vs. Venmo at a Glance *\* An identity verification step is required to access these limits. Until then, the maximum transaction amount is capped at $299.99.* In 2013, eBay Inc. [acquired Braintree, which owns Venmo](https://www.investopedia.com/articles/company-insights/082416/top-5-companies-owned-paypal-pypl.asp). PayPal, also part of eBay, and Venmo remain distinct brands that operate with their own standards and target different customer bases. | PayPal vs. Venmo | | | | --- | --- | --- | | **Feature** | **PayPal** | **Venmo** | | Platforms | Web, smartphone, online shopping checkout, in-store checkout | Mostly smartphone with limited web, online shopping, and in-store abilities | | Payment methods | Bank account, debit card, credit card, PayPal balance | Bank account, debit card, credit card, Venmo balance | | Fees on payments | Free from bank account; 2.9% plus fixed fee if paid with debit or credit card | Free from bank account or debit card; 3% if paid with credit card | | Bank transfers fees & speed | Free for 3- to 5-day transfers; 1.75% for instant transfers (25 cents min, $25 max) | Free for 1- to 3-day transfers; 1.75% for instant transfers (25 cents min, $25 max) | | Limits | Up to $60,000, including $10,000 in a single transaction | $6,999.99 for all transactions during the last 7 days\* | | Geographic reach | Can be used in more than 200 countries, with 25 currencies | U.S. users only | | Best for | Online shoppers, small business owners, those who sell/buy internationally | Making payments to people you personally know | ### Venmo --- ![Venmo]() :fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg)  Venmo [Sign Up Now](https://venmo.com/) Pros * Trusted transactions * Syncs contacts * Free from linked bank accounts Cons * U.S. only * Primarily smartphone platform use ### PayPal --- ![PayPal]() :fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg)  PayPal [Open Account](https://paypal.prf.hn/click/camref:1101loGcQ) Pros * Wide platform availability * High transaction limits * Global reach Cons * Can hold funds Venmo vs. PayPal Expand Venmo vs. PayPal * [Venmo](#toc-venmo) * [PayPal](#toc-paypal) * [PayPal vs. Venmo at a Glance](#toc-paypal-vs-venmo-at-a-glance) * [Accessibility](#toc-venmo-vs-paypal-accessibility) * [Sending Money](#toc-venmo-vs-paypal-sending-money) * [Requesting Money](#toc-venmo-vs-paypal-requesting-money) * [Fees](#toc-venmo-vs-paypal-fees) * [Limits](#toc-venmo-vs-paypal-limits) * [Additional Features](#toc-venmo-vs-paypal-additional-features) * [Business Features](#toc-venmo-vs-paypal-business-features) * [Reviews](#toc-venmo-vs-paypal-reviews) * [Venmo vs. PayPal FAQs](#toc-what-are-venmo-and-paypal) * [Final Evaluation](#toc-how-we-evaluated-venmo-vs-paypal) ## Venmo vs. PayPal: Accessibility PayPal and Venmo both have their own free apps for iOS and Android, which is where most users will go to use each service. They both also have browser-based desktop versions. However, Venmo payments can only be initiated with the mobile app, whereas PayPal payments can be made through the app or the website. PayPal can also be used as payment with a wide variety of online merchants, and even for [QR code](https://www.investopedia.com/terms/q/quick-response-qr-code.asp) purchases in-store. Though Venmo is working to build up this merchant transaction capability among more retailers, its reach is currently very limited compared to PayPal’s very expansive footprint. ## Venmo vs. PayPal: Sending Money The process to send money to someone is fairly similar across the two apps. Both offer the ability to sync your contacts to the app, enabling it to search for any associated PayPal or Venmo accounts held by your friends and family. But even if the app doesn’t surface the contact you’re looking for, you can send money using their username, email address, or mobile number. After choosing the recipient and the amount, both PayPal and Venmo will ask you what payment method you’d like to use. If you have a positive balance with either service, you can use those funds for your payment. Otherwise, funds will be drawn from the bank account, debit card, or credit card you identify as your desired payment method for this transaction. Once you hit "send" on your payment, the amount will hit the user’s PayPal or Venmo balance within a couple of minutes, often even seconds. With both apps, you’ll want to make doubly sure you’re sending money to the right contact, since the companies won’t refund your money if you send it to the wrong person. ## Venmo vs. PayPal: Requesting Money It‘s also possible with both PayPal and Venmo to receive funds from someone. With Venmo, you can request funds from another person, creating a reminder for someone to pay you, or provide them with easy access to your contact info and the proper amount of the requested payment. With PayPal, you can securely request funds and customize a message before sending. Requests can only be made to other PayPal users. Once the person receiving your request for money acts on it by making a payment, the funds will hit your PayPal or Venmo balance almost instantaneously. From there, you can use those funds to make a subsequent payment (or, with PayPal, a merchant purchase), keep them sitting in your account for later use, or transfer them out to your linked bank account. If you opt to transfer funds to your bank, both PayPal and Venmo give you the further option of how quickly to complete the transfer. Without a fee, you can choose a transfer that will generally be completed the following day, but it can take up to two to three days for either app. If you’re in a rush, both Venmo and PayPal allow you to choose an instant transfer for a small fee. ## Venmo vs. PayPal: Fees Fees for the two services are fairly similar. Both offer free payments from [linked bank accounts](https://www.investopedia.com/terms/l/linked-transfer-account.asp), and both charge about 3% for payments from a credit card. Where they differ slightly is that Venmo extends its no-fee option to payments made from [debit cards](https://www.investopedia.com/terms/d/debitcard.asp), while PayPal only allows free payments directly from a bank account. For debit and credit card payments, PayPal’s fee is technically 2.9% plus a fixed fee. See more about Venmo's and PayPal's fees on their website. One exception to the fee on payments made with a credit card is on payments made via [American Express](https://www.investopedia.com/terms/a/american-express-card.asp). Through a very new development, American Express is offering free payments through both PayPal and Venmo, though the payment has to be initiated through the American Express app instead of using the PayPal or Venmo apps. But doing so enables users to pay with a credit card and avoid the roughly 3% fee on that transaction. How quickly you want to transfer accumulated money from your PayPal or Venmo balance to your bank account also has free options on both platforms. Both Venmo and PayPal allow you to choose a standard transfer speed of one to three days for free, or to upgrade your transfer to take place within seconds for a fee of 1.75% of the money transferred. Both services cap the transfer fee at $25 and stipulate a minimum charge of 25 cents. When using PayPal as a merchant collecting payments from customers, PayPal offers a number of different pricing options. Meanwhile, Venmo is not geared toward merchant business transactions, and it has a transaction limit if it sees users are treating a personal account as a business account. ## Venmo vs. PayPal: Limits For those wanting to make very large transfers, PayPal offers a strong advantage. Single payments are generally allowed up to $10,000 each, with a total cap of $60,000. That’s significantly higher than Venmo’s limit of $6,999.99 per seven-day rolling period. On top of lower limits, Venmo also requires an identity verification step to access these limits. Until then, the maximum transaction amount is capped at $299.99. ## Venmo vs. PayPal: Additional Features As you can see, the two services present fairly similarly on basic features and fee structures. But there are a few areas in which the two apps differ markedly. For instance, with its strong focus on transactions between people who know each other personally, Venmo hosts a social feed of transactions that have taken place among people you know, as well as those of strangers, if you opt to view the public feed.   A scroll through the feed of transactions by your Venmo friends will show you who paid who, and with whatever note they shared. The only thing missing is the amount. The feed also supports emojis, which are almost more common than text in the Venmo social feed. When you make your own transactions in the app, sharing them publicly is the default, but you can change this to viewable only by your Venmo friends or only by the recipient, either globally or on a transaction-by-transaction basis. Where PayPal stands out against Venmo is in its ability to be used by merchant sellers who are accepting payments, as well as shoppers and buyers at online and physical retailers. PayPal also offers international transactions. Covering more than 200 countries and transacting in about 25 different currencies, PayPal is the app of choice for those who want to pay or accept funds from those outside the U.S. In contrast, Venmo can only be used for U.S. exchanges.  Lastly, both Venmo and PayPal offer their own credit and debit cards, although Venmo’s offering in this area is nascent. By acquiring a debit or credit card, payments to anyone accepting that card type can be charged directly to your PayPal or Venmo account.  ## Venmo vs. PayPal: Business Features Further cementing its reputation as the digital payments app of choice for merchants, PayPal offers a plethora of small business tools that are entirely absent in Venmo’s more person-to-person focused business model. For instance, merchants who establish a PayPal Business account can use the service to essentially set up the financial transaction side of selling items online, making it easy to accept credit and debit card payments from all over the world. In exchange for this capability, merchants agree to a small percentage fee being subtracted on each transaction. But PayPal’s support for small businesses goes far beyond accepting payments. PayPal Business also offers help with [invoicing](https://www.investopedia.com/terms/i/invoice.asp), product shipping, and marketing insights. Some services are included in the basic business package, while others are available to those with a PayPal Payments Pro account, which carries a monthly maintenance fee. Growing businesses looking to scale can also benefit from PayPal’s provision of [working capital](https://www.investopedia.com/terms/w/workingcapital.asp) and business loans. ## Venmo vs. PayPal: Reviews Both the Venmo and PayPal apps receive similarly favorable third-party customer reviews. Reviewers cite their ease of use, design, and ability to make payments and requests with just a few easy clicks. ## What Are Venmo and PayPal? PayPal and Venmo are both digital payment vehicles, largely operated as smartphone apps. In the same way that writing a check draws funds for a payment from a linked bank account, making a payment with Venmo or PayPal does the same, but with two modern differences.  First, when making a Venmo or PayPal payment, the user can choose where the funds will be taken from, whether it’s the user’s primary checking account, a secondary savings account, a debit card, or a credit card. Second, the transfer of funds happens essentially instantaneously, unlike checks that must be cashed, and that can bounce for insufficient funds. PayPal is the pioneer in this field, having been established in the late 1990s and then soon after becoming the payment tool that facilitated millions of eBay transactions. Venmo, in contrast, is the new kid on the block, though a popular one. Founded in 2009, Venmo was acquired three years later by Braintree in 2012, and then by [PayPal](https://www.investopedia.com/articles/company-insights/082416/top-5-companies-owned-paypal-pypl.asp). ## How Do Venmo and PayPal Work? The basic functionality and setup of both services are the same. You create a free account with the service, establishing your security credentials. You then link at least one bank account for transfers and optionally add other payment methods, like additional bank accounts or debit and credit cards. When you’re ready to pay someone, you enter or search for their contact info, enter the amount to pay, and choose the payment method you’d like to use for the charge. Venmo includes a button to request funds instead of sending them — PayPal does not have a "request" button, but still allows you to receive funds. PayPal and Venmo fund your payments by creating [ACH transfers](https://www.investopedia.com/ach-transfers-what-are-they-and-how-do-they-work-4590120) to and from your linked bank account, while those opting to use a debit or credit card will see the payment amount added to your statement like any other purchase. ## Who Should Use Venmo or PayPal? For those making primarily personal payments to someone they know and trust, Venmo is the ideal choice. With its social interface, making payments with Venmo and seeing exchanges among your contacts feels like a friendly and personable arena. PayPal can also be used for paying your friends and family. Whichever platform is best for you will depend on which one more of your contacts are using. But if you’re selling products, or are regularly paying for online purchases, a PayPal account will serve you much better. Though Venmo has begun to establish a Venmo Business account, it is still a fledgling service. In contrast, PayPal has been serving merchants and small businesses since 1998, and it offers the richest menu of merchant supports of any digital payment app. ## How We Evaluated Venmo vs. PayPal To help you understand when each of the two digital payment apps makes the most sense, we delved into PayPal’s and Venmo’s terms on features, payment transaction fees, bank transfer fees, transaction limits, and business/merchant offerings. By laying out a head-to-head comparison on these aspects, it should be easy to see which app will best serve your different needs, or possibly conclude that the best option is to have an account with each. :max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg) :max_bytes(150000):strip_icc()/Primary_Image-fb4ad6f35ede4823bf1907e794ec9276.jpg) simonlong / 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. BusinessofApps.com. “[Venmo Revenue and Usage Statistics (2022)](https://www.businessofapps.com/data/venmo-statistics/).” 2. BusinessofApps.com. “[Paypal Revenue and Usage Statistics (2022)](https://www.businessofapps.com/data/paypal-statistics/).” Related Articles [![A cheerful mother and daughter hold a debit card while looking at a tablet computer.]() :max_bytes(150000):strip_icc()/Momanddaughterwithdebitcard-adbb458ebc024b029df9696f82a62248.jpeg) Venmo Teen Debit Card Review 2024](https://www.investopedia.com/venmo-teen-debit-card-review-8399586) [![PayPal]() :max_bytes(150000):strip_icc()/paypal.asp-final-1101556384f049bf9f24d7ad7a59494c.jpg) What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) [![Best-money-transfer-apps-5180183]() :max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg) The Best Money Transfer Apps for 2024](https://www.investopedia.com/best-money-transfer-apps-5180183) [![A visual representation of 5 safety tips for Venmo users who are concerned about their privacy.]() :max_bytes(150000):strip_icc()/how-safe-venmo-and-why-it-free_FINAL-d6b7c0672d534208a05d1d53ae0cd915.png) How Safe Is Venmo and Is It Free?](https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp) [![Young Adult Uses Mobile Device]() :max_bytes(150000):strip_icc()/teenwphone-e6f22e15d52a416c9b60ce2310a9f3f5.jpg) Best Ways to Send Money as a Teen](https://www.investopedia.com/best-ways-to-send-money-as-a-teen-7152565) [![PayPal Headquarters San Jose]() :max_bytes(150000):strip_icc()/GettyImages-493248224-788c41854cab42b9be8ecb2aaf7f02b9.jpg) MoneyGram vs. PayPal vs. Xoom: Who Has the Lowest Fees?](https://www.investopedia.com/articles/personal-finance/112415/moneygram-vs-paypal-vs-xoom-who-has-lowest-fees.asp) Related Terms [What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. [more](https://www.investopedia.com/terms/p/paypal.asp) [What Is a Mobile Wallet?](https://www.investopedia.com/terms/m/mobile-wallet.asp) A mobile wallet is an app that stores payment card information and other on a mobile device. [more](https://www.investopedia.com/terms/m/mobile-wallet.asp) [Merchant Services: Their Role in Business, How They Work, and Benefits](https://www.investopedia.com/merchant-service-8624263) Merchant services help businesses accept and process electronic payments from customers. They can include point-of-sale systems, credit card readers, payment gateways, and online transaction processing. [more](https://www.investopedia.com/merchant-service-8624263) [Unified Payments Interface (UPI): Definition and How It Works](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp) A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. [more](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp) [Remittance: What It Is and How to Send One](https://www.investopedia.com/terms/r/remittance.asp) A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. [more](https://www.investopedia.com/terms/r/remittance.asp) [What Is a Digital Wallet?](https://www.investopedia.com/terms/d/digital-wallet.asp) A digital wallet is an application on an electronic device that stores payment information and allows you to securely make purchases without carrying cash or cards. [more](https://www.investopedia.com/terms/d/digital-wallet.asp)

When you need to send someone money or accept a payment from them, there’s no shortage of digital options at your disposal. The two giants in the space, however, are PayPal and Venmo, to the point that each has come to be used as a verb, as in “PayPal me” or “Venmo me.” How to wisely choose one over the other largely depends on the kinds of transactions you want to make and the parties with which you want to exchange funds. For instance, personal transactions with people you know, such as paying your babysitter or splitting a restaurant bill with friends, are particularly well-suited to Venmo, where you can also make your payments a more social affair. Meanwhile, PayPal is the leading choice for transactions that are more purchase-oriented, such as buying from merchants or accepting payments from your own customers. In terms of business payments, Venmo is geared more towards peer-to-peer transactions (P2P) and PayPal is more a business-to-consumer platform (B2C). But there is a fair bit of overlap between the two payment services. To help you choose between them, we’ve dug into the details on features, fees, speed, and versatility, giving you all the information you need to make your own smart choice. PayPal vs. Venmo at a Glance * An identity verification step is required to access these limits. Until then, the maximum transaction amount is capped at $299.99. In 2013, eBay Inc. acquired Braintree, which owns Venmo. PayPal, also part of eBay, and Venmo remain distinct brands that operate with their own standards and target different customer bases. PayPal vs. Venmo Feature PayPal Venmo Platforms Web, smartphone, online shopping checkout, in-store checkout Mostly smartphone with limited web, online shopping, and in-store abilities Payment methods Bank account, debit card, credit card, PayPal balance Bank account, debit card, credit card, Venmo balance Fees on payments Free from bank account; 2.9% plus fixed fee if paid with debit or credit card Free from bank account or debit card; 3% if paid with credit card Bank transfers fees & speed Free for 3- to 5-day transfers; 1.75% for instant transfers (25 cents min, $25 max) Free for 1- to 3-day transfers; 1.75% for instant transfers (25 cents min, $25 max) Limits Up to $60,000, including $10,000 in a single transaction $6,999.99 for all transactions during the last 7 days* Geographic reach Can be used in more than 200 countries, with 25 currencies U.S. users only Best for Online shoppers, small business owners, those who sell/buy internationally Making payments to people you personally know Venmo  Venmo Sign Up Now Pros Trusted transactions Syncs contacts Free from linked bank accounts Cons U.S. only Primarily smartphone platform use PayPal  PayPal Open Account Pros Wide platform availability High transaction limits Global reach Cons Can hold funds Venmo vs. PayPal Expand Venmo vs. PayPal Venmo PayPal PayPal vs. Venmo at a Glance Accessibility Sending Money Requesting Money Fees Limits Additional Features Business Features Reviews Venmo vs. PayPal FAQs Final Evaluation Venmo vs. PayPal: Accessibility PayPal and Venmo both have their own free apps for iOS and Android, which is where most users will go to use each service. They both also have browser-based desktop versions. However, Venmo payments can only be initiated with the mobile app, whereas PayPal payments can be made through the app or the website. PayPal can also be used as payment with a wide variety of online merchants, and even for QR code purchases in-store. Though Venmo is working to build up this merchant transaction capability among more retailers, its reach is currently very limited compared to PayPal’s very expansive footprint. Venmo vs. PayPal: Sending Money The process to send money to someone is fairly similar across the two apps. Both offer the ability to sync your contacts to the app, enabling it to search for any associated PayPal or Venmo accounts held by your friends and family. But even if the app doesn’t surface the contact you’re looking for, you can send money using their username, email address, or mobile number. After choosing the recipient and the amount, both PayPal and Venmo will ask you what payment method you’d like to use. If you have a positive balance with either service, you can use those funds for your payment. Otherwise, funds will be drawn from the bank account, debit card, or credit card you identify as your desired payment method for this transaction. Once you hit "send" on your payment, the amount will hit the user’s PayPal or Venmo balance within a couple of minutes, often even seconds. With both apps, you’ll want to make doubly sure you’re sending money to the right contact, since the companies won’t refund your money if you send it to the wrong person. Venmo vs. PayPal: Requesting Money It‘s also possible with both PayPal and Venmo to receive funds from someone. With Venmo, you can request funds from another person, creating a reminder for someone to pay you, or provide them with easy access to your contact info and the proper amount of the requested payment. With PayPal, you can securely request funds and customize a message before sending. Requests can only be made to other PayPal users. Once the person receiving your request for money acts on it by making a payment, the funds will hit your PayPal or Venmo balance almost instantaneously. From there, you can use those funds to make a subsequent payment (or, with PayPal, a merchant purchase), keep them sitting in your account for later use, or transfer them out to your linked bank account. If you opt to transfer funds to your bank, both PayPal and Venmo give you the further option of how quickly to complete the transfer. Without a fee, you can choose a transfer that will generally be completed the following day, but it can take up to two to three days for either app. If you’re in a rush, both Venmo and PayPal allow you to choose an instant transfer for a small fee. Venmo vs. PayPal: Fees Fees for the two services are fairly similar. Both offer free payments from linked bank accounts, and both charge about 3% for payments from a credit card. Where they differ slightly is that Venmo extends its no-fee option to payments made from debit cards, while PayPal only allows free payments directly from a bank account. For debit and credit card payments, PayPal’s fee is technically 2.9% plus a fixed fee. See more about Venmo's and PayPal's fees on their website. One exception to the fee on payments made with a credit card is on payments made via American Express. Through a very new development, American Express is offering free payments through both PayPal and Venmo, though the payment has to be initiated through the American Express app instead of using the PayPal or Venmo apps. But doing so enables users to pay with a credit card and avoid the roughly 3% fee on that transaction. How quickly you want to transfer accumulated money from your PayPal or Venmo balance to your bank account also has free options on both platforms. Both Venmo and PayPal allow you to choose a standard transfer speed of one to three days for free, or to upgrade your transfer to take place within seconds for a fee of 1.75% of the money transferred. Both services cap the transfer fee at $25 and stipulate a minimum charge of 25 cents. When using PayPal as a merchant collecting payments from customers, PayPal offers a number of different pricing options. Meanwhile, Venmo is not geared toward merchant business transactions, and it has a transaction limit if it sees users are treating a personal account as a business account. Venmo vs. PayPal: Limits For those wanting to make very large transfers, PayPal offers a strong advantage. Single payments are generally allowed up to $10,000 each, with a total cap of $60,000. That’s significantly higher than Venmo’s limit of $6,999.99 per seven-day rolling period. On top of lower limits, Venmo also requires an identity verification step to access these limits. Until then, the maximum transaction amount is capped at $299.99. Venmo vs. PayPal: Additional Features As you can see, the two services present fairly similarly on basic features and fee structures. But there are a few areas in which the two apps differ markedly. For instance, with its strong focus on transactions between people who know each other personally, Venmo hosts a social feed of transactions that have taken place among people you know, as well as those of strangers, if you opt to view the public feed.   A scroll through the feed of transactions by your Venmo friends will show you who paid who, and with whatever note they shared. The only thing missing is the amount. The feed also supports emojis, which are almost more common than text in the Venmo social feed. When you make your own transactions in the app, sharing them publicly is the default, but you can change this to viewable only by your Venmo friends or only by the recipient, either globally or on a transaction-by-transaction basis. Where PayPal stands out against Venmo is in its ability to be used by merchant sellers who are accepting payments, as well as shoppers and buyers at online and physical retailers. PayPal also offers international transactions. Covering more than 200 countries and transacting in about 25 different currencies, PayPal is the app of choice for those who want to pay or accept funds from those outside the U.S. In contrast, Venmo can only be used for U.S. exchanges.  Lastly, both Venmo and PayPal offer their own credit and debit cards, although Venmo’s offering in this area is nascent. By acquiring a debit or credit card, payments to anyone accepting that card type can be charged directly to your PayPal or Venmo account.  Venmo vs. PayPal: Business Features Further cementing its reputation as the digital payments app of choice for merchants, PayPal offers a plethora of small business tools that are entirely absent in Venmo’s more person-to-person focused business model. For instance, merchants who establish a PayPal Business account can use the service to essentially set up the financial transaction side of selling items online, making it easy to accept credit and debit card payments from all over the world. In exchange for this capability, merchants agree to a small percentage fee being subtracted on each transaction. But PayPal’s support for small businesses goes far beyond accepting payments. PayPal Business also offers help with invoicing, product shipping, and marketing insights. Some services are included in the basic business package, while others are available to those with a PayPal Payments Pro account, which carries a monthly maintenance fee. Growing businesses looking to scale can also benefit from PayPal’s provision of working capital and business loans. Venmo vs. PayPal: Reviews Both the Venmo and PayPal apps receive similarly favorable third-party customer reviews. Reviewers cite their ease of use, design, and ability to make payments and requests with just a few easy clicks. What Are Venmo and PayPal? PayPal and Venmo are both digital payment vehicles, largely operated as smartphone apps. In the same way that writing a check draws funds for a payment from a linked bank account, making a payment with Venmo or PayPal does the same, but with two modern differences. First, when making a Venmo or PayPal payment, the user can choose where the funds will be taken from, whether it’s the user’s primary checking account, a secondary savings account, a debit card, or a credit card. Second, the transfer of funds happens essentially instantaneously, unlike checks that must be cashed, and that can bounce for insufficient funds.PayPal is the pioneer in this field, having been established in the late 1990s and then soon after becoming the payment tool that facilitated millions of eBay transactions. Venmo, in contrast, is the new kid on the block, though a popular one. Founded in 2009, Venmo was acquired three years later by Braintree in 2012, and then by PayPal. How Do Venmo and PayPal Work? The basic functionality and setup of both services are the same. You create a free account with the service, establishing your security credentials. You then link at least one bank account for transfers and optionally add other payment methods, like additional bank accounts or debit and credit cards.When you’re ready to pay someone, you enter or search for their contact info, enter the amount to pay, and choose the payment method you’d like to use for the charge. Venmo includes a button to request funds instead of sending them — PayPal does not have a "request" button, but still allows you to receive funds.PayPal and Venmo fund your payments by creating ACH transfers to and from your linked bank account, while those opting to use a debit or credit card will see the payment amount added to your statement like any other purchase. Who Should Use Venmo or PayPal? For those making primarily personal payments to someone they know and trust, Venmo is the ideal choice. With its social interface, making payments with Venmo and seeing exchanges among your contacts feels like a friendly and personable arena.PayPal can also be used for paying your friends and family. Whichever platform is best for you will depend on which one more of your contacts are using.But if you’re selling products, or are regularly paying for online purchases, a PayPal account will serve you much better. Though Venmo has begun to establish a Venmo Business account, it is still a fledgling service.In contrast, PayPal has been serving merchants and small businesses since 1998, and it offers the richest menu of merchant supports of any digital payment app. How We Evaluated Venmo vs. PayPal To help you understand when each of the two digital payment apps makes the most sense, we delved into PayPal’s and Venmo’s terms on features, payment transaction fees, bank transfer fees, transaction limits, and business/merchant offerings. By laying out a head-to-head comparison on these aspects, it should be easy to see which app will best serve your different needs, or possibly conclude that the best option is to have an account with each. simonlong / 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. BusinessofApps.com. “Venmo Revenue and Usage Statistics (2022).” BusinessofApps.com. “Paypal Revenue and Usage Statistics (2022).” Related Articles Venmo Teen Debit Card Review 2024 What Is PayPal and How Does it Work? The Best Money Transfer Apps for 2024 How Safe Is Venmo and Is It Free? Best Ways to Send Money as a Teen MoneyGram vs. PayPal vs. Xoom: Who Has the Lowest Fees? Related Terms What Is PayPal and How Does it Work? PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. more What Is a Mobile Wallet? A mobile wallet is an app that stores payment card information and other on a mobile device. more Merchant Services: Their Role in Business, How They Work, and Benefits Merchant services help businesses accept and process electronic payments from customers. They can include point-of-sale systems, credit card readers, payment gateways, and online transaction processing. more Unified Payments Interface (UPI): Definition and How It Works A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. more Remittance: What It Is and How to Send One A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. more What Is a Digital Wallet? A digital wallet is an application on an electronic device that stores payment information and allows you to securely make purchases without carrying cash or cards. more

https://www.investopedia.com/terms/c/closed-endinvestment.asp

How a Closed-End Fund Works and Differs From an Open-End Fund

<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-closed-end-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 Closed-End Fund? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A closed-end fund is a type of mutual fund that issues a fixed number of shares through one initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund. </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 contrast, an open-end fund, such as most mutual funds and exchange-traded funds (ETFs), accepts a constant flow of new investment capital. It issues new shares and buys back its own shares on demand. </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"> Many municipal bond funds and some global investment funds are closed-end funds. </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 initial capital for a closed-end fund is raised through a one-time offering of a limited number of shares in the fund.</li><li>The shares may then be bought and sold on a public stock exchange, but no new shares can be created.</li><li>Closed-end funds are usually actively managed, unlike index mutual funds and many ETFs, and typically concentrate on a single industry, sector, or region.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-closed-end-funds"></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 Closed-End Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Like many mutual funds, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mutualfund/05/introtoclosed.asp">closed-end fund has a manager</a> overseeing the portfolio and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">actively buying</a>, selling, and holding assets. </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"> Similar to stocks and ETFs, its shares fluctuate in price throughout the trading day. However, the closed-end fund's parent company will issue no additional shares, and the fund itself won't buy back shares—unless the closed-end fund is an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/120516/what-interval-fund.asp">interval fund</a>—which is a type of closed-end fund that can buy back shares. </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"> Closed-end funds and open-end mutual funds have many similarities. Both make distributions of income and capital gains to their shareholders. Both charge an annual <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> for their services. Moreover, the companies that offer them must be registered with the Securities and Exchange Commission (SEC).<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> <span class="heading-toc" id="toc-closed-end-funds-vs-open-end-funds"></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"> Closed-End Funds vs. Open-End Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Closed-end funds differ from open-end funds in fundamental ways. As noted, a closed-end fund raises a prescribed amount of capital in a one-time <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/052615/what-difference-between-exchange-traded-funds-etfs-and-closed-end-funds.asp">offering of a fixed number of shares</a>. Once the shares are sold, the offering is "closed." </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"> Most mutual and exchange-traded funds constantly accept new investor dollars, issuing additional shares, and redeeming—or buying back—shares from shareholders who wish to sell. </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"> A closed-end fund lists on a stock exchange where the shares trade like stocks throughout the trading day. </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"> Open-end mutual funds price their shares only once a day, at the end of the trading day, basing the price on the <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> of the portfolio. The stock price of a closed-end fund fluctuates according to the usual forces of supply and demand and the changing values of the fund's holdings. </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 they trade exclusively in the secondary markets, closed-end funds require a brokerage account to buy and sell. Open-end funds can usually be purchased directly through the fund's sponsoring investment company. </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-comparisonlist mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_29-0"> <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>Diversified portfolio</p></li> <li><p>Professional management</p></li> <li><p>Transparent pricing</p></li> <li><p>Potential for higher yields</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 volatility</p></li> <li><p>Less liquid than open-end funds</p></li> <li><p>Available only through brokers</p></li> <li><p>May get heavily discounted</p></li> </ul> </div> </div></div> <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-closed-end-funds-and-net-asset-value-nav"></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"> Closed-End Funds and Net Asset Value (NAV) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Its pricing is one of the unique characteristics of a closed-end fund. The NAV of the fund is calculated regularly and based on the value of the assets in the fund. However, the price that it trades for on the exchange is market-driven. This means a closed-end fund can trade <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/at-a-premium.asp">at a premium</a> or a discount to its NAV. A premium price means the price of a share is above the NAV, while a discount is the opposite, below the NAV. </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"> There are several reasons for this. A fund's market price may rise because it is focused on a sector currently popular with investors or because its manager is well-regarded among investors. Or, a history of underperformance or volatility may make investors wary of the fund, driving down its share value. </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-closed-end-fund-performance"></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"> Closed-End Fund Performance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Closed-end funds do not repurchase their shares from investors. That means they don't have to maintain a large cash reserve level, leaving them with more money to invest. </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 also make heavy use of leverage—borrowed money—to boost their returns. </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"> As a result, closed-end funds may be able to offer <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0712/closed-end-vs.-open-end-funds.aspx">higher overall returns</a> than their open-fund mutual fund counterparts. </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-examples-of-closed-end-funds"></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"> Examples of Closed-End Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> There are many different types of closed end funds. These can include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/retirement/051616/what-are-nontraded-bdcs-and-should-you-stay-away-them.asp">business development companies (BDCs)</a>, real estate funds, commodity funds, and bond funds. The largest type of closed-end fund, as measured by assets under management, is the municipal bond fund. These large funds invest in the debt obligations of state and local governments and federal government agencies. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundmanager.asp">Managers</a> of these funds often seek broad diversification to minimize risk but may also rely on leverage to maximize returns. </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"> Managers also build closed-end global, international, and emerging markets funds that mix stocks and fixed-income instruments. </p> <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-callout mntl-block" id="mntl-sc-block_48-0"><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_49-0"><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>Global funds combine U.S. and international securities. International funds purchase only non-U.S. securities. Emerging markets funds focus on fast-growing and volatile foreign sectors and regions.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> One of the largest closed-end funds is the Eaton Vance Tax-Managed Global Diversified Equity Income Fund (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=EXG">EXG</a>). Founded in 2007, it had total net assets of $2.7 billion as of Dec. 31, 2023.<span class="ql-inline-citation" data-cite="4"></span> The primary investment objective is to provide current income and gains, with a secondary objective of capital appreciation. </p> <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-what-are-the-advantages-of-a-closed-end-fund"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Advantages of a Closed-End Fund?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Shares of a closed-end fund trade throughout the day on a stock exchange, and that market-driven price may differ from its NAV. This can provide opportunities for profiting from higher or lower values.</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-how-are-closed-end-funds-different-from-open-end-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Are Closed-End Funds Different From Open-End Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An open-end mutual fund issues new shares whenever an investor chooses to buy into it and repurchases them when they're available. A closed-end fund issues shares only once. Closed-end funds also tend to use leverage, or borrowed money, to boost their returns to investors. That means higher potential rewards in good times and higher potential risks in bad times.</p></div> </div> <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-downside-to-closed-end-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Downside to Closed-End Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>One of the significant downsides to closed-end funds is that no new shares are issued. So, to gain access to a closed-end fund, you'd have to find someone willing to sell shares at a premium or wait until some open up on the market.</p></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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Closed-end funds are funds that only issue shares once. When they are all sold, there are no more available unless an owner decides to sell them. Closed-end funds are generally priced by their net asset value, but prices fluctuate throughout a trading day because they are actively traded. </p></div>

## What Is a Closed-End Fund? A closed-end fund is a type of mutual fund that issues a fixed number of shares through one initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund. In contrast, an open-end fund, such as most mutual funds and exchange-traded funds (ETFs), accepts a constant flow of new investment capital. It issues new shares and buys back its own shares on demand. Many municipal bond funds and some global investment funds are closed-end funds. ### Key Takeaways * The initial capital for a closed-end fund is raised through a one-time offering of a limited number of shares in the fund. * The shares may then be bought and sold on a public stock exchange, but no new shares can be created. * Closed-end funds are usually actively managed, unlike index mutual funds and many ETFs, and typically concentrate on a single industry, sector, or region. ## Understanding Closed-End Funds Like many mutual funds, a [closed-end fund has a manager](https://www.investopedia.com/articles/mutualfund/05/introtoclosed.asp) overseeing the portfolio and [actively buying](https://www.investopedia.com/terms/a/activemanagement.asp), selling, and holding assets. Similar to stocks and ETFs, its shares fluctuate in price throughout the trading day. However, the closed-end fund's parent company will issue no additional shares, and the fund itself won't buy back shares—unless the closed-end fund is an [interval fund](https://www.investopedia.com/articles/investing/120516/what-interval-fund.asp)—which is a type of closed-end fund that can buy back shares. Closed-end funds and open-end mutual funds have many similarities. Both make distributions of income and capital gains to their shareholders. Both charge an annual [expense ratio](https://www.investopedia.com/terms/e/expenseratio.asp) for their services. Moreover, the companies that offer them must be registered with the Securities and Exchange Commission (SEC). ## Closed-End Funds vs. Open-End Funds Closed-end funds differ from open-end funds in fundamental ways. As noted, a closed-end fund raises a prescribed amount of capital in a one-time [offering of a fixed number of shares](https://www.investopedia.com/ask/answers/052615/what-difference-between-exchange-traded-funds-etfs-and-closed-end-funds.asp). Once the shares are sold, the offering is "closed." Most mutual and exchange-traded funds constantly accept new investor dollars, issuing additional shares, and redeeming—or buying back—shares from shareholders who wish to sell. A closed-end fund lists on a stock exchange where the shares trade like stocks throughout the trading day. Open-end mutual funds price their shares only once a day, at the end of the trading day, basing the price on the [net asset value](https://www.investopedia.com/terms/n/nav.asp) of the portfolio. The stock price of a closed-end fund fluctuates according to the usual forces of supply and demand and the changing values of the fund's holdings. Because they trade exclusively in the secondary markets, closed-end funds require a brokerage account to buy and sell. Open-end funds can usually be purchased directly through the fund's sponsoring investment company. Pros * Diversified portfolio * Professional management * Transparent pricing * Potential for higher yields Cons * Subject to volatility * Less liquid than open-end funds * Available only through brokers * May get heavily discounted ## Closed-End Funds and Net Asset Value (NAV) Its pricing is one of the unique characteristics of a closed-end fund. The NAV of the fund is calculated regularly and based on the value of the assets in the fund. However, the price that it trades for on the exchange is market-driven. This means a closed-end fund can trade [at a premium](https://www.investopedia.com/terms/a/at-a-premium.asp) or a discount to its NAV. A premium price means the price of a share is above the NAV, while a discount is the opposite, below the NAV. There are several reasons for this. A fund's market price may rise because it is focused on a sector currently popular with investors or because its manager is well-regarded among investors. Or, a history of underperformance or volatility may make investors wary of the fund, driving down its share value. ## Closed-End Fund Performance Closed-end funds do not repurchase their shares from investors. That means they don't have to maintain a large cash reserve level, leaving them with more money to invest. They can also make heavy use of leverage—borrowed money—to boost their returns. As a result, closed-end funds may be able to offer [higher overall returns](https://www.investopedia.com/financial-edge/0712/closed-end-vs.-open-end-funds.aspx) than their open-fund mutual fund counterparts. ## Examples of Closed-End Funds There are many different types of closed end funds. These can include [business development companies (BDCs)](https://www.investopedia.com/articles/retirement/051616/what-are-nontraded-bdcs-and-should-you-stay-away-them.asp), real estate funds, commodity funds, and bond funds. The largest type of closed-end fund, as measured by assets under management, is the municipal bond fund. These large funds invest in the debt obligations of state and local governments and federal government agencies. [Managers](https://www.investopedia.com/terms/f/fundmanager.asp) of these funds often seek broad diversification to minimize risk but may also rely on leverage to maximize returns. Managers also build closed-end global, international, and emerging markets funds that mix stocks and fixed-income instruments. ### Global funds combine U.S. and international securities. International funds purchase only non-U.S. securities. Emerging markets funds focus on fast-growing and volatile foreign sectors and regions. One of the largest closed-end funds is the Eaton Vance Tax-Managed Global Diversified Equity Income Fund ([EXG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=EXG)). Founded in 2007, it had total net assets of $2.7 billion as of Dec. 31, 2023. The primary investment objective is to provide current income and gains, with a secondary objective of capital appreciation. ## What Are the Advantages of a Closed-End Fund? Shares of a closed-end fund trade throughout the day on a stock exchange, and that market-driven price may differ from its NAV. This can provide opportunities for profiting from higher or lower values. ## How Are Closed-End Funds Different From Open-End Funds? An open-end mutual fund issues new shares whenever an investor chooses to buy into it and repurchases them when they're available. A closed-end fund issues shares only once. Closed-end funds also tend to use leverage, or borrowed money, to boost their returns to investors. That means higher potential rewards in good times and higher potential risks in bad times. ## What Is the Downside to Closed-End Funds? One of the significant downsides to closed-end funds is that no new shares are issued. So, to gain access to a closed-end fund, you'd have to find someone willing to sell shares at a premium or wait until some open up on the market. ## The Bottom Line Closed-end funds are funds that only issue shares once. When they are all sold, there are no more available unless an owner decides to sell them. Closed-end funds are generally priced by their net asset value, but prices fluctuate throughout a trading day because they are actively traded.

What Is a Closed-End Fund? A closed-end fund is a type of mutual fund that issues a fixed number of shares through one initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund. In contrast, an open-end fund, such as most mutual funds and exchange-traded funds (ETFs), accepts a constant flow of new investment capital. It issues new shares and buys back its own shares on demand. Many municipal bond funds and some global investment funds are closed-end funds. Key Takeaways The initial capital for a closed-end fund is raised through a one-time offering of a limited number of shares in the fund.The shares may then be bought and sold on a public stock exchange, but no new shares can be created.Closed-end funds are usually actively managed, unlike index mutual funds and many ETFs, and typically concentrate on a single industry, sector, or region. Understanding Closed-End Funds Like many mutual funds, a closed-end fund has a manager overseeing the portfolio and actively buying, selling, and holding assets. Similar to stocks and ETFs, its shares fluctuate in price throughout the trading day. However, the closed-end fund's parent company will issue no additional shares, and the fund itself won't buy back shares—unless the closed-end fund is an interval fund—which is a type of closed-end fund that can buy back shares. Closed-end funds and open-end mutual funds have many similarities. Both make distributions of income and capital gains to their shareholders. Both charge an annual expense ratio for their services. Moreover, the companies that offer them must be registered with the Securities and Exchange Commission (SEC). Closed-End Funds vs. Open-End Funds Closed-end funds differ from open-end funds in fundamental ways. As noted, a closed-end fund raises a prescribed amount of capital in a one-time offering of a fixed number of shares. Once the shares are sold, the offering is "closed." Most mutual and exchange-traded funds constantly accept new investor dollars, issuing additional shares, and redeeming—or buying back—shares from shareholders who wish to sell. A closed-end fund lists on a stock exchange where the shares trade like stocks throughout the trading day. Open-end mutual funds price their shares only once a day, at the end of the trading day, basing the price on the net asset value of the portfolio. The stock price of a closed-end fund fluctuates according to the usual forces of supply and demand and the changing values of the fund's holdings. Because they trade exclusively in the secondary markets, closed-end funds require a brokerage account to buy and sell. Open-end funds can usually be purchased directly through the fund's sponsoring investment company. Pros Diversified portfolio Professional management Transparent pricing Potential for higher yields Cons Subject to volatility Less liquid than open-end funds Available only through brokers May get heavily discounted Closed-End Funds and Net Asset Value (NAV) Its pricing is one of the unique characteristics of a closed-end fund. The NAV of the fund is calculated regularly and based on the value of the assets in the fund. However, the price that it trades for on the exchange is market-driven. This means a closed-end fund can trade at a premium or a discount to its NAV. A premium price means the price of a share is above the NAV, while a discount is the opposite, below the NAV. There are several reasons for this. A fund's market price may rise because it is focused on a sector currently popular with investors or because its manager is well-regarded among investors. Or, a history of underperformance or volatility may make investors wary of the fund, driving down its share value. Closed-End Fund Performance Closed-end funds do not repurchase their shares from investors. That means they don't have to maintain a large cash reserve level, leaving them with more money to invest. They can also make heavy use of leverage—borrowed money—to boost their returns. As a result, closed-end funds may be able to offer higher overall returns than their open-fund mutual fund counterparts. Examples of Closed-End Funds There are many different types of closed end funds. These can include business development companies (BDCs), real estate funds, commodity funds, and bond funds. The largest type of closed-end fund, as measured by assets under management, is the municipal bond fund. These large funds invest in the debt obligations of state and local governments and federal government agencies. Managers of these funds often seek broad diversification to minimize risk but may also rely on leverage to maximize returns. Managers also build closed-end global, international, and emerging markets funds that mix stocks and fixed-income instruments. Global funds combine U.S. and international securities. International funds purchase only non-U.S. securities. Emerging markets funds focus on fast-growing and volatile foreign sectors and regions. One of the largest closed-end funds is the Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG). Founded in 2007, it had total net assets of $2.7 billion as of Dec. 31, 2023. The primary investment objective is to provide current income and gains, with a secondary objective of capital appreciation. What Are the Advantages of a Closed-End Fund? Shares of a closed-end fund trade throughout the day on a stock exchange, and that market-driven price may differ from its NAV. This can provide opportunities for profiting from higher or lower values. How Are Closed-End Funds Different From Open-End Funds? An open-end mutual fund issues new shares whenever an investor chooses to buy into it and repurchases them when they're available. A closed-end fund issues shares only once. Closed-end funds also tend to use leverage, or borrowed money, to boost their returns to investors. That means higher potential rewards in good times and higher potential risks in bad times. What Is the Downside to Closed-End Funds? One of the significant downsides to closed-end funds is that no new shares are issued. So, to gain access to a closed-end fund, you'd have to find someone willing to sell shares at a premium or wait until some open up on the market. The Bottom Line Closed-end funds are funds that only issue shares once. When they are all sold, there are no more available unless an owner decides to sell them. Closed-end funds are generally priced by their net asset value, but prices fluctuate throughout a trading day because they are actively traded.

https://www.investopedia.com/articles/etfs/top-etfs-auto-industry/

2 Auto ETFs for Q4 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 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041615/what-automotive-sector.asp">auto industry</a> includes companies that manufacture cars, trucks, vans, and commercial vehicles, as well as companies that supply automobile parts and technology. Well-known names in the industry include Tesla Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA">TSLA</a>), now the world’s largest automaker by <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketvalue.asp">market value</a>, Ford Motor Co. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=F">F</a>), Toyota Motor Corp. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TM">TM</a>), and General Motors Co. (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GM">GM</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"> Investors looking to invest in a specific industry can typically do so by using an <a 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> focused on that area. An ETF allows investors to hold a basket of stocks operating within a specific industry, thus avoiding the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/idiosyncraticrisk.asp">idiosyncratic risk</a> of investing in a single stock. </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"> But that's no longer the case when it comes to autos. As of this year, there is no pure-play ETF specifically devoted to the auto industry. That's because CARZ, the closest thing to a pure-play auto ETF, recently changed its investment objective and is now less focused on the industry. </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>The auto industry outperformed the broader market over the past year.</li><li>The closest thing to auto exchange-traded fund (ETF) are two funds: CARZ and VCAR.</li><li>The top holdings of these funds are Tesla Inc. and Apple Inc., respectively.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> In January of 2022, the previously named First Trust NASDAQ Global Auto Index Fund changed its investment objective to focus on companies primarily involved in three areas: the development and sales of electric and autonomous vehicles, future auto technologies and products, and related technologies. It also changed the index that it tracks and is now called the First Trust S-Network Future Vehicles &amp; Technology ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CARZ">CARZ</a>).<span class="ql-inline-citation" data-cite="19"></span> It is the closest thing to an auto ETF that trades in the U.S., excluding <a data-component="link" data-ordinal="2" 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="3" 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="4" 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="20"></span> In addition to CARZ, a newer auto-focused fund, called the Simplify Volt RoboCar Disruption and Tech ETF (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=VCAR">VCAR</a>), provides targeted exposure to a certain portion of the auto industry. </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 automobile industry, as represented by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp">benchmark</a> S&amp;P 500 Automobiles Industry Index, has outperformed the broader market in the past year. The index has provided a one-year trailing total return of 10.7%, compared with -10.6% for the S&amp;P 500. We note that this index includes only U.S. companies, while CARZ and VCAR each have a global focus. As mentioned, both of these funds are not pure-play auto industry ETFs. The performance figures above and all data below are as of Sept. 7, 2022.<span class="ql-inline-citation" data-cite="27"></span><span class="ql-inline-citation" data-cite="26"></span> In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. </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-warning" 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">Warning</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>ETFs with very low <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>—less than $50 million—usually have lower <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquidity</a> than larger ETFs. This can result in higher trading costs that can negate some of your investment gains or increase your losses.</p></div></div></div> <span class="heading-toc" id="toc-first-trust-s-network-future-vehicles--technology-etf-carz"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_15-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=CARZ" rel="nocaes">First Trust S-Network Future Vehicles &amp; Technology ETF (CARZ)</a> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <li>Performance over one-year: -20.8%</li><li>Expense ratio: 0.70%</li><li>Annual dividend yield: 0.72%</li><li>Three-month average daily volume: 4,106</li><li>AUM: $47.5 million</li><li>Inception fate: May 9, 2011</li><li>Issuer: First Trust</li> </ul> <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"> CARZ tracks the S-Network Electric &amp; Future Vehicle Ecosystem Index, which targets companies operating in the electric and future vehicle ecosystem. That includes companies involved in manufacturing electric and autonomous vehicles or providing enabling technologies and materials for the manufacturing process. It also includes companies developing and manufacturing future automotive technology and products or companies providing information technology solutions. The ETF normally invests at least 90% of its assets in the equities that comprise the index. The majority of the fund's holdings are based in the U.S., with the remainder represented by a number of other developed and emerging markets, including South Korea, Japan, and China. More than half of the fund's holdings are represented by the information technology sector with another significant chunk devoted to the consumer discretionary sector. The fund follows a value-centric strategy, focusing on stocks that look relatively cheap compared to others in the same sector.<span class="ql-inline-citation" data-cite="12"></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_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 holdings of CARZ include 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>), an electric vehicle and related equipment manufacturer; 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>), a provider of technology hardware, software, and services, including entertainment and news; and Sponsored ADRs of Taiwan Semiconductor Manufacturing Co., Ltd. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSM">TSM</a>), the Taiwan-based semiconductor manufacturer.<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_21-0"></div> <span class="heading-toc" id="toc-simplify-volt-robocar-disruption-and-tech-etf-vcar"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_22-0"> <a class="mntl-sc-block-heading__link" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=VCAR" rel="nocaes">Simplify Volt RoboCar Disruption and Tech ETF (VCAR)</a> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li>Performance over one-year: -28.9%</li><li>Expense ratio: 0.95%</li><li>Annual dividend yield: N/A</li><li>Three-month average daily volume: 1,509</li><li>AUM: $4.1 million</li><li>Inception fate: Dec. 28, 2020</li><li>Issuer: Simplify Asset Management Inc.</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"> VCAR is an actively-managed fund that targets companies poised to dominate the burgeoning industry of autonomous driving. The fund utilizes options in an effort to enhance upside while minimizing drawdowns.<span class="ql-inline-citation" data-cite="23"></span> VCAR has a global focus and is highly concentrated in a small number of positions, with the top 10 holdings accounting for nearly 61% of invested 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_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The top holdings of VCAR include Apple; Microsoft Corp. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>), the multinational technology company; and Tesla.<span class="ql-inline-citation" data-cite="24"></span><br/> </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"> <em>The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.</em> </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 [auto industry](https://www.investopedia.com/ask/answers/041615/what-automotive-sector.asp) includes companies that manufacture cars, trucks, vans, and commercial vehicles, as well as companies that supply automobile parts and technology. Well-known names in the industry include Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)), now the world’s largest automaker by [market value](https://www.investopedia.com/terms/m/marketvalue.asp), Ford Motor Co. ([F](https://www.investopedia.com/markets/quote?tvwidgetsymbol=F)), Toyota Motor Corp. ([TM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TM)), and General Motors Co. ([GM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GM)). Investors looking to invest in a specific industry can typically do so by using an [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) focused on that area. An ETF allows investors to hold a basket of stocks operating within a specific industry, thus avoiding the [idiosyncratic risk](https://www.investopedia.com/terms/i/idiosyncraticrisk.asp) of investing in a single stock. But that's no longer the case when it comes to autos. As of this year, there is no pure-play ETF specifically devoted to the auto industry. That's because CARZ, the closest thing to a pure-play auto ETF, recently changed its investment objective and is now less focused on the industry. ### Key Takeaways * The auto industry outperformed the broader market over the past year. * The closest thing to auto exchange-traded fund (ETF) are two funds: CARZ and VCAR. * The top holdings of these funds are Tesla Inc. and Apple Inc., respectively. In January of 2022, the previously named First Trust NASDAQ Global Auto Index Fund changed its investment objective to focus on companies primarily involved in three areas: the development and sales of electric and autonomous vehicles, future auto technologies and products, and related technologies. It also changed the index that it tracks and is now called the First Trust S-Network Future Vehicles & Technology ETF ([CARZ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CARZ)). It is the closest thing to an auto ETF that trades in the U.S., 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). In addition to CARZ, a newer auto-focused fund, called the Simplify Volt RoboCar Disruption and Tech ETF ([VCAR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VCAR)), provides targeted exposure to a certain portion of the auto industry. The automobile industry, as represented by the [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) S&P 500 Automobiles Industry Index, has outperformed the broader market in the past year. The index has provided a one-year trailing total return of 10.7%, compared with -10.6% for the S&P 500. We note that this index includes only U.S. companies, while CARZ and VCAR each have a global focus. As mentioned, both of these funds are not pure-play auto industry ETFs. The performance figures above and all data below are as of Sept. 7, 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. ### Warning ETFs with very low [assets under management](https://www.investopedia.com/terms/a/aum.asp)—less than $50 million—usually have lower [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) than larger ETFs. This can result in higher trading costs that can negate some of your investment gains or increase your losses. ## [First Trust S-Network Future Vehicles & Technology ETF (CARZ)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=CARZ) * Performance over one-year: -20.8% * Expense ratio: 0.70% * Annual dividend yield: 0.72% * Three-month average daily volume: 4,106 * AUM: $47.5 million * Inception fate: May 9, 2011 * Issuer: First Trust CARZ tracks the S-Network Electric & Future Vehicle Ecosystem Index, which targets companies operating in the electric and future vehicle ecosystem. That includes companies involved in manufacturing electric and autonomous vehicles or providing enabling technologies and materials for the manufacturing process. It also includes companies developing and manufacturing future automotive technology and products or companies providing information technology solutions. The ETF normally invests at least 90% of its assets in the equities that comprise the index. The majority of the fund's holdings are based in the U.S., with the remainder represented by a number of other developed and emerging markets, including South Korea, Japan, and China. More than half of the fund's holdings are represented by the information technology sector with another significant chunk devoted to the consumer discretionary sector. The fund follows a value-centric strategy, focusing on stocks that look relatively cheap compared to others in the same sector. The top holdings of CARZ include Tesla Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)), an electric vehicle and related equipment manufacturer; Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)), a provider of technology hardware, software, and services, including entertainment and news; and Sponsored ADRs of Taiwan Semiconductor Manufacturing Co., Ltd. ([TSM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSM)), the Taiwan-based semiconductor manufacturer. ## [Simplify Volt RoboCar Disruption and Tech ETF (VCAR)](https://www.investopedia.com/markets/quote?tvwidgetsymbol=VCAR) * Performance over one-year: -28.9% * Expense ratio: 0.95% * Annual dividend yield: N/A * Three-month average daily volume: 1,509 * AUM: $4.1 million * Inception fate: Dec. 28, 2020 * Issuer: Simplify Asset Management Inc. VCAR is an actively-managed fund that targets companies poised to dominate the burgeoning industry of autonomous driving. The fund utilizes options in an effort to enhance upside while minimizing drawdowns. VCAR has a global focus and is highly concentrated in a small number of positions, with the top 10 holdings accounting for nearly 61% of invested assets. The top holdings of VCAR include Apple; Microsoft Corp. ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)), the multinational technology company; and Tesla. *The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

The auto industry includes companies that manufacture cars, trucks, vans, and commercial vehicles, as well as companies that supply automobile parts and technology. Well-known names in the industry include Tesla Inc. (TSLA), now the world’s largest automaker by market value, Ford Motor Co. (F), Toyota Motor Corp. (TM), and General Motors Co. (GM). Investors looking to invest in a specific industry can typically do so by using an exchange-traded fund (ETF) focused on that area. An ETF allows investors to hold a basket of stocks operating within a specific industry, thus avoiding the idiosyncratic risk of investing in a single stock. But that's no longer the case when it comes to autos. As of this year, there is no pure-play ETF specifically devoted to the auto industry. That's because CARZ, the closest thing to a pure-play auto ETF, recently changed its investment objective and is now less focused on the industry. Key Takeaways The auto industry outperformed the broader market over the past year.The closest thing to auto exchange-traded fund (ETF) are two funds: CARZ and VCAR.The top holdings of these funds are Tesla Inc. and Apple Inc., respectively. In January of 2022, the previously named First Trust NASDAQ Global Auto Index Fund changed its investment objective to focus on companies primarily involved in three areas: the development and sales of electric and autonomous vehicles, future auto technologies and products, and related technologies. It also changed the index that it tracks and is now called the First Trust S-Network Future Vehicles & Technology ETF (CARZ). It is the closest thing to an auto ETF that trades in the U.S., excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). In addition to CARZ, a newer auto-focused fund, called the Simplify Volt RoboCar Disruption and Tech ETF (VCAR), provides targeted exposure to a certain portion of the auto industry. The automobile industry, as represented by the benchmark S&P 500 Automobiles Industry Index, has outperformed the broader market in the past year. The index has provided a one-year trailing total return of 10.7%, compared with -10.6% for the S&P 500. We note that this index includes only U.S. companies, while CARZ and VCAR each have a global focus. As mentioned, both of these funds are not pure-play auto industry ETFs. The performance figures above and all data below are as of Sept. 7, 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large. Warning ETFs with very low assets under management—less than $50 million—usually have lower liquidity than larger ETFs. This can result in higher trading costs that can negate some of your investment gains or increase your losses. First Trust S-Network Future Vehicles & Technology ETF (CARZ) Performance over one-year: -20.8%Expense ratio: 0.70%Annual dividend yield: 0.72%Three-month average daily volume: 4,106AUM: $47.5 millionInception fate: May 9, 2011Issuer: First Trust CARZ tracks the S-Network Electric & Future Vehicle Ecosystem Index, which targets companies operating in the electric and future vehicle ecosystem. That includes companies involved in manufacturing electric and autonomous vehicles or providing enabling technologies and materials for the manufacturing process. It also includes companies developing and manufacturing future automotive technology and products or companies providing information technology solutions. The ETF normally invests at least 90% of its assets in the equities that comprise the index. The majority of the fund's holdings are based in the U.S., with the remainder represented by a number of other developed and emerging markets, including South Korea, Japan, and China. More than half of the fund's holdings are represented by the information technology sector with another significant chunk devoted to the consumer discretionary sector. The fund follows a value-centric strategy, focusing on stocks that look relatively cheap compared to others in the same sector. The top holdings of CARZ include Tesla Inc. (TSLA), an electric vehicle and related equipment manufacturer; Apple Inc. (AAPL), a provider of technology hardware, software, and services, including entertainment and news; and Sponsored ADRs of Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), the Taiwan-based semiconductor manufacturer. Simplify Volt RoboCar Disruption and Tech ETF (VCAR) Performance over one-year: -28.9%Expense ratio: 0.95%Annual dividend yield: N/AThree-month average daily volume: 1,509AUM: $4.1 millionInception fate: Dec. 28, 2020Issuer: Simplify Asset Management Inc. VCAR is an actively-managed fund that targets companies poised to dominate the burgeoning industry of autonomous driving. The fund utilizes options in an effort to enhance upside while minimizing drawdowns. VCAR has a global focus and is highly concentrated in a small number of positions, with the top 10 holdings accounting for nearly 61% of invested assets. The top holdings of VCAR include Apple; Microsoft Corp. (MSFT), the multinational technology company; and Tesla. The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/job-report-preview-april-2024-8640692

What To Expect From Tomorrow's Report on Jobs

<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"> <em>Updates, May 2, 2024: This article has been updated to include the results of the Job Openings and Labor Turnover Survey. </em> </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>Forecasters expect U.S. employers to have added nearly a quarter million jobs in April, fewer than March's 303,000 but more than historical averages.<br/></li><li>Should the job market stay hot as expected, there would be less pressure on officials at the Federal Reserve to cut interest rates to stimulate the economy.<br/></li><li>Fed watchers will also keep a close eye on wage growth data, since Fed officials have expressed concerns about wage growth fueling inflation.<br/></li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The job market has been steaming ahead lately, and forecasters don’t see any sign that it slowed down much in April.<br/><br/>Friday’s official report on jobs from the Bureau of Labor Statistics is likely to show employers tacked on another 240,000 jobs in April, 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> That would be a slowdown from the 303,000 added in March, but still solid by historical standards. (For comparison, the economy added an average of 177,000 jobs each month in the three years leading up to the pandemic.)  </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-hot-job-market-not-necessarily-good-news"></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"> Hot Job Market Not Necessarily Good News </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A still-hot job market would be good news for workers, but uncomfortable for financial markets. While this data is released after this week's Fed meeting, it would be one more bit of data pushing policymakers at the Federal Reserve to keep <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-may-2024-meeting-preview-8639782">interest rates higher for longer</a>, maintaining upward pressure on borrowing costs for all kinds of loans.  </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"> Fed officials have kept interest rates high to combat inflation but with the risk of causing unemployment to rise. If the job market stays resilient, there will be less urgency to cut interest rates to prevent job losses.  </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-market-participants-also-watching-data-on-wages"></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"> Market Participants Also Watching Data on Wages </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Markets will also be closely watching how much worker pay increased in April since Fed officials have worried that rapid wage increases could fuel inflation. </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"> The median forecast calls for a 0.3% rise in average hourly wages. High wage increases and hot inflation could stoke concerns that the Fed will increase interest rates at some point to corral inflation that’s proved <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/stubborn-inflation-means-higher-interest-rates-for-longer-8629728">more stubborn than expected</a> this year.  </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"> “If inflation doesn’t reestablish a downward trend soon, the prospect of rate increases will come to the fore,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.<br/><br/>In addition to April’s jobs numbers, the bureau gave more detail on March’s data when it released the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jolts.asp">Job Openings and Labor Turnover Survey (JOLTS)</a>. There were 8.5 million job openings in March, down from 8.8 million in the last month, <a data-component="link" data-ordinal="2" 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">and the fewest since February 2021</a>, the Bureau of Labor Statistics said Wednesday. It was lower than forecasters anticipated, but well over the historical average.<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>

*Updates, May 2, 2024: This article has been updated to include the results of the Job Openings and Labor Turnover Survey.* ### Key Takeaways * Forecasters expect U.S. employers to have added nearly a quarter million jobs in April, fewer than March's 303,000 but more than historical averages. * Should the job market stay hot as expected, there would be less pressure on officials at the Federal Reserve to cut interest rates to stimulate the economy. * Fed watchers will also keep a close eye on wage growth data, since Fed officials have expressed concerns about wage growth fueling inflation. The job market has been steaming ahead lately, and forecasters don’t see any sign that it slowed down much in April. Friday’s official report on jobs from the Bureau of Labor Statistics is likely to show employers tacked on another 240,000 jobs in April, according to a survey of economists by Dow Jones Newswires and the *Wall Street Journal*. That would be a slowdown from the 303,000 added in March, but still solid by historical standards. (For comparison, the economy added an average of 177,000 jobs each month in the three years leading up to the pandemic.)  ## Hot Job Market Not Necessarily Good News A still-hot job market would be good news for workers, but uncomfortable for financial markets. While this data is released after this week's Fed meeting, it would be one more bit of data pushing policymakers at the Federal Reserve to keep [interest rates higher for longer](https://www.investopedia.com/fed-may-2024-meeting-preview-8639782), maintaining upward pressure on borrowing costs for all kinds of loans.  Fed officials have kept interest rates high to combat inflation but with the risk of causing unemployment to rise. If the job market stays resilient, there will be less urgency to cut interest rates to prevent job losses.  ## Market Participants Also Watching Data on Wages Markets will also be closely watching how much worker pay increased in April since Fed officials have worried that rapid wage increases could fuel inflation. The median forecast calls for a 0.3% rise in average hourly wages. High wage increases and hot inflation could stoke concerns that the Fed will increase interest rates at some point to corral inflation that’s proved [more stubborn than expected](https://www.investopedia.com/stubborn-inflation-means-higher-interest-rates-for-longer-8629728) this year.  “If inflation doesn’t reestablish a downward trend soon, the prospect of rate increases will come to the fore,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary. In addition to April’s jobs numbers, the bureau gave more detail on March’s data when it released the [Job Openings and Labor Turnover Survey (JOLTS)](https://www.investopedia.com/terms/j/jolts.asp). There were 8.5 million job openings in March, down from 8.8 million in the last month, [and the fewest since February 2021](https://www.investopedia.com/the-job-market-is-getting-stuck-hiring-firing-and-quitting-all-fell-in-march-8641816), the Bureau of Labor Statistics said Wednesday. It was lower than forecasters anticipated, but well over the historical average. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Updates, May 2, 2024: This article has been updated to include the results of the Job Openings and Labor Turnover Survey. Key Takeaways Forecasters expect U.S. employers to have added nearly a quarter million jobs in April, fewer than March's 303,000 but more than historical averages.Should the job market stay hot as expected, there would be less pressure on officials at the Federal Reserve to cut interest rates to stimulate the economy.Fed watchers will also keep a close eye on wage growth data, since Fed officials have expressed concerns about wage growth fueling inflation. The job market has been steaming ahead lately, and forecasters don’t see any sign that it slowed down much in April.Friday’s official report on jobs from the Bureau of Labor Statistics is likely to show employers tacked on another 240,000 jobs in April, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. That would be a slowdown from the 303,000 added in March, but still solid by historical standards. (For comparison, the economy added an average of 177,000 jobs each month in the three years leading up to the pandemic.)  Hot Job Market Not Necessarily Good News A still-hot job market would be good news for workers, but uncomfortable for financial markets. While this data is released after this week's Fed meeting, it would be one more bit of data pushing policymakers at the Federal Reserve to keep interest rates higher for longer, maintaining upward pressure on borrowing costs for all kinds of loans.  Fed officials have kept interest rates high to combat inflation but with the risk of causing unemployment to rise. If the job market stays resilient, there will be less urgency to cut interest rates to prevent job losses.  Market Participants Also Watching Data on Wages Markets will also be closely watching how much worker pay increased in April since Fed officials have worried that rapid wage increases could fuel inflation. The median forecast calls for a 0.3% rise in average hourly wages. High wage increases and hot inflation could stoke concerns that the Fed will increase interest rates at some point to corral inflation that’s proved more stubborn than expected this year.  “If inflation doesn’t reestablish a downward trend soon, the prospect of rate increases will come to the fore,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.In addition to April’s jobs numbers, the bureau gave more detail on March’s data when it released the Job Openings and Labor Turnover Survey (JOLTS). There were 8.5 million job openings in March, down from 8.8 million in the last month, and the fewest since February 2021, the Bureau of Labor Statistics said Wednesday. It was lower than forecasters anticipated, but well over the historical average. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/palantir-falls-as-analyst-says-it-is-overvalued-amid-ai-hype-8621778

Palantir Falls as Analyst Says It's Overvalued Amid AI Hype

<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>Palantir Technologies shares dropped 6% Thursday after an analyst downgraded the stock, claiming artificial intelligence (AI) hype has left it with an "egregiously rich valuation."</li><li>Analyst Brian White at Monness, Crespi, Hardt &amp; Co. lowered the stock's rating to "sell" from "neutral," writing it's time to get "back to reality" after Palantir's "meteoric rise on the Gen AI rocket."</li><li>Despite Thursday's decline, shares of Palantir have gained nearly 39% year to date.</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"> Shares of Palantir Technologies (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PLTR">PLTR</a>) slumped 6% Thursday after an analyst at Monness, Crespi, Hardt &amp; Co. downgraded the stock, claiming that <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> hype has left it with an "egregiously rich valuation." </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"> Analyst Brian White lowered the stock's rating to "sell" from "neutral" with a 12-month price target of $20, saying it was overvalued because of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/can-palantir-sustain-the-ai-fueled-business-growth-that-sent-its-stock-31-percent-higher-8559397">excitement over the company's position in the AI market</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_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> White said that while the company could be well-positioned to gain from the long-term AI trend and take advantage of geopolitical volatility, “revenue from government-related contracts has proven lumpy, execution spotty, valuation excessive, and we believe the darkest days of this economic downturn are ahead of us.” </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"> White wrote that “after a meteoric rise on the Gen AI rocket, back to reality.” </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"> Despite Thursday’s 6% decline to $23.01, shares of Palantir Technologies are up close to 39% for 2024 so far. </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-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_13-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:74.1%;"> <img alt="PLTR" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/oYxCpBBEbgdECr5zht-Vi3ByKNE=/1453x0/filters:no_upscale():max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/hNrWJnRK-2qlb9p9SH5c8B1uJTw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png" data-srcset="https://www.investopedia.com/thmb/a644ul90XnU3UYPsKDnSc2CR7rE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png 750w" data-tracking-container="true" height="1077" id="mntl-sc-block-image_1-0" width="1453"/> <noscript> <img alt="PLTR" class="img--noscript universal-image__image" height="1077" sizes="750px" src="https://www.investopedia.com/thmb/hNrWJnRK-2qlb9p9SH5c8B1uJTw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png" srcset="https://www.investopedia.com/thmb/a644ul90XnU3UYPsKDnSc2CR7rE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png 750w" width="1453"/> </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 * Palantir Technologies shares dropped 6% Thursday after an analyst downgraded the stock, claiming artificial intelligence (AI) hype has left it with an "egregiously rich valuation." * Analyst Brian White at Monness, Crespi, Hardt & Co. lowered the stock's rating to "sell" from "neutral," writing it's time to get "back to reality" after Palantir's "meteoric rise on the Gen AI rocket." * Despite Thursday's decline, shares of Palantir have gained nearly 39% year to date. Shares of Palantir Technologies ([PLTR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PLTR)) slumped 6% Thursday after an analyst at Monness, Crespi, Hardt & Co. downgraded the stock, claiming that [artificial intelligence (AI)](https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp) hype has left it with an "egregiously rich valuation." Analyst Brian White lowered the stock's rating to "sell" from "neutral" with a 12-month price target of $20, saying it was overvalued because of [excitement over the company's position in the AI market](https://www.investopedia.com/can-palantir-sustain-the-ai-fueled-business-growth-that-sent-its-stock-31-percent-higher-8559397).  White said that while the company could be well-positioned to gain from the long-term AI trend and take advantage of geopolitical volatility, “revenue from government-related contracts has proven lumpy, execution spotty, valuation excessive, and we believe the darkest days of this economic downturn are ahead of us.” White wrote that “after a meteoric rise on the Gen AI rocket, back to reality.” Despite Thursday’s 6% decline to $23.01, shares of Palantir Technologies are up close to 39% for 2024 so far. ![PLTR]() :max_bytes(150000):strip_icc()/PLTR_2024-03-28_16-02-31-262dda835dc4450685ba5b31e30ebcc1.png) TradingView Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Palantir Technologies shares dropped 6% Thursday after an analyst downgraded the stock, claiming artificial intelligence (AI) hype has left it with an "egregiously rich valuation."Analyst Brian White at Monness, Crespi, Hardt & Co. lowered the stock's rating to "sell" from "neutral," writing it's time to get "back to reality" after Palantir's "meteoric rise on the Gen AI rocket."Despite Thursday's decline, shares of Palantir have gained nearly 39% year to date. Shares of Palantir Technologies (PLTR) slumped 6% Thursday after an analyst at Monness, Crespi, Hardt & Co. downgraded the stock, claiming that artificial intelligence (AI) hype has left it with an "egregiously rich valuation." Analyst Brian White lowered the stock's rating to "sell" from "neutral" with a 12-month price target of $20, saying it was overvalued because of excitement over the company's position in the AI market.  White said that while the company could be well-positioned to gain from the long-term AI trend and take advantage of geopolitical volatility, “revenue from government-related contracts has proven lumpy, execution spotty, valuation excessive, and we believe the darkest days of this economic downturn are ahead of us.” White wrote that “after a meteoric rise on the Gen AI rocket, back to reality.” Despite Thursday’s 6% decline to $23.01, shares of Palantir Technologies are up close to 39% for 2024 so far. TradingView Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/the-cost-of-homeschooling-5199813

The Cost of Homeschooling

<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"> As more U.S. parents opt to homeschool their children, it's important for families to know its costs. The beginning of the 2020-2021 academic year saw the number of homeschooling households climb to 11.1%.<span class="ql-inline-citation" data-cite="1"></span> That uptick was largely attributed to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723">COVID-19 pandemic</a>, but for many families, homeschooling is the preferred choice for childhood education. Deciding whether a homeschool lifestyle is right for your family requires not just an understanding of what's involved, but also a plan for how to pay for it. </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 COVID-19 pandemic spurred an increase in the number of families choosing to homeschool.</li><li>Homeschooling costs can vary by family based on the number of children, the type of curriculum taught, and whether children participate in extracurricular activities.</li><li>Only a handful of states offer tax breaks for families that choose to homeschool rather than have their children attend public or private school.</li><li>Families have numerous ways to save money while homeschooling in order to bring the cost down.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-average-cost-of-homeschooling"></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"> Average Cost of Homeschooling </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> A variety of costs are involved when you choose to homeschool your children. Some of the most common expenses homeschooling families may pay 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>Curriculum and learning materials</li><li>School supplies (for example, pencils, notebooks, and more)</li><li>Field trips</li><li>Extracurricular activities (for example, sports, art lessons, music lessons, and more)</li><li>Cooperative fees for families who belong to a homeschool co-operative</li><li>Testing fees, if state homeschooling guidelines mandate regular testing</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"> The cost can easily add up, averaging $700 to $1,800 per student annually.<span class="ql-inline-citation" data-cite="2"></span> For a family of four with two school-aged children, this means the average cost of homeschooling can range from $1,400 to $3,600 per year. </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 three main reasons why people homeschool their children are school safety, moral instruction, and family life.<span class="ql-inline-citation" data-cite="10"></span></p></div></div></div> <span class="heading-toc" id="toc-public-school-vs-private-school-costs"></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"> Public School vs. Private School Costs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Let's take a look at how much it costs to send a child to public or private school to see how homeschooling compares: </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>Public school is free for families in the United States. Funding comes from property taxes and government aid. </li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100115/private-school-your-child-good-value.asp">Private school</a>, on the other hand, can be expensive. The average annual tuition of sending a child to a private K-12 school is $23,839.<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_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> But the costs can rise even more. Parents of private school students have to consider additional expenses like laptops, books, uniforms, field trips, and supplies. With public schools, parents' costs typically extend to things like school supplies, clothing, field trip fees, extracurricular activities, and meals. </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"> According to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/national-retail-federation-nrf.asp">National Retail Federation (NRF)</a>, the typical family spent $849 on back-to-school shopping for the 2021 school year. That amount will likely increase to $890.07 per family in 2023, according to the organization.<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_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Adding extracurricular activities like sports into the mix can drive spending even higher. On average, parents spend $883 per child on sports each year, but some sports, such as field hockey or gymnastics, can come with a much higher price tag.<span class="ql-inline-citation" data-cite="4"></span> Parents may also shell out money for music lessons, art clubs, drama, or band—to rent a musical instrument, for example, or to pay for art supplies.<br/> </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_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 considering homeschooling in lieu of public or private school, it's important to check your state's requirements for registration, attendance, testing, and curriculum.</p></div></div></div> <span class="heading-toc" id="toc-hidden-costs-of-homeschooling"></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"> Hidden Costs of Homeschooling </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Compared to the cost of sending a child to private school, or even public school, homeschooling could save a family money. But it's important to keep in mind that some costs may be higher when homeschooling—or at least less obvious when planning a household budget. </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"> Here are some of the ways homeschooling can raise costs for families: </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>Curriculum: </strong>Though it's possible to find a free homeschool curriculum online or put together a curriculum yourself, some families prefer to purchase one. At the higher end, it's possible to spend $1,000-plus on a single prepackaged curriculum, which can quickly add up for families that have children at different grade levels.</li><li><strong>Transportation: </strong>Homeschooling doesn't mean families spend all day at home. Taking field trips, signing kids up for art classes, or joining a co-op with other homeschool families can help expand learning horizons and encourage social interaction. But it can also mean spending more on gas or transportation each month.</li><li><strong>Supplies:</strong> Purchasing supplies for homeschooling can involve more than just notebooks, pencils, or markers. For instance, families may need to purchase a microscope and other equipment to complete science labs. Or they may have to procure arts-and-crafts supplies to complete hands-on projects. All of that can add to the total cost of homeschooling.</li><li><strong>Food:</strong> Kids attending public school may be eligible for reduced or free lunch depending on their state's guidelines. On the other hand, having kids at home all day could add to families' grocery spending if it means more frequent snacking or family meals together.</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"> There's also the income factor to consider. In a two-parent household, one parent may be the sole <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/breadwinner.asp">breadwinner</a> while the other handles homeschooling duties. This can mean the loss of one income if the homeschooling parent previously held a job. And though homeschooling as a single parent is not impossible, it can take creativity to balance the need for income with the demands of homeschooling.<br/> </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-tip" 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" 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><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/070715/pros-cons-working-home.asp">Working from home</a> can help avoid a loss of income, but it can come with its own costs, such as outfitting an office space, paying for cloud storage, or spending more on Internet and phone service.</p></div></div></div> <span class="heading-toc" id="toc-tax-breaks-for-homeschooling-families"></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"> Tax Breaks for Homeschooling Families </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> You may be wondering if the federal government provides any tax benefits to help homeschooling families recoup some of their costs. Unfortunately, the answer is no. There are no federal tax credits or deductions that apply specifically to homeschoolers. </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"> Only a few states offer tax breaks for homeschooling families. They include: </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><strong>Illinois: </strong>Illinois offers the Education Expense Credit for eligible homeschool families, which is worth up to $750 per year.<span class="ql-inline-citation" data-cite="6"></span></li> <li><strong>Indiana: </strong>Indiana families may be eligible for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deduction.asp">tax deduction</a> of up to $1,000 per year for homeschooling expenses paid out of pocket.<span class="ql-inline-citation" data-cite="7"></span></li> <li><strong>Louisiana: </strong>The state of Louisiana offers a generous tax deduction of up to $5,000 per student for homeschooling families.<span class="ql-inline-citation" data-cite="8"></span></li> <li><strong>Minnesota: </strong>In Minnesota, families that homeschool may be eligible for a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxcredit.asp">tax credit</a> or a tax subtraction, either of which can help to reduce tax liability for the year.<span class="ql-inline-citation" data-cite="9"></span><br/></li> </ul> <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-callout mntl-block" id="mntl-sc-block_45-0"><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_46-0"><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>Homeschooling doesn't allow families to opt-out of paying state and local taxes that contribute to funding for public schools.</p></div></div></div> <span class="heading-toc" id="toc-how-to-save-money-on-homeschooling"></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"> How to Save Money on Homeschooling </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> Homeschooling need not take a toll on family budgets. There are numerous ways to cut homeschooling costs and save money without skimping on educational goals. Here are some of the best ways to save money on homeschooling: </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>Take advantage of sales and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-holiday.asp">tax-free weekends</a> to purchase school supplies.</li> <li>Claim state <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0312/how-to-get-the-most-money-back-on-your-tax-return.aspx#:~:text=Tax%20credits%20offset%20your%20tax,you%20claim%20the%20standard%20deduction.">tax deductions and credits</a> for homeschooling expenses if eligible.</li> <li>Look for free or low-cost curriculum options.</li> <li>Attend a curriculum swap or host one with other homeschooling families.</li> <li>Consider a curriculum that can be reused from student to student.</li> <li>Take advantage of free learning programs or tools at local libraries.</li> <li>Consider purchasing a season pass for local museums if they're offered at a discount.</li> <li>Use free learning resources online, such as YouTube, podcasts, or educational websites for children.</li> <li>Investigate free virtual field trips or online tours.</li> <li>Incorporate life skills, such as cooking, cleaning, changing a tire, and managing a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/checkbook.asp">checkbook</a>, as part of your curriculum.</li> <li>Look for free or low-cost online courses to supplement the existing curriculum.</li> </ul> <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"> It's helpful to plan a homeschooling budget at the beginning of each academic year. This can help with saving money year-round. You can also add a cushion for any unexpected expenses that might come up.<br> </br></p> <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-can-kids-be-homeschooled-for-free"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Kids Be Homeschooled for Free?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Generally, parents are not required to pay any fees to the state to homeschool children. Whether it's possible to homeschool entirely for free may depend on a family's learning goals, the number of children, and how creative the parents are with finding opportunities to save money.</p></div> </div> <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-is-homeschooling-cost-effective"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Homeschooling Cost-Effective?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>When compared to public school or private school, homeschooling can be a more cost-effective option for families. Again, individual costs of homeschooling can largely depend on the number of children and the preferred method or approach taken to learning.</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-do-you-get-a-tax-credit-for-homeschooling"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do You Get a Tax Credit for Homeschooling?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are no federal tax credits or deductions for families that choose to homeschool. But a few states do offer tax credits or deductions for eligible homeschool families.</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-do-parents-get-paid-to-homeschool-their-kids"></span> <h2 class="mntl-sc-block-questionandanswer__question">Do Parents Get Paid to Homeschool Their Kids?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are no federal or state programs that pay parents to homeschool their children directly. This is an important consideration in terms of how it may affect household income if one parent leaves a paid job to handle education responsibilities.</p></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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> Parents have different reasons for choosing to homeschool, but one common denominator is managing costs. It is possible to homeschool on a budget, but it does require some planning to find ways to save money. When considering homeschool options, think about what will work best in terms of your children's individual learning styles as well as what you can afford to invest in time and money for them to learn at home. </p></div>

As more U.S. parents opt to homeschool their children, it's important for families to know its costs. The beginning of the 2020-2021 academic year saw the number of homeschooling households climb to 11.1%. That uptick was largely attributed to the [COVID-19 pandemic](https://www.investopedia.com/government-stimulus-efforts-to-fight-the-covid-19-crisis-4799723), but for many families, homeschooling is the preferred choice for childhood education. Deciding whether a homeschool lifestyle is right for your family requires not just an understanding of what's involved, but also a plan for how to pay for it. ### Key Takeaways * The COVID-19 pandemic spurred an increase in the number of families choosing to homeschool. * Homeschooling costs can vary by family based on the number of children, the type of curriculum taught, and whether children participate in extracurricular activities. * Only a handful of states offer tax breaks for families that choose to homeschool rather than have their children attend public or private school. * Families have numerous ways to save money while homeschooling in order to bring the cost down. ## Average Cost of Homeschooling A variety of costs are involved when you choose to homeschool your children. Some of the most common expenses homeschooling families may pay include: * Curriculum and learning materials * School supplies (for example, pencils, notebooks, and more) * Field trips * Extracurricular activities (for example, sports, art lessons, music lessons, and more) * Cooperative fees for families who belong to a homeschool co-operative * Testing fees, if state homeschooling guidelines mandate regular testing The cost can easily add up, averaging $700 to $1,800 per student annually. For a family of four with two school-aged children, this means the average cost of homeschooling can range from $1,400 to $3,600 per year. ### The three main reasons why people homeschool their children are school safety, moral instruction, and family life. ## Public School vs. Private School Costs Let's take a look at how much it costs to send a child to public or private school to see how homeschooling compares: * Public school is free for families in the United States. Funding comes from property taxes and government aid. * [Private school](https://www.investopedia.com/articles/investing/100115/private-school-your-child-good-value.asp), on the other hand, can be expensive. The average annual tuition of sending a child to a private K-12 school is $23,839. But the costs can rise even more. Parents of private school students have to consider additional expenses like laptops, books, uniforms, field trips, and supplies. With public schools, parents' costs typically extend to things like school supplies, clothing, field trip fees, extracurricular activities, and meals. According to the [National Retail Federation (NRF)](https://www.investopedia.com/terms/n/national-retail-federation-nrf.asp), the typical family spent $849 on back-to-school shopping for the 2021 school year. That amount will likely increase to $890.07 per family in 2023, according to the organization. Adding extracurricular activities like sports into the mix can drive spending even higher. On average, parents spend $883 per child on sports each year, but some sports, such as field hockey or gymnastics, can come with a much higher price tag. Parents may also shell out money for music lessons, art clubs, drama, or band—to rent a musical instrument, for example, or to pay for art supplies. ### If you're considering homeschooling in lieu of public or private school, it's important to check your state's requirements for registration, attendance, testing, and curriculum. ## Hidden Costs of Homeschooling Compared to the cost of sending a child to private school, or even public school, homeschooling could save a family money. But it's important to keep in mind that some costs may be higher when homeschooling—or at least less obvious when planning a household budget. Here are some of the ways homeschooling can raise costs for families: * **Curriculum:** Though it's possible to find a free homeschool curriculum online or put together a curriculum yourself, some families prefer to purchase one. At the higher end, it's possible to spend $1,000-plus on a single prepackaged curriculum, which can quickly add up for families that have children at different grade levels. * **Transportation:** Homeschooling doesn't mean families spend all day at home. Taking field trips, signing kids up for art classes, or joining a co-op with other homeschool families can help expand learning horizons and encourage social interaction. But it can also mean spending more on gas or transportation each month. * **Supplies:** Purchasing supplies for homeschooling can involve more than just notebooks, pencils, or markers. For instance, families may need to purchase a microscope and other equipment to complete science labs. Or they may have to procure arts-and-crafts supplies to complete hands-on projects. All of that can add to the total cost of homeschooling. * **Food:** Kids attending public school may be eligible for reduced or free lunch depending on their state's guidelines. On the other hand, having kids at home all day could add to families' grocery spending if it means more frequent snacking or family meals together. There's also the income factor to consider. In a two-parent household, one parent may be the sole [breadwinner](https://www.investopedia.com/terms/b/breadwinner.asp) while the other handles homeschooling duties. This can mean the loss of one income if the homeschooling parent previously held a job. And though homeschooling as a single parent is not impossible, it can take creativity to balance the need for income with the demands of homeschooling. ### [Working from home](https://www.investopedia.com/articles/personal-finance/070715/pros-cons-working-home.asp) can help avoid a loss of income, but it can come with its own costs, such as outfitting an office space, paying for cloud storage, or spending more on Internet and phone service. ## Tax Breaks for Homeschooling Families You may be wondering if the federal government provides any tax benefits to help homeschooling families recoup some of their costs. Unfortunately, the answer is no. There are no federal tax credits or deductions that apply specifically to homeschoolers. Only a few states offer tax breaks for homeschooling families. They include: * **Illinois:** Illinois offers the Education Expense Credit for eligible homeschool families, which is worth up to $750 per year. * **Indiana:** Indiana families may be eligible for a [tax deduction](https://www.investopedia.com/terms/d/deduction.asp) of up to $1,000 per year for homeschooling expenses paid out of pocket. * **Louisiana:** The state of Louisiana offers a generous tax deduction of up to $5,000 per student for homeschooling families. * **Minnesota:** In Minnesota, families that homeschool may be eligible for a [tax credit](https://www.investopedia.com/terms/t/taxcredit.asp) or a tax subtraction, either of which can help to reduce tax liability for the year. ### Homeschooling doesn't allow families to opt-out of paying state and local taxes that contribute to funding for public schools. ## How to Save Money on Homeschooling Homeschooling need not take a toll on family budgets. There are numerous ways to cut homeschooling costs and save money without skimping on educational goals. Here are some of the best ways to save money on homeschooling: * Take advantage of sales and [tax-free weekends](https://www.investopedia.com/terms/t/tax-holiday.asp) to purchase school supplies. * Claim state [tax deductions and credits](https://www.investopedia.com/financial-edge/0312/how-to-get-the-most-money-back-on-your-tax-return.aspx#:~:text=Tax%20credits%20offset%20your%20tax,you%20claim%20the%20standard%20deduction.) for homeschooling expenses if eligible. * Look for free or low-cost curriculum options. * Attend a curriculum swap or host one with other homeschooling families. * Consider a curriculum that can be reused from student to student. * Take advantage of free learning programs or tools at local libraries. * Consider purchasing a season pass for local museums if they're offered at a discount. * Use free learning resources online, such as YouTube, podcasts, or educational websites for children. * Investigate free virtual field trips or online tours. * Incorporate life skills, such as cooking, cleaning, changing a tire, and managing a [checkbook](https://www.investopedia.com/terms/c/checkbook.asp), as part of your curriculum. * Look for free or low-cost online courses to supplement the existing curriculum. It's helpful to plan a homeschooling budget at the beginning of each academic year. This can help with saving money year-round. You can also add a cushion for any unexpected expenses that might come up. ## Can Kids Be Homeschooled for Free? Generally, parents are not required to pay any fees to the state to homeschool children. Whether it's possible to homeschool entirely for free may depend on a family's learning goals, the number of children, and how creative the parents are with finding opportunities to save money. ## Is Homeschooling Cost-Effective? When compared to public school or private school, homeschooling can be a more cost-effective option for families. Again, individual costs of homeschooling can largely depend on the number of children and the preferred method or approach taken to learning. ## Do You Get a Tax Credit for Homeschooling? There are no federal tax credits or deductions for families that choose to homeschool. But a few states do offer tax credits or deductions for eligible homeschool families. ## Do Parents Get Paid to Homeschool Their Kids? There are no federal or state programs that pay parents to homeschool their children directly. This is an important consideration in terms of how it may affect household income if one parent leaves a paid job to handle education responsibilities. ## The Bottom Line Parents have different reasons for choosing to homeschool, but one common denominator is managing costs. It is possible to homeschool on a budget, but it does require some planning to find ways to save money. When considering homeschool options, think about what will work best in terms of your children's individual learning styles as well as what you can afford to invest in time and money for them to learn at home.

As more U.S. parents opt to homeschool their children, it's important for families to know its costs. The beginning of the 2020-2021 academic year saw the number of homeschooling households climb to 11.1%. That uptick was largely attributed to the COVID-19 pandemic, but for many families, homeschooling is the preferred choice for childhood education. Deciding whether a homeschool lifestyle is right for your family requires not just an understanding of what's involved, but also a plan for how to pay for it. Key Takeaways The COVID-19 pandemic spurred an increase in the number of families choosing to homeschool.Homeschooling costs can vary by family based on the number of children, the type of curriculum taught, and whether children participate in extracurricular activities.Only a handful of states offer tax breaks for families that choose to homeschool rather than have their children attend public or private school.Families have numerous ways to save money while homeschooling in order to bring the cost down. Average Cost of Homeschooling A variety of costs are involved when you choose to homeschool your children. Some of the most common expenses homeschooling families may pay include: Curriculum and learning materialsSchool supplies (for example, pencils, notebooks, and more)Field tripsExtracurricular activities (for example, sports, art lessons, music lessons, and more)Cooperative fees for families who belong to a homeschool co-operativeTesting fees, if state homeschooling guidelines mandate regular testing The cost can easily add up, averaging $700 to $1,800 per student annually. For a family of four with two school-aged children, this means the average cost of homeschooling can range from $1,400 to $3,600 per year. The three main reasons why people homeschool their children are school safety, moral instruction, and family life. Public School vs. Private School Costs Let's take a look at how much it costs to send a child to public or private school to see how homeschooling compares: Public school is free for families in the United States. Funding comes from property taxes and government aid. Private school, on the other hand, can be expensive. The average annual tuition of sending a child to a private K-12 school is $23,839. But the costs can rise even more. Parents of private school students have to consider additional expenses like laptops, books, uniforms, field trips, and supplies. With public schools, parents' costs typically extend to things like school supplies, clothing, field trip fees, extracurricular activities, and meals. According to the National Retail Federation (NRF), the typical family spent $849 on back-to-school shopping for the 2021 school year. That amount will likely increase to $890.07 per family in 2023, according to the organization. Adding extracurricular activities like sports into the mix can drive spending even higher. On average, parents spend $883 per child on sports each year, but some sports, such as field hockey or gymnastics, can come with a much higher price tag. Parents may also shell out money for music lessons, art clubs, drama, or band—to rent a musical instrument, for example, or to pay for art supplies. If you're considering homeschooling in lieu of public or private school, it's important to check your state's requirements for registration, attendance, testing, and curriculum. Hidden Costs of Homeschooling Compared to the cost of sending a child to private school, or even public school, homeschooling could save a family money. But it's important to keep in mind that some costs may be higher when homeschooling—or at least less obvious when planning a household budget. Here are some of the ways homeschooling can raise costs for families: Curriculum: Though it's possible to find a free homeschool curriculum online or put together a curriculum yourself, some families prefer to purchase one. At the higher end, it's possible to spend $1,000-plus on a single prepackaged curriculum, which can quickly add up for families that have children at different grade levels.Transportation: Homeschooling doesn't mean families spend all day at home. Taking field trips, signing kids up for art classes, or joining a co-op with other homeschool families can help expand learning horizons and encourage social interaction. But it can also mean spending more on gas or transportation each month.Supplies: Purchasing supplies for homeschooling can involve more than just notebooks, pencils, or markers. For instance, families may need to purchase a microscope and other equipment to complete science labs. Or they may have to procure arts-and-crafts supplies to complete hands-on projects. All of that can add to the total cost of homeschooling.Food: Kids attending public school may be eligible for reduced or free lunch depending on their state's guidelines. On the other hand, having kids at home all day could add to families' grocery spending if it means more frequent snacking or family meals together. There's also the income factor to consider. In a two-parent household, one parent may be the sole breadwinner while the other handles homeschooling duties. This can mean the loss of one income if the homeschooling parent previously held a job. And though homeschooling as a single parent is not impossible, it can take creativity to balance the need for income with the demands of homeschooling. Working from home can help avoid a loss of income, but it can come with its own costs, such as outfitting an office space, paying for cloud storage, or spending more on Internet and phone service. Tax Breaks for Homeschooling Families You may be wondering if the federal government provides any tax benefits to help homeschooling families recoup some of their costs. Unfortunately, the answer is no. There are no federal tax credits or deductions that apply specifically to homeschoolers. Only a few states offer tax breaks for homeschooling families. They include: Illinois: Illinois offers the Education Expense Credit for eligible homeschool families, which is worth up to $750 per year. Indiana: Indiana families may be eligible for a tax deduction of up to $1,000 per year for homeschooling expenses paid out of pocket. Louisiana: The state of Louisiana offers a generous tax deduction of up to $5,000 per student for homeschooling families. Minnesota: In Minnesota, families that homeschool may be eligible for a tax credit or a tax subtraction, either of which can help to reduce tax liability for the year. Homeschooling doesn't allow families to opt-out of paying state and local taxes that contribute to funding for public schools. How to Save Money on Homeschooling Homeschooling need not take a toll on family budgets. There are numerous ways to cut homeschooling costs and save money without skimping on educational goals. Here are some of the best ways to save money on homeschooling: Take advantage of sales and tax-free weekends to purchase school supplies. Claim state tax deductions and credits for homeschooling expenses if eligible. Look for free or low-cost curriculum options. Attend a curriculum swap or host one with other homeschooling families. Consider a curriculum that can be reused from student to student. Take advantage of free learning programs or tools at local libraries. Consider purchasing a season pass for local museums if they're offered at a discount. Use free learning resources online, such as YouTube, podcasts, or educational websites for children. Investigate free virtual field trips or online tours. Incorporate life skills, such as cooking, cleaning, changing a tire, and managing a checkbook, as part of your curriculum. Look for free or low-cost online courses to supplement the existing curriculum. It's helpful to plan a homeschooling budget at the beginning of each academic year. This can help with saving money year-round. You can also add a cushion for any unexpected expenses that might come up. Can Kids Be Homeschooled for Free? Generally, parents are not required to pay any fees to the state to homeschool children. Whether it's possible to homeschool entirely for free may depend on a family's learning goals, the number of children, and how creative the parents are with finding opportunities to save money. Is Homeschooling Cost-Effective? When compared to public school or private school, homeschooling can be a more cost-effective option for families. Again, individual costs of homeschooling can largely depend on the number of children and the preferred method or approach taken to learning. Do You Get a Tax Credit for Homeschooling? There are no federal tax credits or deductions for families that choose to homeschool. But a few states do offer tax credits or deductions for eligible homeschool families. Do Parents Get Paid to Homeschool Their Kids? There are no federal or state programs that pay parents to homeschool their children directly. This is an important consideration in terms of how it may affect household income if one parent leaves a paid job to handle education responsibilities. The Bottom Line Parents have different reasons for choosing to homeschool, but one common denominator is managing costs. It is possible to homeschool on a budget, but it does require some planning to find ways to save money. When considering homeschool options, think about what will work best in terms of your children's individual learning styles as well as what you can afford to invest in time and money for them to learn at home.

https://www.investopedia.com/best-student-loan-refinance-companies-4782684

Best Student Loan Refinance 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="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"> If you have private student loans, you’re in a unique situation. There's a very good chance that your credit wasn’t very good on its own and you may have even needed 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> when you took your loans out. Now that you're repaying the loan, there’s also a decent chance that you could qualify for better rates and terms on your own and even remove your co-signer from your loans entirely. </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"> The question remains, though, which company is the best to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/refinance-student-loans-5323837">refinance student loans</a> given your situation and your goals? We looked at important factors from 23 top lenders, including loan types and amounts, APRs, availability, repayment options, and more, to help you find the best options. </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 Student Loan Refinance 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="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/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&amp;tag.pref_partner=earnest" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Earnest</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">Refinancing Marketplace:</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.credible.com/refinance-student-loans?utm_source=investopedia&amp;utm_medium=referral&amp;utm_campaign=credible&amp;utm_content=" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Credible</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 Rates:</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/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&amp;tag.pref_partner=splash" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Splash Financial</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 Benefits:</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/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&amp;tag.pref_partner=sofi" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> SoFi</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 Parent 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/investopedia-bridge-slr/loans?bridge_partner=isl-lending" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> ISL 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 Large Balances:</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/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Laurel Road</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-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_2-0"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Think twice before you <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/refinance-student-loans-5323837">refinance federal student loans</a>. You’ll lose all of the generous federal benefits and options if you do, such as forbearance, and you’ll begin repayment on your loans immediately. </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 --> </div><!-- end: comp mntl-sc-page--commerce post-intro prm-sc-page mntl-sc-page mntl-block --> <div class="comp loan-quiz even-loan-block even-loans-quiz--finance mntl-block" id="even-loan-block_1-0"></div><!-- end: comp loan-quiz even-loan-block even-loans-quiz--finance 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 Student Loan Refinance 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-Best Student Loan Refinance 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"> Best Student Loan Refinance 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 mntl-toc__list-item" data-click-action="OnPageClick-Earnest" 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-Earnest" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-earnest" rel="nocaes"> <span class="link__wrapper">Earnest</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-Credible" 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-Credible" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-refinancing-marketplace-credible" rel="nocaes"> <span class="link__wrapper">Credible</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-Splash Financial" 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-Splash Financial" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-rates-splash-financial" rel="nocaes"> <span class="link__wrapper">Splash Financial</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-SoFi" 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-SoFi" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-benefits-sofi" rel="nocaes"> <span class="link__wrapper">SoFi</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-ISL 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-ISL Lending" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-parent-loans-isl-lending" rel="nocaes"> <span class="link__wrapper">ISL 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-Laurel Road" 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-Laurel Road" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-large-balances-laurel-road" rel="nocaes"> <span class="link__wrapper">Laurel Road</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-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-Compare Providers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-student-loan-refinance-companies" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Providers</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-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-guide-to-choosing-the-best-student-loan-refinance-companies" id="mntl-toc__list-item-link_1-0-2" 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_1-0-3"> <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-Pros and Cons" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-and-cons-of-student-loan-refinancing" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Pros and Cons</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-Why You Should Trust Us" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-why-you-should-trust-us" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Why You Should Trust Us</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-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faqs-748ae780-733f-4379-95fe-755644821f84" id="mntl-toc__list-item-link_1-0-5" 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 --> </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-earnest"></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"> Earnest</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: 181px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Earnest" 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/0gnkkWre7XAfrCEkCJb9mFbxJbc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Earnest-logo-6dc9528df9cd4a708818865576d1a711.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Earnest" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/0gnkkWre7XAfrCEkCJb9mFbxJbc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Earnest-logo-6dc9528df9cd4a708818865576d1a711.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>Earnest</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>APR Range:</strong> Starting at 5.19% fixed, and 5.99% variable (includes autopay discount)<span class="ql-inline-citation" data-cite="44"></span></li><li><strong>Loan Amounts:</strong> $5,000–$500,000<span class="ql-inline-citation" data-cite="1"></span></li><li><strong>Loan Terms</strong>: 5–20 years<span class="ql-inline-citation" data-cite="2"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${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/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&amp;tag.pref_partner=earnest" 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 and 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>Custom loan options</p></li> <li><p>Skip-a-payment option</p></li> <li><p>Available to international students with Prodigy 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>Restrictions for residents of some states</p></li> <li><p>Skip-a-payment option lowers forbearance length</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"> Earnest has two big factors going for it compared with other lenders. First, it grants you the option to skip one payment every 12 months, provided you’ve made all your payments on time in the interim. But, that doesn't mean it’s not a free pass because that payment is tacked onto the end of your loan, and still accrues <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp">interest</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"> Each time you use it, it reduces the amount of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forbearance.asp">forbearance</a> available by one month. Keep in mind that you only have a maximum of 12 months available at the beginning.<span class="ql-inline-citation" data-cite="46"></span><span class="ql-inline-citation" data-cite="45"></span> This adds extra flexibility to your budget if needed, and that’s always a plus.  </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"> Earnest also offers an unparalleled range of options, so it doesn't force you to choose from a few term options at five-year intervals. The company offers several options for repayment terms with intervals as short as one month, which allows you to find a payment amount that better fits your budget.<span class="ql-inline-citation" data-cite="47"></span><span class="ql-inline-citation" data-cite="5"></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">Repayment Options</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><strong>Forbearance: </strong>Up to 12 months of forbearance during the life of your loan for qualified circumstances, such as financial hardship. </li><li><strong>Deferment</strong>: You can stop your payments entirely during certain qualified periods, such as if you return to school at least half-time or you’re deployed as an active-duty soldier.<span class="ql-inline-citation" data-cite="7"></span></li><li><strong>Biweekly payments</strong>: This option splits up your single monthly payment into payments due every two weeks.<span class="ql-inline-citation" data-cite="8"></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">Eligibility Requirements</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>Minimum <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> of 665 or higher for refinance loans.</li> <li>In some cases, credit requirements for the student borrower may apply in addition to the normal credit requirements for the co-signer.</li> <li>Must be a U.S. citizen or permanent resident.</li> <li>Must have at least two months’ emergency fund.</li> <li>Available in Washington, D.C., and all states except Nevada.</li> <li>Variable-rate loans aren’t available for residents of Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas.<span class="ql-inline-citation" data-cite="40"></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_1-0-1"> <span class="heading-toc" id="toc-refinancing-marketplace-credible"></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">Refinancing Marketplace</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Credible</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 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:50.0%;"> <img alt="Credible 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/TLUn5zpjhhMnWBtUt3TnMxE6ces=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Credible-logo-b636bd98830a4c548332ba1cb0e7f993.jpeg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Credible logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/TLUn5zpjhhMnWBtUt3TnMxE6ces=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Credible-logo-b636bd98830a4c548332ba1cb0e7f993.jpeg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-1"> <svg class="icon icon-camera figure-article-caption-icon"> <use xlink:href="#icon-camera" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> <span class="figure-article-caption-text">Credible logo.</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_3-0-14"> <li><strong>APR Range:</strong> 5.28%–12.43%</li><li><strong>Loan Amounts:</strong> $5,000–$750,000</li><li><strong>Loan Terms:</strong> 5–20 years<span class="ql-inline-citation" data-cite="9"></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-click-action="OffPageClick - External" data-retailer-type="other" data-tracking-container="true" href="https://www.credible.com/refinance-student-loans?utm_source=investopedia&amp;utm_medium=referral&amp;utm_campaign=credible&amp;utm_content=" 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 and 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>Very low rates</p></li> <li><p>$200 best rate guarantee</p></li> <li><p>Good selection of lenders</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>Loan options may vary</p></li> <li><p>May need to join a credit union</p></li> <li><p>Some partner lenders are state-specific</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"> Credible isn’t exactly a lender. Rather, it’s a marketplace that offers personalized prequalified rates with several companies at once.* In other words, it’s a student loan refinancing matchmaking company, although it helps people find other loan types too. </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"> Credible is refreshingly <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transparency.asp">transparent</a> about which lenders it works with so you know which ones to cross off of your shopping list. With nine partner lenders in its network, it’s a fast and easy way to get your rate shopping done.  </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"> Credible even offers a $200 best-rate guarantee, so if you find a better offer from a non-partner lender elsewhere, Credible will <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reimbursement.asp">reimburse</a> you with a gift card.<span class="ql-inline-citation" data-cite="10"></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"> As with any loan marketplace, the downside is you’ll still need to research each company you’re matched with to see if it offers the features you’re looking for, if anything, beyond the lowest rate.<span class="ql-inline-citation" data-cite="9"></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">Repayment Options</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_3-0-24"> Repayment options vary depending on the lender that you’re matched with. If you've completed school, you will likely already be in repayment and continue paying immediately after refinancing. If you end up going back to school, options may 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_3-0-25"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-student-loan-deferment-4771251">Deferment</a></li> <li>Fixed payments</li> <li>Interest-only payments</li> <li>Full repayment</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">Eligibility Requirements</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_3-0-27"> <li>Available in all 50 states</li><li>Minimum credit score of 700 or higher, although some lenders may accept lower scores<span class="ql-inline-citation" data-cite="9"></span></li><li>Must be a U.S. citizen or permanent resident</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-rates-splash-financial"></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 Rates</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Splash Financial</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-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_3-0-28" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Splash Financial" 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/QogApoY2VxiJQ4LDyvBn_kNNVm8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Splash-logo-7354df097dd54f838fbf410cbe7dabb6.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Splash Financial" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/QogApoY2VxiJQ4LDyvBn_kNNVm8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Splash-logo-7354df097dd54f838fbf410cbe7dabb6.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>Splash Financial</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_3-0-29"> <li><strong>APR Range:</strong> 5.09%–10.24%<span class="ql-inline-citation" data-cite="49"></span></li><li><strong>Loan Amounts:</strong> $5,000–No maximum<span class="ql-inline-citation" data-cite="11"></span></li><li><strong>Loan Terms:</strong> Not disclosed</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-30"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${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/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&amp;tag.pref_partner=splash" id="button_1-0-2" 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 and 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_3-0-32"> <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>Very low rates</p></li> <li><p>Affordable options for medical professionals</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>Not available if you didn’t complete your degree</p></li> <li><p>May need to join a credit union</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_3-0-34"> Like Credible, Splash Financial is a student loan marketplace. Splash Financial, however, is specifically geared toward people looking to refinance their loans, and it works with an exclusive set of lenders. </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 such, you can compare rates from several lenders at once, although the exact details of which lenders are in Splash Financial’s network aren’t disclosed.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> Since Splash Financial only serves as an intermediary to connect you with other lenders, there aren’t too many downsides to using it. However, none of the lenders in its network offer refinancing options to those who have not finished their degree. </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">Repayment Options</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_3-0-38"> <li><strong>Full repayment: </strong>Full principle-and-interest payments are required for most refinanced student loans.</li><li><strong>Medical and dental school repayment: </strong>Refinance your medical or dental school loans and you'll only have to make fixed monthly payments of $100 while you're in a residency or fellowship, and for six months after you leave those programs.<span class="ql-inline-citation" data-cite="14"></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">Eligibility Requirements</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_3-0-40"> <li>Minimum credit score not disclosed.</li><li>Must be a U.S. citizen or permanent resident.</li><li>Available in all 50 states, Washington, D.C., Puerto Rico, and U.S. Virgin Islands.</li><li>Must have a completed degree</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-benefits-sofi"></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 Benefits</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> SoFi</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_3-0-41" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="SoFi" 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/k5fXAA53rFlLnmu2At6xe9reDOs=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Sofi-logo-e7310eebe37c45889de436c9f9f095e7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="SoFi" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/k5fXAA53rFlLnmu2At6xe9reDOs=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Sofi-logo-e7310eebe37c45889de436c9f9f095e7.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>SoFi</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_3-0-42"> <li><strong>APR Range:</strong> 5.24%–9.99 (fixed) and 6.24%-9.99 (variable)</li><li><strong>Loan Amounts:</strong> $5,000 minimum. No maximum.<span class="ql-inline-citation" data-cite="16"></span></li><li><strong>Loan Terms</strong>: 5–20 years<span class="ql-inline-citation" data-cite="41"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-43"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${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/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&amp;tag.pref_partner=sofi" id="button_1-0-3" 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 and 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_3-0-45"> <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 financial hardship benefits</p></li> <li><p>Career coaching, special events, and more</p></li> <li><p>Can refinance parent loans in your own name</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>Spouses can’t refinance loans together</p></li> <li><p>Applying with a co-signer may take more time</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_3-0-47"> Private student loan lenders don’t have a particularly good reputation for offering many perks, especially when you compare them with federal student loans. SoFi is somewhat of an exception to that because it offers many borrower benefits, including one-on-one career coaching, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-planning-4427750">financial planning</a>, special events, Los Angeles-based SoFi Stadium lounge access, and more.<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_3-0-48"> SoFi is also one of the few lenders that allows graduates to refinance student loans that their parents took out for their benefit in their names, thereby claiming responsibility for repayment. </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"> Be aware, however, that applying with a co-signer can add extra time to your loan approval timeline. And once listed on the loan, there’s no way to remove a co-signer unless you refinance again in your name alone.<span class="ql-inline-citation" data-cite="18"></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">Repayment Options</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_3-0-51"> <li><strong>Reduced payment</strong>: If you experience a financial hardship, SoFi may be able to work with you on a way to lower your monthly payments.<span class="ql-inline-citation" data-cite="19"></span> </li><li><strong>Forbearance and deferment</strong>: SoFi offers forbearance and deferment options in some cases, such as if you return to school or experience a natural disaster.<span class="ql-inline-citation" data-cite="20"></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">Eligibility Requirements</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_3-0-53"> <li>Minimum credit score not disclosed.</li><li>Completed at least an associate’s degree from a Title IV school.</li><li>Available in all 50 states plus Washington, D.C.</li><li>Must be a U.S. citizen or current resident, including non-permanent residents and DACA recipients.<span class="ql-inline-citation" data-cite="21"></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_1-0-4"> <span class="heading-toc" id="toc-best-for-parent-loans-isl-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 Parent Loans</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> ISL 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-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_3-0-54" style="--imgWidth: 397px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Iowa Student Loan (ISL) Education 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/aNkwkwNdr7w8Jts0-UjZNjCEnmU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Iowa-Student-Loan-logo-a726ba2a72cf413f99d4484f561b5fe8.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Iowa Student Loan (ISL) Education Lending" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/aNkwkwNdr7w8Jts0-UjZNjCEnmU=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Iowa-Student-Loan-logo-a726ba2a72cf413f99d4484f561b5fe8.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>Iowa Student Loan (ISL) Education 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-high-res --> <div class="tabbed-sc-block-intro__content"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> <li><strong>APR Range:</strong> 6.93%–11.58%</li><li><strong>Loan Amounts:</strong> $5,000–$300,000</li><li><strong>Loan Terms:</strong> 7–20 years<span class="ql-inline-citation" data-cite="32"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-56"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${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/investopedia-bridge-slr/loans?bridge_partner=isl-lending" 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 and 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_3-0-58"> <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>Flexible repayment plans</p></li> <li><p>Doesn’t require a completed degree</p></li> <li><p>Loan discharge for death or permanent disability</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 offer variable-rate loans</p></li> <li><p>Not available for DACA recipients</p></li> <li><p>Not available for residents of Maine</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_3-0-60"> The name Iowa Student Loan might fool you into thinking that student loan refinancing is only available to residents of the Hawkeye State, but this <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/non-profitorganization.asp">nonprofit</a> lender is available across the entire country, except for Maine. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-61"> Its low rates make it a good refinancing option, but there are a few reasons why it's a strong candidate for people with parent student loans:<span class="ql-inline-citation" data-cite="33"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-62"> <li>You may be able to opt for a graduated repayment plan that can help make payment easy, especially if you're in the midst of a career transition. </li> <li>You’ll also qualify for a reduced rate on your loan if you’re an active-duty military member.<span class="ql-inline-citation" data-cite="34"></span> </li> <li>Unlike most private student loan lenders, ISL offers a loan <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt-discharge.asp">discharge</a> program if you become permanently disabled or die—similar to federal student loans. No one likes to think about this possibility, but the chances of an unfortunate event happening are higher for parents than newly-minted young grads. </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_3-0-63"> Choosing a loan with these options can better protect you and your family.<span class="ql-inline-citation" data-cite="32"></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">Repayment Options</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_3-0-65"> <li><strong>Forbearance: </strong>May offer a pause in payments for certain cases such as financial hardship.</li> <li><strong>Graduated repayment</strong>: Rather than paying a steady payment, start with smaller payments that gradually grow to a larger size to finish repaying the loan in the same amount of time.</li> <li><strong>Deferment</strong>: ISL offers deferment for certain cases, such as financial hardship or serving in the military, if you’re up to date on payments and provide a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/budget.asp">budget worksheet</a>.</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">Eligibility Requirements</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_3-0-67"> <li>Minimum credit score of 670 or higher.</li> <li>Must be a U.S. citizen or permanent resident.</li> <li>Available in Washington, D.C., and all states except Maine.</li> <li>No prior adverse credit events like foreclosures, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/bankruptcy.asp">bankruptcies</a>, accounts in collection, etc. </li> <li>No more than two late payments overdue by 30 days (and none past 60 days) in the previous two years. </li> <li><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> under 25% (if you don’t pay rent or mortgage) or 40% (for most others)<span class="ql-inline-citation" data-cite="32"></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-large-balances-laurel-road"></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 Large Balances</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Laurel Road</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_3-0-68" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Laurel Road 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/sfmMFcE0kDeIHD4jyto8tDKP-I0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Laurel-Road-Logo-5b83bcbaa6a04bee941e6264be7433ed.jpeg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Laurel Road logo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/sfmMFcE0kDeIHD4jyto8tDKP-I0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Laurel-Road-Logo-5b83bcbaa6a04bee941e6264be7433ed.jpeg" width="1500"/> </noscript> </div> </div> <figcaption class="comp figure-caption mntl-figure-caption figure-article-caption" id="mntl-figure-caption_1-0-5"> <svg class="icon icon-camera figure-article-caption-icon"> <use xlink:href="#icon-camera" xmlns:xlink="http://www.w3.org/1999/xlink"></use> </svg> <span class="figure-article-caption-text">Laurel Road logo.</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_3-0-69"> <li><strong>APR Range:</strong> 5.19%–9.70% with autopay* </li><li><strong>Loan Amounts:</strong> $5,000–No maximum</li><li><strong>Loan Terms</strong>: 5–20 years<span class="ql-inline-citation" data-cite="35"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-70"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-5"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="tag.docid=${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/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr" 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_3-0-72"> <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>Very low student loan refinance rates</p></li> <li><p>Kids can take over parent student loans</p></li> <li><p>Special benefits for healthcare professionals</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 offer deferment if you return to school</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_3-0-74"> Some professions are known for having an especially high price tag, like law and medicine. Laurel Road is one of a few companies that cater to high-balance borrowers, especially people in the medical profession. Laurel Road may offer special rate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discount.asp">discounts</a> and affordable $100 repayment plans for medical residents and fellows.<span class="ql-inline-citation" data-cite="37"></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_3-0-75"> You don’t necessarily have to be a doctor or an x-ray technician to benefit from Laurel Road’s refinancing options. It also offers different ways for others to save. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-76"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp">lender</a> offers a larger suite of banking services, and if you sign up for these and meet certain requirements (and they’re generally not too hard to meet), you could qualify for even lower rates on your student loan refinance.<span class="ql-inline-citation" data-cite="38"></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">Repayment Options</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_3-0-78"> <li><strong>Natural disaster forbearance</strong>: Available for up to two months.</li><li><strong>Economic hardship forbearance</strong>: Available for up to 12 months, granted in four three-month periods at a time. <span class="ql-inline-citation" data-cite="53"></span></li><li><strong>$100 repayment: </strong>Available for medical residents and fellows, this plan offers affordable payments, but keep in mind the payments may not cover the amount of interest accruing monthly.<span class="ql-inline-citation" data-cite="37"></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">Eligibility Requirements</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_3-0-80"> <li>Must be a U.S. citizen or permanent resident.</li><li>Available in all 50 states plus Washington, D.C.</li><li>Can only refinance loans for graduate studies, undergraduate studies at a four-year institution, or certain associate degrees in the medical field.</li><li>Must have completed your degree unless you’re a parent refinancing student loans for your child, or you’re in your final semester of study with a signed job offer.<span class="ql-inline-citation" data-cite="51"></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> <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-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"> There are a lot of reasons to refinance your student loans, and some lenders are clear winners in specific instances. For example, if you’re trying to relieve your parents of the student loan burden they took out for your education, ISL Lending is a top choice. </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"> But, Earnest is a great all-around option for most borrowers to add to any rate-shopping checklist. It offers the highest degree of customization so you’re more likely to land on the best option for your budget, rather than being shoehorned into a small handful of options. That can help you pay off your loan even quicker and perhaps with lower interest so you can move on with your life.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-student-loan-refinance-companies"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Compare the Best Student Loan Refinance Companies </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_4-0-4"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style="width: 132px;"></colgroup> <colgroup span="1" style="width: 114px;"></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th><b>Company</b></th> <th><b>Interest Rate</b></th> <th><b>Loan Terms</b></th> <th><b>Maximum Loan Amount</b></th> <th><b>Minimum Credit Score</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fiona.com/partner/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&amp;tag.pref_partner=earnest" rel="sponsored nofollow">Earnest </a><b>Best Overall</b></td> <td>5.19%–9.99%* with autopay</td> <td>5–20 years</td> <td>$500,000</td> <td>665</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.credible.com/refinance-student-loans/?utm_source=investopedia&amp;utm_medium=referral&amp;utm_campaign=slr_invst&amp;utm_content=4782684" rel="sponsored nofollow">Credible </a><b>Best Refinancing Marketplace</b></td> <td>5.28%–12.43% See Terms*</td> <td>5–20 years </td> <td>$750,000</td> <td>700 for best rates (some lenders may accept lower scores)</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fiona.com/partner/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&amp;tag.pref_partner=splash" rel="sponsored nofollow">Splash Financial </a><b>Best Rates</b></td> <td>5.09%–10.24%</td> <td>Not disclosed </td> <td>None</td> <td>Not disclosed</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fiona.com/partner/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&amp;tag.pref_partner=sofi" rel="sponsored nofollow">SoFi </a><b>Best Benefits</b></td> <td>5.24% - 9.99%</td> <td>5–20 years </td> <td>None</td> <td>Not disclosed</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=isl-lending" rel="sponsored nofollow">ISL Lending </a><b>Best for Parent Loans</b></td> <td>6.93%–11.58%</td> <td>7–20 years</td> <td>$300,000</td> <td>670</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="tag.docid=${DOC_ID}&amp;tag.reqid=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr" rel="sponsored nofollow">Laurel Road </a><b>Best for Large Balances</b></td> <td>5.19%–9.70%* with autopay </td> <td>5–20 years </td> <td>None</td> <td>Not disclosed </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-guide-to-choosing-the-best-student-loan-refinance-companies"></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"> Guide to Choosing the Best Student Loan Refinance Companies </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_4-0-6"> <span class="mntl-sc-block-subheading__text"> What Is Student Loan Refinancing? </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_4-0-7"> Student loan refinacing happens when you apply for one new loan to pay off your existing student loans. Borrowers tend to do this to lower their borrowing costs and get better terms, including lower monthly payments and a better interest rate. If you want to refinance your student loans, you'll have to apply with a private lender. Once your loan is approved, your existing loans are paid off and you begin making payments to the new lender. Keep in mind that you lose any protections by refinancing if you qualified for protections for your federal student loans.<br/> </p><!-- 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"> Compare Student Refinance 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_4-0-9"> When looking at options to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/refinance-student-loans-5323837">refinance your student loans</a>, you want to compare providers to make sure you’re getting the best deal. Keep the following important factors in mind: </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>Rates</strong>: Know what rates are offered and if they are fixed or variable rates. Typically, the higher your credit score, the lower your rate. </li><li><strong>Terms</strong>: Student loan terms generally range from 5 to 20 years. However, some companies cut off term limits at 15 years. Know how long the term is and make sure it’s feasible to make timely payments. </li><li><strong>Customer service</strong>: Know how to get in touch with customer service whether it be through email, online chat, or email. You may have a question the website doesn’t answer. </li><li><strong>Borrower requirements</strong>: Do you need to have a certain FICO score to qualify? Know if there are other qualifications such as being a certain age, minimum income, or a particular type of degree program.</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_4-0-11"> <span class="mntl-sc-block-subheading__text"> How to Refinance Your Student 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_4-0-12"> After choosing the student loan provider that offers the best refinance rates and terms for your needs, you will need to apply to refinance your loan. This is typically done online or with an agent over the phone. You will need your identification, Social Security number, and your current student loan information, including your account number and payoff amount. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-13"> You may also be asked for things like proof of graduation and current income. Having your finances in order makes the process go faster and increases your chances of getting a low interest rate. </p><!-- 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_4-0-14"> <span class="mntl-sc-block-subheading__text"> Alternatives to Student Loan Refinancing </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_4-0-15"> Student loan refinancing makes sense for some people. But, you may find that it isn't the right option for you. If you don't want to lose the benefits associated with your federal student loans, consider the following alternatives: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-16"> <li><strong>Consolidation:</strong> You may be able to consolidate all of your federal student loans into a single loan through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/direct-consolidation-loan.asp">Direct Consolidation Loan</a>. This program gives you a single payment and generally allows you to lower your monthly payment. Interest rates tend to be fixed and you won't give up your student loan benefits. Keep in mind that you may end up with a longer repayment period, which generally means paying more in interest over the life of the loan. There is no application fee for the program and it may not affect your credit score.<span class="ql-inline-citation" data-cite="54"></span></li> <li><strong>Change your new due date: </strong>Consider asking for changes to your loan, including your payment date. Consider syncing your due date to your payday, making it more convenient to make your loan payments on time.</li> <li><strong>Request a new repayment plan:</strong> Consider asking for a new repayment plan that can help you keep on track and provide you with a greater degree of flexibility. An <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/income-driven-repayment-plans-7562851">income-driven repayment plan</a> bases your monthly payment on how much you earn each month.</li> <li><strong>Ask for forbearance and deferment:</strong> These options can give you some temporary relief if you're going through a rough financial time and they won't impact your credit score. Keep in mind that interest continues to accrue when your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deferredpaymentoption.asp#toc-examples-of-a-deferred-payment">payments are deferred</a> or if you qualify for <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forbearance.asp">forbearance</a>, and any missed payments are tacked on to the end of your loan.</li> <li><strong>Student loan forgiveness programs: </strong>You may qualify for <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/student-loan-forgiveness.asp#:~:text=Public%20Service%20Loan%20Forgiveness%20%28PSLF%29&amp;text=These%20payments%20must%20be%20made,payments%20%28120%20payments%20overall%29.">student loan forgiveness</a> through the Public Service Loan Forgiveness program. This applies to certain government and nonprofit employees and those who have a strong payment history.<span class="ql-inline-citation" data-cite="55"></span><br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-pros-and-cons-of-student-loan-refinancing"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-17"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Student Loan Refinancing </span> </h2><!-- end: comp 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_4-0-18"> <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>Lower interest rates</p></li> <li><p>Lower monthly payments</p></li> <li><p>One monthly payment</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>Loss of all federal benefits and protections</p></li> <li><p>Terms may not be better after refinancing</p></li> <li><p>You may end up paying more</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <h3 class="comp mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_4-0-19"> <span class="mntl-sc-block-subheading__text"> Pros Explained<br> </br></span> </h3><!-- end: comp 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_4-0-20"> <li><strong>You may get a lower interest rate:</strong> Most people refinance their debt to get a better interest rate. If you wait until the right time and qualify, you may be able to get a better interest rate, which can lower the amount of money you pay on your student loan(s).</li> <li><strong>You may be able to lower your monthly payment:</strong> If you qualify for refinancing, you may be able to extend your loan terms. Spreading out your debt over a longer term means you'll end up with a lower monthly payment, putting more money in your pocket.</li> <li><strong>You may end up with one easy-to-manage monthly payment:</strong> If you have multiple loans, this means you have to make one payment. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consolidation.asp">Consolidating</a> all of your federal student loans into one can make it easier to manage and budget each month.</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_4-0-21"> <span class="mntl-sc-block-subheading__text"> Cons Explained<br/> </span> </h3><!-- end: comp 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_4-0-22"> <li><strong>You could lose all federal benefits and protections:</strong> Federal student loans come with certain benefits and protections, including <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/student-loan-forgiveness.asp">student loan forgiveness</a> through the Public Service Loan Forgiveness. Depending on the type of loan, you may also qualify for the permanent disability discharge or the closed school discharge programs. If you refinance through a private lender, you lose access to all these options.</li> <li><strong>You may not qualify for better loan terms:</strong> You'll have to meet certain thresholds to get a better interest rate or term length—or to qualify for refinancing at all. Potential new lenders may consider you a credit risk, especially if you have a low credit score and/or are in a lower income level.</li> <li><strong>You may not save money in the end:</strong> Federal student loan rates tend to be fairly low. So, you may give that up if you refinance with a private lender for a variable interest rate and they rise. The same is true if you sign with a longer loan term: Your payments may be lower, but you may end up paying more in interest in the end.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-you-should-trust-us"></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"> Why You Should Trust Us </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"> Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of student loan lenders. We collected thousands of data points across 23 lenders, including loan types, interest rates, fees, loan amounts, and repayment terms, to ensure that we help readers make the right borrowing decision for their education needs. Investopedia launched in 1999 and has helped millions of readers around the world become educated on personal finance.<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_4-0-25"> <span class="heading-toc" id="toc-faqs-748ae780-733f-4379-95fe-755644821f84"></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 Refinance Federal Student Loans?</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>While you can refinance federal student loans—and even combine them with your private student loans—there are some drawbacks to consider.</p><p>When you refinance your federal education debt, you'll lose federal benefits and protections. For example, you'll no longer be eligible for income-driven repayment plans, Public Service <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">Loan Forgiveness</a>, or federal forbearance or deferment programs.</p><p>Refinancing may be worth it if your goal is to save money, but think carefully about the downsides before submitting your loan application.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Should You Consider Refinancing Your Student Loan?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Many people had to take out student loans to get a degree and want to know if they should consider refinancing their student loans. Before deciding, consider your needs and assess your current situation. Think about if it’s a good time to refinance and consider what your current rate is, if you could potentially qualify for a lower rate and if any fees will be involved. </p><p>However, it may make sense to hold off on refinancing your student loans if your income isn’t stable and your FICO score is low.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">How Do You Refinance Student Loans?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>To refinance your student loans, apply for a loan from a private lender for the amount of your existing debt. Once approved, you can use the loan to pay off your old loans. You can refinance both federal and private student loans, consolidating them together. After that, you'll have just one loan to manage, with only one monthly payment to remember. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">Are There Any Downsides to Refinancing Student Loans?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>While you may get more favorable terms, there are some disadvantages that come with refinancing your student loans. For instance, you could lose any options for student loan forgiveness along with the grace period for federal student loans. If you get a variable rate loan, you stand the chance of paying a higher rate if they increase.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">What Credit Score Do You Need to Refinance Your Student Loans?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Not all lenders publicly list their minimum credit score requirements. Of the lenders that we looked at while researching this article (who disclose this information), Earnest has the lowest requirement. To qualify for a loan from Earnest, you'll need a minimum credit score of 650.</p><p>You may still be able to qualify for a loan with a lower credit score if you have a cosigner on your application.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">What's the Difference Between Student Loan Consolidation and Refinance?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Student loan consolidation and student loan refinancing may sound similar, but they're very different terms.</p><p>Although they're both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-pay-off-your-student-loans-4772422">loan payoff options</a>, student loan consolidation refers to federal <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/direct-consolidation-loan.asp">Direct Consolidation Loans</a>. With a Direct Consolidation Loan, you can combine your eligible federal student loans. Repayment terms can be as long as 30 years, and your interest rate is based on the weighted average of your current interest rates.</p><p>With student loan refinancing, you work with a private lender to take out a loan for the existing debt. When you refinance, you'll lose federal loan benefits. However, you can qualify for a lower interest rate and save money over time.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">How Long Does It Take to Refinance Student Loans?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>That depends on several factors. Some lenders can approve you as soon as the same day while others may have more stringent lending conditions, which could take up to several weeks. To make the process go more smoothly and to avoid delays, make sure you have all your documents prepared.</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 23 lenders to find the best companies you see above on this list. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision:</p><p>Advantage Education Loans, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/brazos-student-loans-review-6931112#:~:text=Michael%20Rosenston%20is%20a%20fact,business%2C%20finance%2C%20and%20insurance.&amp;text=Brazos%20is%20an%20excellent%20option,country%20won't%20be%20eligible.">Brazos</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/citizens-bank-student-loans-review-4800080">Citizens Bank</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/college-ave-student-loans-review-4798530">College Ave</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credible-student-loans-review-4798535">Credible</a>, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/discover-student-loans-review-4796391">Discover</a>, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/earnest-student-loans-review-4799946">Earnest</a>, <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/education-loan-finance-student-loans-review-4846168">Education Loan Finance (ELFI)</a>, <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/edvestinu-student-loans-review-6891192">EDvestinU</a>, <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/iowa-student-loans-review-4802445">Iowa Student Loan (ISL) Education Lending</a>, <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/juno-student-loans-review-7089988">Juno</a>, <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/laurel-road-student-loans-review-4842109">Laurel Road</a>, <a data-component="link" data-ordinal="12" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/lendkey-student-loans-review-4802314">Lendkey</a>, <a data-component="link" data-ordinal="13" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mefa-student-loans-review-5069957">MEFA</a>, <a data-component="link" data-ordinal="14" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mpower-financing-student-loans-review-4844534">MPower</a>, <a data-component="link" data-ordinal="15" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/navirefi-student-loans-review-7090601">NaviRefi</a>, <a data-component="link" data-ordinal="16" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/navy-federal-credit-union-student-loans-review-5069953">Navy Federal</a>, <a data-component="link" data-ordinal="17" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/nelnet-student-loan-servicing-review-5071091">Nelnet Bank (U-Fi)</a>, <a data-component="link" data-ordinal="18" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/penfed-credit-union-student-loans-review-5070036">PenFed</a>, <a data-component="link" data-ordinal="19" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/pnc-student-loans-review-6944596">PNC</a>, <a data-component="link" data-ordinal="20" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/rhode-island-student-loan-authority-risla-review-4799313">Rhode Island Student Loan Authority</a>, <a data-component="link" data-ordinal="21" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sofi-student-loans-review-4799276">SoFi</a>, <a data-component="link" data-ordinal="22" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/splash-financial-student-loan-refinancing-review-5069979">Splash Financial</a></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 --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-26"> <em>*Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.</em><br/> </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:66.7%;"> <img alt="Education expense or student loan refinance for post secondary education" class="primary-image__image mntl-primary-image--blurry" height="1001" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/RIcFReT15AQpirCBE_YAmz0q-FA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg" srcset="https://www.investopedia.com/thmb/dPg_LABoJ5IjcV-47NTsrjtY-64=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhCgAHAPYAAB0ZFl5AHFRBI1hkAH9RFWNQJndZM2l8IGt8LHFvPn58L3N0MnN/NXF7P15QR2pNR3h+XG+LHHOJPnqDTIJVLpRYJoJqRoh7UZp8VoGEPYKJOY+kO4qAT4WdR4yTQ46YXIeHYYaPZIiXeJKZbZuYb46mXJ6tUKyKXbaUZ7yVarWXc7OafLSzYcSQXsageYmXgIGrg6GRgqqYgqqmga20k7qnic3Gs8Xf1OfYweXh3ubi3+bj3unl4uvn5Ojp5Ovs5+7q5+np6evr6/Hx8R0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFh0ZFiwAAAAACgAHAEYIUQBJMNgQ4UAHFiZuwAAhwwUGEQ0cqCDwIAQHAT8geMiAoEAFHz126Mihg0cPIUNmJFhBY4CCCxNelPiA40SMEQskaADQAogBCihS2KgRwEKQgAA7')" width="1500"/> <noscript> <img alt="Education expense or student loan refinance for post secondary education" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1001" sizes="750px" src="https://www.investopedia.com/thmb/RIcFReT15AQpirCBE_YAmz0q-FA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg" srcset="https://www.investopedia.com/thmb/dPg_LABoJ5IjcV-47NTsrjtY-64=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg 750w" 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>William_Potter / 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-44"><p>Earnest. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.earnest.com/refinance-student-loans" rel="nofollow sponsored">Refinance Student Loans</a>."</p></li> <li class="mntl-sources__source" id="citation-1"><p>Earnest. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.earnest.com/hc/en-us/articles/218394098-What-is-the-minimum-and-maximum-student-loan-balance-Earnest-can-refinance-" rel="nofollow sponsored">What Is the Minimum and Maximum Student Loan Balance Earnest Can Refinance?</a>"</p></li> <li class="mntl-sources__source" id="citation-2"><p>Earnest. "<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.earnest.com/hc/en-us/articles/360000365128-Why-didn-t-I-get-approved-for-all-loan-terms-Student-Loan-Refinancing" rel="nofollow sponsored">Why Didn’t I Get Approved for All Loan Terms? | Student Loan Refinancing</a>."</p></li> <li class="mntl-sources__source" id="citation-46"><p>Earnest. "<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.earnest.com/hc/en-us/articles/218736348-How-do-I-skip-a-payment-and-when-am-I-eligible-to-do-so-Repaying-Your-Loan" rel="nofollow sponsored">How Do I Skip a Payment and When Am I Eligible To Do So? | Repaying Your Loan</a>."</p></li> <li class="mntl-sources__source" id="citation-45"><p>Earnest. 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If you have private student loans, you’re in a unique situation. There's a very good chance that your credit wasn’t very good on its own and you may have even needed a [co-signer](https://www.investopedia.com/terms/c/co_sign.asp) when you took your loans out. Now that you're repaying the loan, there’s also a decent chance that you could qualify for better rates and terms on your own and even remove your co-signer from your loans entirely. The question remains, though, which company is the best to [refinance student loans](https://www.investopedia.com/refinance-student-loans-5323837) given your situation and your goals? We looked at important factors from 23 top lenders, including loan types and amounts, APRs, availability, repayment options, and more, to help you find the best options. ## Best Student Loan Refinance Companies for May 2024 * **Best Overall:** [Earnest](https://fiona.com/partner/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&tag.pref_partner=earnest) * **Refinancing Marketplace:** [Credible](https://www.credible.com/refinance-student-loans?utm_source=investopedia&utm_medium=referral&utm_campaign=credible&utm_content=) * **Best Rates:** [Splash Financial](https://fiona.com/partner/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&tag.pref_partner=splash) * **Best Benefits:** [SoFi](https://fiona.com/partner/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&tag.pref_partner=sofi) * **Best for Parent Loans:** [ISL Lending](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=isl-lending) * **Best for Large Balances:** [Laurel Road](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr) Think twice before you [refinance federal student loans](https://www.investopedia.com/refinance-student-loans-5323837). You’ll lose all of the generous federal benefits and options if you do, such as forbearance, and you’ll begin repayment on your loans immediately.  Best Student Loan Refinance Companies for May 2024 Expand Best Student Loan Refinance Companies for May 2024 * [Our Top Picks](#summary-list) * [Earnest](#toc-best-overall-earnest) * [Credible](#toc-refinancing-marketplace-credible) * [Splash Financial](#toc-best-rates-splash-financial) * [SoFi](#toc-best-benefits-sofi) * [ISL Lending](#toc-best-for-parent-loans-isl-lending) * [Laurel Road](#toc-best-for-large-balances-laurel-road) * See More (3) * [The Bottom Line](#toc-the-bottom-line) * [Compare Providers](#toc-compare-the-best-student-loan-refinance-companies) * [How to Choose](#toc-guide-to-choosing-the-best-student-loan-refinance-companies) * [Pros and Cons](#toc-pros-and-cons-of-student-loan-refinancing) * [Why You Should Trust Us](#toc-why-you-should-trust-us) * [FAQs](#toc-faqs-748ae780-733f-4379-95fe-755644821f84) ### Best Overall : Earnest --- ![Earnest]() :fill(white):max_bytes(150000):strip_icc()/Earnest-logo-6dc9528df9cd4a708818865576d1a711.jpg) Earnest * **APR Range:** Starting at 5.19% fixed, and 5.99% variable (includes autopay discount) * **Loan Amounts:** $5,000–$500,000 * **Loan Terms**: 5–20 years [Apply Now](https://fiona.com/partner/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&tag.pref_partner=earnest) Pros and Cons Pros * Custom loan options * Skip-a-payment option * Available to international students with Prodigy loans Cons * Restrictions for residents of some states * Skip-a-payment option lowers forbearance length Why We Chose It Earnest has two big factors going for it compared with other lenders. First, it grants you the option to skip one payment every 12 months, provided you’ve made all your payments on time in the interim. But, that doesn't mean it’s not a free pass because that payment is tacked onto the end of your loan, and still accrues [interest](https://www.investopedia.com/terms/i/interest.asp). Each time you use it, it reduces the amount of [forbearance](https://www.investopedia.com/terms/f/forbearance.asp) available by one month. Keep in mind that you only have a maximum of 12 months available at the beginning. This adds extra flexibility to your budget if needed, and that’s always a plus.  Earnest also offers an unparalleled range of options, so it doesn't force you to choose from a few term options at five-year intervals. The company offers several options for repayment terms with intervals as short as one month, which allows you to find a payment amount that better fits your budget. Repayment Options * **Forbearance:** Up to 12 months of forbearance during the life of your loan for qualified circumstances, such as financial hardship. * **Deferment**: You can stop your payments entirely during certain qualified periods, such as if you return to school at least half-time or you’re deployed as an active-duty soldier. * **Biweekly payments**: This option splits up your single monthly payment into payments due every two weeks. Eligibility Requirements * Minimum [credit score](https://www.investopedia.com/terms/c/credit_score.asp) of 665 or higher for refinance loans. * In some cases, credit requirements for the student borrower may apply in addition to the normal credit requirements for the co-signer. * Must be a U.S. citizen or permanent resident. * Must have at least two months’ emergency fund. * Available in Washington, D.C., and all states except Nevada. * Variable-rate loans aren’t available for residents of Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas. ### Refinancing Marketplace : Credible --- ![Credible logo]() :fill(white):max_bytes(150000):strip_icc()/Credible-logo-b636bd98830a4c548332ba1cb0e7f993.jpeg) Credible logo. * **APR Range:** 5.28%–12.43% * **Loan Amounts:** $5,000–$750,000 * **Loan Terms:** 5–20 years [Apply Now](https://www.credible.com/refinance-student-loans?utm_source=investopedia&utm_medium=referral&utm_campaign=credible&utm_content=) Pros and Cons Pros * Very low rates * $200 best rate guarantee * Good selection of lenders Cons * Loan options may vary * May need to join a credit union * Some partner lenders are state-specific Why We Chose It Credible isn’t exactly a lender. Rather, it’s a marketplace that offers personalized prequalified rates with several companies at once.\* In other words, it’s a student loan refinancing matchmaking company, although it helps people find other loan types too. Credible is refreshingly [transparent](https://www.investopedia.com/terms/t/transparency.asp) about which lenders it works with so you know which ones to cross off of your shopping list. With nine partner lenders in its network, it’s a fast and easy way to get your rate shopping done.  Credible even offers a $200 best-rate guarantee, so if you find a better offer from a non-partner lender elsewhere, Credible will [reimburse](https://www.investopedia.com/terms/r/reimbursement.asp) you with a gift card. As with any loan marketplace, the downside is you’ll still need to research each company you’re matched with to see if it offers the features you’re looking for, if anything, beyond the lowest rate.  Repayment Options Repayment options vary depending on the lender that you’re matched with. If you've completed school, you will likely already be in repayment and continue paying immediately after refinancing. If you end up going back to school, options may include: * [Deferment](https://www.investopedia.com/what-is-student-loan-deferment-4771251) * Fixed payments * Interest-only payments * Full repayment Eligibility Requirements * Available in all 50 states * Minimum credit score of 700 or higher, although some lenders may accept lower scores * Must be a U.S. citizen or permanent resident ### Best Rates : Splash Financial --- ![Splash Financial]() :fill(white):max_bytes(150000):strip_icc()/Splash-logo-7354df097dd54f838fbf410cbe7dabb6.jpg) Splash Financial * **APR Range:** 5.09%–10.24% * **Loan Amounts:** $5,000–No maximum * **Loan Terms:** Not disclosed [Apply Now](https://fiona.com/partner/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&tag.pref_partner=splash) Pros and Cons Pros * Very low rates * Affordable options for medical professionals Cons * Not available if you didn’t complete your degree * May need to join a credit union Why We Chose It Like Credible, Splash Financial is a student loan marketplace. Splash Financial, however, is specifically geared toward people looking to refinance their loans, and it works with an exclusive set of lenders. As such, you can compare rates from several lenders at once, although the exact details of which lenders are in Splash Financial’s network aren’t disclosed.  Since Splash Financial only serves as an intermediary to connect you with other lenders, there aren’t too many downsides to using it. However, none of the lenders in its network offer refinancing options to those who have not finished their degree. Repayment Options * **Full repayment:** Full principle-and-interest payments are required for most refinanced student loans. * **Medical and dental school repayment:** Refinance your medical or dental school loans and you'll only have to make fixed monthly payments of $100 while you're in a residency or fellowship, and for six months after you leave those programs. Eligibility Requirements * Minimum credit score not disclosed. * Must be a U.S. citizen or permanent resident. * Available in all 50 states, Washington, D.C., Puerto Rico, and U.S. Virgin Islands. * Must have a completed degree ### Best Benefits : SoFi --- ![SoFi]() :fill(white):max_bytes(150000):strip_icc()/Sofi-logo-e7310eebe37c45889de436c9f9f095e7.jpg) SoFi * **APR Range:** 5.24%–9.99 (fixed) and 6.24%-9.99 (variable) * **Loan Amounts:** $5,000 minimum. No maximum. * **Loan Terms**: 5–20 years [Apply Now](https://fiona.com/partner/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&tag.pref_partner=sofi) Pros and Cons Pros * Strong financial hardship benefits * Career coaching, special events, and more * Can refinance parent loans in your own name Cons * Spouses can’t refinance loans together * Applying with a co-signer may take more time Why We Chose It Private student loan lenders don’t have a particularly good reputation for offering many perks, especially when you compare them with federal student loans. SoFi is somewhat of an exception to that because it offers many borrower benefits, including one-on-one career coaching, [financial planning](https://www.investopedia.com/financial-planning-4427750), special events, Los Angeles-based SoFi Stadium lounge access, and more.  SoFi is also one of the few lenders that allows graduates to refinance student loans that their parents took out for their benefit in their names, thereby claiming responsibility for repayment. Be aware, however, that applying with a co-signer can add extra time to your loan approval timeline. And once listed on the loan, there’s no way to remove a co-signer unless you refinance again in your name alone.  Repayment Options * **Reduced payment**: If you experience a financial hardship, SoFi may be able to work with you on a way to lower your monthly payments. * **Forbearance and deferment**: SoFi offers forbearance and deferment options in some cases, such as if you return to school or experience a natural disaster. Eligibility Requirements * Minimum credit score not disclosed. * Completed at least an associate’s degree from a Title IV school. * Available in all 50 states plus Washington, D.C. * Must be a U.S. citizen or current resident, including non-permanent residents and DACA recipients. ### Best for Parent Loans : ISL Lending --- ![Iowa Student Loan (ISL) Education Lending]() :fill(white):max_bytes(150000):strip_icc()/Iowa-Student-Loan-logo-a726ba2a72cf413f99d4484f561b5fe8.jpg) Iowa Student Loan (ISL) Education Lending * **APR Range:** 6.93%–11.58% * **Loan Amounts:** $5,000–$300,000 * **Loan Terms:** 7–20 years [Apply Now](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=isl-lending) Pros and Cons Pros * Flexible repayment plans * Doesn’t require a completed degree * Loan discharge for death or permanent disability Cons * Doesn’t offer variable-rate loans * Not available for DACA recipients * Not available for residents of Maine Why We Chose It The name Iowa Student Loan might fool you into thinking that student loan refinancing is only available to residents of the Hawkeye State, but this [nonprofit](https://www.investopedia.com/terms/n/non-profitorganization.asp) lender is available across the entire country, except for Maine. Its low rates make it a good refinancing option, but there are a few reasons why it's a strong candidate for people with parent student loans:  * You may be able to opt for a graduated repayment plan that can help make payment easy, especially if you're in the midst of a career transition. * You’ll also qualify for a reduced rate on your loan if you’re an active-duty military member. * Unlike most private student loan lenders, ISL offers a loan [discharge](https://www.investopedia.com/terms/d/debt-discharge.asp) program if you become permanently disabled or die—similar to federal student loans. No one likes to think about this possibility, but the chances of an unfortunate event happening are higher for parents than newly-minted young grads. Choosing a loan with these options can better protect you and your family. Repayment Options * **Forbearance:** May offer a pause in payments for certain cases such as financial hardship. * **Graduated repayment**: Rather than paying a steady payment, start with smaller payments that gradually grow to a larger size to finish repaying the loan in the same amount of time. * **Deferment**: ISL offers deferment for certain cases, such as financial hardship or serving in the military, if you’re up to date on payments and provide a [budget worksheet](https://www.investopedia.com/terms/b/budget.asp). Eligibility Requirements * Minimum credit score of 670 or higher. * Must be a U.S. citizen or permanent resident. * Available in Washington, D.C., and all states except Maine. * No prior adverse credit events like foreclosures, [bankruptcies](https://www.investopedia.com/articles/pf/07/bankruptcy.asp), accounts in collection, etc. * No more than two late payments overdue by 30 days (and none past 60 days) in the previous two years. * [Debt-to-income (DTI) ratio](https://www.investopedia.com/terms/d/dti.asp) under 25% (if you don’t pay rent or mortgage) or 40% (for most others) ### Best for Large Balances : Laurel Road --- ![Laurel Road logo]() :fill(white):max_bytes(150000):strip_icc()/Laurel-Road-Logo-5b83bcbaa6a04bee941e6264be7433ed.jpeg) Laurel Road logo. * **APR Range:** 5.19%–9.70% with autopay\* * **Loan Amounts:** $5,000–No maximum * **Loan Terms**: 5–20 years [Apply Now](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr) Pros & Cons Pros * Very low student loan refinance rates * Kids can take over parent student loans * Special benefits for healthcare professionals Cons * Doesn’t offer deferment if you return to school Why We Chose It Some professions are known for having an especially high price tag, like law and medicine. Laurel Road is one of a few companies that cater to high-balance borrowers, especially people in the medical profession. Laurel Road may offer special rate [discounts](https://www.investopedia.com/terms/d/discount.asp) and affordable $100 repayment plans for medical residents and fellows.  You don’t necessarily have to be a doctor or an x-ray technician to benefit from Laurel Road’s refinancing options. It also offers different ways for others to save. The [lender](https://www.investopedia.com/terms/l/lender.asp) offers a larger suite of banking services, and if you sign up for these and meet certain requirements (and they’re generally not too hard to meet), you could qualify for even lower rates on your student loan refinance. Repayment Options * **Natural disaster forbearance**: Available for up to two months. * **Economic hardship forbearance**: Available for up to 12 months, granted in four three-month periods at a time. * **$100 repayment:** Available for medical residents and fellows, this plan offers affordable payments, but keep in mind the payments may not cover the amount of interest accruing monthly. Eligibility Requirements * Must be a U.S. citizen or permanent resident. * Available in all 50 states plus Washington, D.C. * Can only refinance loans for graduate studies, undergraduate studies at a four-year institution, or certain associate degrees in the medical field. * Must have completed your degree unless you’re a parent refinancing student loans for your child, or you’re in your final semester of study with a signed job offer. ## The Bottom Line There are a lot of reasons to refinance your student loans, and some lenders are clear winners in specific instances. For example, if you’re trying to relieve your parents of the student loan burden they took out for your education, ISL Lending is a top choice. But, Earnest is a great all-around option for most borrowers to add to any rate-shopping checklist. It offers the highest degree of customization so you’re more likely to land on the best option for your budget, rather than being shoehorned into a small handful of options. That can help you pay off your loan even quicker and perhaps with lower interest so you can move on with your life.  ## Compare the Best Student Loan Refinance Companies | **Company** | **Interest Rate** | **Loan Terms** | **Maximum Loan Amount** | **Minimum Credit Score** | | --- | --- | --- | --- | --- | | [Earnest](https://fiona.com/partner/inslr/loans?preferred_offer_partner=39ea5c85-1664-4d62-bd47-90737fe84a56&tag.pref_partner=earnest) **Best Overall** | 5.19%–9.99%\* with autopay | 5–20 years | $500,000 | 665 | | [Credible](https://www.credible.com/refinance-student-loans/?utm_source=investopedia&utm_medium=referral&utm_campaign=slr_invst&utm_content=4782684) **Best Refinancing Marketplace** | 5.28%–12.43% See Terms\* | 5–20 years | $750,000 | 700 for best rates (some lenders may accept lower scores) | | [Splash Financial](https://fiona.com/partner/inslr/loans?preferred_offer_partner=5997024f-0d4b-473a-92c9-8e176b472050&tag.pref_partner=splash) **Best Rates** | 5.09%–10.24% | Not disclosed | None | Not disclosed | | [SoFi](https://fiona.com/partner/inslr/loans?preferred_offer_partner=e8140122-6ed2-46ff-a6cd-3690e5132fa1&tag.pref_partner=sofi) **Best Benefits** | 5.24% - 9.99% | 5–20 years | None | Not disclosed | | [ISL Lending](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=isl-lending) **Best for Parent Loans** | 6.93%–11.58% | 7–20 years | $300,000 | 670 | | [Laurel Road](https://fiona.com/partner/investopedia-bridge-slr/loans?bridge_partner=laurel-road-slr) **Best for Large Balances** | 5.19%–9.70%\* with autopay | 5–20 years | None | Not disclosed | ## Guide to Choosing the Best Student Loan Refinance Companies ### What Is Student Loan Refinancing? Student loan refinacing happens when you apply for one new loan to pay off your existing student loans. Borrowers tend to do this to lower their borrowing costs and get better terms, including lower monthly payments and a better interest rate. If you want to refinance your student loans, you'll have to apply with a private lender. Once your loan is approved, your existing loans are paid off and you begin making payments to the new lender. Keep in mind that you lose any protections by refinancing if you qualified for protections for your federal student loans. ### Compare Student Refinance Loans When looking at options to [refinance your student loans](https://www.investopedia.com/refinance-student-loans-5323837), you want to compare providers to make sure you’re getting the best deal. Keep the following important factors in mind: * **Rates**: Know what rates are offered and if they are fixed or variable rates. Typically, the higher your credit score, the lower your rate. * **Terms**: Student loan terms generally range from 5 to 20 years. However, some companies cut off term limits at 15 years. Know how long the term is and make sure it’s feasible to make timely payments. * **Customer service**: Know how to get in touch with customer service whether it be through email, online chat, or email. You may have a question the website doesn’t answer. * **Borrower requirements**: Do you need to have a certain FICO score to qualify? Know if there are other qualifications such as being a certain age, minimum income, or a particular type of degree program. ### How to Refinance Your Student Loan After choosing the student loan provider that offers the best refinance rates and terms for your needs, you will need to apply to refinance your loan. This is typically done online or with an agent over the phone. You will need your identification, Social Security number, and your current student loan information, including your account number and payoff amount. You may also be asked for things like proof of graduation and current income. Having your finances in order makes the process go faster and increases your chances of getting a low interest rate. ### Alternatives to Student Loan Refinancing Student loan refinancing makes sense for some people. But, you may find that it isn't the right option for you. If you don't want to lose the benefits associated with your federal student loans, consider the following alternatives: * **Consolidation:** You may be able to consolidate all of your federal student loans into a single loan through the [Direct Consolidation Loan](https://www.investopedia.com/terms/d/direct-consolidation-loan.asp). This program gives you a single payment and generally allows you to lower your monthly payment. Interest rates tend to be fixed and you won't give up your student loan benefits. Keep in mind that you may end up with a longer repayment period, which generally means paying more in interest over the life of the loan. There is no application fee for the program and it may not affect your credit score. * **Change your new due date:** Consider asking for changes to your loan, including your payment date. Consider syncing your due date to your payday, making it more convenient to make your loan payments on time. * **Request a new repayment plan:** Consider asking for a new repayment plan that can help you keep on track and provide you with a greater degree of flexibility. An [income-driven repayment plan](https://www.investopedia.com/income-driven-repayment-plans-7562851) bases your monthly payment on how much you earn each month. * **Ask for forbearance and deferment:** These options can give you some temporary relief if you're going through a rough financial time and they won't impact your credit score. Keep in mind that interest continues to accrue when your [payments are deferred](https://www.investopedia.com/terms/d/deferredpaymentoption.asp#toc-examples-of-a-deferred-payment) or if you qualify for [forbearance](https://www.investopedia.com/terms/f/forbearance.asp), and any missed payments are tacked on to the end of your loan. * **Student loan forgiveness programs:** You may qualify for [student loan forgiveness](https://www.investopedia.com/terms/s/student-loan-forgiveness.asp#:~:text=Public%20Service%20Loan%20Forgiveness%20%28PSLF%29&text=These%20payments%20must%20be%20made,payments%20%28120%20payments%20overall%29.) through the Public Service Loan Forgiveness program. This applies to certain government and nonprofit employees and those who have a strong payment history. ## Pros and Cons of Student Loan Refinancing Pros * Lower interest rates * Lower monthly payments * One monthly payment Cons * Loss of all federal benefits and protections * Terms may not be better after refinancing * You may end up paying more ### Pros Explained * **You may get a lower interest rate:** Most people refinance their debt to get a better interest rate. If you wait until the right time and qualify, you may be able to get a better interest rate, which can lower the amount of money you pay on your student loan(s). * **You may be able to lower your monthly payment:** If you qualify for refinancing, you may be able to extend your loan terms. Spreading out your debt over a longer term means you'll end up with a lower monthly payment, putting more money in your pocket. * **You may end up with one easy-to-manage monthly payment:** If you have multiple loans, this means you have to make one payment. [Consolidating](https://www.investopedia.com/terms/c/consolidation.asp) all of your federal student loans into one can make it easier to manage and budget each month. ### Cons Explained * **You could lose all federal benefits and protections:** Federal student loans come with certain benefits and protections, including [student loan forgiveness](https://www.investopedia.com/terms/s/student-loan-forgiveness.asp) through the Public Service Loan Forgiveness. Depending on the type of loan, you may also qualify for the permanent disability discharge or the closed school discharge programs. If you refinance through a private lender, you lose access to all these options. * **You may not qualify for better loan terms:** You'll have to meet certain thresholds to get a better interest rate or term length—or to qualify for refinancing at all. Potential new lenders may consider you a credit risk, especially if you have a low credit score and/or are in a lower income level. * **You may not save money in the end:** Federal student loan rates tend to be fairly low. So, you may give that up if you refinance with a private lender for a variable interest rate and they rise. The same is true if you sign with a longer loan term: Your payments may be lower, but you may end up paying more in interest in the end. ## Why You Should Trust Us Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of student loan lenders. We collected thousands of data points across 23 lenders, including loan types, interest rates, fees, loan amounts, and repayment terms, to ensure that we help readers make the right borrowing decision for their education needs. Investopedia launched in 1999 and has helped millions of readers around the world become educated on personal finance. ## Frequently Asked Questions * ### Can You Refinance Federal Student Loans? While you can refinance federal student loans—and even combine them with your private student loans—there are some drawbacks to consider. When you refinance your federal education debt, you'll lose federal benefits and protections. For example, you'll no longer be eligible for income-driven repayment plans, Public Service [Loan Forgiveness](https://www.investopedia.com/articles/personal-finance/051214/debt-forgiveness-how-get-out-paying-your-student-loans.asp), or federal forbearance or deferment programs. Refinancing may be worth it if your goal is to save money, but think carefully about the downsides before submitting your loan application. * ### Should You Consider Refinancing Your Student Loan? Many people had to take out student loans to get a degree and want to know if they should consider refinancing their student loans. Before deciding, consider your needs and assess your current situation. Think about if it’s a good time to refinance and consider what your current rate is, if you could potentially qualify for a lower rate and if any fees will be involved.  However, it may make sense to hold off on refinancing your student loans if your income isn’t stable and your FICO score is low. * ### How Do You Refinance Student Loans? To refinance your student loans, apply for a loan from a private lender for the amount of your existing debt. Once approved, you can use the loan to pay off your old loans. You can refinance both federal and private student loans, consolidating them together. After that, you'll have just one loan to manage, with only one monthly payment to remember. * ### Are There Any Downsides to Refinancing Student Loans? While you may get more favorable terms, there are some disadvantages that come with refinancing your student loans. For instance, you could lose any options for student loan forgiveness along with the grace period for federal student loans. If you get a variable rate loan, you stand the chance of paying a higher rate if they increase. * ### What Credit Score Do You Need to Refinance Your Student Loans? Not all lenders publicly list their minimum credit score requirements. Of the lenders that we looked at while researching this article (who disclose this information), Earnest has the lowest requirement. To qualify for a loan from Earnest, you'll need a minimum credit score of 650. You may still be able to qualify for a loan with a lower credit score if you have a cosigner on your application. * ### What's the Difference Between Student Loan Consolidation and Refinance? Student loan consolidation and student loan refinancing may sound similar, but they're very different terms. Although they're both [loan payoff options](https://www.investopedia.com/how-to-pay-off-your-student-loans-4772422), student loan consolidation refers to federal [Direct Consolidation Loans](https://www.investopedia.com/terms/d/direct-consolidation-loan.asp). With a Direct Consolidation Loan, you can combine your eligible federal student loans. Repayment terms can be as long as 30 years, and your interest rate is based on the weighted average of your current interest rates. With student loan refinancing, you work with a private lender to take out a loan for the existing debt. When you refinance, you'll lose federal loan benefits. However, you can qualify for a lower interest rate and save money over time. * ### How Long Does It Take to Refinance Student Loans? That depends on several factors. Some lenders can approve you as soon as the same day while others may have more stringent lending conditions, which could take up to several weeks. To make the process go more smoothly and to avoid delays, make sure you have all your documents prepared. * ### Companies We Reviewed We researched and reviewed 23 lenders to find the best companies you see above on this list. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision: Advantage Education Loans, [Brazos](https://www.investopedia.com/brazos-student-loans-review-6931112#:~:text=Michael%20Rosenston%20is%20a%20fact,business%2C%20finance%2C%20and%20insurance.&text=Brazos%20is%20an%20excellent%20option,country%20won't%20be%20eligible.), [Citizens Bank](https://www.investopedia.com/citizens-bank-student-loans-review-4800080), [College Ave](https://www.investopedia.com/college-ave-student-loans-review-4798530), [Credible](https://www.investopedia.com/credible-student-loans-review-4798535), [Discover](https://www.investopedia.com/discover-student-loans-review-4796391), [Earnest](https://www.investopedia.com/earnest-student-loans-review-4799946), [Education Loan Finance (ELFI)](https://www.investopedia.com/education-loan-finance-student-loans-review-4846168), [EDvestinU](https://www.investopedia.com/edvestinu-student-loans-review-6891192), [Iowa Student Loan (ISL) Education Lending](https://www.investopedia.com/iowa-student-loans-review-4802445), [Juno](https://www.investopedia.com/juno-student-loans-review-7089988), [Laurel Road](https://www.investopedia.com/laurel-road-student-loans-review-4842109), [Lendkey](https://www.investopedia.com/lendkey-student-loans-review-4802314), [MEFA](https://www.investopedia.com/mefa-student-loans-review-5069957), [MPower](https://www.investopedia.com/mpower-financing-student-loans-review-4844534), [NaviRefi](https://www.investopedia.com/navirefi-student-loans-review-7090601), [Navy Federal](https://www.investopedia.com/navy-federal-credit-union-student-loans-review-5069953), [Nelnet Bank (U-Fi)](https://www.investopedia.com/nelnet-student-loan-servicing-review-5071091), [PenFed](https://www.investopedia.com/penfed-credit-union-student-loans-review-5070036), [PNC](https://www.investopedia.com/pnc-student-loans-review-6944596), [Rhode Island Student Loan Authority](https://www.investopedia.com/rhode-island-student-loan-authority-risla-review-4799313), [SoFi](https://www.investopedia.com/sofi-student-loans-review-4799276), [Splash Financial](https://www.investopedia.com/splash-financial-student-loan-refinancing-review-5069979) *\*Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.* :max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-student-loan-refinance-companies-of-january-2023-28d41f8550354bbdb98b29cdf9346751.jpg) William\_Potter / 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. Earnest. "[Refinance Student Loans](https://www.earnest.com/refinance-student-loans)." 2. Earnest. "[What Is the Minimum and Maximum Student Loan Balance Earnest Can Refinance?](https://help.earnest.com/hc/en-us/articles/218394098-What-is-the-minimum-and-maximum-student-loan-balance-Earnest-can-refinance-)" 3. Earnest. "[Why Didn’t I Get Approved for All Loan Terms? | Student Loan Refinancing](https://help.earnest.com/hc/en-us/articles/360000365128-Why-didn-t-I-get-approved-for-all-loan-terms-Student-Loan-Refinancing)." 4. Earnest. "[How Do I Skip a Payment and When Am I Eligible To Do So? | Repaying Your Loan](https://help.earnest.com/hc/en-us/articles/218736348-How-do-I-skip-a-payment-and-when-am-I-eligible-to-do-so-Repaying-Your-Loan)." 5. Earnest. "[How Can I Apply for Forbearance? | Student Loan Refinancing](https://help.earnest.com/hc/en-us/articles/21550272136343-How-Can-I-Apply-for-Forbearance-Repaying-your-Loan)." 6. Earnest. "[Refinance Student Loans](https://www.earnest.com/refinance-student-loans)." 7. Earnest. "[Student Loan Calculator](https://www.earnest.com/student-loan-calculator)." 8. Earnest. "[What Are My Repayment Options if I Cannot Make a Payment? | Student Loan Refinancing](https://help.earnest.com/hc/en-us/articles/360015812153-What-are-my-repayment-options-and-what-if-I-cannot-make-a-payment-Student-Loan-Refinancing)." 9. Earnest. "[What Is Biweekly Auto Pay? | Student Loan Refinancing](https://help.earnest.com/hc/en-us/articles/360020461534-How-can-I-switch-to-biweekly-Auto-Pay-Student-Loan-Refinancing)." 10. Earnest. "[Eligibility Guide & Requirements](https://www.earnest.com/eligibility)." 11. Credible. "[Student Loan Refinancing](https://www.credible.com/refinance-student-loans)." 12. Credible. "[Credible Best Rate Guarantee](https://www.credible.com/a/best-rate-guarantee-offer)." 13. Splash. "[Put Us to Work on Those Student Loans](https://www.splashfinancial.com/student-loan-refinancing)." 14. Splash. "[Frequently Asked Questions](https://www.splashfinancial.com/resources/faq/eligibility)." Click "How Much Can I Borrow for Student Loan Refinance?" 15. Splash Financial. "[Refinance Medical School Loans](https://www.splashfinancial.com/medical-school-student-loan-refinancing)." 16. SoFi. "[What Is the Minimum and Maximum Amount I Can Borrow with SoFi](https://support.sofi.com/hc/en-us/articles/360040139791-What-is-the-minimum-and-maximum-amount-I-can-borrow-with-SoFi-)?" 17. SoFi. "[Refinance Student Loan Rates](https://www.sofi.com/refinance-student-loan/refinance-student-loan-rates/)." 18. SoFi. "[SoFi Member Benefits](https://www.sofi.com/member-benefits/#member-benefits-section-one)." 19. SoFi. "[Frequently Asked Questions](https://www.sofi.com/faq/#refinance-loans-general)." 20. SoFi. "[Info Center](https://sofi.mohela.com/DL/resourceCenter/Brands/HelpCenter.aspx)." 21. SoFi. "[Options To Postpone Repayments](https://sofi.mohela.com/DL/resourceCenter/Brands/OptionsToPostponeRepayment.aspx)." 22. SoFi. "[Eligibility Criteria](https://www.sofi.com/eligibility-criteria/)." 23. ISL Education Lending. "[Student Loan Refinance](https://www.iowastudentloan.org/refinance-loan/student-loan.aspx)." 24. ISL Education Lending. "[Private and Federal Student Loan Refinancing](https://www.iowastudentloan.org/refinance-loan/)." 25. ISL Education Lending. "[Funding Private Student Loans](https://www.iowastudentloan.org/what-we-do/supplemental-private-loans/#divArmedForces)." 26. Laurel Road. "[Refinance Student Loans](https://www.laurelroad.com/refinance-student-loans/)." 27. Laurel Road. "[Medical Residents Student Loan Refinance](https://www.laurelroad.com/healthcare-banking/refinance-medical-school-loans/resident-and-fellow-refinancing/#:~:text=Empowering%20tomorrow's%20healthcare%20leaders%20with,beginning%20your%20standard%20repayment%20term.)." 28. Laurel Road. "[Checking + Student Loan Refi](https://www.laurelroad.com/refinance-student-loans/linked-checking/)." 29. Laurel Road. “[Coronavirus (COVID-19) Response](https://www.laurelroad.com/coronavirus-response/).” 30. Laurel Road. “[How to Qualify for Student Loan Refinancing](https://www.laurelroad.com/refinance-student-loans/how-to-qualify-for-student-loan-refinancing/).” 31. Federal Student Aid. "[Consolidating Student Loans](https://studentaid.gov/manage-loans/consolidation)." 32. Federal Student Aid. "[Public Service Loan Forgiveness (PSLF)](https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service)." Related Articles [![Young women looking at papers together]() :max_bytes(150000):strip_icc()/GettyImages-1339976302-a09cb69609984aa392f232fe76becae7.jpg) Student Loan Consolidation vs. Refinancing](https://www.investopedia.com/student-loan-consolidation-vs-refinancing-8641065) [![Best-student-loans-for-bad-credit-4779788]() :max_bytes(150000):strip_icc()/StudentLoan_Catherine-McQueen-35a03c4713b54f5f8487e8044140fd75.jpg) Best Student Loans for Bad Credit](https://www.investopedia.com/best-student-loans-for-bad-credit-4779788) [![Graduate at the National Mall in Washington DC]() :max_bytes(150000):strip_icc()/Primary-Image-best-graduate-student-loans-of-february-2023-7104225-606d3da354404fe3801ceff50e0c9754.jpg) Best Graduate Student Loans of 2024](https://www.investopedia.com/best-graduate-student-loans-7104225) [![Young woman teaches class on human bone structure medical school]() :max_bytes(150000):strip_icc()/Primary-Image-best-medical-school-loans-of-2023-7107013-af28aacdd2a54b7c9b5c68428acdc18b.jpg) Best Medical School Loans](https://www.investopedia.com/best-medical-school-loans-7107013) [![Students using laptops in classroom]() :max_bytes(150000):strip_icc()/GettyImages-1252668228-95c7b972d17b46e38f41cddba69ecd02.jpg) Private Student Loans: What They Are, How They Work](https://www.investopedia.com/private-student-loans-8638542) [![College student doing some home works from home with laptop]() :max_bytes(150000):strip_icc()/Primary-Image-best-parent-loans-for-college-of-2023-7105138-8f05fb0c53cb4aa8b92b4e446d5bcd54.jpg) Best Parent Loans for College](https://www.investopedia.com/best-parent-loans-for-college-7105138) Related Terms [Private Student Loans: What They Are, How They Work](https://www.investopedia.com/private-student-loans-8638542) Private student loans are offered through third-party lenders, and they don't come with the protections afforded to federal student loan borrowers. 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[more](https://www.investopedia.com/terms/n/no_cash-out_refinance.asp) [Interest Rate Reduction Refinance Loan (IRRRL): Overview](https://www.investopedia.com/terms/i/interest-rate-reduction-refinance-loan-irrrl.asp) An interest rate reduction refinance loan (IRRRL), offered by the U.S. Department of Veterans Affairs (VA), helps veterans and their families get lower rates and refinance their loans. [more](https://www.investopedia.com/terms/i/interest-rate-reduction-refinance-loan-irrrl.asp) [Hardship Default: What It Is and How It Works](https://www.investopedia.com/hardship-default-4845851) A hardship default is a failure to make a scheduled payment on a debt due to a financial setback. [more](https://www.investopedia.com/hardship-default-4845851) [What It Means to Be Past Due on a Loan, Plus Consequences](https://www.investopedia.com/terms/p/past-due.asp) Past due is a loan payment that has not been made as of its due date. The borrower may be subject to late fees, unless there is a grace period. [more](https://www.investopedia.com/terms/p/past-due.asp)

If you have private student loans, you’re in a unique situation. There's a very good chance that your credit wasn’t very good on its own and you may have even needed a co-signer when you took your loans out. Now that you're repaying the loan, there’s also a decent chance that you could qualify for better rates and terms on your own and even remove your co-signer from your loans entirely. The question remains, though, which company is the best to refinance student loans given your situation and your goals? We looked at important factors from 23 top lenders, including loan types and amounts, APRs, availability, repayment options, and more, to help you find the best options. Best Student Loan Refinance Companies for May 2024 Best Overall: Earnest Refinancing Marketplace: Credible Best Rates: Splash Financial Best Benefits: SoFi Best for Parent Loans: ISL Lending Best for Large Balances: Laurel Road Think twice before you refinance federal student loans. You’ll lose all of the generous federal benefits and options if you do, such as forbearance, and you’ll begin repayment on your loans immediately.  Best Student Loan Refinance Companies for May 2024 Expand Best Student Loan Refinance Companies for May 2024 Our Top Picks Earnest Credible Splash Financial SoFi ISL Lending Laurel Road See More (3) The Bottom Line Compare Providers How to Choose Pros and Cons Why You Should Trust Us FAQs Best Overall : Earnest Earnest APR Range: Starting at 5.19% fixed, and 5.99% variable (includes autopay discount)Loan Amounts: $5,000–$500,000Loan Terms: 5–20 years Apply Now Pros and Cons Pros Custom loan options Skip-a-payment option Available to international students with Prodigy loans Cons Restrictions for residents of some states Skip-a-payment option lowers forbearance length Why We Chose It Earnest has two big factors going for it compared with other lenders. First, it grants you the option to skip one payment every 12 months, provided you’ve made all your payments on time in the interim. But, that doesn't mean it’s not a free pass because that payment is tacked onto the end of your loan, and still accrues interest. Each time you use it, it reduces the amount of forbearance available by one month. Keep in mind that you only have a maximum of 12 months available at the beginning. This adds extra flexibility to your budget if needed, and that’s always a plus.  Earnest also offers an unparalleled range of options, so it doesn't force you to choose from a few term options at five-year intervals. The company offers several options for repayment terms with intervals as short as one month, which allows you to find a payment amount that better fits your budget. Repayment Options Forbearance: Up to 12 months of forbearance during the life of your loan for qualified circumstances, such as financial hardship. Deferment: You can stop your payments entirely during certain qualified periods, such as if you return to school at least half-time or you’re deployed as an active-duty soldier.Biweekly payments: This option splits up your single monthly payment into payments due every two weeks.  Eligibility Requirements Minimum credit score of 665 or higher for refinance loans. In some cases, credit requirements for the student borrower may apply in addition to the normal credit requirements for the co-signer. Must be a U.S. citizen or permanent resident. Must have at least two months’ emergency fund. Available in Washington, D.C., and all states except Nevada. Variable-rate loans aren’t available for residents of Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas. Refinancing Marketplace : Credible Credible logo. APR Range: 5.28%–12.43%Loan Amounts: $5,000–$750,000Loan Terms: 5–20 years Apply Now Pros and Cons Pros Very low rates $200 best rate guarantee Good selection of lenders Cons Loan options may vary May need to join a credit union Some partner lenders are state-specific Why We Chose It Credible isn’t exactly a lender. Rather, it’s a marketplace that offers personalized prequalified rates with several companies at once.* In other words, it’s a student loan refinancing matchmaking company, although it helps people find other loan types too. Credible is refreshingly transparent about which lenders it works with so you know which ones to cross off of your shopping list. With nine partner lenders in its network, it’s a fast and easy way to get your rate shopping done.  Credible even offers a $200 best-rate guarantee, so if you find a better offer from a non-partner lender elsewhere, Credible will reimburse you with a gift card. As with any loan marketplace, the downside is you’ll still need to research each company you’re matched with to see if it offers the features you’re looking for, if anything, beyond the lowest rate.  Repayment Options Repayment options vary depending on the lender that you’re matched with. If you've completed school, you will likely already be in repayment and continue paying immediately after refinancing. If you end up going back to school, options may include: Deferment Fixed payments Interest-only payments Full repayment Eligibility Requirements Available in all 50 statesMinimum credit score of 700 or higher, although some lenders may accept lower scoresMust be a U.S. citizen or permanent resident Best Rates : Splash Financial Splash Financial APR Range: 5.09%–10.24%Loan Amounts: $5,000–No maximumLoan Terms: Not disclosed Apply Now Pros and Cons Pros Very low rates Affordable options for medical professionals Cons Not available if you didn’t complete your degree May need to join a credit union Why We Chose It Like Credible, Splash Financial is a student loan marketplace. Splash Financial, however, is specifically geared toward people looking to refinance their loans, and it works with an exclusive set of lenders. As such, you can compare rates from several lenders at once, although the exact details of which lenders are in Splash Financial’s network aren’t disclosed.  Since Splash Financial only serves as an intermediary to connect you with other lenders, there aren’t too many downsides to using it. However, none of the lenders in its network offer refinancing options to those who have not finished their degree. Repayment Options Full repayment: Full principle-and-interest payments are required for most refinanced student loans.Medical and dental school repayment: Refinance your medical or dental school loans and you'll only have to make fixed monthly payments of $100 while you're in a residency or fellowship, and for six months after you leave those programs.  Eligibility Requirements Minimum credit score not disclosed.Must be a U.S. citizen or permanent resident.Available in all 50 states, Washington, D.C., Puerto Rico, and U.S. Virgin Islands.Must have a completed degree Best Benefits : SoFi SoFi APR Range: 5.24%–9.99 (fixed) and 6.24%-9.99 (variable)Loan Amounts: $5,000 minimum. No maximum.Loan Terms: 5–20 years Apply Now Pros and Cons Pros Strong financial hardship benefits Career coaching, special events, and more Can refinance parent loans in your own name Cons Spouses can’t refinance loans together Applying with a co-signer may take more time Why We Chose It Private student loan lenders don’t have a particularly good reputation for offering many perks, especially when you compare them with federal student loans. SoFi is somewhat of an exception to that because it offers many borrower benefits, including one-on-one career coaching, financial planning, special events, Los Angeles-based SoFi Stadium lounge access, and more.  SoFi is also one of the few lenders that allows graduates to refinance student loans that their parents took out for their benefit in their names, thereby claiming responsibility for repayment. Be aware, however, that applying with a co-signer can add extra time to your loan approval timeline. And once listed on the loan, there’s no way to remove a co-signer unless you refinance again in your name alone.  Repayment Options Reduced payment: If you experience a financial hardship, SoFi may be able to work with you on a way to lower your monthly payments. Forbearance and deferment: SoFi offers forbearance and deferment options in some cases, such as if you return to school or experience a natural disaster. Eligibility Requirements Minimum credit score not disclosed.Completed at least an associate’s degree from a Title IV school.Available in all 50 states plus Washington, D.C.Must be a U.S. citizen or current resident, including non-permanent residents and DACA recipients. Best for Parent Loans : ISL Lending Iowa Student Loan (ISL) Education Lending APR Range: 6.93%–11.58%Loan Amounts: $5,000–$300,000Loan Terms: 7–20 years Apply Now Pros and Cons Pros Flexible repayment plans Doesn’t require a completed degree Loan discharge for death or permanent disability Cons Doesn’t offer variable-rate loans Not available for DACA recipients Not available for residents of Maine Why We Chose It The name Iowa Student Loan might fool you into thinking that student loan refinancing is only available to residents of the Hawkeye State, but this nonprofit lender is available across the entire country, except for Maine. Its low rates make it a good refinancing option, but there are a few reasons why it's a strong candidate for people with parent student loans:  You may be able to opt for a graduated repayment plan that can help make payment easy, especially if you're in the midst of a career transition. You’ll also qualify for a reduced rate on your loan if you’re an active-duty military member.  Unlike most private student loan lenders, ISL offers a loan discharge program if you become permanently disabled or die—similar to federal student loans. No one likes to think about this possibility, but the chances of an unfortunate event happening are higher for parents than newly-minted young grads. Choosing a loan with these options can better protect you and your family. Repayment Options Forbearance: May offer a pause in payments for certain cases such as financial hardship. Graduated repayment: Rather than paying a steady payment, start with smaller payments that gradually grow to a larger size to finish repaying the loan in the same amount of time. Deferment: ISL offers deferment for certain cases, such as financial hardship or serving in the military, if you’re up to date on payments and provide a budget worksheet. Eligibility Requirements Minimum credit score of 670 or higher. Must be a U.S. citizen or permanent resident. Available in Washington, D.C., and all states except Maine. No prior adverse credit events like foreclosures, bankruptcies, accounts in collection, etc.  No more than two late payments overdue by 30 days (and none past 60 days) in the previous two years.  Debt-to-income (DTI) ratio under 25% (if you don’t pay rent or mortgage) or 40% (for most others) Best for Large Balances : Laurel Road Laurel Road logo. APR Range: 5.19%–9.70% with autopay* Loan Amounts: $5,000–No maximumLoan Terms: 5–20 years Apply Now Pros & Cons Pros Very low student loan refinance rates Kids can take over parent student loans Special benefits for healthcare professionals Cons Doesn’t offer deferment if you return to school Why We Chose It Some professions are known for having an especially high price tag, like law and medicine. Laurel Road is one of a few companies that cater to high-balance borrowers, especially people in the medical profession. Laurel Road may offer special rate discounts and affordable $100 repayment plans for medical residents and fellows.  You don’t necessarily have to be a doctor or an x-ray technician to benefit from Laurel Road’s refinancing options. It also offers different ways for others to save. The lender offers a larger suite of banking services, and if you sign up for these and meet certain requirements (and they’re generally not too hard to meet), you could qualify for even lower rates on your student loan refinance. Repayment Options Natural disaster forbearance: Available for up to two months.Economic hardship forbearance: Available for up to 12 months, granted in four three-month periods at a time. $100 repayment: Available for medical residents and fellows, this plan offers affordable payments, but keep in mind the payments may not cover the amount of interest accruing monthly. Eligibility Requirements Must be a U.S. citizen or permanent resident.Available in all 50 states plus Washington, D.C.Can only refinance loans for graduate studies, undergraduate studies at a four-year institution, or certain associate degrees in the medical field.Must have completed your degree unless you’re a parent refinancing student loans for your child, or you’re in your final semester of study with a signed job offer. The Bottom Line There are a lot of reasons to refinance your student loans, and some lenders are clear winners in specific instances. For example, if you’re trying to relieve your parents of the student loan burden they took out for your education, ISL Lending is a top choice. But, Earnest is a great all-around option for most borrowers to add to any rate-shopping checklist. It offers the highest degree of customization so you’re more likely to land on the best option for your budget, rather than being shoehorned into a small handful of options. That can help you pay off your loan even quicker and perhaps with lower interest so you can move on with your life.  Compare the Best Student Loan Refinance Companies Company Interest Rate Loan Terms Maximum Loan Amount Minimum Credit Score Earnest Best Overall 5.19%–9.99%* with autopay 5–20 years $500,000 665 Credible Best Refinancing Marketplace 5.28%–12.43% See Terms* 5–20 years  $750,000 700 for best rates (some lenders may accept lower scores) Splash Financial Best Rates 5.09%–10.24% Not disclosed  None Not disclosed SoFi Best Benefits 5.24% - 9.99% 5–20 years  None Not disclosed ISL Lending Best for Parent Loans 6.93%–11.58% 7–20 years $300,000 670 Laurel Road Best for Large Balances 5.19%–9.70%* with autopay  5–20 years  None Not disclosed  Guide to Choosing the Best Student Loan Refinance Companies What Is Student Loan Refinancing? Student loan refinacing happens when you apply for one new loan to pay off your existing student loans. Borrowers tend to do this to lower their borrowing costs and get better terms, including lower monthly payments and a better interest rate. If you want to refinance your student loans, you'll have to apply with a private lender. Once your loan is approved, your existing loans are paid off and you begin making payments to the new lender. Keep in mind that you lose any protections by refinancing if you qualified for protections for your federal student loans. Compare Student Refinance Loans  When looking at options to refinance your student loans, you want to compare providers to make sure you’re getting the best deal. Keep the following important factors in mind: Rates: Know what rates are offered and if they are fixed or variable rates. Typically, the higher your credit score, the lower your rate. Terms: Student loan terms generally range from 5 to 20 years. However, some companies cut off term limits at 15 years. Know how long the term is and make sure it’s feasible to make timely payments. Customer service: Know how to get in touch with customer service whether it be through email, online chat, or email. You may have a question the website doesn’t answer. Borrower requirements: Do you need to have a certain FICO score to qualify? Know if there are other qualifications such as being a certain age, minimum income, or a particular type of degree program. How to Refinance Your Student Loan After choosing the student loan provider that offers the best refinance rates and terms for your needs, you will need to apply to refinance your loan. This is typically done online or with an agent over the phone. You will need your identification, Social Security number, and your current student loan information, including your account number and payoff amount. You may also be asked for things like proof of graduation and current income. Having your finances in order makes the process go faster and increases your chances of getting a low interest rate. Alternatives to Student Loan Refinancing Student loan refinancing makes sense for some people. But, you may find that it isn't the right option for you. If you don't want to lose the benefits associated with your federal student loans, consider the following alternatives: Consolidation: You may be able to consolidate all of your federal student loans into a single loan through the Direct Consolidation Loan. This program gives you a single payment and generally allows you to lower your monthly payment. Interest rates tend to be fixed and you won't give up your student loan benefits. Keep in mind that you may end up with a longer repayment period, which generally means paying more in interest over the life of the loan. There is no application fee for the program and it may not affect your credit score. Change your new due date: Consider asking for changes to your loan, including your payment date. Consider syncing your due date to your payday, making it more convenient to make your loan payments on time. Request a new repayment plan: Consider asking for a new repayment plan that can help you keep on track and provide you with a greater degree of flexibility. An income-driven repayment plan bases your monthly payment on how much you earn each month. Ask for forbearance and deferment: These options can give you some temporary relief if you're going through a rough financial time and they won't impact your credit score. Keep in mind that interest continues to accrue when your payments are deferred or if you qualify for forbearance, and any missed payments are tacked on to the end of your loan. Student loan forgiveness programs: You may qualify for student loan forgiveness through the Public Service Loan Forgiveness program. This applies to certain government and nonprofit employees and those who have a strong payment history. Pros and Cons of Student Loan Refinancing Pros Lower interest rates Lower monthly payments One monthly payment Cons Loss of all federal benefits and protections Terms may not be better after refinancing You may end up paying more Pros Explained You may get a lower interest rate: Most people refinance their debt to get a better interest rate. If you wait until the right time and qualify, you may be able to get a better interest rate, which can lower the amount of money you pay on your student loan(s). You may be able to lower your monthly payment: If you qualify for refinancing, you may be able to extend your loan terms. Spreading out your debt over a longer term means you'll end up with a lower monthly payment, putting more money in your pocket. You may end up with one easy-to-manage monthly payment: If you have multiple loans, this means you have to make one payment. Consolidating all of your federal student loans into one can make it easier to manage and budget each month. Cons Explained You could lose all federal benefits and protections: Federal student loans come with certain benefits and protections, including student loan forgiveness through the Public Service Loan Forgiveness. Depending on the type of loan, you may also qualify for the permanent disability discharge or the closed school discharge programs. If you refinance through a private lender, you lose access to all these options. You may not qualify for better loan terms: You'll have to meet certain thresholds to get a better interest rate or term length—or to qualify for refinancing at all. Potential new lenders may consider you a credit risk, especially if you have a low credit score and/or are in a lower income level. You may not save money in the end: Federal student loan rates tend to be fairly low. So, you may give that up if you refinance with a private lender for a variable interest rate and they rise. The same is true if you sign with a longer loan term: Your payments may be lower, but you may end up paying more in interest in the end. Why You Should Trust Us Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of student loan lenders. We collected thousands of data points across 23 lenders, including loan types, interest rates, fees, loan amounts, and repayment terms, to ensure that we help readers make the right borrowing decision for their education needs. Investopedia launched in 1999 and has helped millions of readers around the world become educated on personal finance. Frequently Asked Questions Can You Refinance Federal Student Loans? While you can refinance federal student loans—and even combine them with your private student loans—there are some drawbacks to consider.When you refinance your federal education debt, you'll lose federal benefits and protections. For example, you'll no longer be eligible for income-driven repayment plans, Public Service Loan Forgiveness, or federal forbearance or deferment programs.Refinancing may be worth it if your goal is to save money, but think carefully about the downsides before submitting your loan application. Should You Consider Refinancing Your Student Loan? Many people had to take out student loans to get a degree and want to know if they should consider refinancing their student loans. Before deciding, consider your needs and assess your current situation. Think about if it’s a good time to refinance and consider what your current rate is, if you could potentially qualify for a lower rate and if any fees will be involved. However, it may make sense to hold off on refinancing your student loans if your income isn’t stable and your FICO score is low. How Do You Refinance Student Loans? To refinance your student loans, apply for a loan from a private lender for the amount of your existing debt. Once approved, you can use the loan to pay off your old loans. You can refinance both federal and private student loans, consolidating them together. After that, you'll have just one loan to manage, with only one monthly payment to remember.  Are There Any Downsides to Refinancing Student Loans? While you may get more favorable terms, there are some disadvantages that come with refinancing your student loans. For instance, you could lose any options for student loan forgiveness along with the grace period for federal student loans. If you get a variable rate loan, you stand the chance of paying a higher rate if they increase. What Credit Score Do You Need to Refinance Your Student Loans? Not all lenders publicly list their minimum credit score requirements. Of the lenders that we looked at while researching this article (who disclose this information), Earnest has the lowest requirement. To qualify for a loan from Earnest, you'll need a minimum credit score of 650.You may still be able to qualify for a loan with a lower credit score if you have a cosigner on your application. What's the Difference Between Student Loan Consolidation and Refinance? Student loan consolidation and student loan refinancing may sound similar, but they're very different terms.Although they're both loan payoff options, student loan consolidation refers to federal Direct Consolidation Loans. With a Direct Consolidation Loan, you can combine your eligible federal student loans. Repayment terms can be as long as 30 years, and your interest rate is based on the weighted average of your current interest rates.With student loan refinancing, you work with a private lender to take out a loan for the existing debt. When you refinance, you'll lose federal loan benefits. However, you can qualify for a lower interest rate and save money over time. How Long Does It Take to Refinance Student Loans? That depends on several factors. Some lenders can approve you as soon as the same day while others may have more stringent lending conditions, which could take up to several weeks. To make the process go more smoothly and to avoid delays, make sure you have all your documents prepared. Companies We Reviewed We researched and reviewed 23 lenders to find the best companies you see above on this list. While we write individual reviews for most companies, we do not always write reviews for companies we would not recommend. Below are the companies we researched along with links to individual company reviews to help you learn more before making a decision:Advantage Education Loans, Brazos, Citizens Bank, College Ave, Credible, Discover, Earnest, Education Loan Finance (ELFI), EDvestinU, Iowa Student Loan (ISL) Education Lending, Juno, Laurel Road, Lendkey, MEFA, MPower, NaviRefi, Navy Federal, Nelnet Bank (U-Fi), PenFed, PNC, Rhode Island Student Loan Authority, SoFi, Splash Financial *Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time. William_Potter / 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. Earnest. "Refinance Student Loans." Earnest. "What Is the Minimum and Maximum Student Loan Balance Earnest Can Refinance?" Earnest. "Why Didn’t I Get Approved for All Loan Terms? | Student Loan Refinancing." Earnest. "How Do I Skip a Payment and When Am I Eligible To Do So? | Repaying Your Loan." Earnest. "How Can I Apply for Forbearance? | Student Loan Refinancing." Earnest. "Refinance Student Loans." Earnest. "Student Loan Calculator." Earnest. "What Are My Repayment Options if I Cannot Make a Payment? | Student Loan Refinancing." Earnest. "What Is Biweekly Auto Pay? | Student Loan Refinancing." Earnest. "Eligibility Guide & Requirements." Credible. "Student Loan Refinancing." Credible. "Credible Best Rate Guarantee." Splash. "Put Us to Work on Those Student Loans." Splash. "Frequently Asked Questions." Click "How Much Can I Borrow for Student Loan Refinance?" Splash Financial. "Refinance Medical School Loans." SoFi. "What Is the Minimum and Maximum Amount I Can Borrow with SoFi?" SoFi. "Refinance Student Loan Rates." SoFi. "SoFi Member Benefits." SoFi. "Frequently Asked Questions." SoFi. "Info Center." SoFi. "Options To Postpone Repayments." SoFi. "Eligibility Criteria." ISL Education Lending. "Student Loan Refinance." ISL Education Lending. "Private and Federal Student Loan Refinancing." ISL Education Lending. "Funding Private Student Loans." Laurel Road. "Refinance Student Loans." Laurel Road. "Medical Residents Student Loan Refinance." Laurel Road. "Checking + Student Loan Refi." Laurel Road. “Coronavirus (COVID-19) Response.” Laurel Road. “How to Qualify for Student Loan Refinancing.” Federal Student Aid. "Consolidating Student Loans." Federal Student Aid. "Public Service Loan Forgiveness (PSLF)." Related Articles Student Loan Consolidation vs. Refinancing Best Student Loans for Bad Credit Best Graduate Student Loans of 2024 Best Medical School Loans Private Student Loans: What They Are, How They Work Best Parent Loans for College Related Terms 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 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 No Cash-Out Refinance: Meaning, Overview, Special Considerations A no cash-out refinance is when a loan's terms are refinanced but no cash is allocated for the borrower as spending or expense money. Learn how a no cash-out refinance works. more Interest Rate Reduction Refinance Loan (IRRRL): Overview An interest rate reduction refinance loan (IRRRL), offered by the U.S. Department of Veterans Affairs (VA), helps veterans and their families get lower rates and refinance their loans. more Hardship Default: What It Is and How It Works A hardship default is a failure to make a scheduled payment on a debt due to a financial setback. more What It Means to Be Past Due on a Loan, Plus Consequences Past due is a loan payment that has not been made as of its due date. The borrower may be subject to late fees, unless there is a grace period. more

https://www.investopedia.com/best-accounting-software-5069131

Best Accounting Software

<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"> Accounting software is an essential tool for managing business or personal finances. For businesses, accounting software can keep financial data organized and reduce the risk of human error, assist with budgeting, track inventory, and manage either <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="http://investopedia.com/terms/a/accountsreceivable.asp">accounts receivable</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/accountspayable.asp">accounts payable</a> tasks. For families, accounting software is helpful for household budgeting, tax return preparation, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">retirement planning</a>, investment tracking, and bill payment management.  </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"> One of the most important features of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679">accounting software for businesses</a> and personal finances is expense tracking. By automating the process of tracking expenses, it is easier to collect and categorize tax-deductible expenses, which allows for major tax savings each 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_1-0-2"> We examined 13 software companies before settling on the five best accounting software solutions. Key factors used in the consideration of the best accounting software included cost, ease of use, reputation, and functionality.   </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 Accounting Software </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-click-action="OffPageClick - External" data-tracking-container="true" 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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-QuickBooks Online" 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-QuickBooks Online" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-quickbooks-online" rel="nocaes"> <span class="link__wrapper">QuickBooks Online</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-Quicken" 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-Quicken" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-solution-for-individuals-quicken" rel="nocaes"> <span class="link__wrapper">Quicken</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-Mint" 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-Mint" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-free-solution-for-home-use-mint" rel="nocaes"> <span class="link__wrapper">Mint</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-Wave" 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-Wave" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-solution-for-businesses-wave" rel="nocaes"> <span class="link__wrapper">Wave</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-QuickBooks Self-Employed" 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-QuickBooks Self-Employed" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-micro-businesses--freelancers-quickbooks-self-employed" rel="nocaes"> <span class="link__wrapper">QuickBooks Self-Employed</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 (2)</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-FAQs" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faqs-58c1f897-5e37-48ca-afc0-4d9fb95a91d6" id="mntl-toc__list-item-link_1-0" 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_1-0-1"> <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-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-we-chose-accounting-software-companies" id="mntl-toc__list-item-link_1-0-1" 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-quickbooks-online"></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"> QuickBooks Online</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 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:50.0%;"> <img alt="QuickBooks Online" 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/e2nVd-qGOxm8-Z4PoNdwJtLykn8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-cad782438200444a873b2cad5e1c8c52.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="QuickBooks Online" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/e2nVd-qGOxm8-Z4PoNdwJtLykn8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quickbooks-cad782438200444a873b2cad5e1c8c52.png" 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>QuickBooks Online</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_3-0-1"> <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-click-action="OffPageClick - External" data-retailer-caption="with QuickBooks Online" data-retailer-type="skimlinks" data-tracking-container="true" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" id="button_1-0" rel="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> </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"> QuickBooks Online was chosen as the best overall because of its reputation, usability, and strong customer support options. Business owners can access their financial reports and collect payment from customers easily using the app or website. </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>User-friendly and customizable</p></li> <li><p>Scalable for business growth</p></li> <li><p>Full-service mobile app</p></li> <li><p>ProAdvisor program for accountants and bookkeepers</p></li> <li><p>Quickbooks Community forum for support</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 subscription required</p></li> <li><p>Limitations on the number of users</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"> QuickBooks Online, owned by Intuit, is the leader in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-accounting-software-for-small-business-5069679">accounting software for small businesses</a>. It was founded in 2001 and has over seven million customers.<span class="ql-inline-citation" data-cite="1"></span> There are four levels of online cloud-based software available: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-8"> <li>Simple Start ($30 per month)</li><li>Essentials ($55 per month)</li><li>Plus ($85 per month)</li><li>Advanced ($200 per month)</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_3-0-9"> QuickBooks offers a 30-day free trial. Alternately, accountants who are registered with QuickBooks are able to offer their clients preferred subscription pricing. The fee varies, depending on whether the client or the accountant is billed. All plans can be used online through a web browser and on the QuickBooks mobile app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> The Simple Start plan is a great entry point for basic small businesses. As a business grows and has more needs, it is easy to upgrade to the next level. The upgraded levels offer features like more users, bill management, time and project tracking, inventory, more customizable reporting, and more automation for efficiency. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> QuickBooks Online also offers three levels of a payroll add-on, which can be accessed on the same dashboard as the accounting software. Additionally, there are third-party apps that can integrate with QuickBooks Online to share data seamlessly. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> The ProAdvisor Program allows accountants and bookkeepers to participate in QuickBooks training courses and become a certified ProAdvisor.<span class="ql-inline-citation" data-cite="2"></span> Customers can search the ProAdvisor Directory to find someone in their area for accounting assistance. There is also a QuickBooks Community forum where users can ask questions and find answers to common questions.  </p><!-- 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-solution-for-individuals-quicken"></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 Solution for Individuals</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Quicken</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_3-0-13" style="--imgWidth: 115px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Quicken" 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/UXcGBWc8DT3knf39cBGAapFgDFk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quicken-b7d3009b46c240f0a360d6a4f6b0d66d.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="Quicken" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/UXcGBWc8DT3knf39cBGAapFgDFk=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/quicken-b7d3009b46c240f0a360d6a4f6b0d66d.png" 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>Quicken</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_3-0-14"> <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="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="with Quicken" data-retailer-type="other" data-tracking-container="true" href="https://quicken.sjv.io/c/2104074/1955373/11856" 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> </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_3-0-16"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp" rel="noopener noreferrer">Quicken</a> is the best solution for individuals because of its robust features. This software is scalable and can support a household’s financial needs as they grow more complex over time.  </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"> With Quicken, a household can manage and pay bills, track retirement and investment accounts, and design customized budgets. There is also a rental property management feature that allows individuals who own rental properties to track rental income and expenses.  </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_3-0-19"> <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>Strong reputation</p></li> <li><p>Bill pay feature</p></li> <li><p>Retirement planning</p></li> <li><p>Robust budgeting and investment-tracking tools</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 third-party app extensions like Quickbooks</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_3-0-21"> Since 1982, Quicken has offered management and tracking tools that allow individuals and families to be financially organized and prepared.<span class="ql-inline-citation" data-cite="3"></span> Quicken can be used for household budgeting and income/expense tracking, which can help individuals prepare for tax season. </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"> There are three to four levels of software plans available, depending on whether you have a Mac or Windows operating system: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-23"> <li>Simplifi for Mac and Windows ($71.88 per year)</li><li>Deluxe for Mac and Windows ($59.88 per year)</li><li>Premier for Mac and Windows ($83.88 per year)</li><li>Home &amp; Business for Mac ($119.88 per year)</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_3-0-24"> A 30-day free trial is available. The software is downloaded onto a computer and data is stored locally, however, most key features can also be accessed using a web browser or the Quicken mobile app.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-25"> The Starter plan allows users to track and categorize transactions and manage bills. The more advanced plans add features such as investment, loan, retirement tracking; bill pay; and even basic business invoicing and tracking. The business features can be accessed through the Home &amp; Business plan and can run <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp">Schedule C</a> and Schedule E tax reports and manage lease terms, rental rates, and security deposits. </p><!-- 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-free-solution-for-home-use-mint"></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 Free Solution for Home Use</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Mint</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-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_3-0-26" style="--imgWidth: 506px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Mint" 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/dHgIsxFP7H003x32mK_Z5QsT1Qc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/intuit-mint-ef5234f6aa0e45b1baff3811c49abd21.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Mint" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/dHgIsxFP7H003x32mK_Z5QsT1Qc=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/intuit-mint-ef5234f6aa0e45b1baff3811c49abd21.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>Mint</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_3-0-27"> <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="with Mint" data-retailer-type="other" data-tracking-container="true" href="https://www.mint.com/" 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> </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_3-0-29"> Mint is a great place for households to start when it comes to budgeting and bill tracking and is the best in our review for home use. The software is intuitive and easily accessible. Since Mint is completely free, it is worth trying out before moving to the more robust and costly personal finance software. </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_3-0-31"> <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>Free</p></li> <li><p>Cloud-based</p></li> <li><p>Mobile app</p></li> <li><p>User-friendly</p></li> <li><p>Free credit score monitoring</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 retirement tracking</p></li> <li><p>Limited investment tracking</p></li> <li><p>Some syncing delays depending on your bank</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_3-0-33"> Mint is a free personal finance tool that launched in 2007 and was purchased by Intuit in 2009.<span class="ql-inline-citation" data-cite="4"></span> Mint can be used online or on the mobile app. The software’s primary use is for personal budgeting. The key features include monthly bill payment tracking, a customizable budget planner, credit score monitoring, and options for various spending alerts. </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"> Mint is perfect for individuals and families who want to gain a better understanding of how they are spending their money and then use that information to set new spending or saving goals for the future. After creating an account online or on the mobile app, users can sync their bank accounts and credit cards with the Mint platform. From there, Mint will help to categorize transactions by type and summarize financial activity. </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"> The bill payment and budgeting trackers are powerful tools that will remind users when payments are due and show how spending is aligning with the budget goals on a daily basis. The Mint interface is intuitive and easy to navigate. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-36"> While Mint is less robust when it comes to retirement and investment tracking, the website does have some resources for personal loans, retirement options, investing, and credit cards. </p><!-- 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-solution-for-businesses-wave"></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 Solution for Businesses</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Wave</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 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_3-0-37" style="--imgWidth: 302px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Wave" 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/THYOdCmsXCSYfMHVtmBWURgnxQg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wave-d6b3724e89294aa0a3b040d50f2b1a2c.png" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Wave" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/THYOdCmsXCSYfMHVtmBWURgnxQg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Wave-d6b3724e89294aa0a3b040d50f2b1a2c.png" 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>Wave</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_3-0-38"> <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="with Wave" data-retailer-type="other" data-tracking-container="true" href="https://www.waveapps.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> </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">Key Specs</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_3-0-40"> For service-based businesses with simple business structures, Wave provides a free starting point for bookkeeping and invoicing needs. Businesses can always move to more comprehensive accounting software as they grow, but Wave is a great cost-saving option and is the best in our review for businesses.  </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_3-0-42"> <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</p></li> <li><p>Simple and easy to use</p></li> <li><p>Mobile app</p></li> <li><p>Invoicing and accounting software included in the free version</p></li> <li><p>Payroll add-on 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>Limited integrations</p></li> <li><p>Not as widely used by accountants as its competitors</p></li> <li><p>Payment processing fees of 2.9%-3.4% and $0.60</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_3-0-44"> Launched in 2010, Wave began as a Toronto-based startup offering accounting software.<span class="ql-inline-citation" data-cite="5"></span> By 2019, though, Wave’s workforce had grown to 250 employees, and the company was acquired by H&amp;R Block.<span class="ql-inline-citation" data-cite="6"></span> Entrepreneurs and freelancers are the company’s target audience. This free accounting software is available online and through its mobile app. The free features include income and expense tracking, financial reports, invoicing, and receipt scanning.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> Wave offers credit card and bank transfer payment processing, which costs 2.9% plus 60¢ per transaction for Visa, Mastercard, Discover; 3.4% plus 30¢ per transaction for American Express; and 1% per transaction ($1 minimum fee) for bank transfers (ACH).<span class="ql-inline-citation" data-cite="7"></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_3-0-46"> A monthly subscription for payroll services is also available but has some limitations. For $40 per month plus $6 per employee or contractor, Wave offers full-service payroll in 14 states. Cost in all other states is $20 per month plus $6 per employee or contractor for limited-service payroll, which means that Wave will calculate the payroll tax cost, but the user is required to pay and file payroll taxes on their own. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_3-0-47"> <iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp lazyload mntl-sc-block-iframe__uri mntl-block" 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><!-- end: comp lazyload mntl-sc-block-iframe__uri mntl-block --> </div><!-- end: comp mntl-sc-block prm-sc-block-iframe mntl-sc-block-iframe mntl-block --> </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-micro-businesses--freelancers-quickbooks-self-employed"></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 Micro-Businesses &amp; Freelancers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> QuickBooks Self-Employed</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-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_3-0-48" style="--imgWidth: 354px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="QuickBooks Self-Employed" 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/O1TC8__zlmx86JAIBcEXcioVTH4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Quickbooks-Self-Employed-4f1853f8e0274520949fc4260e82a540.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="QuickBooks Self-Employed" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/O1TC8__zlmx86JAIBcEXcioVTH4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Quickbooks-Self-Employed-4f1853f8e0274520949fc4260e82a540.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>QuickBooks Self-Employed</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_3-0-49"> <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="with QuickBooks" data-retailer-type="skimlinks" data-tracking-container="true" href="https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/" id="button_1-0-4" rel="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> </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">Key Specs</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_3-0-51"> QuickBooks Self-Employed is perfect for independent contractors who use <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/022415/hr-block-vs-turbotax-vs-jackson-hewitt.asp" rel="noopener noreferrer">TurboTax</a> to prepare their annual tax return but need an expense tracking and invoice sending solution throughout the year. This software is our top pick for micro-businesses and freelancers because it's easy to use and provides straightforward financial reporting. </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_3-0-53"> <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>Inexpensive</p></li> <li><p>Connects directly to TurboTax</p></li> <li><p>Mobile app</p></li> <li><p>Mileage tracking</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 customizations &amp; reporting</p></li> <li><p>No inventory feature</p></li> <li><p>Data cannot be migrated to higher-level QuickBooks Online plans when upgrading</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_3-0-55"> QuickBooks Self-Employed, owned by Intuit, is a basic online and mobile app designed primarily for freelancers or independent contractors who file a Schedule C for tax purposes. Key features include tracking mileage, categorizing business expenses, excluding personal expenses, full integration into TurboTax, and estimated quarterly tax payment calculations. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> There are three different types of plans available: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> <li>Self-Employed ($15 per month)</li><li>Self-Employed Tax Bundle ($25 per month)</li><li>Self-Employed Live Tax Bundle ($35 per month)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> </div> </div><!-- end: comp list-sc-item__intro mntl-block --> </div><!-- end: comp list-sc-item__content mntl-block --> </div><!-- end: comp mntl-sc-list-item structured-content list-sc-item mntl-block --> </div> <div class="article-outro article-container"> <div class="comp mntl-sc-page--commerce structured-content article-outro__content prm-sc-page mntl-sc-page mntl-block" id="article-outro__content_1-0"> <div class="comp mntl-sc-block prm-sc-block-faq--finance prm-sc-block-faq mntl-sc-block-faq mntl-block" data-click-action="OnPageClick - FAQ Header" data-tracking-container="true" data-tracking-id="PRM Roundup | FAQ" id="mntl-sc-block_4-0"> <span class="heading-toc" id="toc-faqs-58c1f897-5e37-48ca-afc0-4d9fb95a91d6"></span> <h2 class="comp mntl-sc-block-faq__title mntl-text-block" id="mntl-sc-block-faq__title_1-0"> Frequently Asked Questions</h2><!-- end: comp mntl-sc-block-faq__title mntl-text-block --> <ul class="comp mntl-sc-block-faq__content mntl-accordion" id="mntl-sc-block-faq__content_1-0"> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-0" tabindex="-1"> <h3 class="accordion__title">What Is Accounting Software?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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/a/accounting-software.asp">Accounting software</a> is an automation tool that reduces the need for manual data entry by syncing and categorizing transactions on a single financial reporting platform. Individuals can use accounting software in their homes for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/06/budgeting.asp">budgeting</a>, bill tracking, retirement planning, investment tracking, and personal tax preparation. Businesses can use accounting software for income and expense tracking, invoicing, bill payment, financial reporting, inventory management, and corporate tax preparation.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Does Accounting Software Do?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>The key features that all accounting software offers are bank and credit card transaction syncing, transaction classification, and basic <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/plstatement.asp">profit and loss statements</a>. More advanced subscriptions add detailed customization options. Paid add-ons include payroll services, more comprehensive financial reporting, bill pay in addition to bill tracking, and invoice payment options.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">How to Choose Accounting Software</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>The first step is determining whether you need accounting software for either business or personal purposes. Next, decide how complex of a financial situation you have. </p><p>If your activity is very simple, it’s best to start with free software and scale up as needed. For businesses, simple accounting primarily includes small service-based businesses without inventory. For individuals who do not own businesses and have minimal investments, free software provides basic bookkeeping options with reconciliation features.</p><p>If you have a more complex situation, it is important to make a list of the specific functionalities you will need so that you can inquire about those capabilities with an accounting software company prior to your purchase. For businesses, complex accounting could include inventory, payroll, and loans. For individuals, complex accounting could include investment accounts, business ownership, and rental properties.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Does Accounting Software Cost?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Accounting software ranges from $0 to $100 per month, with many different options in between. The average cost of personal accounting software for comprehensive household budgeting is around $50 per year. The average cost of fully functioning business accounting software for a small business is around $50 per month. Payroll services are the most common add-on to business accounting software, which can range from $30 to $150 per month depending on the number of employees or contractors.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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-chose-accounting-software-companies"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-1"> <span class="mntl-sc-block-heading__text"> How We Chose Accounting Software Companies </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_4-0-2"> After looking at 13 different accounting software companies, we used factors such as cost, usability, integration options, and reputation to narrow our list down to the five best software programs. We also specifically researched free software versus paid software and determined the best free software for personal use and for business use, as well as the best paid software for each. </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="Young man working at home with accounting software" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/X1sdnLwxAWieACGrzdtzNCP9UR8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg" srcset="https://www.investopedia.com/thmb/WsiTP8Eo1-g67BjPRv-ZVsQzb8k=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="Young man working at home with accounting software" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/X1sdnLwxAWieACGrzdtzNCP9UR8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg" srcset="https://www.investopedia.com/thmb/WsiTP8Eo1-g67BjPRv-ZVsQzb8k=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg 750w" 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>Eva-Katalin / 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. 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Accounting software is an essential tool for managing business or personal finances. For businesses, accounting software can keep financial data organized and reduce the risk of human error, assist with budgeting, track inventory, and manage either [accounts receivable](http://investopedia.com/terms/a/accountsreceivable.asp) or [accounts payable](https://www.investopedia.com/terms/a/accountspayable.asp) tasks. For families, accounting software is helpful for household budgeting, tax return preparation, [retirement planning](https://www.investopedia.com/terms/r/retirement-planning.asp), investment tracking, and bill payment management.  One of the most important features of [accounting software for businesses](https://www.investopedia.com/best-accounting-software-for-small-business-5069679) and personal finances is expense tracking. By automating the process of tracking expenses, it is easier to collect and categorize tax-deductible expenses, which allows for major tax savings each year. We examined 13 software companies before settling on the five best accounting software solutions. Key factors used in the consideration of the best accounting software included cost, ease of use, reputation, and functionality.   ## Best Accounting Software * **Best Overall:** [QuickBooks Online](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) * **Best Solution for Individuals:** [Quicken](https://quicken.sjv.io/c/2104074/1955373/11856) * **Best Free Solution for Home Use:** [Mint](https://www.mint.com/) * **Best Solution for Businesses:** [Wave](https://www.waveapps.com/) * **Best for Micro-Businesses & Freelancers:** [QuickBooks Self-Employed](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) Best Accounting Software Expand Best Accounting Software * [Our Top Picks](#summary-list) * [QuickBooks Online](#toc-best-overall-quickbooks-online) * [Quicken](#toc-best-solution-for-individuals-quicken) * [Mint](#toc-best-free-solution-for-home-use-mint) * [Wave](#toc-best-solution-for-businesses-wave) * [QuickBooks Self-Employed](#toc-best-for-micro-businesses--freelancers-quickbooks-self-employed) * See More (2) * [FAQs](#toc-faqs-58c1f897-5e37-48ca-afc0-4d9fb95a91d6) * [Methodology](#toc-how-we-chose-accounting-software-companies) ### Best Overall : QuickBooks Online --- ![QuickBooks Online]() :fill(white):max_bytes(150000):strip_icc()/quickbooks-cad782438200444a873b2cad5e1c8c52.png) QuickBooks Online [Sign Up Now](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) Why We Chose It QuickBooks Online was chosen as the best overall because of its reputation, usability, and strong customer support options. Business owners can access their financial reports and collect payment from customers easily using the app or website. Pros & Cons Pros * User-friendly and customizable * Scalable for business growth * Full-service mobile app * ProAdvisor program for accountants and bookkeepers * Quickbooks Community forum for support Cons * Monthly subscription required * Limitations on the number of users Overview QuickBooks Online, owned by Intuit, is the leader in [accounting software for small businesses](https://www.investopedia.com/best-accounting-software-for-small-business-5069679). It was founded in 2001 and has over seven million customers. There are four levels of online cloud-based software available: * Simple Start ($30 per month) * Essentials ($55 per month) * Plus ($85 per month) * Advanced ($200 per month) QuickBooks offers a 30-day free trial. Alternately, accountants who are registered with QuickBooks are able to offer their clients preferred subscription pricing. The fee varies, depending on whether the client or the accountant is billed. All plans can be used online through a web browser and on the QuickBooks mobile app. The Simple Start plan is a great entry point for basic small businesses. As a business grows and has more needs, it is easy to upgrade to the next level. The upgraded levels offer features like more users, bill management, time and project tracking, inventory, more customizable reporting, and more automation for efficiency. QuickBooks Online also offers three levels of a payroll add-on, which can be accessed on the same dashboard as the accounting software. Additionally, there are third-party apps that can integrate with QuickBooks Online to share data seamlessly. The ProAdvisor Program allows accountants and bookkeepers to participate in QuickBooks training courses and become a certified ProAdvisor. Customers can search the ProAdvisor Directory to find someone in their area for accounting assistance. There is also a QuickBooks Community forum where users can ask questions and find answers to common questions.  ### Best Solution for Individuals : Quicken --- ![Quicken]() :fill(white):max_bytes(150000):strip_icc()/quicken-b7d3009b46c240f0a360d6a4f6b0d66d.png) Quicken [Sign Up Now](https://quicken.sjv.io/c/2104074/1955373/11856) Why We Chose It [Quicken](https://www.investopedia.com/articles/personal-finance/031215/quickbooks-vs-quicken.asp) is the best solution for individuals because of its robust features. This software is scalable and can support a household’s financial needs as they grow more complex over time.  With Quicken, a household can manage and pay bills, track retirement and investment accounts, and design customized budgets. There is also a rental property management feature that allows individuals who own rental properties to track rental income and expenses.  Pros & Cons Pros * Strong reputation * Bill pay feature * Retirement planning * Robust budgeting and investment-tracking tools Cons * No third-party app extensions like Quickbooks Overview Since 1982, Quicken has offered management and tracking tools that allow individuals and families to be financially organized and prepared. Quicken can be used for household budgeting and income/expense tracking, which can help individuals prepare for tax season. There are three to four levels of software plans available, depending on whether you have a Mac or Windows operating system: * Simplifi for Mac and Windows ($71.88 per year) * Deluxe for Mac and Windows ($59.88 per year) * Premier for Mac and Windows ($83.88 per year) * Home & Business for Mac ($119.88 per year) A 30-day free trial is available. The software is downloaded onto a computer and data is stored locally, however, most key features can also be accessed using a web browser or the Quicken mobile app.  The Starter plan allows users to track and categorize transactions and manage bills. The more advanced plans add features such as investment, loan, retirement tracking; bill pay; and even basic business invoicing and tracking. The business features can be accessed through the Home & Business plan and can run [Schedule C](https://www.investopedia.com/ask/answers/081314/whos-required-fill-out-schedule-c-irs-form.asp) and Schedule E tax reports and manage lease terms, rental rates, and security deposits. ### Best Free Solution for Home Use : Mint --- ![Mint]() :fill(white):max_bytes(150000):strip_icc()/intuit-mint-ef5234f6aa0e45b1baff3811c49abd21.png) Mint [Sign Up Now](https://www.mint.com/) Why We Chose It Mint is a great place for households to start when it comes to budgeting and bill tracking and is the best in our review for home use. The software is intuitive and easily accessible. Since Mint is completely free, it is worth trying out before moving to the more robust and costly personal finance software. Pros & Cons Pros * Free * Cloud-based * Mobile app * User-friendly * Free credit score monitoring Cons * Limited retirement tracking * Limited investment tracking * Some syncing delays depending on your bank Overview Mint is a free personal finance tool that launched in 2007 and was purchased by Intuit in 2009. Mint can be used online or on the mobile app. The software’s primary use is for personal budgeting. The key features include monthly bill payment tracking, a customizable budget planner, credit score monitoring, and options for various spending alerts. Mint is perfect for individuals and families who want to gain a better understanding of how they are spending their money and then use that information to set new spending or saving goals for the future. After creating an account online or on the mobile app, users can sync their bank accounts and credit cards with the Mint platform. From there, Mint will help to categorize transactions by type and summarize financial activity. The bill payment and budgeting trackers are powerful tools that will remind users when payments are due and show how spending is aligning with the budget goals on a daily basis. The Mint interface is intuitive and easy to navigate. While Mint is less robust when it comes to retirement and investment tracking, the website does have some resources for personal loans, retirement options, investing, and credit cards. ### Best Solution for Businesses : Wave --- ![Wave]() :fill(white):max_bytes(150000):strip_icc()/Wave-d6b3724e89294aa0a3b040d50f2b1a2c.png) Wave [Sign Up Now](https://www.waveapps.com/) Key Specs For service-based businesses with simple business structures, Wave provides a free starting point for bookkeeping and invoicing needs. Businesses can always move to more comprehensive accounting software as they grow, but Wave is a great cost-saving option and is the best in our review for businesses.  Pros & Cons Pros * Free * Simple and easy to use * Mobile app * Invoicing and accounting software included in the free version * Payroll add-on available Cons * Limited integrations * Not as widely used by accountants as its competitors * Payment processing fees of 2.9%-3.4% and $0.60 Overview Launched in 2010, Wave began as a Toronto-based startup offering accounting software. By 2019, though, Wave’s workforce had grown to 250 employees, and the company was acquired by H&R Block. Entrepreneurs and freelancers are the company’s target audience. This free accounting software is available online and through its mobile app. The free features include income and expense tracking, financial reports, invoicing, and receipt scanning.  Wave offers credit card and bank transfer payment processing, which costs 2.9% plus 60¢ per transaction for Visa, Mastercard, Discover; 3.4% plus 30¢ per transaction for American Express; and 1% per transaction ($1 minimum fee) for bank transfers (ACH). A monthly subscription for payroll services is also available but has some limitations. For $40 per month plus $6 per employee or contractor, Wave offers full-service payroll in 14 states. Cost in all other states is $20 per month plus $6 per employee or contractor for limited-service payroll, which means that Wave will calculate the payroll tax cost, but the user is required to pay and file payroll taxes on their own. ### Best for Micro-Businesses & Freelancers : QuickBooks Self-Employed --- ![QuickBooks Self-Employed]() :fill(white):max_bytes(150000):strip_icc()/Quickbooks-Self-Employed-4f1853f8e0274520949fc4260e82a540.jpg) QuickBooks Self-Employed [Sign Up Now](https://quickbooks.intuit.com/partners/dotdash/?cid=par_dotdash_gpt_2022_QBO_CO-US/) Key Specs QuickBooks Self-Employed is perfect for independent contractors who use [TurboTax](https://www.investopedia.com/articles/personal-finance/022415/hr-block-vs-turbotax-vs-jackson-hewitt.asp) to prepare their annual tax return but need an expense tracking and invoice sending solution throughout the year. This software is our top pick for micro-businesses and freelancers because it's easy to use and provides straightforward financial reporting. Pros & Cons Pros * Inexpensive * Connects directly to TurboTax * Mobile app * Mileage tracking Cons * Limited customizations & reporting * No inventory feature * Data cannot be migrated to higher-level QuickBooks Online plans when upgrading Overview QuickBooks Self-Employed, owned by Intuit, is a basic online and mobile app designed primarily for freelancers or independent contractors who file a Schedule C for tax purposes. Key features include tracking mileage, categorizing business expenses, excluding personal expenses, full integration into TurboTax, and estimated quarterly tax payment calculations. There are three different types of plans available: * Self-Employed ($15 per month) * Self-Employed Tax Bundle ($25 per month) * Self-Employed Live Tax Bundle ($35 per month) ## Frequently Asked Questions * ### What Is Accounting Software? [Accounting software](https://www.investopedia.com/terms/a/accounting-software.asp) is an automation tool that reduces the need for manual data entry by syncing and categorizing transactions on a single financial reporting platform. Individuals can use accounting software in their homes for [budgeting](https://www.investopedia.com/articles/pf/06/budgeting.asp), bill tracking, retirement planning, investment tracking, and personal tax preparation. Businesses can use accounting software for income and expense tracking, invoicing, bill payment, financial reporting, inventory management, and corporate tax preparation. * ### What Does Accounting Software Do? The key features that all accounting software offers are bank and credit card transaction syncing, transaction classification, and basic [profit and loss statements](https://www.investopedia.com/terms/p/plstatement.asp). More advanced subscriptions add detailed customization options. Paid add-ons include payroll services, more comprehensive financial reporting, bill pay in addition to bill tracking, and invoice payment options. * ### How to Choose Accounting Software The first step is determining whether you need accounting software for either business or personal purposes. Next, decide how complex of a financial situation you have.  If your activity is very simple, it’s best to start with free software and scale up as needed. For businesses, simple accounting primarily includes small service-based businesses without inventory. For individuals who do not own businesses and have minimal investments, free software provides basic bookkeeping options with reconciliation features. If you have a more complex situation, it is important to make a list of the specific functionalities you will need so that you can inquire about those capabilities with an accounting software company prior to your purchase. For businesses, complex accounting could include inventory, payroll, and loans. For individuals, complex accounting could include investment accounts, business ownership, and rental properties. * ### What Does Accounting Software Cost? Accounting software ranges from $0 to $100 per month, with many different options in between. The average cost of personal accounting software for comprehensive household budgeting is around $50 per year. The average cost of fully functioning business accounting software for a small business is around $50 per month. Payroll services are the most common add-on to business accounting software, which can range from $30 to $150 per month depending on the number of employees or contractors. ## How We Chose Accounting Software Companies After looking at 13 different accounting software companies, we used factors such as cost, usability, integration options, and reputation to narrow our list down to the five best software programs. We also specifically researched free software versus paid software and determined the best free software for personal use and for business use, as well as the best paid software for each. :max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg) :max_bytes(150000):strip_icc()/Primary-Image-best-accounting-software-5069131-a3747eb662774803a4e7739e7c165d68.jpg) Eva-Katalin / 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. Intuit. "[QuickBooks Online Advanced](https://quickbooks.intuit.com/blog/whats-new/quickbooks-online-advanced-growing-with-and-for-our-customers/)." 2. Intuit. "[QuickBooks ProAdvisor Program for Accountants | Intuit](https://quickbooks.intuit.com/accountants/proadvisor/)." 3. Crunchbase. "[Quicken - Crunchbase Company Profile & Funding](https://www.crunchbase.com/organization/quicken-com)." 4. Intuit. "[Intuit Completes Acquisition of Mint.com](https://investors.intuit.com/news/news-details/2009/Intuit-Completes-Acquisition-of-Mintcom/default.aspx)." 5. Crunchbase. "[Wave - Crunchbase Company Profile & Funding](https://www.crunchbase.com/organization/wave-financial)." 6. Wave. "[About Wave - Wave Financial](https://www.waveapps.com/about-us/about)." 7. Wave. "[Wave Payments Processing Fees and Timelines – Help Center](https://support.waveapps.com/hc/en-us/articles/218323823-Wave-Payments-processing-fees-and-timelines)." 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Accounting software is an essential tool for managing business or personal finances. For businesses, accounting software can keep financial data organized and reduce the risk of human error, assist with budgeting, track inventory, and manage either accounts receivable or accounts payable tasks. For families, accounting software is helpful for household budgeting, tax return preparation, retirement planning, investment tracking, and bill payment management.  One of the most important features of accounting software for businesses and personal finances is expense tracking. By automating the process of tracking expenses, it is easier to collect and categorize tax-deductible expenses, which allows for major tax savings each year. We examined 13 software companies before settling on the five best accounting software solutions. Key factors used in the consideration of the best accounting software included cost, ease of use, reputation, and functionality.   Best Accounting Software Best Overall: QuickBooks Online Best Solution for Individuals: Quicken Best Free Solution for Home Use: Mint Best Solution for Businesses: Wave Best for Micro-Businesses & Freelancers: QuickBooks Self-Employed Best Accounting Software Expand Best Accounting Software Our Top Picks QuickBooks Online Quicken Mint Wave QuickBooks Self-Employed See More (2) FAQs Methodology Best Overall : QuickBooks Online QuickBooks Online Sign Up Now Why We Chose It QuickBooks Online was chosen as the best overall because of its reputation, usability, and strong customer support options. Business owners can access their financial reports and collect payment from customers easily using the app or website. Pros & Cons Pros User-friendly and customizable Scalable for business growth Full-service mobile app ProAdvisor program for accountants and bookkeepers Quickbooks Community forum for support Cons Monthly subscription required Limitations on the number of users Overview QuickBooks Online, owned by Intuit, is the leader in accounting software for small businesses. It was founded in 2001 and has over seven million customers. There are four levels of online cloud-based software available: Simple Start ($30 per month)Essentials ($55 per month)Plus ($85 per month)Advanced ($200 per month) QuickBooks offers a 30-day free trial. Alternately, accountants who are registered with QuickBooks are able to offer their clients preferred subscription pricing. The fee varies, depending on whether the client or the accountant is billed. All plans can be used online through a web browser and on the QuickBooks mobile app. The Simple Start plan is a great entry point for basic small businesses. As a business grows and has more needs, it is easy to upgrade to the next level. The upgraded levels offer features like more users, bill management, time and project tracking, inventory, more customizable reporting, and more automation for efficiency. QuickBooks Online also offers three levels of a payroll add-on, which can be accessed on the same dashboard as the accounting software. Additionally, there are third-party apps that can integrate with QuickBooks Online to share data seamlessly. The ProAdvisor Program allows accountants and bookkeepers to participate in QuickBooks training courses and become a certified ProAdvisor. Customers can search the ProAdvisor Directory to find someone in their area for accounting assistance. There is also a QuickBooks Community forum where users can ask questions and find answers to common questions.  Best Solution for Individuals : Quicken Quicken Sign Up Now Why We Chose It Quicken is the best solution for individuals because of its robust features. This software is scalable and can support a household’s financial needs as they grow more complex over time.  With Quicken, a household can manage and pay bills, track retirement and investment accounts, and design customized budgets. There is also a rental property management feature that allows individuals who own rental properties to track rental income and expenses.  Pros & Cons Pros Strong reputation Bill pay feature Retirement planning Robust budgeting and investment-tracking tools Cons No third-party app extensions like Quickbooks Overview Since 1982, Quicken has offered management and tracking tools that allow individuals and families to be financially organized and prepared. Quicken can be used for household budgeting and income/expense tracking, which can help individuals prepare for tax season. There are three to four levels of software plans available, depending on whether you have a Mac or Windows operating system: Simplifi for Mac and Windows ($71.88 per year)Deluxe for Mac and Windows ($59.88 per year)Premier for Mac and Windows ($83.88 per year)Home & Business for Mac ($119.88 per year) A 30-day free trial is available. The software is downloaded onto a computer and data is stored locally, however, most key features can also be accessed using a web browser or the Quicken mobile app.  The Starter plan allows users to track and categorize transactions and manage bills. The more advanced plans add features such as investment, loan, retirement tracking; bill pay; and even basic business invoicing and tracking. The business features can be accessed through the Home & Business plan and can run Schedule C and Schedule E tax reports and manage lease terms, rental rates, and security deposits. Best Free Solution for Home Use : Mint Mint Sign Up Now Why We Chose It Mint is a great place for households to start when it comes to budgeting and bill tracking and is the best in our review for home use. The software is intuitive and easily accessible. Since Mint is completely free, it is worth trying out before moving to the more robust and costly personal finance software. Pros & Cons Pros Free Cloud-based Mobile app User-friendly Free credit score monitoring Cons Limited retirement tracking Limited investment tracking Some syncing delays depending on your bank Overview Mint is a free personal finance tool that launched in 2007 and was purchased by Intuit in 2009. Mint can be used online or on the mobile app. The software’s primary use is for personal budgeting. The key features include monthly bill payment tracking, a customizable budget planner, credit score monitoring, and options for various spending alerts. Mint is perfect for individuals and families who want to gain a better understanding of how they are spending their money and then use that information to set new spending or saving goals for the future. After creating an account online or on the mobile app, users can sync their bank accounts and credit cards with the Mint platform. From there, Mint will help to categorize transactions by type and summarize financial activity. The bill payment and budgeting trackers are powerful tools that will remind users when payments are due and show how spending is aligning with the budget goals on a daily basis. The Mint interface is intuitive and easy to navigate. While Mint is less robust when it comes to retirement and investment tracking, the website does have some resources for personal loans, retirement options, investing, and credit cards. Best Solution for Businesses : Wave Wave Sign Up Now Key Specs For service-based businesses with simple business structures, Wave provides a free starting point for bookkeeping and invoicing needs. Businesses can always move to more comprehensive accounting software as they grow, but Wave is a great cost-saving option and is the best in our review for businesses.  Pros & Cons Pros Free Simple and easy to use Mobile app Invoicing and accounting software included in the free version Payroll add-on available Cons Limited integrations Not as widely used by accountants as its competitors Payment processing fees of 2.9%-3.4% and $0.60 Overview Launched in 2010, Wave began as a Toronto-based startup offering accounting software. By 2019, though, Wave’s workforce had grown to 250 employees, and the company was acquired by H&R Block. Entrepreneurs and freelancers are the company’s target audience. This free accounting software is available online and through its mobile app. The free features include income and expense tracking, financial reports, invoicing, and receipt scanning.  Wave offers credit card and bank transfer payment processing, which costs 2.9% plus 60¢ per transaction for Visa, Mastercard, Discover; 3.4% plus 30¢ per transaction for American Express; and 1% per transaction ($1 minimum fee) for bank transfers (ACH). A monthly subscription for payroll services is also available but has some limitations. For $40 per month plus $6 per employee or contractor, Wave offers full-service payroll in 14 states. Cost in all other states is $20 per month plus $6 per employee or contractor for limited-service payroll, which means that Wave will calculate the payroll tax cost, but the user is required to pay and file payroll taxes on their own. Best for Micro-Businesses & Freelancers : QuickBooks Self-Employed QuickBooks Self-Employed Sign Up Now Key Specs QuickBooks Self-Employed is perfect for independent contractors who use TurboTax to prepare their annual tax return but need an expense tracking and invoice sending solution throughout the year. This software is our top pick for micro-businesses and freelancers because it's easy to use and provides straightforward financial reporting. Pros & Cons Pros Inexpensive Connects directly to TurboTax Mobile app Mileage tracking Cons Limited customizations & reporting No inventory feature Data cannot be migrated to higher-level QuickBooks Online plans when upgrading Overview QuickBooks Self-Employed, owned by Intuit, is a basic online and mobile app designed primarily for freelancers or independent contractors who file a Schedule C for tax purposes. Key features include tracking mileage, categorizing business expenses, excluding personal expenses, full integration into TurboTax, and estimated quarterly tax payment calculations. There are three different types of plans available: Self-Employed ($15 per month)Self-Employed Tax Bundle ($25 per month)Self-Employed Live Tax Bundle ($35 per month) Frequently Asked Questions What Is Accounting Software? Accounting software is an automation tool that reduces the need for manual data entry by syncing and categorizing transactions on a single financial reporting platform. Individuals can use accounting software in their homes for budgeting, bill tracking, retirement planning, investment tracking, and personal tax preparation. Businesses can use accounting software for income and expense tracking, invoicing, bill payment, financial reporting, inventory management, and corporate tax preparation. What Does Accounting Software Do? The key features that all accounting software offers are bank and credit card transaction syncing, transaction classification, and basic profit and loss statements. More advanced subscriptions add detailed customization options. Paid add-ons include payroll services, more comprehensive financial reporting, bill pay in addition to bill tracking, and invoice payment options. How to Choose Accounting Software The first step is determining whether you need accounting software for either business or personal purposes. Next, decide how complex of a financial situation you have. If your activity is very simple, it’s best to start with free software and scale up as needed. For businesses, simple accounting primarily includes small service-based businesses without inventory. For individuals who do not own businesses and have minimal investments, free software provides basic bookkeeping options with reconciliation features.If you have a more complex situation, it is important to make a list of the specific functionalities you will need so that you can inquire about those capabilities with an accounting software company prior to your purchase. For businesses, complex accounting could include inventory, payroll, and loans. For individuals, complex accounting could include investment accounts, business ownership, and rental properties. What Does Accounting Software Cost? Accounting software ranges from $0 to $100 per month, with many different options in between. The average cost of personal accounting software for comprehensive household budgeting is around $50 per year. The average cost of fully functioning business accounting software for a small business is around $50 per month. Payroll services are the most common add-on to business accounting software, which can range from $30 to $150 per month depending on the number of employees or contractors. How We Chose Accounting Software Companies After looking at 13 different accounting software companies, we used factors such as cost, usability, integration options, and reputation to narrow our list down to the five best software programs. We also specifically researched free software versus paid software and determined the best free software for personal use and for business use, as well as the best paid software for each. Eva-Katalin / 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. Intuit. "QuickBooks Online Advanced." Intuit. "QuickBooks ProAdvisor Program for Accountants | Intuit." Crunchbase. "Quicken - Crunchbase Company Profile & Funding." Intuit. "Intuit Completes Acquisition of Mint.com." Crunchbase. "Wave - Crunchbase Company Profile & Funding." Wave. "About Wave - Wave Financial." Wave. "Wave Payments Processing Fees and Timelines – Help Center." Related Articles Best Accounting Software for Small Businesses for May 2024 Best Accounting Software for Nonprofits for May 2024 The Best Payroll Software for 2024 Best Budgeting Apps for May 2024 Best Expense Tracker Apps for May 2024 Best Tax Apps for 2024 Related Terms Enterprise Resource Planning (ERP): Meaning, Components, and Examples Enterprise resource planning (ERP) is software used by a company to manage key parts of operations, including accounting and resource management. more What Is Personal Finance Management (PFM), How Is It Used? Personal financial management is the software that powers personal finance and many mobile banking apps. more What Is Personal Finance, and Why Is It Important? Personal finance is about managing your budget and how best to put your money to work to realize your financial independence and goals. more What Is Payroll, With Step-by-Step Calculation of Payroll Taxes Payroll is the compensation a business must pay to its employees for a set period or on a given date. Read about payroll accounting here. 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 Budget? Plus 11 Budgeting Myths Holding You Back Budgeting involves estimating revenue and expenses over a specified future period of time. Budgets are usually established and re-evaluated on a periodic basis. more

https://www.investopedia.com/creditfirm-net-review-5085727

CreditFirm.net Credit Repair 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"> <svg class="mntl-svg-resource is-hidden"> <defs> <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> </defs> </svg> <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="CreditFirm.net" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/AhlnxXyuyQD4yklJfOU0QXtc_R0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhDgAEAPIAAABJeQBJegBKevqUAP///f/+/////wBJeSwAAAAADgAEAEIIIgANAAAQwIDBgwgBEBBoQMDAAQYgGhwIAKFFixUtFqgIICAAOw==')" width="1500"/> <noscript> <img alt="CreditFirm.net" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/AhlnxXyuyQD4yklJfOU0QXtc_R0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.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> CreditFirm.net</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 product-card__rating card-rating--finance product-rating" id="product-card__rating_1-0"> <span class="product-rating__rating-label noskim"> Investopedia’s Rating </span> <div alt="4.1 out of 5 stars" class="comp star-rating" id="star-rating_1-0"> <span class="star-rating__label">4.1</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"> <div class="star-rating__full-star star-rating__icon star-rating__star-4 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_1-0" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="20%" stop-color="#333e8b"></stop> <stop offset="20%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-full star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_1-0);"> <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></div><!-- end: comp star-rating --> </div><!-- end: comp product-card__rating card-rating--finance product-rating --> <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-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-tracking-container="false" href="https://shareasale.com/r.cfm?b=1230772&amp;u=2366409&amp;m=49614&amp;urllink=" id="commerce-button_1-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</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"> <strong>Our Take</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_1-0-1"> CreditFirm.net offers an affordable, no-frills credit repair service at $49.99 per month without any additional fees. But those looking for more customizable options and credit monitoring services will have to look elsewhere. </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">Key Takeaways</span></li> <li class="tabbed-sc-block__tab js-tabbed-tab" data-tab-index="3"><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_1-0-3"> <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>Low fees</p></li> <li><p>Assigned a personal credit consultant</p></li> <li><p>Unlimited monthly disputes and communication with creditors</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 money-back guarantee policy</p></li> <li><p>No customization</p></li> <li><p>Doesn’t include credit monitoring</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">Key Takeaways</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="2"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-5"> <li>CreditFirm.net was founded in 1997 and it operates online. </li><li>This credit repair company only offers one credit repair package with services such as credit disputes and interventions. </li><li>There are no initiation fees and customers are charged a flat monthly rate of $49.99 or $89.99 for couples.</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="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-7"> CreditFirm.net is one of the oldest credit repair companies we’ve reviewed. It was founded in 1997 and is based in Deerfield, Illinois. The company has helped over 60,000 customers throughout the U.S. improve their credit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <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_1-0-8"> <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"> 1997 </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Services Offered</span> <span class="definition-list__item-content definition-list__item-content-1"> Credit disputes, credit monitoring </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">First Work Fee</span> <span class="definition-list__item-content definition-list__item-content-2"> None </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Monthly Fee</span> <span class="definition-list__item-content definition-list__item-content-3"> $49.99 </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-4"> Phone, email, contact form </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-5"> www.creditfirm.net </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="CreditFirm.net" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/AhlnxXyuyQD4yklJfOU0QXtc_R0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhDgAEAPIAAABJeQBJegBKevqUAP///f/+/////wBJeSwAAAAADgAEAEIIIgANAAAQwIDBgwgBEBBoQMDAAQYgGhwIAKFFixUtFqgIICAAOw==')" width="1500"/> <noscript> <img alt="CreditFirm.net" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/AhlnxXyuyQD4yklJfOU0QXtc_R0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.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> CreditFirm.net</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__rating product-rating" id="sticky-toc-widget__rating_1-0"> <span class="product-rating__rating-label noskim"> overall rating </span> <div alt="4.1 out of 5 stars" class="comp star-rating" id="star-rating_1-0-1"> <span class="star-rating__label">4.1</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: #d17000;"> <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: #d17000;"> <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: #d17000;"> <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-4 star-rating_star-icon" style="fill: #d17000;"> <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_1-0-1" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="20%" stop-color="#d17000"></stop> <stop offset="20%" stop-color="#d5d5d5"></stop> </lineargradient> </defs> </svg> <div class="star-rating__quarter-full star-rating__icon star-rating__star-5 star-rating_star-icon" style="fill: url(#linear-star-rating_1-0-1);"> <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></div><!-- end: comp star-rating --> </div><!-- end: comp sticky-toc-widget__rating product-rating --> <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-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-tracking-container="false" href="https://shareasale.com/r.cfm?b=1230772&amp;u=2366409&amp;m=49614&amp;urllink=" id="commerce-button_2-0" rel="noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Sign Up Now</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-CreditFirm.net Credit Repair 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"> CreditFirm.net Credit Repair 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-Types of Services" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-types-of-services" id="mntl-toc__list-item-link_3-0-2" rel="nocaes"><span class="link__wrapper">Types of Services</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-Company Features" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-company-features" id="mntl-toc__list-item-link_3-0-3" rel="nocaes"><span class="link__wrapper">Company Features</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-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-Company Reputation" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-company-reputation" id="mntl-toc__list-item-link_3-0-5" rel="nocaes"><span class="link__wrapper">Company Reputation</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-Contract Duration" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-contract-duration" id="mntl-toc__list-item-link_3-0-6" rel="nocaes"><span class="link__wrapper">Contract Duration</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-Cost" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-cost" id="mntl-toc__list-item-link_3-0-7" rel="nocaes"><span class="link__wrapper">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_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-How to Choose" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-a-credit-repair-company" id="mntl-toc__list-item-link_3-0-8" 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_3-0-9"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-9"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Alternative Choices" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternative-choices" id="mntl-toc__list-item-link_3-0-9" rel="nocaes"><span class="link__wrapper">Alternative Choices</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_3-0-10"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-10"> <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_3-0-10" 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_3-0-11"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-11"> <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_3-0-11" 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"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0"> CreditFirm.net is on our list of the best credit repair companies, so it deserves a second look. It offers simple, affordable services with no initiation fees and the ability to cancel at any time. Services include credit disputes, debt validation letters, and cease-and-desist requests. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-1"> CreditFirm.net can meet your credit repair needs by helping you remove false information from your credit reports and it can help you deal with debt collectors. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-2"> As part of reviewing CreditFirm.net, we evaluated 17 credit repair companies in the following categories: costs and fees (40.5%), services offered (34%), customer experiences (22.5%), and stability (3%). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <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_2-0-3"> <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_2-0-4"> <li><strong>Low fees</strong>: CreditFirm.net charges a flat $49.99 monthly fee, and it charges no initiation fee, unlike just about every competitor.</li><li><strong>Assigned a personal credit consultant</strong>: Customers will work with a dedicated personal credit consultant to dispute items on their credit reports and complete any paperwork necessary to work on your case.<span class="ql-inline-citation" data-cite="3"></span> </li><li><strong>Unlimited monthly disputes and communication with creditors</strong>: Some credit repair companies only send a certain number of disputes per month and this can make the process lengthier and more costly. CreditFirm places no limits on the number of credit disputes or requests you can make.<span class="ql-inline-citation" data-cite="4"></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_2-0-5"> <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_2-0-6"> <li><strong>No money-back guarantee policy</strong>:<strong> </strong>CreditFirm doesn’t offer refunds for any reason. Compare that to some competitors that will refund your initial or monthly fee if you decide to cancel or don’t get any results. </li> <li><strong>No customization</strong>:<strong> </strong>CreditFirm offers a single plan with no higher tiers or add-ons. You’ll have to look elsewhere if it doesn't fit your situation. </li> <li><strong>Doesn’t include credit monitoring</strong>: It’s important to monitor your credit throughout the credit repair process but CreditFirm doesn’t include credit monitoring in its package, unlike many other companies. See our picks for 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 tools</a> to supplement this service.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-types-of-services"></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"> Types of Services </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"> CreditFirm's services mainly consist of creditor interventions and credit disputes so customers can only sign up for one package. It will typically take one to two days after you sign up before the company starts working with you on a credit repair plan. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-9"> All services are provided in unlimited quantities per month, a step up from many competitors who put a cap on the number of disputes they’ll send in each cycle. </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_2-0-10"> <span class="mntl-sc-block-subheading__text"> Credit Bureau Disputes </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_2-0-11"> You'll be assigned a personal credit consultant and you'll receive an in-depth legal credit audit that consists of looking over your credit reports and finding any errors. A plan will then be formed to contact the credit bureaus on your behalf to change or remove incorrect items on your credit reports. CreditFirm will look for erroneous hard inquiries, credit account details, and personal details.<span class="ql-inline-citation" data-cite="4"></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_2-0-12"> <span class="mntl-sc-block-subheading__text"> Creditor Requests </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_2-0-13"> Customers can also request that CreditFirm.net send creditor interventions on their behalf in the form of letters or requests. These include debt validation requests, goodwill letters, and cease-and-desist notices.<span class="ql-inline-citation" data-cite="4"></span>  </p><!-- 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_2-0-14"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Many credit repair companies advertise debt validation and cease-and-desist letters as part of their services, but few explain the potential negative ramifications of pursuing these actions. Both are useful if you’re dealing with a debt that you believe to be erroneous, but you should use them sparingly. Both may cause lenders to pursue more aggressive action against you, including legal action if they believe you’ll try to evade the debt.</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-company-features"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-15"> <span class="mntl-sc-block-heading__text"> Company Features </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_2-0-16"> CreditFirm.net is a pretty simple website. It offers only two features. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-17"> <li><strong>Free credit repair consultation</strong>: You can sign up to speak with a representative for free to see if CreditFirm.net or credit repair services in general are a good fit for you.<span class="ql-inline-citation" data-cite="4"></span></li><li><strong>Discount opportunities</strong>: Couples can save by signing up together. It will cost you $89.99 in total.<span class="ql-inline-citation" data-cite="3"></span> We were also informed by customer support that more discounts will be forthcoming.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-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_2-0-18"> <span class="mntl-sc-block-heading__text"> 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_2-0-19"> CreditFirm.net offers 24/7 customer service seven days a week via phone, email, or a contact form. Customers can also log in to their accounts online to manage their requests and oversee their credit disputes. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-20"> <li><strong>Email: </strong>[email protected]</li><li><strong>Phone: </strong>(800) 750-1416</li><li><strong>Fax: </strong>(847) 739-7273</li><li><strong>Mailing Address: </strong>CreditFirm.net, 1020 Milwaukee Ave., Suite 122, Deerfield, IL 60015<span class="ql-inline-citation" data-cite="2"></span></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-company-reputation"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-21"> <span class="mntl-sc-block-heading__text"> Company Reputation </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_2-0-22"> Looking at complaints filed with the Consumer Financial Protection Bureau (CFPB) can sometimes help you assess a company’s reputation. There are no complaints against CreditFirm.net listed with the CFPB, but this doesn’t necessarily indicate a good company reputation. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-23"> Trustpilot gives CreditFirm a rating of 3.8 out of five, with most complaints being about customer response times.<span class="ql-inline-citation" data-cite="5"></span> </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_2-0-24"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>You can file a complaint with the FTC by calling (877) FTC-HELP or through the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://reportfraud.ftc.gov/#/">FTC fraud website</a> if you have issues with any credit repair company or its services.  </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-contract-duration"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-25"> <span class="mntl-sc-block-heading__text"> Contract Duration </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_2-0-26"> Customers don’t have to sign up for a long-term contract with CreditFirm.net. You'll simply pay a monthly fee and you can cancel your monthly membership at any time by contacting customer service.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-cost"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-27"> <span class="mntl-sc-block-heading__text"> Cost </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_2-0-28"> Unlike credit repair companies with multiple service tiers and hidden fees, CreditFirm only charges a monthly fee of $49.99 or $89.99 for couples for all of its services. There's no first work or initiation fee.<span class="ql-inline-citation" data-cite="3"></span> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-how-to-choose-a-credit-repair-company"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-29"> <span class="mntl-sc-block-heading__text"> How to Choose a Credit Repair Company </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_2-0-30"> Some factors to look for can help you find credit repair companies that best suit your needs: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-31"> <li><strong>Price</strong>:<strong> </strong>Most credit repair companies charge first work fees followed by monthly fees, as well as cancellation fees in some cases. Some will charge extra for services like hard inquiry disputes so check what services are inclusive or extra before signing up.</li><li><strong>Consultations</strong>:<strong> </strong>Most companies offer free initial consultations to determine whether credit repair or their companies are a good fit for you. Beware of companies that make guarantees to lower your score or remove accurate negative information.</li><li><strong>Written contract</strong>:<strong> </strong>Having a contract in writing ensures that you're clear as to what your rights are as a consumer and what the company promises to do for you after you sign up for its services.</li><li><strong>Services offered</strong>:<strong> </strong>What will the company actually do on your behalf? Some credit repair companies only dispute certain types of items or they'll only dispute a certain number per month. Be sure that the company you choose can deal with your unique situation. You should be able to figure this out in your consultation.</li><li><strong>Reviews</strong>: Sources like CFPB or Trustpilot can give you some insight into any legal actions or complaints taken against a credit repair company.</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_2-0-32"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>Most credit repair companies are generally reputable, but there may be some that suggest you engage in behaviors that misrepresent facts. This might include asking you to attempt to create a "new" credit report by using your employer identification number. It's better to steer clear and consider another credit repair company if anything seems fishy.</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-alternative-choices"></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"> Alternative Choices </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="table-block" id="mntl-sc-block_2-0-34"> <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> </th> <th><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://CreditFirm.net" rel="sponsored nofollow">CreditFirm.net</a></b></th> <th><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://CreditRepair.com" rel="sponsored nofollow">CreditRepair.com</a></b> </th> <th><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sky-blue-credit-repair-review-5081331">Sky Blue Credit</a></b> </th> </tr> </thead> <tbody data-check="0"> <tr> <td><b>Services Offered</b></td> <td>Credit disputes Credit interventions</td> <td>Credit disputes Credit monitoring Identity theft Debt management</td> <td>Credit disputes Score assistance Debt management One-on-one coaching</td> </tr> <tr> <td><b>Max. Number of Monthly Disputes</b> </td> <td>Unlimited </td> <td>19 per 45–60 days </td> <td>Unlimited </td> </tr> <tr> <td><b>Letters to Creditors/Bureaus</b> </td> <td>Debt validation, section 609, goodwill, method of verification, permissible purpose verification, CFPB investigations, FTC investigations, OCC investigations, cease-and-desist, Section 605B </td> <td>Collections, late payments, charge-offs, liens, bankruptcies, repossessions </td> <td>Debt validation, cease and desist, goodwill, method of verification </td> </tr> <tr> <td><b>Min. First Work Fee</b> </td> <td>$0 </td> <td>$24.95 </td> <td>$79 </td> </tr> <tr> <td><b>Min. Monthly Fee</b> </td> <td>$49.99 </td> <td>$24.95 </td> <td>$79 </td> </tr> <tr> <td><b>Customer Service Platforms</b> </td> <td>Phone, email, contact form </td> <td>Online, phone, email, live chat, mobile app </td> <td>Online, phone, email </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-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_2-0-35"> <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_2-0-36"> CreditFirm.net is a budget-friendly option for those looking for a no-frills solution to their credit repair needs. You won't find any add-ons or ways to customize your package, but the service will likely work well for many consumers. You’ll just have to find your own credit monitoring service to keep tabs on your progress and to make sure that CreditFirm is having a positive impact on your credit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-37"> We've rated CreditFirm among the top credit repair companies, but there are several good options out there. Browse our picks for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-repair-companies-4843898">best credit repair companies</a> if you want to shop around. </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_2-0-38"> <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="afftrack=${DOC_ID}-${REQUEST_ID}" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=1230772&amp;u=2366409&amp;m=49614&amp;urllink=" 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 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 --> <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_2-0-39"> <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_2-0-40"> Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-41"> The top picks were selected based on 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_2-0-42"> <li>Costs and fees (weighted 40.5% in total)</li><li>Services offered (34%)</li><li>Customer experience (22.5%)</li><li>Stability (3%)</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_2-0-43"> We took factors into account, such as how many disputes will be sent per month, what kinds of dispute letters will be sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </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-3"><p>CreditFirm.net. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://creditfirm.net/pricing" rel="nofollow sponsored">One All Inclusive Plan</a>." </p></li> <li class="mntl-sources__source" id="citation-4"><p>CreditFirm.net "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://creditfirm.net/services/" rel="nofollow sponsored">Services We Provide</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>CreditFirm.net "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://creditfirm.net/contact-us/" rel="nofollow sponsored">Contact Us</a>." </p></li> <li class="mntl-sources__source" id="citation-5"><p>Trustpilot. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trustpilot.com/review/www.creditfirm.net">CreditFirm.net Reviews</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="4843898" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/best-credit-repair-companies-4843898" 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:fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg) :fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg)  CreditFirm.net Investopedia’s Rating 4.1 [Sign Up Now](https://shareasale.com/r.cfm?b=1230772&u=2366409&m=49614&urllink=) **Our Take** CreditFirm.net offers an affordable, no-frills credit repair service at $49.99 per month without any additional fees. But those looking for more customizable options and credit monitoring services will have to look elsewhere. * Pros & Cons * Key Takeaways * Company Overview Pros & Cons Pros * Low fees * Assigned a personal credit consultant * Unlimited monthly disputes and communication with creditors Cons * No money-back guarantee policy * No customization * Doesn’t include credit monitoring Key Takeaways * CreditFirm.net was founded in 1997 and it operates online. * This credit repair company only offers one credit repair package with services such as credit disputes and interventions. * There are no initiation fees and customers are charged a flat monthly rate of $49.99 or $89.99 for couples. Company Overview CreditFirm.net is one of the oldest credit repair companies we’ve reviewed. It was founded in 1997 and is based in Deerfield, Illinois. The company has helped over 60,000 customers throughout the U.S. improve their credit. * Year Founded 1997 * Services Offered Credit disputes, credit monitoring * First Work Fee None * Monthly Fee $49.99 * Customer Service Phone, email, contact form * Official Website www.creditfirm.net :fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg) :fill(white):max_bytes(150000):strip_icc()/CreditFirm.net-a3e9d564db594281bb9623e77cfa32ac.jpg)  CreditFirm.net overall rating 4.1 [Sign Up Now](https://shareasale.com/r.cfm?b=1230772&u=2366409&m=49614&urllink=) Table of Contents View All CreditFirm.net Credit Repair Review * [Pros Explained](#toc-pros-explained) * [Cons Explained](#toc-cons-explained) * [Types of Services](#toc-types-of-services) * [Company Features](#toc-company-features) * [Customer Service](#toc-customer-service) * [Company Reputation](#toc-company-reputation) * [Contract Duration](#toc-contract-duration) * [Cost](#toc-cost) * [How to Choose](#toc-how-to-choose-a-credit-repair-company) * [Alternative Choices](#toc-alternative-choices) * [Final Verdict](#toc-final-verdict) * [Methodology](#toc-methodology) CreditFirm.net is on our list of the best credit repair companies, so it deserves a second look. It offers simple, affordable services with no initiation fees and the ability to cancel at any time. Services include credit disputes, debt validation letters, and cease-and-desist requests. CreditFirm.net can meet your credit repair needs by helping you remove false information from your credit reports and it can help you deal with debt collectors. As part of reviewing CreditFirm.net, we evaluated 17 credit repair companies in the following categories: costs and fees (40.5%), services offered (34%), customer experiences (22.5%), and stability (3%). ## Pros Explained * **Low fees**: CreditFirm.net charges a flat $49.99 monthly fee, and it charges no initiation fee, unlike just about every competitor. * **Assigned a personal credit consultant**: Customers will work with a dedicated personal credit consultant to dispute items on their credit reports and complete any paperwork necessary to work on your case. * **Unlimited monthly disputes and communication with creditors**: Some credit repair companies only send a certain number of disputes per month and this can make the process lengthier and more costly. CreditFirm places no limits on the number of credit disputes or requests you can make. ## Cons Explained * **No money-back guarantee policy**:CreditFirm doesn’t offer refunds for any reason. Compare that to some competitors that will refund your initial or monthly fee if you decide to cancel or don’t get any results. * **No customization**:CreditFirm offers a single plan with no higher tiers or add-ons. You’ll have to look elsewhere if it doesn't fit your situation. * **Doesn’t include credit monitoring**: It’s important to monitor your credit throughout the credit repair process but CreditFirm doesn’t include credit monitoring in its package, unlike many other companies. See our picks for the [best credit monitoring tools](https://www.investopedia.com/best-credit-monitoring-services-4846982) to supplement this service. ## Types of Services CreditFirm's services mainly consist of creditor interventions and credit disputes so customers can only sign up for one package. It will typically take one to two days after you sign up before the company starts working with you on a credit repair plan. All services are provided in unlimited quantities per month, a step up from many competitors who put a cap on the number of disputes they’ll send in each cycle. ### Credit Bureau Disputes You'll be assigned a personal credit consultant and you'll receive an in-depth legal credit audit that consists of looking over your credit reports and finding any errors. A plan will then be formed to contact the credit bureaus on your behalf to change or remove incorrect items on your credit reports. CreditFirm will look for erroneous hard inquiries, credit account details, and personal details.  ### Creditor Requests Customers can also request that CreditFirm.net send creditor interventions on their behalf in the form of letters or requests. These include debt validation requests, goodwill letters, and cease-and-desist notices.  Many credit repair companies advertise debt validation and cease-and-desist letters as part of their services, but few explain the potential negative ramifications of pursuing these actions. Both are useful if you’re dealing with a debt that you believe to be erroneous, but you should use them sparingly. Both may cause lenders to pursue more aggressive action against you, including legal action if they believe you’ll try to evade the debt. ## Company Features CreditFirm.net is a pretty simple website. It offers only two features. * **Free credit repair consultation**: You can sign up to speak with a representative for free to see if CreditFirm.net or credit repair services in general are a good fit for you. * **Discount opportunities**: Couples can save by signing up together. It will cost you $89.99 in total. We were also informed by customer support that more discounts will be forthcoming. ## Customer Service CreditFirm.net offers 24/7 customer service seven days a week via phone, email, or a contact form. Customers can also log in to their accounts online to manage their requests and oversee their credit disputes. * **Email:** [email protected] * **Phone:** (800) 750-1416 * **Fax:** (847) 739-7273 * **Mailing Address:** CreditFirm.net, 1020 Milwaukee Ave., Suite 122, Deerfield, IL 60015 ## Company Reputation Looking at complaints filed with the Consumer Financial Protection Bureau (CFPB) can sometimes help you assess a company’s reputation. There are no complaints against CreditFirm.net listed with the CFPB, but this doesn’t necessarily indicate a good company reputation. Trustpilot gives CreditFirm a rating of 3.8 out of five, with most complaints being about customer response times. You can file a complaint with the FTC by calling (877) FTC-HELP or through the [FTC fraud website](https://reportfraud.ftc.gov/#/) if you have issues with any credit repair company or its services.   ## Contract Duration Customers don’t have to sign up for a long-term contract with CreditFirm.net. You'll simply pay a monthly fee and you can cancel your monthly membership at any time by contacting customer service.  ## Cost Unlike credit repair companies with multiple service tiers and hidden fees, CreditFirm only charges a monthly fee of $49.99 or $89.99 for couples for all of its services. There's no first work or initiation fee. ## How to Choose a Credit Repair Company Some factors to look for can help you find credit repair companies that best suit your needs: * **Price**:Most credit repair companies charge first work fees followed by monthly fees, as well as cancellation fees in some cases. Some will charge extra for services like hard inquiry disputes so check what services are inclusive or extra before signing up. * **Consultations**:Most companies offer free initial consultations to determine whether credit repair or their companies are a good fit for you. Beware of companies that make guarantees to lower your score or remove accurate negative information. * **Written contract**:Having a contract in writing ensures that you're clear as to what your rights are as a consumer and what the company promises to do for you after you sign up for its services. * **Services offered**:What will the company actually do on your behalf? Some credit repair companies only dispute certain types of items or they'll only dispute a certain number per month. Be sure that the company you choose can deal with your unique situation. You should be able to figure this out in your consultation. * **Reviews**: Sources like CFPB or Trustpilot can give you some insight into any legal actions or complaints taken against a credit repair company. Most credit repair companies are generally reputable, but there may be some that suggest you engage in behaviors that misrepresent facts. This might include asking you to attempt to create a "new" credit report by using your employer identification number. It's better to steer clear and consider another credit repair company if anything seems fishy. ## Alternative Choices | | **[CreditFirm.net](http://CreditFirm.net)** | **[CreditRepair.com](http://CreditRepair.com)** | **[Sky Blue Credit](https://www.investopedia.com/sky-blue-credit-repair-review-5081331)** | | --- | --- | --- | --- | | **Services Offered** | Credit disputes Credit interventions | Credit disputes Credit monitoring Identity theft Debt management | Credit disputes Score assistance Debt management One-on-one coaching | | **Max. Number of Monthly Disputes** | Unlimited | 19 per 45–60 days | Unlimited | | **Letters to Creditors/Bureaus** | Debt validation, section 609, goodwill, method of verification, permissible purpose verification, CFPB investigations, FTC investigations, OCC investigations, cease-and-desist, Section 605B | Collections, late payments, charge-offs, liens, bankruptcies, repossessions | Debt validation, cease and desist, goodwill, method of verification | | **Min. First Work Fee** | $0 | $24.95 | $79 | | **Min. Monthly Fee** | $49.99 | $24.95 | $79 | | **Customer Service Platforms** | Phone, email, contact form | Online, phone, email, live chat, mobile app | Online, phone, email | ## Final Verdict CreditFirm.net is a budget-friendly option for those looking for a no-frills solution to their credit repair needs. You won't find any add-ons or ways to customize your package, but the service will likely work well for many consumers. You’ll just have to find your own credit monitoring service to keep tabs on your progress and to make sure that CreditFirm is having a positive impact on your credit. We've rated CreditFirm among the top credit repair companies, but there are several good options out there. Browse our picks for the [best credit repair companies](https://www.investopedia.com/best-credit-repair-companies-4843898) if you want to shop around. [Sign Up Now](https://shareasale.com/r.cfm?b=1230772&u=2366409&m=49614&urllink=) ## Methodology Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. The top picks were selected based on the following: * Costs and fees (weighted 40.5% in total) * Services offered (34%) * Customer experience (22.5%) * Stability (3%) We took factors into account, such as how many disputes will be sent per month, what kinds of dispute letters will be sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. 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. CreditFirm.net. "[One All Inclusive Plan](https://creditfirm.net/pricing)." 2. CreditFirm.net "[Services We Provide](https://creditfirm.net/services/)." 3. CreditFirm.net "[Contact Us](https://creditfirm.net/contact-us/)." 4. Trustpilot. "[CreditFirm.net Reviews](https://www.trustpilot.com/review/www.creditfirm.net)." Related Articles [![Best Credit Repair Companies]() :max_bytes(150000):strip_icc()/GettyImages-684216488-bc314b7bbef84f999d8c84b99bb62fb8.jpg) Best Credit Repair Companies for May 2024](https://www.investopedia.com/best-credit-repair-companies-4843898) [![Credit Assistance Network]() :max_bytes(150000):strip_icc()/Credit-Assistance-Network_recirc-f1a931ee08824e2caae5a7d37ea387b5.jpg) Credit Assistance Network Credit Repair Review](https://www.investopedia.com/credit-assistance-network-review-5084497) [![Lexington Law]() :max_bytes(150000):strip_icc()/Lexington_law_recirc-9c4f81336f454d35b50d9cd99eff9e53.jpg) Lexington Law Credit Repair Review](https://www.investopedia.com/lexington-law-review-5086124) [![Credit Glory]() :max_bytes(150000):strip_icc()/Credit-Glory_recirc-d3c3a1577db34a3785e6f24d49c452e4.jpg) Credit Glory Credit Repair Review](https://www.investopedia.com/credit-glory-credit-repair-review-6502743) [![The Credit People]() :max_bytes(150000):strip_icc()/The-Credit-Peaple_recirc-75e59d1bf7444340b04cb84d7f060d6e.jpg) The Credit People Credit Repair Review](https://www.investopedia.com/the-credit-people-review-5085096) [![Sky Blue Credit]() :max_bytes(150000):strip_icc()/Sky-Blue-Credit-Repair_recirc-e6b2666518ff4fd08db44c9d1d4832ca.jpg) Sky Blue Credit Repair Review](https://www.investopedia.com/sky-blue-credit-repair-review-5081331)

 CreditFirm.net Investopedia’s Rating 4.1 Sign Up Now Our Take CreditFirm.net offers an affordable, no-frills credit repair service at $49.99 per month without any additional fees. But those looking for more customizable options and credit monitoring services will have to look elsewhere. Pros & Cons Key Takeaways Company Overview Pros & Cons Pros Low fees Assigned a personal credit consultant Unlimited monthly disputes and communication with creditors Cons No money-back guarantee policy No customization Doesn’t include credit monitoring Key Takeaways CreditFirm.net was founded in 1997 and it operates online. This credit repair company only offers one credit repair package with services such as credit disputes and interventions. There are no initiation fees and customers are charged a flat monthly rate of $49.99 or $89.99 for couples. Company Overview CreditFirm.net is one of the oldest credit repair companies we’ve reviewed. It was founded in 1997 and is based in Deerfield, Illinois. The company has helped over 60,000 customers throughout the U.S. improve their credit. Year Founded 1997 Services Offered Credit disputes, credit monitoring First Work Fee None Monthly Fee $49.99 Customer Service Phone, email, contact form Official Website www.creditfirm.net  CreditFirm.net overall rating 4.1 Sign Up Now Table of Contents View All CreditFirm.net Credit Repair Review Pros Explained Cons Explained Types of Services Company Features Customer Service Company Reputation Contract Duration Cost How to Choose Alternative Choices Final Verdict Methodology CreditFirm.net is on our list of the best credit repair companies, so it deserves a second look. It offers simple, affordable services with no initiation fees and the ability to cancel at any time. Services include credit disputes, debt validation letters, and cease-and-desist requests. CreditFirm.net can meet your credit repair needs by helping you remove false information from your credit reports and it can help you deal with debt collectors. As part of reviewing CreditFirm.net, we evaluated 17 credit repair companies in the following categories: costs and fees (40.5%), services offered (34%), customer experiences (22.5%), and stability (3%). Pros Explained Low fees: CreditFirm.net charges a flat $49.99 monthly fee, and it charges no initiation fee, unlike just about every competitor.Assigned a personal credit consultant: Customers will work with a dedicated personal credit consultant to dispute items on their credit reports and complete any paperwork necessary to work on your case. Unlimited monthly disputes and communication with creditors: Some credit repair companies only send a certain number of disputes per month and this can make the process lengthier and more costly. CreditFirm places no limits on the number of credit disputes or requests you can make. Cons Explained No money-back guarantee policy: CreditFirm doesn’t offer refunds for any reason. Compare that to some competitors that will refund your initial or monthly fee if you decide to cancel or don’t get any results.  No customization: CreditFirm offers a single plan with no higher tiers or add-ons. You’ll have to look elsewhere if it doesn't fit your situation. Doesn’t include credit monitoring: It’s important to monitor your credit throughout the credit repair process but CreditFirm doesn’t include credit monitoring in its package, unlike many other companies. See our picks for the best credit monitoring tools to supplement this service. Types of Services CreditFirm's services mainly consist of creditor interventions and credit disputes so customers can only sign up for one package. It will typically take one to two days after you sign up before the company starts working with you on a credit repair plan. All services are provided in unlimited quantities per month, a step up from many competitors who put a cap on the number of disputes they’ll send in each cycle. Credit Bureau Disputes You'll be assigned a personal credit consultant and you'll receive an in-depth legal credit audit that consists of looking over your credit reports and finding any errors. A plan will then be formed to contact the credit bureaus on your behalf to change or remove incorrect items on your credit reports. CreditFirm will look for erroneous hard inquiries, credit account details, and personal details.  Creditor Requests Customers can also request that CreditFirm.net send creditor interventions on their behalf in the form of letters or requests. These include debt validation requests, goodwill letters, and cease-and-desist notices.  Many credit repair companies advertise debt validation and cease-and-desist letters as part of their services, but few explain the potential negative ramifications of pursuing these actions. Both are useful if you’re dealing with a debt that you believe to be erroneous, but you should use them sparingly. Both may cause lenders to pursue more aggressive action against you, including legal action if they believe you’ll try to evade the debt. Company Features CreditFirm.net is a pretty simple website. It offers only two features. Free credit repair consultation: You can sign up to speak with a representative for free to see if CreditFirm.net or credit repair services in general are a good fit for you.Discount opportunities: Couples can save by signing up together. It will cost you $89.99 in total. We were also informed by customer support that more discounts will be forthcoming. Customer Service CreditFirm.net offers 24/7 customer service seven days a week via phone, email, or a contact form. Customers can also log in to their accounts online to manage their requests and oversee their credit disputes. Email: [email protected]: (800) 750-1416Fax: (847) 739-7273Mailing Address: CreditFirm.net, 1020 Milwaukee Ave., Suite 122, Deerfield, IL 60015 Company Reputation Looking at complaints filed with the Consumer Financial Protection Bureau (CFPB) can sometimes help you assess a company’s reputation. There are no complaints against CreditFirm.net listed with the CFPB, but this doesn’t necessarily indicate a good company reputation. Trustpilot gives CreditFirm a rating of 3.8 out of five, with most complaints being about customer response times. You can file a complaint with the FTC by calling (877) FTC-HELP or through the FTC fraud website if you have issues with any credit repair company or its services.   Contract Duration Customers don’t have to sign up for a long-term contract with CreditFirm.net. You'll simply pay a monthly fee and you can cancel your monthly membership at any time by contacting customer service.  Cost Unlike credit repair companies with multiple service tiers and hidden fees, CreditFirm only charges a monthly fee of $49.99 or $89.99 for couples for all of its services. There's no first work or initiation fee. How to Choose a Credit Repair Company Some factors to look for can help you find credit repair companies that best suit your needs: Price: Most credit repair companies charge first work fees followed by monthly fees, as well as cancellation fees in some cases. Some will charge extra for services like hard inquiry disputes so check what services are inclusive or extra before signing up.Consultations: Most companies offer free initial consultations to determine whether credit repair or their companies are a good fit for you. Beware of companies that make guarantees to lower your score or remove accurate negative information.Written contract: Having a contract in writing ensures that you're clear as to what your rights are as a consumer and what the company promises to do for you after you sign up for its services.Services offered: What will the company actually do on your behalf? Some credit repair companies only dispute certain types of items or they'll only dispute a certain number per month. Be sure that the company you choose can deal with your unique situation. You should be able to figure this out in your consultation.Reviews: Sources like CFPB or Trustpilot can give you some insight into any legal actions or complaints taken against a credit repair company. Most credit repair companies are generally reputable, but there may be some that suggest you engage in behaviors that misrepresent facts. This might include asking you to attempt to create a "new" credit report by using your employer identification number. It's better to steer clear and consider another credit repair company if anything seems fishy. Alternative Choices   CreditFirm.net CreditRepair.com  Sky Blue Credit  Services Offered Credit disputes Credit interventions Credit disputes Credit monitoring Identity theft Debt management Credit disputes Score assistance Debt management One-on-one coaching Max. Number of Monthly Disputes  Unlimited  19 per 45–60 days  Unlimited  Letters to Creditors/Bureaus  Debt validation, section 609, goodwill, method of verification, permissible purpose verification, CFPB investigations, FTC investigations, OCC investigations, cease-and-desist, Section 605B  Collections, late payments, charge-offs, liens, bankruptcies, repossessions  Debt validation, cease and desist, goodwill, method of verification  Min. First Work Fee  $0  $24.95  $79  Min. Monthly Fee  $49.99  $24.95  $79  Customer Service Platforms  Phone, email, contact form  Online, phone, email, live chat, mobile app  Online, phone, email  Final Verdict CreditFirm.net is a budget-friendly option for those looking for a no-frills solution to their credit repair needs. You won't find any add-ons or ways to customize your package, but the service will likely work well for many consumers. You’ll just have to find your own credit monitoring service to keep tabs on your progress and to make sure that CreditFirm is having a positive impact on your credit. We've rated CreditFirm among the top credit repair companies, but there are several good options out there. Browse our picks for the best credit repair companies if you want to shop around. Sign Up Now Methodology Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. The top picks were selected based on the following: Costs and fees (weighted 40.5% in total)Services offered (34%)Customer experience (22.5%)Stability (3%) We took factors into account, such as how many disputes will be sent per month, what kinds of dispute letters will be sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. 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. CreditFirm.net. "One All Inclusive Plan."  CreditFirm.net "Services We Provide." CreditFirm.net "Contact Us."  Trustpilot. "CreditFirm.net Reviews."  Related Articles Best Credit Repair Companies for May 2024 Credit Assistance Network Credit Repair Review Lexington Law Credit Repair Review Credit Glory Credit Repair Review The Credit People Credit Repair Review Sky Blue Credit Repair Review

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

Interpolated Yield Curve (I Curve): Definition and Uses

<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-interpolated-yield-curve-i-curve"></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 Interpolated Yield Curve (I Curve)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An interpolated yield curve (I curve) is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yieldcurve.asp">yield curve</a> derived by using on-the-run Treasuries. Because <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/on-the-runtreasuries.asp">on-the-run Treasuries</a> are limited to specific maturities, the yield of maturities that lies between the on-the-run treasuries must be interpolated. Interpolation is a way to determine the value of an unknown entity, often by using numerical analysis to estimate the value of that entity. </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"> Financial analysts and investors interpolate yield curves in order to help predict future economic activity and bond market price levels. They can accomplish this by using a number of methodologies, including bootstrapping and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/regression.asp">regression analysis</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">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 interpolated yield curve or "I curve" refers to a yield curve that has been plotted using data on the yield and maturities of on-the-run Treasuries.</li><li>On-the-run Treasuries are the most recently issued U.S. Treasury bonds or notes of a specific maturity.</li><li>Interpolation refers to the methods used to create new estimated data points between known data points on a graph.</li><li>Two of the most common methods to interpolate a yield curve are bootstrapping and regression analysis.</li><li>Investors and financial analysts often interpolate yield curves in order to gain a better understanding of where the bond markets and the economy might be going in the future. </li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-interpolated-yield-curve-i-curve"></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 Interpolated Yield Curve (I Curve) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The yield curve is the curve that is formed on a graph when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yield.asp">yield</a> and various maturities of Treasury securities are plotted. The graph is plotted with the y-axis depicting interest rates and the x-axis showing the increasing time durations. Since short-term bonds typically have lower yields than longer-term bonds, the curve slopes upwards from the bottom left to the right. </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 yield curve is plotted using data on the yield and maturities of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/on-the-runtreasuries.asp">on-the-run Treasuries</a>, it is referred to as an interpolated yield curve or I curve. On-the-run Treasuries are the most recently issued U.S. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybill.asp">Treasury bills</a>, notes, or bonds of a particular maturity.<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"> Conversely, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/off-the-runtreasuries.asp">off-the-run Treasuries</a> are marketable Treasury debt consisting of more <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/seasonedissue.asp">seasoned issues</a>. The on-the-run Treasury will have a lower yield and higher price than a similar off-the-run issue, and they only make up a small percentage of the total issued Treasury securities. </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-interpolation"></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"> Interpolation </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Interpolation is simply a method used to determine the value of an unknown entity. Treasury securities issued by the U.S. government are not available for every period of time. For example, you will be able to find the yield for a 1-year bond, but not a 1.5-year bond. </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 determine the value of a missing yield or interest rate to derive a yield curve, the missing information can be interpolated using various methods including bootstrapping or regression analysis. Once the interpolated yield curve has been derived, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yieldspread.asp">yield spreads</a> can be calculated from it as few of the bonds have maturities comparable to those of the on-the-run Treasuries. </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-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><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>Because yield curves reflect the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/08/yield-curve.asp">bond market's opinion</a> of future levels of inflation, interest rates, and overall economic growth, investors can use yield curves to help them make investing decisions.</p></div></div></div> <span class="heading-toc" id="toc-bootstrapping"></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"> Bootstrapping </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> The bootstrapping method uses interpolation to determine the yields for Treasury <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/z/zero-couponbond.asp">zero-coupon securities</a> with various maturities. Using this method, a coupon-bearing bond is stripped of its future cash flows—that is, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/coupon.asp">coupon payments</a>—and converted into multiple zero-coupon bonds. Typically, some rates at the short end of the curve will be known. For rates that are unknown due to insufficient liquidity at the short end, you can use inter-bank money market rates. </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"> To recap, first interpolate rates for each missing maturity. You can do this using a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interpolation.asp">linear interpolation</a> method. Once you have determined all the term structure rates, use the bootstrapping method to derive the zero curve from the par term structure. It is an iterative process that makes it possible to derive a zero-coupon yield curve from the rates and prices of coupon-bearing bonds. </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-special-considerations"></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"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Several different types of fixed-income securities trade at yield spreads to the interpolated yield curve, making it an important benchmark. For example, certain agency <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cmo.asp">collateralized mortgage obligations</a> (CMOs) trade at a spread to the I curve at a spot on the curve equal to their weighted average lives. A CMO's weighted average life will most likely lie somewhere within the on-the-run treasuries, which makes the derivation of the interpolated yield curve necessary. </p></div>

## What Is an Interpolated Yield Curve (I Curve)? An interpolated yield curve (I curve) is a [yield curve](https://www.investopedia.com/terms/y/yieldcurve.asp) derived by using on-the-run Treasuries. Because [on-the-run Treasuries](https://www.investopedia.com/terms/o/on-the-runtreasuries.asp) are limited to specific maturities, the yield of maturities that lies between the on-the-run treasuries must be interpolated. Interpolation is a way to determine the value of an unknown entity, often by using numerical analysis to estimate the value of that entity. Financial analysts and investors interpolate yield curves in order to help predict future economic activity and bond market price levels. They can accomplish this by using a number of methodologies, including bootstrapping and [regression analysis](https://www.investopedia.com/terms/r/regression.asp). ### Key Takeaways * An interpolated yield curve or "I curve" refers to a yield curve that has been plotted using data on the yield and maturities of on-the-run Treasuries. * On-the-run Treasuries are the most recently issued U.S. Treasury bonds or notes of a specific maturity. * Interpolation refers to the methods used to create new estimated data points between known data points on a graph. * Two of the most common methods to interpolate a yield curve are bootstrapping and regression analysis. * Investors and financial analysts often interpolate yield curves in order to gain a better understanding of where the bond markets and the economy might be going in the future. ## Understanding the Interpolated Yield Curve (I Curve) The yield curve is the curve that is formed on a graph when the [yield](https://www.investopedia.com/terms/y/yield.asp) and various maturities of Treasury securities are plotted. The graph is plotted with the y-axis depicting interest rates and the x-axis showing the increasing time durations. Since short-term bonds typically have lower yields than longer-term bonds, the curve slopes upwards from the bottom left to the right. When the yield curve is plotted using data on the yield and maturities of [on-the-run Treasuries](https://www.investopedia.com/terms/o/on-the-runtreasuries.asp), it is referred to as an interpolated yield curve or I curve. On-the-run Treasuries are the most recently issued U.S. [Treasury bills](https://www.investopedia.com/terms/t/treasurybill.asp), notes, or bonds of a particular maturity. Conversely, [off-the-run Treasuries](https://www.investopedia.com/terms/o/off-the-runtreasuries.asp) are marketable Treasury debt consisting of more [seasoned issues](https://www.investopedia.com/terms/s/seasonedissue.asp). The on-the-run Treasury will have a lower yield and higher price than a similar off-the-run issue, and they only make up a small percentage of the total issued Treasury securities. ## Interpolation Interpolation is simply a method used to determine the value of an unknown entity. Treasury securities issued by the U.S. government are not available for every period of time. For example, you will be able to find the yield for a 1-year bond, but not a 1.5-year bond. To determine the value of a missing yield or interest rate to derive a yield curve, the missing information can be interpolated using various methods including bootstrapping or regression analysis. Once the interpolated yield curve has been derived, [yield spreads](https://www.investopedia.com/terms/y/yieldspread.asp) can be calculated from it as few of the bonds have maturities comparable to those of the on-the-run Treasuries. ### Because yield curves reflect the [bond market's opinion](https://www.investopedia.com/articles/economics/08/yield-curve.asp) of future levels of inflation, interest rates, and overall economic growth, investors can use yield curves to help them make investing decisions. ## Bootstrapping The bootstrapping method uses interpolation to determine the yields for Treasury [zero-coupon securities](https://www.investopedia.com/terms/z/zero-couponbond.asp) with various maturities. Using this method, a coupon-bearing bond is stripped of its future cash flows—that is, [coupon payments](https://www.investopedia.com/terms/c/coupon.asp)—and converted into multiple zero-coupon bonds. Typically, some rates at the short end of the curve will be known. For rates that are unknown due to insufficient liquidity at the short end, you can use inter-bank money market rates. To recap, first interpolate rates for each missing maturity. You can do this using a [linear interpolation](https://www.investopedia.com/terms/i/interpolation.asp) method. Once you have determined all the term structure rates, use the bootstrapping method to derive the zero curve from the par term structure. It is an iterative process that makes it possible to derive a zero-coupon yield curve from the rates and prices of coupon-bearing bonds. ## Special Considerations Several different types of fixed-income securities trade at yield spreads to the interpolated yield curve, making it an important benchmark. For example, certain agency [collateralized mortgage obligations](https://www.investopedia.com/terms/c/cmo.asp) (CMOs) trade at a spread to the I curve at a spot on the curve equal to their weighted average lives. A CMO's weighted average life will most likely lie somewhere within the on-the-run treasuries, which makes the derivation of the interpolated yield curve necessary.

What Is an Interpolated Yield Curve (I Curve)? An interpolated yield curve (I curve) is a yield curve derived by using on-the-run Treasuries. Because on-the-run Treasuries are limited to specific maturities, the yield of maturities that lies between the on-the-run treasuries must be interpolated. Interpolation is a way to determine the value of an unknown entity, often by using numerical analysis to estimate the value of that entity. Financial analysts and investors interpolate yield curves in order to help predict future economic activity and bond market price levels. They can accomplish this by using a number of methodologies, including bootstrapping and regression analysis. Key Takeaways An interpolated yield curve or "I curve" refers to a yield curve that has been plotted using data on the yield and maturities of on-the-run Treasuries.On-the-run Treasuries are the most recently issued U.S. Treasury bonds or notes of a specific maturity.Interpolation refers to the methods used to create new estimated data points between known data points on a graph.Two of the most common methods to interpolate a yield curve are bootstrapping and regression analysis.Investors and financial analysts often interpolate yield curves in order to gain a better understanding of where the bond markets and the economy might be going in the future. Understanding the Interpolated Yield Curve (I Curve) The yield curve is the curve that is formed on a graph when the yield and various maturities of Treasury securities are plotted. The graph is plotted with the y-axis depicting interest rates and the x-axis showing the increasing time durations. Since short-term bonds typically have lower yields than longer-term bonds, the curve slopes upwards from the bottom left to the right. When the yield curve is plotted using data on the yield and maturities of on-the-run Treasuries, it is referred to as an interpolated yield curve or I curve. On-the-run Treasuries are the most recently issued U.S. Treasury bills, notes, or bonds of a particular maturity. Conversely, off-the-run Treasuries are marketable Treasury debt consisting of more seasoned issues. The on-the-run Treasury will have a lower yield and higher price than a similar off-the-run issue, and they only make up a small percentage of the total issued Treasury securities. Interpolation Interpolation is simply a method used to determine the value of an unknown entity. Treasury securities issued by the U.S. government are not available for every period of time. For example, you will be able to find the yield for a 1-year bond, but not a 1.5-year bond. To determine the value of a missing yield or interest rate to derive a yield curve, the missing information can be interpolated using various methods including bootstrapping or regression analysis. Once the interpolated yield curve has been derived, yield spreads can be calculated from it as few of the bonds have maturities comparable to those of the on-the-run Treasuries. Because yield curves reflect the bond market's opinion of future levels of inflation, interest rates, and overall economic growth, investors can use yield curves to help them make investing decisions. Bootstrapping The bootstrapping method uses interpolation to determine the yields for Treasury zero-coupon securities with various maturities. Using this method, a coupon-bearing bond is stripped of its future cash flows—that is, coupon payments—and converted into multiple zero-coupon bonds. Typically, some rates at the short end of the curve will be known. For rates that are unknown due to insufficient liquidity at the short end, you can use inter-bank money market rates. To recap, first interpolate rates for each missing maturity. You can do this using a linear interpolation method. Once you have determined all the term structure rates, use the bootstrapping method to derive the zero curve from the par term structure. It is an iterative process that makes it possible to derive a zero-coupon yield curve from the rates and prices of coupon-bearing bonds. Special Considerations Several different types of fixed-income securities trade at yield spreads to the interpolated yield curve, making it an important benchmark. For example, certain agency collateralized mortgage obligations (CMOs) trade at a spread to the I curve at a spot on the curve equal to their weighted average lives. A CMO's weighted average life will most likely lie somewhere within the on-the-run treasuries, which makes the derivation of the interpolated yield curve necessary.

https://www.investopedia.com/make-savings-plan-5208028

Do You Need a Savings Plan? And How Do You Make One?

<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"> Saving money is central to achieving both short- and long-term financial goals, such as building an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emergency_fund.asp">emergency fund</a>, saving for a vacation, or putting aside money toward a down payment on a home. As of January 2022, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/savings-rate.asp">personal savings rate</a> was 6.4%, meaning that the average U.S. household saves less than 10% of disposable income annually.<span class="ql-inline-citation" data-cite="1"></span> Creating a savings plan can help to increase your personal savings rate. </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"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A savings plan is a blueprint for achieving your financial goals, which may include saving for emergencies or planning for retirement.</li><li>Creating a realistic budget can help with developing a consistent savings plan.</li><li>Automating deposits into savings or investment accounts can help you avoid spending money that would otherwise be earmarked for saving.</li><li>Reviewing your savings plan regularly can help you gauge your progress and determine whether any adjustments are necessary.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-savings-plan"></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"> Understanding a Savings Plan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> A savings plan is a method for amassing money in order to reach specific financial goals. It enumerates the goals in question and the steps needed to reach them. Such goals may 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>Emergency savings</li><li>Vacation plans</li><li>Wedding arrangements</li><li>Buying a home</li><li>Home repairs or improvements</li><li>Purchasing a vehicle</li><li>College planning</li><li>Retirement savings</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"> The types of financial goals you include in a savings plan will depend on your individual financial situation.<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-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>Saving and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing-4427685">investing</a> aren’t the same thing because saving usually means adding money to a bank account, while investing means putting your money into the stock market.</p></div></div></div> <span class="heading-toc" id="toc-how-to-create-a-savings-plan"></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 to Create a Savings Plan </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Creating a personalized savings plan doesn’t have to be complicated. Here is a checklist to follow that can make the process easier.<br/> </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"> Step 1: Start with a financial inventory </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Knowing where you stand financially can help you determine your starting point for shaping a savings plan. Begin by creating a financial inventory, which is simply a list of your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidasset.asp">liquid assets</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability.asp">liabilities</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"> Assets could 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>Cash</li> <li>Checking account</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/m/moneymarketaccount.asp">Money market account</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">Certificate of deposit (CD)</a></li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/401kplan.asp">401(k) plan</a> (and other <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/employer_sponsored_plan.asp">employer-sponsored retirement plans</a>)</li> <li><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ira.asp">Individual retirement account (IRA)</a></li> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hsa.asp">Health savings account (HSA)</a></li> <li><a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokerageaccount.asp">Brokerage account</a></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"> These are assets you could tap into for cash fairly quickly. You may also have other assets that are less liquid, such as vehicles or homes. </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"> Liabilities could include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <li>Credit card debt</li> <li>Student loan</li> <li>Car loan</li> <li>Mortgage</li> <li>Business loan</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-loan-5076027">Personal loan</a></li> <li>Medical bills</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"> Subtracting your total liabilities from your total assets will give you your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/networth.asp">net worth</a>. According to Federal Reserve data, total household net worth reached $141.7 trillion as of the second quarter of 2021.<span class="ql-inline-citation" data-cite="2"></span> According to a 2019 survey from the Federal Reserve, the average net worth is around $748,000, while the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/median.asp">median</a> net worth is closer to $121,000.<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_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_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>You can use an online calculator to estimate your net worth as part of your financial inventory.<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_34-0"> <span class="mntl-sc-block-subheading__text"> Step 2: Establish your savings goals </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> The next step is determining goals, whether short term or long term, to include in your savings plan. Short-term goals include things you need to save money for in the near term. For example, one of your priorities may be saving for emergencies. This is a fairly common goal: 45% of workers say that paying for a $400 emergency expense out of pocket would be difficult, according to a 2021 Bipartisan Policy Center survey.<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_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Long-term goals don’t require immediate cash. Retirement and college are but two examples. In terms of the amount saved, long-term goals may be larger than short-term goals, but you have a longer time frame in which to execute your savings plan. </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"> When setting financial goals for your savings plan, keep them S.M.A.R.T.: </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>Specific</li><li>Measurable</li><li>Achievable</li><li>Realistic</li><li>Time bound</li> </ul> <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"> For example, rather than creating a vague goal like saving money for emergencies, you could set a S.M.A.R.T. goal of saving $10,000 in 12 months. This goal is specific because you have a set dollar amount in mind and measurable because you can track your progress month to month. There’s also a time element because you’re giving yourself 12 months to reach it. </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"> Whether the goal checks off achievable and realistic boxes can depend on how much money you’re able to save each month. This is where the next step in the savings plan process comes into it.<br/> </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 3: Decide how much to allocate to each goal </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> A savings plan only works when you are committed to it and have money to save each month. If you have a monthly budget, then you may already have an idea of how much extra money you have available to save each month. If you’re not a regular budgeter, you’ll need to first add up your income and subtract your expenses <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/budgeting-calculator-5101411">to calculate how much you can realistically afford to save</a>. </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"> Let’s use the average <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/household_income.asp">household income</a> and annual consumer expenditures as an example. According to the U.S. Department of Labor’s Bureau of Labor Statistics, the typical household made $84,352 in 2020. Meanwhile, the average household spent $61,334.<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_51-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Using those numbers, the average monthly income works out to $7,029. Average monthly spending is $5,111. If your income and spending align with those numbers, you have roughly $1,918 left each month that you can apply to your savings plan. </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"> Now, say you have three savings goals: </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>Vacation fund: $2,000</li><li>Home repair fund: $5,000</li><li>Emergency fund: $10,000</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"> You want to complete the vacation fund in six months, the home repair fund in six months, and the emergency fund in 12 months. Based on those time frames, here’s how your monthly savings would need to break down: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> <li>Vacation fund: $333/month x six months</li><li>Home repair fund: $833/month x six months</li><li>Emergency fund: $833/month x 12 months</li> </ul> <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 total comes to $1,999, making you $81 shy of what you need to reach your goals. The easiest way to make up for the shortfall would be to review your budget and reduce spending to find $81 you could redirect to savings. Accomplish that and your goal is achievable and realistic, as well as specific, measurable, and time bound. </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-important" 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_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>If you’re contributing to a 401(k) at work through payroll deductions, you wouldn’t include those amounts in your income or expenses.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-subheading__text"> Step 4: Decide where to keep your savings </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> When you have your goals in mind, you can think about where you want to keep the funds. Your options include: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_68-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> <li>Savings account</li> <li>Money market account</li> <li>CD</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tax-advantaged.asp">Tax-advantaged account</a></li> <li>Taxable investment account</li> </ul> <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"> The option you choose can depend on the goal. For example, if you’re saving for emergencies, then your money needs to be easily accessible. At the same time, you may want to earn a high rate of interest on your savings. Therefore, 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> could be the best option. </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"> With retirement savings, you can choose between tax-advantaged and taxable accounts. Tax-advantaged accounts, such as a 401(k) or an IRA, can yield tax benefits. They are designed for long-term savings because you generally can’t take money out before age 59½ without triggering an early withdrawal penalty.<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_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> On the other hand, you can use <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-brokers-for-beginners-4587873">online brokerage accounts to invest money</a> that you may need for short- or long-term goals. The catch, however, is that if you sell assets in a brokerage account for a profit, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/taxes/capital-gains-tax-101/">you’ll owe capital gains tax</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_77-0"><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_78-0"><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>Automating deposits into savings accounts, retirement accounts, or investment accounts is a simple way to ensure that you’re making progress toward your goals.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-subheading__text"> Step 5: Maximize your savings plan </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> When you’ve got your savings plan in place, look for opportunities to make the most of it. For example, if you’re contributing to a 401(k) at work, check your annual contribution limits. Are you contributing enough <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/112315/how-401k-matching-works.asp">to get the full employer match if one is offered</a>? If not, then you may want to contact your benefits coordinator to increase your contributions. </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"> You can also maximize your savings plan by earmarking windfalls or unexpected amounts of money that come your way for one or more of your goals. For example, the average tax refund for 2021 was $2,775.<span class="ql-inline-citation" data-cite="7"></span> If you typically receive a tax refund, you could put that amount directly into savings so there’s no temptation to spend it. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> Reviewing your savings plan monthly can help you see how much progress you’re making. You can also review your spending and budget to look for any extra money you might be able to save, which is another way to maximize your plan.<br/> </p> <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-is-a-personal-savings-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Personal Savings Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A personal savings plan is a plan for saving money that typically revolves around distinct financial goals. A comprehensive savings plan may include both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/save-for-a-home-or-retirement-8599275">short-term and long-term financial goals</a> and is customized to your income, time horizon, and ability to save.</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-how-do-you-make-a-savings-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Make a Savings Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Making a savings plan starts with creating a financial inventory, then setting clear financial goals. When you’ve done that, you can calculate what you can afford to save each month, how much to allocate to each savings plan goal, and where to keep your savings.</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-is-a-good-savings-plan"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Good Savings Plan?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A good savings plan is one that allows you to identify which financial goals are most important to you, prioritize those goals, and achieve them in a time frame that you prefer. Every savings plan is different based on what you hope to achieve with your money, how long you have to save, and how much you can afford to commit to savings.</p></div> </div></div>

Saving money is central to achieving both short- and long-term financial goals, such as building an [emergency fund](https://www.investopedia.com/terms/e/emergency_fund.asp), saving for a vacation, or putting aside money toward a down payment on a home. As of January 2022, the [personal savings rate](https://www.investopedia.com/terms/s/savings-rate.asp) was 6.4%, meaning that the average U.S. household saves less than 10% of disposable income annually. Creating a savings plan can help to increase your personal savings rate. ### * A savings plan is a blueprint for achieving your financial goals, which may include saving for emergencies or planning for retirement. * Creating a realistic budget can help with developing a consistent savings plan. * Automating deposits into savings or investment accounts can help you avoid spending money that would otherwise be earmarked for saving. * Reviewing your savings plan regularly can help you gauge your progress and determine whether any adjustments are necessary. ## Understanding a Savings Plan A savings plan is a method for amassing money in order to reach specific financial goals. It enumerates the goals in question and the steps needed to reach them. Such goals may include: * Emergency savings * Vacation plans * Wedding arrangements * Buying a home * Home repairs or improvements * Purchasing a vehicle * College planning * Retirement savings The types of financial goals you include in a savings plan will depend on your individual financial situation. ### Saving and [investing](https://www.investopedia.com/investing-4427685) aren’t the same thing because saving usually means adding money to a bank account, while investing means putting your money into the stock market. ## How to Create a Savings Plan Creating a personalized savings plan doesn’t have to be complicated. Here is a checklist to follow that can make the process easier. ### Step 1: Start with a financial inventory Knowing where you stand financially can help you determine your starting point for shaping a savings plan. Begin by creating a financial inventory, which is simply a list of your [liquid assets](https://www.investopedia.com/terms/l/liquidasset.asp) and [liabilities](https://www.investopedia.com/terms/l/liability.asp). Assets could include: * Cash * Checking account * Savings account * [Money market account](https://www.investopedia.com/terms/m/moneymarketaccount.asp) * [Certificate of deposit (CD)](https://www.investopedia.com/terms/c/certificateofdeposit.asp) * [401(k) plan](https://www.investopedia.com/terms/1/401kplan.asp) (and other [employer-sponsored retirement plans](https://www.investopedia.com/terms/e/employer_sponsored_plan.asp)) * [Individual retirement account (IRA)](https://www.investopedia.com/terms/i/ira.asp) * [Health savings account (HSA)](https://www.investopedia.com/terms/h/hsa.asp) * [Brokerage account](https://www.investopedia.com/terms/b/brokerageaccount.asp) These are assets you could tap into for cash fairly quickly. You may also have other assets that are less liquid, such as vehicles or homes. Liabilities could include: * Credit card debt * Student loan * Car loan * Mortgage * Business loan * [Personal loan](https://www.investopedia.com/personal-loan-5076027) * Medical bills Subtracting your total liabilities from your total assets will give you your [net worth](https://www.investopedia.com/terms/n/networth.asp). According to Federal Reserve data, total household net worth reached $141.7 trillion as of the second quarter of 2021. According to a 2019 survey from the Federal Reserve, the average net worth is around $748,000, while the [median](https://www.investopedia.com/terms/m/median.asp) net worth is closer to $121,000. ### You can use an online calculator to estimate your net worth as part of your financial inventory. ### Step 2: Establish your savings goals The next step is determining goals, whether short term or long term, to include in your savings plan. Short-term goals include things you need to save money for in the near term. For example, one of your priorities may be saving for emergencies. This is a fairly common goal: 45% of workers say that paying for a $400 emergency expense out of pocket would be difficult, according to a 2021 Bipartisan Policy Center survey. Long-term goals don’t require immediate cash. Retirement and college are but two examples. In terms of the amount saved, long-term goals may be larger than short-term goals, but you have a longer time frame in which to execute your savings plan. When setting financial goals for your savings plan, keep them S.M.A.R.T.: * Specific * Measurable * Achievable * Realistic * Time bound For example, rather than creating a vague goal like saving money for emergencies, you could set a S.M.A.R.T. goal of saving $10,000 in 12 months. This goal is specific because you have a set dollar amount in mind and measurable because you can track your progress month to month. There’s also a time element because you’re giving yourself 12 months to reach it. Whether the goal checks off achievable and realistic boxes can depend on how much money you’re able to save each month. This is where the next step in the savings plan process comes into it. ### Step 3: Decide how much to allocate to each goal A savings plan only works when you are committed to it and have money to save each month. If you have a monthly budget, then you may already have an idea of how much extra money you have available to save each month. If you’re not a regular budgeter, you’ll need to first add up your income and subtract your expenses [to calculate how much you can realistically afford to save](https://www.investopedia.com/budgeting-calculator-5101411). Let’s use the average [household income](https://www.investopedia.com/terms/h/household_income.asp) and annual consumer expenditures as an example. According to the U.S. Department of Labor’s Bureau of Labor Statistics, the typical household made $84,352 in 2020. Meanwhile, the average household spent $61,334. Using those numbers, the average monthly income works out to $7,029. Average monthly spending is $5,111. If your income and spending align with those numbers, you have roughly $1,918 left each month that you can apply to your savings plan. Now, say you have three savings goals: * Vacation fund: $2,000 * Home repair fund: $5,000 * Emergency fund: $10,000 You want to complete the vacation fund in six months, the home repair fund in six months, and the emergency fund in 12 months. Based on those time frames, here’s how your monthly savings would need to break down: * Vacation fund: $333/month x six months * Home repair fund: $833/month x six months * Emergency fund: $833/month x 12 months The total comes to $1,999, making you $81 shy of what you need to reach your goals. The easiest way to make up for the shortfall would be to review your budget and reduce spending to find $81 you could redirect to savings. Accomplish that and your goal is achievable and realistic, as well as specific, measurable, and time bound. ### If you’re contributing to a 401(k) at work through payroll deductions, you wouldn’t include those amounts in your income or expenses. ### Step 4: Decide where to keep your savings When you have your goals in mind, you can think about where you want to keep the funds. Your options include: * Savings account * Money market account * CD * [Tax-advantaged account](https://www.investopedia.com/terms/t/tax-advantaged.asp) * Taxable investment account The option you choose can depend on the goal. For example, if you’re saving for emergencies, then your money needs to be easily accessible. At the same time, you may want to earn a high rate of interest on your savings. Therefore, a [high-yield savings account](https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp) could be the best option. With retirement savings, you can choose between tax-advantaged and taxable accounts. Tax-advantaged accounts, such as a 401(k) or an IRA, can yield tax benefits. They are designed for long-term savings because you generally can’t take money out before age 59½ without triggering an early withdrawal penalty. On the other hand, you can use [online brokerage accounts to invest money](https://www.investopedia.com/best-brokers-for-beginners-4587873) that you may need for short- or long-term goals. The catch, however, is that if you sell assets in a brokerage account for a profit, [you’ll owe capital gains tax](https://www.investopedia.com/taxes/capital-gains-tax-101/). ### Automating deposits into savings accounts, retirement accounts, or investment accounts is a simple way to ensure that you’re making progress toward your goals. ### Step 5: Maximize your savings plan When you’ve got your savings plan in place, look for opportunities to make the most of it. For example, if you’re contributing to a 401(k) at work, check your annual contribution limits. Are you contributing enough [to get the full employer match if one is offered](https://www.investopedia.com/articles/personal-finance/112315/how-401k-matching-works.asp)? If not, then you may want to contact your benefits coordinator to increase your contributions. You can also maximize your savings plan by earmarking windfalls or unexpected amounts of money that come your way for one or more of your goals. For example, the average tax refund for 2021 was $2,775. If you typically receive a tax refund, you could put that amount directly into savings so there’s no temptation to spend it. Reviewing your savings plan monthly can help you see how much progress you’re making. You can also review your spending and budget to look for any extra money you might be able to save, which is another way to maximize your plan. ## What Is a Personal Savings Plan? A personal savings plan is a plan for saving money that typically revolves around distinct financial goals. A comprehensive savings plan may include both [short-term and long-term financial goals](https://www.investopedia.com/save-for-a-home-or-retirement-8599275) and is customized to your income, time horizon, and ability to save. ## How Do You Make a Savings Plan? Making a savings plan starts with creating a financial inventory, then setting clear financial goals. When you’ve done that, you can calculate what you can afford to save each month, how much to allocate to each savings plan goal, and where to keep your savings. ## What Is a Good Savings Plan? A good savings plan is one that allows you to identify which financial goals are most important to you, prioritize those goals, and achieve them in a time frame that you prefer. Every savings plan is different based on what you hope to achieve with your money, how long you have to save, and how much you can afford to commit to savings.

Saving money is central to achieving both short- and long-term financial goals, such as building an emergency fund, saving for a vacation, or putting aside money toward a down payment on a home. As of January 2022, the personal savings rate was 6.4%, meaning that the average U.S. household saves less than 10% of disposable income annually. Creating a savings plan can help to increase your personal savings rate. A savings plan is a blueprint for achieving your financial goals, which may include saving for emergencies or planning for retirement.Creating a realistic budget can help with developing a consistent savings plan.Automating deposits into savings or investment accounts can help you avoid spending money that would otherwise be earmarked for saving.Reviewing your savings plan regularly can help you gauge your progress and determine whether any adjustments are necessary. Understanding a Savings Plan A savings plan is a method for amassing money in order to reach specific financial goals. It enumerates the goals in question and the steps needed to reach them. Such goals may include: Emergency savingsVacation plansWedding arrangementsBuying a homeHome repairs or improvementsPurchasing a vehicleCollege planningRetirement savings The types of financial goals you include in a savings plan will depend on your individual financial situation. Saving and investing aren’t the same thing because saving usually means adding money to a bank account, while investing means putting your money into the stock market. How to Create a Savings Plan Creating a personalized savings plan doesn’t have to be complicated. Here is a checklist to follow that can make the process easier. Step 1: Start with a financial inventory Knowing where you stand financially can help you determine your starting point for shaping a savings plan. Begin by creating a financial inventory, which is simply a list of your liquid assets and liabilities. Assets could include: Cash Checking account Savings account Money market account Certificate of deposit (CD) 401(k) plan (and other employer-sponsored retirement plans) Individual retirement account (IRA) Health savings account (HSA) Brokerage account These are assets you could tap into for cash fairly quickly. You may also have other assets that are less liquid, such as vehicles or homes. Liabilities could include: Credit card debt Student loan Car loan Mortgage Business loan Personal loan Medical bills Subtracting your total liabilities from your total assets will give you your net worth. According to Federal Reserve data, total household net worth reached $141.7 trillion as of the second quarter of 2021. According to a 2019 survey from the Federal Reserve, the average net worth is around $748,000, while the median net worth is closer to $121,000. You can use an online calculator to estimate your net worth as part of your financial inventory. Step 2: Establish your savings goals The next step is determining goals, whether short term or long term, to include in your savings plan. Short-term goals include things you need to save money for in the near term. For example, one of your priorities may be saving for emergencies. This is a fairly common goal: 45% of workers say that paying for a $400 emergency expense out of pocket would be difficult, according to a 2021 Bipartisan Policy Center survey. Long-term goals don’t require immediate cash. Retirement and college are but two examples. In terms of the amount saved, long-term goals may be larger than short-term goals, but you have a longer time frame in which to execute your savings plan. When setting financial goals for your savings plan, keep them S.M.A.R.T.: SpecificMeasurableAchievableRealisticTime bound For example, rather than creating a vague goal like saving money for emergencies, you could set a S.M.A.R.T. goal of saving $10,000 in 12 months. This goal is specific because you have a set dollar amount in mind and measurable because you can track your progress month to month. There’s also a time element because you’re giving yourself 12 months to reach it. Whether the goal checks off achievable and realistic boxes can depend on how much money you’re able to save each month. This is where the next step in the savings plan process comes into it. Step 3: Decide how much to allocate to each goal A savings plan only works when you are committed to it and have money to save each month. If you have a monthly budget, then you may already have an idea of how much extra money you have available to save each month. If you’re not a regular budgeter, you’ll need to first add up your income and subtract your expenses to calculate how much you can realistically afford to save. Let’s use the average household income and annual consumer expenditures as an example. According to the U.S. Department of Labor’s Bureau of Labor Statistics, the typical household made $84,352 in 2020. Meanwhile, the average household spent $61,334. Using those numbers, the average monthly income works out to $7,029. Average monthly spending is $5,111. If your income and spending align with those numbers, you have roughly $1,918 left each month that you can apply to your savings plan. Now, say you have three savings goals: Vacation fund: $2,000Home repair fund: $5,000Emergency fund: $10,000 You want to complete the vacation fund in six months, the home repair fund in six months, and the emergency fund in 12 months. Based on those time frames, here’s how your monthly savings would need to break down: Vacation fund: $333/month x six monthsHome repair fund: $833/month x six monthsEmergency fund: $833/month x 12 months The total comes to $1,999, making you $81 shy of what you need to reach your goals. The easiest way to make up for the shortfall would be to review your budget and reduce spending to find $81 you could redirect to savings. Accomplish that and your goal is achievable and realistic, as well as specific, measurable, and time bound. If you’re contributing to a 401(k) at work through payroll deductions, you wouldn’t include those amounts in your income or expenses. Step 4: Decide where to keep your savings When you have your goals in mind, you can think about where you want to keep the funds. Your options include: Savings account Money market account CD Tax-advantaged account Taxable investment account The option you choose can depend on the goal. For example, if you’re saving for emergencies, then your money needs to be easily accessible. At the same time, you may want to earn a high rate of interest on your savings. Therefore, a high-yield savings account could be the best option. With retirement savings, you can choose between tax-advantaged and taxable accounts. Tax-advantaged accounts, such as a 401(k) or an IRA, can yield tax benefits. They are designed for long-term savings because you generally can’t take money out before age 59½ without triggering an early withdrawal penalty. On the other hand, you can use online brokerage accounts to invest money that you may need for short- or long-term goals. The catch, however, is that if you sell assets in a brokerage account for a profit, you’ll owe capital gains tax. Automating deposits into savings accounts, retirement accounts, or investment accounts is a simple way to ensure that you’re making progress toward your goals. Step 5: Maximize your savings plan When you’ve got your savings plan in place, look for opportunities to make the most of it. For example, if you’re contributing to a 401(k) at work, check your annual contribution limits. Are you contributing enough to get the full employer match if one is offered? If not, then you may want to contact your benefits coordinator to increase your contributions. You can also maximize your savings plan by earmarking windfalls or unexpected amounts of money that come your way for one or more of your goals. For example, the average tax refund for 2021 was $2,775. If you typically receive a tax refund, you could put that amount directly into savings so there’s no temptation to spend it. Reviewing your savings plan monthly can help you see how much progress you’re making. You can also review your spending and budget to look for any extra money you might be able to save, which is another way to maximize your plan. What Is a Personal Savings Plan? A personal savings plan is a plan for saving money that typically revolves around distinct financial goals. A comprehensive savings plan may include both short-term and long-term financial goals and is customized to your income, time horizon, and ability to save. How Do You Make a Savings Plan? Making a savings plan starts with creating a financial inventory, then setting clear financial goals. When you’ve done that, you can calculate what you can afford to save each month, how much to allocate to each savings plan goal, and where to keep your savings. What Is a Good Savings Plan? A good savings plan is one that allows you to identify which financial goals are most important to you, prioritize those goals, and achieve them in a time frame that you prefer. Every savings plan is different based on what you hope to achieve with your money, how long you have to save, and how much you can afford to commit to savings.

https://www.investopedia.com/financial-assistance-for-native-americans-8380363

Financial Assistance for Native Americans

<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"> Given the unique hurdles and historic struggles that Native American people have endured, it’s vital for these communities to know what resources exist to assist them. In the United States, indigenous people suffer high rates of unemployment and poverty. And while they have made achievements in education, they still have the lowest rates of holding postsecondary degrees in the country, according to the National Community Reinvestment Coalition, an association of organizations that advocate for community reinvestment.<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"> Native Americans have access to special programs meant to fill in the gaps left by the traditional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/welfare.asp">welfare</a> programs in the country. But these have been unable to secure even basic needs for Native American communities, fueling poor outcomes. “Federal funding for Native American programs across the government remains grossly inadequate to meet the most basic needs the federal government is obligated to provide,” noted a 2018 report from the U.S. Commission on Civil Rights.<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_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Given these realities, here is a look at the financial assistance that is available. </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>In the United States, the main social welfare program is Temporary Assistance to Needy Families (TANF), operated by the U.S. Department of Health and Human Services.</li><li>In addition, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This covers general assistance, child assistance, nonmedical institutional or custodial care of adults, and disaster assistance.</li><li>There are some further resources for economic development, job training, and health.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> While the use of the word “tribe” is contested, the term is used here because it is the specific designation used by the U.S. government, a crucial component of eligibility criteria for assistance programs. </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-financial-assistance-programs-for-native-americans"></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"> Financial Assistance Programs for Native Americans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> In the United States, the main government-run social assistance program is Temporary Assistance to Needy Families (TANF), also referred to as welfare. Started in 1997, the program provides cash assistance to needy American families with children. It is administered through the U.S. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/us-department-health-and-human-services-hhs.asp">Department of Health and Human Services</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_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Tribal governments also run welfare plans. Qualification for these, and the specifics of what the plans do, go through the tribes. For instance, the Navajo Nation Division of Social Services offers assistance, among other things, for water, energy, and school clothing for those with less than 60% of their state’s median income.<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_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> There are further support programs related to these services, such as the “477 programs,” named after the federal law that established them. These programs, which also receive federal dollars, are meant to increase self-determination for tribes by lessening the effects of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unemployment.asp">unemployment</a> and increasing job opportunities for Native Americans.<span class="ql-inline-citation" data-cite="8"></span> These funds are used by tribes to provide a wide range of services, from childcare and employee recruitment to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commercial-loan.asp">commercial loan</a> programs for Native American businesses.<span class="ql-inline-citation" data-cite="17"></span><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_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> In addition, the federal government offers some financial assistance specifically aimed at individual indigenous people. For instance, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This is meant to increase welfare by providing cash to those who don’t qualify for the TANF program. Because they are meant as extra layers of social protection, these programs may require that you can prove you have exhausted attempts to receive assistance through the broader welfare program.<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_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> There are five main categories that the Indian Affairs bureau’s social services money is meant to cover: </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><strong>General assistance</strong>:<strong> </strong>For “essential needs” such as food, clothing, and shelter</li><li><strong>Child assistance</strong>: This includes payments for children in foster homes, or in day care or special-care programs.</li><li><strong>Nonmedical institutional or custodial care</strong>: This covers costs arising from either in-home care or institutional care of an adult who is of advanced age or physically or mentally impaired.</li><li><strong>Emergency assistance</strong>:<strong> </strong>For expenses from a natural disaster like a flood or fire</li><li><strong>Burial assistance</strong><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_23-0"></div> <span class="heading-toc" id="toc-eligibility-requirements"></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"> Eligibility Requirements </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> To qualify for the Bureau of Indian Affairs’ financial assistance for Native Americans, you have to be a member of a federally recognized tribe. </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"> If you are not currently a member of a tribe, the precise criteria you have to meet to join one will vary depending on the tribe. But two common prerequisites, according to the U.S. Department of the Interior, are lineal descendancy from a person named in the tribe’s “base roll”—the original set of members named in their constitution—or being related to a tribal member descended from somebody named in the base roll.<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"> This process will likely involve conducting genealogical research to establish your ancestry and connection with a specific tribe. From there, it will mean talking with the tribe directly to learn about their enrollment process. </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-applying-for-financial-assistance"></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"> Applying for Financial Assistance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The financial assistance flows through the regional offices of the Bureau of Indian Affairs. The bureau has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.bia.gov/regional-offices/pacific/central-california-agency/social-services">an application</a>, which can be accessed on its website, as well as information about regional offices of the bureau.<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_33-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> In addition to filling out that application, you will need documents that prove membership in a tribe recognized by the U.S., personal identity, income, and denial from other forms of general assistance programs.<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_35-0"></div> <span class="heading-toc" id="toc-other-benefits-for-native-americans"></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"> Other Benefits for Native Americans </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> As with the 477 programs, which provide federal funding for tribes to stimulate social services, there are a number of programs that provide money for education, health, or career readiness and economic opportunity. For example, the Native Employment Works (NEW) sends additional federal funding to tribes that took part in the Tribal Job Opportunities and Basic Skills Program.<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_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> But what about assistance for individuals? </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"> There are other benefits and services available to Native Americans. These include: </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><strong>Family and Child Education</strong>: Those with young children may have access to early childhood education or parenting classes.<span class="ql-inline-citation" data-cite="11"></span></li> <li><strong>Home loans</strong>: Native American veterans are eligible for home loans through the Native American Direct Loan program.<span class="ql-inline-citation" data-cite="10"></span> There are also home improvement grants available to Native Americans, as well as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.benefits.gov/benefit/847">low-cost housing programs</a>.<span class="ql-inline-citation" data-cite="13"></span></li> <li><strong>Food</strong>: An alternative to food stamps, the Food Distribution Program on Indian Reservations (FDPIR) distributes food to households on reservations and in some areas of Oklahoma.<span class="ql-inline-citation" data-cite="12"></span></li> <li><strong>Scholarships</strong>: There are several educational options, including <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.benefits.gov/benefit/796">grants for attending higher education</a>, as well as <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.benefits.gov/benefit/766">scholarships</a> for pursuing an undergraduate degree in some degree pathways in the health profession.<span class="ql-inline-citation" data-cite="20"></span><br/></li> </ul> <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-what-percentage-native-american-do-you-need-to-be-to-get-financial-aid"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Percentage Native American Do You Need to Be to Get Financial Aid?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To qualify for assistance, you will need membership in a federally recognized tribe. The criteria are different for each tribe, but typically involve descendance from members of the tribe’s base roll.<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_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-can-i-get-money-for-being-native-american"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Get Money for Being Native American?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No. The U.S. does not give out cash payments to indigenous people. Some tribal governments run casinos that pay shareholder dividends. But those are not operated by the U.S. government.<span class="ql-inline-citation" data-cite="3"></span> However, there are financial assistance programs available to Native American people in need.</p></div> </div> <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-how-do-i-prove-my-native-american-status-for-benefits"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Prove My Native American Status for Benefits?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For access to federal benefits, you will need membership in a federally recognized tribe. That might be established through a tribal membership card, issued to those belonging to the tribe, or a “certificate of degree of Indian blood (CDIB),” offered by the U.S. government, which vouches that a person has a specific degree of blood tracing to a federally recognized tribe.<span class="ql-inline-citation" data-cite="2"></span><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_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"> Given the number of challenges faced by indigenous people in the United States, it can be crucial to know what financial assistance options exist. In addition to the typical welfare option available to low-income American citizens and the assistance provided to facilitate a tribe’s own welfare programs, there is a direct assistance program and a number of other benefits, such as housing loans, food distribution on reservations, and scholarships. </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"> Even so, broad investigations of the federal money directed to Native American communities conclude that it has not been enough to meet basic needs.<br> </br></p></div>

Given the unique hurdles and historic struggles that Native American people have endured, it’s vital for these communities to know what resources exist to assist them. In the United States, indigenous people suffer high rates of unemployment and poverty. And while they have made achievements in education, they still have the lowest rates of holding postsecondary degrees in the country, according to the National Community Reinvestment Coalition, an association of organizations that advocate for community reinvestment. Native Americans have access to special programs meant to fill in the gaps left by the traditional [welfare](https://www.investopedia.com/terms/w/welfare.asp) programs in the country. But these have been unable to secure even basic needs for Native American communities, fueling poor outcomes. “Federal funding for Native American programs across the government remains grossly inadequate to meet the most basic needs the federal government is obligated to provide,” noted a 2018 report from the U.S. Commission on Civil Rights. Given these realities, here is a look at the financial assistance that is available. ### Key Takeaways * In the United States, the main social welfare program is Temporary Assistance to Needy Families (TANF), operated by the U.S. Department of Health and Human Services. * In addition, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This covers general assistance, child assistance, nonmedical institutional or custodial care of adults, and disaster assistance. * There are some further resources for economic development, job training, and health. While the use of the word “tribe” is contested, the term is used here because it is the specific designation used by the U.S. government, a crucial component of eligibility criteria for assistance programs. ## Financial Assistance Programs for Native Americans In the United States, the main government-run social assistance program is Temporary Assistance to Needy Families (TANF), also referred to as welfare. Started in 1997, the program provides cash assistance to needy American families with children. It is administered through the U.S. [Department of Health and Human Services](https://www.investopedia.com/terms/u/us-department-health-and-human-services-hhs.asp). Tribal governments also run welfare plans. Qualification for these, and the specifics of what the plans do, go through the tribes. For instance, the Navajo Nation Division of Social Services offers assistance, among other things, for water, energy, and school clothing for those with less than 60% of their state’s median income. There are further support programs related to these services, such as the “477 programs,” named after the federal law that established them. These programs, which also receive federal dollars, are meant to increase self-determination for tribes by lessening the effects of [unemployment](https://www.investopedia.com/terms/u/unemployment.asp) and increasing job opportunities for Native Americans. These funds are used by tribes to provide a wide range of services, from childcare and employee recruitment to [commercial loan](https://www.investopedia.com/terms/c/commercial-loan.asp) programs for Native American businesses. In addition, the federal government offers some financial assistance specifically aimed at individual indigenous people. For instance, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This is meant to increase welfare by providing cash to those who don’t qualify for the TANF program. Because they are meant as extra layers of social protection, these programs may require that you can prove you have exhausted attempts to receive assistance through the broader welfare program. There are five main categories that the Indian Affairs bureau’s social services money is meant to cover: * **General assistance**:For “essential needs” such as food, clothing, and shelter * **Child assistance**: This includes payments for children in foster homes, or in day care or special-care programs. * **Nonmedical institutional or custodial care**: This covers costs arising from either in-home care or institutional care of an adult who is of advanced age or physically or mentally impaired. * **Emergency assistance**:For expenses from a natural disaster like a flood or fire * **Burial assistance** ## Eligibility Requirements To qualify for the Bureau of Indian Affairs’ financial assistance for Native Americans, you have to be a member of a federally recognized tribe. If you are not currently a member of a tribe, the precise criteria you have to meet to join one will vary depending on the tribe. But two common prerequisites, according to the U.S. Department of the Interior, are lineal descendancy from a person named in the tribe’s “base roll”—the original set of members named in their constitution—or being related to a tribal member descended from somebody named in the base roll. This process will likely involve conducting genealogical research to establish your ancestry and connection with a specific tribe. From there, it will mean talking with the tribe directly to learn about their enrollment process. ## Applying for Financial Assistance The financial assistance flows through the regional offices of the Bureau of Indian Affairs. The bureau has [an application](https://www.bia.gov/regional-offices/pacific/central-california-agency/social-services), which can be accessed on its website, as well as information about regional offices of the bureau. In addition to filling out that application, you will need documents that prove membership in a tribe recognized by the U.S., personal identity, income, and denial from other forms of general assistance programs.  ## Other Benefits for Native Americans As with the 477 programs, which provide federal funding for tribes to stimulate social services, there are a number of programs that provide money for education, health, or career readiness and economic opportunity. For example, the Native Employment Works (NEW) sends additional federal funding to tribes that took part in the Tribal Job Opportunities and Basic Skills Program.  But what about assistance for individuals? There are other benefits and services available to Native Americans. These include: * **Family and Child Education**: Those with young children may have access to early childhood education or parenting classes. * **Home loans**: Native American veterans are eligible for home loans through the Native American Direct Loan program. There are also home improvement grants available to Native Americans, as well as [low-cost housing programs](https://www.benefits.gov/benefit/847). * **Food**: An alternative to food stamps, the Food Distribution Program on Indian Reservations (FDPIR) distributes food to households on reservations and in some areas of Oklahoma. * **Scholarships**: There are several educational options, including [grants for attending higher education](https://www.benefits.gov/benefit/796), as well as [scholarships](https://www.benefits.gov/benefit/766) for pursuing an undergraduate degree in some degree pathways in the health profession. ## What Percentage Native American Do You Need to Be to Get Financial Aid? To qualify for assistance, you will need membership in a federally recognized tribe. The criteria are different for each tribe, but typically involve descendance from members of the tribe’s base roll. ## Can I Get Money for Being Native American? No. The U.S. does not give out cash payments to indigenous people. Some tribal governments run casinos that pay shareholder dividends. But those are not operated by the U.S. government. However, there are financial assistance programs available to Native American people in need. ## How Do I Prove My Native American Status for Benefits? For access to federal benefits, you will need membership in a federally recognized tribe. That might be established through a tribal membership card, issued to those belonging to the tribe, or a “certificate of degree of Indian blood (CDIB),” offered by the U.S. government, which vouches that a person has a specific degree of blood tracing to a federally recognized tribe. ## The Bottom Line Given the number of challenges faced by indigenous people in the United States, it can be crucial to know what financial assistance options exist. In addition to the typical welfare option available to low-income American citizens and the assistance provided to facilitate a tribe’s own welfare programs, there is a direct assistance program and a number of other benefits, such as housing loans, food distribution on reservations, and scholarships. Even so, broad investigations of the federal money directed to Native American communities conclude that it has not been enough to meet basic needs.

Given the unique hurdles and historic struggles that Native American people have endured, it’s vital for these communities to know what resources exist to assist them. In the United States, indigenous people suffer high rates of unemployment and poverty. And while they have made achievements in education, they still have the lowest rates of holding postsecondary degrees in the country, according to the National Community Reinvestment Coalition, an association of organizations that advocate for community reinvestment. Native Americans have access to special programs meant to fill in the gaps left by the traditional welfare programs in the country. But these have been unable to secure even basic needs for Native American communities, fueling poor outcomes. “Federal funding for Native American programs across the government remains grossly inadequate to meet the most basic needs the federal government is obligated to provide,” noted a 2018 report from the U.S. Commission on Civil Rights. Given these realities, here is a look at the financial assistance that is available. Key Takeaways In the United States, the main social welfare program is Temporary Assistance to Needy Families (TANF), operated by the U.S. Department of Health and Human Services.In addition, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This covers general assistance, child assistance, nonmedical institutional or custodial care of adults, and disaster assistance.There are some further resources for economic development, job training, and health. While the use of the word “tribe” is contested, the term is used here because it is the specific designation used by the U.S. government, a crucial component of eligibility criteria for assistance programs. Financial Assistance Programs for Native Americans In the United States, the main government-run social assistance program is Temporary Assistance to Needy Families (TANF), also referred to as welfare. Started in 1997, the program provides cash assistance to needy American families with children. It is administered through the U.S. Department of Health and Human Services. Tribal governments also run welfare plans. Qualification for these, and the specifics of what the plans do, go through the tribes. For instance, the Navajo Nation Division of Social Services offers assistance, among other things, for water, energy, and school clothing for those with less than 60% of their state’s median income. There are further support programs related to these services, such as the “477 programs,” named after the federal law that established them. These programs, which also receive federal dollars, are meant to increase self-determination for tribes by lessening the effects of unemployment and increasing job opportunities for Native Americans. These funds are used by tribes to provide a wide range of services, from childcare and employee recruitment to commercial loan programs for Native American businesses. In addition, the federal government offers some financial assistance specifically aimed at individual indigenous people. For instance, the Bureau of Indian Affairs maintains the Financial Assistance and Social Services program for Native Americans. This is meant to increase welfare by providing cash to those who don’t qualify for the TANF program. Because they are meant as extra layers of social protection, these programs may require that you can prove you have exhausted attempts to receive assistance through the broader welfare program. There are five main categories that the Indian Affairs bureau’s social services money is meant to cover: General assistance: For “essential needs” such as food, clothing, and shelterChild assistance: This includes payments for children in foster homes, or in day care or special-care programs.Nonmedical institutional or custodial care: This covers costs arising from either in-home care or institutional care of an adult who is of advanced age or physically or mentally impaired.Emergency assistance: For expenses from a natural disaster like a flood or fireBurial assistance Eligibility Requirements To qualify for the Bureau of Indian Affairs’ financial assistance for Native Americans, you have to be a member of a federally recognized tribe. If you are not currently a member of a tribe, the precise criteria you have to meet to join one will vary depending on the tribe. But two common prerequisites, according to the U.S. Department of the Interior, are lineal descendancy from a person named in the tribe’s “base roll”—the original set of members named in their constitution—or being related to a tribal member descended from somebody named in the base roll. This process will likely involve conducting genealogical research to establish your ancestry and connection with a specific tribe. From there, it will mean talking with the tribe directly to learn about their enrollment process. Applying for Financial Assistance The financial assistance flows through the regional offices of the Bureau of Indian Affairs. The bureau has an application, which can be accessed on its website, as well as information about regional offices of the bureau. In addition to filling out that application, you will need documents that prove membership in a tribe recognized by the U.S., personal identity, income, and denial from other forms of general assistance programs.  Other Benefits for Native Americans As with the 477 programs, which provide federal funding for tribes to stimulate social services, there are a number of programs that provide money for education, health, or career readiness and economic opportunity. For example, the Native Employment Works (NEW) sends additional federal funding to tribes that took part in the Tribal Job Opportunities and Basic Skills Program.  But what about assistance for individuals? There are other benefits and services available to Native Americans. These include: Family and Child Education: Those with young children may have access to early childhood education or parenting classes. Home loans: Native American veterans are eligible for home loans through the Native American Direct Loan program. There are also home improvement grants available to Native Americans, as well as low-cost housing programs. Food: An alternative to food stamps, the Food Distribution Program on Indian Reservations (FDPIR) distributes food to households on reservations and in some areas of Oklahoma. Scholarships: There are several educational options, including grants for attending higher education, as well as scholarships for pursuing an undergraduate degree in some degree pathways in the health profession. What Percentage Native American Do You Need to Be to Get Financial Aid? To qualify for assistance, you will need membership in a federally recognized tribe. The criteria are different for each tribe, but typically involve descendance from members of the tribe’s base roll. Can I Get Money for Being Native American? No. The U.S. does not give out cash payments to indigenous people. Some tribal governments run casinos that pay shareholder dividends. But those are not operated by the U.S. government. However, there are financial assistance programs available to Native American people in need. How Do I Prove My Native American Status for Benefits? For access to federal benefits, you will need membership in a federally recognized tribe. That might be established through a tribal membership card, issued to those belonging to the tribe, or a “certificate of degree of Indian blood (CDIB),” offered by the U.S. government, which vouches that a person has a specific degree of blood tracing to a federally recognized tribe. The Bottom Line Given the number of challenges faced by indigenous people in the United States, it can be crucial to know what financial assistance options exist. In addition to the typical welfare option available to low-income American citizens and the assistance provided to facilitate a tribe’s own welfare programs, there is a direct assistance program and a number of other benefits, such as housing loans, food distribution on reservations, and scholarships. Even so, broad investigations of the federal money directed to Native American communities conclude that it has not been enough to meet basic needs.

https://www.investopedia.com/nearly-half-of-women-say-they-have-less-than-usd250-left-each-month-after-paying-bills-8647057

Nearly Half of Women Say They Have Less Than $250 Left Each Month After Paying Bills

<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>Nearly half (44%) of women say they have less than $250 left over each month after paying for monthly expenses like housing, food and other household costs, transportation, child care and more, according to Investopedia and Real Simple's 2024 <em>Her Money Mindset </em>survey.</li><li>The survey found that over half (54%) of women in America are struggling to pay at least one kind of expense.</li><li>The survey found 60% of women surveyed have never asked for a raise, and 69% have never asked for a promotion.</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_3-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Graphic showing results of Her Money Mindset Survery" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/-eN0yAm5qn0cGFAkQmmtpGjaSZI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/-eN0yAm5qn0cGFAkQmmtpGjaSZI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg" data-srcset="https://www.investopedia.com/thmb/7G_gzANjqg66oX3ML3Y3smlgcdQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg 750w" data-tracking-container="true" height="2000" id="mntl-sc-block-image_1-0" width="3000"/> <noscript> <img alt="Graphic showing results of Her Money Mindset Survery" class="img--noscript universal-image__image" height="2000" sizes="750px" src="https://www.investopedia.com/thmb/-eN0yAm5qn0cGFAkQmmtpGjaSZI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg" srcset="https://www.investopedia.com/thmb/7G_gzANjqg66oX3ML3Y3smlgcdQ=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg 750w" width="3000"/> </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>Alice Morgan / Investopedia</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> After paying all of their monthly expenses for housing, food and other household costs, transportation, child care and more, 44% of women say they have less than $250 left over each month, according to Investopedia and Real Simple’s 2024 <em>Her Money Mindset</em> survey. The survey found that, on average, women have $422 left over each month after spending on necessities.  </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"> As the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/federal-reserve-preferred-inflation-measure-heated-up-march-8639440">cost of living for Americans</a> climbs, the survey also found that over half (54%) of women in America are struggling to pay at least one kind of expense. </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_8-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/nj0gh/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="2 in 5 Women Are Struggling to Cover Household Expenses"></iframe></div> <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"> Forty percent of women surveyed said they’re struggling to cover household expenses such as food and toiletries. Household expenses is the category they were most likely to say they struggle to cover, followed by transportation at 29%, and housing costs at 27%. </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 survey found millennial and younger women are likely to find it more difficult to cover these types of expenses, and a greater share of their spending goes toward necessities at 57%. About one-quarter of women respondents who are millennials and younger also said they have student loan debt. </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"> According to a 2023 report by the Federal Reserve on family finances in the U.S., the average transaction account, which includes checking, savings, money market, call accounts, and prepaid debit cards, had a balance of $62,500 in 2022. However, the median value of these accounts was lower at $8,000.<span class="ql-inline-citation" data-cite="1"></span> With women in our survey reporting they have less than $250 after paying bills each month, it makes saving toward that balance even harder.                            </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/F0uFO/2/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="Nearly 7 in 10 Women Have Never Asked For a Promotion"></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-60-of-women-say-theyve-never-asked-for-a-raise"></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"> 60% of Women Say They’ve Never Asked For a Raise </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Adding to women’s economic anxiety over cash outflows is another startling stat about their inflows: The survey found 60% of women have never asked for a raise, and 69% have never asked for a promotion. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/history-gender-wage-gap-america-5074898">gender wage gap has narrowed</a> over the years, but women in the U.S. still made about 84 cents for every dollar that men earned in 2022, according to a 2023 report by the U.S. Census Bureau.<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> <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"> Methodology </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> <br/>Real Simple and Investopedia surveyed 2,002 American women (aged 18+) from Jan. 9 to Jan. 22, 2024. The survey was fielded online via a self-administered questionnaire to an opt-in panel of respondents from a market research vendor. Quotas were implemented in sampling using benchmarks from American Community Survey (ACS) from the U.S. Census Bureau for region, age groups, race/ethnicity, and household income. Respondents must have reported at least partially managing their own finances in order to qualify. </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 * Nearly half (44%) of women say they have less than $250 left over each month after paying for monthly expenses like housing, food and other household costs, transportation, child care and more, according to Investopedia and Real Simple's 2024 *Her Money Mindset* survey. * The survey found that over half (54%) of women in America are struggling to pay at least one kind of expense. * The survey found 60% of women surveyed have never asked for a raise, and 69% have never asked for a promotion. ![Graphic showing results of Her Money Mindset Survery]() :max_bytes(150000):strip_icc()/IMG_47621-c35a9b3a16874a4ca3a714c6e0eabb75.jpg) Alice Morgan / Investopedia After paying all of their monthly expenses for housing, food and other household costs, transportation, child care and more, 44% of women say they have less than $250 left over each month, according to Investopedia and Real Simple’s 2024 *Her Money Mindset* survey. The survey found that, on average, women have $422 left over each month after spending on necessities.  As the [cost of living for Americans](https://www.investopedia.com/federal-reserve-preferred-inflation-measure-heated-up-march-8639440) climbs, the survey also found that over half (54%) of women in America are struggling to pay at least one kind of expense. Forty percent of women surveyed said they’re struggling to cover household expenses such as food and toiletries. Household expenses is the category they were most likely to say they struggle to cover, followed by transportation at 29%, and housing costs at 27%. The survey found millennial and younger women are likely to find it more difficult to cover these types of expenses, and a greater share of their spending goes toward necessities at 57%. About one-quarter of women respondents who are millennials and younger also said they have student loan debt. According to a 2023 report by the Federal Reserve on family finances in the U.S., the average transaction account, which includes checking, savings, money market, call accounts, and prepaid debit cards, had a balance of $62,500 in 2022. However, the median value of these accounts was lower at $8,000. With women in our survey reporting they have less than $250 after paying bills each month, it makes saving toward that balance even harder.                            ## 60% of Women Say They’ve Never Asked For a Raise Adding to women’s economic anxiety over cash outflows is another startling stat about their inflows: The survey found 60% of women have never asked for a raise, and 69% have never asked for a promotion. The [gender wage gap has narrowed](https://www.investopedia.com/history-gender-wage-gap-america-5074898) over the years, but women in the U.S. still made about 84 cents for every dollar that men earned in 2022, according to a 2023 report by the U.S. Census Bureau. ### Methodology Real Simple and Investopedia surveyed 2,002 American women (aged 18+) from Jan. 9 to Jan. 22, 2024. The survey was fielded online via a self-administered questionnaire to an opt-in panel of respondents from a market research vendor. Quotas were implemented in sampling using benchmarks from American Community Survey (ACS) from the U.S. Census Bureau for region, age groups, race/ethnicity, and household income. Respondents must have reported at least partially managing their own finances in order to qualify. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Nearly half (44%) of women say they have less than $250 left over each month after paying for monthly expenses like housing, food and other household costs, transportation, child care and more, according to Investopedia and Real Simple's 2024 Her Money Mindset survey.The survey found that over half (54%) of women in America are struggling to pay at least one kind of expense.The survey found 60% of women surveyed have never asked for a raise, and 69% have never asked for a promotion. Alice Morgan / Investopedia After paying all of their monthly expenses for housing, food and other household costs, transportation, child care and more, 44% of women say they have less than $250 left over each month, according to Investopedia and Real Simple’s 2024 Her Money Mindset survey. The survey found that, on average, women have $422 left over each month after spending on necessities.  As the cost of living for Americans climbs, the survey also found that over half (54%) of women in America are struggling to pay at least one kind of expense. Forty percent of women surveyed said they’re struggling to cover household expenses such as food and toiletries. Household expenses is the category they were most likely to say they struggle to cover, followed by transportation at 29%, and housing costs at 27%. The survey found millennial and younger women are likely to find it more difficult to cover these types of expenses, and a greater share of their spending goes toward necessities at 57%. About one-quarter of women respondents who are millennials and younger also said they have student loan debt. According to a 2023 report by the Federal Reserve on family finances in the U.S., the average transaction account, which includes checking, savings, money market, call accounts, and prepaid debit cards, had a balance of $62,500 in 2022. However, the median value of these accounts was lower at $8,000. With women in our survey reporting they have less than $250 after paying bills each month, it makes saving toward that balance even harder.                            60% of Women Say They’ve Never Asked For a Raise Adding to women’s economic anxiety over cash outflows is another startling stat about their inflows: The survey found 60% of women have never asked for a raise, and 69% have never asked for a promotion. The gender wage gap has narrowed over the years, but women in the U.S. still made about 84 cents for every dollar that men earned in 2022, according to a 2023 report by the U.S. Census Bureau. Methodology Real Simple and Investopedia surveyed 2,002 American women (aged 18+) from Jan. 9 to Jan. 22, 2024. The survey was fielded online via a self-administered questionnaire to an opt-in panel of respondents from a market research vendor. Quotas were implemented in sampling using benchmarks from American Community Survey (ACS) from the U.S. Census Bureau for region, age groups, race/ethnicity, and household income. Respondents must have reported at least partially managing their own finances in order to qualify. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

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

Intercommodity Spread: What It Is, How It Works, Types

<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-intercommodity-spread"></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 Intercommodity Spread? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An intercommodity spread is a sophisticated options trade that attempts to take advantage of the value differential between two or more related <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodities</a>, such as crude oil and heating oil, or corn and wheat. A commodity is a necessary good used in commerce that is interchangeable with other commodities of the same type. </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 trader of intercommodity spreads will go long on one futures market in a given delivery month while simultaneously going short on the related commodity in the same delivery month. </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 interccommodity spread is an options trade that attempts to take advantage of the value differential between two or more related commodities in the marketplace. </li><li>Intercommodity spread trading requires an understanding of various optioned commodities and the dynamics between them. </li><li>This type of trading is not recommended for inexperienced traders. </li><li>There are few types of intercommodity spreads, including one called a crush spread. </li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-intercommodity-spreads"></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 Intercommodity Spreads </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Intercommodity spread trading requires knowledge of the dynamics between the various commodities being optioned. For example, wheat typically costs more than corn, but the spread can vary, from perhaps 80 cents to $2 per bushel. </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"> An intercommodity spread trader will know that when the spread between wheat and corn rises to around $1.50, the range will tend to contract, and the price of wheat will drop relative to corn. Conversely, when the wheat-corn spread narrows to around 90 cents per bushel, the cost of wheat tends to increase relative to corn. </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 this knowledge, a trader can go long on wheat and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/short.asp" rel="noopener noreferrer">short</a> on corn when the spread is widening. Alternatively, the trader may go long on corn and short on wheat when the spread is narrowing. In this way, the trader hopes to make money by correctly predicting the price trend. </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"> In this instance, the trader is not concerned with the actual price of each commodity. They are interested in the direction and difference in the price. </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-types-of-intercommodity-spreads"></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"> Types of Intercommodity Spreads </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Examples of intercommodity spreads include the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crackspread.asp" rel="noopener noreferrer">crack spread</a> and the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crushspread.asp" rel="noopener noreferrer">crush spread</a>. </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"> Crack Spread </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The crack spread involves the simultaneous purchase of futures in crude oil and refined petroleum products, such as gasoline and heating oil. </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"> A trader might execute what's known as a 3-2-1 crack spread, meaning three long options on crude oil against two short options on gasoline and one short option on heating oil. </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>The trader could also execute a reverse spread, going long on gas and heating oil, and short on crude oil.</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"> Crush Spread </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> A crush spread is similar but generally applies to agricultural commodities. It involves buying simultaneous long and short futures in a raw product, such as soybeans, and the crushed and refined crop, such as soybean oil. For example, a trader could go long on raw soybeans but sell short on soybean oil futures. </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-special-considerations"></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"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> One advantage of intercommodity trading is they often have lower margin requirements than straight futures trades. </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 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/margin.asp" rel="noopener noreferrer">margin</a> is the difference between the total value of securities held in an investor's account and the loan amount from a broker, which allows the trader to borrow more and thus make larger trades. However, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp" rel="noopener noreferrer">leveraged</a> trades can expose the trader to greater risk when spreads move in unexpected directions and may have catastrophic results. </p></div>

## What Is an Intercommodity Spread? An intercommodity spread is a sophisticated options trade that attempts to take advantage of the value differential between two or more related [commodities](https://www.investopedia.com/terms/c/commodity.asp), such as crude oil and heating oil, or corn and wheat. A commodity is a necessary good used in commerce that is interchangeable with other commodities of the same type. A trader of intercommodity spreads will go long on one futures market in a given delivery month while simultaneously going short on the related commodity in the same delivery month. ### Key Takeaways * An interccommodity spread is an options trade that attempts to take advantage of the value differential between two or more related commodities in the marketplace. * Intercommodity spread trading requires an understanding of various optioned commodities and the dynamics between them. * This type of trading is not recommended for inexperienced traders. * There are few types of intercommodity spreads, including one called a crush spread. ## Understanding Intercommodity Spreads Intercommodity spread trading requires knowledge of the dynamics between the various commodities being optioned. For example, wheat typically costs more than corn, but the spread can vary, from perhaps 80 cents to $2 per bushel. An intercommodity spread trader will know that when the spread between wheat and corn rises to around $1.50, the range will tend to contract, and the price of wheat will drop relative to corn. Conversely, when the wheat-corn spread narrows to around 90 cents per bushel, the cost of wheat tends to increase relative to corn. With this knowledge, a trader can go long on wheat and [short](https://www.investopedia.com/terms/s/short.asp) on corn when the spread is widening. Alternatively, the trader may go long on corn and short on wheat when the spread is narrowing. In this way, the trader hopes to make money by correctly predicting the price trend. In this instance, the trader is not concerned with the actual price of each commodity. They are interested in the direction and difference in the price. ## Types of Intercommodity Spreads Examples of intercommodity spreads include the [crack spread](https://www.investopedia.com/terms/c/crackspread.asp) and the [crush spread](https://www.investopedia.com/terms/c/crushspread.asp). ### Crack Spread The crack spread involves the simultaneous purchase of futures in crude oil and refined petroleum products, such as gasoline and heating oil. A trader might execute what's known as a 3-2-1 crack spread, meaning three long options on crude oil against two short options on gasoline and one short option on heating oil. ### The trader could also execute a reverse spread, going long on gas and heating oil, and short on crude oil. ### Crush Spread A crush spread is similar but generally applies to agricultural commodities. It involves buying simultaneous long and short futures in a raw product, such as soybeans, and the crushed and refined crop, such as soybean oil. For example, a trader could go long on raw soybeans but sell short on soybean oil futures. ## Special Considerations One advantage of intercommodity trading is they often have lower margin requirements than straight futures trades. The [margin](https://www.investopedia.com/terms/m/margin.asp) is the difference between the total value of securities held in an investor's account and the loan amount from a broker, which allows the trader to borrow more and thus make larger trades. However, [leveraged](https://www.investopedia.com/terms/l/leverage.asp) trades can expose the trader to greater risk when spreads move in unexpected directions and may have catastrophic results.

What Is an Intercommodity Spread? An intercommodity spread is a sophisticated options trade that attempts to take advantage of the value differential between two or more related commodities, such as crude oil and heating oil, or corn and wheat. A commodity is a necessary good used in commerce that is interchangeable with other commodities of the same type. A trader of intercommodity spreads will go long on one futures market in a given delivery month while simultaneously going short on the related commodity in the same delivery month. Key Takeaways An interccommodity spread is an options trade that attempts to take advantage of the value differential between two or more related commodities in the marketplace. Intercommodity spread trading requires an understanding of various optioned commodities and the dynamics between them. This type of trading is not recommended for inexperienced traders. There are few types of intercommodity spreads, including one called a crush spread. Understanding Intercommodity Spreads Intercommodity spread trading requires knowledge of the dynamics between the various commodities being optioned. For example, wheat typically costs more than corn, but the spread can vary, from perhaps 80 cents to $2 per bushel. An intercommodity spread trader will know that when the spread between wheat and corn rises to around $1.50, the range will tend to contract, and the price of wheat will drop relative to corn. Conversely, when the wheat-corn spread narrows to around 90 cents per bushel, the cost of wheat tends to increase relative to corn. With this knowledge, a trader can go long on wheat and short on corn when the spread is widening. Alternatively, the trader may go long on corn and short on wheat when the spread is narrowing. In this way, the trader hopes to make money by correctly predicting the price trend. In this instance, the trader is not concerned with the actual price of each commodity. They are interested in the direction and difference in the price. Types of Intercommodity Spreads Examples of intercommodity spreads include the crack spread and the crush spread. Crack Spread The crack spread involves the simultaneous purchase of futures in crude oil and refined petroleum products, such as gasoline and heating oil. A trader might execute what's known as a 3-2-1 crack spread, meaning three long options on crude oil against two short options on gasoline and one short option on heating oil. The trader could also execute a reverse spread, going long on gas and heating oil, and short on crude oil. Crush Spread A crush spread is similar but generally applies to agricultural commodities. It involves buying simultaneous long and short futures in a raw product, such as soybeans, and the crushed and refined crop, such as soybean oil. For example, a trader could go long on raw soybeans but sell short on soybean oil futures. Special Considerations One advantage of intercommodity trading is they often have lower margin requirements than straight futures trades. The margin is the difference between the total value of securities held in an investor's account and the loan amount from a broker, which allows the trader to borrow more and thus make larger trades. However, leveraged trades can expose the trader to greater risk when spreads move in unexpected directions and may have catastrophic results.

https://www.investopedia.com/personal-loans-divorce-legal-fees-8410094

Getting Personal Loans for Divorce Legal Fees

<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 end of a marriage is rarely any fun, and there are consequences that extend far beyond the emotional distress, many of them financial. A study by the legal website Nolo.com found that the average cost of a do-it-yourself divorce without a lawyer was $925. When lawyers got involved, the average jumped from $4,100 for an uncontested divorce to over $20,000 for a divorce that went to trial.<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"> When someone doesn't have the funds to pay legal fees and other expenses, it's often possible to take out a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-loans-4689729">personal loan</a> to cover them. Divorce loans can be used for many of the costs associated with a divorce, allowing the borrower to repay the money over the next two to seven years. Here's how these loans work. </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>Divorce loans are personal loans that come with fixed interest rates and fixed monthly payments. </li><li>These loans work well for divorce costs because they are unsecured, meaning that they require no collateral.</li><li>In addition to legal fees, personal loans can be used to pay for moving expenses and other costs resulting from a divorce.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-divorce-loan"></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 Divorce Loan?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> A divorce loan is an informal name for a personal loan that's used to pay for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-the-divorce-process-works-5205594">divorce</a>. These loans are ideal for divorce expenses since they're typically <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/secured-vs-unsecured-loans-7558592">unsecured</a> (i.e., they have no collateral requirement), and since they provide a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lump-sum-payment.asp">lump sum</a> of cash that the borrower can spend however they wish.  </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"> Personal loans for divorce also come with fixed <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> and set monthly payments, which means you can borrow what you need, and you'll know exactly how much you'll owe and for how long. Generally speaking, divorce loans are available in amounts ranging from $1,000 to $100,000, depending on the lender. Typical repayment terms are from 24 to 84 months, although this also varies. </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 best personal loans for divorce will typically be available to individuals with good to excellent credit, or <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 670 and up. For borrowers with lower scores, interest rates can be on the high side. Additionally, such borrowers are more likely to have to pay <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/origination-fee.asp">origination fees</a>, which will be subtracted from the initial loan amount. </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-tip" 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>The cheapest way to get a divorce is if both parties can agree on all the major terms. In that scenario, a divorce can cost less than $500, plus filing fees that vary by state, according to LegalZoom.<span class="ql-inline-citation" data-cite="3"></span></p></div></div></div> <span class="heading-toc" id="toc-what-costs-can-a-personal-loan-cover-in-a-divorce"></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 Costs Can a Personal Loan Cover in a Divorce?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> A personal loan can cover any and all costs associated with a divorce, in addition to related expenses that pop up during and after the proceedings. Here's a rundown of some of the potential expenses you could use a divorce loan for: </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>Initial divorce paperwork</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/american-rule.asp">Attorney fees</a></li> <li>Court fees</li> <li>Costs for storage</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/top-financial-mistakes-to-avoid-in-a-divorce-settlement-5200237">Divorce settlement</a> </li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxadvisor.asp">Tax advisor</a> expenses</li> <li>Real estate appraisal work</li> <li>Moving or relocation expenses</li> <li>Deposits for home and utilities</li> <li>Mental health counseling</li> <li>New health insurance policy</li> <li>Furniture and household supplies</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 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>Most of the time, each party in a divorce pays their own legal fees. However, the petitioner (the person requesting the divorce) typically pays for court fees and similar charges.</p></div></div></div> <span class="heading-toc" id="toc-how-to-get-a-personal-loan-to-pay-for-divorce"></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"> How to Get a Personal Loan to Pay for Divorce </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> While you're unlikely to find many lenders specifically advertising divorce loans, you can apply for this type of loan with any bank or other financial institution that offers personal loans. Many of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-personal-loans-4773300">best personal loans</a> are offered by online lenders, which makes it easy to compare options and look for the best rates before you apply. </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 shopping for a loan, you'll want to compare available loan amounts, <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 (APRs)</a>, the length of their repayment terms, and any loan fees. Using a loan calculator can help you figure out what your monthly payment would be based on your APR, repayment term, and how much you borrow. </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"> Before you apply it's a good idea to gather the necessary documentation, such as pay stubs, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/w2form.asp">W-2 forms</a>, proof of address, and possibly recent <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxreturn.asp">tax returns</a>. Plan on sharing information like your full name, date of birth, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/ssn.asp">Social Security number (SSN)</a>, employment status, monthly housing payment, income, and more on the loan application. </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-pros-and-cons-of-getting-a-personal-loan-to-pay-for-divorce"></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"> Pros and Cons of Getting a Personal Loan to Pay for Divorce </span> </h2> <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>It can provide the money you need to put your divorce behind you</p></li> <li><p>You can use the funds to cover related expenses for moving, new housing, and more</p></li> <li><p>You can lock in a fixed interest rate and monthly payment</p></li> <li><p>Personal loans have lower rates than credit cards</p><p><br/></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>Repayment can take years</p></li> <li><p>You must meet loan eligibility requirements</p></li> <li><p>Any missed payments can hurt your credit score</p></li> <li><p>Loans for divorce can be expensive if you have poor credit</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> <span class="heading-toc" id="toc-other-ways-to-finance-a-divorce"></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"> Other Ways to Finance a Divorce </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> There are other ways to pay for a divorce, and you may want to consider them in place of, or in addition to, taking out a divorce loan. Here are a few options to consider: </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><strong>Borrow from family</strong>: If you have family members or friends who are willing to help you through these challenging times, asking them for a loan could be an option. Just make sure both parties agree to all terms upfront and that you take repayment seriously. If you fail to pay the money back as agreed, that could ruin your relationship.</li> <li><strong>Use a credit card</strong>: Credit cards tend to be an expensive way to borrow money for a divorce (or anything else). However, there are credit cards that offer 0% introductory rates, often for up to 21 months. Note, however, that you'll want to make sure your divorce attorney accepts credit cards as payment.</li> <li><strong>Pay in cash</strong>: If you and your former partner have the cash to pay for a divorce separately or together as one, consider funding the process as you go. This will help you avoid new debt that can be difficult to pay off later once the divorce is complete.</li> <li><strong>Ask your lawyer about a payment plan</strong>: See if your attorney will accept a payment plan allowing you to pay the bill over time. Note, however, that many expenses associated with divorce don't qualify for a payment plan, including filing fees and court fees.</li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>Tap into home equity</strong>:<strong> </strong>If you are living in a home with considerable equity, it's possible to use it as collateral for a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/mortgage/heloc/">home equity loan or home equity line of credit (HELOC)</a>. You'll just need to be clear on who is responsible for repaying the loan after the divorce.</li> </ul> <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-how-much-does-a-divorce-attorney-cost"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does a Divorce Attorney Cost?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>According to Nolo.com, the average hourly fee charged by divorce lawyers in 2019 was $270. But costs can vary widely depending on the part of the country and the lawyer's level of experience.<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_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-is-the-minimum-time-for-divorce"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Minimum Time for Divorce?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The waiting period before a divorce is final varies by state. Some have no waiting period, while others require a wait of up to 365 days (a full year).</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-who-is-responsible-for-debts-after-divorce"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Is Responsible for Debts After Divorce?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The person responsible for post-divorce debt depends on whether the debt was incurred separately and how any debt incurred while the couple was together is divided during divorce proceedings.<span class="ql-inline-citation" data-cite="4"></span> Ultimately, this will vary from case to case.</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-are-legal-fees-from-a-divorce-tax-deductible"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Legal Fees From a Divorce Tax Deductible?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>No, the legal fees for a divorce are considered a personal legal expense by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a> and aren't tax-deductible.<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_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-does-divorce-impact-my-credit-score"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does Divorce Impact My Credit Score?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Divorce itself has <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-divorce-impacts-your-credit-score-5195370">no direct impact on credit scores</a>, although the financial issues that may arise from divorce can. For example, missing payments on bills can lead to credit score damage, as can having a higher <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> due to post-divorce debt.</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"> Taking out a personal loan for divorce can make sense if you need cash now and you expect to have the income to pay it back later on. Just remember to compare lenders side-by-side to find the lowest rates and best loan terms. Also make sure you only borrow what you need, and keep in mind that your credit score and finances can improve as you pay it off. </p></div>

The end of a marriage is rarely any fun, and there are consequences that extend far beyond the emotional distress, many of them financial. A study by the legal website Nolo.com found that the average cost of a do-it-yourself divorce without a lawyer was $925. When lawyers got involved, the average jumped from $4,100 for an uncontested divorce to over $20,000 for a divorce that went to trial. When someone doesn't have the funds to pay legal fees and other expenses, it's often possible to take out a [personal loan](https://www.investopedia.com/personal-loans-4689729) to cover them. Divorce loans can be used for many of the costs associated with a divorce, allowing the borrower to repay the money over the next two to seven years. Here's how these loans work. ### Key Takeaways * Divorce loans are personal loans that come with fixed interest rates and fixed monthly payments. * These loans work well for divorce costs because they are unsecured, meaning that they require no collateral. * In addition to legal fees, personal loans can be used to pay for moving expenses and other costs resulting from a divorce. ## What Is a Divorce Loan? A divorce loan is an informal name for a personal loan that's used to pay for a [divorce](https://www.investopedia.com/how-the-divorce-process-works-5205594). These loans are ideal for divorce expenses since they're typically [unsecured](https://www.investopedia.com/secured-vs-unsecured-loans-7558592) (i.e., they have no collateral requirement), and since they provide a [lump sum](https://www.investopedia.com/terms/l/lump-sum-payment.asp) of cash that the borrower can spend however they wish.  Personal loans for divorce also come with fixed [interest rates](https://www.investopedia.com/terms/i/interestrate.asp) and set monthly payments, which means you can borrow what you need, and you'll know exactly how much you'll owe and for how long. Generally speaking, divorce loans are available in amounts ranging from $1,000 to $100,000, depending on the lender. Typical repayment terms are from 24 to 84 months, although this also varies. The best personal loans for divorce will typically be available to individuals with good to excellent credit, or [FICO scores](https://www.investopedia.com/terms/f/ficoscore.asp) of 670 and up. For borrowers with lower scores, interest rates can be on the high side. Additionally, such borrowers are more likely to have to pay [origination fees](https://www.investopedia.com/terms/o/origination-fee.asp), which will be subtracted from the initial loan amount. ### The cheapest way to get a divorce is if both parties can agree on all the major terms. In that scenario, a divorce can cost less than $500, plus filing fees that vary by state, according to LegalZoom. ## What Costs Can a Personal Loan Cover in a Divorce? A personal loan can cover any and all costs associated with a divorce, in addition to related expenses that pop up during and after the proceedings. Here's a rundown of some of the potential expenses you could use a divorce loan for: * Initial divorce paperwork * [Attorney fees](https://www.investopedia.com/terms/a/american-rule.asp) * Court fees * Costs for storage * [Divorce settlement](https://www.investopedia.com/top-financial-mistakes-to-avoid-in-a-divorce-settlement-5200237) * [Tax advisor](https://www.investopedia.com/terms/t/taxadvisor.asp) expenses * Real estate appraisal work * Moving or relocation expenses * Deposits for home and utilities * Mental health counseling * New health insurance policy * Furniture and household supplies ### Note Most of the time, each party in a divorce pays their own legal fees. However, the petitioner (the person requesting the divorce) typically pays for court fees and similar charges. ## How to Get a Personal Loan to Pay for Divorce While you're unlikely to find many lenders specifically advertising divorce loans, you can apply for this type of loan with any bank or other financial institution that offers personal loans. Many of the [best personal loans](https://www.investopedia.com/best-personal-loans-4773300) are offered by online lenders, which makes it easy to compare options and look for the best rates before you apply. In shopping for a loan, you'll want to compare available loan amounts, [annual percentage rates (APRs)](https://www.investopedia.com/terms/a/apr.asp), the length of their repayment terms, and any loan fees. Using a loan calculator can help you figure out what your monthly payment would be based on your APR, repayment term, and how much you borrow. Before you apply it's a good idea to gather the necessary documentation, such as pay stubs, [W-2 forms](https://www.investopedia.com/terms/w/w2form.asp), proof of address, and possibly recent [tax returns](https://www.investopedia.com/terms/t/taxreturn.asp). Plan on sharing information like your full name, date of birth, [Social Security number (SSN)](https://www.investopedia.com/terms/s/ssn.asp), employment status, monthly housing payment, income, and more on the loan application. ## Pros and Cons of Getting a Personal Loan to Pay for Divorce Pros * It can provide the money you need to put your divorce behind you * You can use the funds to cover related expenses for moving, new housing, and more * You can lock in a fixed interest rate and monthly payment * Personal loans have lower rates than credit cards Cons * Repayment can take years * You must meet loan eligibility requirements * Any missed payments can hurt your credit score * Loans for divorce can be expensive if you have poor credit ## Other Ways to Finance a Divorce There are other ways to pay for a divorce, and you may want to consider them in place of, or in addition to, taking out a divorce loan. Here are a few options to consider: * **Borrow from family**: If you have family members or friends who are willing to help you through these challenging times, asking them for a loan could be an option. Just make sure both parties agree to all terms upfront and that you take repayment seriously. If you fail to pay the money back as agreed, that could ruin your relationship. * **Use a credit card**: Credit cards tend to be an expensive way to borrow money for a divorce (or anything else). However, there are credit cards that offer 0% introductory rates, often for up to 21 months. Note, however, that you'll want to make sure your divorce attorney accepts credit cards as payment. * **Pay in cash**: If you and your former partner have the cash to pay for a divorce separately or together as one, consider funding the process as you go. This will help you avoid new debt that can be difficult to pay off later once the divorce is complete. * **Ask your lawyer about a payment plan**: See if your attorney will accept a payment plan allowing you to pay the bill over time. Note, however, that many expenses associated with divorce don't qualify for a payment plan, including filing fees and court fees. * **Tap into home equity**:If you are living in a home with considerable equity, it's possible to use it as collateral for a [home equity loan or home equity line of credit (HELOC)](https://www.investopedia.com/mortgage/heloc/). You'll just need to be clear on who is responsible for repaying the loan after the divorce. ## How Much Does a Divorce Attorney Cost? According to Nolo.com, the average hourly fee charged by divorce lawyers in 2019 was $270. But costs can vary widely depending on the part of the country and the lawyer's level of experience. ## What Is the Minimum Time for Divorce? The waiting period before a divorce is final varies by state. Some have no waiting period, while others require a wait of up to 365 days (a full year). ## Who Is Responsible for Debts After Divorce? The person responsible for post-divorce debt depends on whether the debt was incurred separately and how any debt incurred while the couple was together is divided during divorce proceedings. Ultimately, this will vary from case to case. ## Are Legal Fees From a Divorce Tax Deductible? No, the legal fees for a divorce are considered a personal legal expense by the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) and aren't tax-deductible. ## Does Divorce Impact My Credit Score? Divorce itself has [no direct impact on credit scores](https://www.investopedia.com/how-divorce-impacts-your-credit-score-5195370), although the financial issues that may arise from divorce can. For example, missing payments on bills can lead to credit score damage, as can having a higher [credit utilization ratio](https://www.investopedia.com/terms/c/credit-utilization-rate.asp) due to post-divorce debt. ## The Bottom Line Taking out a personal loan for divorce can make sense if you need cash now and you expect to have the income to pay it back later on. Just remember to compare lenders side-by-side to find the lowest rates and best loan terms. Also make sure you only borrow what you need, and keep in mind that your credit score and finances can improve as you pay it off.

The end of a marriage is rarely any fun, and there are consequences that extend far beyond the emotional distress, many of them financial. A study by the legal website Nolo.com found that the average cost of a do-it-yourself divorce without a lawyer was $925. When lawyers got involved, the average jumped from $4,100 for an uncontested divorce to over $20,000 for a divorce that went to trial. When someone doesn't have the funds to pay legal fees and other expenses, it's often possible to take out a personal loan to cover them. Divorce loans can be used for many of the costs associated with a divorce, allowing the borrower to repay the money over the next two to seven years. Here's how these loans work. Key Takeaways Divorce loans are personal loans that come with fixed interest rates and fixed monthly payments. These loans work well for divorce costs because they are unsecured, meaning that they require no collateral.In addition to legal fees, personal loans can be used to pay for moving expenses and other costs resulting from a divorce. What Is a Divorce Loan?  A divorce loan is an informal name for a personal loan that's used to pay for a divorce. These loans are ideal for divorce expenses since they're typically unsecured (i.e., they have no collateral requirement), and since they provide a lump sum of cash that the borrower can spend however they wish.  Personal loans for divorce also come with fixed interest rates and set monthly payments, which means you can borrow what you need, and you'll know exactly how much you'll owe and for how long. Generally speaking, divorce loans are available in amounts ranging from $1,000 to $100,000, depending on the lender. Typical repayment terms are from 24 to 84 months, although this also varies. The best personal loans for divorce will typically be available to individuals with good to excellent credit, or FICO scores of 670 and up. For borrowers with lower scores, interest rates can be on the high side. Additionally, such borrowers are more likely to have to pay origination fees, which will be subtracted from the initial loan amount. The cheapest way to get a divorce is if both parties can agree on all the major terms. In that scenario, a divorce can cost less than $500, plus filing fees that vary by state, according to LegalZoom. What Costs Can a Personal Loan Cover in a Divorce?  A personal loan can cover any and all costs associated with a divorce, in addition to related expenses that pop up during and after the proceedings. Here's a rundown of some of the potential expenses you could use a divorce loan for: Initial divorce paperwork Attorney fees Court fees Costs for storage Divorce settlement  Tax advisor expenses Real estate appraisal work Moving or relocation expenses Deposits for home and utilities Mental health counseling New health insurance policy Furniture and household supplies Note Most of the time, each party in a divorce pays their own legal fees. However, the petitioner (the person requesting the divorce) typically pays for court fees and similar charges. How to Get a Personal Loan to Pay for Divorce While you're unlikely to find many lenders specifically advertising divorce loans, you can apply for this type of loan with any bank or other financial institution that offers personal loans. Many of the best personal loans are offered by online lenders, which makes it easy to compare options and look for the best rates before you apply. In shopping for a loan, you'll want to compare available loan amounts, annual percentage rates (APRs), the length of their repayment terms, and any loan fees. Using a loan calculator can help you figure out what your monthly payment would be based on your APR, repayment term, and how much you borrow. Before you apply it's a good idea to gather the necessary documentation, such as pay stubs, W-2 forms, proof of address, and possibly recent tax returns. Plan on sharing information like your full name, date of birth, Social Security number (SSN), employment status, monthly housing payment, income, and more on the loan application. Pros and Cons of Getting a Personal Loan to Pay for Divorce Pros It can provide the money you need to put your divorce behind you You can use the funds to cover related expenses for moving, new housing, and more You can lock in a fixed interest rate and monthly payment Personal loans have lower rates than credit cards Cons Repayment can take years You must meet loan eligibility requirements Any missed payments can hurt your credit score Loans for divorce can be expensive if you have poor credit Other Ways to Finance a Divorce There are other ways to pay for a divorce, and you may want to consider them in place of, or in addition to, taking out a divorce loan. Here are a few options to consider: Borrow from family: If you have family members or friends who are willing to help you through these challenging times, asking them for a loan could be an option. Just make sure both parties agree to all terms upfront and that you take repayment seriously. If you fail to pay the money back as agreed, that could ruin your relationship. Use a credit card: Credit cards tend to be an expensive way to borrow money for a divorce (or anything else). However, there are credit cards that offer 0% introductory rates, often for up to 21 months. Note, however, that you'll want to make sure your divorce attorney accepts credit cards as payment. Pay in cash: If you and your former partner have the cash to pay for a divorce separately or together as one, consider funding the process as you go. This will help you avoid new debt that can be difficult to pay off later once the divorce is complete. Ask your lawyer about a payment plan: See if your attorney will accept a payment plan allowing you to pay the bill over time. Note, however, that many expenses associated with divorce don't qualify for a payment plan, including filing fees and court fees. Tap into home equity: If you are living in a home with considerable equity, it's possible to use it as collateral for a home equity loan or home equity line of credit (HELOC). You'll just need to be clear on who is responsible for repaying the loan after the divorce. How Much Does a Divorce Attorney Cost? According to Nolo.com, the average hourly fee charged by divorce lawyers in 2019 was $270. But costs can vary widely depending on the part of the country and the lawyer's level of experience. What Is the Minimum Time for Divorce? The waiting period before a divorce is final varies by state. Some have no waiting period, while others require a wait of up to 365 days (a full year). Who Is Responsible for Debts After Divorce? The person responsible for post-divorce debt depends on whether the debt was incurred separately and how any debt incurred while the couple was together is divided during divorce proceedings. Ultimately, this will vary from case to case. Are Legal Fees From a Divorce Tax Deductible? No, the legal fees for a divorce are considered a personal legal expense by the Internal Revenue Service (IRS) and aren't tax-deductible. Does Divorce Impact My Credit Score? Divorce itself has no direct impact on credit scores, although the financial issues that may arise from divorce can. For example, missing payments on bills can lead to credit score damage, as can having a higher credit utilization ratio due to post-divorce debt. The Bottom Line Taking out a personal loan for divorce can make sense if you need cash now and you expect to have the income to pay it back later on. Just remember to compare lenders side-by-side to find the lowest rates and best loan terms. Also make sure you only borrow what you need, and keep in mind that your credit score and finances can improve as you pay it off.

https://www.investopedia.com/financial-edge/0412/the-3-best-commodities-to-invest-in.aspx

3 Commodities to Invest in

<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"> Any savvy investor knows you can't put all your eggs in one basket. Even though it may not cut out risk entirely, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversifying</a> your investment portfolio can help you reach your investment goals by maximizing your returns. </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"> There are plenty of different investment vehicles for you to choose from including stocks, bonds, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/100615/top-3-commodities-mutual-funds.asp">commodity-centric mutual funds</a>, futures, and currencies. These can be broken down even further, grouping together assets that share characteristics: <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> stocks, financials, and government bonds are just a few examples. </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"> And don't forget <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodities</a>. These are basic goods that can be transformed into other goods and services. There are a number of different commodity investments for both new and experienced traders. But before you head out to make the leap, here are a few important things you need to know about commodity investing, including the best ones to consider. </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>Investing in commodities can provide investors with diversification, a hedge against inflation, and excess positive returns.</li><li>Investors may experience volatility when their investments track a single commodity or one sector of the economy.</li><li>Supply, demand, and geopolitics all affect commodity prices.</li><li>Investors can trade commodity-based futures, stocks, ETFs, or mutual funds, or they can hold physical commodities such as gold bullion.</li><li>Three of the most commonly traded commodities include oil, gold, and base metals.</li></ul></div></div></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-note" 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 with-title" id="mntl-sc-block-callout-heading_2-0">How to Invest in Commodities</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>You can invest in oil, gold, or base metals by buying individual stocks, exchange-trading funds (ETFs), or mutual funds that focus on those sectors. But there are other ways to go:</p> <ul> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/040615/introduction-trading-oil-futures.asp#:~:text=Oil%20futures%20contracts%20are%20simple,but%20on%20some%20coming%20date.">Oil futures</a> are a favorite of day traders and are bought and sold through brokerages that specialize in futures trading. This is volatile stuff and not for the faint of heart. </li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/11/best-bets-buying-gold.asp">Gold</a> investors can purchase bars, coins, or jewelry, and stash them in a safety deposit box.</li> <li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/base-metals.asp#:~:text=What%20Are%20Base%20Metals%3F,such%20as%20construction%20and%20manufacturing.">Base metals</a> like aluminum, zinc, and copper are valuable only in huge quantities. The best way to invest in them is through the stocks of producers like Alcoa and U.S. Steel, or through ETFs.</li> </ul></div></div></div> <span class="heading-toc" id="toc-what-is-commodity-investing"></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"> What Is Commodity Investing? </span> </h2> <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/investing/commodities-trading-overview/">Commodity trading</a> goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still popular investment vehicles. </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"> Investors hoping to get into the commodity market can do so in several different ways. <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">Commodity-hungry investors </a>can consider investing directly in the physical commodity or indirectly by purchasing shares in commodity companies. These companies are accessible through several <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> or <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</a> (ETFs). </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"> Benefits </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> One of the biggest benefits of investing in commodities is the fact that they tend to protect investors against the effects of inflation. Generally, demand for commodities tends to be high during periods of high <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">inflation</a>, which pushes up prices. It's also a good bet against the U.S. dollar; so when the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/greenback.asp">greenback</a> declines, commodity prices rise. </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"> Aside from the benefits of diversification, there is the potential to maximize <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">returns</a> with commodity investing. Although commodity prices are subject to fluctuations in the market through exchange rates, interest rates, and the global economy, global demand is strong. This has an overall positive impact on the stocks of companies that deal specifically with commodities, which can translate to positive returns for investors. </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"> Unique Risks </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> One thing to keep in mind is that commodities tend to be much more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatile</a> than other kinds of investments, especially funds that track a single commodity or a specific <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sector.asp">sector</a> of the economy. </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 who trade <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a> should remember that it involves speculation. Futures contracts involve tracking an underlying commodity or index. This could have an impact on the performance of the contract and thus give the investor a negative (or positive) difference. </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"> Futures also come with their own set of unique risks that must be managed independently of the underlying commodity.<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> <div class="comp mntl-sc-block finance-sc-block-comparisonlist mntl-block" id="mntl-sc-block_28-0"><div class="comp mntl-sc-block mntl-sc-block-comparisonlist" id="mntl-sc-block_29-0"> <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>Protect against inflation</p></li> <li><p>Diversify a portfolio</p></li> <li><p>Hedge against a decline in the base currency</p></li> <li><p>Help hedge price risk</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>Increased volatility when compared to other investments</p></li> <li><p>Margin trading in commodities potentially resulting in significant losses</p></li> <li><p>Speculative nature of trading with uncertainty of the outcome</p></li> </ul> </div> </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-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_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Futures markets are regulated by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cftc.asp">Commodity Futures Trading Commission</a> (CFTC).<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-crude-oil"></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"> Crude Oil </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> If you have <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crude-oil.asp">crude oil</a> in mind, it helps to know what shapes prices and how you can invest in this commodity. After production, crude oil is refined into many different products, including gasoline that is used to fuel vehicles. But it goes beyond just gas. Products made from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/petroleum.asp">petroleum</a> include plastics, medicines, linoleum, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, asphalt, and thousands of others.<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"> But what affects prices? Crude oil generally reacts to the <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/law-of-supply-demand.asp">laws of supply and demand</a>. When demand exceeds supply, prices tend to rise. When demand wanes and supply remains fairly consistent, prices tend to fall. For instance, when gas is in high demand—say, during the summer driving season—the price at the pumps rises, translating into higher crude oil prices. </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"> Similarly, demand from developing nations such as China and India—whose economies are still growing—is also pushing up prices. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/politicalrisk.asp">Geopolitics</a> also has a big impact on the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can send oil prices skyrocketing. </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-important" 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" 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>Oil prices were once greatly influenced by the producer cartel <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/opec.asp">OPEC</a>, made up mainly of Middle-East countries. In the early 21st century, the development of new technology, particularly hydro-fracturing (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fracking.asp">fracking</a>), created a second U.S. energy boom, largely decreasing OPEC's importance and influence. Today, the U.S. is the largest net producer of crude oil in the world.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></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 Invest in Crude Oil </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Investing in physical crude oil isn't as easy as investing in other commodities; you can't just buy a barrel of oil. As an investor, you may consider futures; the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a>. And they also require a great deal of knowledge, so it's not really a good option for novice investors. </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"> Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. These vehicles trade on exchanges just like stocks, so they're easy to come by. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.uscfinvestments.com/uso">U.S. Oil Fund</a> is one example. It tracks the movement of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wti.asp">West Texas Intermediate</a> light, sweet crude oil.<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_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings. </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-gold"></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"> Gold </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The gold market boasts diversity and growth. It's used in jewelry, technology, by central banks, and investors, giving rise to its market at different times within the global economy. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preciousmetal.asp">precious metal</a> has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, you can bet gold prices will go up. </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"> Just like crude oil, when there's an increase in demand, the same happens to the price of gold. Furthermore, prices are affected when central banks—which hold gold—decide to diversify their monetary reserves by buying more gold. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-subheading__text"> How to Invest in Gold </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Unlike crude oil, investors can take possession of the physical commodity. Investors who want to hold the physical commodity can do so by purchasing gold <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bullion.asp">bullion</a> bars or coins. But this means having to pay to store it in a deposit box, vault, or another safe place. </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"> Another option, just as you would for crude, is to go through the futures contract. Contracts require investors to deposit an initial <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/margin.asp">margin</a>. But again, there is a risk to this kind of investment. If the price rises, investors will profit; however, if the price drops, the investor stands to lose their money.<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_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Stocks and ETFs, along with mutual fund options are plenty. With gold stocks, investors aren't just limited to producers but also to exploration and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/12/beginners-guide-mining-stocks.asp">mining companies</a>. As usual, it's a good idea for investors to do their homework and see what the operational risks are for each company. </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"> Gold ETFs, on the other hand, provide exposure to the precious metal while tracking its price. For instance, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ssga.com/us/en/individual/etfs/funds/spdr-gold-shares-gld">SPDR Gold Shares ETF</a> gives investors exposure to bullion without having to take possession of it. </p> <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-callout mntl-block" id="mntl-sc-block_63-0"><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_64-0"><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>Silver often trades similarly to gold, but with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gold-silver-ratio.asp">gold/silver price ratio</a> that fluctuates over time.</p></div></div></div> <span class="heading-toc" id="toc-base-metals"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_65-0"> <span class="mntl-sc-block-heading__text"> Base Metals </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> Base metals are common metals used in commercial and industrial applications, such as construction and manufacturing. Aluminum, zinc, and copper are good examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found around the world. </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 because they are plentiful, prices tend to be much lower than they are for precious metals; however, the increase in the applications of base metals coupled with rising global demand—particularly from China and other developing nations—continues to positively impact <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/commodityprices.asp">prices</a>. </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"> How to Invest in Base Metals </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_71-0"> Holding on to aluminum, zinc, and copper may not necessarily be very fruitful. Because of their low prices, investors would have to hold copious amounts of these commodities in order to profit. </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"> Instead, holding stocks in base metals companies like aluminum company Alcoa or a steel company like U.S. Steel is a great way to get a foot in the door. Furthermore, holding ETFs like the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-metals-mining-etf-xme">SPDR S&amp;P Metals &amp; Mining ETF</a> provides <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/copper-etfs-how-they-work-8430658">exposure to companies involved in metals and mining</a>. </p> <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-is-the-best-way-to-invest-in-commodities"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Best Way to Invest in Commodities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The best way to invest in commodities is through commodity ETFs. ETFs allow for ease of trading because they are purchased like stocks, provide diversification, are not traded on margin like futures are, and typically have low <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratios</a>.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_76-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_77-0"><span class="heading-toc" id="toc-when-should-you-buy-commodities"></span> <h2 class="mntl-sc-block-questionandanswer__question">When Should You Buy Commodities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There is no specific time that constitutes the best time to buy commodities. Commodities are a hedge against inflation, so buying before periods of high inflation is a good investment strategy; however, predicting when inflation will occur can be tough.</p><p>A commodity should be viewed as any other investment, taking into consideration an investor's time horizon and risk profile. Buying a commodity when it is at a low price and its future outlook appears strong based on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundamentals.asp">fundamentals</a> is always a good time to buy for a long-term horizon.</p></div> </div> <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-do-i-buy-oil-commodities"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Buy Oil Commodities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>An individual can buy oil commodities by either purchasing an oil commodity ETF, buying the shares of oil companies, or buying <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/040615/introduction-trading-oil-futures.asp">oil futures</a> through a brokerage account.</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-are-commodities-a-good-investment"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are Commodities a Good Investment?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to trade—for example, the fact that oil prices can fluctuate based on the political climate in the Middle East.</p><p>The type of investment also matters; ETFs provide more diversification and lower risks whereas futures are more speculative and the risks are higher because of margin requirements. That being said, commodities can hedge against inflation, and gold, in particular, can hedge against a market downturn.</p></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-how-do-i-start-commodities-trading"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Start Commodities Trading?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>You can start trading commodities by opening a brokerage account and purchasing shares in the commodity-specific company of your choice or a commodity ETF after you have done your research and determined the specific investments that are right for you.</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"> Like any investment, commodities come with their own risks but can still be a great way to diversify your portfolio if you understand the various aspects of the commodity in which you choose to invest. </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"> In addition to the commodities mentioned above, other commodities to consider are other precious metals—platinum, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/palladium.asp">palladium</a>, silver—lithium, cotton, and food products such as coffee, corn, oats, wheat, soybeans, and sugar. But as with all investment decisions, do your research or consult with an experienced <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/broker.asp">broker</a>. </p></div>

Any savvy investor knows you can't put all your eggs in one basket. Even though it may not cut out risk entirely, [diversifying](https://www.investopedia.com/terms/d/diversification.asp) your investment portfolio can help you reach your investment goals by maximizing your returns. There are plenty of different investment vehicles for you to choose from including stocks, bonds, [commodity-centric mutual funds](https://www.investopedia.com/articles/investing/100615/top-3-commodities-mutual-funds.asp), futures, and currencies. These can be broken down even further, grouping together assets that share characteristics: [large-cap](https://www.investopedia.com/terms/l/large-cap.asp) stocks, financials, and government bonds are just a few examples. And don't forget [commodities](https://www.investopedia.com/terms/c/commodity.asp). These are basic goods that can be transformed into other goods and services. There are a number of different commodity investments for both new and experienced traders. But before you head out to make the leap, here are a few important things you need to know about commodity investing, including the best ones to consider. ### Key Takeaways * Investing in commodities can provide investors with diversification, a hedge against inflation, and excess positive returns. * Investors may experience volatility when their investments track a single commodity or one sector of the economy. * Supply, demand, and geopolitics all affect commodity prices. * Investors can trade commodity-based futures, stocks, ETFs, or mutual funds, or they can hold physical commodities such as gold bullion. * Three of the most commonly traded commodities include oil, gold, and base metals. ### How to Invest in Commodities You can invest in oil, gold, or base metals by buying individual stocks, exchange-trading funds (ETFs), or mutual funds that focus on those sectors. But there are other ways to go: * [Oil futures](https://www.investopedia.com/articles/active-trading/040615/introduction-trading-oil-futures.asp#:~:text=Oil%20futures%20contracts%20are%20simple,but%20on%20some%20coming%20date.) are a favorite of day traders and are bought and sold through brokerages that specialize in futures trading. This is volatile stuff and not for the faint of heart. * [Gold](https://www.investopedia.com/articles/basics/11/best-bets-buying-gold.asp) investors can purchase bars, coins, or jewelry, and stash them in a safety deposit box. * [Base metals](https://www.investopedia.com/terms/b/base-metals.asp#:~:text=What%20Are%20Base%20Metals%3F,such%20as%20construction%20and%20manufacturing.) like aluminum, zinc, and copper are valuable only in huge quantities. The best way to invest in them is through the stocks of producers like Alcoa and U.S. Steel, or through ETFs. ## What Is Commodity Investing? [Commodity trading](https://www.investopedia.com/investing/commodities-trading-overview/) goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still popular investment vehicles. Investors hoping to get into the commodity market can do so in several different ways. [Commodity-hungry investors](https://www.investopedia.com/articles/investing/101515/top-5-natural-resources-mutual-funds.asp) can consider investing directly in the physical commodity or indirectly by purchasing shares in commodity companies. These companies are accessible through several [mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) or [exchange traded funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs). ### Benefits One of the biggest benefits of investing in commodities is the fact that they tend to protect investors against the effects of inflation. Generally, demand for commodities tends to be high during periods of high [inflation](https://www.investopedia.com/terms/i/inflation.asp), which pushes up prices. It's also a good bet against the U.S. dollar; so when the [greenback](https://www.investopedia.com/terms/g/greenback.asp) declines, commodity prices rise. Aside from the benefits of diversification, there is the potential to maximize [returns](https://www.investopedia.com/terms/r/return.asp) with commodity investing. Although commodity prices are subject to fluctuations in the market through exchange rates, interest rates, and the global economy, global demand is strong. This has an overall positive impact on the stocks of companies that deal specifically with commodities, which can translate to positive returns for investors. ### Unique Risks One thing to keep in mind is that commodities tend to be much more [volatile](https://www.investopedia.com/terms/v/volatility.asp) than other kinds of investments, especially funds that track a single commodity or a specific [sector](https://www.investopedia.com/terms/s/sector.asp) of the economy. Investors who trade [futures](https://www.investopedia.com/terms/f/futures.asp) should remember that it involves speculation. Futures contracts involve tracking an underlying commodity or index. This could have an impact on the performance of the contract and thus give the investor a negative (or positive) difference. Futures also come with their own set of unique risks that must be managed independently of the underlying commodity. Pros * Protect against inflation * Diversify a portfolio * Hedge against a decline in the base currency * Help hedge price risk Cons * Increased volatility when compared to other investments * Margin trading in commodities potentially resulting in significant losses * Speculative nature of trading with uncertainty of the outcome ### Futures markets are regulated by the [Commodity Futures Trading Commission](https://www.investopedia.com/terms/c/cftc.asp) (CFTC). ## Crude Oil If you have [crude oil](https://www.investopedia.com/terms/c/crude-oil.asp) in mind, it helps to know what shapes prices and how you can invest in this commodity. After production, crude oil is refined into many different products, including gasoline that is used to fuel vehicles. But it goes beyond just gas. Products made from [petroleum](https://www.investopedia.com/terms/p/petroleum.asp) include plastics, medicines, linoleum, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, asphalt, and thousands of others. But what affects prices? Crude oil generally reacts to the [laws of supply and demand](https://www.investopedia.com/terms/l/law-of-supply-demand.asp). When demand exceeds supply, prices tend to rise. When demand wanes and supply remains fairly consistent, prices tend to fall. For instance, when gas is in high demand—say, during the summer driving season—the price at the pumps rises, translating into higher crude oil prices. Similarly, demand from developing nations such as China and India—whose economies are still growing—is also pushing up prices. [Geopolitics](https://www.investopedia.com/terms/p/politicalrisk.asp) also has a big impact on the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can send oil prices skyrocketing. ### Oil prices were once greatly influenced by the producer cartel [OPEC](https://www.investopedia.com/terms/o/opec.asp), made up mainly of Middle-East countries. In the early 21st century, the development of new technology, particularly hydro-fracturing ([fracking](https://www.investopedia.com/terms/f/fracking.asp)), created a second U.S. energy boom, largely decreasing OPEC's importance and influence. Today, the U.S. is the largest net producer of crude oil in the world. ### How to Invest in Crude Oil Investing in physical crude oil isn't as easy as investing in other commodities; you can't just buy a barrel of oil. As an investor, you may consider futures; the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of [capital](https://www.investopedia.com/terms/c/capital.asp). And they also require a great deal of knowledge, so it's not really a good option for novice investors. Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. These vehicles trade on exchanges just like stocks, so they're easy to come by. The [U.S. Oil Fund](https://www.uscfinvestments.com/uso) is one example. It tracks the movement of [West Texas Intermediate](https://www.investopedia.com/terms/w/wti.asp) light, sweet crude oil. Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings. ## Gold The gold market boasts diversity and growth. It's used in jewelry, technology, by central banks, and investors, giving rise to its market at different times within the global economy. The [precious metal](https://www.investopedia.com/terms/p/preciousmetal.asp) has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, you can bet gold prices will go up. Just like crude oil, when there's an increase in demand, the same happens to the price of gold. Furthermore, prices are affected when central banks—which hold gold—decide to diversify their monetary reserves by buying more gold. ### How to Invest in Gold Unlike crude oil, investors can take possession of the physical commodity. Investors who want to hold the physical commodity can do so by purchasing gold [bullion](https://www.investopedia.com/terms/b/bullion.asp) bars or coins. But this means having to pay to store it in a deposit box, vault, or another safe place. Another option, just as you would for crude, is to go through the futures contract. Contracts require investors to deposit an initial [margin](https://www.investopedia.com/terms/m/margin.asp). But again, there is a risk to this kind of investment. If the price rises, investors will profit; however, if the price drops, the investor stands to lose their money. Stocks and ETFs, along with mutual fund options are plenty. With gold stocks, investors aren't just limited to producers but also to exploration and [mining companies](https://www.investopedia.com/articles/basics/12/beginners-guide-mining-stocks.asp). As usual, it's a good idea for investors to do their homework and see what the operational risks are for each company. Gold ETFs, on the other hand, provide exposure to the precious metal while tracking its price. For instance, the [SPDR Gold Shares ETF](https://www.ssga.com/us/en/individual/etfs/funds/spdr-gold-shares-gld) gives investors exposure to bullion without having to take possession of it. ### Silver often trades similarly to gold, but with a [gold/silver price ratio](https://www.investopedia.com/terms/g/gold-silver-ratio.asp) that fluctuates over time. ## Base Metals Base metals are common metals used in commercial and industrial applications, such as construction and manufacturing. Aluminum, zinc, and copper are good examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found around the world. But because they are plentiful, prices tend to be much lower than they are for precious metals; however, the increase in the applications of base metals coupled with rising global demand—particularly from China and other developing nations—continues to positively impact [prices](https://www.investopedia.com/ask/answers/06/commodityprices.asp). ### How to Invest in Base Metals Holding on to aluminum, zinc, and copper may not necessarily be very fruitful. Because of their low prices, investors would have to hold copious amounts of these commodities in order to profit. Instead, holding stocks in base metals companies like aluminum company Alcoa or a steel company like U.S. Steel is a great way to get a foot in the door. Furthermore, holding ETFs like the [SPDR S&P Metals & Mining ETF](https://www.ssga.com/us/en/individual/etfs/funds/spdr-sp-metals-mining-etf-xme) provides [exposure to companies involved in metals and mining](https://www.investopedia.com/copper-etfs-how-they-work-8430658). ## What Is the Best Way to Invest in Commodities? The best way to invest in commodities is through commodity ETFs. ETFs allow for ease of trading because they are purchased like stocks, provide diversification, are not traded on margin like futures are, and typically have low [expense ratios](https://www.investopedia.com/terms/e/expenseratio.asp). ## When Should You Buy Commodities? There is no specific time that constitutes the best time to buy commodities. Commodities are a hedge against inflation, so buying before periods of high inflation is a good investment strategy; however, predicting when inflation will occur can be tough. A commodity should be viewed as any other investment, taking into consideration an investor's time horizon and risk profile. Buying a commodity when it is at a low price and its future outlook appears strong based on [fundamentals](https://www.investopedia.com/terms/f/fundamentals.asp) is always a good time to buy for a long-term horizon. ## How Do I Buy Oil Commodities? An individual can buy oil commodities by either purchasing an oil commodity ETF, buying the shares of oil companies, or buying [oil futures](https://www.investopedia.com/articles/active-trading/040615/introduction-trading-oil-futures.asp) through a brokerage account. ## Are Commodities a Good Investment? Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to trade—for example, the fact that oil prices can fluctuate based on the political climate in the Middle East. The type of investment also matters; ETFs provide more diversification and lower risks whereas futures are more speculative and the risks are higher because of margin requirements. That being said, commodities can hedge against inflation, and gold, in particular, can hedge against a market downturn. ## How Do I Start Commodities Trading? You can start trading commodities by opening a brokerage account and purchasing shares in the commodity-specific company of your choice or a commodity ETF after you have done your research and determined the specific investments that are right for you. ## The Bottom Line Like any investment, commodities come with their own risks but can still be a great way to diversify your portfolio if you understand the various aspects of the commodity in which you choose to invest. In addition to the commodities mentioned above, other commodities to consider are other precious metals—platinum, [palladium](https://www.investopedia.com/terms/p/palladium.asp), silver—lithium, cotton, and food products such as coffee, corn, oats, wheat, soybeans, and sugar. But as with all investment decisions, do your research or consult with an experienced [broker](https://www.investopedia.com/terms/b/broker.asp).

Any savvy investor knows you can't put all your eggs in one basket. Even though it may not cut out risk entirely, diversifying your investment portfolio can help you reach your investment goals by maximizing your returns. There are plenty of different investment vehicles for you to choose from including stocks, bonds, commodity-centric mutual funds, futures, and currencies. These can be broken down even further, grouping together assets that share characteristics: large-cap stocks, financials, and government bonds are just a few examples. And don't forget commodities. These are basic goods that can be transformed into other goods and services. There are a number of different commodity investments for both new and experienced traders. But before you head out to make the leap, here are a few important things you need to know about commodity investing, including the best ones to consider. Key Takeaways Investing in commodities can provide investors with diversification, a hedge against inflation, and excess positive returns.Investors may experience volatility when their investments track a single commodity or one sector of the economy.Supply, demand, and geopolitics all affect commodity prices.Investors can trade commodity-based futures, stocks, ETFs, or mutual funds, or they can hold physical commodities such as gold bullion.Three of the most commonly traded commodities include oil, gold, and base metals. How to Invest in Commodities You can invest in oil, gold, or base metals by buying individual stocks, exchange-trading funds (ETFs), or mutual funds that focus on those sectors. But there are other ways to go: Oil futures are a favorite of day traders and are bought and sold through brokerages that specialize in futures trading. This is volatile stuff and not for the faint of heart. Gold investors can purchase bars, coins, or jewelry, and stash them in a safety deposit box. Base metals like aluminum, zinc, and copper are valuable only in huge quantities. The best way to invest in them is through the stocks of producers like Alcoa and U.S. Steel, or through ETFs. What Is Commodity Investing? Commodity trading goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still popular investment vehicles. Investors hoping to get into the commodity market can do so in several different ways. Commodity-hungry investors can consider investing directly in the physical commodity or indirectly by purchasing shares in commodity companies. These companies are accessible through several mutual funds or exchange traded funds (ETFs). Benefits One of the biggest benefits of investing in commodities is the fact that they tend to protect investors against the effects of inflation. Generally, demand for commodities tends to be high during periods of high inflation, which pushes up prices. It's also a good bet against the U.S. dollar; so when the greenback declines, commodity prices rise. Aside from the benefits of diversification, there is the potential to maximize returns with commodity investing. Although commodity prices are subject to fluctuations in the market through exchange rates, interest rates, and the global economy, global demand is strong. This has an overall positive impact on the stocks of companies that deal specifically with commodities, which can translate to positive returns for investors. Unique Risks One thing to keep in mind is that commodities tend to be much more volatile than other kinds of investments, especially funds that track a single commodity or a specific sector of the economy. Investors who trade futures should remember that it involves speculation. Futures contracts involve tracking an underlying commodity or index. This could have an impact on the performance of the contract and thus give the investor a negative (or positive) difference. Futures also come with their own set of unique risks that must be managed independently of the underlying commodity. Pros Protect against inflation Diversify a portfolio Hedge against a decline in the base currency Help hedge price risk Cons Increased volatility when compared to other investments Margin trading in commodities potentially resulting in significant losses Speculative nature of trading with uncertainty of the outcome Futures markets are regulated by the Commodity Futures Trading Commission (CFTC). Crude Oil If you have crude oil in mind, it helps to know what shapes prices and how you can invest in this commodity. After production, crude oil is refined into many different products, including gasoline that is used to fuel vehicles. But it goes beyond just gas. Products made from petroleum include plastics, medicines, linoleum, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, asphalt, and thousands of others. But what affects prices? Crude oil generally reacts to the laws of supply and demand. When demand exceeds supply, prices tend to rise. When demand wanes and supply remains fairly consistent, prices tend to fall. For instance, when gas is in high demand—say, during the summer driving season—the price at the pumps rises, translating into higher crude oil prices. Similarly, demand from developing nations such as China and India—whose economies are still growing—is also pushing up prices. Geopolitics also has a big impact on the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can send oil prices skyrocketing. Oil prices were once greatly influenced by the producer cartel OPEC, made up mainly of Middle-East countries. In the early 21st century, the development of new technology, particularly hydro-fracturing (fracking), created a second U.S. energy boom, largely decreasing OPEC's importance and influence. Today, the U.S. is the largest net producer of crude oil in the world. How to Invest in Crude Oil Investing in physical crude oil isn't as easy as investing in other commodities; you can't just buy a barrel of oil. As an investor, you may consider futures; the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of capital. And they also require a great deal of knowledge, so it's not really a good option for novice investors. Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. These vehicles trade on exchanges just like stocks, so they're easy to come by. The U.S. Oil Fund is one example. It tracks the movement of West Texas Intermediate light, sweet crude oil. Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings. Gold The gold market boasts diversity and growth. It's used in jewelry, technology, by central banks, and investors, giving rise to its market at different times within the global economy. The precious metal has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, you can bet gold prices will go up. Just like crude oil, when there's an increase in demand, the same happens to the price of gold. Furthermore, prices are affected when central banks—which hold gold—decide to diversify their monetary reserves by buying more gold. How to Invest in Gold Unlike crude oil, investors can take possession of the physical commodity. Investors who want to hold the physical commodity can do so by purchasing gold bullion bars or coins. But this means having to pay to store it in a deposit box, vault, or another safe place. Another option, just as you would for crude, is to go through the futures contract. Contracts require investors to deposit an initial margin. But again, there is a risk to this kind of investment. If the price rises, investors will profit; however, if the price drops, the investor stands to lose their money. Stocks and ETFs, along with mutual fund options are plenty. With gold stocks, investors aren't just limited to producers but also to exploration and mining companies. As usual, it's a good idea for investors to do their homework and see what the operational risks are for each company. Gold ETFs, on the other hand, provide exposure to the precious metal while tracking its price. For instance, the SPDR Gold Shares ETF gives investors exposure to bullion without having to take possession of it. Silver often trades similarly to gold, but with a gold/silver price ratio that fluctuates over time. Base Metals Base metals are common metals used in commercial and industrial applications, such as construction and manufacturing. Aluminum, zinc, and copper are good examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found around the world. But because they are plentiful, prices tend to be much lower than they are for precious metals; however, the increase in the applications of base metals coupled with rising global demand—particularly from China and other developing nations—continues to positively impact prices. How to Invest in Base Metals Holding on to aluminum, zinc, and copper may not necessarily be very fruitful. Because of their low prices, investors would have to hold copious amounts of these commodities in order to profit. Instead, holding stocks in base metals companies like aluminum company Alcoa or a steel company like U.S. Steel is a great way to get a foot in the door. Furthermore, holding ETFs like the SPDR S&P Metals & Mining ETF provides exposure to companies involved in metals and mining. What Is the Best Way to Invest in Commodities? The best way to invest in commodities is through commodity ETFs. ETFs allow for ease of trading because they are purchased like stocks, provide diversification, are not traded on margin like futures are, and typically have low expense ratios. When Should You Buy Commodities? There is no specific time that constitutes the best time to buy commodities. Commodities are a hedge against inflation, so buying before periods of high inflation is a good investment strategy; however, predicting when inflation will occur can be tough.A commodity should be viewed as any other investment, taking into consideration an investor's time horizon and risk profile. Buying a commodity when it is at a low price and its future outlook appears strong based on fundamentals is always a good time to buy for a long-term horizon. How Do I Buy Oil Commodities? An individual can buy oil commodities by either purchasing an oil commodity ETF, buying the shares of oil companies, or buying oil futures through a brokerage account. Are Commodities a Good Investment? Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to trade—for example, the fact that oil prices can fluctuate based on the political climate in the Middle East.The type of investment also matters; ETFs provide more diversification and lower risks whereas futures are more speculative and the risks are higher because of margin requirements. That being said, commodities can hedge against inflation, and gold, in particular, can hedge against a market downturn. How Do I Start Commodities Trading? You can start trading commodities by opening a brokerage account and purchasing shares in the commodity-specific company of your choice or a commodity ETF after you have done your research and determined the specific investments that are right for you. The Bottom Line Like any investment, commodities come with their own risks but can still be a great way to diversify your portfolio if you understand the various aspects of the commodity in which you choose to invest. In addition to the commodities mentioned above, other commodities to consider are other precious metals—platinum, palladium, silver—lithium, cotton, and food products such as coffee, corn, oats, wheat, soybeans, and sugar. But as with all investment decisions, do your research or consult with an experienced broker.

https://www.investopedia.com/top-stocks-moving-now-gamestop-enphase-energy-tesla-and-more-8648190

Top Stocks Moving Now: GameStop, Enphase Energy, Tesla, and More

<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 Dow, S&amp;P 500, and Nasdaq were little changed at midday Tuesday, May 14, 2024, after the latest report on producer prices showed wholesale inflation was hotter than expected in April. </li><li>Solar and electric vehicle stocks advanced as the White House announced tariffs on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. </li><li>Monday’s resurgence of the meme stock craze of early 2021 continued, with shares of AMC Entertainment and GameStop skyrocketing. </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 Dow, S&amp;P 500, and Nasdaq were little changed at midday after the Labor Department reported <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-may-14-8648056">wholesale prices rose more than expected</a> in April. </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"> Solar stocks such as Enphase Energy (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ENPH">ENPH</a>) climbed, as well as those of Tesla (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA">TSLA</a>) and other electric vehicle (EV) makers, after the Biden administration <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/biden-levies-sweeping-tariffs-on-chinese-chips-solar-cells-evs-8648008">announced tariffs</a> on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. </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"> Shares of Plug Power (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PLUG">PLUG</a>) soared after the hydrogen technology company said it received a conditional Department of Energy (DoE) loan of up to $1.66 billion to add six new facilities. </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"> Monday’s resurgence of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/meme-stock-5206762">meme stock craze</a> of early 2021 continued, with shares of AMC Entertainment (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMC">AMC</a>) skyrocketing as the movie theater chain completed its $250 million stock sale. Shares of another meme favorite, GameStop (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GME">GME</a>), also soared. </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"> Alibaba Group (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA">BABA</a>) <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/adr.asp">American depositary receipts (ADRs)</a> dropped after the Chinese e-commerce giant <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/alibaba-stock-sinks-as-profit-plunges-on-investment-losses-8648037">reported</a> an 86% plunge in fiscal fourth-quarter net income from a year ago on the back of investment losses. </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"> Amazon (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN">AMZN</a>) shares lost ground after the tech giant said Amazon Web Services CEO Adam Selipsky will step down. </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"> Shares of Marathon Petroleum (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MPC">MPC</a>) were lower as the energy producer shook up its management team, naming President Maryann Mannen to replace CEO Michael Hennigan, who became executive chair.  </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"> Oil futures slid and gold prices advanced. The yield on the 10-year Treasury note fell. The U.S. dollar was up versus the yen, but slipped against the euro and pound. Most major cryptocurrencies traded in negative territory.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_18-0"></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_19-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.7%;"> <img alt="ENPH, SEDG, RUN" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/GxepSaMWbsJC3b5PxDcGA_8pf_Y=/1216x0/filters:no_upscale():max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/jq87RWfoIMsYUZxazMk4HZfWU-Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png" data-srcset="https://www.investopedia.com/thmb/75gQTKEkOcaV9Fbxf2BCRCZ632E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png 750w" data-tracking-container="true" height="617" id="mntl-sc-block-image_1-0" width="1216"/> <noscript> <img alt="ENPH, SEDG, RUN" class="img--noscript universal-image__image" height="617" sizes="750px" src="https://www.investopedia.com/thmb/jq87RWfoIMsYUZxazMk4HZfWU-Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png" srcset="https://www.investopedia.com/thmb/75gQTKEkOcaV9Fbxf2BCRCZ632E=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png 750w" width="1216"/> </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 * The Dow, S&P 500, and Nasdaq were little changed at midday Tuesday, May 14, 2024, after the latest report on producer prices showed wholesale inflation was hotter than expected in April. * Solar and electric vehicle stocks advanced as the White House announced tariffs on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. * Monday’s resurgence of the meme stock craze of early 2021 continued, with shares of AMC Entertainment and GameStop skyrocketing. The Dow, S&P 500, and Nasdaq were little changed at midday after the Labor Department reported [wholesale prices rose more than expected](https://www.investopedia.com/us-economy-news-today-may-14-8648056) in April. Solar stocks such as Enphase Energy ([ENPH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ENPH)) climbed, as well as those of Tesla ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSLA)) and other electric vehicle (EV) makers, after the Biden administration [announced tariffs](https://www.investopedia.com/biden-levies-sweeping-tariffs-on-chinese-chips-solar-cells-evs-8648008) on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. Shares of Plug Power ([PLUG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PLUG)) soared after the hydrogen technology company said it received a conditional Department of Energy (DoE) loan of up to $1.66 billion to add six new facilities. Monday’s resurgence of the [meme stock craze](https://www.investopedia.com/meme-stock-5206762) of early 2021 continued, with shares of AMC Entertainment ([AMC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMC)) skyrocketing as the movie theater chain completed its $250 million stock sale. Shares of another meme favorite, GameStop ([GME](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GME)), also soared. Alibaba Group ([BABA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA)) [American depositary receipts (ADRs)](https://www.investopedia.com/terms/a/adr.asp) dropped after the Chinese e-commerce giant [reported](https://www.investopedia.com/alibaba-stock-sinks-as-profit-plunges-on-investment-losses-8648037) an 86% plunge in fiscal fourth-quarter net income from a year ago on the back of investment losses. Amazon ([AMZN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMZN)) shares lost ground after the tech giant said Amazon Web Services CEO Adam Selipsky will step down. Shares of Marathon Petroleum ([MPC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MPC)) were lower as the energy producer shook up its management team, naming President Maryann Mannen to replace CEO Michael Hennigan, who became executive chair.  Oil futures slid and gold prices advanced. The yield on the 10-year Treasury note fell. The U.S. dollar was up versus the yen, but slipped against the euro and pound. Most major cryptocurrencies traded in negative territory. ![ENPH, SEDG, RUN]() :max_bytes(150000):strip_icc()/ENPH_2024-05-14_11-57-47-40020489b1c446a3a04ed9a6e1b6189a.png) TradingView Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways The Dow, S&P 500, and Nasdaq were little changed at midday Tuesday, May 14, 2024, after the latest report on producer prices showed wholesale inflation was hotter than expected in April. Solar and electric vehicle stocks advanced as the White House announced tariffs on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. Monday’s resurgence of the meme stock craze of early 2021 continued, with shares of AMC Entertainment and GameStop skyrocketing. The Dow, S&P 500, and Nasdaq were little changed at midday after the Labor Department reported wholesale prices rose more than expected in April. Solar stocks such as Enphase Energy (ENPH) climbed, as well as those of Tesla (TSLA) and other electric vehicle (EV) makers, after the Biden administration announced tariffs on a large swath of Chinese imports, from semiconductors and solar cells to electric vehicles. Shares of Plug Power (PLUG) soared after the hydrogen technology company said it received a conditional Department of Energy (DoE) loan of up to $1.66 billion to add six new facilities. Monday’s resurgence of the meme stock craze of early 2021 continued, with shares of AMC Entertainment (AMC) skyrocketing as the movie theater chain completed its $250 million stock sale. Shares of another meme favorite, GameStop (GME), also soared. Alibaba Group (BABA) American depositary receipts (ADRs) dropped after the Chinese e-commerce giant reported an 86% plunge in fiscal fourth-quarter net income from a year ago on the back of investment losses. Amazon (AMZN) shares lost ground after the tech giant said Amazon Web Services CEO Adam Selipsky will step down. Shares of Marathon Petroleum (MPC) were lower as the energy producer shook up its management team, naming President Maryann Mannen to replace CEO Michael Hennigan, who became executive chair.  Oil futures slid and gold prices advanced. The yield on the 10-year Treasury note fell. The U.S. dollar was up versus the yen, but slipped against the euro and pound. Most major cryptocurrencies traded in negative territory. TradingView Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/coinbase-loses-bid-to-dismiss-sec-lawsuit-against-it-stock-slips-8620971

Coinbase Loses Bid To Dismiss SEC Lawsuit Against It, Stock Slips

<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>Coinbase Global Inc. lost a motion to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC) for violating securities law.</li><li>A U.S. district judge found that the commission "sufficiently pleaded" that Coinbase operates as an exchange, broker, and clearing agency under federal law.</li><li>The decision comes as the SEC is analyzing applications for spot ether exchange-traded funds (ETFs), months after spot bitcoin ETFs were approved by the agency.</li><li>The case now moves to discovery ahead of a trial.<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"> Coinbase Global Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=COIN">COIN</a>) suffered a setback as a judge denied the company’s motion to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) for violating securities laws.<span class="ql-inline-citation" data-cite="3"></span> The company's stock dropped as much as 4.8% on Wednesday but eventually gained some lost ground. </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-round-1-to-sec"></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"> Round 1 to SEC </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> U.S. District Judge Katherine Polk Failla’s decision will allow the lawsuit to go forward, finding that the SEC has "sufficiently pleaded" that Coinbase operates as an exchange, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/brokers-4689772#:~:text=Brokers%20are%20the%20bridge%20between,for%20the%20buyer%20and%20seller.">broker</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/clearinghouse.asp#:~:text=A%20clearinghouse%20is%20a%20designated,seller%20honor%20their%20contractual%20obligations.">clearing agency</a> under federal securities laws, and through its staking program engages in the unregistered offer and sale of securities.  </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"> “We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” said Coinbase Chief Legal Officer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://twitter.com/iampaulgrewal">Paul Grewal</a> on X, formerly known as Twitter.<span class="ql-inline-citation" data-cite="1"></span> “Early motions like ours against a government agency are almost always denied. But clarity is the ultimate goal and today’s decision continues us on that path.”   </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 regulator <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sec-sues-coinbase-for-operating-an-unregistered-exchange-7508669">sued</a> Coinbase in June, alleging that the company violated securities laws by operating as an unregistered exchange, broker-dealer, and clearing agency. Coinbase filed a motion to dismiss in August. The case now moves to discovery ahead of a trial.<br/> </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-order-not-all-bad-for-coinbase"></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"> Order Not All Bad For Coinbase </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> But it wasn't all bad for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tech/coinbase-what-it-and-how-do-you-use-it/">Coinbase</a>, either. The court did grant the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-crypto-exchanges-5071855">crypto exchange</a>'s motion to dismiss with respect to the SEC’s claims that the company acts as an unregistered broker by making its <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cryptocurrency-wallets-5272123#:~:text=A%20cryptocurrency%20wallet%20is%20a,Bitcoin%2C%20Ethereum%2C%20and%20Dogecoin.">wallet</a> application available to customers.<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"> “We also appreciate the court’s understanding that technology innovations like Coinbase Wallet do not and cannot implicate U.S. securities laws,” Grewal wrote.<br> </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"> Crypto lawyer Mike Selig said in an X post that it was a "significant setback for SEC w/ Judge Failla granting Coinbase’s motion to dismiss SEC’s claim that Coinbase acted as a broker by offering non-custodial digital wallet software. SEC aimed to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sec-chair-gensler-doubles-down-crypto-regulation-7509858">discourage</a> builders from developing peer-to-peer software. Didn’t work."<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"> It’s the latest in an ongoing spat between the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/sec-urges-caution-on-crypto-investing-7370599">SEC</a> and the crypto <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/how-sec-regs-will-change-cryptocurrency-markets/">industry</a> that seeks to mainstream access to cryptocurrencies.<span class="ql-inline-citation" data-cite="4"></span> Earlier this year, the SEC <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/spot-bitcoin-etfs-are-approved-by-sec-cleared-to-start-trading-thursday-8357670">approved the operation</a> of <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/spot-bitcoin-etfs-8358373">spot bitcoin ETFs</a>, leading to billions of dollars in inflows and driving the <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bitcoin-kisses-usd70k-for-second-all-time-high-this-week-then-promptly-falters-8606419">price of the biggest cryptocurrency</a> by market capitalization to all-time highs. <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"> The SEC is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/why-spot-ether-etfs-could-face-a-difficult-path-to-approval-8609104">analyzing proposals</a> for spot ether ETFs, although there is doubt that it will receive a positive response given that ether is <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-crypto-staking-platforms-7486033#:~:text=The%20staking%20process%20varies%20depending,secure%20the%20underlying%20blockchain%20network.">staked</a>—a process in which cryptocurrency holders lock up their funds as collateral to support the operations of a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blockchain.asp">blockchain</a> network in exchange for rewards in the form of additional cryptocurrency. </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 * Coinbase Global Inc. lost a motion to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC) for violating securities law. * A U.S. district judge found that the commission "sufficiently pleaded" that Coinbase operates as an exchange, broker, and clearing agency under federal law. * The decision comes as the SEC is analyzing applications for spot ether exchange-traded funds (ETFs), months after spot bitcoin ETFs were approved by the agency. * The case now moves to discovery ahead of a trial. Coinbase Global Inc. ([COIN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=COIN)) suffered a setback as a judge denied the company’s motion to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) for violating securities laws. The company's stock dropped as much as 4.8% on Wednesday but eventually gained some lost ground. ## Round 1 to SEC U.S. District Judge Katherine Polk Failla’s decision will allow the lawsuit to go forward, finding that the SEC has "sufficiently pleaded" that Coinbase operates as an exchange, [broker](https://www.investopedia.com/brokers-4689772#:~:text=Brokers%20are%20the%20bridge%20between,for%20the%20buyer%20and%20seller.), and [clearing agency](https://www.investopedia.com/terms/c/clearinghouse.asp#:~:text=A%20clearinghouse%20is%20a%20designated,seller%20honor%20their%20contractual%20obligations.) under federal securities laws, and through its staking program engages in the unregistered offer and sale of securities.  “We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” said Coinbase Chief Legal Officer [Paul Grewal](https://twitter.com/iampaulgrewal) on X, formerly known as Twitter. “Early motions like ours against a government agency are almost always denied. But clarity is the ultimate goal and today’s decision continues us on that path.”   The regulator [sued](https://www.investopedia.com/sec-sues-coinbase-for-operating-an-unregistered-exchange-7508669) Coinbase in June, alleging that the company violated securities laws by operating as an unregistered exchange, broker-dealer, and clearing agency. Coinbase filed a motion to dismiss in August. The case now moves to discovery ahead of a trial. ## Order Not All Bad For Coinbase But it wasn't all bad for [Coinbase](https://www.investopedia.com/tech/coinbase-what-it-and-how-do-you-use-it/), either. The court did grant the [crypto exchange](https://www.investopedia.com/best-crypto-exchanges-5071855)'s motion to dismiss with respect to the SEC’s claims that the company acts as an unregistered broker by making its [wallet](https://www.investopedia.com/cryptocurrency-wallets-5272123#:~:text=A%20cryptocurrency%20wallet%20is%20a,Bitcoin%2C%20Ethereum%2C%20and%20Dogecoin.) application available to customers. “We also appreciate the court’s understanding that technology innovations like Coinbase Wallet do not and cannot implicate U.S. securities laws,” Grewal wrote. Crypto lawyer Mike Selig said in an X post that it was a "significant setback for SEC w/ Judge Failla granting Coinbase’s motion to dismiss SEC’s claim that Coinbase acted as a broker by offering non-custodial digital wallet software. SEC aimed to [discourage](https://www.investopedia.com/sec-chair-gensler-doubles-down-crypto-regulation-7509858) builders from developing peer-to-peer software. Didn’t work." It’s the latest in an ongoing spat between the [SEC](https://www.investopedia.com/sec-urges-caution-on-crypto-investing-7370599) and the crypto [industry](https://www.investopedia.com/news/how-sec-regs-will-change-cryptocurrency-markets/) that seeks to mainstream access to cryptocurrencies. Earlier this year, the SEC [approved the operation](https://www.investopedia.com/spot-bitcoin-etfs-are-approved-by-sec-cleared-to-start-trading-thursday-8357670) of [spot bitcoin ETFs](https://www.investopedia.com/spot-bitcoin-etfs-8358373), leading to billions of dollars in inflows and driving the [price of the biggest cryptocurrency](https://www.investopedia.com/bitcoin-kisses-usd70k-for-second-all-time-high-this-week-then-promptly-falters-8606419) by market capitalization to all-time highs.  The SEC is [analyzing proposals](https://www.investopedia.com/why-spot-ether-etfs-could-face-a-difficult-path-to-approval-8609104) for spot ether ETFs, although there is doubt that it will receive a positive response given that ether is [staked](https://www.investopedia.com/best-crypto-staking-platforms-7486033#:~:text=The%20staking%20process%20varies%20depending,secure%20the%20underlying%20blockchain%20network.)—a process in which cryptocurrency holders lock up their funds as collateral to support the operations of a [blockchain](https://www.investopedia.com/terms/b/blockchain.asp) network in exchange for rewards in the form of additional cryptocurrency. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Coinbase Global Inc. lost a motion to dismiss a lawsuit filed by the Securities and Exchange Commission (SEC) for violating securities law.A U.S. district judge found that the commission "sufficiently pleaded" that Coinbase operates as an exchange, broker, and clearing agency under federal law.The decision comes as the SEC is analyzing applications for spot ether exchange-traded funds (ETFs), months after spot bitcoin ETFs were approved by the agency.The case now moves to discovery ahead of a trial. Coinbase Global Inc. (COIN) suffered a setback as a judge denied the company’s motion to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) for violating securities laws. The company's stock dropped as much as 4.8% on Wednesday but eventually gained some lost ground. Round 1 to SEC U.S. District Judge Katherine Polk Failla’s decision will allow the lawsuit to go forward, finding that the SEC has "sufficiently pleaded" that Coinbase operates as an exchange, broker, and clearing agency under federal securities laws, and through its staking program engages in the unregistered offer and sale of securities.  “We were prepared for this, and we look forward to uncovering more about the SEC’s internal views and discussions on crypto regulation,” said Coinbase Chief Legal Officer Paul Grewal on X, formerly known as Twitter. “Early motions like ours against a government agency are almost always denied. But clarity is the ultimate goal and today’s decision continues us on that path.”   The regulator sued Coinbase in June, alleging that the company violated securities laws by operating as an unregistered exchange, broker-dealer, and clearing agency. Coinbase filed a motion to dismiss in August. The case now moves to discovery ahead of a trial. Order Not All Bad For Coinbase But it wasn't all bad for Coinbase, either. The court did grant the crypto exchange's motion to dismiss with respect to the SEC’s claims that the company acts as an unregistered broker by making its wallet application available to customers. “We also appreciate the court’s understanding that technology innovations like Coinbase Wallet do not and cannot implicate U.S. securities laws,” Grewal wrote. Crypto lawyer Mike Selig said in an X post that it was a "significant setback for SEC w/ Judge Failla granting Coinbase’s motion to dismiss SEC’s claim that Coinbase acted as a broker by offering non-custodial digital wallet software. SEC aimed to discourage builders from developing peer-to-peer software. Didn’t work." It’s the latest in an ongoing spat between the SEC and the crypto industry that seeks to mainstream access to cryptocurrencies. Earlier this year, the SEC approved the operation of spot bitcoin ETFs, leading to billions of dollars in inflows and driving the price of the biggest cryptocurrency by market capitalization to all-time highs.  The SEC is analyzing proposals for spot ether ETFs, although there is doubt that it will receive a positive response given that ether is staked—a process in which cryptocurrency holders lock up their funds as collateral to support the operations of a blockchain network in exchange for rewards in the form of additional cryptocurrency. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/ask/answers/difference-between-preferred-stock-and-common-stock/

Preferred vs. Common Stock: 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-preferred-vs-common-stock-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"> Preferred vs. Common Stock: 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 differences between preferred and common stock. The main difference is that preferred stock usually does not give shareholders voting rights, while <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/050615/what-are-some-advantages-ordinary-shares.asp">common or ordinary stock</a> does, usually at one vote per share owned.<span class="ql-inline-citation" data-cite="1"></span> Many investors know more about <a 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">common stock</a> than they do about preferred 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"> Both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/types-of-stocks-5215684">types of stock</a> represent a piece of ownership in a company, and both are tools investors can use to try to profit from the future successes of the business. </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 main difference between preferred and common stock is that preferred stock gives no voting rights to shareholders while common stock does. </li><li>Preferred shareholders have priority over a company's income, meaning they are paid dividends before common shareholders.</li><li>Common stockholders are last in line when it comes to company assets, which means they will be paid out after creditors, bondholders, and preferred shareholders.</li></ul></div></div></div> <span class="heading-toc" id="toc-preferred-stock"></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"> Preferred Stock </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> One main difference from common stock is that preferred stock comes with no voting rights. So when it comes time for a company to elect a board of directors or vote on any form of corporate policy, preferred shareholders have no voice about the future of the company. In fact, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/preferredstock.asp">preferred stock functions similarly to bonds</a> in terms of yield, since with preferred shares, investors are usually guaranteed <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/perpetual-preferred-stock.asp">a fixed dividend in perpetuity</a> when bond holders receive coupons until bond maturity. However, in case of bankruptcy or liquidation, bondolders are more senior in the list of stakeholders to be paid. This means, they are paid first before preferred shareholders. </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/d/dividendyield.asp">dividend yield</a> of a preferred stock is calculated as the dollar amount of a dividend divided by the price of the stock. This is often based on the par value before a preferred stock is offered. It's commonly calculated as a percentage of the current market price after it begins trading. This is different from common stock, which has variable dividends that are declared by the board of directors and never guaranteed. In fact, many companies do not pay out dividends to common stock at all. </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"> Like bonds, preferred shares also have a par value which is affected by interest rates. When interest rates rise, the value of the preferred stock declines, and vice versa. With common stocks, however, the value of shares is regulated by demand and supply of the market participants. </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"> In a liquidation, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the company's good times when the company has excess cash and decides to distribute money to investors through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividends</a>. The dividends for this type of stock are usually higher than those issued for common stock. Preferred stock also gets priority over common stock, so if a company misses a dividend payment, it must first pay any arrears to preferred shareholders before paying out common shareholders.<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"> Unlike common shares, preferreds also have a callability feature which gives the issuer the right to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/redemption.asp">redeem the shares</a> from the market after a predetermined time. Investors who buy preferred shares have a real opportunity for these shares to be called back at a redemption rate representing a significant premium over their purchase price. The market for preferred shares often anticipates callbacks and prices may be bid up accordingly. </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-common-stock"></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"> Common Stock </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Common stock represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks, they are usually referring to common stock. In fact, the great majority of stock is issued in this form. </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"> Common shares represent a claim on profits (dividends) and confer voting rights. Investors most often get one vote per share owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders. </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"> Common stock tends to outperform <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/051315/what-are-differences-between-preference-shares-and-bonds.asp">bonds and preferred shares</a>. It is also the type of stock that provides the biggest potential for long-term gains. If a company does well, the value of a common stock can go up. But keep in mind, if the company does poorly, the stock's value will also go down. </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 first common stock ever issued was by the Dutch East India Company in 1602.<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_28-0"> Preferred shares can be <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertible-security.asp">converted</a> to a fixed number of common shares, but common shares don't have this benefit. </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"> When it comes to a company's dividends, the company's board of directors will decide whether or not to pay out a dividend to common stockholders. If a company misses a dividend, the common stockholder gets bumped back for a preferred stockholder, meaning paying the latter is a higher priority for the company. </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 claim over a company's income and earnings is most important during times of insolvency. Common stockholders are last in line for the company's assets.<span class="ql-inline-citation" data-cite="1"></span> This means that when the company must <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidate.asp">liquidate</a> and pay all creditors and bondholders, common stockholders will not receive any money until after the preferred shareholders are paid out. </p></div>

## Preferred vs. Common Stock: An Overview There are many differences between preferred and common stock. The main difference is that preferred stock usually does not give shareholders voting rights, while [common or ordinary stock](https://www.investopedia.com/ask/answers/050615/what-are-some-advantages-ordinary-shares.asp) does, usually at one vote per share owned. Many investors know more about [common stock](https://www.investopedia.com/ask/answers/040315/what-can-shareholders-vote.asp) than they do about preferred stock. Both [types of stock](https://www.investopedia.com/types-of-stocks-5215684) represent a piece of ownership in a company, and both are tools investors can use to try to profit from the future successes of the business. ### Key Takeaways * The main difference between preferred and common stock is that preferred stock gives no voting rights to shareholders while common stock does. * Preferred shareholders have priority over a company's income, meaning they are paid dividends before common shareholders. * Common stockholders are last in line when it comes to company assets, which means they will be paid out after creditors, bondholders, and preferred shareholders. ## Preferred Stock One main difference from common stock is that preferred stock comes with no voting rights. So when it comes time for a company to elect a board of directors or vote on any form of corporate policy, preferred shareholders have no voice about the future of the company. In fact, [preferred stock functions similarly to bonds](https://www.investopedia.com/ask/answers/06/preferredstock.asp) in terms of yield, since with preferred shares, investors are usually guaranteed [a fixed dividend in perpetuity](https://www.investopedia.com/terms/p/perpetual-preferred-stock.asp) when bond holders receive coupons until bond maturity. However, in case of bankruptcy or liquidation, bondolders are more senior in the list of stakeholders to be paid. This means, they are paid first before preferred shareholders. The [dividend yield](https://www.investopedia.com/terms/d/dividendyield.asp) of a preferred stock is calculated as the dollar amount of a dividend divided by the price of the stock. This is often based on the par value before a preferred stock is offered. It's commonly calculated as a percentage of the current market price after it begins trading. This is different from common stock, which has variable dividends that are declared by the board of directors and never guaranteed. In fact, many companies do not pay out dividends to common stock at all. Like bonds, preferred shares also have a par value which is affected by interest rates. When interest rates rise, the value of the preferred stock declines, and vice versa. With common stocks, however, the value of shares is regulated by demand and supply of the market participants. In a liquidation, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the company's good times when the company has excess cash and decides to distribute money to investors through [dividends](https://www.investopedia.com/terms/d/dividend.asp). The dividends for this type of stock are usually higher than those issued for common stock. Preferred stock also gets priority over common stock, so if a company misses a dividend payment, it must first pay any arrears to preferred shareholders before paying out common shareholders. Unlike common shares, preferreds also have a callability feature which gives the issuer the right to [redeem the shares](https://www.investopedia.com/terms/r/redemption.asp) from the market after a predetermined time. Investors who buy preferred shares have a real opportunity for these shares to be called back at a redemption rate representing a significant premium over their purchase price. The market for preferred shares often anticipates callbacks and prices may be bid up accordingly. ## Common Stock Common stock represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks, they are usually referring to common stock. In fact, the great majority of stock is issued in this form. Common shares represent a claim on profits (dividends) and confer voting rights. Investors most often get one vote per share owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders. Common stock tends to outperform [bonds and preferred shares](https://www.investopedia.com/ask/answers/051315/what-are-differences-between-preference-shares-and-bonds.asp). It is also the type of stock that provides the biggest potential for long-term gains. If a company does well, the value of a common stock can go up. But keep in mind, if the company does poorly, the stock's value will also go down. ### The first common stock ever issued was by the Dutch East India Company in 1602. Preferred shares can be [converted](https://www.investopedia.com/terms/c/convertible-security.asp) to a fixed number of common shares, but common shares don't have this benefit. When it comes to a company's dividends, the company's board of directors will decide whether or not to pay out a dividend to common stockholders. If a company misses a dividend, the common stockholder gets bumped back for a preferred stockholder, meaning paying the latter is a higher priority for the company. The claim over a company's income and earnings is most important during times of insolvency. Common stockholders are last in line for the company's assets. This means that when the company must [liquidate](https://www.investopedia.com/terms/l/liquidate.asp) and pay all creditors and bondholders, common stockholders will not receive any money until after the preferred shareholders are paid out.

Preferred vs. Common Stock: An Overview There are many differences between preferred and common stock. The main difference is that preferred stock usually does not give shareholders voting rights, while common or ordinary stock does, usually at one vote per share owned. Many investors know more about common stock than they do about preferred stock. Both types of stock represent a piece of ownership in a company, and both are tools investors can use to try to profit from the future successes of the business. Key Takeaways The main difference between preferred and common stock is that preferred stock gives no voting rights to shareholders while common stock does. Preferred shareholders have priority over a company's income, meaning they are paid dividends before common shareholders.Common stockholders are last in line when it comes to company assets, which means they will be paid out after creditors, bondholders, and preferred shareholders. Preferred Stock One main difference from common stock is that preferred stock comes with no voting rights. So when it comes time for a company to elect a board of directors or vote on any form of corporate policy, preferred shareholders have no voice about the future of the company. In fact, preferred stock functions similarly to bonds in terms of yield, since with preferred shares, investors are usually guaranteed a fixed dividend in perpetuity when bond holders receive coupons until bond maturity. However, in case of bankruptcy or liquidation, bondolders are more senior in the list of stakeholders to be paid. This means, they are paid first before preferred shareholders. The dividend yield of a preferred stock is calculated as the dollar amount of a dividend divided by the price of the stock. This is often based on the par value before a preferred stock is offered. It's commonly calculated as a percentage of the current market price after it begins trading. This is different from common stock, which has variable dividends that are declared by the board of directors and never guaranteed. In fact, many companies do not pay out dividends to common stock at all. Like bonds, preferred shares also have a par value which is affected by interest rates. When interest rates rise, the value of the preferred stock declines, and vice versa. With common stocks, however, the value of shares is regulated by demand and supply of the market participants. In a liquidation, preferred stockholders have a greater claim to a company's assets and earnings. This is true during the company's good times when the company has excess cash and decides to distribute money to investors through dividends. The dividends for this type of stock are usually higher than those issued for common stock. Preferred stock also gets priority over common stock, so if a company misses a dividend payment, it must first pay any arrears to preferred shareholders before paying out common shareholders. Unlike common shares, preferreds also have a callability feature which gives the issuer the right to redeem the shares from the market after a predetermined time. Investors who buy preferred shares have a real opportunity for these shares to be called back at a redemption rate representing a significant premium over their purchase price. The market for preferred shares often anticipates callbacks and prices may be bid up accordingly. Common Stock Common stock represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks, they are usually referring to common stock. In fact, the great majority of stock is issued in this form. Common shares represent a claim on profits (dividends) and confer voting rights. Investors most often get one vote per share owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders. Common stock tends to outperform bonds and preferred shares. It is also the type of stock that provides the biggest potential for long-term gains. If a company does well, the value of a common stock can go up. But keep in mind, if the company does poorly, the stock's value will also go down. The first common stock ever issued was by the Dutch East India Company in 1602. Preferred shares can be converted to a fixed number of common shares, but common shares don't have this benefit. When it comes to a company's dividends, the company's board of directors will decide whether or not to pay out a dividend to common stockholders. If a company misses a dividend, the common stockholder gets bumped back for a preferred stockholder, meaning paying the latter is a higher priority for the company. The claim over a company's income and earnings is most important during times of insolvency. Common stockholders are last in line for the company's assets. This means that when the company must liquidate and pay all creditors and bondholders, common stockholders will not receive any money until after the preferred shareholders are paid out.

https://www.investopedia.com/articles/stocks/11/rebalancing-strategies.asp

Types of Rebalancing Strategies

<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/r/rebalancing.asp">Rebalancing</a> is an essential component of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfoliomanagement.asp">portfolio management</a> process. Investors who seek the services of a professional typically have a desired level of systematic <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk.asp">risk</a> exposure, and thus their portfolio manager has a responsibility to adjust investment holdings to adhere to the clients’ constraints and preferences. </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"> Although portfolio rebalancing strategies incur transaction costs and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxliability.asp">tax liabilities</a>, there are several distinct advantages to maintaining the desired target allocation. </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>Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels.</li><li>Rebalancing allows investors to ensure that their portfolio remains aligned with their intended risk profile.</li><li>Strategies include calendar rebalancing, percentage-of-portfolio rebalancing, and constant-proportion portfolio insurance.</li></ul></div></div></div> <span class="heading-toc" id="toc-why-rebalance"></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 Rebalance? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Primarily, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/rebalance-your-portfolio-stay-on-track/">portfolio rebalancing</a> safeguards the investor from being overly exposed to undesirable risks. It also ensures that the portfolio exposures remain within the manager’s area of expertise. </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"> Assume that a retiree has 75% of their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a> invested in <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskfreeasset.asp">risk-free assets</a>, with the remainder in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity.asp">equities</a>. If the equity investments triple in value, then 50% of the portfolio is now allocated to risky stocks. An individual portfolio manager who specializes in <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fixed-income-trading-strategy-and-education-4689677">fixed-income investments</a> would no longer be qualified to manage the portfolio, as the allocation has shifted outside their area of expertise. To avoid these unwanted shifts, the portfolio must be regularly rebalanced. </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"> Also, the growing portfolio proportion allocated to equities increases the overall risk to levels beyond those normally desired by a retiree. </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"> There are several basic rebalancing options that either <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retailinvestor.asp">retail</a> or <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> can utilize to create an optimal investment process. </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-calendar-rebalancing"></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"> Calendar Rebalancing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Calendar rebalancing is the most rudimentary rebalancing approach. This strategy simply involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting to the original allocation at a desired frequency. Monthly and quarterly assessments are typically preferred, because weekly rebalancing would be overly expensive and a yearly approach would allow for too much intermediate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/styledrift.asp">portfolio drift</a>. The ideal frequency of rebalancing must be determined based on time constraints, transaction costs, and allowable drift. </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 question that many investors have relates to the ideal time frame for rebalancing their portfolios. A 2019 Vanguard study tracked portfolios with a 60/40 mix of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock.asp">stocks</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bond.asp">bonds</a> that were rebalanced monthly, quarterly, annually, and never. The researchers found “little difference” in portfolio performance among the time frames involved.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> A major advantage of calendar rebalancing over formulaic rebalancing is that it is significantly less time consuming for the investor, since the latter method is a continuous process. </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-percentage-of-portfolio-rebalancing"></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"> Percentage-of-Portfolio Rebalancing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> A preferred yet slightly more intensive approach to implement involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Every <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp#axzz1PpVUPE9M">asset </a><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assetclasses.asp">class</a>, or individual security, is given a target weight and a corresponding tolerance range. </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"> For example, an allocation strategy might include the requirement to hold 30% in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/emergingmarketfund.asp">emerging market equities</a>, 30% in domestic <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bluechip.asp">blue chips</a>, and 40% in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/government-bond.asp">government bonds</a> with a corridor of +/- 5% for each asset class. Basically, emerging market and domestic blue chip holdings can both fluctuate between 25% and 35%, while 35% to 45% of the portfolio must be allocated to government bonds. When the weight of any one holding jumps outside of the allowable band, the entire portfolio is rebalanced to reflect the initial target composition. </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"> These two rebalancing techniques—the calendar and corridor methods—are known as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/09/constant-mix-buy-hold.asp#:~:text=Constant%2Dmix%20is%20to%20have,performs%20better%20in%20rising%20markets.">constant-mix</a> strategies because the weights of the holdings do not change. </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"> Determining the range of the corridors depends on the intrinsic characteristics of individual asset classes, as different securities possess unique properties that influence the decision. <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>, price <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a>, and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correlation.asp">correlation</a> with other portfolio holdings are the three most important variables in determining band sizes. Intuitively, higher transaction costs will require wider allowable ranges to minimize the impact of expensive trading costs. </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"> High volatility, on the other hand, has the opposite impact on the optimal corridor bands—<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/aggressiveinvestmentstrategy.asp">riskier securities </a>should be confined to a narrow range to ensure that they are not overrepresented or underrepresented in the portfolio. Finally, securities or asset classes that are strongly correlated with other held investments can acceptably have broad ranges since their price movements parallel other assets within the portfolio. </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-constant-proportion-portfolio-insurance"></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"> Constant Proportion Portfolio Insurance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> A third rebalancing approach, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cppi.asp">constant proportion portfolio insurance (CPPI)</a> strategy, assumes that as investors’ wealth increases, so does their <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risktolerance.asp">risk tolerance</a>. The basic premise of this technique stems from having a preference of maintaining a minimum safety reserve held in either <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cash.asp">cash</a> or risk-free government bonds. When the value of the portfolio increases, more funds are invested in equities, whereas a fall in portfolio worth results in a smaller position toward risky assets. Maintaining the safety reserve, whether it will be used to fund a college expense or put a down payment on a home, is the most important requirement for the investor. </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 CPPI strategies, the amount of money invested in stocks can be determined with the formula: </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"> <span data-value="\begin{aligned} &amp;\$\text{ Stock Investments} = M \times (TA - F)\\ &amp;\textbf{where:}\\ &amp;M=\text{Investment multiplier (More Risk = Higher }M)\\ &amp;TA=\text{Total portfolio assets}\\ &amp;F=\text{Allowable floor (minimum safety reserve)}\\ \end{aligned}"><span class="katex"><span class="katex-mathml"> <math> <semantics> <mtable> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> $ </mi> <mtext>  Stock Investments </mtext> <mo> = </mo> <mi> M </mi> <mo> × </mo> <mo> ( </mo> <mi> T </mi> <mi> A </mi> <mo> − </mo> <mi> F </mi> <mo> ) </mo> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mtext> where: </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> M </mi> <mo> = </mo> <mtext> Investment multiplier (More Risk = Higher  </mtext> <mi> M </mi> <mo> ) </mo> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> T </mi> <mi> A </mi> <mo> = </mo> <mtext> Total portfolio assets </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> F </mi> <mo> = </mo> <mtext> Allowable floor (minimum safety reserve) </mtext> </mrow> </mstyle> </mtd> </mtr> </mtable> <annotation encoding="application/x-tex"> \begin{aligned} &amp;\$\text{ Stock Investments} = M \times (TA - F)\\ &amp;\textbf{where:}\\ &amp;M=\text{Investment multiplier (More Risk = Higher }M)\\ &amp;TA=\text{Total portfolio assets}\\ &amp;F=\text{Allowable floor (minimum safety reserve)}\\ \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 class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><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">$</span><span class="mord text"><span class="mord"> Stock Investments</span></span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord mathdefault">M</span><span class="mspace"></span><span class="mbin">×</span><span class="mspace"></span><span class="mopen">(</span><span class="mord mathdefault">T</span><span class="mord mathdefault">A</span><span class="mspace"></span><span class="mbin">−</span><span class="mspace"></span><span class="mord mathdefault">F</span><span class="mclose">)</span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord text"><span class="mord textbf">where:</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathdefault">M</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">Investment multiplier (More Risk = Higher </span></span><span class="mord mathdefault">M</span><span class="mclose">)</span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathdefault">T</span><span class="mord mathdefault">A</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">Total portfolio assets</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathdefault">F</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">Allowable floor (minimum safety reserve)</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> <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 example, assume that an individual has an investment portfolio of $300,000, of which $150,000 must be saved to pay for her daughter’s university tuition. The investment multiplier is 1.5. </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"> Initially, the amount of funds invested in stocks is $225,000 [1.5*($300,000-150,000)], with the remainder allocated to risk-free securities. If the market falls by 20%, then the value of the equity holdings will be reduced to $180,000 ($225,000*0.8), while the worth of the fixed-income holdings remain at $75,000, to produce a total portfolio value of $255,000. The portfolio then would have to be rebalanced using the previous formula, and now only $157,500 would be allocated to risky investments [1.5*(255,000-150,0000)]. </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"> CPPI rebalancing must be used in tandem with rebalancing and portfolio optimization strategies, as it fails to provide details on the frequency of rebalancing and only indicates how much equity should be held within a portfolio rather than providing a holding breakdown of asset classes along with their ideal corridors. Another source of difficulty with the CPPI approach deals with the ambiguous nature of the aforementioned “M,” which will vary among investors. </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_47-0"><span class="heading-toc" id="toc-why-should-you-rebalance-a-portfolio"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why should you rebalance a portfolio?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are two main purposes to portfolio rebalancing:</p><ol><li>It minimizes risk by ensuring that investors are not overly exposed to volatile assets in the long run.</li><li>Rebalancing ensures portfolio diversification and that exposures within the portfolio remain in the manager’s area of expertise.</li></ol></div> </div> <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-what-costs-should-you-consider-while-rebalancing-a-portfolio"></span> <h2 class="mntl-sc-block-questionandanswer__question">What costs should you consider while rebalancing a portfolio?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The two main costs to consider while <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-rebalance-your-portfolio-7973806">rebalancing a portfolio</a> are taxes and transaction fees. Each rebalancing transaction may incur fees, such as those from fund managers. Asset sales also have tax implications in the form of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalgain.asp">capital gains</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalloss.asp">losses</a>.</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-a-calendar-rebalancing-strategy"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is a calendar rebalancing strategy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Calendar rebalancing is a rudimentary rebalancing approach that involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting them to their original weightings to minimize risk.</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-a-percentage-of-portfolio-rebalancing-strategy"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is a percentage-of-portfolio rebalancing strategy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A percentage-of-portfolio rebalancing strategy aims to reconstitute asset ratios based on the investor’s risk tolerance as opposed to a predetermined time frame. Thus, it involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Once the asset’s price exceeds the allowable percentage composition, it is rebalanced back to its original weighting.</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-a-constant-proportion-portfolio-insurance-cppi-rebalancing-strategy"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is a constant proportion portfolio insurance (CPPI) rebalancing strategy?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A constant proportion portfolio insurance (CPPI) strategy involves holding a minimum safety reserve, either in cash or risk-free government bonds, and investing the rest in risky assets, such as stocks. The strategy is mostly used to fund a major life event, such as college expenses, and is more commonly used as an investor’s wealth and risk tolerance increase. An investment multiplier is used to determine the amounts for safety reserves and investment.</p></div> </div> <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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels. The ideal strategy will balance out the overall needs of rebalancing with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/explicitcost.asp">explicit costs</a> associated with the chosen strategy. </p></div>

[Rebalancing](https://www.investopedia.com/terms/r/rebalancing.asp) is an essential component of the [portfolio management](https://www.investopedia.com/terms/p/portfoliomanagement.asp) process. Investors who seek the services of a professional typically have a desired level of systematic [risk](https://www.investopedia.com/terms/r/risk.asp) exposure, and thus their portfolio manager has a responsibility to adjust investment holdings to adhere to the clients’ constraints and preferences. Although portfolio rebalancing strategies incur transaction costs and [tax liabilities](https://www.investopedia.com/terms/t/taxliability.asp), there are several distinct advantages to maintaining the desired target allocation. ### Key Takeaways * Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels. * Rebalancing allows investors to ensure that their portfolio remains aligned with their intended risk profile. * Strategies include calendar rebalancing, percentage-of-portfolio rebalancing, and constant-proportion portfolio insurance. ## Why Rebalance? Primarily, [portfolio rebalancing](https://www.investopedia.com/investing/rebalance-your-portfolio-stay-on-track/) safeguards the investor from being overly exposed to undesirable risks. It also ensures that the portfolio exposures remain within the manager’s area of expertise. Assume that a retiree has 75% of their [portfolio](https://www.investopedia.com/terms/p/portfolio.asp) invested in [risk-free assets](https://www.investopedia.com/terms/r/riskfreeasset.asp), with the remainder in [equities](https://www.investopedia.com/terms/e/equity.asp). If the equity investments triple in value, then 50% of the portfolio is now allocated to risky stocks. An individual portfolio manager who specializes in [fixed-income investments](https://www.investopedia.com/fixed-income-trading-strategy-and-education-4689677) would no longer be qualified to manage the portfolio, as the allocation has shifted outside their area of expertise. To avoid these unwanted shifts, the portfolio must be regularly rebalanced. Also, the growing portfolio proportion allocated to equities increases the overall risk to levels beyond those normally desired by a retiree. There are several basic rebalancing options that either [retail](https://www.investopedia.com/terms/r/retailinvestor.asp) or [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) can utilize to create an optimal investment process. ## Calendar Rebalancing Calendar rebalancing is the most rudimentary rebalancing approach. This strategy simply involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting to the original allocation at a desired frequency. Monthly and quarterly assessments are typically preferred, because weekly rebalancing would be overly expensive and a yearly approach would allow for too much intermediate [portfolio drift](https://www.investopedia.com/terms/s/styledrift.asp). The ideal frequency of rebalancing must be determined based on time constraints, transaction costs, and allowable drift. A question that many investors have relates to the ideal time frame for rebalancing their portfolios. A 2019 Vanguard study tracked portfolios with a 60/40 mix of [stocks](https://www.investopedia.com/terms/s/stock.asp) and [bonds](https://www.investopedia.com/terms/b/bond.asp) that were rebalanced monthly, quarterly, annually, and never. The researchers found “little difference” in portfolio performance among the time frames involved. A major advantage of calendar rebalancing over formulaic rebalancing is that it is significantly less time consuming for the investor, since the latter method is a continuous process. ## Percentage-of-Portfolio Rebalancing A preferred yet slightly more intensive approach to implement involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Every [asset](https://www.investopedia.com/terms/a/assetclasses.asp#axzz1PpVUPE9M) [class](https://www.investopedia.com/terms/a/assetclasses.asp), or individual security, is given a target weight and a corresponding tolerance range. For example, an allocation strategy might include the requirement to hold 30% in [emerging market equities](https://www.investopedia.com/terms/e/emergingmarketfund.asp), 30% in domestic [blue chips](https://www.investopedia.com/terms/b/bluechip.asp), and 40% in [government bonds](https://www.investopedia.com/terms/g/government-bond.asp) with a corridor of +/- 5% for each asset class. Basically, emerging market and domestic blue chip holdings can both fluctuate between 25% and 35%, while 35% to 45% of the portfolio must be allocated to government bonds. When the weight of any one holding jumps outside of the allowable band, the entire portfolio is rebalanced to reflect the initial target composition. These two rebalancing techniques—the calendar and corridor methods—are known as [constant-mix](https://www.investopedia.com/articles/stocks/09/constant-mix-buy-hold.asp#:~:text=Constant%2Dmix%20is%20to%20have,performs%20better%20in%20rising%20markets.) strategies because the weights of the holdings do not change. Determining the range of the corridors depends on the intrinsic characteristics of individual asset classes, as different securities possess unique properties that influence the decision. [Transaction costs](https://www.investopedia.com/terms/t/transactioncosts.asp), price [volatility](https://www.investopedia.com/terms/v/volatility.asp), and [correlation](https://www.investopedia.com/terms/c/correlation.asp) with other portfolio holdings are the three most important variables in determining band sizes. Intuitively, higher transaction costs will require wider allowable ranges to minimize the impact of expensive trading costs. High volatility, on the other hand, has the opposite impact on the optimal corridor bands—[riskier securities](https://www.investopedia.com/terms/a/aggressiveinvestmentstrategy.asp) should be confined to a narrow range to ensure that they are not overrepresented or underrepresented in the portfolio. Finally, securities or asset classes that are strongly correlated with other held investments can acceptably have broad ranges since their price movements parallel other assets within the portfolio. ## Constant Proportion Portfolio Insurance A third rebalancing approach, the [constant proportion portfolio insurance (CPPI)](https://www.investopedia.com/terms/c/cppi.asp) strategy, assumes that as investors’ wealth increases, so does their [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp). The basic premise of this technique stems from having a preference of maintaining a minimum safety reserve held in either [cash](https://www.investopedia.com/terms/c/cash.asp) or risk-free government bonds. When the value of the portfolio increases, more funds are invested in equities, whereas a fall in portfolio worth results in a smaller position toward risky assets. Maintaining the safety reserve, whether it will be used to fund a college expense or put a down payment on a home, is the most important requirement for the investor. For CPPI strategies, the amount of money invested in stocks can be determined with the formula: $  Stock Investments = M × ( T A − F ) where: M = Investment multiplier (More Risk = Higher  M ) T A = Total portfolio assets F = Allowable floor (minimum safety reserve) \begin{aligned} &\$\text{ Stock Investments} = M \times (TA - F)\\ &\textbf{where:}\\ &M=\text{Investment multiplier (More Risk = Higher }M)\\ &TA=\text{Total portfolio assets}\\ &F=\text{Allowable floor (minimum safety reserve)}\\ \end{aligned} ​$ Stock Investments=M×(TA−F)where:M=Investment multiplier (More Risk = Higher M)TA=Total portfolio assetsF=Allowable floor (minimum safety reserve)​ For example, assume that an individual has an investment portfolio of $300,000, of which $150,000 must be saved to pay for her daughter’s university tuition. The investment multiplier is 1.5. Initially, the amount of funds invested in stocks is $225,000 [1.5\*($300,000-150,000)], with the remainder allocated to risk-free securities. If the market falls by 20%, then the value of the equity holdings will be reduced to $180,000 ($225,000\*0.8), while the worth of the fixed-income holdings remain at $75,000, to produce a total portfolio value of $255,000. The portfolio then would have to be rebalanced using the previous formula, and now only $157,500 would be allocated to risky investments [1.5\*(255,000-150,0000)]. CPPI rebalancing must be used in tandem with rebalancing and portfolio optimization strategies, as it fails to provide details on the frequency of rebalancing and only indicates how much equity should be held within a portfolio rather than providing a holding breakdown of asset classes along with their ideal corridors. Another source of difficulty with the CPPI approach deals with the ambiguous nature of the aforementioned “M,” which will vary among investors. ## Why should you rebalance a portfolio? There are two main purposes to portfolio rebalancing: 1. It minimizes risk by ensuring that investors are not overly exposed to volatile assets in the long run. 2. Rebalancing ensures portfolio diversification and that exposures within the portfolio remain in the manager’s area of expertise. ## What costs should you consider while rebalancing a portfolio? The two main costs to consider while [rebalancing a portfolio](https://www.investopedia.com/how-to-rebalance-your-portfolio-7973806) are taxes and transaction fees. Each rebalancing transaction may incur fees, such as those from fund managers. Asset sales also have tax implications in the form of [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) or [losses](https://www.investopedia.com/terms/c/capitalloss.asp). ## What is a calendar rebalancing strategy? Calendar rebalancing is a rudimentary rebalancing approach that involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting them to their original weightings to minimize risk. ## What is a percentage-of-portfolio rebalancing strategy? A percentage-of-portfolio rebalancing strategy aims to reconstitute asset ratios based on the investor’s risk tolerance as opposed to a predetermined time frame. Thus, it involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Once the asset’s price exceeds the allowable percentage composition, it is rebalanced back to its original weighting. ## What is a constant proportion portfolio insurance (CPPI) rebalancing strategy? A constant proportion portfolio insurance (CPPI) strategy involves holding a minimum safety reserve, either in cash or risk-free government bonds, and investing the rest in risky assets, such as stocks. The strategy is mostly used to fund a major life event, such as college expenses, and is more commonly used as an investor’s wealth and risk tolerance increase. An investment multiplier is used to determine the amounts for safety reserves and investment. ## The Bottom Line Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels. The ideal strategy will balance out the overall needs of rebalancing with the [explicit costs](https://www.investopedia.com/terms/e/explicitcost.asp) associated with the chosen strategy.

Rebalancing is an essential component of the portfolio management process. Investors who seek the services of a professional typically have a desired level of systematic risk exposure, and thus their portfolio manager has a responsibility to adjust investment holdings to adhere to the clients’ constraints and preferences. Although portfolio rebalancing strategies incur transaction costs and tax liabilities, there are several distinct advantages to maintaining the desired target allocation. Key Takeaways Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels.Rebalancing allows investors to ensure that their portfolio remains aligned with their intended risk profile.Strategies include calendar rebalancing, percentage-of-portfolio rebalancing, and constant-proportion portfolio insurance. Why Rebalance? Primarily, portfolio rebalancing safeguards the investor from being overly exposed to undesirable risks. It also ensures that the portfolio exposures remain within the manager’s area of expertise. Assume that a retiree has 75% of their portfolio invested in risk-free assets, with the remainder in equities. If the equity investments triple in value, then 50% of the portfolio is now allocated to risky stocks. An individual portfolio manager who specializes in fixed-income investments would no longer be qualified to manage the portfolio, as the allocation has shifted outside their area of expertise. To avoid these unwanted shifts, the portfolio must be regularly rebalanced. Also, the growing portfolio proportion allocated to equities increases the overall risk to levels beyond those normally desired by a retiree. There are several basic rebalancing options that either retail or institutional investors can utilize to create an optimal investment process. Calendar Rebalancing Calendar rebalancing is the most rudimentary rebalancing approach. This strategy simply involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting to the original allocation at a desired frequency. Monthly and quarterly assessments are typically preferred, because weekly rebalancing would be overly expensive and a yearly approach would allow for too much intermediate portfolio drift. The ideal frequency of rebalancing must be determined based on time constraints, transaction costs, and allowable drift. A question that many investors have relates to the ideal time frame for rebalancing their portfolios. A 2019 Vanguard study tracked portfolios with a 60/40 mix of stocks and bonds that were rebalanced monthly, quarterly, annually, and never. The researchers found “little difference” in portfolio performance among the time frames involved. A major advantage of calendar rebalancing over formulaic rebalancing is that it is significantly less time consuming for the investor, since the latter method is a continuous process. Percentage-of-Portfolio Rebalancing A preferred yet slightly more intensive approach to implement involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Every asset class, or individual security, is given a target weight and a corresponding tolerance range. For example, an allocation strategy might include the requirement to hold 30% in emerging market equities, 30% in domestic blue chips, and 40% in government bonds with a corridor of +/- 5% for each asset class. Basically, emerging market and domestic blue chip holdings can both fluctuate between 25% and 35%, while 35% to 45% of the portfolio must be allocated to government bonds. When the weight of any one holding jumps outside of the allowable band, the entire portfolio is rebalanced to reflect the initial target composition. These two rebalancing techniques—the calendar and corridor methods—are known as constant-mix strategies because the weights of the holdings do not change. Determining the range of the corridors depends on the intrinsic characteristics of individual asset classes, as different securities possess unique properties that influence the decision. Transaction costs, price volatility, and correlation with other portfolio holdings are the three most important variables in determining band sizes. Intuitively, higher transaction costs will require wider allowable ranges to minimize the impact of expensive trading costs. High volatility, on the other hand, has the opposite impact on the optimal corridor bands—riskier securities should be confined to a narrow range to ensure that they are not overrepresented or underrepresented in the portfolio. Finally, securities or asset classes that are strongly correlated with other held investments can acceptably have broad ranges since their price movements parallel other assets within the portfolio. Constant Proportion Portfolio Insurance A third rebalancing approach, the constant proportion portfolio insurance (CPPI) strategy, assumes that as investors’ wealth increases, so does their risk tolerance. The basic premise of this technique stems from having a preference of maintaining a minimum safety reserve held in either cash or risk-free government bonds. When the value of the portfolio increases, more funds are invested in equities, whereas a fall in portfolio worth results in a smaller position toward risky assets. Maintaining the safety reserve, whether it will be used to fund a college expense or put a down payment on a home, is the most important requirement for the investor. For CPPI strategies, the amount of money invested in stocks can be determined with the formula: $  Stock Investments = M × ( T A − F ) where: M = Investment multiplier (More Risk = Higher  M ) T A = Total portfolio assets F = Allowable floor (minimum safety reserve) \begin{aligned} &\$\text{ Stock Investments} = M \times (TA - F)\\ &\textbf{where:}\\ &M=\text{Investment multiplier (More Risk = Higher }M)\\ &TA=\text{Total portfolio assets}\\ &F=\text{Allowable floor (minimum safety reserve)}\\ \end{aligned} ​$ Stock Investments=M×(TA−F)where:M=Investment multiplier (More Risk = Higher M)TA=Total portfolio assetsF=Allowable floor (minimum safety reserve)​ For example, assume that an individual has an investment portfolio of $300,000, of which $150,000 must be saved to pay for her daughter’s university tuition. The investment multiplier is 1.5. Initially, the amount of funds invested in stocks is $225,000 [1.5*($300,000-150,000)], with the remainder allocated to risk-free securities. If the market falls by 20%, then the value of the equity holdings will be reduced to $180,000 ($225,000*0.8), while the worth of the fixed-income holdings remain at $75,000, to produce a total portfolio value of $255,000. The portfolio then would have to be rebalanced using the previous formula, and now only $157,500 would be allocated to risky investments [1.5*(255,000-150,0000)]. CPPI rebalancing must be used in tandem with rebalancing and portfolio optimization strategies, as it fails to provide details on the frequency of rebalancing and only indicates how much equity should be held within a portfolio rather than providing a holding breakdown of asset classes along with their ideal corridors. Another source of difficulty with the CPPI approach deals with the ambiguous nature of the aforementioned “M,” which will vary among investors. Why should you rebalance a portfolio? There are two main purposes to portfolio rebalancing:It minimizes risk by ensuring that investors are not overly exposed to volatile assets in the long run.Rebalancing ensures portfolio diversification and that exposures within the portfolio remain in the manager’s area of expertise. What costs should you consider while rebalancing a portfolio? The two main costs to consider while rebalancing a portfolio are taxes and transaction fees. Each rebalancing transaction may incur fees, such as those from fund managers. Asset sales also have tax implications in the form of capital gains or losses. What is a calendar rebalancing strategy? Calendar rebalancing is a rudimentary rebalancing approach that involves analyzing the investment holdings within the portfolio at predetermined time intervals and adjusting them to their original weightings to minimize risk. What is a percentage-of-portfolio rebalancing strategy? A percentage-of-portfolio rebalancing strategy aims to reconstitute asset ratios based on the investor’s risk tolerance as opposed to a predetermined time frame. Thus, it involves a rebalancing schedule focused on the allowable percentage composition of an asset in a portfolio. Once the asset’s price exceeds the allowable percentage composition, it is rebalanced back to its original weighting. What is a constant proportion portfolio insurance (CPPI) rebalancing strategy? A constant proportion portfolio insurance (CPPI) strategy involves holding a minimum safety reserve, either in cash or risk-free government bonds, and investing the rest in risky assets, such as stocks. The strategy is mostly used to fund a major life event, such as college expenses, and is more commonly used as an investor’s wealth and risk tolerance increase. An investment multiplier is used to determine the amounts for safety reserves and investment. The Bottom Line Portfolio rebalancing provides protection and discipline for any investment management strategy at the retail and professional levels. The ideal strategy will balance out the overall needs of rebalancing with the explicit costs associated with the chosen strategy.

https://www.investopedia.com/articles/07/clean_and_green.asp

Go Green With Socially Responsible Investing

<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/s/sri.asp" rel="noopener noreferrer">Socially responsible investing</a> (SRI) is an investment process that considers social and environmental factors within the context of traditional quantitative securities and investment analysis. In this article, we'll review SRI investing and what it can do for your portfolio. </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>Socially responsible investing considers the social and environmental impact of any investment.</li><li>Early socially minded investors avoided alcohol, tobacco, gambling, and weapons-making businesses. Later, socially responsible investors avoided companies that invested in South Africa during apartheid.</li><li>Screening for socially responsible investments doesn't necessarily come at the cost of investment performance.</li></ul></div></div></div> <span class="heading-toc" id="toc-religious-and-political-roots"></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"> Religious and Political Roots </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> SRI traces its roots to religious practice. In the 1800s, religious investors avoided businesses involved with alcohol, tobacco, gambling, and weapons making. In the 1970s and 1980s, opposition to the Vietnam War and apartheid in South Africa helped to establish socially responsible investment practices as we know them today.<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_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> In 1982, Calvert Social Investment Fund became the first mutual fund to prohibit investments in South Africa, setting the stage for the divestiture movement opposed to that country's system of racial inequality.<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_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> More recently, clean-tech investors (or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/greeneconomics.asp" rel="noopener noreferrer">green investors</a>) have moved into the SRI arena as they look for companies involved in clean energy or other technologies that balance the interaction between humans and the environment. This stems from the growing recognition that <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/uneconomic-growth.asp" rel="noopener noreferrer">uneconomic growth</a> is having serious negative social and environmental consequences, and capital should support growth that is more sustainable. </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-socially-responsible-investing-goes-mainstream"></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"> Socially Responsible Investing Goes Mainstream </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Because not everyone holds the same values, it is difficult to provide a universal definition of socially responsible investing. Some investors oppose investing in companies involved with alcohol, while others enjoy a good tipple and find investments in alcohol perfectly acceptable. However, there are some investments for which there is near unanimity among the socially conscious. Tobacco, for example, is almost universally disdained. </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"> In 1950, Pioneer Fund became the first mutual fund to screen for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sinfulstock.asp" rel="noopener noreferrer">sin stocks</a> such as alcohol, tobacco, and gambling.<span class="ql-inline-citation" data-cite="1"></span> Founded in 1928, the Pioneer Fund avoided such investments throughout much of its history, though its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prospectus.asp" rel="noopener noreferrer">prospectus</a> did not formally impose this criteria until July 2018.<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_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Mutual funds and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp" rel="noopener noreferrer">exchange-traded funds</a> (ETFs) that adhere to an <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" rel="noopener noreferrer">environmental, social, and governance</a> (ESG) criteria are now commonplace. A mutual fund and ETF screener operated by Mitre Media turns up more than 1,300 choices in the ESG equity category.<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"> Social investors use five basic strategies to maximize financial return and social good: </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"> Screening </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> This is the filtering process used to either identify certain securities to exclude or to find those that should be included in investors' portfolios based on social and/or environmental criteria. </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"> Negative Screening </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> The original focus of SRIs was to avoid investments in companies engaged in undesirable activities, whether it was a beer brewer or tobacco manufacturer. These negative screens exclude certain securities from investment consideration based on social or environmental criteria and can preclude investing in tobacco, gambling, alcohol, or weapons manufacturing. </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"> Inclusionary/Positive Screening </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Inclusionary or positive screening favors investments in companies that have strong records in a particular area such as the environment, employee relations, or diversity. Screening individual companies in an industry on social and environmental grounds highlights the records of individual firms relative to their peers. </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 screening technique grew out of the negative screening process. As avoidance screens became more sophisticated, some investors began to realize they could actively seek out and include companies with desirable characteristics in their portfolios, rather than simply avoiding companies. </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"> Extensive evaluations of corporations' business practices are now commonly performed so that companies are often assessed to determine how <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sustainability.asp" rel="noopener noreferrer">sustainable</a> they are as businesses and whether or not they are having a high and positive social and environmental impact. Positive screening is often used to support underserved communities in areas such as mortgages or small business credit. </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"> Divestiture </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/divestment.asp" rel="noopener noreferrer">Divesting</a> securities means to remove selected investments from a portfolio based on certain social or environmental criteria. On Wall Street, there has always been the belief that if you don't like how a company is run you can simply sell your stake and move on. </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"> Although this may sound simple and elegant in theory, the reality is that there are always transaction costs related to moving into or out of a security. Furthermore, many institutional investors hold such large positions that it can be extremely difficult and expensive to simply sell out of them. </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"> Shareholder Activism </span> </h3> <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/s/shareholderactivist.asp" rel="noopener noreferrer">Shareholder activism</a> attempts to positively influence corporate behavior in the belief that the cooperative efforts of social investors can prod management to steer a more responsible social and/or environmental course. These efforts can include initiating conversations with corporate management on issues of concern, along with submitting and voting proxy resolutions. </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"> Issues such as overseas labor, discrimination, marketing practices, excessive <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/07/executive_compensation.asp" rel="noopener noreferrer">executive compensation</a> are often questioned in the belief that changes will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors and communities. </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-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"> SRI advocates argue that screening helps eliminate companies that have risks not generally recognized by traditional financial analysis. Critics, however, say any approach that reduces the universe of potential investments will result in sacrificed performance. No doubt the debate will continue. But there are reasons to believe that investing in a socially responsible manner does not necessarily mean a reduction in 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"> The track record of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/domini_400.asp" rel="noopener noreferrer">MSCI KLD 400 Social Index</a> suggests that socially responsible investors do not need sacrifice performance for following their values. Created in 1990, the index was the first benchmark for equity portfolios subject to multiple social screens.<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_48-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> For example, the iShares MSCI KLD 400 Social ETF uses the index as its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp" rel="noopener noreferrer">benchmark</a> and returned 20.81% in 2020.<span class="ql-inline-citation" data-cite="6"></span> This compares to the 18.37% one-year return for the iShares Core S&amp;P 500 ETF, which is based on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp" rel="noopener noreferrer">S&amp;P 500 Index</a>.<span class="ql-inline-citation" data-cite="5"></span> </p></div>

[Socially responsible investing](https://www.investopedia.com/terms/s/sri.asp) (SRI) is an investment process that considers social and environmental factors within the context of traditional quantitative securities and investment analysis. In this article, we'll review SRI investing and what it can do for your portfolio. ### Key Takeaways * Socially responsible investing considers the social and environmental impact of any investment. * Early socially minded investors avoided alcohol, tobacco, gambling, and weapons-making businesses. Later, socially responsible investors avoided companies that invested in South Africa during apartheid. * Screening for socially responsible investments doesn't necessarily come at the cost of investment performance. ## Religious and Political Roots SRI traces its roots to religious practice. In the 1800s, religious investors avoided businesses involved with alcohol, tobacco, gambling, and weapons making. In the 1970s and 1980s, opposition to the Vietnam War and apartheid in South Africa helped to establish socially responsible investment practices as we know them today. In 1982, Calvert Social Investment Fund became the first mutual fund to prohibit investments in South Africa, setting the stage for the divestiture movement opposed to that country's system of racial inequality. More recently, clean-tech investors (or [green investors](https://www.investopedia.com/terms/g/greeneconomics.asp)) have moved into the SRI arena as they look for companies involved in clean energy or other technologies that balance the interaction between humans and the environment. This stems from the growing recognition that [uneconomic growth](https://www.investopedia.com/terms/u/uneconomic-growth.asp) is having serious negative social and environmental consequences, and capital should support growth that is more sustainable. ## Socially Responsible Investing Goes Mainstream Because not everyone holds the same values, it is difficult to provide a universal definition of socially responsible investing. Some investors oppose investing in companies involved with alcohol, while others enjoy a good tipple and find investments in alcohol perfectly acceptable. However, there are some investments for which there is near unanimity among the socially conscious. Tobacco, for example, is almost universally disdained. In 1950, Pioneer Fund became the first mutual fund to screen for [sin stocks](https://www.investopedia.com/terms/s/sinfulstock.asp) such as alcohol, tobacco, and gambling. Founded in 1928, the Pioneer Fund avoided such investments throughout much of its history, though its [prospectus](https://www.investopedia.com/terms/p/prospectus.asp) did not formally impose this criteria until July 2018. Mutual funds and [exchange-traded funds](https://www.investopedia.com/terms/e/etf.asp) (ETFs) that adhere to an [environmental, social, and governance](https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) (ESG) criteria are now commonplace. A mutual fund and ETF screener operated by Mitre Media turns up more than 1,300 choices in the ESG equity category. Social investors use five basic strategies to maximize financial return and social good: ### Screening This is the filtering process used to either identify certain securities to exclude or to find those that should be included in investors' portfolios based on social and/or environmental criteria. ### Negative Screening The original focus of SRIs was to avoid investments in companies engaged in undesirable activities, whether it was a beer brewer or tobacco manufacturer. These negative screens exclude certain securities from investment consideration based on social or environmental criteria and can preclude investing in tobacco, gambling, alcohol, or weapons manufacturing. ### Inclusionary/Positive Screening Inclusionary or positive screening favors investments in companies that have strong records in a particular area such as the environment, employee relations, or diversity. Screening individual companies in an industry on social and environmental grounds highlights the records of individual firms relative to their peers. This screening technique grew out of the negative screening process. As avoidance screens became more sophisticated, some investors began to realize they could actively seek out and include companies with desirable characteristics in their portfolios, rather than simply avoiding companies. Extensive evaluations of corporations' business practices are now commonly performed so that companies are often assessed to determine how [sustainable](https://www.investopedia.com/terms/s/sustainability.asp) they are as businesses and whether or not they are having a high and positive social and environmental impact. Positive screening is often used to support underserved communities in areas such as mortgages or small business credit. ### Divestiture [Divesting](https://www.investopedia.com/terms/d/divestment.asp) securities means to remove selected investments from a portfolio based on certain social or environmental criteria. On Wall Street, there has always been the belief that if you don't like how a company is run you can simply sell your stake and move on. Although this may sound simple and elegant in theory, the reality is that there are always transaction costs related to moving into or out of a security. Furthermore, many institutional investors hold such large positions that it can be extremely difficult and expensive to simply sell out of them. ### Shareholder Activism [Shareholder activism](https://www.investopedia.com/terms/s/shareholderactivist.asp) attempts to positively influence corporate behavior in the belief that the cooperative efforts of social investors can prod management to steer a more responsible social and/or environmental course. These efforts can include initiating conversations with corporate management on issues of concern, along with submitting and voting proxy resolutions. Issues such as overseas labor, discrimination, marketing practices, excessive [executive compensation](https://www.investopedia.com/articles/stocks/07/executive_compensation.asp) are often questioned in the belief that changes will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors and communities. ## The Bottom Line SRI advocates argue that screening helps eliminate companies that have risks not generally recognized by traditional financial analysis. Critics, however, say any approach that reduces the universe of potential investments will result in sacrificed performance. No doubt the debate will continue. But there are reasons to believe that investing in a socially responsible manner does not necessarily mean a reduction in returns. The track record of the [MSCI KLD 400 Social Index](https://www.investopedia.com/terms/d/domini_400.asp) suggests that socially responsible investors do not need sacrifice performance for following their values. Created in 1990, the index was the first benchmark for equity portfolios subject to multiple social screens. For example, the iShares MSCI KLD 400 Social ETF uses the index as its [benchmark](https://www.investopedia.com/terms/b/benchmark.asp) and returned 20.81% in 2020. This compares to the 18.37% one-year return for the iShares Core S&P 500 ETF, which is based on the [S&P 500 Index](https://www.investopedia.com/terms/s/sp500.asp).

Socially responsible investing (SRI) is an investment process that considers social and environmental factors within the context of traditional quantitative securities and investment analysis. In this article, we'll review SRI investing and what it can do for your portfolio. Key Takeaways Socially responsible investing considers the social and environmental impact of any investment.Early socially minded investors avoided alcohol, tobacco, gambling, and weapons-making businesses. Later, socially responsible investors avoided companies that invested in South Africa during apartheid.Screening for socially responsible investments doesn't necessarily come at the cost of investment performance. Religious and Political Roots SRI traces its roots to religious practice. In the 1800s, religious investors avoided businesses involved with alcohol, tobacco, gambling, and weapons making. In the 1970s and 1980s, opposition to the Vietnam War and apartheid in South Africa helped to establish socially responsible investment practices as we know them today. In 1982, Calvert Social Investment Fund became the first mutual fund to prohibit investments in South Africa, setting the stage for the divestiture movement opposed to that country's system of racial inequality. More recently, clean-tech investors (or green investors) have moved into the SRI arena as they look for companies involved in clean energy or other technologies that balance the interaction between humans and the environment. This stems from the growing recognition that uneconomic growth is having serious negative social and environmental consequences, and capital should support growth that is more sustainable. Socially Responsible Investing Goes Mainstream Because not everyone holds the same values, it is difficult to provide a universal definition of socially responsible investing. Some investors oppose investing in companies involved with alcohol, while others enjoy a good tipple and find investments in alcohol perfectly acceptable. However, there are some investments for which there is near unanimity among the socially conscious. Tobacco, for example, is almost universally disdained. In 1950, Pioneer Fund became the first mutual fund to screen for sin stocks such as alcohol, tobacco, and gambling. Founded in 1928, the Pioneer Fund avoided such investments throughout much of its history, though its prospectus did not formally impose this criteria until July 2018. Mutual funds and exchange-traded funds (ETFs) that adhere to an environmental, social, and governance (ESG) criteria are now commonplace. A mutual fund and ETF screener operated by Mitre Media turns up more than 1,300 choices in the ESG equity category. Social investors use five basic strategies to maximize financial return and social good: Screening This is the filtering process used to either identify certain securities to exclude or to find those that should be included in investors' portfolios based on social and/or environmental criteria. Negative Screening The original focus of SRIs was to avoid investments in companies engaged in undesirable activities, whether it was a beer brewer or tobacco manufacturer. These negative screens exclude certain securities from investment consideration based on social or environmental criteria and can preclude investing in tobacco, gambling, alcohol, or weapons manufacturing. Inclusionary/Positive Screening Inclusionary or positive screening favors investments in companies that have strong records in a particular area such as the environment, employee relations, or diversity. Screening individual companies in an industry on social and environmental grounds highlights the records of individual firms relative to their peers. This screening technique grew out of the negative screening process. As avoidance screens became more sophisticated, some investors began to realize they could actively seek out and include companies with desirable characteristics in their portfolios, rather than simply avoiding companies. Extensive evaluations of corporations' business practices are now commonly performed so that companies are often assessed to determine how sustainable they are as businesses and whether or not they are having a high and positive social and environmental impact. Positive screening is often used to support underserved communities in areas such as mortgages or small business credit. Divestiture Divesting securities means to remove selected investments from a portfolio based on certain social or environmental criteria. On Wall Street, there has always been the belief that if you don't like how a company is run you can simply sell your stake and move on. Although this may sound simple and elegant in theory, the reality is that there are always transaction costs related to moving into or out of a security. Furthermore, many institutional investors hold such large positions that it can be extremely difficult and expensive to simply sell out of them. Shareholder Activism Shareholder activism attempts to positively influence corporate behavior in the belief that the cooperative efforts of social investors can prod management to steer a more responsible social and/or environmental course. These efforts can include initiating conversations with corporate management on issues of concern, along with submitting and voting proxy resolutions. Issues such as overseas labor, discrimination, marketing practices, excessive executive compensation are often questioned in the belief that changes will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors and communities. The Bottom Line SRI advocates argue that screening helps eliminate companies that have risks not generally recognized by traditional financial analysis. Critics, however, say any approach that reduces the universe of potential investments will result in sacrificed performance. No doubt the debate will continue. But there are reasons to believe that investing in a socially responsible manner does not necessarily mean a reduction in returns. The track record of the MSCI KLD 400 Social Index suggests that socially responsible investors do not need sacrifice performance for following their values. Created in 1990, the index was the first benchmark for equity portfolios subject to multiple social screens. For example, the iShares MSCI KLD 400 Social ETF uses the index as its benchmark and returned 20.81% in 2020. This compares to the 18.37% one-year return for the iShares Core S&P 500 ETF, which is based on the S&P 500 Index.

https://www.investopedia.com/terms/c/credit-card-dump.asp

Credit Card Dump: Definition, Examples, Protecting Against

<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-credit-card-dump"></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 Credit Card Dump? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A credit card dump is a type of crime in which the criminal makes an unauthorized digital copy of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp" rel="noopener noreferrer">credit card</a>. This type of crime has existed for decades, but it has seen wider public awareness in recent years due to the rising prevalence of credit card forgeries, identity theft, and other types of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0112/3-ways-cyber-crime-impacts-business.aspx" rel="noopener noreferrer">cybercrime</a>. </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 dump is a type of crime in which credit card information is stolen from customers and made available to potential buyers.</li><li>Thieves do so either by physically copying data from the card or by hacking the payments network of the companies in question.</li><li>In recent years, criminals have undertaken increasingly large scale credit card dump attacks, sometimes with millions of victims.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-credit-card-dumps-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 Credit Card Dumps Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> There are many ways in which a credit card dump might occur. One common method is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/skimming.asp">skimming</a>, in which an illegal <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/card-reader.asp">card reader</a>, sometimes hidden in a legitimate <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp">automated teller machine (ATM)</a> or gas station pump, copies the data from a credit card. In other cases, cybercriminals are able to obtain a large number of card numbers at once, by compromising the computer systems of companies handling customer credit card information. For example, criminals might access thousands of retail customers’ credit card numbers by infecting the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/point-of-sale.asp">point-of-sale (POS)</a> devices of a large retail chain.  </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"> Although measures such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/06/personalinfoandbrokers.asp">personal information numbers (PINs)</a> and security chips can help make this theft more difficult, hackers nonetheless continue to find new ways to exploit weaknesses in the electronic payments system in order to capture valuable credit card information. To profit from this theft, cybercriminals resell the credit card information on the black market. Alternatively, hackers could also use the information themselves in order to make unauthorized online purchases using stolen credit cards. </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-protecting-against-credit-card-dumps"></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"> Protecting Against Credit Card Dumps </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Ultimately, consumers have limited means to protect themselves against the risk of cybercrime. After all, even the most cautious individuals might fall victim to credit card theft if hackers manage to compromise the systems of the companies where they shop. Nevertheless, there are steps individuals can take to reduce some of their risks. These include refraining from sharing their credit card information with others, keeping their credit cards close at hand when in public places, checking for any suspicious objects on or around ATMs, gas pumps, and POS machines; and regularly reviewing their credit card statements for any unfamiliar transactions. </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-examples-of-credit-card-dumps"></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"> Examples of Credit Card Dumps </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Unfortunately, there is no shortage of examples in which hackers managed to compromise vast amounts of credit card data from unsuspecting customers. Here are just a few examples: </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"> Capital One, the fifth-largest credit card issuer in the United States, revealed in July 2019 that a hacker accessed the personal information of around 106 million customers and applicants in the U.S. and Canada. The information that was accessed included highly personal details on consumers and small businesses, including names, social security numbers, income, and dates of birth as of the time they applied for one of several credit card products from 2005 through early 2019.<span class="ql-inline-citation" data-cite="3"></span> To date, the Capital One hack is the second-largest such data dump of all time. </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"> Data dumps don't only happen in America. In May 2019, for example, the popular Australian graphic design website, Canva, was breached by hackers, with nearly 140 million user accounts compromised. In addition to personal information such as names, usernames, and email addresses, the hackers also managed to access users’ credit card information.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Another notable incident occurred in October 2013, when Adobe (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=adbe">ADBE</a>) lost nearly 3 million customer credit card records in a large scale attack by hackers. The breach was part of a larger effort in which data from over 150 million users was also stolen. The company ultimately reached a roughly $1 million settlement with its customers over the incident.<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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_23-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/iHwcD/2/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Credit Card Security Breaches"></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_24-0"></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-was-the-biggest-credit-card-dump-to-date"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Was the Biggest Credit Card Dump to Date?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In terms of the number of customers exposed, the largest credit card dump so far was a hack on credit bureau Equifax in September of 2017, which exposed personal data of more than 147 million customers, including credit card details.<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_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-what-was-the-first-credit-card-dump"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Was the First Credit Card Dump?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Card theft, scams, and black markets for personal IDs have been around since the advent of credit cards in the 1960s and '70s. The first large-scale credit card dump, however, is often attributed to the year 1984, when the New York Times reported that the password for a leading credit union, TRW, was stolen from a Sears store on the West Coast. That password unlocked the credit histories and personal information of many Sears customers that would subsequently be used to obtain their credit card numbers.<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_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-how-can-i-avoid-being-a-victim-of-a-credit-card-dump"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can I Avoid Being a Victim of a Credit Card Dump?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Unfortunately, since credit card dumps involve security breaches of companies that you may shop at, having your card numbers stolen may be out of your hands. If you are aware of a breach, contact your credit card issuer immediately to put a freeze on your account and cancel &amp; replace your cards.</p><p>Another, newer, innovation is the use of virtual credit card numbers. Many banks and card companies today allow you to generate a temporary credit card number online that can be used for online shopping. This number, however, would not be able to be used again for subsequent purchases.</p></div> </div></div>

## What Is a Credit Card Dump? A credit card dump is a type of crime in which the criminal makes an unauthorized digital copy of a [credit card](https://www.investopedia.com/terms/c/creditcard.asp). This type of crime has existed for decades, but it has seen wider public awareness in recent years due to the rising prevalence of credit card forgeries, identity theft, and other types of [cybercrime](https://www.investopedia.com/financial-edge/0112/3-ways-cyber-crime-impacts-business.aspx). ### Key Takeaways * A credit card dump is a type of crime in which credit card information is stolen from customers and made available to potential buyers. * Thieves do so either by physically copying data from the card or by hacking the payments network of the companies in question. * In recent years, criminals have undertaken increasingly large scale credit card dump attacks, sometimes with millions of victims. ## How Credit Card Dumps Work There are many ways in which a credit card dump might occur. One common method is [skimming](https://www.investopedia.com/terms/s/skimming.asp), in which an illegal [card reader](https://www.investopedia.com/terms/c/card-reader.asp), sometimes hidden in a legitimate [automated teller machine (ATM)](https://www.investopedia.com/terms/a/atm.asp) or gas station pump, copies the data from a credit card. In other cases, cybercriminals are able to obtain a large number of card numbers at once, by compromising the computer systems of companies handling customer credit card information. For example, criminals might access thousands of retail customers’ credit card numbers by infecting the [point-of-sale (POS)](https://www.investopedia.com/terms/p/point-of-sale.asp) devices of a large retail chain.  Although measures such as [personal information numbers (PINs)](https://www.investopedia.com/ask/answers/06/personalinfoandbrokers.asp) and security chips can help make this theft more difficult, hackers nonetheless continue to find new ways to exploit weaknesses in the electronic payments system in order to capture valuable credit card information. To profit from this theft, cybercriminals resell the credit card information on the black market. Alternatively, hackers could also use the information themselves in order to make unauthorized online purchases using stolen credit cards. ## Protecting Against Credit Card Dumps Ultimately, consumers have limited means to protect themselves against the risk of cybercrime. After all, even the most cautious individuals might fall victim to credit card theft if hackers manage to compromise the systems of the companies where they shop. Nevertheless, there are steps individuals can take to reduce some of their risks. These include refraining from sharing their credit card information with others, keeping their credit cards close at hand when in public places, checking for any suspicious objects on or around ATMs, gas pumps, and POS machines; and regularly reviewing their credit card statements for any unfamiliar transactions. ## Examples of Credit Card Dumps Unfortunately, there is no shortage of examples in which hackers managed to compromise vast amounts of credit card data from unsuspecting customers. Here are just a few examples: Capital One, the fifth-largest credit card issuer in the United States, revealed in July 2019 that a hacker accessed the personal information of around 106 million customers and applicants in the U.S. and Canada. The information that was accessed included highly personal details on consumers and small businesses, including names, social security numbers, income, and dates of birth as of the time they applied for one of several credit card products from 2005 through early 2019. To date, the Capital One hack is the second-largest such data dump of all time. Data dumps don't only happen in America. In May 2019, for example, the popular Australian graphic design website, Canva, was breached by hackers, with nearly 140 million user accounts compromised. In addition to personal information such as names, usernames, and email addresses, the hackers also managed to access users’ credit card information. Another notable incident occurred in October 2013, when Adobe ([ADBE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=adbe)) lost nearly 3 million customer credit card records in a large scale attack by hackers. The breach was part of a larger effort in which data from over 150 million users was also stolen. The company ultimately reached a roughly $1 million settlement with its customers over the incident. ## What Was the Biggest Credit Card Dump to Date? In terms of the number of customers exposed, the largest credit card dump so far was a hack on credit bureau Equifax in September of 2017, which exposed personal data of more than 147 million customers, including credit card details. ## What Was the First Credit Card Dump? Card theft, scams, and black markets for personal IDs have been around since the advent of credit cards in the 1960s and '70s. The first large-scale credit card dump, however, is often attributed to the year 1984, when the New York Times reported that the password for a leading credit union, TRW, was stolen from a Sears store on the West Coast. That password unlocked the credit histories and personal information of many Sears customers that would subsequently be used to obtain their credit card numbers. ## How Can I Avoid Being a Victim of a Credit Card Dump? Unfortunately, since credit card dumps involve security breaches of companies that you may shop at, having your card numbers stolen may be out of your hands. If you are aware of a breach, contact your credit card issuer immediately to put a freeze on your account and cancel & replace your cards. Another, newer, innovation is the use of virtual credit card numbers. Many banks and card companies today allow you to generate a temporary credit card number online that can be used for online shopping. This number, however, would not be able to be used again for subsequent purchases.

What Is a Credit Card Dump? A credit card dump is a type of crime in which the criminal makes an unauthorized digital copy of a credit card. This type of crime has existed for decades, but it has seen wider public awareness in recent years due to the rising prevalence of credit card forgeries, identity theft, and other types of cybercrime. Key Takeaways A credit card dump is a type of crime in which credit card information is stolen from customers and made available to potential buyers.Thieves do so either by physically copying data from the card or by hacking the payments network of the companies in question.In recent years, criminals have undertaken increasingly large scale credit card dump attacks, sometimes with millions of victims. How Credit Card Dumps Work There are many ways in which a credit card dump might occur. One common method is skimming, in which an illegal card reader, sometimes hidden in a legitimate automated teller machine (ATM) or gas station pump, copies the data from a credit card. In other cases, cybercriminals are able to obtain a large number of card numbers at once, by compromising the computer systems of companies handling customer credit card information. For example, criminals might access thousands of retail customers’ credit card numbers by infecting the point-of-sale (POS) devices of a large retail chain.  Although measures such as personal information numbers (PINs) and security chips can help make this theft more difficult, hackers nonetheless continue to find new ways to exploit weaknesses in the electronic payments system in order to capture valuable credit card information. To profit from this theft, cybercriminals resell the credit card information on the black market. Alternatively, hackers could also use the information themselves in order to make unauthorized online purchases using stolen credit cards. Protecting Against Credit Card Dumps Ultimately, consumers have limited means to protect themselves against the risk of cybercrime. After all, even the most cautious individuals might fall victim to credit card theft if hackers manage to compromise the systems of the companies where they shop. Nevertheless, there are steps individuals can take to reduce some of their risks. These include refraining from sharing their credit card information with others, keeping their credit cards close at hand when in public places, checking for any suspicious objects on or around ATMs, gas pumps, and POS machines; and regularly reviewing their credit card statements for any unfamiliar transactions. Examples of Credit Card Dumps Unfortunately, there is no shortage of examples in which hackers managed to compromise vast amounts of credit card data from unsuspecting customers. Here are just a few examples: Capital One, the fifth-largest credit card issuer in the United States, revealed in July 2019 that a hacker accessed the personal information of around 106 million customers and applicants in the U.S. and Canada. The information that was accessed included highly personal details on consumers and small businesses, including names, social security numbers, income, and dates of birth as of the time they applied for one of several credit card products from 2005 through early 2019. To date, the Capital One hack is the second-largest such data dump of all time. Data dumps don't only happen in America. In May 2019, for example, the popular Australian graphic design website, Canva, was breached by hackers, with nearly 140 million user accounts compromised. In addition to personal information such as names, usernames, and email addresses, the hackers also managed to access users’ credit card information. Another notable incident occurred in October 2013, when Adobe (ADBE) lost nearly 3 million customer credit card records in a large scale attack by hackers. The breach was part of a larger effort in which data from over 150 million users was also stolen. The company ultimately reached a roughly $1 million settlement with its customers over the incident. What Was the Biggest Credit Card Dump to Date? In terms of the number of customers exposed, the largest credit card dump so far was a hack on credit bureau Equifax in September of 2017, which exposed personal data of more than 147 million customers, including credit card details. What Was the First Credit Card Dump? Card theft, scams, and black markets for personal IDs have been around since the advent of credit cards in the 1960s and '70s. The first large-scale credit card dump, however, is often attributed to the year 1984, when the New York Times reported that the password for a leading credit union, TRW, was stolen from a Sears store on the West Coast. That password unlocked the credit histories and personal information of many Sears customers that would subsequently be used to obtain their credit card numbers. How Can I Avoid Being a Victim of a Credit Card Dump? Unfortunately, since credit card dumps involve security breaches of companies that you may shop at, having your card numbers stolen may be out of your hands. If you are aware of a breach, contact your credit card issuer immediately to put a freeze on your account and cancel & replace your cards.Another, newer, innovation is the use of virtual credit card numbers. Many banks and card companies today allow you to generate a temporary credit card number online that can be used for online shopping. This number, however, would not be able to be used again for subsequent purchases.

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

Workflow: What It Is, How It Works, Digital Era

<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-workflow"></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 Workflow? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion; and how these steps can be executed and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/022017/7-jobs-cant-be-automated.asp" rel="noopener noreferrer">automated</a> according to a set of procedural rules. Organizations use workflow to coordinate tasks, improve organizational efficiency, add responsiveness, and drive profitability. Workflow may be sequential, with each step contingent upon completion of the previous one, or parallel, with multiple steps occurring simultaneously. </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>Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion.</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/six-sigma.asp" rel="noopener noreferrer">Six Sigma</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/total-quality-management-tqm.asp" rel="noopener noreferrer">Total quality management</a> (TQM) are two popular process improvement philosophies that companies embrace.</li> <li>Big data has helped to automate workflows through the development of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/alternative-investments-4427781" rel="noopener noreferrer">artificial intelligence</a> and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/machine-learning.asp" rel="noopener noreferrer">machine learning</a> systems.</li> <li>Workflow software and apps help businesses manage projects across different teams, locations, and time zones.</li> </ul></div></div></div> <span class="heading-toc" id="toc-understanding-workflow"></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 Workflow </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The concept of workflow was important to the study of the rational organization of work processes. These processes optimize manufacturing or informational processes to avoid bottlenecks—<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/triage.asp">known as triage</a>. After WW2, the quality movement developed several workflow improvement theories, which embraced more qualitative notions of business process re-engineering. These philosophies could be applied to car <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/assembly-line.asp-0">assembly lines</a>, a loan application by a bank, or the production of a newspaper. </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"> Six Sigma and Total quality management (TQM) are two process improvement philosophies that have been embraced by organizations around the world. TQM is a structured approach to overall organizational management, where internal guidelines and process standards reduce errors. The goal of Six Sigma is to reduce defects through quality control. </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-important" 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_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Six Sigma emphasizes cycle-time improvement while at the same time reducing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/manufacturing.asp">manufacturing</a> defects to a level of no more than 3.4 occurrences per million units or events. In other words, the system is a method to work faster with fewer mistakes.<span class="ql-inline-citation" data-cite="1"></span></p></div></div></div> <span class="heading-toc" id="toc-workflow-technologies-and-big-data"></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"> Workflow Technologies and Big Data </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Workflow technologies and management systems are being used today in industries as wide-ranging as finance, healthcare, marketing, and higher education. They have been fundamental to the development of artificial intelligence (AI) and machine learning systems that are having a significant impact on corporate workflows in every industry, thanks to their ability to process and extract value from big data. </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"> By gathering and sharing data across an organization, and embedding analytics, enterprise data management systems are used to eliminate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/information-silo.asp" rel="noopener noreferrer">information silos</a> and optimize business processes and automate data processing. This has helped to connect previously disconnected sectors and industries. </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"> Finance is being transformed by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/040915/how-big-data-has-changed-finance.asp" rel="noopener noreferrer">big data</a>, using it for both trading and compliance workflows. Investors are tapping into the flood of real-time data produced by global digitalization and social media, and experimenting with enhanced data analytics and AI to generate investment ideas – free of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/022015/how-cognitive-bias-affects-your-business.asp" rel="noopener noreferrer">cognitive bias</a> — and manage risk. </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-workflow-in-the-digital-era"></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"> Workflow in the Digital Era </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The need to manage projects across different teams, locations, and time zones has seen a huge rise in the popularity of workflow apps and software. This trend has only accelerated in 2021 as more companies connect with their employees <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/work-from-home-guide/">remotely</a> during the coronavirus pandemic. Some of the more popular workflow management software out there includes Easynote, Trello, Monday.com, and Accelo. These platforms make it easy to create tasks and assign them to different people while managing the entire workflow through a dashboard that acts as a central hub. Best of all, many of these platforms provide free access to key features, keeping costs low for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/011916/5-questions-ask-investing-startup.asp">startups</a> and small businesses. </p></div>

## What is Workflow? Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion; and how these steps can be executed and [automated](https://www.investopedia.com/articles/personal-finance/022017/7-jobs-cant-be-automated.asp) according to a set of procedural rules. Organizations use workflow to coordinate tasks, improve organizational efficiency, add responsiveness, and drive profitability. Workflow may be sequential, with each step contingent upon completion of the previous one, or parallel, with multiple steps occurring simultaneously. ### Key Takeaways * Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion. * [Six Sigma](https://www.investopedia.com/terms/s/six-sigma.asp) and [Total quality management](https://www.investopedia.com/terms/t/total-quality-management-tqm.asp) (TQM) are two popular process improvement philosophies that companies embrace. * Big data has helped to automate workflows through the development of [artificial intelligence](https://www.investopedia.com/alternative-investments-4427781) and [machine learning](https://www.investopedia.com/terms/m/machine-learning.asp) systems. * Workflow software and apps help businesses manage projects across different teams, locations, and time zones. ## Understanding Workflow The concept of workflow was important to the study of the rational organization of work processes. These processes optimize manufacturing or informational processes to avoid bottlenecks—[known as triage](https://www.investopedia.com/terms/t/triage.asp). After WW2, the quality movement developed several workflow improvement theories, which embraced more qualitative notions of business process re-engineering. These philosophies could be applied to car [assembly lines](https://www.investopedia.com/terms/a/assembly-line.asp-0), a loan application by a bank, or the production of a newspaper. Six Sigma and Total quality management (TQM) are two process improvement philosophies that have been embraced by organizations around the world. TQM is a structured approach to overall organizational management, where internal guidelines and process standards reduce errors. The goal of Six Sigma is to reduce defects through quality control. ### Six Sigma emphasizes cycle-time improvement while at the same time reducing [manufacturing](https://www.investopedia.com/terms/m/manufacturing.asp) defects to a level of no more than 3.4 occurrences per million units or events. In other words, the system is a method to work faster with fewer mistakes. ## Workflow Technologies and Big Data Workflow technologies and management systems are being used today in industries as wide-ranging as finance, healthcare, marketing, and higher education. They have been fundamental to the development of artificial intelligence (AI) and machine learning systems that are having a significant impact on corporate workflows in every industry, thanks to their ability to process and extract value from big data. By gathering and sharing data across an organization, and embedding analytics, enterprise data management systems are used to eliminate [information silos](https://www.investopedia.com/terms/i/information-silo.asp) and optimize business processes and automate data processing. This has helped to connect previously disconnected sectors and industries. Finance is being transformed by [big data](https://www.investopedia.com/articles/active-trading/040915/how-big-data-has-changed-finance.asp), using it for both trading and compliance workflows. Investors are tapping into the flood of real-time data produced by global digitalization and social media, and experimenting with enhanced data analytics and AI to generate investment ideas – free of [cognitive bias](https://www.investopedia.com/articles/investing/022015/how-cognitive-bias-affects-your-business.asp) — and manage risk. ## Workflow in the Digital Era The need to manage projects across different teams, locations, and time zones has seen a huge rise in the popularity of workflow apps and software. This trend has only accelerated in 2021 as more companies connect with their employees [remotely](https://www.investopedia.com/personal-finance/work-from-home-guide/) during the coronavirus pandemic. Some of the more popular workflow management software out there includes Easynote, Trello, Monday.com, and Accelo. These platforms make it easy to create tasks and assign them to different people while managing the entire workflow through a dashboard that acts as a central hub. Best of all, many of these platforms provide free access to key features, keeping costs low for [startups](https://www.investopedia.com/articles/investing/011916/5-questions-ask-investing-startup.asp) and small businesses.

What is Workflow? Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion; and how these steps can be executed and automated according to a set of procedural rules. Organizations use workflow to coordinate tasks, improve organizational efficiency, add responsiveness, and drive profitability. Workflow may be sequential, with each step contingent upon completion of the previous one, or parallel, with multiple steps occurring simultaneously. Key Takeaways Workflow describes the steps in a business work process, through which a piece of work passes from initiation to completion. Six Sigma and Total quality management (TQM) are two popular process improvement philosophies that companies embrace. Big data has helped to automate workflows through the development of artificial intelligence and machine learning systems. Workflow software and apps help businesses manage projects across different teams, locations, and time zones. Understanding Workflow The concept of workflow was important to the study of the rational organization of work processes. These processes optimize manufacturing or informational processes to avoid bottlenecks—known as triage. After WW2, the quality movement developed several workflow improvement theories, which embraced more qualitative notions of business process re-engineering. These philosophies could be applied to car assembly lines, a loan application by a bank, or the production of a newspaper. Six Sigma and Total quality management (TQM) are two process improvement philosophies that have been embraced by organizations around the world. TQM is a structured approach to overall organizational management, where internal guidelines and process standards reduce errors. The goal of Six Sigma is to reduce defects through quality control. Six Sigma emphasizes cycle-time improvement while at the same time reducing manufacturing defects to a level of no more than 3.4 occurrences per million units or events. In other words, the system is a method to work faster with fewer mistakes. Workflow Technologies and Big Data Workflow technologies and management systems are being used today in industries as wide-ranging as finance, healthcare, marketing, and higher education. They have been fundamental to the development of artificial intelligence (AI) and machine learning systems that are having a significant impact on corporate workflows in every industry, thanks to their ability to process and extract value from big data. By gathering and sharing data across an organization, and embedding analytics, enterprise data management systems are used to eliminate information silos and optimize business processes and automate data processing. This has helped to connect previously disconnected sectors and industries. Finance is being transformed by big data, using it for both trading and compliance workflows. Investors are tapping into the flood of real-time data produced by global digitalization and social media, and experimenting with enhanced data analytics and AI to generate investment ideas – free of cognitive bias — and manage risk. Workflow in the Digital Era The need to manage projects across different teams, locations, and time zones has seen a huge rise in the popularity of workflow apps and software. This trend has only accelerated in 2021 as more companies connect with their employees remotely during the coronavirus pandemic. Some of the more popular workflow management software out there includes Easynote, Trello, Monday.com, and Accelo. These platforms make it easy to create tasks and assign them to different people while managing the entire workflow through a dashboard that acts as a central hub. Best of all, many of these platforms provide free access to key features, keeping costs low for startups and small businesses.

https://www.investopedia.com/the-express-podcast-episode-174-8576265

Demystifying A.I. and How to Harness It To Learn and Earn More

<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=MERE6831081540" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="https://playlist.megaphone.fm/?e=MERE6831081540"></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"> Sonia Dumas, a futurist and co-founder of Campaign Coach A.I., joins the show to explain how A.I. is being used across industries from real estate to financial planning to enhance productivity and profitability, and why we there is nothing 'artificial' about it. Plus, more record highs for the stock market despite very thin breadth is just one reason doubters don't think this rally can last. Also, it's been a tough market for cheap stocks as investors keep favoring the biggest, most expensive companies. </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>Link for Show Notes: </strong> </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8575023">https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8575023</a><br/><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-closely-watched-cpi-inflation-report-8575435">https://www.investopedia.com/what-you-need-to-know-ahead-of-closely-watched-cpi-inflation-report-8575435</a><br/><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/form-13f.asp">https://www.investopedia.com/terms/f/form-13f.asp</a><br/><a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/russell_1000index.asp">https://www.investopedia.com/terms/r/russell_1000index.asp</a><br/><a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp">https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp</a><br/><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/soniadumas/">https://www.linkedin.com/in/soniadumas/</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"> <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><br/> </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) Sonia Dumas, a futurist and co-founder of Campaign Coach A.I., joins the show to explain how A.I. is being used across industries from real estate to financial planning to enhance productivity and profitability, and why we there is nothing 'artificial' about it. Plus, more record highs for the stock market despite very thin breadth is just one reason doubters don't think this rally can last. Also, it's been a tough market for cheap stocks as investors keep favoring the biggest, most expensive companies. **Link for Show Notes:** <https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8575023> <https://www.investopedia.com/what-you-need-to-know-ahead-of-closely-watched-cpi-inflation-report-8575435> <https://www.investopedia.com/terms/f/form-13f.asp> <https://www.investopedia.com/terms/r/russell_1000index.asp> <https://www.investopedia.com/terms/a/artificial-intelligence-ai.asp> <https://www.linkedin.com/in/soniadumas/> **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 Sonia Dumas, a futurist and co-founder of Campaign Coach A.I., joins the show to explain how A.I. is being used across industries from real estate to financial planning to enhance productivity and profitability, and why we there is nothing 'artificial' about it. Plus, more record highs for the stock market despite very thin breadth is just one reason doubters don't think this rally can last. Also, it's been a tough market for cheap stocks as investors keep favoring the biggest, most expensive companies. Link for Show Notes: https://www.investopedia.com/what-to-expect-in-the-markets-this-week-8575023https://www.investopedia.com/what-you-need-to-know-ahead-of-closely-watched-cpi-inflation-report-8575435https://www.investopedia.com/terms/f/form-13f.asphttps://www.investopedia.com/terms/r/russell_1000index.asphttps://www.investopedia.com/terms/a/artificial-intelligence-ai.asphttps://www.linkedin.com/in/soniadumas/ Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/a/adjustable-peg.asp

Adjustable Peg: What it Means, 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-an-adjustable-peg"></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 Adjustable Peg? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An adjustable peg is an exchange rate policy in which a currency is pegged or fixed to a major <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currency.asp">currency</a> such as the U.S. dollar or euro, but which can be readjusted to account for changing market conditions or macroeconomic trends. An example of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/managed-currency.asp">managed currency</a> or "<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dirtyfloat.asp">dirty float"</a>, these periodic adjustments are usually intended to improve the country's competitive position in the export market and world financial stage. </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 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crawlingpeg.asp">crawling peg</a> is a system of exchange rate adjustments in which a currency with a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fixedexchangerate.asp">fixed exchange rate</a> is allowed to fluctuate within a narrow band of rates.  </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 adjustable peg describes a currency regime where a country allows its currency's value to float on the market, but only within a narrow band before the central bank intervenes to restore the peg.</li><li>Typically, the currency is allowed to fluctuate within a narrow band before the peg is restored; however, the peg itself can be reviewed and adjusted according to economic conditions and macro trends.</li><li>The adjustable peg is a hybrid system seeking to take advantage of the benefits from both a fixed peg and freely floating currency.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-adjustable-pegs"></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 Adjustable Pegs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> An adjustable peg can float on the market according to economic conditions, but typically has only a 2% percent degree of flexibility against a specified base level or peg. If the exchange rate moves by more than the agreed-upon level, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/centralbank.asp">central bank</a> <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreign-exchange-intervention.asp">intervenes</a> to keep the target exchange rate at the peg. Over time, the peg itself can be re-evaluated and changed to reflect changing conditions and trends. The ability of countries to revalue their peg to reassert their competitiveness is at the crux of the adjustable peg system. </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 adjustable peg system stems from the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, in 1944. Under the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brettonwoodsagreement.asp">Bretton Woods Agreement</a>, currencies were pegged to the price of gold, and the U.S. dollar was seen as a reserve currency linked to the price of gold. Following Bretton Woods, most Western European nations pegged their currencies to the U.S. dollar until 1971. The agreement dissolved between 1968 and 1973 after an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overvalued.asp">overvaluation</a> of the U.S. dollar led to concerns about the exchange rates and tie to the price of gold. President Richard Nixon called for a temporary suspension of the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertible-currency.asp">dollar’s convertibility</a>.<span class="ql-inline-citation" data-cite="3"></span> Countries were then free to choose any exchange agreement, except for the price of gold.  </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-example-of-an-adjustable-peg"></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"> Example of an Adjustable Peg </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> An example of what has been considered a mutually beneficial adjustable currency peg is the Chinese yuan's link to the U.S. dollar. Once a hard peg, the Chinese yuan (CNY) is allowed to fluctuate in a narrow band between 0.3% and 0.5% before intervention.<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"> As an exporter, China benefits from a relatively weak currency, which makes its exports relatively less expensive compared to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/export.asp">exports</a> from competing countries. China pegs the yuan to the dollar because the U.S. is China's largest import partner. The stable exchange rate in China and a weak yuan also benefit specific businesses in the U.S. For example, stability allows businesses to engage in long-term planning such as developing prototypes and investing in the manufacturing and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/import.asp">importing</a> of goods with the understanding that costs will not be affected by currency fluctuations. </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"> One disadvantage of a pegged currency is that its exchange rate is often kept artificially low, creating an anti-competitive trading environment compared to a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/floatingexchangerate.asp">floating exchange rate</a>. Many domestic manufacturers in the U.S. would argue that is the case with the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/forex/c/cny-china-yuan-renminbi.asp">yuan's</a> peg. Manufacturers consider those low-priced goods, partially the result of an artificial exchange rate, come at the expense of jobs in the U.S.  </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-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><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>China briefly decoupled from the dollar in 2005 and again in December 2015, switching to a basket of 13 currencies, but discreetly switched back in both cases.</p></div></div></div></div>

## What Is an Adjustable Peg? An adjustable peg is an exchange rate policy in which a currency is pegged or fixed to a major [currency](https://www.investopedia.com/terms/c/currency.asp) such as the U.S. dollar or euro, but which can be readjusted to account for changing market conditions or macroeconomic trends. An example of [managed currency](https://www.investopedia.com/terms/m/managed-currency.asp) or "[dirty float"](https://www.investopedia.com/terms/d/dirtyfloat.asp), these periodic adjustments are usually intended to improve the country's competitive position in the export market and world financial stage. A [crawling peg](https://www.investopedia.com/terms/c/crawlingpeg.asp) is a system of exchange rate adjustments in which a currency with a [fixed exchange rate](https://www.investopedia.com/terms/f/fixedexchangerate.asp) is allowed to fluctuate within a narrow band of rates.  ### Key Takeaways * An adjustable peg describes a currency regime where a country allows its currency's value to float on the market, but only within a narrow band before the central bank intervenes to restore the peg. * Typically, the currency is allowed to fluctuate within a narrow band before the peg is restored; however, the peg itself can be reviewed and adjusted according to economic conditions and macro trends. * The adjustable peg is a hybrid system seeking to take advantage of the benefits from both a fixed peg and freely floating currency. ## Understanding Adjustable Pegs An adjustable peg can float on the market according to economic conditions, but typically has only a 2% percent degree of flexibility against a specified base level or peg. If the exchange rate moves by more than the agreed-upon level, the [central bank](https://www.investopedia.com/terms/c/centralbank.asp) [intervenes](https://www.investopedia.com/terms/f/foreign-exchange-intervention.asp) to keep the target exchange rate at the peg. Over time, the peg itself can be re-evaluated and changed to reflect changing conditions and trends. The ability of countries to revalue their peg to reassert their competitiveness is at the crux of the adjustable peg system. The adjustable peg system stems from the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, in 1944. Under the [Bretton Woods Agreement](https://www.investopedia.com/terms/b/brettonwoodsagreement.asp), currencies were pegged to the price of gold, and the U.S. dollar was seen as a reserve currency linked to the price of gold. Following Bretton Woods, most Western European nations pegged their currencies to the U.S. dollar until 1971. The agreement dissolved between 1968 and 1973 after an [overvaluation](https://www.investopedia.com/terms/o/overvalued.asp) of the U.S. dollar led to concerns about the exchange rates and tie to the price of gold. President Richard Nixon called for a temporary suspension of the [dollar’s convertibility](https://www.investopedia.com/terms/c/convertible-currency.asp). Countries were then free to choose any exchange agreement, except for the price of gold.  ## Example of an Adjustable Peg An example of what has been considered a mutually beneficial adjustable currency peg is the Chinese yuan's link to the U.S. dollar. Once a hard peg, the Chinese yuan (CNY) is allowed to fluctuate in a narrow band between 0.3% and 0.5% before intervention. As an exporter, China benefits from a relatively weak currency, which makes its exports relatively less expensive compared to [exports](https://www.investopedia.com/terms/e/export.asp) from competing countries. China pegs the yuan to the dollar because the U.S. is China's largest import partner. The stable exchange rate in China and a weak yuan also benefit specific businesses in the U.S. For example, stability allows businesses to engage in long-term planning such as developing prototypes and investing in the manufacturing and [importing](https://www.investopedia.com/terms/i/import.asp) of goods with the understanding that costs will not be affected by currency fluctuations. One disadvantage of a pegged currency is that its exchange rate is often kept artificially low, creating an anti-competitive trading environment compared to a [floating exchange rate](https://www.investopedia.com/terms/f/floatingexchangerate.asp). Many domestic manufacturers in the U.S. would argue that is the case with the [yuan's](https://www.investopedia.com/terms/forex/c/cny-china-yuan-renminbi.asp) peg. Manufacturers consider those low-priced goods, partially the result of an artificial exchange rate, come at the expense of jobs in the U.S.  ### China briefly decoupled from the dollar in 2005 and again in December 2015, switching to a basket of 13 currencies, but discreetly switched back in both cases.

What Is an Adjustable Peg? An adjustable peg is an exchange rate policy in which a currency is pegged or fixed to a major currency such as the U.S. dollar or euro, but which can be readjusted to account for changing market conditions or macroeconomic trends. An example of managed currency or "dirty float", these periodic adjustments are usually intended to improve the country's competitive position in the export market and world financial stage. A crawling peg is a system of exchange rate adjustments in which a currency with a fixed exchange rate is allowed to fluctuate within a narrow band of rates.  Key Takeaways An adjustable peg describes a currency regime where a country allows its currency's value to float on the market, but only within a narrow band before the central bank intervenes to restore the peg.Typically, the currency is allowed to fluctuate within a narrow band before the peg is restored; however, the peg itself can be reviewed and adjusted according to economic conditions and macro trends.The adjustable peg is a hybrid system seeking to take advantage of the benefits from both a fixed peg and freely floating currency. Understanding Adjustable Pegs An adjustable peg can float on the market according to economic conditions, but typically has only a 2% percent degree of flexibility against a specified base level or peg. If the exchange rate moves by more than the agreed-upon level, the central bank intervenes to keep the target exchange rate at the peg. Over time, the peg itself can be re-evaluated and changed to reflect changing conditions and trends. The ability of countries to revalue their peg to reassert their competitiveness is at the crux of the adjustable peg system. The adjustable peg system stems from the United Nations Monetary and Financial Conference held in Bretton Woods, New Hampshire, in 1944. Under the Bretton Woods Agreement, currencies were pegged to the price of gold, and the U.S. dollar was seen as a reserve currency linked to the price of gold. Following Bretton Woods, most Western European nations pegged their currencies to the U.S. dollar until 1971. The agreement dissolved between 1968 and 1973 after an overvaluation of the U.S. dollar led to concerns about the exchange rates and tie to the price of gold. President Richard Nixon called for a temporary suspension of the dollar’s convertibility. Countries were then free to choose any exchange agreement, except for the price of gold.  Example of an Adjustable Peg An example of what has been considered a mutually beneficial adjustable currency peg is the Chinese yuan's link to the U.S. dollar. Once a hard peg, the Chinese yuan (CNY) is allowed to fluctuate in a narrow band between 0.3% and 0.5% before intervention. As an exporter, China benefits from a relatively weak currency, which makes its exports relatively less expensive compared to exports from competing countries. China pegs the yuan to the dollar because the U.S. is China's largest import partner. The stable exchange rate in China and a weak yuan also benefit specific businesses in the U.S. For example, stability allows businesses to engage in long-term planning such as developing prototypes and investing in the manufacturing and importing of goods with the understanding that costs will not be affected by currency fluctuations. One disadvantage of a pegged currency is that its exchange rate is often kept artificially low, creating an anti-competitive trading environment compared to a floating exchange rate. Many domestic manufacturers in the U.S. would argue that is the case with the yuan's peg. Manufacturers consider those low-priced goods, partially the result of an artificial exchange rate, come at the expense of jobs in the U.S.  China briefly decoupled from the dollar in 2005 and again in December 2015, switching to a basket of 13 currencies, but discreetly switched back in both cases.

https://www.investopedia.com/sec-proposes-faster-trade-settlement-times-in-wake-of-meme-stock-mania-5218692

SEC Proposes Faster Trade Settlement Times in Wake of Meme Stock Mania

<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 <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) on Wednesday proposed to speed up the standard trade settlement time for most equities to one business day after the transaction (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/what-do-t1-t2-and-t3-mean/">T+1</a>) from two business days (T+2), aiming to reduce risks for market participants and U.S. investors.<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_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 SEC has proposed to speed up the trade settlement cycle to T+1—one business day after the transaction—aiming to reduce risks for market participants and investors.</li><li>The proposal comes roughly a year after Robinhood temporarily suspended trading in meme stocks to ensure it could meet deposit requirements.</li><li>A T+1 settlement cycle would help market participants better understand clearing obligations.</li><li>Broker industry group SIFMA said the plan will reduce risks while a trade is being finalized. </li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> A move to quicker settlement times would come as welcome news for app-based brokers like Robinhood Markets Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=hood">HOOD</a>). The plan seeks to cut <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditrisk.asp">credit</a>, market, and liquidity risks. </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"> Robinhood temporarily suspended trading in stocks like GameStop Corp. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=gme">GME</a>) and AMC Entertainment Holdings Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=amc">AMC</a>) at the height of the meme stock frenzy last January. The brokerage did this to ensure it met deposit requirements after retail investors piled into these institutionally-held stocks, seeking to force a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shortsqueeze.asp">short squeeze</a> rally. </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"> A T+1 settlement cycle would help market participants gain a better understanding of where the money and shares were coming from to meet clearing obligations, if a similar scenario were to happen again. </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 existing two-day period to settle trades exposes investors and the industry to unnecessary risk and is ripe for change,” Robinhood CEO Vlad Tenev said at the time on the trading app’s blog. “We want to join together to move forward to real-time settlement,” he added.<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_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> SEC Chair <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/who-is-gary-gensler-5095448">Gary Gensler’s</a> echoed Tenev’s comments in a statement yesterday, saying the "proposed amendments to the securities clearing and settling process, if adopted, could lower risk to the financial system and drive greater efficiencies in the markets. Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/clearinghouse.asp#:~:text=A%20clearinghouse%20is%20a%20designated,seller%20honor%20their%20contractual%20obligations.">clearinghouses</a>.” Gensler said.<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"> Central clearinghouses play a pivotal role in the settlement process by overseeing trading activity and ensuring brokers meet contractual obligations. If a market participant fails, a central clearinghouse typically covers the cost of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mismatch.asp#:~:text=A%20mismatch%20refers%20to%20incorrectly,maturity%20dates%2C%20and%20currency%20conversions.">mismatched</a> trades to provide market stability.<br/> </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>A <strong>clearinghouse</strong> is a designated intermediary between a buyer and seller in a financial market. The clearinghouse validates and finalizes the transaction, ensuring that both the buyer and the seller honor their contractual obligations.</p></div></div></div> <span class="heading-toc" id="toc-industry-group-backs-move"></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"> Industry Group Backs Move </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sifma.asp">Securities Industry and Financial Markets Association</a> (SIFMA) threw its support behind faster settlement times. “The change will improve market resiliency by further reducing risk that exists while a trade is being finalized, benefit investors by shortening the execution time frame between buying or selling their securities, and reduce the level of margin market participants must post to offset the settlement risk,” the group’s CEO Kenneth Bentsen said in a statement.<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> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><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_23-0"><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 <strong>SIFMA</strong> is a not-for-profit trade association that represents securities <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokerage-company.asp">brokerage firms</a>, investment banking institutions, and other investment firms. The organization’s membership represents 75 percent of the U.S. broker-dealer sector by revenue and 50 percent of the asset management sector as measured by assets under management.</p></div></div></div> <span class="heading-toc" id="toc-straight-through-process-also-in-focus"></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"> Straight Through Process Also in Focus </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> In addition to shortening settlement times, the agency is proposing speeding up trade <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/confirmation.asp#:~:text=Confirmation%20can%20refer%20to%20either,of%20a%20trend%20for%20traders.">confirmations</a> to ensure brokers complete them by the end of the trade date. It also proposes certain types of clearing agencies that provide matching services to facilitate <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/straightthroughprocessing.asp">straight-through processing</a> (STP), which is an automated process done purely through electronic transfers. Furthermore, the STP changes will require an annual report on the progress under the proposal.<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_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> The proposed same-day trade settlement cycle now enters a 60-day period for public comment before the agency’s five-member bipartisan commission votes on making the change permeant.<span class="ql-inline-citation" data-cite="1"></span> </p></div>

The [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) on Wednesday proposed to speed up the standard trade settlement time for most equities to one business day after the transaction ([T+1](https://www.investopedia.com/ask/answers/what-do-t1-t2-and-t3-mean/)) from two business days (T+2), aiming to reduce risks for market participants and U.S. investors. ### Key Takeaways * The SEC has proposed to speed up the trade settlement cycle to T+1—one business day after the transaction—aiming to reduce risks for market participants and investors. * The proposal comes roughly a year after Robinhood temporarily suspended trading in meme stocks to ensure it could meet deposit requirements. * A T+1 settlement cycle would help market participants better understand clearing obligations. * Broker industry group SIFMA said the plan will reduce risks while a trade is being finalized. A move to quicker settlement times would come as welcome news for app-based brokers like Robinhood Markets Inc. ([HOOD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=hood)). The plan seeks to cut [credit](https://www.investopedia.com/terms/c/creditrisk.asp), market, and liquidity risks. Robinhood temporarily suspended trading in stocks like GameStop Corp. ([GME](https://www.investopedia.com/markets/quote?tvwidgetsymbol=gme)) and AMC Entertainment Holdings Inc. ([AMC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=amc)) at the height of the meme stock frenzy last January. The brokerage did this to ensure it met deposit requirements after retail investors piled into these institutionally-held stocks, seeking to force a [short squeeze](https://www.investopedia.com/terms/s/shortsqueeze.asp) rally. A T+1 settlement cycle would help market participants gain a better understanding of where the money and shares were coming from to meet clearing obligations, if a similar scenario were to happen again. “The existing two-day period to settle trades exposes investors and the industry to unnecessary risk and is ripe for change,” Robinhood CEO Vlad Tenev said at the time on the trading app’s blog. “We want to join together to move forward to real-time settlement,” he added.  SEC Chair [Gary Gensler’s](https://www.investopedia.com/who-is-gary-gensler-5095448) echoed Tenev’s comments in a statement yesterday, saying the "proposed amendments to the securities clearing and settling process, if adopted, could lower risk to the financial system and drive greater efficiencies in the markets. Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with [clearinghouses](https://www.investopedia.com/terms/c/clearinghouse.asp#:~:text=A%20clearinghouse%20is%20a%20designated,seller%20honor%20their%20contractual%20obligations.).” Gensler said. Central clearinghouses play a pivotal role in the settlement process by overseeing trading activity and ensuring brokers meet contractual obligations. If a market participant fails, a central clearinghouse typically covers the cost of [mismatched](https://www.investopedia.com/terms/m/mismatch.asp#:~:text=A%20mismatch%20refers%20to%20incorrectly,maturity%20dates%2C%20and%20currency%20conversions.) trades to provide market stability. ### A **clearinghouse** is a designated intermediary between a buyer and seller in a financial market. The clearinghouse validates and finalizes the transaction, ensuring that both the buyer and the seller honor their contractual obligations. ## Industry Group Backs Move The [Securities Industry and Financial Markets Association](https://www.investopedia.com/terms/s/sifma.asp) (SIFMA) threw its support behind faster settlement times. “The change will improve market resiliency by further reducing risk that exists while a trade is being finalized, benefit investors by shortening the execution time frame between buying or selling their securities, and reduce the level of margin market participants must post to offset the settlement risk,” the group’s CEO Kenneth Bentsen said in a statement. ### The **SIFMA** is a not-for-profit trade association that represents securities [brokerage firms](https://www.investopedia.com/terms/b/brokerage-company.asp), investment banking institutions, and other investment firms. The organization’s membership represents 75 percent of the U.S. broker-dealer sector by revenue and 50 percent of the asset management sector as measured by assets under management. ## Straight Through Process Also in Focus In addition to shortening settlement times, the agency is proposing speeding up trade [confirmations](https://www.investopedia.com/terms/c/confirmation.asp#:~:text=Confirmation%20can%20refer%20to%20either,of%20a%20trend%20for%20traders.) to ensure brokers complete them by the end of the trade date. It also proposes certain types of clearing agencies that provide matching services to facilitate [straight-through processing](https://www.investopedia.com/terms/s/straightthroughprocessing.asp) (STP), which is an automated process done purely through electronic transfers. Furthermore, the STP changes will require an annual report on the progress under the proposal. The proposed same-day trade settlement cycle now enters a 60-day period for public comment before the agency’s five-member bipartisan commission votes on making the change permeant.

The Securities and Exchange Commission (SEC) on Wednesday proposed to speed up the standard trade settlement time for most equities to one business day after the transaction (T+1) from two business days (T+2), aiming to reduce risks for market participants and U.S. investors. Key Takeaways The SEC has proposed to speed up the trade settlement cycle to T+1—one business day after the transaction—aiming to reduce risks for market participants and investors.The proposal comes roughly a year after Robinhood temporarily suspended trading in meme stocks to ensure it could meet deposit requirements.A T+1 settlement cycle would help market participants better understand clearing obligations.Broker industry group SIFMA said the plan will reduce risks while a trade is being finalized.  A move to quicker settlement times would come as welcome news for app-based brokers like Robinhood Markets Inc. (HOOD). The plan seeks to cut credit, market, and liquidity risks. Robinhood temporarily suspended trading in stocks like GameStop Corp. (GME) and AMC Entertainment Holdings Inc. (AMC) at the height of the meme stock frenzy last January. The brokerage did this to ensure it met deposit requirements after retail investors piled into these institutionally-held stocks, seeking to force a short squeeze rally. A T+1 settlement cycle would help market participants gain a better understanding of where the money and shares were coming from to meet clearing obligations, if a similar scenario were to happen again. “The existing two-day period to settle trades exposes investors and the industry to unnecessary risk and is ripe for change,” Robinhood CEO Vlad Tenev said at the time on the trading app’s blog. “We want to join together to move forward to real-time settlement,” he added.  SEC Chair Gary Gensler’s echoed Tenev’s comments in a statement yesterday, saying the "proposed amendments to the securities clearing and settling process, if adopted, could lower risk to the financial system and drive greater efficiencies in the markets. Shortening the settlement cycle should reduce the amount of margin that counterparties would need to post with clearinghouses.” Gensler said. Central clearinghouses play a pivotal role in the settlement process by overseeing trading activity and ensuring brokers meet contractual obligations. If a market participant fails, a central clearinghouse typically covers the cost of mismatched trades to provide market stability. A clearinghouse is a designated intermediary between a buyer and seller in a financial market. The clearinghouse validates and finalizes the transaction, ensuring that both the buyer and the seller honor their contractual obligations. Industry Group Backs Move The Securities Industry and Financial Markets Association (SIFMA) threw its support behind faster settlement times. “The change will improve market resiliency by further reducing risk that exists while a trade is being finalized, benefit investors by shortening the execution time frame between buying or selling their securities, and reduce the level of margin market participants must post to offset the settlement risk,” the group’s CEO Kenneth Bentsen said in a statement. The SIFMA is a not-for-profit trade association that represents securities brokerage firms, investment banking institutions, and other investment firms. The organization’s membership represents 75 percent of the U.S. broker-dealer sector by revenue and 50 percent of the asset management sector as measured by assets under management. Straight Through Process Also in Focus In addition to shortening settlement times, the agency is proposing speeding up trade confirmations to ensure brokers complete them by the end of the trade date. It also proposes certain types of clearing agencies that provide matching services to facilitate straight-through processing (STP), which is an automated process done purely through electronic transfers. Furthermore, the STP changes will require an annual report on the progress under the proposal. The proposed same-day trade settlement cycle now enters a 60-day period for public comment before the agency’s five-member bipartisan commission votes on making the change permeant.

https://www.investopedia.com/darden-restaurants-stock-sinks-as-sales-hurt-by-tougher-operating-environment-8612608

Darden Restaurants Stock Sinks as Sales Hurt by 'Tougher' Operating Environment

<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>Darden Restaurants missed quarterly revenue forecasts and lowered its full-year sales outlook Thursday as it faced a tougher-than-expected operating environment.</li><li>Sales got a lift from the addition of Ruth's Chris Steak House restaurants, which Darden purchased last year.</li><li>Same-store sales fell at its biggest revenue generator, Olive Garden, as well as its Fine Dining and Other Business units.</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"> Shares of Darden Restaurants (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DRI">DRI</a>) dropped 6% in early trading Thursday after the restaurant chain’s quarterly sales fell and it reduced its full-year revenue outlook, citing difficult conditions.  </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 operator of Olive Garden and The Capital Grille reported third-quarter fiscal 2024 revenue increased 6.8% from a year earlier to $2.97 billion, short of forecasts. 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>) came in at $2.62, in line with estimates.<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"> Total sales were driven by the addition of 79 company-owned Ruth's Chris Steak House restaurants and 53 other net new restaurants. Darden purchased the Ruth’s Chris chain last year for $715 million.<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_8-0"></div> <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/s/samestoresales.asp">Same-store sales</a> declined 1%, and were down at its biggest revenue generator, Olive Garden. Sales for Olive Garden fell 1.8%. Darden's Fine Dining segment recorded a 2.3% drop and its Other Business segment declined 2.6%. Sales were up 2.3% at LongHorn Steakhouse. </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"> CEO Rick Cardenas said that Darden faced “an operating environment that was tougher than we anticipated.” </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 company lowered its outlook for full-year revenue to $11.4 billion from $11.5 billion, and same-store sales growth to a gain of 1.5% to 2% from an increase of 2.5% to 3%. </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"> Shares of Darden Restaurants were down 6% to $164.03 as of 11:40 a.m. ET Thursday. They've gained close to 8% over the past year.<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-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_17-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.7%;"> <img alt="DRI" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/leguoUHQXidy1GQlRiCJB64LKiU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/leguoUHQXidy1GQlRiCJB64LKiU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png" data-srcset="https://www.investopedia.com/thmb/ICO4HbUI8nK8MNNJJNVRuMZBF2g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png 750w" data-tracking-container="true" height="1077" id="mntl-sc-block-image_1-0" width="1590"/> <noscript> <img alt="DRI" class="img--noscript universal-image__image" height="1077" sizes="750px" src="https://www.investopedia.com/thmb/leguoUHQXidy1GQlRiCJB64LKiU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png" srcset="https://www.investopedia.com/thmb/ICO4HbUI8nK8MNNJJNVRuMZBF2g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png 750w" width="1590"/> </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>

### Key Takeaways * Darden Restaurants missed quarterly revenue forecasts and lowered its full-year sales outlook Thursday as it faced a tougher-than-expected operating environment. * Sales got a lift from the addition of Ruth's Chris Steak House restaurants, which Darden purchased last year. * Same-store sales fell at its biggest revenue generator, Olive Garden, as well as its Fine Dining and Other Business units. Shares of Darden Restaurants ([DRI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DRI)) dropped 6% in early trading Thursday after the restaurant chain’s quarterly sales fell and it reduced its full-year revenue outlook, citing difficult conditions.  The operator of Olive Garden and The Capital Grille reported third-quarter fiscal 2024 revenue increased 6.8% from a year earlier to $2.97 billion, short of forecasts. Adjusted [earnings per share (EPS](https://www.investopedia.com/terms/e/eps.asp)) came in at $2.62, in line with estimates. Total sales were driven by the addition of 79 company-owned Ruth's Chris Steak House restaurants and 53 other net new restaurants. Darden purchased the Ruth’s Chris chain last year for $715 million. [Same-store sales](https://www.investopedia.com/terms/s/samestoresales.asp) declined 1%, and were down at its biggest revenue generator, Olive Garden. Sales for Olive Garden fell 1.8%. Darden's Fine Dining segment recorded a 2.3% drop and its Other Business segment declined 2.6%. Sales were up 2.3% at LongHorn Steakhouse. CEO Rick Cardenas said that Darden faced “an operating environment that was tougher than we anticipated.” The company lowered its outlook for full-year revenue to $11.4 billion from $11.5 billion, and same-store sales growth to a gain of 1.5% to 2% from an increase of 2.5% to 3%. Shares of Darden Restaurants were down 6% to $164.03 as of 11:40 a.m. ET Thursday. They've gained close to 8% over the past year. ![DRI]() :max_bytes(150000):strip_icc()/DRI_2024-03-21_11-42-06-df8558088f7640ccb368760ba3795cc8.png) TradingView

Key Takeaways Darden Restaurants missed quarterly revenue forecasts and lowered its full-year sales outlook Thursday as it faced a tougher-than-expected operating environment.Sales got a lift from the addition of Ruth's Chris Steak House restaurants, which Darden purchased last year.Same-store sales fell at its biggest revenue generator, Olive Garden, as well as its Fine Dining and Other Business units. Shares of Darden Restaurants (DRI) dropped 6% in early trading Thursday after the restaurant chain’s quarterly sales fell and it reduced its full-year revenue outlook, citing difficult conditions.  The operator of Olive Garden and The Capital Grille reported third-quarter fiscal 2024 revenue increased 6.8% from a year earlier to $2.97 billion, short of forecasts. Adjusted earnings per share (EPS) came in at $2.62, in line with estimates. Total sales were driven by the addition of 79 company-owned Ruth's Chris Steak House restaurants and 53 other net new restaurants. Darden purchased the Ruth’s Chris chain last year for $715 million. Same-store sales declined 1%, and were down at its biggest revenue generator, Olive Garden. Sales for Olive Garden fell 1.8%. Darden's Fine Dining segment recorded a 2.3% drop and its Other Business segment declined 2.6%. Sales were up 2.3% at LongHorn Steakhouse. CEO Rick Cardenas said that Darden faced “an operating environment that was tougher than we anticipated.” The company lowered its outlook for full-year revenue to $11.4 billion from $11.5 billion, and same-store sales growth to a gain of 1.5% to 2% from an increase of 2.5% to 3%. Shares of Darden Restaurants were down 6% to $164.03 as of 11:40 a.m. ET Thursday. They've gained close to 8% over the past year. TradingView

https://www.investopedia.com/capital-one-spark-cash-plus-offers-a-usd3-000-early-spend-bonus-5217156

Capital One Spark Cash Plus Offers a $3,000 Early-Spend Bonus

<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"> Capital One has announced a new, massive early-spend bonus on its new <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/capital-one-shakes-up-lineup-of-spark-cash-cards-5198345">Capital One Spark Cash Plus</a> charge card. New cardholders can earn up to $3,000 if they apply by March 14, 2022 and meet the spending requirements. </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-advisorinsight" 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 Capital One Spark Cash Plus was introduced in August 2020, offering a high rewards rate on all purchases and an annual bonus for cardholders that spend $200,000 or more annually.</li><li>The charge card is currently offering a $3,000 early-spend bonus for a limited time.</li><li>While the bonus is attractive, make sure you can meet the spending requirement to earn it.</li></ul></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_5-0"> <span class="mntl-sc-block-subheading__text"> How to Earn $3,000 With the Capital One Spark Cash Plus </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> The Capital One Spark Cash Plus is offering a new-cardholder bonus of up to $3,000—that's $500 after you spend $5,000 in the first three months and another $2,500 after you spend a total of $50,000 or more over the first six months.<span class="ql-inline-citation" data-cite="1"></span> That's in addition to the $1,000 you'll earn through the card's 2% rewards rate on all spending. </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"> The steep spending requirement to earn the bonus is indicative of the card's target market, which is small businesses with a lot of expenses. </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 card also offers a $200 cash bonus every year when you spend at least $200,000. </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"> If your business can easily surpass $50,000 in credit card expenses in half a year, this card can be incredibly appealing. And if you can meet the $200,000 annual spending requirement to get the $200 bonus, that's enough to cover the card's $150 annual fee. </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"> Keep in mind, though, that this is a charge card, which means that no matter how much you spend in a month, you'll need to pay your balance in full. Otherwise, the card issuer will assess a late payment penalty of 2.99% of the unpaid statement balance.<span class="ql-inline-citation" data-cite="2"></span><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>

Capital One has announced a new, massive early-spend bonus on its new [Capital One Spark Cash Plus](https://www.investopedia.com/capital-one-shakes-up-lineup-of-spark-cash-cards-5198345) charge card. New cardholders can earn up to $3,000 if they apply by March 14, 2022 and meet the spending requirements. ### Key Takeaways * The Capital One Spark Cash Plus was introduced in August 2020, offering a high rewards rate on all purchases and an annual bonus for cardholders that spend $200,000 or more annually. * The charge card is currently offering a $3,000 early-spend bonus for a limited time. * While the bonus is attractive, make sure you can meet the spending requirement to earn it. ### How to Earn $3,000 With the Capital One Spark Cash Plus The Capital One Spark Cash Plus is offering a new-cardholder bonus of up to $3,000—that's $500 after you spend $5,000 in the first three months and another $2,500 after you spend a total of $50,000 or more over the first six months. That's in addition to the $1,000 you'll earn through the card's 2% rewards rate on all spending. The steep spending requirement to earn the bonus is indicative of the card's target market, which is small businesses with a lot of expenses. The card also offers a $200 cash bonus every year when you spend at least $200,000. If your business can easily surpass $50,000 in credit card expenses in half a year, this card can be incredibly appealing. And if you can meet the $200,000 annual spending requirement to get the $200 bonus, that's enough to cover the card's $150 annual fee. Keep in mind, though, that this is a charge card, which means that no matter how much you spend in a month, you'll need to pay your balance in full. Otherwise, the card issuer will assess a late payment penalty of 2.99% of the unpaid statement balance. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Capital One has announced a new, massive early-spend bonus on its new Capital One Spark Cash Plus charge card. New cardholders can earn up to $3,000 if they apply by March 14, 2022 and meet the spending requirements. Key Takeaways The Capital One Spark Cash Plus was introduced in August 2020, offering a high rewards rate on all purchases and an annual bonus for cardholders that spend $200,000 or more annually.The charge card is currently offering a $3,000 early-spend bonus for a limited time.While the bonus is attractive, make sure you can meet the spending requirement to earn it. How to Earn $3,000 With the Capital One Spark Cash Plus The Capital One Spark Cash Plus is offering a new-cardholder bonus of up to $3,000—that's $500 after you spend $5,000 in the first three months and another $2,500 after you spend a total of $50,000 or more over the first six months. That's in addition to the $1,000 you'll earn through the card's 2% rewards rate on all spending. The steep spending requirement to earn the bonus is indicative of the card's target market, which is small businesses with a lot of expenses. The card also offers a $200 cash bonus every year when you spend at least $200,000. If your business can easily surpass $50,000 in credit card expenses in half a year, this card can be incredibly appealing. And if you can meet the $200,000 annual spending requirement to get the $200 bonus, that's enough to cover the card's $150 annual fee. Keep in mind, though, that this is a charge card, which means that no matter how much you spend in a month, you'll need to pay your balance in full. Otherwise, the card issuer will assess a late payment penalty of 2.99% of the unpaid statement balance. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/articles/financial-theory/09/uncorrelated-assets-diversification.asp

Protecting Portfolios Using Correlation Diversification

<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/d/diversification.asp">Diversification</a> naturally appeals to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskaverse.asp">risk-averse</a> creature inside every investor. Betting all your money on just one horse seems riskier than spreading out your bets on four different horses—and it can be. </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 how do you choose those horses? You can use your intuition and randomly pick any four. But that would be like playing a game of chance. Professional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fundmanager.asp">fund managers</a> don't rely merely on their intuition for picking a well-diversified <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a>. They use statistical techniques for finding what are called "uncorrelated <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">assets</a><em>."</em> Uncorrelated assets can help you diversify your portfolio and manage risks—good news for investors who are wary of the uncertainty in rolling dice. </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"> But it's not perfect, either: diversifying your portfolio by picking up uncorrelated assets may not always work. In this article, we show you what <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/correlation.asp">correlation</a> is and explain how uncorrelated assets work—and when they don't. </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>The concept of diversification in investing refers to owning a wide variety of securities across several asset classes to defray risk.</li><li>Historically stocks and bonds are used as examples of two uncorrelated asset classes.</li><li>Diversification works best when assets are uncorrelated or negatively correlated with one another, so that as some parts of the portfolio fall, others rise.</li></ul></div></div></div> <span class="heading-toc" id="toc-a-game-of-numbers"></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"> A Game of Numbers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Correlation statistically measures the degree of relationship between two variables in terms of a number that lies between +1.0 and -1.0. When it comes to diversified portfolios, correlation represents the degree of relationship between the price movements of different assets included in the portfolio. A correlation of +1.0 means that prices move in tandem; a correlation of -1.0 means that prices move in opposite directions. A correlation of 0 means that the price movements of assets are uncorrelated; in other words, the price movement of one asset has no effect on the price movement of the other asset. </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"> In actual practice, it's difficult to find a pair of assets that have a perfect <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/positive-correlation.asp">positive correlation</a> of +1.0, a perfect <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/negative-correlation.asp">negative correlation</a> of -1.0 or even a perfect neutral correlation of 0. A correlation between different pairs of assets could be any one of the numerous possibilities lying between +1.0 and -1.0 (for example, +0.62 or -0.30). Each number thus tells you how far or how close you are from that perfect 0 where two variables are uncorrelated. So, if the correlation between Asset A and Asset B is 0.35 and the correlation between Asset A and Asset C is 0.25, then you can say that Asset A is more correlated with Asset B than it is with Asset C.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> If two pairs of assets offer the same return at the same risk, choosing the pair that is <em>less</em> correlated decreases the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/03/050203.asp">overall risk of the portfolio</a>. </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-all-assets-are-not-created-equal"></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"> All Assets Are Not Created Equal </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Some plants thrive on snow-capped mountains, some grow in wild deserts, and some grow in rain forests. Just as different weather affects different kinds of plants differently, different <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/macroeconomics.asp">macroeconomic</a> factors affect different assets differently.  </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"> Likewise, changes in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insights/macroeconomic-analysis/">macroeconomic environment</a> have different effects on different assets. For instance, prices of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialasset.asp">financial assets</a> (like stocks and bonds) and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/physicalasset.asp">physical assets</a> (like gold), may move in opposite directions due to inflation. High inflation may lead to a <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx">rise in gold prices</a>, whereas it may lead to a fall in prices of financial assets.<span class="ql-inline-citation" data-cite="2"></span><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> <span class="heading-toc" id="toc-using-a-correlation-matrix"></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"> Using a Correlation Matrix </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Statisticians use price data to find out how the prices of two assets have moved in the past in relation to each other. Each pair of assets is assigned a number that represents the degree of correlation in their price movements. This number can be used for constructing what is called a "correlation matrix" for different assets. A correlation matrix makes the task of choosing different assets easier by presenting their correlation with each other in a tabular form. Once you have the matrix, you can use it for choosing a wide variety of assets having different correlations with each other. </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"> While choosing assets for your portfolio, you have to choose from a wide range of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/permutation.asp">permutations</a> and combinations. No matter how you play your hand in a portfolio of many assets, some of the assets would be positively correlated, some would be negatively correlated, and the correlation of the rest could be scattered around zero. </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"> Start with broad categories (like stocks, bonds, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/governmentsecurity.asp">government securities</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/realestate.asp">real estate</a>, etc.) and then narrow down to subcategories (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumer-goods.asp">consumer goods</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/06/drugmarket.asp">pharmaceuticals</a>, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/energy_sector.asp">energy</a>, <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/technology_sector.asp">technology</a> and so on). Finally, choose the specific asset that you want to own. The aim of choosing uncorrelated assets is to diversify your risks. Keeping uncorrelated assets ensures that your entire portfolio is not killed by just one stray bullet. </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-making-uncorrelated-assets-correlated"></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"> Making Uncorrelated Assets Correlated </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> One stray bullet may not be enough to kill a portfolio of uncorrelated assets, but when the entire <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-market.asp">financial market</a> is facing an assault by weapons of financial mass destruction, then even totally uncorrelated assets may perish together. Big financial downfalls caused by an unholy alliance of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-innovation.asp">financial innovations</a> and leverage may bring assets of all kinds under the same hammer. This is what happened during the near-collapse of the hedge fund <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/longtermcapital.asp">Long-Term Capital Management</a> in 1998. It's also what happened during the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subprime-meltdown.asp">subprime mortgage meltdown</a> in 2007–08. </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 lesson from those affairs now seems to be well taken: <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/leverage.asp">leverage</a>—the amount of borrowed money used to make an investment—cuts both ways. By using leverage, you can take on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-exposure.asp">exposure</a> that is many times more than your <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital.asp">capital</a>.<span class="ql-inline-citation" data-cite="4"></span> The strategy of taking high exposure by using borrowed money works perfectly well when you are on a winning streak. You take home greater profit even after paying back the money that you owe. But the problem with leverage is that it also enhances the potential of loss from an investment gone wrong. You have to pay back the money that you owe from some other source. </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"> When the price of one <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">asset</a> is collapsing, the level of leverage may force a trader to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidate.asp">liquidate</a> even his good assets. When a trader is selling his good assets to cover his losses, he hardly has time to distinguish between correlated and uncorrelated assets. He sells whatever is there in his hands. During the cry of "sell, sell, sell," even the price of good assets may go downhill. The situation becomes complicated when everybody is holding a similarly diversified portfolio. The fall of one diversified portfolio could very well lead to the fall of another diversified portfolio. So, big financial downfalls can put all assets in the same boat. </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-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"> During hard economic times, uncorrelated assets may seem to have vanished, but <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/05/diversification.asp">diversification</a> still serves its purpose. Diversification may not provide complete insurance against disaster, but it still retains its charm as protection against random events in the market. And although there's a potential for high gains by throwing caution to the wind, the risks involved explain why mostly <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/11/dangerous-moves-first-time-investors.asp">first-time investors</a> tend to do it. </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"> Remember: Nothing short of a complete wipeout would kill all kinds of assets together. In all other scenarios, while some assets perish faster than others, some do manage to survive. If all assets went down the drain together, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-market.asp">financial market</a> that we see today would have been dead long ago. </p></div>

[Diversification](https://www.investopedia.com/terms/d/diversification.asp) naturally appeals to the [risk-averse](https://www.investopedia.com/terms/r/riskaverse.asp) creature inside every investor. Betting all your money on just one horse seems riskier than spreading out your bets on four different horses—and it can be. But how do you choose those horses? You can use your intuition and randomly pick any four. But that would be like playing a game of chance. Professional [fund managers](https://www.investopedia.com/terms/f/fundmanager.asp) don't rely merely on their intuition for picking a well-diversified [portfolio](https://www.investopedia.com/terms/p/portfolio.asp). They use statistical techniques for finding what are called "uncorrelated [assets](https://www.investopedia.com/terms/a/asset.asp)*."* Uncorrelated assets can help you diversify your portfolio and manage risks—good news for investors who are wary of the uncertainty in rolling dice. But it's not perfect, either: diversifying your portfolio by picking up uncorrelated assets may not always work. In this article, we show you what [correlation](https://www.investopedia.com/terms/c/correlation.asp) is and explain how uncorrelated assets work—and when they don't. ### Key Takeaways * The concept of diversification in investing refers to owning a wide variety of securities across several asset classes to defray risk. * Historically stocks and bonds are used as examples of two uncorrelated asset classes. * Diversification works best when assets are uncorrelated or negatively correlated with one another, so that as some parts of the portfolio fall, others rise. ## A Game of Numbers Correlation statistically measures the degree of relationship between two variables in terms of a number that lies between +1.0 and -1.0. When it comes to diversified portfolios, correlation represents the degree of relationship between the price movements of different assets included in the portfolio. A correlation of +1.0 means that prices move in tandem; a correlation of -1.0 means that prices move in opposite directions. A correlation of 0 means that the price movements of assets are uncorrelated; in other words, the price movement of one asset has no effect on the price movement of the other asset. In actual practice, it's difficult to find a pair of assets that have a perfect [positive correlation](https://www.investopedia.com/terms/p/positive-correlation.asp) of +1.0, a perfect [negative correlation](https://www.investopedia.com/terms/n/negative-correlation.asp) of -1.0 or even a perfect neutral correlation of 0. A correlation between different pairs of assets could be any one of the numerous possibilities lying between +1.0 and -1.0 (for example, +0.62 or -0.30). Each number thus tells you how far or how close you are from that perfect 0 where two variables are uncorrelated. So, if the correlation between Asset A and Asset B is 0.35 and the correlation between Asset A and Asset C is 0.25, then you can say that Asset A is more correlated with Asset B than it is with Asset C. If two pairs of assets offer the same return at the same risk, choosing the pair that is *less* correlated decreases the [overall risk of the portfolio](https://www.investopedia.com/articles/basics/03/050203.asp). ## All Assets Are Not Created Equal Some plants thrive on snow-capped mountains, some grow in wild deserts, and some grow in rain forests. Just as different weather affects different kinds of plants differently, different [macroeconomic](https://www.investopedia.com/terms/m/macroeconomics.asp) factors affect different assets differently.  Likewise, changes in the [macroeconomic environment](https://www.investopedia.com/insights/macroeconomic-analysis/) have different effects on different assets. For instance, prices of [financial assets](https://www.investopedia.com/terms/f/financialasset.asp) (like stocks and bonds) and [physical assets](https://www.investopedia.com/terms/p/physicalasset.asp) (like gold), may move in opposite directions due to inflation. High inflation may lead to a [rise in gold prices](https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx), whereas it may lead to a fall in prices of financial assets. ## Using a Correlation Matrix Statisticians use price data to find out how the prices of two assets have moved in the past in relation to each other. Each pair of assets is assigned a number that represents the degree of correlation in their price movements. This number can be used for constructing what is called a "correlation matrix" for different assets. A correlation matrix makes the task of choosing different assets easier by presenting their correlation with each other in a tabular form. Once you have the matrix, you can use it for choosing a wide variety of assets having different correlations with each other. While choosing assets for your portfolio, you have to choose from a wide range of [permutations](https://www.investopedia.com/terms/p/permutation.asp) and combinations. No matter how you play your hand in a portfolio of many assets, some of the assets would be positively correlated, some would be negatively correlated, and the correlation of the rest could be scattered around zero. Start with broad categories (like stocks, bonds, [government securities](https://www.investopedia.com/terms/g/governmentsecurity.asp), [real estate](https://www.investopedia.com/terms/r/realestate.asp), etc.) and then narrow down to subcategories ([consumer goods](https://www.investopedia.com/terms/c/consumer-goods.asp), [pharmaceuticals](https://www.investopedia.com/articles/06/drugmarket.asp), [energy](https://www.investopedia.com/terms/e/energy_sector.asp), [technology](https://www.investopedia.com/terms/t/technology_sector.asp) and so on). Finally, choose the specific asset that you want to own. The aim of choosing uncorrelated assets is to diversify your risks. Keeping uncorrelated assets ensures that your entire portfolio is not killed by just one stray bullet. ## Making Uncorrelated Assets Correlated One stray bullet may not be enough to kill a portfolio of uncorrelated assets, but when the entire [financial market](https://www.investopedia.com/terms/f/financial-market.asp) is facing an assault by weapons of financial mass destruction, then even totally uncorrelated assets may perish together. Big financial downfalls caused by an unholy alliance of [financial innovations](https://www.investopedia.com/terms/f/financial-innovation.asp) and leverage may bring assets of all kinds under the same hammer. This is what happened during the near-collapse of the hedge fund [Long-Term Capital Management](https://www.investopedia.com/terms/l/longtermcapital.asp) in 1998. It's also what happened during the [subprime mortgage meltdown](https://www.investopedia.com/terms/s/subprime-meltdown.asp) in 2007–08. The lesson from those affairs now seems to be well taken: [leverage](https://www.investopedia.com/terms/l/leverage.asp)—the amount of borrowed money used to make an investment—cuts both ways. By using leverage, you can take on the [exposure](https://www.investopedia.com/terms/f/financial-exposure.asp) that is many times more than your [capital](https://www.investopedia.com/terms/c/capital.asp). The strategy of taking high exposure by using borrowed money works perfectly well when you are on a winning streak. You take home greater profit even after paying back the money that you owe. But the problem with leverage is that it also enhances the potential of loss from an investment gone wrong. You have to pay back the money that you owe from some other source. When the price of one [asset](https://www.investopedia.com/terms/a/asset.asp) is collapsing, the level of leverage may force a trader to [liquidate](https://www.investopedia.com/terms/l/liquidate.asp) even his good assets. When a trader is selling his good assets to cover his losses, he hardly has time to distinguish between correlated and uncorrelated assets. He sells whatever is there in his hands. During the cry of "sell, sell, sell," even the price of good assets may go downhill. The situation becomes complicated when everybody is holding a similarly diversified portfolio. The fall of one diversified portfolio could very well lead to the fall of another diversified portfolio. So, big financial downfalls can put all assets in the same boat. ## The Bottom Line During hard economic times, uncorrelated assets may seem to have vanished, but [diversification](https://www.investopedia.com/articles/basics/05/diversification.asp) still serves its purpose. Diversification may not provide complete insurance against disaster, but it still retains its charm as protection against random events in the market. And although there's a potential for high gains by throwing caution to the wind, the risks involved explain why mostly [first-time investors](https://www.investopedia.com/articles/basics/11/dangerous-moves-first-time-investors.asp) tend to do it. Remember: Nothing short of a complete wipeout would kill all kinds of assets together. In all other scenarios, while some assets perish faster than others, some do manage to survive. If all assets went down the drain together, the [financial market](https://www.investopedia.com/terms/f/financial-market.asp) that we see today would have been dead long ago.

Diversification naturally appeals to the risk-averse creature inside every investor. Betting all your money on just one horse seems riskier than spreading out your bets on four different horses—and it can be. But how do you choose those horses? You can use your intuition and randomly pick any four. But that would be like playing a game of chance. Professional fund managers don't rely merely on their intuition for picking a well-diversified portfolio. They use statistical techniques for finding what are called "uncorrelated assets." Uncorrelated assets can help you diversify your portfolio and manage risks—good news for investors who are wary of the uncertainty in rolling dice. But it's not perfect, either: diversifying your portfolio by picking up uncorrelated assets may not always work. In this article, we show you what correlation is and explain how uncorrelated assets work—and when they don't. Key Takeaways The concept of diversification in investing refers to owning a wide variety of securities across several asset classes to defray risk.Historically stocks and bonds are used as examples of two uncorrelated asset classes.Diversification works best when assets are uncorrelated or negatively correlated with one another, so that as some parts of the portfolio fall, others rise. A Game of Numbers Correlation statistically measures the degree of relationship between two variables in terms of a number that lies between +1.0 and -1.0. When it comes to diversified portfolios, correlation represents the degree of relationship between the price movements of different assets included in the portfolio. A correlation of +1.0 means that prices move in tandem; a correlation of -1.0 means that prices move in opposite directions. A correlation of 0 means that the price movements of assets are uncorrelated; in other words, the price movement of one asset has no effect on the price movement of the other asset. In actual practice, it's difficult to find a pair of assets that have a perfect positive correlation of +1.0, a perfect negative correlation of -1.0 or even a perfect neutral correlation of 0. A correlation between different pairs of assets could be any one of the numerous possibilities lying between +1.0 and -1.0 (for example, +0.62 or -0.30). Each number thus tells you how far or how close you are from that perfect 0 where two variables are uncorrelated. So, if the correlation between Asset A and Asset B is 0.35 and the correlation between Asset A and Asset C is 0.25, then you can say that Asset A is more correlated with Asset B than it is with Asset C. If two pairs of assets offer the same return at the same risk, choosing the pair that is less correlated decreases the overall risk of the portfolio. All Assets Are Not Created Equal Some plants thrive on snow-capped mountains, some grow in wild deserts, and some grow in rain forests. Just as different weather affects different kinds of plants differently, different macroeconomic factors affect different assets differently.  Likewise, changes in the macroeconomic environment have different effects on different assets. For instance, prices of financial assets (like stocks and bonds) and physical assets (like gold), may move in opposite directions due to inflation. High inflation may lead to a rise in gold prices, whereas it may lead to a fall in prices of financial assets. Using a Correlation Matrix Statisticians use price data to find out how the prices of two assets have moved in the past in relation to each other. Each pair of assets is assigned a number that represents the degree of correlation in their price movements. This number can be used for constructing what is called a "correlation matrix" for different assets. A correlation matrix makes the task of choosing different assets easier by presenting their correlation with each other in a tabular form. Once you have the matrix, you can use it for choosing a wide variety of assets having different correlations with each other. While choosing assets for your portfolio, you have to choose from a wide range of permutations and combinations. No matter how you play your hand in a portfolio of many assets, some of the assets would be positively correlated, some would be negatively correlated, and the correlation of the rest could be scattered around zero. Start with broad categories (like stocks, bonds, government securities, real estate, etc.) and then narrow down to subcategories (consumer goods, pharmaceuticals, energy, technology and so on). Finally, choose the specific asset that you want to own. The aim of choosing uncorrelated assets is to diversify your risks. Keeping uncorrelated assets ensures that your entire portfolio is not killed by just one stray bullet. Making Uncorrelated Assets Correlated One stray bullet may not be enough to kill a portfolio of uncorrelated assets, but when the entire financial market is facing an assault by weapons of financial mass destruction, then even totally uncorrelated assets may perish together. Big financial downfalls caused by an unholy alliance of financial innovations and leverage may bring assets of all kinds under the same hammer. This is what happened during the near-collapse of the hedge fund Long-Term Capital Management in 1998. It's also what happened during the subprime mortgage meltdown in 2007–08. The lesson from those affairs now seems to be well taken: leverage—the amount of borrowed money used to make an investment—cuts both ways. By using leverage, you can take on the exposure that is many times more than your capital. The strategy of taking high exposure by using borrowed money works perfectly well when you are on a winning streak. You take home greater profit even after paying back the money that you owe. But the problem with leverage is that it also enhances the potential of loss from an investment gone wrong. You have to pay back the money that you owe from some other source. When the price of one asset is collapsing, the level of leverage may force a trader to liquidate even his good assets. When a trader is selling his good assets to cover his losses, he hardly has time to distinguish between correlated and uncorrelated assets. He sells whatever is there in his hands. During the cry of "sell, sell, sell," even the price of good assets may go downhill. The situation becomes complicated when everybody is holding a similarly diversified portfolio. The fall of one diversified portfolio could very well lead to the fall of another diversified portfolio. So, big financial downfalls can put all assets in the same boat. The Bottom Line During hard economic times, uncorrelated assets may seem to have vanished, but diversification still serves its purpose. Diversification may not provide complete insurance against disaster, but it still retains its charm as protection against random events in the market. And although there's a potential for high gains by throwing caution to the wind, the risks involved explain why mostly first-time investors tend to do it. Remember: Nothing short of a complete wipeout would kill all kinds of assets together. In all other scenarios, while some assets perish faster than others, some do manage to survive. If all assets went down the drain together, the financial market that we see today would have been dead long ago.

https://www.investopedia.com/berkshire-hathaway-slashes-taiwan-semiconductor-stake-7109925

Berkshire Sale Sends Taiwan Semiconductor Stock Tumbling

<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>Berkshire Hathaway sold 86% of its stake in chipmaker Taiwan Semiconductor just months after first buying the stock.</li><li>Berkshire also trimmed its position in Activision Blizzard last quarter as the stock failed to rise to Microsoft's per-share offer.</li><li>The billionaire investor increased his position in Apple by more than 4 million shares.</li><li>Along with Apple, Louisiana-Pacific and Paramount Global were the only positions that increased relative to the third quarter.</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"> Warren Buffett's Berkshire Hathaway Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.A">BRK.A</a>) sent shares of Taiwan Semiconductor Manufacturing Co. Ltd. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSM">TSM</a>) plunging as much as 6% Wednesday morning after unexpectedly dumping most of its stake in the chipmaker just months after taking a position. </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"> Berkshire sold more than 50 million shares of Taiwan Semiconductor in the fourth quarter, or 86% of the $4.1 billion position it opened just three months prior, according to its latest <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/what-13f-and-when-it-useful/">13F form</a>.<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="2"></span> The company owned only $618 million of Taiwan Semiconductor stock as of the end of 2022. </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"> Berkshire's about-face, an unusual move for a firm known for its long-term investments, could signal trouble for Taiwan Semiconductor and other chipmakers. The semiconductor industry is still reeling from COVID-related supply chain issues, the lingering effects of China's long lockdown period, and inflation.<span class="ql-inline-citation" data-cite="8"></span> Shares of competitors Qualcomm Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=QCOM">QCOM</a>), Advanced Micro Devices Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMD">AMD</a>), and NVIDIA Corp. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>) also retreated in early trading Wednesday. </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"> Berkshire also sold about an eighth of its stake in video game maker Activision, jettisoning more than 7 million shares to leave it with about $4 billion invested in the company. </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"> Berkshire <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/berkshire-hathaway-bought-roughly-usd1-billion-in-activision-blizzard-shares-ahead-of-microsoft-acquisition-5219157">began amassing its position</a> in the video game maker in late 2021 as the stock tumbled to a one-year low of about $57 in the wake of sexual harassment allegations, but before Microsoft Corp. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT">MSFT</a>) announced plans to buy the game developer for $95 per share.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="10"></span> Activision shares have failed to achieve that price point since Microsoft's intention to purchase became public.<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"> Microsoft's $69 billion purchase of Activision, which would be among the largest ever, hit obstacles in recent months as the U.S. Federal Trade Commission and other regulators <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ftc-microsoft-activision-acquisition-6889953">have opposed the deal</a> on anti-competitive grounds.<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_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Buffett bought about 4.3 million Apple shares in the fourth quarter, bringing the value of Berkshire's stake in the company to more than $110 billion.<span class="ql-inline-citation" data-cite="9"></span> Apple was one of just three positions that Buffett increased, alongside Paramount Global (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=PARA">PARA</a>) and Louisiana-Pacific Corp. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LPX">LPX</a>).<span class="ql-inline-citation" data-cite="1"></span><span class="ql-inline-citation" data-cite="2"></span> </p></div>

### Key Takeaways * Berkshire Hathaway sold 86% of its stake in chipmaker Taiwan Semiconductor just months after first buying the stock. * Berkshire also trimmed its position in Activision Blizzard last quarter as the stock failed to rise to Microsoft's per-share offer. * The billionaire investor increased his position in Apple by more than 4 million shares. * Along with Apple, Louisiana-Pacific and Paramount Global were the only positions that increased relative to the third quarter. Warren Buffett's Berkshire Hathaway Inc. ([BRK.A](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.A)) sent shares of Taiwan Semiconductor Manufacturing Co. Ltd. ([TSM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=TSM)) plunging as much as 6% Wednesday morning after unexpectedly dumping most of its stake in the chipmaker just months after taking a position. Berkshire sold more than 50 million shares of Taiwan Semiconductor in the fourth quarter, or 86% of the $4.1 billion position it opened just three months prior, according to its latest [13F form](https://www.investopedia.com/news/what-13f-and-when-it-useful/). The company owned only $618 million of Taiwan Semiconductor stock as of the end of 2022. Berkshire's about-face, an unusual move for a firm known for its long-term investments, could signal trouble for Taiwan Semiconductor and other chipmakers. The semiconductor industry is still reeling from COVID-related supply chain issues, the lingering effects of China's long lockdown period, and inflation. Shares of competitors Qualcomm Inc. ([QCOM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=QCOM)), Advanced Micro Devices Inc. ([AMD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AMD)), and NVIDIA Corp. ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)) also retreated in early trading Wednesday. Berkshire also sold about an eighth of its stake in video game maker Activision, jettisoning more than 7 million shares to leave it with about $4 billion invested in the company. Berkshire [began amassing its position](https://www.investopedia.com/berkshire-hathaway-bought-roughly-usd1-billion-in-activision-blizzard-shares-ahead-of-microsoft-acquisition-5219157) in the video game maker in late 2021 as the stock tumbled to a one-year low of about $57 in the wake of sexual harassment allegations, but before Microsoft Corp. ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) announced plans to buy the game developer for $95 per share. Activision shares have failed to achieve that price point since Microsoft's intention to purchase became public. Microsoft's $69 billion purchase of Activision, which would be among the largest ever, hit obstacles in recent months as the U.S. Federal Trade Commission and other regulators [have opposed the deal](https://www.investopedia.com/ftc-microsoft-activision-acquisition-6889953) on anti-competitive grounds. Buffett bought about 4.3 million Apple shares in the fourth quarter, bringing the value of Berkshire's stake in the company to more than $110 billion. Apple was one of just three positions that Buffett increased, alongside Paramount Global ([PARA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=PARA)) and Louisiana-Pacific Corp. ([LPX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LPX)).

Key Takeaways Berkshire Hathaway sold 86% of its stake in chipmaker Taiwan Semiconductor just months after first buying the stock.Berkshire also trimmed its position in Activision Blizzard last quarter as the stock failed to rise to Microsoft's per-share offer.The billionaire investor increased his position in Apple by more than 4 million shares.Along with Apple, Louisiana-Pacific and Paramount Global were the only positions that increased relative to the third quarter. Warren Buffett's Berkshire Hathaway Inc. (BRK.A) sent shares of Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) plunging as much as 6% Wednesday morning after unexpectedly dumping most of its stake in the chipmaker just months after taking a position. Berkshire sold more than 50 million shares of Taiwan Semiconductor in the fourth quarter, or 86% of the $4.1 billion position it opened just three months prior, according to its latest 13F form. The company owned only $618 million of Taiwan Semiconductor stock as of the end of 2022. Berkshire's about-face, an unusual move for a firm known for its long-term investments, could signal trouble for Taiwan Semiconductor and other chipmakers. The semiconductor industry is still reeling from COVID-related supply chain issues, the lingering effects of China's long lockdown period, and inflation. Shares of competitors Qualcomm Inc. (QCOM), Advanced Micro Devices Inc. (AMD), and NVIDIA Corp. (NVDA) also retreated in early trading Wednesday. Berkshire also sold about an eighth of its stake in video game maker Activision, jettisoning more than 7 million shares to leave it with about $4 billion invested in the company. Berkshire began amassing its position in the video game maker in late 2021 as the stock tumbled to a one-year low of about $57 in the wake of sexual harassment allegations, but before Microsoft Corp. (MSFT) announced plans to buy the game developer for $95 per share. Activision shares have failed to achieve that price point since Microsoft's intention to purchase became public. Microsoft's $69 billion purchase of Activision, which would be among the largest ever, hit obstacles in recent months as the U.S. Federal Trade Commission and other regulators have opposed the deal on anti-competitive grounds. Buffett bought about 4.3 million Apple shares in the fourth quarter, bringing the value of Berkshire's stake in the company to more than $110 billion. Apple was one of just three positions that Buffett increased, alongside Paramount Global (PARA) and Louisiana-Pacific Corp. (LPX).

https://www.investopedia.com/credit-versio-credit-repair-review-6502807

Credit Versio Credit Repair 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"> <svg class="mntl-svg-resource is-hidden"> <defs> <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> </defs> </svg> <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="Credit Versio" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/3pBf7_DR9f376bP3S-TzEodQQT0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhEQAEAPEAAIOu4f/+/f///4Ou4SwAAAAAEQAEAEEIHQAFCAAgsKDBgwAIFiQYQGBChwMVHpy4UCJFgwEBADs=')" width="1500"/> <noscript> <img alt="Credit Versio" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/3pBf7_DR9f376bP3S-TzEodQQT0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.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>Credit Versio</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 product-card__rating card-rating--finance product-rating" id="product-card__rating_1-0"> <span class="product-rating__rating-label noskim"> Investopedia’s Rating </span> <div alt="3.6 out of 5 stars" class="comp star-rating" id="star-rating_1-0"> <span class="star-rating__label">3.6</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_1-0" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="50%" stop-color="#333e8b"></stop> <stop offset="50%" 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_1-0);"> <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 product-card__rating card-rating--finance product-rating --> <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.creditversio.com/" id="commerce-button_1-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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"> <strong>Our Take</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_1-0-1"> Credit Versio offers an affordable DIY approach to credit repair using software that gently steers you along and monitors your progress. It's best for people who want to take charge on their own but need a little guidance to get things going.  </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">Key Takeaways</span></li> <li class="tabbed-sc-block__tab js-tabbed-tab" data-tab-index="3"><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_1-0-3"> <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>Very affordable</p></li> <li><p>Can get started ASAP</p></li> <li><p>Easy-to-use, intuitive interface</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>Short track record</p></li> <li><p>Requires you to send letters yourself</p></li> <li><p>May not have a money-back guarantee</p></li> <li><p>No hand holding from a live credit analyst</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">Key Takeaways</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="2"> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-5"> <li>Credit Versio is a “free” credit repair service that you can use if you pay for a subscription to a third-party credit monitoring company. </li><li>Credit Versio uses intuitive, AI-driven software to walk you through your own DIY credit repair.</li><li>You'll need to budget a little extra for the price of stamps, printing, and envelopes to send off your own credit dispute letters. </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="3"> <span class="tabbed-sc-block__text">Company Overview</span> </div> <div class="tabbed-sc-block__content js-tabbed-content expert-content" data-tab-index="3"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_1-0-7"> Credit Versio, based in Las Vegas, is one of the newest companies in the credit repair world, founded in 2020. That short track record hasn't held it back, however, and the company claims over 100,000 people signed up in its first year alone.<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_1-0-8"> The company has an overall good reputation, driven by people looking for a different approach to credit repair. Unlike traditional credit repair companies that have someone do all the work for you, Credit Versio is a DIY credit repair software program that guides you on how to fix your own credit for a fraction of the price. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <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_1-0-9"> <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"> 2020 </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Services Offered</span> <span class="definition-list__item-content definition-list__item-content-1"> Credit repair, credit monitoring, identity theft insurance </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">First Work Fee</span> <span class="definition-list__item-content definition-list__item-content-2"> $0 </span> </span> </li> <li class="definition-list__item"> <span class="definition-list__item-content-container"> <span class="definition-list__item-title">Monthly Fee</span> <span class="definition-list__item-content definition-list__item-content-3"> $19.95 to $29.95/month, with an option for a seven-day trial for $1 </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-4"> Phone, email </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-5"> https://www.creditversio.com/ </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="Credit Versio" class="primary-image__image mntl-primary-image--blurry" height="750" onload="(function(e){e.classList.add('loaded')})(this)" src="https://www.investopedia.com/thmb/3pBf7_DR9f376bP3S-TzEodQQT0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg" style="--blurry: url('data:image/gif;charset=utf-8;base64,R0lGODlhEQAEAPEAAIOu4f/+/f///4Ou4SwAAAAAEQAEAEEIHQAFCAAgsKDBgwAIFiQYQGBChwMVHpy4UCJFgwEBADs=')" width="1500"/> <noscript> <img alt="Credit Versio" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="750" src="https://www.investopedia.com/thmb/3pBf7_DR9f376bP3S-TzEodQQT0=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.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>Credit Versio</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__rating product-rating" id="sticky-toc-widget__rating_1-0"> <span class="product-rating__rating-label noskim"> overall rating </span> <div alt="3.6 out of 5 stars" class="comp star-rating" id="star-rating_1-0-1"> <span class="star-rating__label">3.6</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: #d17000;"> <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: #d17000;"> <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: #d17000;"> <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_1-0-1" x1="0%" x2="100%" y1="0%" y2="0%"> <stop offset="50%" stop-color="#d17000"></stop> <stop offset="50%" 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_1-0-1);"> <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 sticky-toc-widget__rating product-rating --> <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.creditversio.com/" id="commerce-button_2-0" rel="noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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-Credit Versio Credit Repair 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"> Credit Versio Credit Repair 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-Types of Services" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-types-of-services" id="mntl-toc__list-item-link_3-0-2" rel="nocaes"><span class="link__wrapper">Types of Services</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-Company Features" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-company-features" id="mntl-toc__list-item-link_3-0-3" rel="nocaes"><span class="link__wrapper">Company Features</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-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-Company Reputation" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-company-reputation" id="mntl-toc__list-item-link_3-0-5" rel="nocaes"><span class="link__wrapper">Company Reputation</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-Contract Duration" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-contract-duration" id="mntl-toc__list-item-link_3-0-6" rel="nocaes"><span class="link__wrapper">Contract Duration</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-Cost" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-cost" id="mntl-toc__list-item-link_3-0-7" rel="nocaes"><span class="link__wrapper">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_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-Guide to Choosing" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-how-to-choose-a-credit-repair-company" id="mntl-toc__list-item-link_3-0-8" rel="nocaes"><span class="link__wrapper">Guide to Choosing</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_3-0-9"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-9"> <a class="mntl-toc__list-item-link mntl-text-link mntl-toc__list-item-link js-mntl-toc-link" data-click-action="OnPageClick-Alternative Choices" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternative-choices" id="mntl-toc__list-item-link_3-0-9" rel="nocaes"><span class="link__wrapper">Alternative Choices</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_3-0-10"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-10"> <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_3-0-10" 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_3-0-11"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-11"> <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-frequently-asked-questions" id="mntl-toc__list-item-link_3-0-11" 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 --> <li class="comp mntl-toc__list-item mntl-block" id="mntl-toc__list-item_3-0-12"> <div class="comp mntl-toc__list-item-heading mntl-block" id="mntl-toc__list-item-heading_3-0-12"> <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_3-0-12" 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"> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0"> Credit Versio isn't your typical credit repair company. Rather than assigning you to a live credit analyst who handles things for you, it puts you in the driver's seat using AI-driven software that guides you through a step-by-step plan customized to your own credit reports. It then monitors your progress over time, and if your tactics fail, it suggests alternate strategies to try until you've achieved the results you want.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-1"> Another thing that separates Credit Versio from the rest of the pack is how you pay and the additional services you need to get the job done. Credit Versio is free; you'll need to purchase a subscription to one of two companies (SmartCredit or IdentityIQ), and you'll get all of the perks associated with these plans, including identity theft insurance and credit monitoring. But after that, Credit Versio itself charges no additional fees, making it a transparent and affordable route for people willing to take charge of their own credit repair. </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_2-0-2"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Credit Versio uses a DIY approach to credit repair. If you'd rather hand things off to someone else because you don't have enough time to do it on your own or you're not confident in your abilities, consider hiring a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-repair-companies-4843898">more traditional credit repair company</a>.</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-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_2-0-3"> <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_2-0-4"> <li><strong>Very affordable: </strong>You probably won't find a cheaper option for a credit repair company. In fact, after you pay for a third-party <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-monitoring-service.asp">credit monitoring service</a>, Credit Versio itself is free. </li> <li><strong>Can get started ASAP: </strong>Often, you'll need to wait at least a day before someone sits down with you to create a credit repair plan. But with Credit Versio's DIY approach, you can get the ball rolling in just a few minutes. </li> <li><strong>Easy-to-use, intuitive interface: </strong>Credit Versio's online portal offers a smooth experience that makes it easy to see where you're at now, what needs to be done, and what improvements you've already made. </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_2-0-5"> <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_2-0-6"> <li><strong>Short track record: </strong>Credit repair isn't a very old industry, but having a longer relative track record can be a sign of a more stable and customer-driven company. Credit Versio is one of the newest companies out there, so it doesn't have that history built up yet. </li><li><strong>Requires you to send letters yourself: </strong>Typically, credit repair is a hand-off service where someone else does all the work for you. That's not the case with Credit Versio; you'll need to take a more active role in things, including printing and mailing your own credit dispute letters that the company helps you create. </li><li><strong>May not have a money-back guarantee: </strong>Credit Versio doesn't charge for its services, but you will need to purchase a subscription to either IdentityIQ or SmartCredit. SmartCredit offers a limited money-back guarantee, but IdentityIQ does not.</li><li><strong>No hand-holding from a live credit analyst: </strong>Since Credit Versio is a software program and not a team of live experts, you won't have much, if any, interaction with a live person. Its program and educational materials are very good, but if you really need one-on-one interaction with a human, this won't be a good option for you.</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-types-of-services"></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"> Types of Services </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"> When you sign up with Credit Versio, you're getting two products: Credit Versio's program and a separate credit monitoring service through either IdentityIQ or SmartCredit (your choice). Thus, some of the services come from Credit Versio itself, and others come from whichever program you select.  </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"> Software-Driven Credit Analysis </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"> After you sign up, Credit Versio uses either IdentityIQ or SmartCredit to immediately pull your credit reports from each of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/top-three-credit-bureaus/">three credit bureaus</a>. It then imports them into its software program, where it scans for different types of errors, such as duplicate listings or fraudulent activity.  </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_2-0-11"> <span class="mntl-sc-block-subheading__text"> Credit Disputes </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"> The heart of Credit Versio's approach is guiding you through the process of sending your own credit disputes. Once you identify an error that needs to be corrected, it'll guide you through the process of auto-generating a dispute letter. You can select a reason for the dispute from a drop-down list or use a custom field to enter your own wording.  </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"> Credit Versio then emails you the letter, and you print and send it off. The program monitors your credit reports to see whether the letter had any effect, and if it did, it may be reflected in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-improve-your-credit-score-4590097">credit score increase</a>. If it does not go up, the program will keep suggesting alternative strategies until you're successful in removing the negative mark.  </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_2-0-14"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>Credit Versio claims it's more effective because the letters you send come directly from you, making them harder for the recipients to ignore as formulaic spam from credit repair companies. That may be true, but in addition, it may be better to use the "custom reason" field to tailor your writing to your own situation and provide more details rather than using all of the pre-written wording for generating dispute letters.<span class="ql-inline-citation" data-cite="8"></span></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 --> <h3 class="comp finance-sc-block-subheading mntl-sc-block prm-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_2-0-15"> <span class="mntl-sc-block-subheading__text"> Credit Education </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_2-0-16"> Without a real, live person helping you, Credit Versio actually does offer quite a robust suite of educational tools featuring well-known credit experts. These videos and articles can help you learn more about specific nuances that may affect you, such as negative accounts that you've paid off, and how to fix or at least understand them so you can plan around them.  </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_2-0-17"> <span class="mntl-sc-block-subheading__text"> Credit Monitoring </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_2-0-18"> Credit Versio works with a third-party credit monitoring program: SmartCredit or IdentityIQ. The credit monitoring services these programs provide are the backbone for Credit Versio, offering the raw data (i.e., your credit reports) that it uses to generate a credit repair plan for 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_2-0-19"> Thus, you get the added benefit of credit monitoring. If anything pops up on your credit reports that may be concerning, such as identity theft, you'll be immediately notified. And depending on which credit monitoring program you select, you'll get either twice-monthly or unlimited updates on your TransUnion credit report and associated credit score.  </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_2-0-20"> <span class="mntl-sc-block-subheading__text"> Identity Theft Insurance </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_2-0-21"> Another added benefit of the third-party credit monitoring service is that it comes with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-identity-theft-protection-services-5025069">identity theft insurance</a>. If you're forced to pay for someone else's misdeeds while they were pretending to be you, you'll be covered for up to $25,000 in damages if you select IdentityIQ's plan, or $1,000,000 in damages if you select SmartCredit's plan. This protection lasts for as long as you continue the subscription.<span class="ql-inline-citation" data-cite="3"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-company-features"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-22"> <span class="mntl-sc-block-heading__text"> Company Features </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_2-0-23"> Since Credit Versio is really a free add-on service to other companies that you actually pay for, you'll need to spend a fair amount of time scoping out those companies too. Notably, neither SmartCredit nor IdentityIQ offers a free trial, although IdentityIQ does offer a seven-day trial for just $1. The downside is it doesn't offer any form of a money-back guarantee. SmartCredit may offer this in limited circumstances (only if you ask for a refund "prior to your second bill," according to its service terms). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-24"> Unfortunately, Credit Versio doesn't offer mobile apps for those who prefer this connection method—a missed opportunity, especially considering it <em>is</em> a software program. It is also geared towards individuals and does not offer business credit repair services.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-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_2-0-25"> <span class="mntl-sc-block-heading__text"> 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_2-0-26"> Although Credit Versio is software-based, it does offer a customer support team. The downside is it's relatively limited, with phone lines only open from 9 a.m. to 5 p.m. PST, Monday through Friday. If you're on the East Coast, that translates into call-in hours from 12 p.m. to 8 p.m. EST. You can also get help via email.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-company-reputation"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-27"> <span class="mntl-sc-block-heading__text"> Company Reputation </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_2-0-28"> Being such a new company, there hasn't been much time to collect independent reviews or complaints on watchdog sites like the CFPB. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-29"> There's also a lack of customer reviews on many traditional review sites, with the notable exception of Trustpilot. There's actually quite a lot of information here, and most of it is quite positive. People generally seem to have good success with the service, and it has earned a TrustScore of 4.5 out of five.<span class="ql-inline-citation" data-cite="2"></span>  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-contract-duration"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-30"> <span class="mntl-sc-block-heading__text"> Contract Duration </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_2-0-31"> Credit Versio doesn't require you to sign any contracts. As long as you continue paying for the required third-party credit monitoring, you'll have access to Credit Versio. These credit monitoring services, in turn, also don't have any minimum contract requirements and allow you to cancel at any time.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-cost"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-32"> <span class="mntl-sc-block-heading__text"> Cost </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_2-0-33"> Credit Versio itself is free, and that makes it the cheapest credit repair company out there. Instead of charging money itself, it partners up with two credit monitoring services, and that's where the actual cost comes from. You can sign up for these services directly through Credit Versio. These are the options you can choose from and how they differ: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-34"> <li><strong>SmartCredit Basic: </strong>$19.95 per month, with twice-monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insurance </li><li><strong>SmartCredit Premium: </strong>$29.95 per month, with unlimited monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insurance</li><li><strong>IdentityIQ Secure Max:</strong> Starts with a seven-day trial for $1; after that, it's $24.99 per month and offers $25,000 in identity theft insurance<span class="ql-inline-citation" data-cite="3"></span></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_2-0-35"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-2"> <p>If you're not sure about using Credit Versio, try opting for the IdentityIQ plan and getting started immediately. You'll be able to see whether you like using it, and it'll only set you back $1 if you cancel within the first seven days. To get regular progress updates, though, you will need to continue the service. </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-to-choose-a-credit-repair-company"></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"> How to Choose a Credit Repair Company </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"> Credit Versio is much different than other credit repair companies. If this is your first venture into the world of credit repair, it's a good idea to shop around before deciding. Here are some tips for finding the best credit repair options for your situation. Consider 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_2-0-38"> <li><strong>Your needs: </strong>Credit Versio is really geared towards sending disputes. If you need help with something else, like managing your debt collectors, consider another company or working with a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-counseling-services-5179499">credit counseling service</a>.</li> <li><strong>Amount of work required: </strong>Credit Versio requires you to do everything yourself. Most credit repair companies don't; they only require minimal effort on your part. </li> <li><strong>Potential fees: </strong>Some credit repair companies advertise a flat-rate fee to get started and more fees to continue service. Before you sign up with these companies, ask about any and all other potential fees you might incur because there can be many hidden and extremely expensive fees to get the most from the service.</li> <li><strong>Try-before-you-buy or a money-back guarantee: </strong>If you're skeptical, seek out companies that offer free initial consults with a professional credit analyst or a good no-strings-attached cancellation policy and money-back guarantee.</li> <li><strong>The tell-tale signs of a credit repair scam: </strong>Unfortunately, the world of credit repair has a shady reputation, and for a good reason. There are a<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/credit-scams-online.asp"> lot of scams</a> out there with hallmark warning signs, such as promising to remove <em>all </em>negative information from your credit reports, even items that are accurate. </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_2-0-39"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-3"> <p>If you do want that extra guidance, browse our picks for the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-credit-repair-companies-4843898">best credit repair companies</a> to find the help you need.</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-alternative-choices"></span> <h2 class="comp finance-sc-block-heading mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_2-0-40"> <span class="mntl-sc-block-heading__text"> Alternative Choices </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="table-block" id="mntl-sc-block_2-0-41"> <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> </th> <th><b>Credit Versio</b></th> <th><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-credit-pros-review-5083712">The Credit Pros</a></b> </th> <th><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/credilife-review-5086462">Credilife</a></b> </th> </tr> </thead> <tbody data-check="0"> <tr> <td><b>Services Offered</b></td> <td>Credit repair Credit monitoring Identity theft insurance Credit disputes</td> <td>Credit repair Credit monitoring Credit disputes</td> <td>Credit repair Credit monitoring Identity theft insurance (extra cost)  Credit disputes</td> </tr> <tr> <td><b>Max. Number of Monthly Disputes</b></td> <td>Unlimited </td> <td>Unlimited </td> <td>Unlimited </td> </tr> <tr> <td><b>Letters to Creditors/Bureaus</b> </td> <td>Credit disputes </td> <td>Credit disputes </td> <td>Debt validation, credit disputes, letters for derogatory information, goodwill removal request, cease and desist </td> </tr> <tr> <td><b>First Work Fee</b></td> <td>$0 </td> <td>$119 </td> <td>$21.99 </td> </tr> <tr> <td><b>Min. Monthly Fee</b> </td> <td>$19.95 </td> <td>$69 </td> <td>$135 </td> </tr> <tr> <td><b>Customer Service Platforms</b> </td> <td>Phone, email </td> <td>Phone, email, live chat </td> <td>Phone, email </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-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_2-0-42"> <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_2-0-43"> The simple truth is that most people can handle fixing up their credit on their own for free. Credit repair companies are best for people with very complicated situations, very little knowledge or confidence about how credit works, and/or very little time. If you're somewhere in between—not quite sure what to do but capable of doing most things yourself with a little guidance and online research—then Credit Versio could be a great option. </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_2-0-44"> <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_2-0-45"> <span class="mntl-sc-block-subheading__text"> What Does Credit Versio Do? </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_2-0-46"> Credit Versio is an automated credit repair program and credit monitoring service via a third-party vendor. The online tools provided by Credit Versio are designed to help you dispute and manage credit issues, monitor your credit, and overall repair and improve your credit over time. </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_2-0-47"> <span class="mntl-sc-block-subheading__text"> What Score Does Credit Versio Use? </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_2-0-48"> Credit Versio pulls your credit information from the three major credit bureaus: Equifax, Experian, and TransUnion. </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_2-0-49"> <span class="mntl-sc-block-subheading__text"> Does Credit Versio Send the Letters for You? </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_2-0-50"> Credit Versio's software will help guide you on how to write an auto-generating dispute letter to send to your creditors. You will have to print and mail the letters yourself, which means paying for postage. </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_2-0-51"> <span class="mntl-sc-block-subheading__text"> Does Credit Versio Dispute Inquiries? </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_2-0-52"> Credit Versio gives you the tools, like an automated system that connects you to the three major credit bureaus, to dispute credit inquiries yourself. </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_2-0-53"> <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="other" data-tracking-container="true" href="https://www.creditversio.com/" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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 --> <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_2-0-54"> <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_2-0-55"> Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-56"> The top picks were selected based on: </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_2-0-57"> <li>Costs and fees (weighted 40.5% in total)</li><li>Services offered (34%)</li><li>Customer experience (22.5%)</li><li>Stability (3%)</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_2-0-58"> We took into account factors like how many disputes will be sent per month, the kinds of dispute letters that are sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> </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-1"><p>Credit Versio. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.creditversio.com/">Home Page</a>." </p></li> <li class="mntl-sources__source" id="citation-8"><p>National Consumer Law Center. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nclc.org/images/pdf/pr-reports/report-automated_injustice.pdf">AUTOMATED INJUSTICE: HOW A MECHANIZED DISPUTE SYSTEM FRUSTRATES CONSUMERS SEEKING TO FIX ERRORS IN THEIR CREDIT REPORTS</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>Credit Versio. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.creditversio.com/pricing">Pricing</a>." </p></li> <li class="mntl-sources__source" id="citation-2"><p>Trustpilot. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.trustpilot.com/review/creditversio.com">Credit Versio</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="6502743" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/credit-glory-credit-repair-review-6502743" id="mntl-card-list-items_1-0"> 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:fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg) :fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg) Credit Versio Investopedia’s Rating 3.6 [Learn More](https://www.creditversio.com/) **Our Take** Credit Versio offers an affordable DIY approach to credit repair using software that gently steers you along and monitors your progress. It's best for people who want to take charge on their own but need a little guidance to get things going.  * Pros & Cons * Key Takeaways * Company Overview Pros & Cons Pros * Very affordable * Can get started ASAP * Easy-to-use, intuitive interface Cons * Short track record * Requires you to send letters yourself * May not have a money-back guarantee * No hand holding from a live credit analyst Key Takeaways * Credit Versio is a “free” credit repair service that you can use if you pay for a subscription to a third-party credit monitoring company. * Credit Versio uses intuitive, AI-driven software to walk you through your own DIY credit repair. * You'll need to budget a little extra for the price of stamps, printing, and envelopes to send off your own credit dispute letters. Company Overview Credit Versio, based in Las Vegas, is one of the newest companies in the credit repair world, founded in 2020. That short track record hasn't held it back, however, and the company claims over 100,000 people signed up in its first year alone.  The company has an overall good reputation, driven by people looking for a different approach to credit repair. Unlike traditional credit repair companies that have someone do all the work for you, Credit Versio is a DIY credit repair software program that guides you on how to fix your own credit for a fraction of the price. * Year Founded 2020 * Services Offered Credit repair, credit monitoring, identity theft insurance * First Work Fee $0 * Monthly Fee $19.95 to $29.95/month, with an option for a seven-day trial for $1 * Customer Service Phone, email * Official Website https://www.creditversio.com/ :fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg) :fill(white):max_bytes(150000):strip_icc()/CreditVersio-4b623d74071945ed8a3bbbe2c412dfbd.jpg) Credit Versio overall rating 3.6 [Learn More](https://www.creditversio.com/) Table of Contents View All Credit Versio Credit Repair Review * [Pros Explained](#toc-pros-explained) * [Cons Explained](#toc-cons-explained) * [Types of Services](#toc-types-of-services) * [Company Features](#toc-company-features) * [Customer Service](#toc-customer-service) * [Company Reputation](#toc-company-reputation) * [Contract Duration](#toc-contract-duration) * [Cost](#toc-cost) * [Guide to Choosing](#toc-how-to-choose-a-credit-repair-company) * [Alternative Choices](#toc-alternative-choices) * [Final Verdict](#toc-final-verdict) * [FAQ](#toc-frequently-asked-questions) * [Methodology](#toc-methodology) Credit Versio isn't your typical credit repair company. Rather than assigning you to a live credit analyst who handles things for you, it puts you in the driver's seat using AI-driven software that guides you through a step-by-step plan customized to your own credit reports. It then monitors your progress over time, and if your tactics fail, it suggests alternate strategies to try until you've achieved the results you want.  Another thing that separates Credit Versio from the rest of the pack is how you pay and the additional services you need to get the job done. Credit Versio is free; you'll need to purchase a subscription to one of two companies (SmartCredit or IdentityIQ), and you'll get all of the perks associated with these plans, including identity theft insurance and credit monitoring. But after that, Credit Versio itself charges no additional fees, making it a transparent and affordable route for people willing to take charge of their own credit repair. Credit Versio uses a DIY approach to credit repair. If you'd rather hand things off to someone else because you don't have enough time to do it on your own or you're not confident in your abilities, consider hiring a [more traditional credit repair company](https://www.investopedia.com/best-credit-repair-companies-4843898). ## Pros Explained * **Very affordable:** You probably won't find a cheaper option for a credit repair company. In fact, after you pay for a third-party [credit monitoring service](https://www.investopedia.com/terms/c/credit-monitoring-service.asp), Credit Versio itself is free. * **Can get started ASAP:** Often, you'll need to wait at least a day before someone sits down with you to create a credit repair plan. But with Credit Versio's DIY approach, you can get the ball rolling in just a few minutes. * **Easy-to-use, intuitive interface:** Credit Versio's online portal offers a smooth experience that makes it easy to see where you're at now, what needs to be done, and what improvements you've already made. ## Cons Explained * **Short track record:** Credit repair isn't a very old industry, but having a longer relative track record can be a sign of a more stable and customer-driven company. Credit Versio is one of the newest companies out there, so it doesn't have that history built up yet. * **Requires you to send letters yourself:** Typically, credit repair is a hand-off service where someone else does all the work for you. That's not the case with Credit Versio; you'll need to take a more active role in things, including printing and mailing your own credit dispute letters that the company helps you create. * **May not have a money-back guarantee:** Credit Versio doesn't charge for its services, but you will need to purchase a subscription to either IdentityIQ or SmartCredit. SmartCredit offers a limited money-back guarantee, but IdentityIQ does not. * **No hand-holding from a live credit analyst:** Since Credit Versio is a software program and not a team of live experts, you won't have much, if any, interaction with a live person. Its program and educational materials are very good, but if you really need one-on-one interaction with a human, this won't be a good option for you. ## Types of Services When you sign up with Credit Versio, you're getting two products: Credit Versio's program and a separate credit monitoring service through either IdentityIQ or SmartCredit (your choice). Thus, some of the services come from Credit Versio itself, and others come from whichever program you select.  ### Software-Driven Credit Analysis After you sign up, Credit Versio uses either IdentityIQ or SmartCredit to immediately pull your credit reports from each of the [three credit bureaus](https://www.investopedia.com/personal-finance/top-three-credit-bureaus/). It then imports them into its software program, where it scans for different types of errors, such as duplicate listings or fraudulent activity.  ### Credit Disputes The heart of Credit Versio's approach is guiding you through the process of sending your own credit disputes. Once you identify an error that needs to be corrected, it'll guide you through the process of auto-generating a dispute letter. You can select a reason for the dispute from a drop-down list or use a custom field to enter your own wording.  Credit Versio then emails you the letter, and you print and send it off. The program monitors your credit reports to see whether the letter had any effect, and if it did, it may be reflected in a [credit score increase](https://www.investopedia.com/how-to-improve-your-credit-score-4590097). If it does not go up, the program will keep suggesting alternative strategies until you're successful in removing the negative mark.  Credit Versio claims it's more effective because the letters you send come directly from you, making them harder for the recipients to ignore as formulaic spam from credit repair companies. That may be true, but in addition, it may be better to use the "custom reason" field to tailor your writing to your own situation and provide more details rather than using all of the pre-written wording for generating dispute letters. ### Credit Education Without a real, live person helping you, Credit Versio actually does offer quite a robust suite of educational tools featuring well-known credit experts. These videos and articles can help you learn more about specific nuances that may affect you, such as negative accounts that you've paid off, and how to fix or at least understand them so you can plan around them.  ### Credit Monitoring Credit Versio works with a third-party credit monitoring program: SmartCredit or IdentityIQ. The credit monitoring services these programs provide are the backbone for Credit Versio, offering the raw data (i.e., your credit reports) that it uses to generate a credit repair plan for you.  Thus, you get the added benefit of credit monitoring. If anything pops up on your credit reports that may be concerning, such as identity theft, you'll be immediately notified. And depending on which credit monitoring program you select, you'll get either twice-monthly or unlimited updates on your TransUnion credit report and associated credit score.  ### Identity Theft Insurance Another added benefit of the third-party credit monitoring service is that it comes with [identity theft insurance](https://www.investopedia.com/best-identity-theft-protection-services-5025069). If you're forced to pay for someone else's misdeeds while they were pretending to be you, you'll be covered for up to $25,000 in damages if you select IdentityIQ's plan, or $1,000,000 in damages if you select SmartCredit's plan. This protection lasts for as long as you continue the subscription.  ## Company Features Since Credit Versio is really a free add-on service to other companies that you actually pay for, you'll need to spend a fair amount of time scoping out those companies too. Notably, neither SmartCredit nor IdentityIQ offers a free trial, although IdentityIQ does offer a seven-day trial for just $1. The downside is it doesn't offer any form of a money-back guarantee. SmartCredit may offer this in limited circumstances (only if you ask for a refund "prior to your second bill," according to its service terms). Unfortunately, Credit Versio doesn't offer mobile apps for those who prefer this connection method—a missed opportunity, especially considering it *is* a software program. It is also geared towards individuals and does not offer business credit repair services.  ## Customer Service Although Credit Versio is software-based, it does offer a customer support team. The downside is it's relatively limited, with phone lines only open from 9 a.m. to 5 p.m. PST, Monday through Friday. If you're on the East Coast, that translates into call-in hours from 12 p.m. to 8 p.m. EST. You can also get help via email.  ## Company Reputation Being such a new company, there hasn't been much time to collect independent reviews or complaints on watchdog sites like the CFPB. There's also a lack of customer reviews on many traditional review sites, with the notable exception of Trustpilot. There's actually quite a lot of information here, and most of it is quite positive. People generally seem to have good success with the service, and it has earned a TrustScore of 4.5 out of five.  ## Contract Duration Credit Versio doesn't require you to sign any contracts. As long as you continue paying for the required third-party credit monitoring, you'll have access to Credit Versio. These credit monitoring services, in turn, also don't have any minimum contract requirements and allow you to cancel at any time.  ## Cost Credit Versio itself is free, and that makes it the cheapest credit repair company out there. Instead of charging money itself, it partners up with two credit monitoring services, and that's where the actual cost comes from. You can sign up for these services directly through Credit Versio. These are the options you can choose from and how they differ: * **SmartCredit Basic:** $19.95 per month, with twice-monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insurance * **SmartCredit Premium:** $29.95 per month, with unlimited monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insurance * **IdentityIQ Secure Max:** Starts with a seven-day trial for $1; after that, it's $24.99 per month and offers $25,000 in identity theft insurance If you're not sure about using Credit Versio, try opting for the IdentityIQ plan and getting started immediately. You'll be able to see whether you like using it, and it'll only set you back $1 if you cancel within the first seven days. To get regular progress updates, though, you will need to continue the service.  ## How to Choose a Credit Repair Company Credit Versio is much different than other credit repair companies. If this is your first venture into the world of credit repair, it's a good idea to shop around before deciding. Here are some tips for finding the best credit repair options for your situation. Consider the following: * **Your needs:** Credit Versio is really geared towards sending disputes. If you need help with something else, like managing your debt collectors, consider another company or working with a [credit counseling service](https://www.investopedia.com/best-credit-counseling-services-5179499). * **Amount of work required:** Credit Versio requires you to do everything yourself. Most credit repair companies don't; they only require minimal effort on your part. * **Potential fees:** Some credit repair companies advertise a flat-rate fee to get started and more fees to continue service. Before you sign up with these companies, ask about any and all other potential fees you might incur because there can be many hidden and extremely expensive fees to get the most from the service. * **Try-before-you-buy or a money-back guarantee:** If you're skeptical, seek out companies that offer free initial consults with a professional credit analyst or a good no-strings-attached cancellation policy and money-back guarantee. * **The tell-tale signs of a credit repair scam:** Unfortunately, the world of credit repair has a shady reputation, and for a good reason. There are a [lot of scams](https://www.investopedia.com/articles/pf/08/credit-scams-online.asp) out there with hallmark warning signs, such as promising to remove *all* negative information from your credit reports, even items that are accurate. If you do want that extra guidance, browse our picks for the [best credit repair companies](https://www.investopedia.com/best-credit-repair-companies-4843898) to find the help you need. ## Alternative Choices | | **Credit Versio** | **[The Credit Pros](https://www.investopedia.com/the-credit-pros-review-5083712)** | **[Credilife](https://www.investopedia.com/credilife-review-5086462)** | | --- | --- | --- | --- | | **Services Offered** | Credit repair Credit monitoring Identity theft insurance Credit disputes | Credit repair Credit monitoring Credit disputes | Credit repair Credit monitoring Identity theft insurance (extra cost)  Credit disputes | | **Max. Number of Monthly Disputes** | Unlimited | Unlimited | Unlimited | | **Letters to Creditors/Bureaus** | Credit disputes | Credit disputes | Debt validation, credit disputes, letters for derogatory information, goodwill removal request, cease and desist | | **First Work Fee** | $0 | $119 | $21.99 | | **Min. Monthly Fee** | $19.95 | $69 | $135 | | **Customer Service Platforms** | Phone, email | Phone, email, live chat | Phone, email | ## Final Verdict The simple truth is that most people can handle fixing up their credit on their own for free. Credit repair companies are best for people with very complicated situations, very little knowledge or confidence about how credit works, and/or very little time. If you're somewhere in between—not quite sure what to do but capable of doing most things yourself with a little guidance and online research—then Credit Versio could be a great option. ## Frequently Asked Questions ### What Does Credit Versio Do? Credit Versio is an automated credit repair program and credit monitoring service via a third-party vendor. The online tools provided by Credit Versio are designed to help you dispute and manage credit issues, monitor your credit, and overall repair and improve your credit over time. ### What Score Does Credit Versio Use? Credit Versio pulls your credit information from the three major credit bureaus: Equifax, Experian, and TransUnion. ### Does Credit Versio Send the Letters for You? Credit Versio's software will help guide you on how to write an auto-generating dispute letter to send to your creditors. You will have to print and mail the letters yourself, which means paying for postage. ### Does Credit Versio Dispute Inquiries? Credit Versio gives you the tools, like an automated system that connects you to the three major credit bureaus, to dispute credit inquiries yourself. [Learn More](https://www.creditversio.com/) ## Methodology Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. The top picks were selected based on: * Costs and fees (weighted 40.5% in total) * Services offered (34%) * Customer experience (22.5%) * Stability (3%) We took into account factors like how many disputes will be sent per month, the kinds of dispute letters that are sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. 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. Credit Versio. "[Home Page](https://www.creditversio.com/)." 2. National Consumer Law Center. "[AUTOMATED INJUSTICE: HOW A MECHANIZED DISPUTE SYSTEM FRUSTRATES CONSUMERS SEEKING TO FIX ERRORS IN THEIR CREDIT REPORTS](https://www.nclc.org/images/pdf/pr-reports/report-automated_injustice.pdf)." 3. Credit Versio. "[Pricing](https://www.creditversio.com/pricing)." 4. Trustpilot. "[Credit Versio](https://www.trustpilot.com/review/creditversio.com)." 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Credit Versio Investopedia’s Rating 3.6 Learn More Our Take Credit Versio offers an affordable DIY approach to credit repair using software that gently steers you along and monitors your progress. It's best for people who want to take charge on their own but need a little guidance to get things going.  Pros & Cons Key Takeaways Company Overview Pros & Cons Pros Very affordable Can get started ASAP Easy-to-use, intuitive interface Cons Short track record Requires you to send letters yourself May not have a money-back guarantee No hand holding from a live credit analyst Key Takeaways Credit Versio is a “free” credit repair service that you can use if you pay for a subscription to a third-party credit monitoring company. Credit Versio uses intuitive, AI-driven software to walk you through your own DIY credit repair.You'll need to budget a little extra for the price of stamps, printing, and envelopes to send off your own credit dispute letters.  Company Overview Credit Versio, based in Las Vegas, is one of the newest companies in the credit repair world, founded in 2020. That short track record hasn't held it back, however, and the company claims over 100,000 people signed up in its first year alone.  The company has an overall good reputation, driven by people looking for a different approach to credit repair. Unlike traditional credit repair companies that have someone do all the work for you, Credit Versio is a DIY credit repair software program that guides you on how to fix your own credit for a fraction of the price. Year Founded 2020 Services Offered Credit repair, credit monitoring, identity theft insurance First Work Fee $0 Monthly Fee $19.95 to $29.95/month, with an option for a seven-day trial for $1 Customer Service Phone, email Official Website https://www.creditversio.com/ Credit Versio overall rating 3.6 Learn More Table of Contents View All Credit Versio Credit Repair Review Pros Explained Cons Explained Types of Services Company Features Customer Service Company Reputation Contract Duration Cost Guide to Choosing Alternative Choices Final Verdict FAQ Methodology Credit Versio isn't your typical credit repair company. Rather than assigning you to a live credit analyst who handles things for you, it puts you in the driver's seat using AI-driven software that guides you through a step-by-step plan customized to your own credit reports. It then monitors your progress over time, and if your tactics fail, it suggests alternate strategies to try until you've achieved the results you want.  Another thing that separates Credit Versio from the rest of the pack is how you pay and the additional services you need to get the job done. Credit Versio is free; you'll need to purchase a subscription to one of two companies (SmartCredit or IdentityIQ), and you'll get all of the perks associated with these plans, including identity theft insurance and credit monitoring. But after that, Credit Versio itself charges no additional fees, making it a transparent and affordable route for people willing to take charge of their own credit repair. Credit Versio uses a DIY approach to credit repair. If you'd rather hand things off to someone else because you don't have enough time to do it on your own or you're not confident in your abilities, consider hiring a more traditional credit repair company. Pros Explained Very affordable: You probably won't find a cheaper option for a credit repair company. In fact, after you pay for a third-party credit monitoring service, Credit Versio itself is free.  Can get started ASAP: Often, you'll need to wait at least a day before someone sits down with you to create a credit repair plan. But with Credit Versio's DIY approach, you can get the ball rolling in just a few minutes.  Easy-to-use, intuitive interface: Credit Versio's online portal offers a smooth experience that makes it easy to see where you're at now, what needs to be done, and what improvements you've already made.  Cons Explained Short track record: Credit repair isn't a very old industry, but having a longer relative track record can be a sign of a more stable and customer-driven company. Credit Versio is one of the newest companies out there, so it doesn't have that history built up yet. Requires you to send letters yourself: Typically, credit repair is a hand-off service where someone else does all the work for you. That's not the case with Credit Versio; you'll need to take a more active role in things, including printing and mailing your own credit dispute letters that the company helps you create. May not have a money-back guarantee: Credit Versio doesn't charge for its services, but you will need to purchase a subscription to either IdentityIQ or SmartCredit. SmartCredit offers a limited money-back guarantee, but IdentityIQ does not.No hand-holding from a live credit analyst: Since Credit Versio is a software program and not a team of live experts, you won't have much, if any, interaction with a live person. Its program and educational materials are very good, but if you really need one-on-one interaction with a human, this won't be a good option for you. Types of Services When you sign up with Credit Versio, you're getting two products: Credit Versio's program and a separate credit monitoring service through either IdentityIQ or SmartCredit (your choice). Thus, some of the services come from Credit Versio itself, and others come from whichever program you select.  Software-Driven Credit Analysis After you sign up, Credit Versio uses either IdentityIQ or SmartCredit to immediately pull your credit reports from each of the three credit bureaus. It then imports them into its software program, where it scans for different types of errors, such as duplicate listings or fraudulent activity.  Credit Disputes The heart of Credit Versio's approach is guiding you through the process of sending your own credit disputes. Once you identify an error that needs to be corrected, it'll guide you through the process of auto-generating a dispute letter. You can select a reason for the dispute from a drop-down list or use a custom field to enter your own wording.  Credit Versio then emails you the letter, and you print and send it off. The program monitors your credit reports to see whether the letter had any effect, and if it did, it may be reflected in a credit score increase. If it does not go up, the program will keep suggesting alternative strategies until you're successful in removing the negative mark.  Credit Versio claims it's more effective because the letters you send come directly from you, making them harder for the recipients to ignore as formulaic spam from credit repair companies. That may be true, but in addition, it may be better to use the "custom reason" field to tailor your writing to your own situation and provide more details rather than using all of the pre-written wording for generating dispute letters. Credit Education Without a real, live person helping you, Credit Versio actually does offer quite a robust suite of educational tools featuring well-known credit experts. These videos and articles can help you learn more about specific nuances that may affect you, such as negative accounts that you've paid off, and how to fix or at least understand them so you can plan around them.  Credit Monitoring Credit Versio works with a third-party credit monitoring program: SmartCredit or IdentityIQ. The credit monitoring services these programs provide are the backbone for Credit Versio, offering the raw data (i.e., your credit reports) that it uses to generate a credit repair plan for you.  Thus, you get the added benefit of credit monitoring. If anything pops up on your credit reports that may be concerning, such as identity theft, you'll be immediately notified. And depending on which credit monitoring program you select, you'll get either twice-monthly or unlimited updates on your TransUnion credit report and associated credit score.  Identity Theft Insurance Another added benefit of the third-party credit monitoring service is that it comes with identity theft insurance. If you're forced to pay for someone else's misdeeds while they were pretending to be you, you'll be covered for up to $25,000 in damages if you select IdentityIQ's plan, or $1,000,000 in damages if you select SmartCredit's plan. This protection lasts for as long as you continue the subscription.  Company Features Since Credit Versio is really a free add-on service to other companies that you actually pay for, you'll need to spend a fair amount of time scoping out those companies too. Notably, neither SmartCredit nor IdentityIQ offers a free trial, although IdentityIQ does offer a seven-day trial for just $1. The downside is it doesn't offer any form of a money-back guarantee. SmartCredit may offer this in limited circumstances (only if you ask for a refund "prior to your second bill," according to its service terms). Unfortunately, Credit Versio doesn't offer mobile apps for those who prefer this connection method—a missed opportunity, especially considering it is a software program. It is also geared towards individuals and does not offer business credit repair services.  Customer Service Although Credit Versio is software-based, it does offer a customer support team. The downside is it's relatively limited, with phone lines only open from 9 a.m. to 5 p.m. PST, Monday through Friday. If you're on the East Coast, that translates into call-in hours from 12 p.m. to 8 p.m. EST. You can also get help via email.  Company Reputation Being such a new company, there hasn't been much time to collect independent reviews or complaints on watchdog sites like the CFPB. There's also a lack of customer reviews on many traditional review sites, with the notable exception of Trustpilot. There's actually quite a lot of information here, and most of it is quite positive. People generally seem to have good success with the service, and it has earned a TrustScore of 4.5 out of five.  Contract Duration Credit Versio doesn't require you to sign any contracts. As long as you continue paying for the required third-party credit monitoring, you'll have access to Credit Versio. These credit monitoring services, in turn, also don't have any minimum contract requirements and allow you to cancel at any time.  Cost Credit Versio itself is free, and that makes it the cheapest credit repair company out there. Instead of charging money itself, it partners up with two credit monitoring services, and that's where the actual cost comes from. You can sign up for these services directly through Credit Versio. These are the options you can choose from and how they differ: SmartCredit Basic: $19.95 per month, with twice-monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insurance SmartCredit Premium: $29.95 per month, with unlimited monthly TransUnion credit report and score updates and $1,000,000 worth of identity theft insuranceIdentityIQ Secure Max: Starts with a seven-day trial for $1; after that, it's $24.99 per month and offers $25,000 in identity theft insurance If you're not sure about using Credit Versio, try opting for the IdentityIQ plan and getting started immediately. You'll be able to see whether you like using it, and it'll only set you back $1 if you cancel within the first seven days. To get regular progress updates, though, you will need to continue the service.  How to Choose a Credit Repair Company Credit Versio is much different than other credit repair companies. If this is your first venture into the world of credit repair, it's a good idea to shop around before deciding. Here are some tips for finding the best credit repair options for your situation. Consider the following: Your needs: Credit Versio is really geared towards sending disputes. If you need help with something else, like managing your debt collectors, consider another company or working with a credit counseling service. Amount of work required: Credit Versio requires you to do everything yourself. Most credit repair companies don't; they only require minimal effort on your part.  Potential fees: Some credit repair companies advertise a flat-rate fee to get started and more fees to continue service. Before you sign up with these companies, ask about any and all other potential fees you might incur because there can be many hidden and extremely expensive fees to get the most from the service. Try-before-you-buy or a money-back guarantee: If you're skeptical, seek out companies that offer free initial consults with a professional credit analyst or a good no-strings-attached cancellation policy and money-back guarantee. The tell-tale signs of a credit repair scam: Unfortunately, the world of credit repair has a shady reputation, and for a good reason. There are a lot of scams out there with hallmark warning signs, such as promising to remove all negative information from your credit reports, even items that are accurate.  If you do want that extra guidance, browse our picks for the best credit repair companies to find the help you need. Alternative Choices   Credit Versio The Credit Pros  Credilife  Services Offered Credit repair Credit monitoring Identity theft insurance Credit disputes Credit repair Credit monitoring Credit disputes Credit repair Credit monitoring Identity theft insurance (extra cost)  Credit disputes Max. Number of Monthly Disputes Unlimited  Unlimited  Unlimited  Letters to Creditors/Bureaus  Credit disputes  Credit disputes  Debt validation, credit disputes, letters for derogatory information, goodwill removal request, cease and desist  First Work Fee $0  $119  $21.99  Min. Monthly Fee  $19.95  $69  $135  Customer Service Platforms  Phone, email  Phone, email, live chat  Phone, email  Final Verdict The simple truth is that most people can handle fixing up their credit on their own for free. Credit repair companies are best for people with very complicated situations, very little knowledge or confidence about how credit works, and/or very little time. If you're somewhere in between—not quite sure what to do but capable of doing most things yourself with a little guidance and online research—then Credit Versio could be a great option. Frequently Asked Questions What Does Credit Versio Do? Credit Versio is an automated credit repair program and credit monitoring service via a third-party vendor. The online tools provided by Credit Versio are designed to help you dispute and manage credit issues, monitor your credit, and overall repair and improve your credit over time. What Score Does Credit Versio Use? Credit Versio pulls your credit information from the three major credit bureaus: Equifax, Experian, and TransUnion. Does Credit Versio Send the Letters for You? Credit Versio's software will help guide you on how to write an auto-generating dispute letter to send to your creditors. You will have to print and mail the letters yourself, which means paying for postage. Does Credit Versio Dispute Inquiries? Credit Versio gives you the tools, like an automated system that connects you to the three major credit bureaus, to dispute credit inquiries yourself. Learn More Methodology Our team evaluated 17 credit repair companies and collected over 600 data points before selecting our top choices. We weighed 39 criteria, giving the highest weights to those that are the most significant for customers. The top picks were selected based on: Costs and fees (weighted 40.5% in total)Services offered (34%)Customer experience (22.5%)Stability (3%) We took into account factors like how many disputes will be sent per month, the kinds of dispute letters that are sent, cancellation and return policies, and how long companies have been in business. This information was used in our company's star ratings and best picks. 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. Credit Versio. "Home Page."  National Consumer Law Center. "AUTOMATED INJUSTICE: HOW A MECHANIZED DISPUTE SYSTEM FRUSTRATES CONSUMERS SEEKING TO FIX ERRORS IN THEIR CREDIT REPORTS." Credit Versio. "Pricing."  Trustpilot. "Credit Versio." Related Articles Credit Glory Credit Repair Review Lexington Law Credit Repair Review The Credit People Credit Repair Review Credit Assistance Network Credit Repair Review Ovation Credit Repair Review The Credit Pros Credit Repair Review

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

Trading Desk: Definition, What It Does, Common Types

<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-trading-desk"></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 Trading Desk? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A trading desk is a physical location where transactions for buying and selling <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">securities</a> occur. Depending on the type of financial institution, the trading desk may be filled by traders trading for their own proprietary account, brokers who act as agents matching buyers and sellers, or some mixture of both. </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"> Trading desks are found in most financial firms that are involved in facilitating trade executions in markets such as equities, fixed income securities, futures, commodities, and currencies. These facilities are crucial to providing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidmarket.asp">market liquidity</a>. </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 trading desk may also be known as a dealing desk. </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>A trading desk is a designated space within a financial firm where trading activity takes place.</li><li>Trading desks are occupied by professionals, ranging from proprietary traders to agency-only brokers.</li><li>Trading desks are typically segmented by asset class or security types, such as those specializing in equities, fixed income, forex, commodities, and/or derivatives.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-trading-desks"></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 Trading Desks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Traders operating in the <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> usually converge in a room known as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trading_floor.asp">trading floor</a> or trading room. The trading floor is made up of desks that share a large open space. Each desk, formally called a trading desk, specializes in a security type or market segment. Trading desks are where buying and selling of securities occur within a financial institution. </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"> Before the 1970s, many banks split their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalmarkets.asp">capital markets</a> business into many different departments across several regions. These institutions began consolidating these departments in the 1970s following the launch of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasdaq.asp">NASDAQ</a>, which required all investment firms to have equity trading desks.<span class="ql-inline-citation" data-cite="2"></span> Today, many asset managers outsource their trading desks to these larger institutions.<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"> Trading desks are manned by licensed traders who specialize in a given investment type, such as equities or commodities. These traders primarily use electronic trading systems and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketmaker.asp">market makers</a> to identify the best prices for their clients. </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 personnel on trading desks receive clients' orders from the sales desk, which is in charge of suggesting trading ideas to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/institutionalinvestor.asp">institutional</a> and high-net-worth investors. In addition to trading activities, trading desks also help clients with structuring financial products, watching for opportunities, or supporting agreements between companies and investors. </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-how-trading-desks-work"></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 Trading Desks Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Trading desks generate an income by charging a commission on trades they transact. For example, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedgefund.asp">hedge fund</a> may deal through an equity trading desk at an investment bank and pay a modest fee for each trade. In some cases, brokers may operate their own trading desk by being the counterparty for their client’s trades. These trades may never reach the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interbankmarket.asp">interbank market</a> and may stay within the confines of the broker’s own liquidity pool. </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"> There are many different types of trading desks, depending on the security being traded. Oftentimes, these desks are separated and may be located at certain central exchanges. </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-types-of-trading-desks"></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"> Types of Trading Desks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Some common trading desks include: </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><strong>Equity trading desks</strong> handle everything from equity trading to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exoticoption.asp">exotic options</a> trading.</li> <li><strong>Fixed-income trading desks</strong> handle government bonds, corporate bonds, and other bonds and bond-like instruments that pay a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yield.asp">yield</a>.</li> <li><strong>Foreign exchange trading desks</strong> facilitate trading in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/currencypair.asp">currency pairs</a> by acting as market makers. They can also engage in <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/proprietarytrading.asp">proprietary trading</a> activities.</li> <li><strong>Commodity trading desks</strong> are focused on agricultural products, metals, and other commodities, such as <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crude-oil.asp">crude oil</a>, gold, and coffee.</li> <li><strong>Derivatives trading desks</strong> specialize in <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp">derivatives</a>, such as options, futures, forwards, and swaps.</li> </ul> <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"> Each of these sectors can be further subdivided. For instance, <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> is a very broad category and can deal with anything from ultra-safe U.S. Treasuries to ultra-risky, low-grade company bonds—also known as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/junkbond.asp">junk bonds</a>. Larger investment banks may subdivide their trading desks to specialize in narrower categories within these main sectors. </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 brokers also offer trading desks for their clients, especially in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/forex/f/foreign-exchange-markets.asp">foreign exchange market</a> and equity day trading market. With the ability to instantly execute trades, these brokers set themselves apart from other brokers acting as intermediaries. Most large financial institutions have their own trading desks in place to assist their internal teams and external clients in placing orders. </p></div>

## What Is a Trading Desk? A trading desk is a physical location where transactions for buying and selling [securities](https://www.investopedia.com/terms/s/security.asp) occur. Depending on the type of financial institution, the trading desk may be filled by traders trading for their own proprietary account, brokers who act as agents matching buyers and sellers, or some mixture of both. Trading desks are found in most financial firms that are involved in facilitating trade executions in markets such as equities, fixed income securities, futures, commodities, and currencies. These facilities are crucial to providing [market liquidity](https://www.investopedia.com/terms/l/liquidmarket.asp). A trading desk may also be known as a dealing desk. ### Key Takeaways * A trading desk is a designated space within a financial firm where trading activity takes place. * Trading desks are occupied by professionals, ranging from proprietary traders to agency-only brokers. * Trading desks are typically segmented by asset class or security types, such as those specializing in equities, fixed income, forex, commodities, and/or derivatives. ## Understanding Trading Desks Traders operating in the [financial markets](https://www.investopedia.com/terms/f/financial-market.asp) usually converge in a room known as the [trading floor](https://www.investopedia.com/terms/t/trading_floor.asp) or trading room. The trading floor is made up of desks that share a large open space. Each desk, formally called a trading desk, specializes in a security type or market segment. Trading desks are where buying and selling of securities occur within a financial institution. Before the 1970s, many banks split their [capital markets](https://www.investopedia.com/terms/c/capitalmarkets.asp) business into many different departments across several regions. These institutions began consolidating these departments in the 1970s following the launch of the [NASDAQ](https://www.investopedia.com/terms/n/nasdaq.asp), which required all investment firms to have equity trading desks. Today, many asset managers outsource their trading desks to these larger institutions. Trading desks are manned by licensed traders who specialize in a given investment type, such as equities or commodities. These traders primarily use electronic trading systems and [market makers](https://www.investopedia.com/terms/m/marketmaker.asp) to identify the best prices for their clients. The personnel on trading desks receive clients' orders from the sales desk, which is in charge of suggesting trading ideas to [institutional](https://www.investopedia.com/terms/i/institutionalinvestor.asp) and high-net-worth investors. In addition to trading activities, trading desks also help clients with structuring financial products, watching for opportunities, or supporting agreements between companies and investors. ## How Trading Desks Work Trading desks generate an income by charging a commission on trades they transact. For example, a [hedge fund](https://www.investopedia.com/terms/h/hedgefund.asp) may deal through an equity trading desk at an investment bank and pay a modest fee for each trade. In some cases, brokers may operate their own trading desk by being the counterparty for their client’s trades. These trades may never reach the [interbank market](https://www.investopedia.com/terms/i/interbankmarket.asp) and may stay within the confines of the broker’s own liquidity pool. There are many different types of trading desks, depending on the security being traded. Oftentimes, these desks are separated and may be located at certain central exchanges. ## Types of Trading Desks Some common trading desks include: * **Equity trading desks** handle everything from equity trading to [exotic options](https://www.investopedia.com/terms/e/exoticoption.asp) trading. * **Fixed-income trading desks** handle government bonds, corporate bonds, and other bonds and bond-like instruments that pay a [yield](https://www.investopedia.com/terms/y/yield.asp). * **Foreign exchange trading desks** facilitate trading in [currency pairs](https://www.investopedia.com/terms/c/currencypair.asp) by acting as market makers. They can also engage in [proprietary trading](https://www.investopedia.com/terms/p/proprietarytrading.asp) activities. * **Commodity trading desks** are focused on agricultural products, metals, and other commodities, such as [crude oil](https://www.investopedia.com/terms/c/crude-oil.asp), gold, and coffee. * **Derivatives trading desks** specialize in [derivatives](https://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp), such as options, futures, forwards, and swaps. Each of these sectors can be further subdivided. For instance, [fixed income](https://www.investopedia.com/terms/f/fixedincome.asp) is a very broad category and can deal with anything from ultra-safe U.S. Treasuries to ultra-risky, low-grade company bonds—also known as [junk bonds](https://www.investopedia.com/terms/j/junkbond.asp). Larger investment banks may subdivide their trading desks to specialize in narrower categories within these main sectors. Many brokers also offer trading desks for their clients, especially in the [foreign exchange market](https://www.investopedia.com/terms/forex/f/foreign-exchange-markets.asp) and equity day trading market. With the ability to instantly execute trades, these brokers set themselves apart from other brokers acting as intermediaries. Most large financial institutions have their own trading desks in place to assist their internal teams and external clients in placing orders.

What Is a Trading Desk? A trading desk is a physical location where transactions for buying and selling securities occur. Depending on the type of financial institution, the trading desk may be filled by traders trading for their own proprietary account, brokers who act as agents matching buyers and sellers, or some mixture of both. Trading desks are found in most financial firms that are involved in facilitating trade executions in markets such as equities, fixed income securities, futures, commodities, and currencies. These facilities are crucial to providing market liquidity. A trading desk may also be known as a dealing desk. Key Takeaways A trading desk is a designated space within a financial firm where trading activity takes place.Trading desks are occupied by professionals, ranging from proprietary traders to agency-only brokers.Trading desks are typically segmented by asset class or security types, such as those specializing in equities, fixed income, forex, commodities, and/or derivatives. Understanding Trading Desks Traders operating in the financial markets usually converge in a room known as the trading floor or trading room. The trading floor is made up of desks that share a large open space. Each desk, formally called a trading desk, specializes in a security type or market segment. Trading desks are where buying and selling of securities occur within a financial institution. Before the 1970s, many banks split their capital markets business into many different departments across several regions. These institutions began consolidating these departments in the 1970s following the launch of the NASDAQ, which required all investment firms to have equity trading desks. Today, many asset managers outsource their trading desks to these larger institutions. Trading desks are manned by licensed traders who specialize in a given investment type, such as equities or commodities. These traders primarily use electronic trading systems and market makers to identify the best prices for their clients. The personnel on trading desks receive clients' orders from the sales desk, which is in charge of suggesting trading ideas to institutional and high-net-worth investors. In addition to trading activities, trading desks also help clients with structuring financial products, watching for opportunities, or supporting agreements between companies and investors. How Trading Desks Work Trading desks generate an income by charging a commission on trades they transact. For example, a hedge fund may deal through an equity trading desk at an investment bank and pay a modest fee for each trade. In some cases, brokers may operate their own trading desk by being the counterparty for their client’s trades. These trades may never reach the interbank market and may stay within the confines of the broker’s own liquidity pool. There are many different types of trading desks, depending on the security being traded. Oftentimes, these desks are separated and may be located at certain central exchanges. Types of Trading Desks Some common trading desks include: Equity trading desks handle everything from equity trading to exotic options trading. Fixed-income trading desks handle government bonds, corporate bonds, and other bonds and bond-like instruments that pay a yield. Foreign exchange trading desks facilitate trading in currency pairs by acting as market makers. They can also engage in proprietary trading activities. Commodity trading desks are focused on agricultural products, metals, and other commodities, such as crude oil, gold, and coffee. Derivatives trading desks specialize in derivatives, such as options, futures, forwards, and swaps. Each of these sectors can be further subdivided. For instance, fixed income is a very broad category and can deal with anything from ultra-safe U.S. Treasuries to ultra-risky, low-grade company bonds—also known as junk bonds. Larger investment banks may subdivide their trading desks to specialize in narrower categories within these main sectors. Many brokers also offer trading desks for their clients, especially in the foreign exchange market and equity day trading market. With the ability to instantly execute trades, these brokers set themselves apart from other brokers acting as intermediaries. Most large financial institutions have their own trading desks in place to assist their internal teams and external clients in placing orders.

https://www.investopedia.com/money-conversations-to-have-with-your-partner-and-parents-8610589

Your Life in Money: Conversations to Have with Your Partner and Parents

<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"> Money is a deeply personal topic, so it makes sense that money-related choices involve the people you care about. As you move through life, your financial decisions will inevitably be affected by the people you choose to share your life with. </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 wait! This isn’t a bad thing. While many of us were taught not to talk about money to avoid discomfort or awkwardness, having candid money conversations with your partner and parents can actually help you feel more comfortable with your finances and secure in your relationships. You’ve already built strong connections with these people, and with allies like them, you don’t have to feel isolated in your finances. </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"> As you hit new milestones, here are some key money questions to keep in mind. </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>Talking with your partner and parents about financial goals and planning can help ensure you are on the same page about money.</li><li>Begin money discussions with your parents as early as high school to determine how much support they will give you after graduation and beyond.</li><li>Be proactive about money conversations with your partner, and revisit your financial planning at least twice a year.</li><li>When discussing money with your partner, remember that a 50/50 split may not be fair and completely merging finances may not be in anyone’s best interest.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-leaving-the-nest"></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"> Leaving the Nest </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Whether for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0712/money-management-for-college-students.aspx">college</a> or just for the next chapter of your life, moving out is one of the first steps to becoming an independent adult. But leaving the nest doesn’t mean leaving that relationship completely. After you stop living full time in your parents’ home, you may still want—and need—their financial support. </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 decide what to do next, sit down with your parents or guardians to have a serious discussion about your future finances. With conversations like these, experts recommend letting your parents know about them in advance, so everyone involved can feel prepared and ready when the time comes. </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"> If you haven’t had these kinds of conversations with them before, this probably seems like a daunting task. But these talks will likely help you feel more confident in your decisions and empower you to take ownership of your life and finances. </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"> What Level of Financial Support, if Any, Can I Expect from You for College Expenses? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> According to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/erin-lowry-49674222/">Erin Lowry</a>, young-adult financial expert and author of “Broke Millennial Talks Money,” you should start talking to your parents or guardians about financial decisions as soon as necessary. This may mean sitting down with them as early as your junior year of high school to understand how they are willing to financially support you during college. </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 parents are not willing or able to support their students financially, while others can fund their student’s education while also providing them with a monthly allowance. Either way, by getting a jump on this conversation, you will be able to make smart decisions when deciding where to go to school or how to save for your education. </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"> Besides Tuition, Will You Provide Support for Other College Expenses Such as Housing, Food, and Transportation? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> When you’re a kid, there are some aspects of life that you don’t have to worry about. When you move out, these responsibilities become your own instead of your parents’. These additional expenses are not directly connected to tuition, so you will want to consult your parents on if or how they are willing to support these costs. </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 may also need to acquaint yourself with the real <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cost-of-living.asp">costs of these expenses</a> if you haven’t had to think of them in the past. Regardless of whether your parents can provide you with financial support or not, they will probably be able to help you estimate costs and build a budget for the future. </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"> After Graduation, Will You Help Me with My Expenses? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> For many, graduating college means being on your own without the structure of school for the first time. During this transitional period of your life, it’s important to know whether there is going to be a strict cutoff or slow withdrawal from your parents’ financial support. </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"> According to Lowry, you may want to consider if you are staying on your family’s phone plan, health insurance, or subscription services. Past behavior doesn’t necessarily indicate future behavior in this situation, and you shouldn’t assume that your parents will pay for tuition if you choose to go to grad school or assist with rent if you move to a more expensive area. </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"> Some parents may allow their children to live at home after graduation rent free, while other parents may require rent. If you choose to move out completely, you may need to discuss whether your parents are comfortable <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/co_sign.asp">co-signing</a> or acting as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/guarantor.asp">guarantors</a> on your new lease. </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"> “Don’t say anything to make them defensive,” Lowry says. “They don’t owe you a stipend once you’ve graduated college—or even in college, quite frankly. So it’s just making sure you’re able to have this conversation in a pragmatic and direct way that also respects the boundaries that they might be putting into place.” </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 this conversation, you and your parents should walk away with a clear plan and timeline. </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-moving-in-with-a-partner"></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"> Moving in with a Partner </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> Moving in with a partner is one of the most exciting times in your relationship. You’ve found someone who you like enough to live with. </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"> But amid the excitement, remember that living together is not only a romantic decision but also a financial commitment. Combining households means merging finances to some extent, from dividing rent and mortgage payments to sharing utility bills and managing household expenses. </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 Should We Split Rent, Utilities, and Other Household Expenses? What About Chores? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> Fair is subjective, and according to Lowry, splitting rent, utilities, and household expenses equally may not always be the most equitable to divide expenses—especially if one partner has a much higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/income.asp">income</a> than the other or if one partner <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-hidden-costs-of-owning-a-home-4776306">owns the home</a> that the other is moving into. Once you factor in the household tasks, too, the division of physical and financial burden becomes harder to define. </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"> “When it comes to compromising, we often have this rhetoric of ‘If they want to spend $100, and you want to spend no dollars, $50 is in the middle.’ But then, both of you lose,” Lowry says. “Sometimes the compromise is about one person getting the thing that they want, and then just being careful that it doesn’t become tit-for-tat later.” </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_2-0">Tip</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>With a conversation like this, you are opening the door to the nitty-gritty of salaries, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/1111/what-credit-score-should-you-have.aspx">credit scores</a>, and savings. While you may not cover all of these topics when you move in together, this conversation could help you gauge your partner’s comfort in discussing the topics.</p></div></div></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> What Are Your Financial Goals for the Next Few Years? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Lowry says that asking your partner about their financial goals can help you understand the money values ingrained in them throughout their life and learn what they want your life together to look like. </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"> As Lowry notes, you likely already have a sense of your partner’s financial priorities and style of spending and saving based on their clothing, what vacations they take, and how much they spend on dates. Having a direct conversation about money values may not always be the most productive way to approach the conversation. </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"> Asking about goals can also delicately approach the topic 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>, allowing your partner to bring up their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/student-loan-debt-too-much-8576649">student loans</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-card-debt.asp">credit card debt</a> in the context of their long-term plans.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> How Should We Approach Finances Moving Forward? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> According to Lowry, after you have an initial conversation, it can be productive to check in twice a year to make sure that you are both still on the same page. Financial circumstances and expenses may change, and adapting your financial ecosystem for your home is key to creating a sustainable living arrangement with your partner. </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"> Most importantly, Lowry advises against completely merging your finances when you move in together because no legal protections are preventing your partner from draining the account.<span class="ql-inline-citation" data-cite="3"></span> While married couples would undergo court proceedings to divide their finances during a divorce, there are no such requirements for couples who break up. </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-committing-to-your-relationship"></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"> Committing to Your Relationship </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> After living together, many people choose to get married, have children, or join their finances in a more serious way. These commitments come with new financial challenges and legal frameworks to navigate. </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"> By factoring your finances into important life decisions, you will be able to better manage your life and set yourself up for a healthy and happy relationship. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-subheading__text"> What Do You Want Our Life Together to Look Like? Should We Be Planning for Children, Travel, or Homebuying? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> You should know if you and your partner align in your visions for the future before deciding to commit to one another. Misalignment in these areas can lead to significant conflicts down the road, so attacking them head-on is ideal. </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"> When it comes to having children or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/how-set-budget-your-first-home/">buying a new home</a>—two large financial commitments—Lowry advises looking at the situations holistically to know what budgeting will look like in real life. For children, you may want to consider the costs of childcare, while for moving, you may want to consider the effect of a higher rent.<br/> </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-callout mntl-block" id="mntl-sc-block_71-0"><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_72-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_3-0">Tip</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>Lowry recommends estimating the costs of a lifestyle change and trying to live within a budget that accounts for these costs. The added benefit is that after living within a tighter budget, you will have a larger pot of savings if you decide to pursue that lifestyle change.</p></div></div></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"> How Do You Feel About a Prenup? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> While discussing a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prenuptialagreement.asp">prenuptial agreement</a> may not be the most romantic topic, it’s important because marriages are not only about love but also about legal and financial considerations. Discussing a prenup can kick-start conversations on financial matters, trust, and approaches to asset management should you need to separate. </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"> To put a prenup into perspective and dispel some of the stigma surrounding the topic, Lowry says that everyone technically enters marriage with a prenup—the default laws of the state.<span class="ql-inline-citation" data-cite="1"></span> By creating a formal agreement, you are only personalizing your plan instead of accepting a one-size-fits-all solution. </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"> Lowry has a prenup herself, and she says that prenups are especially important for women to pursue, due to gender disparities in caregiving and financial responsibilities. Your prenup may involve contributions to spousal individual retirement accounts (IRAs), evaluation of life insurance policies, or revisiting alimony agreements to reflect new circumstances. </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"> Who Should We Turn to When We Need Advice? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> Partners should discuss who they feel comfortable seeking advice from, whether it’s family members, friends, financial advisors, or lawyers. Because money is such a private topic, your partner may not be happy with you consulting certain people about your joint finances. </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"> Understanding each other’s preferred sources of guidance can foster communication and trust within the relationship. This question also helps to establish a framework for handling challenges and emergencies before they happen. </p> <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-planning-the-golden-years"></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"> Planning the Golden Years </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_86-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/retirement-planning.asp">Discussing retirement</a> with your partner, your parents, and your partner’s parents is crucial to building a sustainable financial ecosystem. While your relationships with each person will differ, you should know how your loved ones want to live out their golden years and how you will or will not be involved with that vision. </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"> The last thing you want is to put off retirement conversations until it is too late to plan ahead, so be sure to prioritize this topic as you and your family members go “over the hill.” </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_90-0"> <span class="mntl-sc-block-subheading__text"> What Is Your Retirement Plan, and Do You Expect Financial Support from Me? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_91-0"> “One heavily overlooked topic with parents is ‘Are you your parents’ retirement plan?’” Lowry says. </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"> As Lowry says, it can be difficult to discuss retirement with parents because they may get defensive or feel like you are trying to parent them. However, having these conversations early—around your mid-20s—allows you to prepare well in advance if you will need to step in to provide for your parents. </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"> The same is true for your partner’s parents as your lives and families become intertwined. Bringing up this topic to a partner is a difficult task, but your partner’s finances will probably be your finances, too, so their parents’ retirement is a key topic of discussion.  </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"> When it comes to your retirement and your partner’s retirement, being open about your retirement plan and timeline is the most important thing. You should make it clear if you plan to share a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nestegg.asp">nest egg</a> with your partner or if you want to draw a boundary there. As equals, this conversation will likely come naturally over a longer period of time, but you should try to check in about retirement plans every now and then to make sure that you are both on track. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_98-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_99-0"> <span class="mntl-sc-block-subheading__text"> What Is Your Ideal Care Arrangement When You Get Older? </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_100-0"> While this is more of a personal question, it’s again important to know how your family members want to be cared for and how you are involved with that plan. In some cultures, parents return to live with their adult children when they retire or grow old. In other cultures, it is acceptable to send older family members to care homes. </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"> Understanding the care expectations of your parents and your partner’s parents can help you better plan for the costs of different care arrangements and draw boundaries early on. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_103-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_104-0"><span class="heading-toc" id="toc-how-should-couples-talk-about-money"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Should Couples Talk About Money?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Couples should talk about money proactively before making major commitments such as co-habiting, marrying, or buying a home. They should be forthright about their financial and personal goals, including having children, buying property, paying off debt, and retiring. It’s also important to check in regularly to update plans and ensure that you’re still on the same page.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_106-0"><span class="heading-toc" id="toc-how-do-i-manage-my-money-with-my-partner"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Manage My Money with My Partner?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The best way to manage money with a partner is to understand that financial planning as a couple is rarely a 50/50 proposition. “I always love the expression ‘Equal is not always fair,’” says Erin Lowry, author of “Broke Millennial Talks Money.” For example, if one person is earning twice as much and has half the student loan debt as their partner, then splitting the rent down the middle wouldn’t make sense.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_107-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_108-0"><span class="heading-toc" id="toc-how-do-i-talk-to-my-parents-about-money"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do I Talk to My Parents About Money?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Talk to your parents about money as early as possible, starting in high school if you’re able to do so, and touch base regularly to ensure that you’re not missing out on new goals or information. Be clear about how much support you can expect from them and how much they hope to receive from you, especially during big life changes like your graduation and their retirement.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_109-0"></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_110-0"> <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_111-0"> From school expenses and moving in with your partner to family planning and your parents’ retirement, you will be confronted with difficult and deeply intimate money conversations throughout your life. It’s crucial to have an open dialogue surrounding finances in your close relationships, and early communication can strengthen bonds and provide clarity on financial expectations. </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"> Proactive communication can ensure mutual understanding and alignment on financial matters, ultimately leading to healthier and more secure partnerships. These questions can put your conversation on the right path. </p></div>

Money is a deeply personal topic, so it makes sense that money-related choices involve the people you care about. As you move through life, your financial decisions will inevitably be affected by the people you choose to share your life with. But wait! This isn’t a bad thing. While many of us were taught not to talk about money to avoid discomfort or awkwardness, having candid money conversations with your partner and parents can actually help you feel more comfortable with your finances and secure in your relationships. You’ve already built strong connections with these people, and with allies like them, you don’t have to feel isolated in your finances. As you hit new milestones, here are some key money questions to keep in mind. ### Key Takeaways * Talking with your partner and parents about financial goals and planning can help ensure you are on the same page about money. * Begin money discussions with your parents as early as high school to determine how much support they will give you after graduation and beyond. * Be proactive about money conversations with your partner, and revisit your financial planning at least twice a year. * When discussing money with your partner, remember that a 50/50 split may not be fair and completely merging finances may not be in anyone’s best interest. ## Leaving the Nest Whether for [college](https://www.investopedia.com/financial-edge/0712/money-management-for-college-students.aspx) or just for the next chapter of your life, moving out is one of the first steps to becoming an independent adult. But leaving the nest doesn’t mean leaving that relationship completely. After you stop living full time in your parents’ home, you may still want—and need—their financial support. Before you decide what to do next, sit down with your parents or guardians to have a serious discussion about your future finances. With conversations like these, experts recommend letting your parents know about them in advance, so everyone involved can feel prepared and ready when the time comes. If you haven’t had these kinds of conversations with them before, this probably seems like a daunting task. But these talks will likely help you feel more confident in your decisions and empower you to take ownership of your life and finances. ### What Level of Financial Support, if Any, Can I Expect from You for College Expenses? According to [Erin Lowry](https://www.linkedin.com/in/erin-lowry-49674222/), young-adult financial expert and author of “Broke Millennial Talks Money,” you should start talking to your parents or guardians about financial decisions as soon as necessary. This may mean sitting down with them as early as your junior year of high school to understand how they are willing to financially support you during college. Some parents are not willing or able to support their students financially, while others can fund their student’s education while also providing them with a monthly allowance. Either way, by getting a jump on this conversation, you will be able to make smart decisions when deciding where to go to school or how to save for your education. ### Besides Tuition, Will You Provide Support for Other College Expenses Such as Housing, Food, and Transportation? When you’re a kid, there are some aspects of life that you don’t have to worry about. When you move out, these responsibilities become your own instead of your parents’. These additional expenses are not directly connected to tuition, so you will want to consult your parents on if or how they are willing to support these costs. You may also need to acquaint yourself with the real [costs of these expenses](https://www.investopedia.com/terms/c/cost-of-living.asp) if you haven’t had to think of them in the past. Regardless of whether your parents can provide you with financial support or not, they will probably be able to help you estimate costs and build a budget for the future. ### After Graduation, Will You Help Me with My Expenses? For many, graduating college means being on your own without the structure of school for the first time. During this transitional period of your life, it’s important to know whether there is going to be a strict cutoff or slow withdrawal from your parents’ financial support. According to Lowry, you may want to consider if you are staying on your family’s phone plan, health insurance, or subscription services. Past behavior doesn’t necessarily indicate future behavior in this situation, and you shouldn’t assume that your parents will pay for tuition if you choose to go to grad school or assist with rent if you move to a more expensive area. Some parents may allow their children to live at home after graduation rent free, while other parents may require rent. If you choose to move out completely, you may need to discuss whether your parents are comfortable [co-signing](https://www.investopedia.com/terms/c/co_sign.asp) or acting as [guarantors](https://www.investopedia.com/terms/g/guarantor.asp) on your new lease. “Don’t say anything to make them defensive,” Lowry says. “They don’t owe you a stipend once you’ve graduated college—or even in college, quite frankly. So it’s just making sure you’re able to have this conversation in a pragmatic and direct way that also respects the boundaries that they might be putting into place.” After this conversation, you and your parents should walk away with a clear plan and timeline. ## Moving in with a Partner Moving in with a partner is one of the most exciting times in your relationship. You’ve found someone who you like enough to live with. But amid the excitement, remember that living together is not only a romantic decision but also a financial commitment. Combining households means merging finances to some extent, from dividing rent and mortgage payments to sharing utility bills and managing household expenses. ### How Should We Split Rent, Utilities, and Other Household Expenses? What About Chores? Fair is subjective, and according to Lowry, splitting rent, utilities, and household expenses equally may not always be the most equitable to divide expenses—especially if one partner has a much higher [income](https://www.investopedia.com/terms/i/income.asp) than the other or if one partner [owns the home](https://www.investopedia.com/the-hidden-costs-of-owning-a-home-4776306) that the other is moving into. Once you factor in the household tasks, too, the division of physical and financial burden becomes harder to define. “When it comes to compromising, we often have this rhetoric of ‘If they want to spend $100, and you want to spend no dollars, $50 is in the middle.’ But then, both of you lose,” Lowry says. “Sometimes the compromise is about one person getting the thing that they want, and then just being careful that it doesn’t become tit-for-tat later.” ### Tip With a conversation like this, you are opening the door to the nitty-gritty of salaries, [credit scores](https://www.investopedia.com/financial-edge/1111/what-credit-score-should-you-have.aspx), and savings. While you may not cover all of these topics when you move in together, this conversation could help you gauge your partner’s comfort in discussing the topics. ### What Are Your Financial Goals for the Next Few Years? Lowry says that asking your partner about their financial goals can help you understand the money values ingrained in them throughout their life and learn what they want your life together to look like. As Lowry notes, you likely already have a sense of your partner’s financial priorities and style of spending and saving based on their clothing, what vacations they take, and how much they spend on dates. Having a direct conversation about money values may not always be the most productive way to approach the conversation. Asking about goals can also delicately approach the topic of [debt](https://www.investopedia.com/terms/d/debt.asp), allowing your partner to bring up their [student loans](https://www.investopedia.com/student-loan-debt-too-much-8576649) or [credit card debt](https://www.investopedia.com/terms/c/credit-card-debt.asp) in the context of their long-term plans.  ### How Should We Approach Finances Moving Forward? According to Lowry, after you have an initial conversation, it can be productive to check in twice a year to make sure that you are both still on the same page. Financial circumstances and expenses may change, and adapting your financial ecosystem for your home is key to creating a sustainable living arrangement with your partner. Most importantly, Lowry advises against completely merging your finances when you move in together because no legal protections are preventing your partner from draining the account. While married couples would undergo court proceedings to divide their finances during a divorce, there are no such requirements for couples who break up. ## Committing to Your Relationship After living together, many people choose to get married, have children, or join their finances in a more serious way. These commitments come with new financial challenges and legal frameworks to navigate. By factoring your finances into important life decisions, you will be able to better manage your life and set yourself up for a healthy and happy relationship. ### What Do You Want Our Life Together to Look Like? Should We Be Planning for Children, Travel, or Homebuying? You should know if you and your partner align in your visions for the future before deciding to commit to one another. Misalignment in these areas can lead to significant conflicts down the road, so attacking them head-on is ideal. When it comes to having children or [buying a new home](https://www.investopedia.com/personal-finance/how-set-budget-your-first-home/)—two large financial commitments—Lowry advises looking at the situations holistically to know what budgeting will look like in real life. For children, you may want to consider the costs of childcare, while for moving, you may want to consider the effect of a higher rent. ### Tip Lowry recommends estimating the costs of a lifestyle change and trying to live within a budget that accounts for these costs. The added benefit is that after living within a tighter budget, you will have a larger pot of savings if you decide to pursue that lifestyle change. ### How Do You Feel About a Prenup? While discussing a [prenuptial agreement](https://www.investopedia.com/terms/p/prenuptialagreement.asp) may not be the most romantic topic, it’s important because marriages are not only about love but also about legal and financial considerations. Discussing a prenup can kick-start conversations on financial matters, trust, and approaches to asset management should you need to separate. To put a prenup into perspective and dispel some of the stigma surrounding the topic, Lowry says that everyone technically enters marriage with a prenup—the default laws of the state. By creating a formal agreement, you are only personalizing your plan instead of accepting a one-size-fits-all solution. Lowry has a prenup herself, and she says that prenups are especially important for women to pursue, due to gender disparities in caregiving and financial responsibilities. Your prenup may involve contributions to spousal individual retirement accounts (IRAs), evaluation of life insurance policies, or revisiting alimony agreements to reflect new circumstances. ### Who Should We Turn to When We Need Advice? Partners should discuss who they feel comfortable seeking advice from, whether it’s family members, friends, financial advisors, or lawyers. Because money is such a private topic, your partner may not be happy with you consulting certain people about your joint finances. Understanding each other’s preferred sources of guidance can foster communication and trust within the relationship. This question also helps to establish a framework for handling challenges and emergencies before they happen. ## Planning the Golden Years [Discussing retirement](https://www.investopedia.com/terms/r/retirement-planning.asp) with your partner, your parents, and your partner’s parents is crucial to building a sustainable financial ecosystem. While your relationships with each person will differ, you should know how your loved ones want to live out their golden years and how you will or will not be involved with that vision. The last thing you want is to put off retirement conversations until it is too late to plan ahead, so be sure to prioritize this topic as you and your family members go “over the hill.” ### What Is Your Retirement Plan, and Do You Expect Financial Support from Me? “One heavily overlooked topic with parents is ‘Are you your parents’ retirement plan?’” Lowry says. As Lowry says, it can be difficult to discuss retirement with parents because they may get defensive or feel like you are trying to parent them. However, having these conversations early—around your mid-20s—allows you to prepare well in advance if you will need to step in to provide for your parents. The same is true for your partner’s parents as your lives and families become intertwined. Bringing up this topic to a partner is a difficult task, but your partner’s finances will probably be your finances, too, so their parents’ retirement is a key topic of discussion.  When it comes to your retirement and your partner’s retirement, being open about your retirement plan and timeline is the most important thing. You should make it clear if you plan to share a [nest egg](https://www.investopedia.com/terms/n/nestegg.asp) with your partner or if you want to draw a boundary there. As equals, this conversation will likely come naturally over a longer period of time, but you should try to check in about retirement plans every now and then to make sure that you are both on track. ### What Is Your Ideal Care Arrangement When You Get Older? While this is more of a personal question, it’s again important to know how your family members want to be cared for and how you are involved with that plan. In some cultures, parents return to live with their adult children when they retire or grow old. In other cultures, it is acceptable to send older family members to care homes. Understanding the care expectations of your parents and your partner’s parents can help you better plan for the costs of different care arrangements and draw boundaries early on. ## How Should Couples Talk About Money? Couples should talk about money proactively before making major commitments such as co-habiting, marrying, or buying a home. They should be forthright about their financial and personal goals, including having children, buying property, paying off debt, and retiring. It’s also important to check in regularly to update plans and ensure that you’re still on the same page. ## How Do I Manage My Money with My Partner? The best way to manage money with a partner is to understand that financial planning as a couple is rarely a 50/50 proposition. “I always love the expression ‘Equal is not always fair,’” says Erin Lowry, author of “Broke Millennial Talks Money.” For example, if one person is earning twice as much and has half the student loan debt as their partner, then splitting the rent down the middle wouldn’t make sense. ## How Do I Talk to My Parents About Money? Talk to your parents about money as early as possible, starting in high school if you’re able to do so, and touch base regularly to ensure that you’re not missing out on new goals or information. Be clear about how much support you can expect from them and how much they hope to receive from you, especially during big life changes like your graduation and their retirement. ## The Bottom Line From school expenses and moving in with your partner to family planning and your parents’ retirement, you will be confronted with difficult and deeply intimate money conversations throughout your life. It’s crucial to have an open dialogue surrounding finances in your close relationships, and early communication can strengthen bonds and provide clarity on financial expectations. Proactive communication can ensure mutual understanding and alignment on financial matters, ultimately leading to healthier and more secure partnerships. These questions can put your conversation on the right path.

Money is a deeply personal topic, so it makes sense that money-related choices involve the people you care about. As you move through life, your financial decisions will inevitably be affected by the people you choose to share your life with. But wait! This isn’t a bad thing. While many of us were taught not to talk about money to avoid discomfort or awkwardness, having candid money conversations with your partner and parents can actually help you feel more comfortable with your finances and secure in your relationships. You’ve already built strong connections with these people, and with allies like them, you don’t have to feel isolated in your finances. As you hit new milestones, here are some key money questions to keep in mind. Key Takeaways Talking with your partner and parents about financial goals and planning can help ensure you are on the same page about money.Begin money discussions with your parents as early as high school to determine how much support they will give you after graduation and beyond.Be proactive about money conversations with your partner, and revisit your financial planning at least twice a year.When discussing money with your partner, remember that a 50/50 split may not be fair and completely merging finances may not be in anyone’s best interest. Leaving the Nest Whether for college or just for the next chapter of your life, moving out is one of the first steps to becoming an independent adult. But leaving the nest doesn’t mean leaving that relationship completely. After you stop living full time in your parents’ home, you may still want—and need—their financial support. Before you decide what to do next, sit down with your parents or guardians to have a serious discussion about your future finances. With conversations like these, experts recommend letting your parents know about them in advance, so everyone involved can feel prepared and ready when the time comes. If you haven’t had these kinds of conversations with them before, this probably seems like a daunting task. But these talks will likely help you feel more confident in your decisions and empower you to take ownership of your life and finances. What Level of Financial Support, if Any, Can I Expect from You for College Expenses? According to Erin Lowry, young-adult financial expert and author of “Broke Millennial Talks Money,” you should start talking to your parents or guardians about financial decisions as soon as necessary. This may mean sitting down with them as early as your junior year of high school to understand how they are willing to financially support you during college. Some parents are not willing or able to support their students financially, while others can fund their student’s education while also providing them with a monthly allowance. Either way, by getting a jump on this conversation, you will be able to make smart decisions when deciding where to go to school or how to save for your education. Besides Tuition, Will You Provide Support for Other College Expenses Such as Housing, Food, and Transportation? When you’re a kid, there are some aspects of life that you don’t have to worry about. When you move out, these responsibilities become your own instead of your parents’. These additional expenses are not directly connected to tuition, so you will want to consult your parents on if or how they are willing to support these costs. You may also need to acquaint yourself with the real costs of these expenses if you haven’t had to think of them in the past. Regardless of whether your parents can provide you with financial support or not, they will probably be able to help you estimate costs and build a budget for the future. After Graduation, Will You Help Me with My Expenses? For many, graduating college means being on your own without the structure of school for the first time. During this transitional period of your life, it’s important to know whether there is going to be a strict cutoff or slow withdrawal from your parents’ financial support. According to Lowry, you may want to consider if you are staying on your family’s phone plan, health insurance, or subscription services. Past behavior doesn’t necessarily indicate future behavior in this situation, and you shouldn’t assume that your parents will pay for tuition if you choose to go to grad school or assist with rent if you move to a more expensive area. Some parents may allow their children to live at home after graduation rent free, while other parents may require rent. If you choose to move out completely, you may need to discuss whether your parents are comfortable co-signing or acting as guarantors on your new lease. “Don’t say anything to make them defensive,” Lowry says. “They don’t owe you a stipend once you’ve graduated college—or even in college, quite frankly. So it’s just making sure you’re able to have this conversation in a pragmatic and direct way that also respects the boundaries that they might be putting into place.” After this conversation, you and your parents should walk away with a clear plan and timeline. Moving in with a Partner Moving in with a partner is one of the most exciting times in your relationship. You’ve found someone who you like enough to live with. But amid the excitement, remember that living together is not only a romantic decision but also a financial commitment. Combining households means merging finances to some extent, from dividing rent and mortgage payments to sharing utility bills and managing household expenses. How Should We Split Rent, Utilities, and Other Household Expenses? What About Chores? Fair is subjective, and according to Lowry, splitting rent, utilities, and household expenses equally may not always be the most equitable to divide expenses—especially if one partner has a much higher income than the other or if one partner owns the home that the other is moving into. Once you factor in the household tasks, too, the division of physical and financial burden becomes harder to define. “When it comes to compromising, we often have this rhetoric of ‘If they want to spend $100, and you want to spend no dollars, $50 is in the middle.’ But then, both of you lose,” Lowry says. “Sometimes the compromise is about one person getting the thing that they want, and then just being careful that it doesn’t become tit-for-tat later.” Tip With a conversation like this, you are opening the door to the nitty-gritty of salaries, credit scores, and savings. While you may not cover all of these topics when you move in together, this conversation could help you gauge your partner’s comfort in discussing the topics. What Are Your Financial Goals for the Next Few Years? Lowry says that asking your partner about their financial goals can help you understand the money values ingrained in them throughout their life and learn what they want your life together to look like. As Lowry notes, you likely already have a sense of your partner’s financial priorities and style of spending and saving based on their clothing, what vacations they take, and how much they spend on dates. Having a direct conversation about money values may not always be the most productive way to approach the conversation. Asking about goals can also delicately approach the topic of debt, allowing your partner to bring up their student loans or credit card debt in the context of their long-term plans.  How Should We Approach Finances Moving Forward? According to Lowry, after you have an initial conversation, it can be productive to check in twice a year to make sure that you are both still on the same page. Financial circumstances and expenses may change, and adapting your financial ecosystem for your home is key to creating a sustainable living arrangement with your partner. Most importantly, Lowry advises against completely merging your finances when you move in together because no legal protections are preventing your partner from draining the account. While married couples would undergo court proceedings to divide their finances during a divorce, there are no such requirements for couples who break up. Committing to Your Relationship After living together, many people choose to get married, have children, or join their finances in a more serious way. These commitments come with new financial challenges and legal frameworks to navigate. By factoring your finances into important life decisions, you will be able to better manage your life and set yourself up for a healthy and happy relationship. What Do You Want Our Life Together to Look Like? Should We Be Planning for Children, Travel, or Homebuying? You should know if you and your partner align in your visions for the future before deciding to commit to one another. Misalignment in these areas can lead to significant conflicts down the road, so attacking them head-on is ideal. When it comes to having children or buying a new home—two large financial commitments—Lowry advises looking at the situations holistically to know what budgeting will look like in real life. For children, you may want to consider the costs of childcare, while for moving, you may want to consider the effect of a higher rent. Tip Lowry recommends estimating the costs of a lifestyle change and trying to live within a budget that accounts for these costs. The added benefit is that after living within a tighter budget, you will have a larger pot of savings if you decide to pursue that lifestyle change. How Do You Feel About a Prenup? While discussing a prenuptial agreement may not be the most romantic topic, it’s important because marriages are not only about love but also about legal and financial considerations. Discussing a prenup can kick-start conversations on financial matters, trust, and approaches to asset management should you need to separate. To put a prenup into perspective and dispel some of the stigma surrounding the topic, Lowry says that everyone technically enters marriage with a prenup—the default laws of the state. By creating a formal agreement, you are only personalizing your plan instead of accepting a one-size-fits-all solution. Lowry has a prenup herself, and she says that prenups are especially important for women to pursue, due to gender disparities in caregiving and financial responsibilities. Your prenup may involve contributions to spousal individual retirement accounts (IRAs), evaluation of life insurance policies, or revisiting alimony agreements to reflect new circumstances. Who Should We Turn to When We Need Advice? Partners should discuss who they feel comfortable seeking advice from, whether it’s family members, friends, financial advisors, or lawyers. Because money is such a private topic, your partner may not be happy with you consulting certain people about your joint finances. Understanding each other’s preferred sources of guidance can foster communication and trust within the relationship. This question also helps to establish a framework for handling challenges and emergencies before they happen. Planning the Golden Years Discussing retirement with your partner, your parents, and your partner’s parents is crucial to building a sustainable financial ecosystem. While your relationships with each person will differ, you should know how your loved ones want to live out their golden years and how you will or will not be involved with that vision. The last thing you want is to put off retirement conversations until it is too late to plan ahead, so be sure to prioritize this topic as you and your family members go “over the hill.” What Is Your Retirement Plan, and Do You Expect Financial Support from Me? “One heavily overlooked topic with parents is ‘Are you your parents’ retirement plan?’” Lowry says. As Lowry says, it can be difficult to discuss retirement with parents because they may get defensive or feel like you are trying to parent them. However, having these conversations early—around your mid-20s—allows you to prepare well in advance if you will need to step in to provide for your parents. The same is true for your partner’s parents as your lives and families become intertwined. Bringing up this topic to a partner is a difficult task, but your partner’s finances will probably be your finances, too, so their parents’ retirement is a key topic of discussion.  When it comes to your retirement and your partner’s retirement, being open about your retirement plan and timeline is the most important thing. You should make it clear if you plan to share a nest egg with your partner or if you want to draw a boundary there. As equals, this conversation will likely come naturally over a longer period of time, but you should try to check in about retirement plans every now and then to make sure that you are both on track. What Is Your Ideal Care Arrangement When You Get Older? While this is more of a personal question, it’s again important to know how your family members want to be cared for and how you are involved with that plan. In some cultures, parents return to live with their adult children when they retire or grow old. In other cultures, it is acceptable to send older family members to care homes. Understanding the care expectations of your parents and your partner’s parents can help you better plan for the costs of different care arrangements and draw boundaries early on. How Should Couples Talk About Money? Couples should talk about money proactively before making major commitments such as co-habiting, marrying, or buying a home. They should be forthright about their financial and personal goals, including having children, buying property, paying off debt, and retiring. It’s also important to check in regularly to update plans and ensure that you’re still on the same page. How Do I Manage My Money with My Partner? The best way to manage money with a partner is to understand that financial planning as a couple is rarely a 50/50 proposition. “I always love the expression ‘Equal is not always fair,’” says Erin Lowry, author of “Broke Millennial Talks Money.” For example, if one person is earning twice as much and has half the student loan debt as their partner, then splitting the rent down the middle wouldn’t make sense. How Do I Talk to My Parents About Money? Talk to your parents about money as early as possible, starting in high school if you’re able to do so, and touch base regularly to ensure that you’re not missing out on new goals or information. Be clear about how much support you can expect from them and how much they hope to receive from you, especially during big life changes like your graduation and their retirement. The Bottom Line From school expenses and moving in with your partner to family planning and your parents’ retirement, you will be confronted with difficult and deeply intimate money conversations throughout your life. It’s crucial to have an open dialogue surrounding finances in your close relationships, and early communication can strengthen bonds and provide clarity on financial expectations. Proactive communication can ensure mutual understanding and alignment on financial matters, ultimately leading to healthier and more secure partnerships. These questions can put your conversation on the right path.

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

Financial Portal: 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-financial-portal"></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 Financial Portal? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Financial portals are websites or apps that provide a variety of financial data and information all in one place. They act as information hubs for users or clients, who are often individual <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investor.asp" rel="noopener noreferrer">investors</a> and provide up-to-date financial news and data to make their investment decisions. Financial portals are often cloud-based platforms that are customizable for both the financial institution and the investor client. </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"> Most online brokerages now offer their customers financial portals in addition to trading services, but non-brokers also provide portals either for free or by subscription. </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 financial portal is a comprehensive online platform that aggregates financial and economic news and information for users to monitor and digest.</li><li>Portals can be user-customizable, as a dashboard showing only the relevant data wanted by the user.</li><li>Users tend to be individual investors who use portals to gather the information necessary to make trades, such as quotes, research, fundamental and technical analysis, etc.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-financial-portals"></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 Financial Portals </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Investors need the latest information in order to stay current with the markets and make educated trades. Although there are many sites to choose from when deciding where to get your news, some make more sense than others depending on the information you need. </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"> Financial portals are intended to give clients all of the finance-related information they need in one place. Often the portals will provide visitors with <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>, research, articles, analyst recommendations and so on. Financial portals may also provide links to various relevant sites that offer this kind of information. In addition, many financial portals provide email accounts, chat rooms and web forums. Use of a financial portal offers benefits to financial services and institutions as well as investors, leveraging technology so that customers can have more control of their financial future and advisors can work more efficiently. </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"> InetSoft is an example of a company that builds custom financial-sector client portals. This kind of developer can handle all the service and integration work necessary to build the web portal. Specifically, InetSoft offers features such as live chat with financial advisors, document or task management, calculators, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">asset</a> views and estimates, on-demand reports or financial <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/index.asp">indexes</a>, and financial-news tracking. InetSoft's client portals are cloud-based, with no hardware or software infrastructure. </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-example-of-a-financial-portal"></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"> Example of a Financial Portal </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Pensionmark, a financial services company for employees, offers an interactive personal financial portal, which they market as a "financial control center" that offers budgeting and savings tools. Pensionmark's financial portal shows an investor everything they are making and spending as well as everything they own, including savings, investments and real estate, all in one place and kept up-to-date in real time. Customers can chart how long their savings will last based on their expected retirement date. </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"> Pensionmark claims that its "unique service model aims for better outcomes with less effort for every <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stakeholder.asp">stakeholder</a>." Their financial portal includes elements such as: an organizer, which connects all accounts and information for an organized, consolidated view; a financial workshop, which offers individualized tips on staying on target and managing financial goals; an education center, which offers a personalized library of videos, articles and resources; a vault, which clients can use to store sensitive documents that are available any time they need to access them; a spending tracker and other budgeting tools; digital post mail, which offers secure online delivery of a client's U.S. postal mail; and interactive charts and detailed views on a client's investments. </p></div>

## What Is a Financial Portal? Financial portals are websites or apps that provide a variety of financial data and information all in one place. They act as information hubs for users or clients, who are often individual [investors](https://www.investopedia.com/terms/i/investor.asp) and provide up-to-date financial news and data to make their investment decisions. Financial portals are often cloud-based platforms that are customizable for both the financial institution and the investor client. Most online brokerages now offer their customers financial portals in addition to trading services, but non-brokers also provide portals either for free or by subscription. ### Key Takeaways * A financial portal is a comprehensive online platform that aggregates financial and economic news and information for users to monitor and digest. * Portals can be user-customizable, as a dashboard showing only the relevant data wanted by the user. * Users tend to be individual investors who use portals to gather the information necessary to make trades, such as quotes, research, fundamental and technical analysis, etc. ## Understanding Financial Portals Investors need the latest information in order to stay current with the markets and make educated trades. Although there are many sites to choose from when deciding where to get your news, some make more sense than others depending on the information you need. Financial portals are intended to give clients all of the finance-related information they need in one place. Often the portals will provide visitors with [quotes](https://www.investopedia.com/terms/q/quote.asp), research, articles, analyst recommendations and so on. Financial portals may also provide links to various relevant sites that offer this kind of information. In addition, many financial portals provide email accounts, chat rooms and web forums. Use of a financial portal offers benefits to financial services and institutions as well as investors, leveraging technology so that customers can have more control of their financial future and advisors can work more efficiently. InetSoft is an example of a company that builds custom financial-sector client portals. This kind of developer can handle all the service and integration work necessary to build the web portal. Specifically, InetSoft offers features such as live chat with financial advisors, document or task management, calculators, [asset](https://www.investopedia.com/terms/a/asset.asp) views and estimates, on-demand reports or financial [indexes](https://www.investopedia.com/terms/i/index.asp), and financial-news tracking. InetSoft's client portals are cloud-based, with no hardware or software infrastructure. ## Example of a Financial Portal Pensionmark, a financial services company for employees, offers an interactive personal financial portal, which they market as a "financial control center" that offers budgeting and savings tools. Pensionmark's financial portal shows an investor everything they are making and spending as well as everything they own, including savings, investments and real estate, all in one place and kept up-to-date in real time. Customers can chart how long their savings will last based on their expected retirement date. Pensionmark claims that its "unique service model aims for better outcomes with less effort for every [stakeholder](https://www.investopedia.com/terms/s/stakeholder.asp)." Their financial portal includes elements such as: an organizer, which connects all accounts and information for an organized, consolidated view; a financial workshop, which offers individualized tips on staying on target and managing financial goals; an education center, which offers a personalized library of videos, articles and resources; a vault, which clients can use to store sensitive documents that are available any time they need to access them; a spending tracker and other budgeting tools; digital post mail, which offers secure online delivery of a client's U.S. postal mail; and interactive charts and detailed views on a client's investments.

What Is a Financial Portal? Financial portals are websites or apps that provide a variety of financial data and information all in one place. They act as information hubs for users or clients, who are often individual investors and provide up-to-date financial news and data to make their investment decisions. Financial portals are often cloud-based platforms that are customizable for both the financial institution and the investor client. Most online brokerages now offer their customers financial portals in addition to trading services, but non-brokers also provide portals either for free or by subscription. Key Takeaways A financial portal is a comprehensive online platform that aggregates financial and economic news and information for users to monitor and digest.Portals can be user-customizable, as a dashboard showing only the relevant data wanted by the user.Users tend to be individual investors who use portals to gather the information necessary to make trades, such as quotes, research, fundamental and technical analysis, etc. Understanding Financial Portals Investors need the latest information in order to stay current with the markets and make educated trades. Although there are many sites to choose from when deciding where to get your news, some make more sense than others depending on the information you need. Financial portals are intended to give clients all of the finance-related information they need in one place. Often the portals will provide visitors with quotes, research, articles, analyst recommendations and so on. Financial portals may also provide links to various relevant sites that offer this kind of information. In addition, many financial portals provide email accounts, chat rooms and web forums. Use of a financial portal offers benefits to financial services and institutions as well as investors, leveraging technology so that customers can have more control of their financial future and advisors can work more efficiently. InetSoft is an example of a company that builds custom financial-sector client portals. This kind of developer can handle all the service and integration work necessary to build the web portal. Specifically, InetSoft offers features such as live chat with financial advisors, document or task management, calculators, asset views and estimates, on-demand reports or financial indexes, and financial-news tracking. InetSoft's client portals are cloud-based, with no hardware or software infrastructure. Example of a Financial Portal Pensionmark, a financial services company for employees, offers an interactive personal financial portal, which they market as a "financial control center" that offers budgeting and savings tools. Pensionmark's financial portal shows an investor everything they are making and spending as well as everything they own, including savings, investments and real estate, all in one place and kept up-to-date in real time. Customers can chart how long their savings will last based on their expected retirement date. Pensionmark claims that its "unique service model aims for better outcomes with less effort for every stakeholder." Their financial portal includes elements such as: an organizer, which connects all accounts and information for an organized, consolidated view; a financial workshop, which offers individualized tips on staying on target and managing financial goals; an education center, which offers a personalized library of videos, articles and resources; a vault, which clients can use to store sensitive documents that are available any time they need to access them; a spending tracker and other budgeting tools; digital post mail, which offers secure online delivery of a client's U.S. postal mail; and interactive charts and detailed views on a client's investments.

https://www.investopedia.com/are-student-credit-cards-only-for-students-5192525

Are Student Credit Cards Only for Students?

<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"> Unlike most regular credit cards, student credit cards are available to college students. They tend to have less stringent eligibility requirements, so you can qualify even if you don’t have an established credit history.  </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"> If you aren't a student but have a limited credit history and have struggled to get approved for a credit card, you may be wondering if you can <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-student-credit-card-5191330">get a student credit card</a>. The answer is: yes, in some cases. While there are no student card age maximums, there are age minimums, along with other restrictions that may limit your ability to qualify for a student credit card. Here is what you need to know. </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>Student credit cards allow you access to credit while you're in college.</li><li>With a student card, you can start to build your credit score for the future.</li><li>Most companies require you to be currently enrolled in college to qualify for a student credit card.</li><li>Part-time college students are typically eligible for student cards.</li><li>There isn't an upper age limit for student credit cards, but there is a minimum age requirement.</li></ul></div></div></div> <span class="heading-toc" id="toc-how-do-student-credit-cards-work"></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"> How Do Student Credit Cards Work?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Credit card companies created student cards specifically for college students, young adults in school who are less likely to have credit histories. Student credit cards are not only convenient to have, but they can help you build a good credit score for the future.  </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"> They're also an appealing option because, unlike <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securedcard.asp">secured credit cards</a>, they don't require you to come up with a security deposit.  </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"> Student cards work just like traditional cards. The card issuer will give you a credit limit, and you can charge up to that limit to purchase items or pay for services. At the end of your statement billing period, you're required to make at least the minimum payment due. If you pay only the minimum, and don't pay the entire statement balance in full each month, you'll have to pay interest on your outstanding balance. Student cards can carry relatively high interest rates, often exceeding 20%. </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"> Many credit card companies, including Bank of America and Discover, offer rewards for using their student credit cards.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="4"></span> You can earn cash back, points, or airline miles when you use your card to buy textbooks, a new computer, gas for your car, or anything else.  </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-who-is-eligible-for-student-credit-cards"></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"> Who Is Eligible for Student Credit Cards?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> With most student credit cards, you must be currently enrolled at a two-year or four-year college or university. College freshman, sophomores, juniors, seniors, and graduate students are eligible for student credit cards as long as they meet the card issuer's other requirements.  </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 card issuers' rules vary, applicants generally must meet certain criteria surrounding age, citizenship, and enrollment. For example, Discover uses the following criteria: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_20-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> <li>You must be at least 18 or the age of majority in your state</li><li>You must have a permanent U.S. address</li><li>You must have a Social Security number</li><li>You must show proof of your enrollment, such as the name of your school, expected graduation date, or college acceptance letter<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_22-0"></div> <span class="heading-toc" id="toc-student-credit-card-enrollment-exceptions"></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"> Student Credit Card Enrollment Exceptions </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> While most companies that issue student credit cards require applicants to be current college students, there are some exceptions.  </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"> For example, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/journey-student-credit-card-from-capital-one-review-4798875">Journey Student Credit Card from Capital One</a> is marketed to college students, but there is no requirement that you be enrolled in school, nor do you have to provide any information about your college. As long as you meet the card's age and income requirements, you can qualify.<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> <span class="heading-toc" id="toc-do-i-have-to-be-a-full-time-college-student-to-qualify-for-a-student-card"></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"> Do I Have to Be a Full-Time College Student to Qualify for a Student Card?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> While most student credit card issuers require you to be currently enrolled in college, most don't require that you be enrolled full-time. If you're a part-time college student, you can still qualify for a card as long as you can provide an expected graduation date or other proof of enrollment.  </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-student-credit-card-alternatives"></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"> Student Credit Card Alternatives </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> If you aren't eligible for a student credit card because you're no longer in college, or for other reasons, there are alternative ways to build your credit.  </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><strong>Secured credit cards. </strong>With a secured credit card, you must pay a security deposit that acts as your credit limit. The card issuer will report your account activity to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/personal-finance/top-three-credit-bureaus/">major credit bureaus</a>, so as long as you make your payments on time and use your card responsibly, you'll be building a good credit history. After a period of time, you should be eligible for a regular, non-secured card. </li> <li><strong>Cards for bad credit. </strong>Some credit cards are designed for people with <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-get-a-credit-card-with-bad-credit-5069555">poor credit or no credit</a>. While you can get approved with bad credit, be aware that these cards often charge sky-high interest rates and fees. </li> <li><strong>Retail cards. </strong>Retail credit cards, or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0511/store-credit-card-traps-to-avoid.aspx">store cards</a>, which can be used only at a particular retailer, are generally easier to obtain than typical credit cards. While they can have high interest rates, you can use them for necessary purchases and pay off the balance in full each month to avoid paying interest. Over time, using a retail card can help improve your credit so that you qualify for other types of cards.</li> </ul></div>

Unlike most regular credit cards, student credit cards are available to college students. They tend to have less stringent eligibility requirements, so you can qualify even if you don’t have an established credit history.  If you aren't a student but have a limited credit history and have struggled to get approved for a credit card, you may be wondering if you can [get a student credit card](https://www.investopedia.com/how-to-get-a-student-credit-card-5191330). The answer is: yes, in some cases. While there are no student card age maximums, there are age minimums, along with other restrictions that may limit your ability to qualify for a student credit card. Here is what you need to know. ### Key Takeaways * Student credit cards allow you access to credit while you're in college. * With a student card, you can start to build your credit score for the future. * Most companies require you to be currently enrolled in college to qualify for a student credit card. * Part-time college students are typically eligible for student cards. * There isn't an upper age limit for student credit cards, but there is a minimum age requirement. ## How Do Student Credit Cards Work? Credit card companies created student cards specifically for college students, young adults in school who are less likely to have credit histories. Student credit cards are not only convenient to have, but they can help you build a good credit score for the future.  They're also an appealing option because, unlike [secured credit cards](https://www.investopedia.com/terms/s/securedcard.asp), they don't require you to come up with a security deposit.  Student cards work just like traditional cards. The card issuer will give you a credit limit, and you can charge up to that limit to purchase items or pay for services. At the end of your statement billing period, you're required to make at least the minimum payment due. If you pay only the minimum, and don't pay the entire statement balance in full each month, you'll have to pay interest on your outstanding balance. Student cards can carry relatively high interest rates, often exceeding 20%. Many credit card companies, including Bank of America and Discover, offer rewards for using their student credit cards. You can earn cash back, points, or airline miles when you use your card to buy textbooks, a new computer, gas for your car, or anything else.  ## Who Is Eligible for Student Credit Cards? With most student credit cards, you must be currently enrolled at a two-year or four-year college or university. College freshman, sophomores, juniors, seniors, and graduate students are eligible for student credit cards as long as they meet the card issuer's other requirements.  While card issuers' rules vary, applicants generally must meet certain criteria surrounding age, citizenship, and enrollment. For example, Discover uses the following criteria: * You must be at least 18 or the age of majority in your state * You must have a permanent U.S. address * You must have a Social Security number * You must show proof of your enrollment, such as the name of your school, expected graduation date, or college acceptance letter ## Student Credit Card Enrollment Exceptions While most companies that issue student credit cards require applicants to be current college students, there are some exceptions.  For example, the [Journey Student Credit Card from Capital One](https://www.investopedia.com/journey-student-credit-card-from-capital-one-review-4798875) is marketed to college students, but there is no requirement that you be enrolled in school, nor do you have to provide any information about your college. As long as you meet the card's age and income requirements, you can qualify. ## Do I Have to Be a Full-Time College Student to Qualify for a Student Card? While most student credit card issuers require you to be currently enrolled in college, most don't require that you be enrolled full-time. If you're a part-time college student, you can still qualify for a card as long as you can provide an expected graduation date or other proof of enrollment.  ## Student Credit Card Alternatives If you aren't eligible for a student credit card because you're no longer in college, or for other reasons, there are alternative ways to build your credit.  * **Secured credit cards.** With a secured credit card, you must pay a security deposit that acts as your credit limit. The card issuer will report your account activity to the [major credit bureaus](https://www.investopedia.com/personal-finance/top-three-credit-bureaus/), so as long as you make your payments on time and use your card responsibly, you'll be building a good credit history. After a period of time, you should be eligible for a regular, non-secured card. * **Cards for bad credit.** Some credit cards are designed for people with [poor credit or no credit](https://www.investopedia.com/how-to-get-a-credit-card-with-bad-credit-5069555). While you can get approved with bad credit, be aware that these cards often charge sky-high interest rates and fees. * **Retail cards.** Retail credit cards, or [store cards](https://www.investopedia.com/financial-edge/0511/store-credit-card-traps-to-avoid.aspx), which can be used only at a particular retailer, are generally easier to obtain than typical credit cards. While they can have high interest rates, you can use them for necessary purchases and pay off the balance in full each month to avoid paying interest. Over time, using a retail card can help improve your credit so that you qualify for other types of cards.

Unlike most regular credit cards, student credit cards are available to college students. They tend to have less stringent eligibility requirements, so you can qualify even if you don’t have an established credit history.  If you aren't a student but have a limited credit history and have struggled to get approved for a credit card, you may be wondering if you can get a student credit card. The answer is: yes, in some cases. While there are no student card age maximums, there are age minimums, along with other restrictions that may limit your ability to qualify for a student credit card. Here is what you need to know. Key Takeaways Student credit cards allow you access to credit while you're in college.With a student card, you can start to build your credit score for the future.Most companies require you to be currently enrolled in college to qualify for a student credit card.Part-time college students are typically eligible for student cards.There isn't an upper age limit for student credit cards, but there is a minimum age requirement. How Do Student Credit Cards Work?  Credit card companies created student cards specifically for college students, young adults in school who are less likely to have credit histories. Student credit cards are not only convenient to have, but they can help you build a good credit score for the future.  They're also an appealing option because, unlike secured credit cards, they don't require you to come up with a security deposit.  Student cards work just like traditional cards. The card issuer will give you a credit limit, and you can charge up to that limit to purchase items or pay for services. At the end of your statement billing period, you're required to make at least the minimum payment due. If you pay only the minimum, and don't pay the entire statement balance in full each month, you'll have to pay interest on your outstanding balance. Student cards can carry relatively high interest rates, often exceeding 20%. Many credit card companies, including Bank of America and Discover, offer rewards for using their student credit cards. You can earn cash back, points, or airline miles when you use your card to buy textbooks, a new computer, gas for your car, or anything else.  Who Is Eligible for Student Credit Cards?  With most student credit cards, you must be currently enrolled at a two-year or four-year college or university. College freshman, sophomores, juniors, seniors, and graduate students are eligible for student credit cards as long as they meet the card issuer's other requirements.  While card issuers' rules vary, applicants generally must meet certain criteria surrounding age, citizenship, and enrollment. For example, Discover uses the following criteria: You must be at least 18 or the age of majority in your stateYou must have a permanent U.S. addressYou must have a Social Security numberYou must show proof of your enrollment, such as the name of your school, expected graduation date, or college acceptance letter Student Credit Card Enrollment Exceptions While most companies that issue student credit cards require applicants to be current college students, there are some exceptions.  For example, the Journey Student Credit Card from Capital One is marketed to college students, but there is no requirement that you be enrolled in school, nor do you have to provide any information about your college. As long as you meet the card's age and income requirements, you can qualify. Do I Have to Be a Full-Time College Student to Qualify for a Student Card?  While most student credit card issuers require you to be currently enrolled in college, most don't require that you be enrolled full-time. If you're a part-time college student, you can still qualify for a card as long as you can provide an expected graduation date or other proof of enrollment.  Student Credit Card Alternatives If you aren't eligible for a student credit card because you're no longer in college, or for other reasons, there are alternative ways to build your credit.  Secured credit cards. With a secured credit card, you must pay a security deposit that acts as your credit limit. The card issuer will report your account activity to the major credit bureaus, so as long as you make your payments on time and use your card responsibly, you'll be building a good credit history. After a period of time, you should be eligible for a regular, non-secured card.  Cards for bad credit. Some credit cards are designed for people with poor credit or no credit. While you can get approved with bad credit, be aware that these cards often charge sky-high interest rates and fees.  Retail cards. Retail credit cards, or store cards, which can be used only at a particular retailer, are generally easier to obtain than typical credit cards. While they can have high interest rates, you can use them for necessary purchases and pay off the balance in full each month to avoid paying interest. Over time, using a retail card can help improve your credit so that you qualify for other types of cards.

https://www.investopedia.com/cryptocurrency-market-news-week-of-feb-12-8575903

Cryptocurrency Market News: Bitcoin Scales $50K

<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 briefly topped $50,000 for the first time in more than two years at midday Monday, and this week analysts are tracking whether it can rise and hold above that level.</li><li>Spot bitcoin exchange-traded funds (ETFs) at the end of last week posted their strongest net inflows since the start of trading in January.</li><li>A Grayscale report points to spot bitcoin ETF inflows and the upcoming bitcoin halving as potential tailwinds for prices.</li><li>The pro-bitcoin president of El Salvador was re-elected for another term.</li><li>The Solana network experienced another outage, temporarily halting the use of decentralized applications built on that blockchain.</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"> <em>A weekly round up of cryptocurrency market news, why that matters to you and what it means for crypto investors in the coming days.</em> </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"> Bitcoin price (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=btcusd">BTCUSD</a>) popped past $50,000 on Monday, for the first time since late 2021, riding a strong bullish sentiment propelled by bitcoin exchange-traded fund (ETF) inflows, exuberance around the upcoming halving, and the re-election of El Salvador's pro-bitcoin president, Nayib Bukele.<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_6-0"></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_7-0"> <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_8-0"> Bitcoin investors enjoyed a roughly 15% rally over the past week through midday Monday to touch $50,000 from under $43,000.<span class="ql-inline-citation" data-cite="6"></span> Much of that is credited to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/where-to-buy-the-new-spot-bitcoin-etfs-8557203">spot bitcoin ETFs</a> but that wasn't the only factor driving up prices. </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"> Spot Bitcoin ETFs Were On a Roll </span> </h3> <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/spot-bitcoin-etfs-8358373">Spot bitcoin ETFs</a> that were recently approved by U.S. regulators experienced their second-largest day in terms of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fund-flow.asp">inflows</a> last Friday, with a little more than $540 million flowing into various bitcoin ETF offerings that day.<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"> Thursday showed strong numbers for the ETF category as well, with more than $400 million of net inflows. This despite more than $150 million flowing out of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/why-buy-expensive-bitcoin-etf-instead-actual-bitcoin/">Grayscale Bitcoin Trust</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC">GBTC</a>) over the two-day period. BlackRock's iShares Bitcoin Trust (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ibit">IBIT</a>) accounted for nearly half of all inflows over those two days.<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"> According to Bloomberg Senior ETF Analyst Eric Balchunas, IBIT and Fidelity's Wise Origin Bitcoin Fund (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=fbtc">FBTC</a>) are the two largest ETFs in history when measured by assets held after only one month<strong> </strong>of existence.<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_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"> Bitcoin Halving Optimism Propped Up Price </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The combination of robust spot bitcoin ETF inflows and the scheduled <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bitcoin-halving-4843769">bitcoin halving</a> event expected by midyear—which will cut in half the value of rewards for mining bitcoin—appears to be driving the positive narrative in crypto overall, as indicated in a report issued by crypto investment firm Grayscale Advisors LLC last week.<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 report suggested that the coming round of bitcoin halving differs significantly from previous ones and may not prove all negative for bitcoin miners. </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 the reduction in block rewards poses a challenge, the growing roles of ordinal inscriptions and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/lightning-network-what-it-and-can-it-solve-bitcoins-scaling-problem/">Layer 2</a> projects within the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bitcoin.asp">Bitcoin</a> ecosystem have recently emerged as promising use cases," the report said. </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 data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-are-bitcoin-ordinals-7486436">Bitcoin ordinals</a> assign more information to the serial numbers of each <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/satoshi.asp">satoshi</a>, the smallest bitcoin unit and the extra data is referred to as an inscription. Layer 2 projects are meant to improve the throughput—or processing speed—of any cryptocurrency blockchain network.<br/> </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"> "These innovations may offer a silver lining for miners by potentially both enhancing transaction <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/throughput.asp">throughput</a> and increasing transaction fees for the network," the Grayscale report said. </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"> El Salvador's Crypto-Loving President Got Another Term </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> A bitcoin-relevant geopolitical event was the re-election of pro-crypto President Nayib Bukele in El Salvador via a landslide victory. </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 country has accumulated bitcoin to hold in reserve and made the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/el-salvador-accepts-bitcoin-as-legal-tender-5200470">cryptocurrency legal tender</a> in 2021 under Bukele's leadership, among other initiatives, although momentum has been limited for his highly publicized plans for a tax-free crypto haven powered by geothermal energy from a volcano, according to <em>Reuters</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_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"> Solana Outage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Beyond bitcoin, another news development in crypto was the temporary halting of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/solana-5210472">Solana</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=solusd">SOLUSD</a>) network on Feb. 6 due to a bug. The level of centralization in Solana, which has experienced heightened activity in recent months, and limited ability for the network to be paused for maintenance is something the crypto system has been criticized for in the past.<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_35-0"></div> <span class="heading-toc" id="toc-what-to-expect-from-crypto-markets-this-week"></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 To Expect From Crypto Markets This Week </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> This week, analysts will be tracking how high bitcoin can do after breaking through the key price level on Monday. The crypto asset previously faced resistance below $50,000 in late March 2022 and in early January of this year. However, analysts at Bernstein expect a "FOMO" or fear-of-missing-out rally in bitcoin.<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_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> In other notable crypto happenings, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tech/three-people-who-were-supposedly-bitcoin-founder-satoshi-nakamoto/#toc-craig-wright">Craig Wright</a> v. Crypto Open Patent Alliance (COPA) case will continue in the UK. Wright is facing charges of "industrial scale" forgeries in an attempt to convince people he is bitcoin creator <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/satoshi-nakamoto.asp">Satoshi Nakamoto</a>.<span class="ql-inline-citation" data-cite="8"></span> </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 briefly topped $50,000 for the first time in more than two years at midday Monday, and this week analysts are tracking whether it can rise and hold above that level. * Spot bitcoin exchange-traded funds (ETFs) at the end of last week posted their strongest net inflows since the start of trading in January. * A Grayscale report points to spot bitcoin ETF inflows and the upcoming bitcoin halving as potential tailwinds for prices. * The pro-bitcoin president of El Salvador was re-elected for another term. * The Solana network experienced another outage, temporarily halting the use of decentralized applications built on that blockchain. *A weekly round up of cryptocurrency market news, why that matters to you and what it means for crypto investors in the coming days.* Bitcoin price ([BTCUSD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=btcusd)) popped past $50,000 on Monday, for the first time since late 2021, riding a strong bullish sentiment propelled by bitcoin exchange-traded fund (ETF) inflows, exuberance around the upcoming halving, and the re-election of El Salvador's pro-bitcoin president, Nayib Bukele. ## What Happened In Crypto Markets Last Week? Bitcoin investors enjoyed a roughly 15% rally over the past week through midday Monday to touch $50,000 from under $43,000. Much of that is credited to [spot bitcoin ETFs](https://www.investopedia.com/where-to-buy-the-new-spot-bitcoin-etfs-8557203) but that wasn't the only factor driving up prices. ### Spot Bitcoin ETFs Were On a Roll [Spot bitcoin ETFs](https://www.investopedia.com/spot-bitcoin-etfs-8358373) that were recently approved by U.S. regulators experienced their second-largest day in terms of [inflows](https://www.investopedia.com/terms/f/fund-flow.asp) last Friday, with a little more than $540 million flowing into various bitcoin ETF offerings that day. Thursday showed strong numbers for the ETF category as well, with more than $400 million of net inflows. This despite more than $150 million flowing out of [Grayscale Bitcoin Trust](https://www.investopedia.com/news/why-buy-expensive-bitcoin-etf-instead-actual-bitcoin/) ([GBTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC)) over the two-day period. BlackRock's iShares Bitcoin Trust ([IBIT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ibit)) accounted for nearly half of all inflows over those two days. According to Bloomberg Senior ETF Analyst Eric Balchunas, IBIT and Fidelity's Wise Origin Bitcoin Fund ([FBTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=fbtc)) are the two largest ETFs in history when measured by assets held after only one monthof existence. ### Bitcoin Halving Optimism Propped Up Price The combination of robust spot bitcoin ETF inflows and the scheduled [bitcoin halving](https://www.investopedia.com/bitcoin-halving-4843769) event expected by midyear—which will cut in half the value of rewards for mining bitcoin—appears to be driving the positive narrative in crypto overall, as indicated in a report issued by crypto investment firm Grayscale Advisors LLC last week. The report suggested that the coming round of bitcoin halving differs significantly from previous ones and may not prove all negative for bitcoin miners. "While the reduction in block rewards poses a challenge, the growing roles of ordinal inscriptions and [Layer 2](https://www.investopedia.com/news/lightning-network-what-it-and-can-it-solve-bitcoins-scaling-problem/) projects within the [Bitcoin](https://www.investopedia.com/terms/b/bitcoin.asp) ecosystem have recently emerged as promising use cases," the report said. [Bitcoin ordinals](https://www.investopedia.com/what-are-bitcoin-ordinals-7486436) assign more information to the serial numbers of each [satoshi](https://www.investopedia.com/terms/s/satoshi.asp), the smallest bitcoin unit and the extra data is referred to as an inscription. Layer 2 projects are meant to improve the throughput—or processing speed—of any cryptocurrency blockchain network. "These innovations may offer a silver lining for miners by potentially both enhancing transaction [throughput](https://www.investopedia.com/terms/t/throughput.asp) and increasing transaction fees for the network," the Grayscale report said. ### El Salvador's Crypto-Loving President Got Another Term A bitcoin-relevant geopolitical event was the re-election of pro-crypto President Nayib Bukele in El Salvador via a landslide victory. The country has accumulated bitcoin to hold in reserve and made the [cryptocurrency legal tender](https://www.investopedia.com/el-salvador-accepts-bitcoin-as-legal-tender-5200470) in 2021 under Bukele's leadership, among other initiatives, although momentum has been limited for his highly publicized plans for a tax-free crypto haven powered by geothermal energy from a volcano, according to *Reuters*. ### Solana Outage Beyond bitcoin, another news development in crypto was the temporary halting of the [Solana](https://www.investopedia.com/solana-5210472) ([SOLUSD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=solusd)) network on Feb. 6 due to a bug. The level of centralization in Solana, which has experienced heightened activity in recent months, and limited ability for the network to be paused for maintenance is something the crypto system has been criticized for in the past. ## What To Expect From Crypto Markets This Week This week, analysts will be tracking how high bitcoin can do after breaking through the key price level on Monday. The crypto asset previously faced resistance below $50,000 in late March 2022 and in early January of this year. However, analysts at Bernstein expect a "FOMO" or fear-of-missing-out rally in bitcoin. In other notable crypto happenings, the [Craig Wright](https://www.investopedia.com/tech/three-people-who-were-supposedly-bitcoin-founder-satoshi-nakamoto/#toc-craig-wright) v. Crypto Open Patent Alliance (COPA) case will continue in the UK. Wright is facing charges of "industrial scale" forgeries in an attempt to convince people he is bitcoin creator [Satoshi Nakamoto](https://www.investopedia.com/terms/s/satoshi-nakamoto.asp). Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Bitcoin briefly topped $50,000 for the first time in more than two years at midday Monday, and this week analysts are tracking whether it can rise and hold above that level.Spot bitcoin exchange-traded funds (ETFs) at the end of last week posted their strongest net inflows since the start of trading in January.A Grayscale report points to spot bitcoin ETF inflows and the upcoming bitcoin halving as potential tailwinds for prices.The pro-bitcoin president of El Salvador was re-elected for another term.The Solana network experienced another outage, temporarily halting the use of decentralized applications built on that blockchain. A weekly round up of cryptocurrency market news, why that matters to you and what it means for crypto investors in the coming days. Bitcoin price (BTCUSD) popped past $50,000 on Monday, for the first time since late 2021, riding a strong bullish sentiment propelled by bitcoin exchange-traded fund (ETF) inflows, exuberance around the upcoming halving, and the re-election of El Salvador's pro-bitcoin president, Nayib Bukele. What Happened In Crypto Markets Last Week? Bitcoin investors enjoyed a roughly 15% rally over the past week through midday Monday to touch $50,000 from under $43,000. Much of that is credited to spot bitcoin ETFs but that wasn't the only factor driving up prices. Spot Bitcoin ETFs Were On a Roll Spot bitcoin ETFs that were recently approved by U.S. regulators experienced their second-largest day in terms of inflows last Friday, with a little more than $540 million flowing into various bitcoin ETF offerings that day. Thursday showed strong numbers for the ETF category as well, with more than $400 million of net inflows. This despite more than $150 million flowing out of Grayscale Bitcoin Trust (GBTC) over the two-day period. BlackRock's iShares Bitcoin Trust (IBIT) accounted for nearly half of all inflows over those two days. According to Bloomberg Senior ETF Analyst Eric Balchunas, IBIT and Fidelity's Wise Origin Bitcoin Fund (FBTC) are the two largest ETFs in history when measured by assets held after only one month of existence. Bitcoin Halving Optimism Propped Up Price The combination of robust spot bitcoin ETF inflows and the scheduled bitcoin halving event expected by midyear—which will cut in half the value of rewards for mining bitcoin—appears to be driving the positive narrative in crypto overall, as indicated in a report issued by crypto investment firm Grayscale Advisors LLC last week. The report suggested that the coming round of bitcoin halving differs significantly from previous ones and may not prove all negative for bitcoin miners. "While the reduction in block rewards poses a challenge, the growing roles of ordinal inscriptions and Layer 2 projects within the Bitcoin ecosystem have recently emerged as promising use cases," the report said. Bitcoin ordinals assign more information to the serial numbers of each satoshi, the smallest bitcoin unit and the extra data is referred to as an inscription. Layer 2 projects are meant to improve the throughput—or processing speed—of any cryptocurrency blockchain network. "These innovations may offer a silver lining for miners by potentially both enhancing transaction throughput and increasing transaction fees for the network," the Grayscale report said. El Salvador's Crypto-Loving President Got Another Term A bitcoin-relevant geopolitical event was the re-election of pro-crypto President Nayib Bukele in El Salvador via a landslide victory. The country has accumulated bitcoin to hold in reserve and made the cryptocurrency legal tender in 2021 under Bukele's leadership, among other initiatives, although momentum has been limited for his highly publicized plans for a tax-free crypto haven powered by geothermal energy from a volcano, according to Reuters. Solana Outage Beyond bitcoin, another news development in crypto was the temporary halting of the Solana (SOLUSD) network on Feb. 6 due to a bug. The level of centralization in Solana, which has experienced heightened activity in recent months, and limited ability for the network to be paused for maintenance is something the crypto system has been criticized for in the past. What To Expect From Crypto Markets This Week This week, analysts will be tracking how high bitcoin can do after breaking through the key price level on Monday. The crypto asset previously faced resistance below $50,000 in late March 2022 and in early January of this year. However, analysts at Bernstein expect a "FOMO" or fear-of-missing-out rally in bitcoin. In other notable crypto happenings, the Craig Wright v. Crypto Open Patent Alliance (COPA) case will continue in the UK. Wright is facing charges of "industrial scale" forgeries in an attempt to convince people he is bitcoin creator Satoshi Nakamoto. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/3-charts-that-suggest-traders-will-want-to-buy-mid-cap-stocks-in-2020-4780884

3 Charts Suggest Bullishness on Mid-Cap Stocks in 2020

<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"> For most of the past year, the most actively traded companies like 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>) and Facebook, Inc. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=fb">FB</a>) have dominated the financial media and the screens of retail traders. One of the groups that has been relatively under-followed is U.S. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/midcapstock.asp">mid-cap companies</a>. Based on the charts discussed below, it appears that 2020 could be the year for targeted exposure to the mid-cap segment. </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-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_3-0"> <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_4-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchange-traded-products-etp.asp">Exchange-traded products</a> such as the Core S&amp;P Mid-Cap ETF (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=ijh">IJH</a>) are the products of choice for investors who are interested in gaining exposure to a certain sector or market segment. As you can see from the chart below, the price of the mid-cap fund has recently broken out of a well-defined <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/ascendingtriangle.asp">ascending triangle</a> pattern and looks poised to make a run higher. </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"> For those who follow technical analysis, it is interesting to note how the 50-day and 200-day <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/movingaverage.asp">moving averages</a> have trended sideways for months and how they have started to trend higher following the breakout. The upward shift in the long-term moving average is evidence that the bulls are in control of the long-term trend, and many bulls will likely use the nearby <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/support.asp">support levels</a> for determining the placement of their <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stop-lossorder.asp">stop-loss orders</a>. Based on the height of the pattern, we'd expect traders to set their short-term target prices near $215. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_7-0"></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_8-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:64.7%;"> <img alt="Chart showing the share price performance of the iShares Core S&amp;P Mid-Cap ETF (IJH)" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/k5DTeBdMDrn7M2JoZLIQ1szspqA=/680x0/filters:no_upscale():max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/XN4hfMbDCbnoLdCt6mvNDEN7Vhw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg" data-srcset="https://www.investopedia.com/thmb/-v6TccdarlsKvRBWlU4s1vvIFIU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg 750w" data-tracking-container="true" height="440" id="mntl-sc-block-image_1-0" width="680"/> <noscript> <img alt="Chart showing the share price performance of the iShares Core S&amp;P Mid-Cap ETF (IJH)" class="img--noscript universal-image__image" height="440" sizes="750px" src="https://www.investopedia.com/thmb/XN4hfMbDCbnoLdCt6mvNDEN7Vhw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg" srcset="https://www.investopedia.com/thmb/-v6TccdarlsKvRBWlU4s1vvIFIU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg 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-owner">StockCharts.com</span> </figcaption></figure> <span class="heading-toc" id="toc-teledyne-technologies-incorporated-tdy"></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"> Teledyne Technologies Incorporated (TDY) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> With a weighting of 0.72%, Teledyne Technologies Incorporated (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=tdy">TDY</a>) represents the largest holding of the IJH ETF. As you can see from the chart below, the stock has been trading with an extremely strong uptrend. </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 recent break beyond the short-term period of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consolidation.asp">consolidation</a> near $345 (shown by the horizontal trendline) suggests that the next leg of the uptrend is underway. Followers of technical analysis will expect the upward momentum to continue until the price closes below the influential support level market by the ascending trendline and the 50-day moving average at $343.60. </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-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_14-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:64.7%;"> <img alt="Chart showing the share price performance of Teledyne Technologies Incorporated (TDY)" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/DYgAK24vgeIdPCiqx0lh6oY64PY=/680x0/filters:no_upscale():max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/ij1yAs55eQY0H5KyKok4_i0B898=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg" data-srcset="https://www.investopedia.com/thmb/ENvlf9Dewdw3vZnxKvmckp5CJ-M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg 750w" data-tracking-container="true" height="440" id="mntl-sc-block-image_2-0" width="680"/> <noscript> <img alt="Chart showing the share price performance of Teledyne Technologies Incorporated (TDY)" class="img--noscript universal-image__image" height="440" sizes="750px" src="https://www.investopedia.com/thmb/ij1yAs55eQY0H5KyKok4_i0B898=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg" srcset="https://www.investopedia.com/thmb/ENvlf9Dewdw3vZnxKvmckp5CJ-M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg 750w" width="680"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-owner">StockCharts.com</span> </figcaption></figure> <span class="heading-toc" id="toc-tyler-technologies-inc-tyl"></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"> Tyler Technologies, Inc. (TYL) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Another mid-cap stock that is trading within a major uptrend is Tyler Technologies, Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=tyl">TYL</a>). While some traders may feel like they missed the move higher, the recent break beyond $292 suggests that the next leg higher is just beginning. </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 mentioned above, the upward shift of the long-term moving averages is a bullish sign that also suggests the long-term trend higher is in the early stages. From a risk-management perspective, active traders will most likely look to buy as close to the psychological $300 mark and then place stop-loss orders below the 50-day moving average ($286.40), the ascending trendline, or the 200-day moving average ($247.03), depending on <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> and investment horizon.  </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-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_20-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:64.7%;"> <img alt="Chart showing the share price performance of Tyler Technologies, Inc. (TYL)" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/ht65l32DeMOu6rne4yyFxRXaAUU=/680x0/filters:no_upscale():max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/LM68HoiMCoLz6NleSD59kMNCa1Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg" data-srcset="https://www.investopedia.com/thmb/MuLLeREpVRPeidp3d1mUcM4Tgm8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg 750w" data-tracking-container="true" height="440" id="mntl-sc-block-image_3-0" width="680"/> <noscript> <img alt="Chart showing the share price performance of Tyler Technologies, Inc. (TYL)" class="img--noscript universal-image__image" height="440" sizes="750px" src="https://www.investopedia.com/thmb/LM68HoiMCoLz6NleSD59kMNCa1Q=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg" srcset="https://www.investopedia.com/thmb/MuLLeREpVRPeidp3d1mUcM4Tgm8=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg 750w" width="680"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_3-0"> <span class="figure-article-caption-owner">StockCharts.com</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_21-0"> <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_22-0"> Mid-cap companies in the United States have been relatively under-followed by retail investors over the past year. While it may seem like it is late in the uptrend to open a position, the charts discussed above suggest that the long-term uptrend has lots of room to the upside and that the next leg higher could just be getting started. </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"> <em>At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.</em> </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>

For most of the past year, the most actively traded companies like Apple Inc. ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=aapl)) and Facebook, Inc. ([FB](https://www.investopedia.com/markets/quote?tvwidgetsymbol=fb)) have dominated the financial media and the screens of retail traders. One of the groups that has been relatively under-followed is U.S. [mid-cap companies](https://www.investopedia.com/terms/m/midcapstock.asp). Based on the charts discussed below, it appears that 2020 could be the year for targeted exposure to the mid-cap segment. ## iShares Core S&P Mid-Cap ETF (IJH) [Exchange-traded products](https://www.investopedia.com/terms/e/exchange-traded-products-etp.asp) such as the Core S&P Mid-Cap ETF ([IJH](https://www.investopedia.com/markets/quote?tvwidgetsymbol=ijh)) are the products of choice for investors who are interested in gaining exposure to a certain sector or market segment. As you can see from the chart below, the price of the mid-cap fund has recently broken out of a well-defined [ascending triangle](https://www.investopedia.com/terms/a/ascendingtriangle.asp) pattern and looks poised to make a run higher. For those who follow technical analysis, it is interesting to note how the 50-day and 200-day [moving averages](https://www.investopedia.com/terms/m/movingaverage.asp) have trended sideways for months and how they have started to trend higher following the breakout. The upward shift in the long-term moving average is evidence that the bulls are in control of the long-term trend, and many bulls will likely use the nearby [support levels](https://www.investopedia.com/terms/s/support.asp) for determining the placement of their [stop-loss orders](https://www.investopedia.com/terms/s/stop-lossorder.asp). Based on the height of the pattern, we'd expect traders to set their short-term target prices near $215. ![Chart showing the share price performance of the iShares Core S&P Mid-Cap ETF (IJH)]() :max_bytes(150000):strip_icc()/IJH_010720-e758addb98e545d2a20856daa598006d.jpg) StockCharts.com ## Teledyne Technologies Incorporated (TDY) With a weighting of 0.72%, Teledyne Technologies Incorporated ([TDY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=tdy)) represents the largest holding of the IJH ETF. As you can see from the chart below, the stock has been trading with an extremely strong uptrend. The recent break beyond the short-term period of [consolidation](https://www.investopedia.com/terms/c/consolidation.asp) near $345 (shown by the horizontal trendline) suggests that the next leg of the uptrend is underway. Followers of technical analysis will expect the upward momentum to continue until the price closes below the influential support level market by the ascending trendline and the 50-day moving average at $343.60. ![Chart showing the share price performance of Teledyne Technologies Incorporated (TDY)]() :max_bytes(150000):strip_icc()/TDY_010720-d1c5f6dc57c64da1932405a38f29d966.jpg) StockCharts.com ## Tyler Technologies, Inc. (TYL) Another mid-cap stock that is trading within a major uptrend is Tyler Technologies, Inc. ([TYL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=tyl)). While some traders may feel like they missed the move higher, the recent break beyond $292 suggests that the next leg higher is just beginning. As mentioned above, the upward shift of the long-term moving averages is a bullish sign that also suggests the long-term trend higher is in the early stages. From a risk-management perspective, active traders will most likely look to buy as close to the psychological $300 mark and then place stop-loss orders below the 50-day moving average ($286.40), the ascending trendline, or the 200-day moving average ($247.03), depending on [risk tolerance](https://www.investopedia.com/terms/r/risktolerance.asp) and investment horizon.  ![Chart showing the share price performance of Tyler Technologies, Inc. (TYL)]() :max_bytes(150000):strip_icc()/TYL_010720-39ad8217251c46aeb5f1115ce1653b0c.jpg) StockCharts.com ## The Bottom Line Mid-cap companies in the United States have been relatively under-followed by retail investors over the past year. While it may seem like it is late in the uptrend to open a position, the charts discussed above suggest that the long-term uptrend has lots of room to the upside and that the next leg higher could just be getting started. *At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

For most of the past year, the most actively traded companies like Apple Inc. (AAPL) and Facebook, Inc. (FB) have dominated the financial media and the screens of retail traders. One of the groups that has been relatively under-followed is U.S. mid-cap companies. Based on the charts discussed below, it appears that 2020 could be the year for targeted exposure to the mid-cap segment. iShares Core S&P Mid-Cap ETF (IJH) Exchange-traded products such as the Core S&P Mid-Cap ETF (IJH) are the products of choice for investors who are interested in gaining exposure to a certain sector or market segment. As you can see from the chart below, the price of the mid-cap fund has recently broken out of a well-defined ascending triangle pattern and looks poised to make a run higher. For those who follow technical analysis, it is interesting to note how the 50-day and 200-day moving averages have trended sideways for months and how they have started to trend higher following the breakout. The upward shift in the long-term moving average is evidence that the bulls are in control of the long-term trend, and many bulls will likely use the nearby support levels for determining the placement of their stop-loss orders. Based on the height of the pattern, we'd expect traders to set their short-term target prices near $215. StockCharts.com Teledyne Technologies Incorporated (TDY) With a weighting of 0.72%, Teledyne Technologies Incorporated (TDY) represents the largest holding of the IJH ETF. As you can see from the chart below, the stock has been trading with an extremely strong uptrend. The recent break beyond the short-term period of consolidation near $345 (shown by the horizontal trendline) suggests that the next leg of the uptrend is underway. Followers of technical analysis will expect the upward momentum to continue until the price closes below the influential support level market by the ascending trendline and the 50-day moving average at $343.60. StockCharts.com Tyler Technologies, Inc. (TYL) Another mid-cap stock that is trading within a major uptrend is Tyler Technologies, Inc. (TYL). While some traders may feel like they missed the move higher, the recent break beyond $292 suggests that the next leg higher is just beginning. As mentioned above, the upward shift of the long-term moving averages is a bullish sign that also suggests the long-term trend higher is in the early stages. From a risk-management perspective, active traders will most likely look to buy as close to the psychological $300 mark and then place stop-loss orders below the 50-day moving average ($286.40), the ascending trendline, or the 200-day moving average ($247.03), depending on risk tolerance and investment horizon.  StockCharts.com The Bottom Line Mid-cap companies in the United States have been relatively under-followed by retail investors over the past year. While it may seem like it is late in the uptrend to open a position, the charts discussed above suggest that the long-term uptrend has lots of room to the upside and that the next leg higher could just be getting started. At the time of writing, Casey Murphy did not own a position in any of the assets mentioned. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/special-needs-trust-vs-able-account-5217834

Special Needs Trust vs. ABLE Account: 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-special-needs-trust-vs-able-account-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"> Special Needs Trust vs. ABLE Account: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> ABLE accounts and special needs trusts, also known as supplemental needs trusts, both give people with disabilities a way to save money tax-free. By saving money in an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/able-account.asp">ABLE account</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/special-needs-trust.asp">supplemental needs trust (SNT)</a>, you can also make sure that a disabled person continues to be eligible for public programs. </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 ABLE accounts and SNTs protect resources. Each allows the accumulation of resources for the benefit of an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/specialneedschild.asp">individual with a disability</a> without jeopardizing key federally funded benefits, like Supplemental Security Income and Medicaid. </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"> There are significant differences between the two ways of saving, though. ABLE accounts and SNTs have different rules when it comes to what you can use your savings for. They also have different annual limits on how much you can save. Then, there are a number of other differences that may have an impact on you, depending on your circumstances. </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 this article, we’ll take a brief look at each type of saving strategy and explore the differences between them. </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>Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose.</li><li>ABLE accounts are easier to set up and manage. However, they come with some disadvantages—primarily, limits on the amount of money you can contribute each year.</li><li>SNTs don’t have any such limits but can be expensive to set up and more complicated to manage.</li><li>You don’t have to choose one or the other. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits.</li></ul></div></div></div> <span class="heading-toc" id="toc-supplemental-needs-trusts-snts"></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"> Supplemental Needs Trusts (SNTs) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A supplemental needs trust (SNT) is a way for a disabled person to receive money without losing access to their public benefits. </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"> Most public assistance programs for people with disabilities have income and asset restrictions—if a disabled person earns too much or has too much money in savings, they will no longer be eligible for these benefits. An SNT is a way around this restriction. Money put in the trust doesn't count toward the purpose of qualifying for public assistance. </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"> An SNT is a legal arrangement and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fiduciary.asp">fiduciary relationship</a>. In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets. An SNT is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit. </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"> An SNT benefits the beneficiary as it allows them to put more money away without losing their Social Security benefits. The individual who creates the trust can rest assured that the money contributed will be used as outlined in the creation of the trust. Furthermore, benefiting both the beneficiary and the trust creator, assets in the trust cannot be claimed by creditors or in the loss of a lawsuit. </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"> It’s also important to recognize that the money in an SNT can only be used for a limited range of expenses. You are not supposed to use these funds to cover basic living expenses. Instead, proceeds from this type of trust are commonly used for healthcare needs, transportation, and other qualifying costs.<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_22-0"></div> <span class="heading-toc" id="toc-able-accounts"></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"> ABLE Accounts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> In many ways, an ABLE account is similar to an SNT. An ABLE account is a tax-advantaged savings account available to individuals with significant disabilities appearing before age 26. Contributions can be made to the account by the beneficiary, friends, or family members, just as with an SNT.<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"> Just as with an SNT, money saved in an ABLE account doesn’t affect a disabled person’s eligibility for public benefits. There are also tax benefits to setting up an ABLE account—while the contributions themselves are not intended to be tax-deductible, the funds within the account grow tax-free and distributions are tax-free.<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_27-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> ABLE accounts are a much newer financial product than SNTs. They were created by the 2014 Achieving a Better Life Experience (ABLE) Act as a way of giving more disabled people access to the benefits that, up until then, were restricted to those who held SNTs.<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"> ABLE accounts can be used to pay for a wider range of things than the money in an SNT. The money in an ABLE account can be used to pay for any <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/able-account-eligible-expenses-5217840">qualified disability expenses (QDEs)</a>.<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_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-note" 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 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><br/>There is an annual limit to how much you can contribute to an ABLE account: $17,000 in 2023. SNTs have no limits.<span class="ql-inline-citation" data-cite="5"></span><br/></p></div></div></div> <span class="heading-toc" id="toc-key-differences"></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"> Key Differences </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> There are three main differences between SNTs and ABLE accounts: eligibility, the expenses permitted for each type of account, and the limits on how much money you can save through them.<br/> </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"> Eligibility </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> ABLE accounts are offered to those meeting certain requirements. You only have to meet one of the following: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <li>Eligible for SSI determined by a disability or blindness that occurred before the age of 26</li><li>Eligible for benefits, including disability insurance benefits, childhood disability benefits, and disabled widow/widower benefits determined by a disability or blindness that occurred before the age of 26</li><li>A certificate proving that your disability or blindness occurred before the age of 26<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_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> An individual that qualifies for disability according to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/ssa.asp">Social Security Administration</a> has to set up a first-party SNT before they reach 65. Third-party trusts, however, have no age restrictions. First-party SNTs are invested with assets that belong to the beneficiary while third-party trusts are invested with assets from anyone but the beneficiary. </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"> Account Limits </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> ABLE accounts have contribution limits as well as amount limits. You can only contribute a certain amount each year. This amount is set federally under the same tax code governing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/1/529plan.asp">529 plans</a>: $17,000 in 2023. In addition, ABLE accounts have a maximum limit set by <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/state-able-accounts-5217828">the state that manages them</a>. Many states set this limit above $300,000, with only the first $100,000 exempt from impacting eligibility for <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/ssi.asp">supplemental security income</a> (SSI). SNTs have no such limits.<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_46-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> One disadvantage of SNTs is that they can be expensive to set up. You will typically need to hire an attorney to set up the trust. In contrast, setting up an ABLE account is fast and easy, and can be done directly through the state's website. No attorney or financial advisor assistance is needed.<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_48-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> Permitted Expenses </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The third main difference between these accounts concerns what you can use them to pay for. </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"> Put simply, SNTs are supposed to pay for "extra" things that make life more comfortable, such as vacations, pets, entertainment, home furnishings, assistive technology, therapies not covered by Medicaid, and more. These are things that public benefits cannot pay for. If the money in an SNT is used to pay for basic costs of living, a person’s public benefits might be decreased. </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"> ABLE accounts have a broader range of permitted expenses. This includes anything that helps a person with a disability improve their health, independence, or quality of life. QDEs can include basic costs of living, as well as costs for education, food, employment, transportation, technology, support services, and more.<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_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> Other Differences </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> As well as the fundamental differences mentioned above, these accounts differ in several other ways. These features may make a big difference to you, depending on your situation. </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>Everyday management: </strong>In general, money in SNTs is more difficult to access. The funds in ABLE accounts can be accessed easily, and many programs offer a debit card that allows you to pay for items directly from the account.</li> <li><strong>Who manages the account: </strong>ABLE accounts are owned and managed by a person with disabilities, who is responsible for making sure that they only spend money on allowable expenses. SNTs are managed by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/trustee.asp">trustees</a>, who are responsible for keeping records of expenses.</li> <li><strong>Tax: </strong>The <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/qualified-disability-trust-5217846">money you keep in an ABLE account</a> is tax-free, but the money kept in an SNT is taxable each year.</li> <li><strong>Medicaid liability:</strong> Money left in a person’s ABLE account after they die may be used to reimburse the state Medicaid agency for services Medicaid paid for after the ABLE account was created, depending on state regulations. There is often no money left after Medicaid is paid back. SNTs that were created with a parent, grandparent, or other person’s money (known as a third-party trust) do not have to repay Medicaid after a person dies.<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_60-0"></div> <span class="heading-toc" id="toc-snt-vs-able-account-which-is-better"></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"> SNT vs. ABLE Account: Which Is Better? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Every family’s needs and circumstances are different, and when making financial decisions it’s best to consult a professional. You can find lists of financial professionals who work with people with disabilities online, and the ABLE National Resource Center provides<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ablenrc.org/able-account-special-needs-and-pooled-trust-comparison-chart/"> a comparison tool</a> to help you understand how each type of account can help you.<span class="ql-inline-citation" data-cite="11"></span><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_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> It’s also important to realize that you don't need to choose between an ABLE account and an SNT. You can in fact have both. These accounts are best used for different purposes, despite having some characteristics in common. </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"> According to the team at the ABLE National Resource Center, these financial instruments can work together. That’s because, they explain, “a special needs or pooled trust is considered a 'person' who can contribute to an ABLE account, much like any other third party, without an effect on means-tested benefits. The ABLE account then may, in turn, fund food or shelter expenses of the account owner without a reduction in supplemental security income benefits, unlike the effect which would occur if the SNT or [pooled trust] paid directly.” </p> <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-callout mntl-block" id="mntl-sc-block_68-0"><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_69-0"><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 money in SNTs is to pay for “extra” expenses that are not covered by public benefits. You can use the money in an ABLE account for a much broader range of expenses, including the basic costs of living, education, food, employment, and transportation.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_70-0"> You should set up an ABLE account if you or a family member qualify. This will ensure that the disabled individual, whether you or a family member, will be able to obtain benefits. There may be additional benefits as well, such as tax relief. </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"> There are many factors to consider when choosing the best option for your family, points out <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/juliana-crist-15532b16/">Juliana Crist</a>, senior consultant at AKF Consulting, a municipal advisor to state-run investment plans. “Things like guardianship orders, end-of-life planning, tax considerations, Medicaid payback, and total assets all play into the decision of which financial tool to use,” Crist says. Her firm, she continues, “always likes to say that SNTs and ABLE accounts are complementary tools—they work very well together.“ </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"> Establishing an SNT is strategically viable if you need to sequester more money than an ABLE account allows, which is up to $100,000. If you put in more than $100,000, then SSI benefits will be suspended. Additionally, the maximum you can contribute to an ABLE account in 2023 is $17,000. If you wish to fund more than that per month, it is recommended you set up an SNT.<span class="ql-inline-citation" data-cite="5"></span><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_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-can-i-have-an-snt-and-an-able-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can I Have an SNT and an ABLE Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, you can have both. And you can even set up an SNT so that it can fund an ABLE account.</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-who-controls-an-snt"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Controls an SNT?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The most common type of SNT is a third-party trust set up by parents to benefit their children. In this case, the parents act as trustees. A trustee is a person or entity who manages the trust assets and administers the trust provisions. A trustee can be a family member, friend, or colleague of the beneficiary, a professional, or a combination of the two.</p></div> </div> <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-does-autism-qualify-for-an-able-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">Does Autism Qualify for an ABLE Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, autism is a disability that qualifies for an ABLE account. The Internal Revenue Service lists the disabilities that qualify, which the Social Security Administration will accept for SSI or SSDI.<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_81-0"></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_82-0"> <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_83-0"> Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose, and they can be expensive to establish. </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"> ABLE accounts are much easier to set up and manage. However, they come with some disadvantages: primarily, limits on the amount of money you can save each year. You don’t have to choose one or the other, though. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits.<br/> </p></div>

## Special Needs Trust vs. ABLE Account: An Overview ABLE accounts and special needs trusts, also known as supplemental needs trusts, both give people with disabilities a way to save money tax-free. By saving money in an [ABLE account](https://www.investopedia.com/terms/a/able-account.asp) or [supplemental needs trust (SNT)](https://www.investopedia.com/terms/s/special-needs-trust.asp), you can also make sure that a disabled person continues to be eligible for public programs. Both ABLE accounts and SNTs protect resources. Each allows the accumulation of resources for the benefit of an [individual with a disability](https://www.investopedia.com/terms/s/specialneedschild.asp) without jeopardizing key federally funded benefits, like Supplemental Security Income and Medicaid. There are significant differences between the two ways of saving, though. ABLE accounts and SNTs have different rules when it comes to what you can use your savings for. They also have different annual limits on how much you can save. Then, there are a number of other differences that may have an impact on you, depending on your circumstances. In this article, we’ll take a brief look at each type of saving strategy and explore the differences between them. ### Key Takeaways * Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose. * ABLE accounts are easier to set up and manage. However, they come with some disadvantages—primarily, limits on the amount of money you can contribute each year. * SNTs don’t have any such limits but can be expensive to set up and more complicated to manage. * You don’t have to choose one or the other. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits. ## Supplemental Needs Trusts (SNTs) A supplemental needs trust (SNT) is a way for a disabled person to receive money without losing access to their public benefits. Most public assistance programs for people with disabilities have income and asset restrictions—if a disabled person earns too much or has too much money in savings, they will no longer be eligible for these benefits. An SNT is a way around this restriction. Money put in the trust doesn't count toward the purpose of qualifying for public assistance. An SNT is a legal arrangement and [fiduciary relationship](https://www.investopedia.com/terms/f/fiduciary.asp). In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets. An SNT is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit. An SNT benefits the beneficiary as it allows them to put more money away without losing their Social Security benefits. The individual who creates the trust can rest assured that the money contributed will be used as outlined in the creation of the trust. Furthermore, benefiting both the beneficiary and the trust creator, assets in the trust cannot be claimed by creditors or in the loss of a lawsuit. It’s also important to recognize that the money in an SNT can only be used for a limited range of expenses. You are not supposed to use these funds to cover basic living expenses. Instead, proceeds from this type of trust are commonly used for healthcare needs, transportation, and other qualifying costs. ## ABLE Accounts In many ways, an ABLE account is similar to an SNT. An ABLE account is a tax-advantaged savings account available to individuals with significant disabilities appearing before age 26. Contributions can be made to the account by the beneficiary, friends, or family members, just as with an SNT. Just as with an SNT, money saved in an ABLE account doesn’t affect a disabled person’s eligibility for public benefits. There are also tax benefits to setting up an ABLE account—while the contributions themselves are not intended to be tax-deductible, the funds within the account grow tax-free and distributions are tax-free. ABLE accounts are a much newer financial product than SNTs. They were created by the 2014 Achieving a Better Life Experience (ABLE) Act as a way of giving more disabled people access to the benefits that, up until then, were restricted to those who held SNTs. ABLE accounts can be used to pay for a wider range of things than the money in an SNT. The money in an ABLE account can be used to pay for any [qualified disability expenses (QDEs)](https://www.investopedia.com/able-account-eligible-expenses-5217840). ### There is an annual limit to how much you can contribute to an ABLE account: $17,000 in 2023. SNTs have no limits. ## Key Differences There are three main differences between SNTs and ABLE accounts: eligibility, the expenses permitted for each type of account, and the limits on how much money you can save through them. ### Eligibility ABLE accounts are offered to those meeting certain requirements. You only have to meet one of the following: * Eligible for SSI determined by a disability or blindness that occurred before the age of 26 * Eligible for benefits, including disability insurance benefits, childhood disability benefits, and disabled widow/widower benefits determined by a disability or blindness that occurred before the age of 26 * A certificate proving that your disability or blindness occurred before the age of 26 An individual that qualifies for disability according to the [Social Security Administration](https://www.investopedia.com/terms/s/ssa.asp) has to set up a first-party SNT before they reach 65. Third-party trusts, however, have no age restrictions. First-party SNTs are invested with assets that belong to the beneficiary while third-party trusts are invested with assets from anyone but the beneficiary. ### Account Limits ABLE accounts have contribution limits as well as amount limits. You can only contribute a certain amount each year. This amount is set federally under the same tax code governing [529 plans](https://www.investopedia.com/terms/1/529plan.asp): $17,000 in 2023. In addition, ABLE accounts have a maximum limit set by [the state that manages them](https://www.investopedia.com/state-able-accounts-5217828). Many states set this limit above $300,000, with only the first $100,000 exempt from impacting eligibility for [supplemental security income](https://www.investopedia.com/terms/s/ssi.asp) (SSI). SNTs have no such limits. One disadvantage of SNTs is that they can be expensive to set up. You will typically need to hire an attorney to set up the trust. In contrast, setting up an ABLE account is fast and easy, and can be done directly through the state's website. No attorney or financial advisor assistance is needed. ### Permitted Expenses The third main difference between these accounts concerns what you can use them to pay for. Put simply, SNTs are supposed to pay for "extra" things that make life more comfortable, such as vacations, pets, entertainment, home furnishings, assistive technology, therapies not covered by Medicaid, and more. These are things that public benefits cannot pay for. If the money in an SNT is used to pay for basic costs of living, a person’s public benefits might be decreased. ABLE accounts have a broader range of permitted expenses. This includes anything that helps a person with a disability improve their health, independence, or quality of life. QDEs can include basic costs of living, as well as costs for education, food, employment, transportation, technology, support services, and more. ### Other Differences As well as the fundamental differences mentioned above, these accounts differ in several other ways. These features may make a big difference to you, depending on your situation. * **Everyday management:** In general, money in SNTs is more difficult to access. The funds in ABLE accounts can be accessed easily, and many programs offer a debit card that allows you to pay for items directly from the account. * **Who manages the account:** ABLE accounts are owned and managed by a person with disabilities, who is responsible for making sure that they only spend money on allowable expenses. SNTs are managed by [trustees](https://www.investopedia.com/terms/t/trustee.asp), who are responsible for keeping records of expenses. * **Tax:** The [money you keep in an ABLE account](https://www.investopedia.com/qualified-disability-trust-5217846) is tax-free, but the money kept in an SNT is taxable each year. * **Medicaid liability:** Money left in a person’s ABLE account after they die may be used to reimburse the state Medicaid agency for services Medicaid paid for after the ABLE account was created, depending on state regulations. There is often no money left after Medicaid is paid back. SNTs that were created with a parent, grandparent, or other person’s money (known as a third-party trust) do not have to repay Medicaid after a person dies. ## SNT vs. ABLE Account: Which Is Better? Every family’s needs and circumstances are different, and when making financial decisions it’s best to consult a professional. You can find lists of financial professionals who work with people with disabilities online, and the ABLE National Resource Center provides [a comparison tool](https://www.ablenrc.org/able-account-special-needs-and-pooled-trust-comparison-chart/) to help you understand how each type of account can help you. It’s also important to realize that you don't need to choose between an ABLE account and an SNT. You can in fact have both. These accounts are best used for different purposes, despite having some characteristics in common. According to the team at the ABLE National Resource Center, these financial instruments can work together. That’s because, they explain, “a special needs or pooled trust is considered a 'person' who can contribute to an ABLE account, much like any other third party, without an effect on means-tested benefits. The ABLE account then may, in turn, fund food or shelter expenses of the account owner without a reduction in supplemental security income benefits, unlike the effect which would occur if the SNT or [pooled trust] paid directly.” ### The money in SNTs is to pay for “extra” expenses that are not covered by public benefits. You can use the money in an ABLE account for a much broader range of expenses, including the basic costs of living, education, food, employment, and transportation. You should set up an ABLE account if you or a family member qualify. This will ensure that the disabled individual, whether you or a family member, will be able to obtain benefits. There may be additional benefits as well, such as tax relief. There are many factors to consider when choosing the best option for your family, points out [Juliana Crist](https://www.linkedin.com/in/juliana-crist-15532b16/), senior consultant at AKF Consulting, a municipal advisor to state-run investment plans. “Things like guardianship orders, end-of-life planning, tax considerations, Medicaid payback, and total assets all play into the decision of which financial tool to use,” Crist says. Her firm, she continues, “always likes to say that SNTs and ABLE accounts are complementary tools—they work very well together.“ Establishing an SNT is strategically viable if you need to sequester more money than an ABLE account allows, which is up to $100,000. If you put in more than $100,000, then SSI benefits will be suspended. Additionally, the maximum you can contribute to an ABLE account in 2023 is $17,000. If you wish to fund more than that per month, it is recommended you set up an SNT. ## Can I Have an SNT and an ABLE Account? Yes, you can have both. And you can even set up an SNT so that it can fund an ABLE account. ## Who Controls an SNT? The most common type of SNT is a third-party trust set up by parents to benefit their children. In this case, the parents act as trustees. A trustee is a person or entity who manages the trust assets and administers the trust provisions. A trustee can be a family member, friend, or colleague of the beneficiary, a professional, or a combination of the two. ## Does Autism Qualify for an ABLE Account? Yes, autism is a disability that qualifies for an ABLE account. The Internal Revenue Service lists the disabilities that qualify, which the Social Security Administration will accept for SSI or SSDI. ## The Bottom Line Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose, and they can be expensive to establish. ABLE accounts are much easier to set up and manage. However, they come with some disadvantages: primarily, limits on the amount of money you can save each year. You don’t have to choose one or the other, though. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits.

Special Needs Trust vs. ABLE Account: An Overview ABLE accounts and special needs trusts, also known as supplemental needs trusts, both give people with disabilities a way to save money tax-free. By saving money in an ABLE account or supplemental needs trust (SNT), you can also make sure that a disabled person continues to be eligible for public programs. Both ABLE accounts and SNTs protect resources. Each allows the accumulation of resources for the benefit of an individual with a disability without jeopardizing key federally funded benefits, like Supplemental Security Income and Medicaid. There are significant differences between the two ways of saving, though. ABLE accounts and SNTs have different rules when it comes to what you can use your savings for. They also have different annual limits on how much you can save. Then, there are a number of other differences that may have an impact on you, depending on your circumstances. In this article, we’ll take a brief look at each type of saving strategy and explore the differences between them. Key Takeaways Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose.ABLE accounts are easier to set up and manage. However, they come with some disadvantages—primarily, limits on the amount of money you can contribute each year.SNTs don’t have any such limits but can be expensive to set up and more complicated to manage.You don’t have to choose one or the other. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits. Supplemental Needs Trusts (SNTs) A supplemental needs trust (SNT) is a way for a disabled person to receive money without losing access to their public benefits. Most public assistance programs for people with disabilities have income and asset restrictions—if a disabled person earns too much or has too much money in savings, they will no longer be eligible for these benefits. An SNT is a way around this restriction. Money put in the trust doesn't count toward the purpose of qualifying for public assistance. An SNT is a legal arrangement and fiduciary relationship. In a fiduciary relationship, a person or entity acts on behalf of another person or people to manage assets. An SNT is a popular strategy for those who want to help someone in need without taking the risk that the person will lose their eligibility for programs that require their income or assets to remain below a certain limit. An SNT benefits the beneficiary as it allows them to put more money away without losing their Social Security benefits. The individual who creates the trust can rest assured that the money contributed will be used as outlined in the creation of the trust. Furthermore, benefiting both the beneficiary and the trust creator, assets in the trust cannot be claimed by creditors or in the loss of a lawsuit. It’s also important to recognize that the money in an SNT can only be used for a limited range of expenses. You are not supposed to use these funds to cover basic living expenses. Instead, proceeds from this type of trust are commonly used for healthcare needs, transportation, and other qualifying costs. ABLE Accounts In many ways, an ABLE account is similar to an SNT. An ABLE account is a tax-advantaged savings account available to individuals with significant disabilities appearing before age 26. Contributions can be made to the account by the beneficiary, friends, or family members, just as with an SNT. Just as with an SNT, money saved in an ABLE account doesn’t affect a disabled person’s eligibility for public benefits. There are also tax benefits to setting up an ABLE account—while the contributions themselves are not intended to be tax-deductible, the funds within the account grow tax-free and distributions are tax-free. ABLE accounts are a much newer financial product than SNTs. They were created by the 2014 Achieving a Better Life Experience (ABLE) Act as a way of giving more disabled people access to the benefits that, up until then, were restricted to those who held SNTs. ABLE accounts can be used to pay for a wider range of things than the money in an SNT. The money in an ABLE account can be used to pay for any qualified disability expenses (QDEs). There is an annual limit to how much you can contribute to an ABLE account: $17,000 in 2023. SNTs have no limits. Key Differences There are three main differences between SNTs and ABLE accounts: eligibility, the expenses permitted for each type of account, and the limits on how much money you can save through them. Eligibility ABLE accounts are offered to those meeting certain requirements. You only have to meet one of the following: Eligible for SSI determined by a disability or blindness that occurred before the age of 26Eligible for benefits, including disability insurance benefits, childhood disability benefits, and disabled widow/widower benefits determined by a disability or blindness that occurred before the age of 26A certificate proving that your disability or blindness occurred before the age of 26 An individual that qualifies for disability according to the Social Security Administration has to set up a first-party SNT before they reach 65. Third-party trusts, however, have no age restrictions. First-party SNTs are invested with assets that belong to the beneficiary while third-party trusts are invested with assets from anyone but the beneficiary. Account Limits ABLE accounts have contribution limits as well as amount limits. You can only contribute a certain amount each year. This amount is set federally under the same tax code governing 529 plans: $17,000 in 2023. In addition, ABLE accounts have a maximum limit set by the state that manages them. Many states set this limit above $300,000, with only the first $100,000 exempt from impacting eligibility for supplemental security income (SSI). SNTs have no such limits. One disadvantage of SNTs is that they can be expensive to set up. You will typically need to hire an attorney to set up the trust. In contrast, setting up an ABLE account is fast and easy, and can be done directly through the state's website. No attorney or financial advisor assistance is needed. Permitted Expenses The third main difference between these accounts concerns what you can use them to pay for. Put simply, SNTs are supposed to pay for "extra" things that make life more comfortable, such as vacations, pets, entertainment, home furnishings, assistive technology, therapies not covered by Medicaid, and more. These are things that public benefits cannot pay for. If the money in an SNT is used to pay for basic costs of living, a person’s public benefits might be decreased. ABLE accounts have a broader range of permitted expenses. This includes anything that helps a person with a disability improve their health, independence, or quality of life. QDEs can include basic costs of living, as well as costs for education, food, employment, transportation, technology, support services, and more. Other Differences As well as the fundamental differences mentioned above, these accounts differ in several other ways. These features may make a big difference to you, depending on your situation. Everyday management: In general, money in SNTs is more difficult to access. The funds in ABLE accounts can be accessed easily, and many programs offer a debit card that allows you to pay for items directly from the account. Who manages the account: ABLE accounts are owned and managed by a person with disabilities, who is responsible for making sure that they only spend money on allowable expenses. SNTs are managed by trustees, who are responsible for keeping records of expenses. Tax: The money you keep in an ABLE account is tax-free, but the money kept in an SNT is taxable each year. Medicaid liability: Money left in a person’s ABLE account after they die may be used to reimburse the state Medicaid agency for services Medicaid paid for after the ABLE account was created, depending on state regulations. There is often no money left after Medicaid is paid back. SNTs that were created with a parent, grandparent, or other person’s money (known as a third-party trust) do not have to repay Medicaid after a person dies. SNT vs. ABLE Account: Which Is Better? Every family’s needs and circumstances are different, and when making financial decisions it’s best to consult a professional. You can find lists of financial professionals who work with people with disabilities online, and the ABLE National Resource Center provides a comparison tool to help you understand how each type of account can help you. It’s also important to realize that you don't need to choose between an ABLE account and an SNT. You can in fact have both. These accounts are best used for different purposes, despite having some characteristics in common. According to the team at the ABLE National Resource Center, these financial instruments can work together. That’s because, they explain, “a special needs or pooled trust is considered a 'person' who can contribute to an ABLE account, much like any other third party, without an effect on means-tested benefits. The ABLE account then may, in turn, fund food or shelter expenses of the account owner without a reduction in supplemental security income benefits, unlike the effect which would occur if the SNT or [pooled trust] paid directly.” The money in SNTs is to pay for “extra” expenses that are not covered by public benefits. You can use the money in an ABLE account for a much broader range of expenses, including the basic costs of living, education, food, employment, and transportation. You should set up an ABLE account if you or a family member qualify. This will ensure that the disabled individual, whether you or a family member, will be able to obtain benefits. There may be additional benefits as well, such as tax relief. There are many factors to consider when choosing the best option for your family, points out Juliana Crist, senior consultant at AKF Consulting, a municipal advisor to state-run investment plans. “Things like guardianship orders, end-of-life planning, tax considerations, Medicaid payback, and total assets all play into the decision of which financial tool to use,” Crist says. Her firm, she continues, “always likes to say that SNTs and ABLE accounts are complementary tools—they work very well together.“ Establishing an SNT is strategically viable if you need to sequester more money than an ABLE account allows, which is up to $100,000. If you put in more than $100,000, then SSI benefits will be suspended. Additionally, the maximum you can contribute to an ABLE account in 2023 is $17,000. If you wish to fund more than that per month, it is recommended you set up an SNT. Can I Have an SNT and an ABLE Account? Yes, you can have both. And you can even set up an SNT so that it can fund an ABLE account. Who Controls an SNT? The most common type of SNT is a third-party trust set up by parents to benefit their children. In this case, the parents act as trustees. A trustee is a person or entity who manages the trust assets and administers the trust provisions. A trustee can be a family member, friend, or colleague of the beneficiary, a professional, or a combination of the two. Does Autism Qualify for an ABLE Account? Yes, autism is a disability that qualifies for an ABLE account. The Internal Revenue Service lists the disabilities that qualify, which the Social Security Administration will accept for SSI or SSDI. The Bottom Line Both ABLE accounts and SNTs allow a person diagnosed with disabilities—or their relatives—to save money without affecting their eligibility for public benefits. Prior to 2014, only SNTs could be used for this purpose, and they can be expensive to establish. ABLE accounts are much easier to set up and manage. However, they come with some disadvantages: primarily, limits on the amount of money you can save each year. You don’t have to choose one or the other, though. It’s possible to set up an ABLE account for everyday expenses and have an SNT that you can use for larger purchases that are not covered by public benefits.

https://www.investopedia.com/auto-theft-spiked-dramatically-in-2020-5100902

Auto Theft Spiked Dramatically in 2020, Reversing Recent Declines

<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"> Reversing a downward trend in recent years, auto theft soared in 2020, with numbers on track to surpass any year in the past decade, according to a new analysis. The pandemic’s economic impact may be largely to blame, the report suggests, and the rise could, to some extent, affect car insurance rates as a result. </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 new report shows that 2020 may be the biggest year for car thefts in the last decade.</li><li>Pandemic-related economic impacts may be a big part of the cause.</li><li>Auto theft rates play a role in calculating the cost of insurance coverage.</li></ul><p><br/></p></div></div></div> <span class="heading-toc" id="toc-auto-thefts-rose-9-from-2019"></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"> Auto Thefts Rose 9% From 2019 </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> An initial analysis released this week by the National Insurance Crime Bureau (NICB) reports that there were 873,080 auto thefts in 2020, a 9.2% increase from 2019. That represents more than 73,000 additional thefts.<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_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> “Preliminary reports indicate a sharp increase in automobile thefts for 2020,” says David Glawe, NICB president and CEO. “All indications are 2020 will be the largest theft year in the past decade by a significant margin.” </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"> According to the findings, every single month in 2020 showed increases compared to 2019—with the months of June through December posting double-digit gains. </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"> NICB released the early data in advance of its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.nicb.org/news/reports-statistics" rel="noopener noreferrer">annual Hot Spots report</a>, due out in mid-2021, because of the unique circumstances of 2020. </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-economic-civil-turmoil-are-likely-causes"></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"> Economic, Civil Turmoil Are Likely Causes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> Glawe notes that further cause assessment is still ongoing, but “considerations such as the pandemic, economic downturn, loss of juvenile outreach programs, and public safety budgetary and resource limitations are likely contributing factors.” </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"> “Thieves exploit opportunities and may look for vehicles parked in the same location or citizens not taking proper measures to secure their vehicles,” he adds. </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-car-theft-is-a-costly-crime"></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"> Car Theft Is a Costly Crime </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Motor vehicle theft accounts for $6.4 billion in losses annually, according to the latest tally from the FBI’s Uniform Crime Reporting Program. The average loss per theft is $8,886.<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"> Only about 56% of stolen vehicles are ever recovered, according to other data.<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> <span class="heading-toc" id="toc-how-car-theft-affects-insurance-rates"></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"> How Car Theft Affects Insurance Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Vehicle theft rates play a role in determining the cost of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/comprehensive-insurance.asp" rel="noopener noreferrer">comprehensive coverage</a>, says Janet Ruiz, director of strategic communication at the Insurance Information Institute. Comprehensive is the part of a full-coverage auto policy that insures against theft or damage to an automobile for reasons other than a collision. </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"> Generally, a quarter of the comprehensive auto premium covers auto theft claims, Ruiz says. </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"> Where a policyholder lives and the type of car they own, can both affect insurance premiums. The NICB compiles auto theft data by state and city.<span class="ql-inline-citation" data-cite="4"></span> And the Insurance Institute for Highway Safety’s Highway Loss Data Institute lists vehicle makes and models with the lowest and highest comprehensive insurance loss rates.<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> <span class="heading-toc" id="toc-what-drivers-can-do-to-prevent-theft"></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"> What Drivers Can Do to Prevent Theft </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Given the current situation, the NICB says drivers should double-down on prevention tactics to safeguard their vehicles and minimize the risk of theft. Along with common-sense practices like always removing keys or fobs from the car, locking doors, and parking in well-lit areas, the NICB notes that alarms and immobilizing and tracking devices can help thwart thieves and aid police in recovering the vehicle.<span class="ql-inline-citation" data-cite="6"></span> </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>

Reversing a downward trend in recent years, auto theft soared in 2020, with numbers on track to surpass any year in the past decade, according to a new analysis. The pandemic’s economic impact may be largely to blame, the report suggests, and the rise could, to some extent, affect car insurance rates as a result. ### Key Takeaways * A new report shows that 2020 may be the biggest year for car thefts in the last decade. * Pandemic-related economic impacts may be a big part of the cause. * Auto theft rates play a role in calculating the cost of insurance coverage. ## Auto Thefts Rose 9% From 2019 An initial analysis released this week by the National Insurance Crime Bureau (NICB) reports that there were 873,080 auto thefts in 2020, a 9.2% increase from 2019. That represents more than 73,000 additional thefts. “Preliminary reports indicate a sharp increase in automobile thefts for 2020,” says David Glawe, NICB president and CEO. “All indications are 2020 will be the largest theft year in the past decade by a significant margin.” According to the findings, every single month in 2020 showed increases compared to 2019—with the months of June through December posting double-digit gains. NICB released the early data in advance of its [annual Hot Spots report](https://www.nicb.org/news/reports-statistics), due out in mid-2021, because of the unique circumstances of 2020. ## Economic, Civil Turmoil Are Likely Causes Glawe notes that further cause assessment is still ongoing, but “considerations such as the pandemic, economic downturn, loss of juvenile outreach programs, and public safety budgetary and resource limitations are likely contributing factors.” “Thieves exploit opportunities and may look for vehicles parked in the same location or citizens not taking proper measures to secure their vehicles,” he adds. ## Car Theft Is a Costly Crime Motor vehicle theft accounts for $6.4 billion in losses annually, according to the latest tally from the FBI’s Uniform Crime Reporting Program. The average loss per theft is $8,886. Only about 56% of stolen vehicles are ever recovered, according to other data. ## How Car Theft Affects Insurance Rates Vehicle theft rates play a role in determining the cost of [comprehensive coverage](https://www.investopedia.com/terms/c/comprehensive-insurance.asp), says Janet Ruiz, director of strategic communication at the Insurance Information Institute. Comprehensive is the part of a full-coverage auto policy that insures against theft or damage to an automobile for reasons other than a collision. Generally, a quarter of the comprehensive auto premium covers auto theft claims, Ruiz says. Where a policyholder lives and the type of car they own, can both affect insurance premiums. The NICB compiles auto theft data by state and city. And the Insurance Institute for Highway Safety’s Highway Loss Data Institute lists vehicle makes and models with the lowest and highest comprehensive insurance loss rates. ## What Drivers Can Do to Prevent Theft Given the current situation, the NICB says drivers should double-down on prevention tactics to safeguard their vehicles and minimize the risk of theft. Along with common-sense practices like always removing keys or fobs from the car, locking doors, and parking in well-lit areas, the NICB notes that alarms and immobilizing and tracking devices can help thwart thieves and aid police in recovering the vehicle. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Reversing a downward trend in recent years, auto theft soared in 2020, with numbers on track to surpass any year in the past decade, according to a new analysis. The pandemic’s economic impact may be largely to blame, the report suggests, and the rise could, to some extent, affect car insurance rates as a result. Key Takeaways A new report shows that 2020 may be the biggest year for car thefts in the last decade.Pandemic-related economic impacts may be a big part of the cause.Auto theft rates play a role in calculating the cost of insurance coverage. Auto Thefts Rose 9% From 2019 An initial analysis released this week by the National Insurance Crime Bureau (NICB) reports that there were 873,080 auto thefts in 2020, a 9.2% increase from 2019. That represents more than 73,000 additional thefts. “Preliminary reports indicate a sharp increase in automobile thefts for 2020,” says David Glawe, NICB president and CEO. “All indications are 2020 will be the largest theft year in the past decade by a significant margin.” According to the findings, every single month in 2020 showed increases compared to 2019—with the months of June through December posting double-digit gains. NICB released the early data in advance of its annual Hot Spots report, due out in mid-2021, because of the unique circumstances of 2020. Economic, Civil Turmoil Are Likely Causes Glawe notes that further cause assessment is still ongoing, but “considerations such as the pandemic, economic downturn, loss of juvenile outreach programs, and public safety budgetary and resource limitations are likely contributing factors.” “Thieves exploit opportunities and may look for vehicles parked in the same location or citizens not taking proper measures to secure their vehicles,” he adds. Car Theft Is a Costly Crime Motor vehicle theft accounts for $6.4 billion in losses annually, according to the latest tally from the FBI’s Uniform Crime Reporting Program. The average loss per theft is $8,886. Only about 56% of stolen vehicles are ever recovered, according to other data. How Car Theft Affects Insurance Rates Vehicle theft rates play a role in determining the cost of comprehensive coverage, says Janet Ruiz, director of strategic communication at the Insurance Information Institute. Comprehensive is the part of a full-coverage auto policy that insures against theft or damage to an automobile for reasons other than a collision. Generally, a quarter of the comprehensive auto premium covers auto theft claims, Ruiz says. Where a policyholder lives and the type of car they own, can both affect insurance premiums. The NICB compiles auto theft data by state and city. And the Insurance Institute for Highway Safety’s Highway Loss Data Institute lists vehicle makes and models with the lowest and highest comprehensive insurance loss rates. What Drivers Can Do to Prevent Theft Given the current situation, the NICB says drivers should double-down on prevention tactics to safeguard their vehicles and minimize the risk of theft. Along with common-sense practices like always removing keys or fobs from the car, locking doors, and parking in well-lit areas, the NICB notes that alarms and immobilizing and tracking devices can help thwart thieves and aid police in recovering the vehicle. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/reimagining-retirement-and-the-meaning-of-wealth-in-the-new-economic-normal-8407116

Reimagining Retirement and the Meaning of Wealth in the New Economic Normal

<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=MERE4095164935" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Reimagining Retirement and the Meaning of Wealth in the New Economic Normal"></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"> The past couple of years have warped many of our perceptions about retirement, and the reasons why we save and invest. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/douglasboneparth">Doug Boneparth</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/jamiehopkinsfinancialservices">Jamie Hopkins</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/peterlazaroff">Peter Lazaroff</a> climb back aboard The Express to share their views about what the words "retirement" and "wealth" mean today, and how investors should approach their goals given higher interest rates and the end of easy money. Plus, the S&amp;P Technology sector hits an all-time high as mutual fund managers are warming back up to stocks and planning for a soft landing. What could go wrong? </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"> Do you have a news tip for Investopedia reporters? Please email us at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="mailto:[email protected]">[email protected]</a><br/> </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) The past couple of years have warped many of our perceptions about retirement, and the reasons why we save and invest. [Doug Boneparth](https://www.linkedin.com/in/douglasboneparth), [Jamie Hopkins](https://www.linkedin.com/in/jamiehopkinsfinancialservices) and [Peter Lazaroff](https://www.linkedin.com/in/peterlazaroff) climb back aboard The Express to share their views about what the words "retirement" and "wealth" mean today, and how investors should approach their goals given higher interest rates and the end of easy money. Plus, the S&P Technology sector hits an all-time high as mutual fund managers are warming back up to stocks and planning for a soft landing. What could go wrong? 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 The past couple of years have warped many of our perceptions about retirement, and the reasons why we save and invest. Doug Boneparth, Jamie Hopkins and Peter Lazaroff climb back aboard The Express to share their views about what the words "retirement" and "wealth" mean today, and how investors should approach their goals given higher interest rates and the end of easy money. Plus, the S&P Technology sector hits an all-time high as mutual fund managers are warming back up to stocks and planning for a soft landing. What could go wrong? Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/best-money-transfer-apps-5180183

The Best Money Transfer Apps for 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"> Based on our research, WorldRemit is the best money transfer app due to its international flexibility, lack of hidden costs, and more. Money transfer apps, also called peer-to-peer (P2P) money transfer apps, let you transfer cash from person to person, or from entity to entity, quickly, conveniently, cheaply, and securely. They simplify payments and also allow you to use a digital wallet to link your credit card or bank account. You can make electronic transactions and payments with just a few taps on a mobile device. </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"> The best money transfer apps collect high app store ratings, help app shoppers shell out money safely, and involve no hidden fees. They also fit consumer-specific needs, such as international payments, social options, digital wallet offerings, and more.  </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"> The Best Money Transfer Apps for 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 International Transfers:</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://worldremit.sjv.io/c/2104074/1616956/17563" rel="nofollow noskim noopener nocaes" target="_blank"> WorldRemit</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 Ease of Use:</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://paypal.prf.hn/click/camref:1101loGcQ" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> PayPal</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 Low Fees:</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://cashapp.pxf.io/c/2104074/1484514/12855" rel="nofollow noskim noopener nocaes" target="_blank"> Cash App</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 Shared Bills:</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://venmo.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Venmo</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 Bank to Bank Transfers:</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.zellepay.com/" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Zelle</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><!-- 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"> The Best Money Transfer Apps for 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-The Best Money Transfer Apps for 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"> The Best Money Transfer Apps for 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-WorldRemit" 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-WorldRemit" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-international-transfers-worldremit" rel="nocaes"> <span class="link__wrapper">WorldRemit</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-PayPal" 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-PayPal" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-ease-of-use-paypal" rel="nocaes"> <span class="link__wrapper">PayPal</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-Cash App" 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-Cash App" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-low-fees-cash-app" rel="nocaes"> <span class="link__wrapper">Cash App</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-Venmo" 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-Venmo" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-shared-bills-venmo" rel="nocaes"> <span class="link__wrapper">Venmo</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-Zelle" 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-Zelle" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-bank-to-bank-transfers-zelle" rel="nocaes"> <span class="link__wrapper">Zelle</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 (2)</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-Compare Apps" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-money-transfer-apps" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Apps</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-Pros and Cons" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-and-cons-of-money-transfer-apps" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">Pros and Cons</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-Alternatives" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-alternatives-to-money-transfer-apps" id="mntl-toc__list-item-link_1-0-3" 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_1-0-4"> <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-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-83637559-627c-4a6b-b254-c5a11d63502d" id="mntl-toc__list-item-link_1-0-4" 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 --> <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-how-we-pick-the-best-money-transfer-apps" 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-international-transfers-worldremit"></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 International Transfers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> WorldRemit</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 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:50.0%;"> <img alt="WorldRemit" 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/S0lf_a1gjA8M7o14ry_5v_E0YT4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/WorldRemit-88ede7b39dfc4156851fec4da0c3a44c.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="WorldRemit" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/S0lf_a1gjA8M7o14ry_5v_E0YT4=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/WorldRemit-88ede7b39dfc4156851fec4da0c3a44c.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>WorldRemit</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_3-0-1"> <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="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at WorldRemit" data-retailer-type="other" data-tracking-container="true" href="https://worldremit.sjv.io/c/2104074/1616956/17563" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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"> The World Remit app won this category for having no hidden costs and the flexibility to send to over 130 countries.<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_3-0-4"> WorldRemit can send money to recipients within minutes. Most transfers complete within 24 hours wherever recipients live in the world.<span class="ql-inline-citation" data-cite="6"></span> When you introduce a friend to WorldRemit, you both get a voucher to use on your next transfer. Also, first-time customers can use the promo code 3Free to make their first three transfers with no fees. </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_3-0-6"> <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>Quick deposit options worldwide</p></li> <li><p>Easy to use</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>Complex transfer fees</p></li> <li><p>Limits on large transfers to certain destinations</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_3-0-8"> The app gives you various ways to send money—through cash pickup, bank transfer, mobile money, home delivery, and airtime top-up, and that's why it landed in our top category. </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"> WorldRemit accepts most types of debit, credit, and prepaid cards issued by Visa or Mastercard. WorldRemit also accepts payment from Klarna, Trustly, POLi, Apple Pay, and more. It no longer accepts Google Pay. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> To send money, download the iOS or Android version of the World Remit app. Select the country and amount you want to send and enter recipient details and bank information. Once you pay for the transaction, your recipient will find out by SMS and email when they can access their money. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> WorldRemit, approved by the Financial Conduct Authority (FCA), puts a high priority on security by implementing strict verification procedures. The company employs teams to monitor accounts for unusual activity.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> WorldRemit's large network of local partners works with worldwide banks and financial institutions. You can send a maximum of $9,000 in 24 hours and $5,000 per transaction for debit, credit, or prepaid cards. You can submit a maximum of $9,000 in Apple Pay payments within 24 hours and send a maximum of $300 per transaction.<span class="ql-inline-citation" data-cite="8"></span> WorldRemit lists all fees and exchange rates before you execute each transaction. </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"> WorldRemit also offers a wallet for use in a limited number of countries, but any WorldRemit customer can send money to a WorldRemit Wallet.  </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 accidentally send money to the wrong person, WorldRemit can sometimes recall the mobile money or bank transfer transaction. In this situation, you want to contact WorldRemit as soon as possible. </p><!-- 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-ease-of-use-paypal"></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 Ease of Use</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> PayPal</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_3-0-15" style="--imgWidth: 181px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="PayPal" 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/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="PayPal" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/K_gcfTMVlfyOCOkujzVGSVzTDh8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.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> PayPal</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_3-0-16"> <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 PayPal" data-retailer-type="other" data-tracking-container="true" href="https://paypal.prf.hn/click/camref:1101loGcQ" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-18"> The app's robust offerings, mixed with speed and convenience and PayPal's brand name awareness, make it a good choice. </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_3-0-20"> <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>Name/brand recognition cultivates instant trust</p></li> <li><p>Easy to install and use</p></li> <li><p>Fast and secure</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>High transaction fees</p></li> <li><p>May hold money</p></li> <li><p>Difficult customer service</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_3-0-22"> PayPal offers a wide range of versatile, flexible, secure, and easy-to-use money transfer tools. You can transfer money for free from a PayPal balance, bank account, or Amex Send account. You can also use PayPal Instant Transfer and transfer funds immediately (for a fee). </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"> PayPal offers versions of its app for iOS, Android, and Windows. It takes just minutes to download and start transferring money. You can share a PayPal.Me link for a quick and secure payment option. PayPal's invoice creation feature also allows you to customize and track every invoice you send. </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"> You can send up to $60,000, but PayPal may limit the transaction to $10,000, depending on the currency you use.<span class="ql-inline-citation" data-cite="2"></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_3-0-25"> If you accidentally send money to the wrong person, you can reach out to the contact and ask for a refund. If the individual doesn't respond, you can open a dispute in PayPal's Resolution Center. </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"> You can tap into your PayPal balance to keep money in your account with the PayPal Cash Card, a debit card with a daily spending limit of $3,000 and a daily cash ATM withdrawal limit of $400 with a limit of 30 transactions per day.<span class="ql-inline-citation" data-cite="3"></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_3-0-27"> Users pay 2.90% plus a fixed fee to send money via a credit card. PayPal charges 5.0% to send international personal transactions using a PayPal balance, bank account, or through an Amex Send account.<span class="ql-inline-citation" data-cite="4"></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"> PayPal keeps your information secure using sophisticated encryption. The company monitors transactions 24/7 and offers dispute resolution if you have a problem with a transaction. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> PayPal limits transfers to U.S. banks only and can connect with most U.S. banks and credit unions. Unfortunately, some banks, including online-only or prepaid bank accounts, can't give you access to PayPal. </p><!-- 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-for-low-fees-cash-app"></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 Low Fees</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Cash App</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-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_3-0-30" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Square Cash" 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/ljjWUXmX8ZjF8LMmUytgKbc1J0U=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Cash_App-1de91ae80d2f428b869bc75074f005dd.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="Square Cash" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/ljjWUXmX8ZjF8LMmUytgKbc1J0U=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Cash_App-1de91ae80d2f428b869bc75074f005dd.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> Square Cash</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_3-0-31"> <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="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Cash App" data-retailer-type="other" data-tracking-container="true" href="https://cashapp.pxf.io/c/2104074/1484514/12855" id="button_1-0-2" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-33"> Cash App, owned by Square Inc., scored the highest in the low fees category because it allows users to send funds instantly via mobile app for free. Cash App stands out for its simplicity (you either pay or get paid), ease of use, and minimal fees.   </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"> Cash App also offers unique options not common in other money transfer apps, such as investment options, getting special savings with “cash boosts,” and buying and selling Bitcoin. </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_3-0-36"> <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>Offers more than just payment options</p></li> <li><p>Simple and fast</p></li> <li><p>Great for money requests for friends and family</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 rely on another person to return money if you send to the wrong individual</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_3-0-38"> Cash App won because of its low fees and flexibility—including the ability to buy and sell Bitcoin straight from your Cash App balance.  </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"> You can also transfer funds to a bank account from your Cash App account or store money in your Cash App account. Tap the "Balance" tab on the app home screen, click "Cash out," enter the amount and indicate whether you want to request money or pay money. To send a payment, enter the other person's $Cashtag, phone number, or email address and tap "pay." </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"> Cash App lets you send $250 in any 7-day period and receive up to $1,000 instantly within any 30-day period.<span class="ql-inline-citation" data-cite="9"></span> However, you can hurdle over these limits by verifying your identity. Note: the app doesn't transfer money immediately—you should have your money within one to three business days. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> Cash App supports debit and credit cards from Visa, MasterCard, American Express, and Discover. The app supports most government-enabled prepaid cards but users cannot deposit to these cards. Cash App does not support ATM cards, Paypal, and business debit cards at this time.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> Cash App employs up-to-date security encryption and fraud detection technology. Cash App features PCI Data Security Standard (PCI-DSS) Level 1 compliance.<span class="ql-inline-citation" data-cite="10"></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"> Unfortunately, sending a payment to the wrong person doesn't guarantee a swift return; you can only request the money and rely on that person's honesty to get your funds returned. </p><!-- 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-shared-bills-venmo"></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 Shared Bills</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Venmo</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_3-0-44" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Venmo" 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/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Venmo" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/4r3SZ5836HUm2mzXmN8FMZ5wWb8=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.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> Venmo</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_3-0-45"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-click-action="OffPageClick - External" data-retailer-caption="at Venmo" data-retailer-type="other" data-tracking-container="true" href="https://venmo.com/" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-47"> Venmo offers the best of both worlds—it offers a quick and easy way to send and receive money and offers a potential "parking place" for your cash. You can spend, send, or transfer Venmo money to your bank account. Because of these reasons, it won the category for shared 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_3-0-48"> You can even make the experience more interactive by adding emojis or animated stickers with your transactions. </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_3-0-50"> <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>Provides a social way to split money</p></li> <li><p>Money moves instantly</p></li> <li><p>No need to add money to Venmo to make 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>Past security concerns</p></li> <li><p>Fee for instant cash-out transfers to your bank account</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_3-0-52"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/venmo-vs-paypal-5114030">Venmo</a> (which is owned by PayPal) conquered this category because it allows for quick and easy money exchange between individuals. You can send or receive money for free through the peer-to-peer payment app, though Venmo charges 1.75% of the transfer total to send money via credit card.<span class="ql-inline-citation" data-cite="11"></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_3-0-53"> Venmo also charges a 1.75% fee ($0.25 minimum and $25 maximum) for instant cash-out transfers to your bank account. You can keep money in Venmo or your bank account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-54"> You can send money using your iOS- or Android-based smartphone by choosing a sign-up method and creating a secure password between eight and 20 characters long. Venmo asks you to verify your phone number, email address, and bank account. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can also choose an instant transfer to a bank account or debit card (incurs a 1.75% fee) which arrives within 30 minutes. Venmo should work with all U.S.-based banks. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-56"> Venmo uses encryption to keep information secure. You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN. Note: The Consumer Financial Protection Bureau raised red flags about Venmo's "debt-collection practices" through a Civil Investigative Demand in January 2021.<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_3-0-57"> Venmo imposes a $299.99 spending limit, but users can submit information about their identity to increase the weekly rolling limit to $60,000.<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_3-0-58"> If you accidentally send money to the wrong person, you can request a return for the money you sent by mistake. If you don’t hear back or need help sending a charge request, you can contact Venmo's support team. Venmo offers no recovery guarantees.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-59"> Read our full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp">Venmo Review</a>. </p><!-- 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-bank-to-bank-transfers-zelle"></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 Bank to Bank Transfers</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Zelle</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_3-0-60" style="--imgWidth: 760px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Zelle" 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/O4gbl9cb86RrHw7JSP_ARGnnNXc=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Zelle-5192fad7f41b4776bbe82a03d99fffc1.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="Zelle" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/O4gbl9cb86RrHw7JSP_ARGnnNXc=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Zelle-5192fad7f41b4776bbe82a03d99fffc1.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> Zelle</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"> <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_3-0-61"> <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 Zelle" data-retailer-type="other" data-tracking-container="true" href="https://www.zellepay.com/" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-63"> For bank-to-bank transfers, Zelle won because of its quick access and wide availability at most banks and credit unions. Users can head to a bank's website or directly to the mobile app to register with just an email address or phone number. </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_3-0-65"> <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>Widely used by many banks</p></li> <li><p>You can still use it if your bank doesn't offer Zelle</p></li> <li><p>Swift movement of funds</p></li> <li><p>Money is federally insured</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>Only works with domestic banks</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_3-0-67"> No other app offers such an easy bank-to-bank process. Zelle can transfer money to other Zelle users through the easy-to-use app. Users can send or request money with an email address or phone number. Recipients must have a Zelle account to send or receive money. Zelle sends a text or email and a link to accept payment. </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"> You can find the free app through the App Store or on Google Play. Enter the amount you want to send. The money goes directly into the recipient's bank account, typically in minutes.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> The Zelle app utilizes authentication and monitoring features for top security or uses your bank or credit union's mobile app. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> If your bank or credit union does not yet offer Zelle, you can only send up to $500.<span class="ql-inline-citation" data-cite="15"></span> You cannot request to increase or decrease your send limit. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-71"> You should know and trust the people you send money to because you can't cancel a payment through Zelle if the recipient already has a Zelle account. However, you can cancel a payment if the recipient hasn't enrolled in Zelle. Go to your activity page on the Zelle app, choose the payment you want to cancel, and tap "cancel this payment.” </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-72"> Read our full <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/zelle-new-p2p-payment-app-pypl/">Zelle Review</a>. </p><!-- 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"> Your final decision on the best money transfer app depends on your goals and preferences. For example, if you want your app to have additional features (like investing in Bitcoin), gravitate toward Cash App, which offers it. </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"> However, for a comprehensive overall money transfer app, you can't go wrong with PayPal, which offers a suite of payment options and a successful track record to back it up. PayPal also offers robust safety features, payment protection, and handy tools for businesses.<br/> </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-money-transfer-apps"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-3"> <span class="mntl-sc-block-heading__text"> Compare the Best Money Transfer Apps </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_4-0-4"> <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>App</b></th> <th><b>Operating System</b></th> <th><b>Minimum Transfer</b></th> <th><b>Transfer Speed</b></th> </tr> </thead> <tbody data-check="0"> <tr> <th><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://worldremit.sjv.io/c/2104074/1616956/17563" rel="nofollow">WorldRemit</a> <br/>Best for International Transfers</th> <td>iOS and Android </td> <td>Depends on the country you send from and the payment method used to fund the transfer</td> <td>Instant</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="sponsored nofollow">PayPal</a> <br/>Best for Ease of Use</th> <td>iOS and Android</td> <td>No minimum transfer amount</td> <td>Transfers occur in minutes and vary by bank. Debit card transfers may take up to 30 minutes.</td> </tr> <tr> <th><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://cashapp.pxf.io/c/2104074/1484514/12855" rel="nofollow">Cash App</a> <br/>Best for Low Fees</th> <td>iOS and Android </td> <td>No minimum transfer amount</td> <td>Standard deposits arrive within three business days. Instant deposits arrive immediately.</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://venmo.com/" rel="sponsored nofollow">Venmo</a> <br/>Best for Shared Bills</th> <td>iOS and Android</td> <td>No minimum transfer amount</td> <td>Instant</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://pay.facebook.com/" rel="sponsored nofollow">Facebook Pay</a> <br/>Best for Small Transfers</th> <td>Depends on the apps you already use </td> <td>No minimum transfer amount</td> <td>Instant, though the bank may take up to five days to process</td> </tr> <tr> <th><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.zellepay.com/" rel="sponsored nofollow">Zelle</a> <br/>Best for Bank to Bank Transfers</th> <td>iOS and Android</td> <td>Varies by bank/credit union Zelle partners with</td> <td>Instant</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 --> <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_4-0-5"> <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><strong>In the News: </strong>Money transfers and person-to-person payments are increasingly popular. According to the Consumer Financial Protection Bureau, the total person-to-person (P2P) payment dollar volume quadrupled between 2018 and 2022. </p> <p>Though money transfer apps are convenient and easy to use, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/08/fdic-insured-bank-account.asp">not all apps are backed by the Federal Deposit Insurance Corporation (FDIC)</a>, so consumers' deposits aren't always insured. As a result, you should be careful about what apps you use and how much money you store in them.<span class="ql-inline-citation" data-cite="18"></span></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 --> <span class="heading-toc" id="toc-pros-and-cons-of-money-transfer-apps"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-6"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Money Transfer Apps </span> </h2><!-- end: comp 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_4-0-7"> <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>Easy fund requests and payments</p></li> <li><p>Multiple funding options</p></li> <li><p>Quick access to transferred money</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>Payments vulnerable to scams</p></li> <li><p>Potentially high transaction fees</p></li> <li><p>Funds rarely backed by FDIC insurance</p></li> </ul> </div> </div><!-- end: comp mntl-sc-block prm-sc-block-comparisonlist mntl-sc-block-comparisonlist --> <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"> Pros Explained </span> </h3><!-- end: comp 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_4-0-9"> <li><strong>Easy fund requests and payments:</strong> Money transfer apps like PayPal and Venmo allow you to quickly and easily send money to contacts in your phone or request funds with just a phone number, reducing the need to carry cash or personal checks. </li> <li><strong>Multiple funding options:</strong> Depending on the app, you can make payments or send money with several different funding options. For example, you can send money directly from a checking account or use a debit card, credit card, or even <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrency</a>. </li> <li><strong>Quick access to transferred money:</strong> Rather than waiting for a check to arrive in the mail, money transfer apps offer quick access to funds, typically within one to three days. With some apps, instant transfers are available for a fee, allowing funds to be transferred within minutes. </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_4-0-10"> <span class="mntl-sc-block-subheading__text"> Cons Explained </span> </h3><!-- end: comp 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_4-0-11"> <li><strong>Payments vulnerable to scams:</strong> Most payments are nearly instant and unable to be canceled or reversed. Scammers have repeatedly taken advantage of this feature to convince unsuspecting people to send payments to bad actors.<span class="ql-inline-citation" data-cite="19"></span> </li> <li><strong>Potentially high transaction fees:</strong> Fees vary by platform and type of transaction, but the costs can add up, particularly if you routinely request instant access to transferred funds or link your accounts to plastic.<span class="ql-inline-citation" data-cite="20"></span></li> <li><strong>Funds rarely backed by FDIC insurance:</strong> If you store your money with a money transfer app, you should know that the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic.asp">FDIC</a> does not insure the funds. If the platform fails, you could lose the money in your account.<span class="ql-inline-citation" data-cite="21"></span></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_4-0-12"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0-1"> <p>The Federal Reserve reported in 2021, its most recent survey, that 46.4% of all households use online payment services like Cash App, PayPal, and Venmo.<span class="ql-inline-citation" data-cite="22"></span></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-alternatives-to-money-transfer-apps"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-13"> <span class="mntl-sc-block-heading__text"> Alternatives to Money Transfer Apps </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_4-0-14"> Money transfer apps can be helpful when splitting a dinner bill or paying your dog walker. But they're not appropriate for all situations. In some cases, you may need to use an alternative method to send money or pay for services.  </p><!-- 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_4-0-15"> <span class="mntl-sc-block-subheading__text"> Cashier's Checks </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_4-0-16"> When making a significant, high-dollar purchase—such as buying a home or car—you may need a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-ways-to-get-a-cashier-s-check-4590106">cashier's check</a> to complete the transaction. The bank guarantees cashier's checks, so there's no risk of the check bouncing when it's cashed. Banks typically charge a moderate flat fee per cashier's check.<span class="ql-inline-citation" data-cite="23"></span>  </p><!-- 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_4-0-17"> <span class="mntl-sc-block-subheading__text"> Money Orders </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_4-0-18"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/money-order.asp">Money orders</a> are a safer alternative to personal checks or cash. You can purchase a money order at any post office and at some banks, and each domestic money order can be up to $1,000. At the time of purchase, you'll receive a receipt that you can use to track the payment in case the money order is lost or stolen. A small fee applies for each money order purchased.<span class="ql-inline-citation" data-cite="24"></span> </p><!-- 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_4-0-19"> <span class="mntl-sc-block-subheading__text"> Personal Checks </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_4-0-20"> For routine transactions, such as paying rent or utility bills, a personal check is an acceptable form of payment. It may take longer than other payment options since it may have to be mailed and cashed, but there are no fees with personal checks, and the money is withdrawn directly 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>.  </p><!-- 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_4-0-21"> <span class="mntl-sc-block-subheading__text"> Money Transfer Services </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_4-0-22"> Money transfer services, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/081715/sending-money-moneygram-vs-western-union.asp">Western Union or MoneyGram</a>, allow those without bank accounts to transfer money or pay bills. Through a remittance transfer, customers can also use these services to send money to loved ones internationally. Remittance transfers have specific consumer-protection requirements.<span class="ql-inline-citation" data-cite="25"></span> </p><!-- 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_4-0-23"> <span class="mntl-sc-block-subheading__text"> Wire Transfers </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_4-0-24"> If you need to securely transfer large sums—such as money to cover the closing costs on a home—a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wiretransfer.asp">wire transfer</a> is a popular choice. It allows you to transfer money electronically from one bank account to another, but your bank will likely charge you fees to complete the transfer. Review your account's deposit agreement or schedule of fees to find out what <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/bank_fees.asp">bank fees</a> may apply. </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_4-0-25"> <span class="heading-toc" id="toc-faq-83637559-627c-4a6b-b254-c5a11d63502d"></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 the Best Money Transfer App?</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>No one money transfer app is best for everyone (or for every situation). For example, Zelle, one of our top picks, is an excellent choice for those that want to move money quickly from one domestic bank account to another; <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">WorldRemit</a> is a better choice for international payments. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="sponsored nofollow">PayPal</a> is a relatively simple solution, while <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">Cash App</a> is a top choice for having low fees. You may also want to check out <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/venmo-vs-paypal-5114030">Venmo</a> for sharing bills, and <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/092315/it-safe-send-money-through-facebook.asp">Facebook Pay</a> for small transfers.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">What Is the Best App for International Money Transfers?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>If you need to send money to someone in another country, we found that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">WorldRemit</a> is the best app for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/093015/best-ways-send-large-sums-money-abroad.asp">international transfers</a>. Most transfers are completed within minutes, and you can choose from several transfer options, including cash pickup, bank transfer, or even home delivery.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">How Do Money Transfer Apps Work?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-2"> <div class="faq-accordion__item-answer"> <p>Money transfer apps allow you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0411/7-low-cost-ways-to-transfer-money.aspx">transfer money</a> quickly and easily. Some apps hold your money and others transfer it from one bank to another. Some money transfer apps specifically cater to consumer-specific needs.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">What Apps Allow Instant Money Transfer?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>With most apps, it can take one to five business days for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transfer.asp">funds to transfer</a>. However, the following apps offer instant transfer options, so the money is received within minutes if you pay an additional fee: </p><ul><li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">Cash App</a></li><li><a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="sponsored nofollow">PayPal</a></li><li>Venmo</li></ul><p>Zelle does not charge a fee.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">Are Money Transfer Apps Safe to Use?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Generally, money transfer apps offer robust security features to protect your money. However, it's important to understand that if you send money to the wrong recipient, you may not get your funds back. Providers might not help recover misdirected funds. Only send money to people you know and trust.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-5" tabindex="-1"> <h3 class="accordion__title">How Long Does It Take to Transfer Money With an App?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>The length of time it takes varies. Some transfers occur immediately and others can take up to a few days. Keep your needs and time frame in mind so you choose the best <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0910/mobile-money-using-your-cell-phone-to-transfer-funds.aspx">mobile money</a> app for you. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-6" tabindex="-1"> <h3 class="accordion__title">What Money Transfer App Is Safest?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>All of our list's major <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0411/7-low-cost-ways-to-transfer-money.aspx">money transfer</a> apps are generally secure, using the latest encryption technology and privacy measures to protect user information. These include <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">WorldRemit</a>, Zelle, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://paypal.prf.hn/click/camref:1101loGcQ" rel="sponsored nofollow">PayPal</a>, <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&amp;subid2=n71c6efc7d2204b938255af9db2dfc58f20" rel="nofollow">Cash App</a>, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp">Venmo</a>, and Facebook Pay.</p><p>However, there is still a risk of scams and data breaches, so it's important to take extra steps to protect your information. For example, enabling multifactor authentication, regularly changing passwords, and avoiding public WiFi connections can help keep your account safe.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-7" tabindex="-1"> <h3 class="accordion__title">Is Zelle Safer Than Venmo?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-is-zelle-7097991">Zelle</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/010715/venmo-its-business-model-and-competition.asp">Venmo</a> are both generally safe. The platforms use encryption to protect account information and monitor account activity, and encrypted data is stored on servers in secure locations. </p><p>However, all money transfer apps have some level of risk. To protect yourself, verify the recipient's contact information before sending money, and only send money to those you know and trust.</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-pick-the-best-money-transfer-apps"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-26"> <span class="mntl-sc-block-heading__text"> How We Pick the Best Money Transfer Apps </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_4-0-27"> We researched 13 money transfer apps. First, we took a look at each app's store ratings, then tested each app for ease of use and transaction speed. We also analyzed each app's compatible systems and narrowed our search by evaluating each app's security features. We then calculated each app's minimum and maximum transfer amounts.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-28"> We rounded out the list by taking a look at fees and the flexibility within each transfer option and gave final preference to apps that offer unique features. </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_4-0-29"> <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><!-- 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-money-transfer-apps-5180183" class="primary-image__image mntl-primary-image--blurry" height="1000" onload="(function(e){e.classList.add('loaded')})(this)" sizes="750px" src="https://www.investopedia.com/thmb/ke-jpKakdY2Vh6BSt8ocC6BNjtA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg" srcset="https://www.investopedia.com/thmb/FnpMSwjhQkpng1agsMXcRbPvYd4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg 750w" style="--blurry: url('data:image/gif;charset=utf-8;base64,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')" width="1500"/> <noscript> <img alt="Best-money-transfer-apps-5180183" class="loaded primary-img--noscript primary-image__image mntl-primary-image--blurry" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/ke-jpKakdY2Vh6BSt8ocC6BNjtA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg" srcset="https://www.investopedia.com/thmb/FnpMSwjhQkpng1agsMXcRbPvYd4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg 750w" 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>Getty Images / <a href="https://www.gettyimages.com/search/photographer?photographer=sasun%20bughdaryan">sasun bughdaryan</a></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-5"><p>WorldRemit. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.worldremit.com/en/faq/send-to" rel="nofollow sponsored">Send Money to Over 130 Countries With WorldRemit</a>."</p></li> <li class="mntl-sources__source" id="citation-6"><p>WorldRemit. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.worldremit.com/en/faq/bank-transfers" rel="nofollow sponsored">Bank Transfers</a>."</p></li> <li class="mntl-sources__source" id="citation-8"><p>WorldRemit. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.worldremit.com/en/faq/send-from/americas/usa" rel="nofollow sponsored">Send Money From the United States</a>."</p></li> <li class="mntl-sources__source" id="citation-2"><p>PayPal. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.paypal.com/us/cshelp/article/what-is-the-maximum-amount-i-can-send-with-my-paypal-account-faq732" rel="nofollow sponsored">What's the Maximum Amount I Can Send With My PayPal</a>."</p></li> <li class="mntl-sources__source" id="citation-3"><p>PayPal. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.paypal.com/myaccount/bundle/fees" rel="nofollow sponsored">PayPal Debit Card, Direct Deposit, and Cash Load</a>."</p></li> <li class="mntl-sources__source" id="citation-4"><p>PayPal. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.paypal.com/us/webapps/mpp/paypal-fees" rel="nofollow sponsored">PayPal Consumer Fees</a>."</p></li> <li class="mntl-sources__source" id="citation-9"><p>Cash App. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://cash.app/help/us/en-us/1015-account-settings" rel="nofollow sponsored">Account Settings</a>."</p></li> <li class="mntl-sources__source" id="citation-10"><p>Cash App. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://cash.app/help/us/en-us/5144-cash-app-security" rel="nofollow sponsored">Cash App Security</a>."</p></li> <li class="mntl-sources__source" id="citation-11"><p>Venmo. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.venmo.com/hc/en-us/articles/115015844068-Instant-Bank-Transfer-FAQ" rel="nofollow sponsored">Instant Bank Transfer FAQ</a>."</p></li> <li class="mntl-sources__source" id="citation-1"><p>PayPal. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001633917/649f6b82-3897-4940-b9f3-64c0937779aa.pdf">10-K Filing</a>."</p></li> <li class="mntl-sources__source" id="citation-12"><p>Venmo. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://help.venmo.com/hc/en-us/articles/221010968-Personal-Profile-Payment-Limits" rel="nofollow sponsored">Personal Profile Payment Limits</a>."</p></li> <li class="mntl-sources__source" id="citation-15"><p>Zelle. "<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.zellepay.com/faq/there-limit-how-much-money-i-can-send" rel="nofollow sponsored">Is There a Limit to How Much Money I Can Send?</a>"</p></li> <li class="mntl-sources__source" id="citation-18"><p>Consumer Financial Protection Bureau. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-analysis-of-deposit-insurance-coverage-on-funds-stored-through-payment-apps/full-report/">Analysis of Deposit Insurance Coverage on Funds Stored Through Payment Apps</a>."</p></li> <li class="mntl-sources__source" id="citation-19"><p>Federal Bureau of Investigation. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ic3.gov/Media/Y2022/PSA220414">Cybercriminals Trick Victims Into Transferring Funds to 'Reverse' Instant Payments.</a>"</p></li> <li class="mntl-sources__source" id="citation-20"><p>Consumer Financial Protection Bureau. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.consumerfinance.gov/about-us/blog/helpful-tips-using-mobile-payment-services-and-avoiding-risky-mistakes/">Helpful Tips for Using Mobile Payment Services and Avoiding Risky Mistakes</a>."</p></li> <li class="mntl-sources__source" id="citation-21"><p>Consumer Financial Protection Bureau. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.consumerfinance.gov/about-us/newsroom/consumer-advisory-your-money-is-at-greater-risk-when-you-hold-it-in-a-payment-app-instead-of-moving-it-to-an-account-with-deposit-insurance/">Consumer Advisory: Your Money Is at Greater Risk When You Hold It in a Payment App, Instead of Moving It to an Account With Deposit Insurance</a>."</p></li> <li class="mntl-sources__source" id="citation-22"><p>Federal Reserve. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.fdic.gov/analysis/household-survey/2021report.pdf">2021 FDIC National Survey of Unbanked and Underbanked Households</a>."</p></li> <li class="mntl-sources__source" id="citation-23"><p>FDIC. “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.fdic.gov/resources/consumers/consumer-assistance-topics/deposit-accounts.html">Deposit Accounts</a>."</p></li> <li class="mntl-sources__source" id="citation-24"><p>United States Postal Service. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.usps.com/shop/money-orders.htm" rel="nofollow sponsored">Sending Money Orders</a>."</p></li> <li class="mntl-sources__source" id="citation-25"><p>Consumer Financial Protection Bureau. "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-wire-transfer-en-1163/">What Is a Wire Transfer?</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="8399586" data-ordinal="1" data-tax-levels="" href="https://www.investopedia.com/venmo-teen-debit-card-review-8399586" 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Based on our research, WorldRemit is the best money transfer app due to its international flexibility, lack of hidden costs, and more. Money transfer apps, also called peer-to-peer (P2P) money transfer apps, let you transfer cash from person to person, or from entity to entity, quickly, conveniently, cheaply, and securely. They simplify payments and also allow you to use a digital wallet to link your credit card or bank account. You can make electronic transactions and payments with just a few taps on a mobile device. The best money transfer apps collect high app store ratings, help app shoppers shell out money safely, and involve no hidden fees. They also fit consumer-specific needs, such as international payments, social options, digital wallet offerings, and more.  ## The Best Money Transfer Apps for 2024 * **Best for International Transfers:** [WorldRemit](https://worldremit.sjv.io/c/2104074/1616956/17563) * **Best for Ease of Use:** [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) * **Best for Low Fees:** [Cash App](https://cashapp.pxf.io/c/2104074/1484514/12855) * **Best for Shared Bills:** [Venmo](https://venmo.com/) * **Best for Bank to Bank Transfers:** [Zelle](https://www.zellepay.com/) The Best Money Transfer Apps for 2024 Expand The Best Money Transfer Apps for 2024 * [Our Top Picks](#summary-list) * [WorldRemit](#toc-best-for-international-transfers-worldremit) * [PayPal](#toc-best-for-ease-of-use-paypal) * [Cash App](#toc-best-for-low-fees-cash-app) * [Venmo](#toc-best-for-shared-bills-venmo) * [Zelle](#toc-best-for-bank-to-bank-transfers-zelle) * See More (2) * [Final Verdict](#toc-final-verdict) * [Compare Apps](#toc-compare-the-best-money-transfer-apps) * [Pros and Cons](#toc-pros-and-cons-of-money-transfer-apps) * [Alternatives](#toc-alternatives-to-money-transfer-apps) * [FAQ](#toc-faq-83637559-627c-4a6b-b254-c5a11d63502d) * [Methodology](#toc-how-we-pick-the-best-money-transfer-apps) ### Best for International Transfers : WorldRemit --- ![WorldRemit]() :fill(white):max_bytes(150000):strip_icc()/WorldRemit-88ede7b39dfc4156851fec4da0c3a44c.jpg) WorldRemit [Learn More](https://worldremit.sjv.io/c/2104074/1616956/17563) Why We Chose It The World Remit app won this category for having no hidden costs and the flexibility to send to over 130 countries.  WorldRemit can send money to recipients within minutes. Most transfers complete within 24 hours wherever recipients live in the world. When you introduce a friend to WorldRemit, you both get a voucher to use on your next transfer. Also, first-time customers can use the promo code 3Free to make their first three transfers with no fees. Pros & Cons Pros * Quick deposit options worldwide * Easy to use Cons * Complex transfer fees * Limits on large transfers to certain destinations Overview The app gives you various ways to send money—through cash pickup, bank transfer, mobile money, home delivery, and airtime top-up, and that's why it landed in our top category. WorldRemit accepts most types of debit, credit, and prepaid cards issued by Visa or Mastercard. WorldRemit also accepts payment from Klarna, Trustly, POLi, Apple Pay, and more. It no longer accepts Google Pay. To send money, download the iOS or Android version of the World Remit app. Select the country and amount you want to send and enter recipient details and bank information. Once you pay for the transaction, your recipient will find out by SMS and email when they can access their money. WorldRemit, approved by the Financial Conduct Authority (FCA), puts a high priority on security by implementing strict verification procedures. The company employs teams to monitor accounts for unusual activity.  WorldRemit's large network of local partners works with worldwide banks and financial institutions. You can send a maximum of $9,000 in 24 hours and $5,000 per transaction for debit, credit, or prepaid cards. You can submit a maximum of $9,000 in Apple Pay payments within 24 hours and send a maximum of $300 per transaction. WorldRemit lists all fees and exchange rates before you execute each transaction. WorldRemit also offers a wallet for use in a limited number of countries, but any WorldRemit customer can send money to a WorldRemit Wallet.  If you accidentally send money to the wrong person, WorldRemit can sometimes recall the mobile money or bank transfer transaction. In this situation, you want to contact WorldRemit as soon as possible. ### Best for Ease of Use : PayPal --- ![PayPal]() :fill(white):max_bytes(150000):strip_icc()/Pay_pal-26eacf915e884ff0a93cb2f3552b3ddf.jpg)  PayPal [Learn More](https://paypal.prf.hn/click/camref:1101loGcQ) Why We Chose It The app's robust offerings, mixed with speed and convenience and PayPal's brand name awareness, make it a good choice. Pros & Cons Pros * Name/brand recognition cultivates instant trust * Easy to install and use * Fast and secure Cons * High transaction fees * May hold money * Difficult customer service Overview PayPal offers a wide range of versatile, flexible, secure, and easy-to-use money transfer tools. You can transfer money for free from a PayPal balance, bank account, or Amex Send account. You can also use PayPal Instant Transfer and transfer funds immediately (for a fee). PayPal offers versions of its app for iOS, Android, and Windows. It takes just minutes to download and start transferring money. You can share a PayPal.Me link for a quick and secure payment option. PayPal's invoice creation feature also allows you to customize and track every invoice you send. You can send up to $60,000, but PayPal may limit the transaction to $10,000, depending on the currency you use.  If you accidentally send money to the wrong person, you can reach out to the contact and ask for a refund. If the individual doesn't respond, you can open a dispute in PayPal's Resolution Center. You can tap into your PayPal balance to keep money in your account with the PayPal Cash Card, a debit card with a daily spending limit of $3,000 and a daily cash ATM withdrawal limit of $400 with a limit of 30 transactions per day.  Users pay 2.90% plus a fixed fee to send money via a credit card. PayPal charges 5.0% to send international personal transactions using a PayPal balance, bank account, or through an Amex Send account. PayPal keeps your information secure using sophisticated encryption. The company monitors transactions 24/7 and offers dispute resolution if you have a problem with a transaction. PayPal limits transfers to U.S. banks only and can connect with most U.S. banks and credit unions. Unfortunately, some banks, including online-only or prepaid bank accounts, can't give you access to PayPal. ### Best for Low Fees : Cash App --- ![Square Cash]() :fill(white):max_bytes(150000):strip_icc()/Cash_App-1de91ae80d2f428b869bc75074f005dd.jpg)  Square Cash [Learn More](https://cashapp.pxf.io/c/2104074/1484514/12855) Why We Chose It Cash App, owned by Square Inc., scored the highest in the low fees category because it allows users to send funds instantly via mobile app for free. Cash App stands out for its simplicity (you either pay or get paid), ease of use, and minimal fees.   Cash App also offers unique options not common in other money transfer apps, such as investment options, getting special savings with “cash boosts,” and buying and selling Bitcoin. Pros & Cons Pros * Offers more than just payment options * Simple and fast * Great for money requests for friends and family Cons * Must rely on another person to return money if you send to the wrong individual Overview Cash App won because of its low fees and flexibility—including the ability to buy and sell Bitcoin straight from your Cash App balance.  You can also transfer funds to a bank account from your Cash App account or store money in your Cash App account. Tap the "Balance" tab on the app home screen, click "Cash out," enter the amount and indicate whether you want to request money or pay money. To send a payment, enter the other person's $Cashtag, phone number, or email address and tap "pay." Cash App lets you send $250 in any 7-day period and receive up to $1,000 instantly within any 30-day period. However, you can hurdle over these limits by verifying your identity. Note: the app doesn't transfer money immediately—you should have your money within one to three business days. Cash App supports debit and credit cards from Visa, MasterCard, American Express, and Discover. The app supports most government-enabled prepaid cards but users cannot deposit to these cards. Cash App does not support ATM cards, Paypal, and business debit cards at this time.  Cash App employs up-to-date security encryption and fraud detection technology. Cash App features PCI Data Security Standard (PCI-DSS) Level 1 compliance.  Unfortunately, sending a payment to the wrong person doesn't guarantee a swift return; you can only request the money and rely on that person's honesty to get your funds returned. ### Best for Shared Bills : Venmo --- ![Venmo]() :fill(white):max_bytes(150000):strip_icc()/Venmo-a44f8668afea44b19245354b148b35b7.jpg)  Venmo [Learn More](https://venmo.com/) Why We Chose It Venmo offers the best of both worlds—it offers a quick and easy way to send and receive money and offers a potential "parking place" for your cash. You can spend, send, or transfer Venmo money to your bank account. Because of these reasons, it won the category for shared expenses.  You can even make the experience more interactive by adding emojis or animated stickers with your transactions. Pros & Cons Pros * Provides a social way to split money * Money moves instantly * No need to add money to Venmo to make payments Cons * Past security concerns * Fee for instant cash-out transfers to your bank account Overview [Venmo](https://www.investopedia.com/venmo-vs-paypal-5114030) (which is owned by PayPal) conquered this category because it allows for quick and easy money exchange between individuals. You can send or receive money for free through the peer-to-peer payment app, though Venmo charges 1.75% of the transfer total to send money via credit card. Venmo also charges a 1.75% fee ($0.25 minimum and $25 maximum) for instant cash-out transfers to your bank account. You can keep money in Venmo or your bank account. You can send money using your iOS- or Android-based smartphone by choosing a sign-up method and creating a secure password between eight and 20 characters long. Venmo asks you to verify your phone number, email address, and bank account. The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can also choose an instant transfer to a bank account or debit card (incurs a 1.75% fee) which arrives within 30 minutes. Venmo should work with all U.S.-based banks. Venmo uses encryption to keep information secure. You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN. Note: The Consumer Financial Protection Bureau raised red flags about Venmo's "debt-collection practices" through a Civil Investigative Demand in January 2021. Venmo imposes a $299.99 spending limit, but users can submit information about their identity to increase the weekly rolling limit to $60,000.  If you accidentally send money to the wrong person, you can request a return for the money you sent by mistake. If you don’t hear back or need help sending a charge request, you can contact Venmo's support team. Venmo offers no recovery guarantees.  Read our full [Venmo Review](https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp). ### Best for Bank to Bank Transfers : Zelle --- ![Zelle]() :fill(white):max_bytes(150000):strip_icc()/Zelle-5192fad7f41b4776bbe82a03d99fffc1.jpg)  Zelle [Learn More](https://www.zellepay.com/) Why We Chose It For bank-to-bank transfers, Zelle won because of its quick access and wide availability at most banks and credit unions. Users can head to a bank's website or directly to the mobile app to register with just an email address or phone number. Pros & Cons Pros * Widely used by many banks * You can still use it if your bank doesn't offer Zelle * Swift movement of funds * Money is federally insured Cons * Only works with domestic banks Overview No other app offers such an easy bank-to-bank process. Zelle can transfer money to other Zelle users through the easy-to-use app. Users can send or request money with an email address or phone number. Recipients must have a Zelle account to send or receive money. Zelle sends a text or email and a link to accept payment. You can find the free app through the App Store or on Google Play. Enter the amount you want to send. The money goes directly into the recipient's bank account, typically in minutes.  The Zelle app utilizes authentication and monitoring features for top security or uses your bank or credit union's mobile app. If your bank or credit union does not yet offer Zelle, you can only send up to $500. You cannot request to increase or decrease your send limit. You should know and trust the people you send money to because you can't cancel a payment through Zelle if the recipient already has a Zelle account. However, you can cancel a payment if the recipient hasn't enrolled in Zelle. Go to your activity page on the Zelle app, choose the payment you want to cancel, and tap "cancel this payment.” Read our full [Zelle Review](https://www.investopedia.com/news/zelle-new-p2p-payment-app-pypl/). ## Final Verdict Your final decision on the best money transfer app depends on your goals and preferences. For example, if you want your app to have additional features (like investing in Bitcoin), gravitate toward Cash App, which offers it. However, for a comprehensive overall money transfer app, you can't go wrong with PayPal, which offers a suite of payment options and a successful track record to back it up. PayPal also offers robust safety features, payment protection, and handy tools for businesses. ## Compare the Best Money Transfer Apps | **App** | **Operating System** | **Minimum Transfer** | **Transfer Speed** | | --- | --- | --- | --- | | [WorldRemit](https://worldremit.sjv.io/c/2104074/1616956/17563) Best for International Transfers | iOS and Android | Depends on the country you send from and the payment method used to fund the transfer | Instant | | [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) Best for Ease of Use | iOS and Android | No minimum transfer amount | Transfers occur in minutes and vary by bank. Debit card transfers may take up to 30 minutes. | | [Cash App](https://cashapp.pxf.io/c/2104074/1484514/12855) Best for Low Fees | iOS and Android | No minimum transfer amount | Standard deposits arrive within three business days. Instant deposits arrive immediately. | | [Venmo](https://venmo.com/) Best for Shared Bills | iOS and Android | No minimum transfer amount | Instant | | [Facebook Pay](https://pay.facebook.com/) Best for Small Transfers | Depends on the apps you already use | No minimum transfer amount | Instant, though the bank may take up to five days to process | | [Zelle](https://www.zellepay.com/) Best for Bank to Bank Transfers | iOS and Android | Varies by bank/credit union Zelle partners with | Instant | ### In the News **In the News:** Money transfers and person-to-person payments are increasingly popular. According to the Consumer Financial Protection Bureau, the total person-to-person (P2P) payment dollar volume quadrupled between 2018 and 2022.  Though money transfer apps are convenient and easy to use, [not all apps are backed by the Federal Deposit Insurance Corporation (FDIC)](https://www.investopedia.com/ask/answers/08/fdic-insured-bank-account.asp), so consumers' deposits aren't always insured. As a result, you should be careful about what apps you use and how much money you store in them. ## Pros and Cons of Money Transfer Apps Pros * Easy fund requests and payments * Multiple funding options * Quick access to transferred money Cons * Payments vulnerable to scams * Potentially high transaction fees * Funds rarely backed by FDIC insurance ### Pros Explained * **Easy fund requests and payments:** Money transfer apps like PayPal and Venmo allow you to quickly and easily send money to contacts in your phone or request funds with just a phone number, reducing the need to carry cash or personal checks. * **Multiple funding options:** Depending on the app, you can make payments or send money with several different funding options. For example, you can send money directly from a checking account or use a debit card, credit card, or even [cryptocurrency](https://www.investopedia.com/terms/c/cryptocurrency.asp). * **Quick access to transferred money:** Rather than waiting for a check to arrive in the mail, money transfer apps offer quick access to funds, typically within one to three days. With some apps, instant transfers are available for a fee, allowing funds to be transferred within minutes. ### Cons Explained * **Payments vulnerable to scams:** Most payments are nearly instant and unable to be canceled or reversed. Scammers have repeatedly taken advantage of this feature to convince unsuspecting people to send payments to bad actors. * **Potentially high transaction fees:** Fees vary by platform and type of transaction, but the costs can add up, particularly if you routinely request instant access to transferred funds or link your accounts to plastic. * **Funds rarely backed by FDIC insurance:** If you store your money with a money transfer app, you should know that the [FDIC](https://www.investopedia.com/terms/f/fdic.asp) does not insure the funds. If the platform fails, you could lose the money in your account. The Federal Reserve reported in 2021, its most recent survey, that 46.4% of all households use online payment services like Cash App, PayPal, and Venmo. ## Alternatives to Money Transfer Apps Money transfer apps can be helpful when splitting a dinner bill or paying your dog walker. But they're not appropriate for all situations. In some cases, you may need to use an alternative method to send money or pay for services.  ### Cashier's Checks When making a significant, high-dollar purchase—such as buying a home or car—you may need a [cashier's check](https://www.investopedia.com/best-ways-to-get-a-cashier-s-check-4590106) to complete the transaction. The bank guarantees cashier's checks, so there's no risk of the check bouncing when it's cashed. Banks typically charge a moderate flat fee per cashier's check.  ### Money Orders [Money orders](https://www.investopedia.com/terms/m/money-order.asp) are a safer alternative to personal checks or cash. You can purchase a money order at any post office and at some banks, and each domestic money order can be up to $1,000. At the time of purchase, you'll receive a receipt that you can use to track the payment in case the money order is lost or stolen. A small fee applies for each money order purchased. ### Personal Checks For routine transactions, such as paying rent or utility bills, a personal check is an acceptable form of payment. It may take longer than other payment options since it may have to be mailed and cashed, but there are no fees with personal checks, and the money is withdrawn directly from your [checking account](https://www.investopedia.com/terms/c/checkingaccount.asp).  ### Money Transfer Services Money transfer services, such as [Western Union or MoneyGram](https://www.investopedia.com/articles/personal-finance/081715/sending-money-moneygram-vs-western-union.asp), allow those without bank accounts to transfer money or pay bills. Through a remittance transfer, customers can also use these services to send money to loved ones internationally. Remittance transfers have specific consumer-protection requirements. ### Wire Transfers If you need to securely transfer large sums—such as money to cover the closing costs on a home—a [wire transfer](https://www.investopedia.com/terms/w/wiretransfer.asp) is a popular choice. It allows you to transfer money electronically from one bank account to another, but your bank will likely charge you fees to complete the transfer. Review your account's deposit agreement or schedule of fees to find out what [bank fees](https://www.investopedia.com/articles/pf/07/bank_fees.asp) may apply. ## Frequently Asked Questions * ### What Is the Best Money Transfer App? No one money transfer app is best for everyone (or for every situation). For example, Zelle, one of our top picks, is an excellent choice for those that want to move money quickly from one domestic bank account to another; [WorldRemit](https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20) is a better choice for international payments. [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) is a relatively simple solution, while [Cash App](https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20) is a top choice for having low fees. You may also want to check out [Venmo](https://www.investopedia.com/venmo-vs-paypal-5114030) for sharing bills, and [Facebook Pay](https://www.investopedia.com/articles/personal-finance/092315/it-safe-send-money-through-facebook.asp) for small transfers. * ### What Is the Best App for International Money Transfers? If you need to send money to someone in another country, we found that [WorldRemit](https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20) is the best app for [international transfers](https://www.investopedia.com/articles/personal-finance/093015/best-ways-send-large-sums-money-abroad.asp). Most transfers are completed within minutes, and you can choose from several transfer options, including cash pickup, bank transfer, or even home delivery. * ### How Do Money Transfer Apps Work? Money transfer apps allow you to [transfer money](https://www.investopedia.com/financial-edge/0411/7-low-cost-ways-to-transfer-money.aspx) quickly and easily. Some apps hold your money and others transfer it from one bank to another. Some money transfer apps specifically cater to consumer-specific needs. * ### What Apps Allow Instant Money Transfer? With most apps, it can take one to five business days for [funds to transfer](https://www.investopedia.com/terms/t/transfer.asp). However, the following apps offer instant transfer options, so the money is received within minutes if you pay an additional fee:  + [Cash App](https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20) + [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ) + VenmoZelle does not charge a fee. * ### Are Money Transfer Apps Safe to Use? Generally, money transfer apps offer robust security features to protect your money. However, it's important to understand that if you send money to the wrong recipient, you may not get your funds back. Providers might not help recover misdirected funds. Only send money to people you know and trust. * ### How Long Does It Take to Transfer Money With an App? The length of time it takes varies. Some transfers occur immediately and others can take up to a few days. Keep your needs and time frame in mind so you choose the best [mobile money](https://www.investopedia.com/financial-edge/0910/mobile-money-using-your-cell-phone-to-transfer-funds.aspx) app for you. * ### What Money Transfer App Is Safest? All of our list's major [money transfer](https://www.investopedia.com/financial-edge/0411/7-low-cost-ways-to-transfer-money.aspx) apps are generally secure, using the latest encryption technology and privacy measures to protect user information. These include [WorldRemit](https://worldremit.sjv.io/c/2104074/1616956/17563?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20), Zelle, [PayPal](https://paypal.prf.hn/click/camref:1101loGcQ), [Cash App](https://cashapp.pxf.io/c/2104074/1484514/12855?subid1=5180183&subid2=n71c6efc7d2204b938255af9db2dfc58f20), [Venmo](https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp), and Facebook Pay. However, there is still a risk of scams and data breaches, so it's important to take extra steps to protect your information. For example, enabling multifactor authentication, regularly changing passwords, and avoiding public WiFi connections can help keep your account safe. * ### Is Zelle Safer Than Venmo? Both [Zelle](https://www.investopedia.com/what-is-zelle-7097991) and [Venmo](https://www.investopedia.com/articles/personal-finance/010715/venmo-its-business-model-and-competition.asp) are both generally safe. The platforms use encryption to protect account information and monitor account activity, and encrypted data is stored on servers in secure locations.  However, all money transfer apps have some level of risk. To protect yourself, verify the recipient's contact information before sending money, and only send money to those you know and trust. ## How We Pick the Best Money Transfer Apps We researched 13 money transfer apps. First, we took a look at each app's store ratings, then tested each app for ease of use and transaction speed. We also analyzed each app's compatible systems and narrowed our search by evaluating each app's security features. We then calculated each app's minimum and maximum transfer amounts.  We rounded out the list by taking a look at fees and the flexibility within each transfer option and gave final preference to apps that offer unique features. :max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg) :max_bytes(150000):strip_icc()/MoneyTransfer_-sasun-bughdaryan-60aa1f2beee34f93b8dca675acc8510c.jpg) Getty Images / [sasun bughdaryan](https://www.gettyimages.com/search/photographer?photographer=sasun%20bughdaryan) 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. WorldRemit. "[Send Money to Over 130 Countries With WorldRemit](https://www.worldremit.com/en/faq/send-to)." 2. WorldRemit. "[Bank Transfers](https://www.worldremit.com/en/faq/bank-transfers)." 3. WorldRemit. "[Send Money From the United States](https://www.worldremit.com/en/faq/send-from/americas/usa)." 4. PayPal. "[What's the Maximum Amount I Can Send With My PayPal](https://www.paypal.com/us/cshelp/article/what-is-the-maximum-amount-i-can-send-with-my-paypal-account-faq732)." 5. PayPal. "[PayPal Debit Card, Direct Deposit, and Cash Load](https://www.paypal.com/myaccount/bundle/fees)." 6. PayPal. "[PayPal Consumer Fees](https://www.paypal.com/us/webapps/mpp/paypal-fees)." 7. Cash App. "[Account Settings](https://cash.app/help/us/en-us/1015-account-settings)." 8. Cash App. "[Cash App Security](https://cash.app/help/us/en-us/5144-cash-app-security)." 9. Venmo. "[Instant Bank Transfer FAQ](https://help.venmo.com/hc/en-us/articles/115015844068-Instant-Bank-Transfer-FAQ)." 10. PayPal. "[10-K Filing](https://d18rn0p25nwr6d.cloudfront.net/CIK-0001633917/649f6b82-3897-4940-b9f3-64c0937779aa.pdf)." 11. Venmo. "[Personal Profile Payment Limits](https://help.venmo.com/hc/en-us/articles/221010968-Personal-Profile-Payment-Limits)." 12. Zelle. "[Is There a Limit to How Much Money I Can Send?](https://www.zellepay.com/faq/there-limit-how-much-money-i-can-send)" 13. Consumer Financial Protection Bureau. "[Analysis of Deposit Insurance Coverage on Funds Stored Through Payment Apps](https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-analysis-of-deposit-insurance-coverage-on-funds-stored-through-payment-apps/full-report/)." 14. Federal Bureau of Investigation. "[Cybercriminals Trick Victims Into Transferring Funds to 'Reverse' Instant Payments.](https://www.ic3.gov/Media/Y2022/PSA220414)" 15. Consumer Financial Protection Bureau. "[Helpful Tips for Using Mobile Payment Services and Avoiding Risky Mistakes](https://www.consumerfinance.gov/about-us/blog/helpful-tips-using-mobile-payment-services-and-avoiding-risky-mistakes/)." 16. Consumer Financial Protection Bureau. "[Consumer Advisory: Your Money Is at Greater Risk When You Hold It in a Payment App, Instead of Moving It to an Account With Deposit Insurance](https://www.consumerfinance.gov/about-us/newsroom/consumer-advisory-your-money-is-at-greater-risk-when-you-hold-it-in-a-payment-app-instead-of-moving-it-to-an-account-with-deposit-insurance/)." 17. Federal Reserve. "[2021 FDIC National Survey of Unbanked and Underbanked Households](https://www.fdic.gov/analysis/household-survey/2021report.pdf)." 18. FDIC. “[Deposit Accounts](https://www.fdic.gov/resources/consumers/consumer-assistance-topics/deposit-accounts.html)." 19. United States Postal Service. "[Sending Money Orders](https://www.usps.com/shop/money-orders.htm)." 20. Consumer Financial Protection Bureau. "[What Is a Wire Transfer?](https://www.consumerfinance.gov/ask-cfpb/what-is-a-wire-transfer-en-1163/)" Related Articles [![A cheerful mother and daughter hold a debit card while looking at a tablet computer.]() :max_bytes(150000):strip_icc()/Momanddaughterwithdebitcard-adbb458ebc024b029df9696f82a62248.jpeg) Venmo Teen Debit Card Review 2024](https://www.investopedia.com/venmo-teen-debit-card-review-8399586) [![Young Adult Uses Mobile Device]() :max_bytes(150000):strip_icc()/teenwphone-e6f22e15d52a416c9b60ce2310a9f3f5.jpg) Best Ways to Send Money as a Teen](https://www.investopedia.com/best-ways-to-send-money-as-a-teen-7152565) [![A visual representation of 5 safety tips for Venmo users who are concerned about their privacy.]() :max_bytes(150000):strip_icc()/how-safe-venmo-and-why-it-free_FINAL-d6b7c0672d534208a05d1d53ae0cd915.png) How Safe Is Venmo and Is It Free?](https://www.investopedia.com/articles/personal-finance/032415/how-safe-venmo-and-why-it-free.asp) [![PayPal]() :max_bytes(150000):strip_icc()/paypal.asp-final-1101556384f049bf9f24d7ad7a59494c.jpg) What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) [![A woman signs a check at a desk.]() :max_bytes(150000):strip_icc()/signing1-35fca5c87fe84542acb63991ef1c3b1c.jpg) What Is an ACH Transfer? How It Works](https://www.investopedia.com/ach-transfers-what-are-they-and-how-do-they-work-4590120) [![Remittance: Money that is sent from one party to another.]() :max_bytes(150000):strip_icc()/remittance.asp-v1-final-15009dcc008b44c3ab240f0dfbef02ad.png) Remittance: What It Is and How to Send One](https://www.investopedia.com/terms/r/remittance.asp) Related Terms [What Is PayPal and How Does it Work?](https://www.investopedia.com/terms/p/paypal.asp) PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. [more](https://www.investopedia.com/terms/p/paypal.asp) [Remittance: What It Is and How to Send One](https://www.investopedia.com/terms/r/remittance.asp) A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. [more](https://www.investopedia.com/terms/r/remittance.asp) [What Is a Money Order, How Does It Work, and How Do I Get One?](https://www.investopedia.com/terms/m/money-order.asp) A money order is a secure alternative to cash or a personal check. It works similarly to a check, and is usually issued by governments and banking institutions. [more](https://www.investopedia.com/terms/m/money-order.asp) [What Is a Wire Transfer? How It Works, Safety, and Fees](https://www.investopedia.com/terms/w/wiretransfer.asp) A wire transfer is an electronic transfer of funds across a network administered by hundreds of banks around the world. [more](https://www.investopedia.com/terms/w/wiretransfer.asp) [Unified Payments Interface (UPI): Definition and How It Works](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp) A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. [more](https://www.investopedia.com/terms/u/unified-payment-interface-upi.asp) [What Is Online Banking? Definition and How It Works](https://www.investopedia.com/terms/o/onlinebanking.asp) Online banking allows a user to conduct financial transactions via the Internet. Online banking is also known as Internet banking or web banking. [more](https://www.investopedia.com/terms/o/onlinebanking.asp)

Based on our research, WorldRemit is the best money transfer app due to its international flexibility, lack of hidden costs, and more. Money transfer apps, also called peer-to-peer (P2P) money transfer apps, let you transfer cash from person to person, or from entity to entity, quickly, conveniently, cheaply, and securely. They simplify payments and also allow you to use a digital wallet to link your credit card or bank account. You can make electronic transactions and payments with just a few taps on a mobile device. The best money transfer apps collect high app store ratings, help app shoppers shell out money safely, and involve no hidden fees. They also fit consumer-specific needs, such as international payments, social options, digital wallet offerings, and more.  The Best Money Transfer Apps for 2024 Best for International Transfers: WorldRemit Best for Ease of Use: PayPal Best for Low Fees: Cash App Best for Shared Bills: Venmo Best for Bank to Bank Transfers: Zelle The Best Money Transfer Apps for 2024 Expand The Best Money Transfer Apps for 2024 Our Top Picks WorldRemit PayPal Cash App Venmo Zelle See More (2) Final Verdict Compare Apps Pros and Cons Alternatives FAQ Methodology Best for International Transfers : WorldRemit WorldRemit Learn More Why We Chose It The World Remit app won this category for having no hidden costs and the flexibility to send to over 130 countries.  WorldRemit can send money to recipients within minutes. Most transfers complete within 24 hours wherever recipients live in the world. When you introduce a friend to WorldRemit, you both get a voucher to use on your next transfer. Also, first-time customers can use the promo code 3Free to make their first three transfers with no fees. Pros & Cons Pros Quick deposit options worldwide Easy to use Cons Complex transfer fees Limits on large transfers to certain destinations Overview The app gives you various ways to send money—through cash pickup, bank transfer, mobile money, home delivery, and airtime top-up, and that's why it landed in our top category. WorldRemit accepts most types of debit, credit, and prepaid cards issued by Visa or Mastercard. WorldRemit also accepts payment from Klarna, Trustly, POLi, Apple Pay, and more. It no longer accepts Google Pay. To send money, download the iOS or Android version of the World Remit app. Select the country and amount you want to send and enter recipient details and bank information. Once you pay for the transaction, your recipient will find out by SMS and email when they can access their money. WorldRemit, approved by the Financial Conduct Authority (FCA), puts a high priority on security by implementing strict verification procedures. The company employs teams to monitor accounts for unusual activity.  WorldRemit's large network of local partners works with worldwide banks and financial institutions. You can send a maximum of $9,000 in 24 hours and $5,000 per transaction for debit, credit, or prepaid cards. You can submit a maximum of $9,000 in Apple Pay payments within 24 hours and send a maximum of $300 per transaction. WorldRemit lists all fees and exchange rates before you execute each transaction. WorldRemit also offers a wallet for use in a limited number of countries, but any WorldRemit customer can send money to a WorldRemit Wallet.  If you accidentally send money to the wrong person, WorldRemit can sometimes recall the mobile money or bank transfer transaction. In this situation, you want to contact WorldRemit as soon as possible. Best for Ease of Use : PayPal  PayPal Learn More Why We Chose It The app's robust offerings, mixed with speed and convenience and PayPal's brand name awareness, make it a good choice. Pros & Cons Pros Name/brand recognition cultivates instant trust Easy to install and use Fast and secure Cons High transaction fees May hold money Difficult customer service Overview PayPal offers a wide range of versatile, flexible, secure, and easy-to-use money transfer tools. You can transfer money for free from a PayPal balance, bank account, or Amex Send account. You can also use PayPal Instant Transfer and transfer funds immediately (for a fee). PayPal offers versions of its app for iOS, Android, and Windows. It takes just minutes to download and start transferring money. You can share a PayPal.Me link for a quick and secure payment option. PayPal's invoice creation feature also allows you to customize and track every invoice you send. You can send up to $60,000, but PayPal may limit the transaction to $10,000, depending on the currency you use.  If you accidentally send money to the wrong person, you can reach out to the contact and ask for a refund. If the individual doesn't respond, you can open a dispute in PayPal's Resolution Center. You can tap into your PayPal balance to keep money in your account with the PayPal Cash Card, a debit card with a daily spending limit of $3,000 and a daily cash ATM withdrawal limit of $400 with a limit of 30 transactions per day.  Users pay 2.90% plus a fixed fee to send money via a credit card. PayPal charges 5.0% to send international personal transactions using a PayPal balance, bank account, or through an Amex Send account. PayPal keeps your information secure using sophisticated encryption. The company monitors transactions 24/7 and offers dispute resolution if you have a problem with a transaction. PayPal limits transfers to U.S. banks only and can connect with most U.S. banks and credit unions. Unfortunately, some banks, including online-only or prepaid bank accounts, can't give you access to PayPal. Best for Low Fees : Cash App  Square Cash Learn More Why We Chose It Cash App, owned by Square Inc., scored the highest in the low fees category because it allows users to send funds instantly via mobile app for free. Cash App stands out for its simplicity (you either pay or get paid), ease of use, and minimal fees.   Cash App also offers unique options not common in other money transfer apps, such as investment options, getting special savings with “cash boosts,” and buying and selling Bitcoin. Pros & Cons Pros Offers more than just payment options Simple and fast Great for money requests for friends and family Cons Must rely on another person to return money if you send to the wrong individual Overview Cash App won because of its low fees and flexibility—including the ability to buy and sell Bitcoin straight from your Cash App balance.  You can also transfer funds to a bank account from your Cash App account or store money in your Cash App account. Tap the "Balance" tab on the app home screen, click "Cash out," enter the amount and indicate whether you want to request money or pay money. To send a payment, enter the other person's $Cashtag, phone number, or email address and tap "pay." Cash App lets you send $250 in any 7-day period and receive up to $1,000 instantly within any 30-day period. However, you can hurdle over these limits by verifying your identity. Note: the app doesn't transfer money immediately—you should have your money within one to three business days. Cash App supports debit and credit cards from Visa, MasterCard, American Express, and Discover. The app supports most government-enabled prepaid cards but users cannot deposit to these cards. Cash App does not support ATM cards, Paypal, and business debit cards at this time.  Cash App employs up-to-date security encryption and fraud detection technology. Cash App features PCI Data Security Standard (PCI-DSS) Level 1 compliance.  Unfortunately, sending a payment to the wrong person doesn't guarantee a swift return; you can only request the money and rely on that person's honesty to get your funds returned. Best for Shared Bills : Venmo  Venmo Learn More Why We Chose It Venmo offers the best of both worlds—it offers a quick and easy way to send and receive money and offers a potential "parking place" for your cash. You can spend, send, or transfer Venmo money to your bank account. Because of these reasons, it won the category for shared expenses.  You can even make the experience more interactive by adding emojis or animated stickers with your transactions. Pros & Cons Pros Provides a social way to split money Money moves instantly No need to add money to Venmo to make payments Cons Past security concerns Fee for instant cash-out transfers to your bank account Overview Venmo (which is owned by PayPal) conquered this category because it allows for quick and easy money exchange between individuals. You can send or receive money for free through the peer-to-peer payment app, though Venmo charges 1.75% of the transfer total to send money via credit card. Venmo also charges a 1.75% fee ($0.25 minimum and $25 maximum) for instant cash-out transfers to your bank account. You can keep money in Venmo or your bank account. You can send money using your iOS- or Android-based smartphone by choosing a sign-up method and creating a secure password between eight and 20 characters long. Venmo asks you to verify your phone number, email address, and bank account. The standard bank transfer through the ACH network to a verified checking account typically takes one to three business days to arrive. You can also choose an instant transfer to a bank account or debit card (incurs a 1.75% fee) which arrives within 30 minutes. Venmo should work with all U.S.-based banks. Venmo uses encryption to keep information secure. You can add additional layers of security to your Venmo account by adding multi-factor authentication and a PIN. Note: The Consumer Financial Protection Bureau raised red flags about Venmo's "debt-collection practices" through a Civil Investigative Demand in January 2021. Venmo imposes a $299.99 spending limit, but users can submit information about their identity to increase the weekly rolling limit to $60,000.  If you accidentally send money to the wrong person, you can request a return for the money you sent by mistake. If you don’t hear back or need help sending a charge request, you can contact Venmo's support team. Venmo offers no recovery guarantees.  Read our full Venmo Review. Best for Bank to Bank Transfers : Zelle  Zelle Learn More Why We Chose It For bank-to-bank transfers, Zelle won because of its quick access and wide availability at most banks and credit unions. Users can head to a bank's website or directly to the mobile app to register with just an email address or phone number. Pros & Cons Pros Widely used by many banks You can still use it if your bank doesn't offer Zelle Swift movement of funds Money is federally insured Cons Only works with domestic banks Overview No other app offers such an easy bank-to-bank process. Zelle can transfer money to other Zelle users through the easy-to-use app. Users can send or request money with an email address or phone number. Recipients must have a Zelle account to send or receive money. Zelle sends a text or email and a link to accept payment. You can find the free app through the App Store or on Google Play. Enter the amount you want to send. The money goes directly into the recipient's bank account, typically in minutes.  The Zelle app utilizes authentication and monitoring features for top security or uses your bank or credit union's mobile app. If your bank or credit union does not yet offer Zelle, you can only send up to $500. You cannot request to increase or decrease your send limit. You should know and trust the people you send money to because you can't cancel a payment through Zelle if the recipient already has a Zelle account. However, you can cancel a payment if the recipient hasn't enrolled in Zelle. Go to your activity page on the Zelle app, choose the payment you want to cancel, and tap "cancel this payment.” Read our full Zelle Review. Final Verdict Your final decision on the best money transfer app depends on your goals and preferences. For example, if you want your app to have additional features (like investing in Bitcoin), gravitate toward Cash App, which offers it. However, for a comprehensive overall money transfer app, you can't go wrong with PayPal, which offers a suite of payment options and a successful track record to back it up. PayPal also offers robust safety features, payment protection, and handy tools for businesses. Compare the Best Money Transfer Apps App Operating System Minimum Transfer Transfer Speed WorldRemit Best for International Transfers iOS and Android  Depends on the country you send from and the payment method used to fund the transfer Instant PayPal Best for Ease of Use iOS and Android No minimum transfer amount Transfers occur in minutes and vary by bank. Debit card transfers may take up to 30 minutes. Cash App Best for Low Fees iOS and Android  No minimum transfer amount Standard deposits arrive within three business days. Instant deposits arrive immediately. Venmo Best for Shared Bills iOS and Android No minimum transfer amount Instant Facebook Pay Best for Small Transfers Depends on the apps you already use  No minimum transfer amount Instant, though the bank may take up to five days to process Zelle Best for Bank to Bank Transfers iOS and Android Varies by bank/credit union Zelle partners with Instant In the News In the News: Money transfers and person-to-person payments are increasingly popular. According to the Consumer Financial Protection Bureau, the total person-to-person (P2P) payment dollar volume quadrupled between 2018 and 2022.  Though money transfer apps are convenient and easy to use, not all apps are backed by the Federal Deposit Insurance Corporation (FDIC), so consumers' deposits aren't always insured. As a result, you should be careful about what apps you use and how much money you store in them. Pros and Cons of Money Transfer Apps Pros Easy fund requests and payments Multiple funding options Quick access to transferred money Cons Payments vulnerable to scams Potentially high transaction fees Funds rarely backed by FDIC insurance Pros Explained Easy fund requests and payments: Money transfer apps like PayPal and Venmo allow you to quickly and easily send money to contacts in your phone or request funds with just a phone number, reducing the need to carry cash or personal checks.  Multiple funding options: Depending on the app, you can make payments or send money with several different funding options. For example, you can send money directly from a checking account or use a debit card, credit card, or even cryptocurrency.  Quick access to transferred money: Rather than waiting for a check to arrive in the mail, money transfer apps offer quick access to funds, typically within one to three days. With some apps, instant transfers are available for a fee, allowing funds to be transferred within minutes.  Cons Explained Payments vulnerable to scams: Most payments are nearly instant and unable to be canceled or reversed. Scammers have repeatedly taken advantage of this feature to convince unsuspecting people to send payments to bad actors.  Potentially high transaction fees: Fees vary by platform and type of transaction, but the costs can add up, particularly if you routinely request instant access to transferred funds or link your accounts to plastic. Funds rarely backed by FDIC insurance: If you store your money with a money transfer app, you should know that the FDIC does not insure the funds. If the platform fails, you could lose the money in your account. The Federal Reserve reported in 2021, its most recent survey, that 46.4% of all households use online payment services like Cash App, PayPal, and Venmo. Alternatives to Money Transfer Apps Money transfer apps can be helpful when splitting a dinner bill or paying your dog walker. But they're not appropriate for all situations. In some cases, you may need to use an alternative method to send money or pay for services.  Cashier's Checks When making a significant, high-dollar purchase—such as buying a home or car—you may need a cashier's check to complete the transaction. The bank guarantees cashier's checks, so there's no risk of the check bouncing when it's cashed. Banks typically charge a moderate flat fee per cashier's check.  Money Orders Money orders are a safer alternative to personal checks or cash. You can purchase a money order at any post office and at some banks, and each domestic money order can be up to $1,000. At the time of purchase, you'll receive a receipt that you can use to track the payment in case the money order is lost or stolen. A small fee applies for each money order purchased. Personal Checks For routine transactions, such as paying rent or utility bills, a personal check is an acceptable form of payment. It may take longer than other payment options since it may have to be mailed and cashed, but there are no fees with personal checks, and the money is withdrawn directly from your checking account.  Money Transfer Services Money transfer services, such as Western Union or MoneyGram, allow those without bank accounts to transfer money or pay bills. Through a remittance transfer, customers can also use these services to send money to loved ones internationally. Remittance transfers have specific consumer-protection requirements. Wire Transfers If you need to securely transfer large sums—such as money to cover the closing costs on a home—a wire transfer is a popular choice. It allows you to transfer money electronically from one bank account to another, but your bank will likely charge you fees to complete the transfer. Review your account's deposit agreement or schedule of fees to find out what bank fees may apply. Frequently Asked Questions What Is the Best Money Transfer App? No one money transfer app is best for everyone (or for every situation). For example, Zelle, one of our top picks, is an excellent choice for those that want to move money quickly from one domestic bank account to another; WorldRemit is a better choice for international payments. PayPal is a relatively simple solution, while Cash App is a top choice for having low fees. You may also want to check out Venmo for sharing bills, and Facebook Pay for small transfers. What Is the Best App for International Money Transfers? If you need to send money to someone in another country, we found that WorldRemit is the best app for international transfers. Most transfers are completed within minutes, and you can choose from several transfer options, including cash pickup, bank transfer, or even home delivery. How Do Money Transfer Apps Work? Money transfer apps allow you to transfer money quickly and easily. Some apps hold your money and others transfer it from one bank to another. Some money transfer apps specifically cater to consumer-specific needs. What Apps Allow Instant Money Transfer? With most apps, it can take one to five business days for funds to transfer. However, the following apps offer instant transfer options, so the money is received within minutes if you pay an additional fee: Cash AppPayPalVenmoZelle does not charge a fee. Are Money Transfer Apps Safe to Use? Generally, money transfer apps offer robust security features to protect your money. However, it's important to understand that if you send money to the wrong recipient, you may not get your funds back. Providers might not help recover misdirected funds. Only send money to people you know and trust. How Long Does It Take to Transfer Money With an App? The length of time it takes varies. Some transfers occur immediately and others can take up to a few days. Keep your needs and time frame in mind so you choose the best mobile money app for you.  What Money Transfer App Is Safest? All of our list's major money transfer apps are generally secure, using the latest encryption technology and privacy measures to protect user information. These include WorldRemit, Zelle, PayPal, Cash App, Venmo, and Facebook Pay.However, there is still a risk of scams and data breaches, so it's important to take extra steps to protect your information. For example, enabling multifactor authentication, regularly changing passwords, and avoiding public WiFi connections can help keep your account safe. Is Zelle Safer Than Venmo? Both Zelle and Venmo are both generally safe. The platforms use encryption to protect account information and monitor account activity, and encrypted data is stored on servers in secure locations. However, all money transfer apps have some level of risk. To protect yourself, verify the recipient's contact information before sending money, and only send money to those you know and trust. How We Pick the Best Money Transfer Apps We researched 13 money transfer apps. First, we took a look at each app's store ratings, then tested each app for ease of use and transaction speed. We also analyzed each app's compatible systems and narrowed our search by evaluating each app's security features. We then calculated each app's minimum and maximum transfer amounts.  We rounded out the list by taking a look at fees and the flexibility within each transfer option and gave final preference to apps that offer unique features. Getty Images / sasun bughdaryan 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. WorldRemit. "Send Money to Over 130 Countries With WorldRemit." WorldRemit. "Bank Transfers." WorldRemit. "Send Money From the United States." PayPal. "What's the Maximum Amount I Can Send With My PayPal." PayPal. "PayPal Debit Card, Direct Deposit, and Cash Load." PayPal. "PayPal Consumer Fees." Cash App. "Account Settings." Cash App. "Cash App Security." Venmo. "Instant Bank Transfer FAQ." PayPal. "10-K Filing." Venmo. "Personal Profile Payment Limits." Zelle. "Is There a Limit to How Much Money I Can Send?" Consumer Financial Protection Bureau. "Analysis of Deposit Insurance Coverage on Funds Stored Through Payment Apps." Federal Bureau of Investigation. "Cybercriminals Trick Victims Into Transferring Funds to 'Reverse' Instant Payments." Consumer Financial Protection Bureau. "Helpful Tips for Using Mobile Payment Services and Avoiding Risky Mistakes." Consumer Financial Protection Bureau. "Consumer Advisory: Your Money Is at Greater Risk When You Hold It in a Payment App, Instead of Moving It to an Account With Deposit Insurance." Federal Reserve. "2021 FDIC National Survey of Unbanked and Underbanked Households." FDIC. “Deposit Accounts." United States Postal Service. "Sending Money Orders." Consumer Financial Protection Bureau. "What Is a Wire Transfer?" Related Articles Venmo Teen Debit Card Review 2024 Best Ways to Send Money as a Teen How Safe Is Venmo and Is It Free? What Is PayPal and How Does it Work? What Is an ACH Transfer? How It Works Remittance: What It Is and How to Send One Related Terms What Is PayPal and How Does it Work? PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. more Remittance: What It Is and How to Send One A remittance is a sum of money sent to another party, usually in another country. Remittances are a major source of income for people in poor nations. more What Is a Money Order, How Does It Work, and How Do I Get One? A money order is a secure alternative to cash or a personal check. It works similarly to a check, and is usually issued by governments and banking institutions. more What Is a Wire Transfer? How It Works, Safety, and Fees A wire transfer is an electronic transfer of funds across a network administered by hundreds of banks around the world. more Unified Payments Interface (UPI): Definition and How It Works A Unified Payments Interface (UPI) is a smartphone application which allows users to transfer money between bank accounts. more What Is Online Banking? Definition and How It Works Online banking allows a user to conduct financial transactions via the Internet. Online banking is also known as Internet banking or web banking. more

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

Alpha: Its Meaning in Investing, With 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-alpha"></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 Alpha? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market, or its “edge.” Alpha is thus also often referred to as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/excessreturn.asp">excess return</a> or the <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/abnormalreturn.asp">abnormal rate of return</a> in relation to a benchmark, when adjusted for risk. </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"> Alpha is often used in conjunction with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/beta.asp">beta</a> (the Greek letter β), which measures the broad market’s overall <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> or risk, known as <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/systematicrisk.asp">systematic market risk</a>. </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"> Alpha is used in finance as a measure of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialperformance.asp">performance</a>, indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/active-return.asp">active return</a> on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole. </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"> The excess return of an investment relative to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/return.asp">return</a> of a benchmark index is the investment’s alpha. Alpha may be positive or negative and is the result of active investing. Beta, on the other hand, can be earned through passive <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/index-investing.asp">index investing</a>. </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>Alpha refers to excess returns earned on an investment above the benchmark return when adjusted for risk.</li><li>Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk.</li><li>Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return.</li><li>Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation.</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_12-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Alpha" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/nemrmkd2uZIaqugZDUACwcZ8dHY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/nemrmkd2uZIaqugZDUACwcZ8dHY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.jpg" data-srcset="https://www.investopedia.com/thmb/66rq5fLoWx0yk7Isro5MFugA6vs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Alpha" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/nemrmkd2uZIaqugZDUACwcZ8dHY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.jpg" srcset="https://www.investopedia.com/thmb/66rq5fLoWx0yk7Isro5MFugA6vs=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.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>Sydney Saporito / Investopedia</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-alpha"></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"> Understanding Alpha </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Alpha is one of five popular technical investment <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskrewardratio.asp">risk ratios</a>. The others are beta, <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/standarddeviation.asp">standard deviation</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/r-squared.asp">R-squared</a>, and the <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sharperatio.asp">Sharpe ratio</a>. These are all statistical measurements used in <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/modernportfoliotheory.asp">modern portfolio theory (MPT)</a>. All of these indicators are intended to help investors determine the risk-return profile of an investment. </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"> Active portfolio managers seek to generate alpha in diversified portfolios, with <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp">diversification</a> intended to eliminate <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsystematicrisk.asp">unsystematic risk</a>. Because alpha represents the performance of a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">portfolio</a> relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return. </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 other words, alpha is the return on an investment that is not a result of a general movement in the greater market. As such, an alpha of zero would indicate that the portfolio or fund is tracking perfectly with the benchmark index and that the manager has not added or lost any additional value compared to the broad market. </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-applying-alpha-to-investing"></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"> Applying Alpha to Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The concept of alpha became more popular with the advent of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/smart-beta.asp">smart beta</a> index funds tied to indexes like the Standard &amp; Poor’s 500 index and the Wilshire 5000 Total Market Index. These funds attempt to enhance the performance of a portfolio that tracks a targeted subset of the market. </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 the considerable desirability of alpha in a portfolio, many index benchmarks manage to beat asset managers the vast majority of the time. Due in part to a growing lack of faith in traditional financial advising brought about by this trend, more and more investors are switching to low-cost, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passiveinvesting.asp">passive</a> online advisors (often called <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp">robo-advisors</a>​) who exclusively or almost exclusively invest clients’ capital into index-tracking funds, the rationale being that if they <a class="pseudoStyle" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/trading/10/beat-the-market.asp">cannot beat the market</a>, they may as well join it. </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"> Moreover, because most traditional financial advisors charge a fee, when one manages a portfolio and nets an alpha of zero, it actually represents a slight <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netloss.asp">net loss</a> for the investor. For example, suppose that Jim, a financial advisor, charges 1% of a portfolio’s value for his services and that during a 12-month period, Jim managed to produce an alpha of 0.75 for the portfolio of one of his clients, Frank. </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"> While Jim has indeed helped the performance of Frank’s portfolio, the fee that Jim charges is in excess of the alpha he has generated, so Frank’s portfolio has experienced a net loss. For investors, the example highlights the importance of considering fees in conjunction with performance returns and alpha. </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-efficient-market-hypothesis"></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"> Efficient Market Hypothesis </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp">efficient market hypothesis (EMH)</a> postulates that market prices incorporate all available information at all times, so securities are always properly priced (the market is efficient). Therefore, according to the EMH, there is no way to systematically identify and take advantage of mispricings in the market because they do not exist. </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"> If mispricings are identified, they are quickly <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/arbitrage.asp">arbitraged</a> away, so persistent patterns of market anomalies that can be taken advantage of tend to be few and far between. </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"> Empirical evidence comparing historical returns of active mutual funds relative to their passive benchmarks indicates that fewer than 10% of all active funds are able to earn a positive alpha over a 10-plus-year time period, and this percentage falls once taxes and fees are taken into consideration. In other words, alpha is hard to come by, especially after taxes and 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"> Because beta risk can be isolated by diversifying and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedging</a> various risks (which comes with various transaction costs), some have proposed that alpha does not really exist, but simply represents the compensation for taking some unhedged risk that hadn’t been identified or was overlooked. </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-seeking-investment-alpha"></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"> Seeking Investment Alpha </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> Alpha is commonly used to rank active mutual funds as well as all other types of investments. It is often represented as a single number (like +3.0 or -5.0) and typically refers to a percentage measuring how the portfolio or fund performed compared to the referenced benchmark index (i.e., 3% better or 5% worse). </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"> A deeper analysis of alpha may also include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jensensmeasure.asp">Jensen’s alpha</a>. Jensen’s alpha takes into consideration 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 (CAPM)</a> market theory and includes a risk-adjusted component in its calculation. Beta (or the beta coefficient) is used in the CAPM, which calculates the expected return of an asset based on its own particular beta and the expected market returns. <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/07/alphabeta.asp">Alpha and beta</a> are used together by investment managers to calculate, compare, and analyze returns. </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 entire investing universe offers a broad range of securities, investment products, and advisory options for investors to consider. Different market cycles also have an influence on the alpha of investments across different asset classes. This is why risk-return metrics are important to consider in conjunction with alpha. </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-example-of-alpha"></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"> Example of Alpha </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> Alpha is illustrated in the following two historical examples of a fixed-income <a 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 an equity ETF: </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"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ishares.asp">iShares</a> Convertible Bond ETF (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=icvt">ICVT</a>) is a fixed-income investment with low risk. It tracks a customized index called the Bloomberg U.S. Convertible Cash Pay Bond &gt; $250MM Index. The three-year standard deviation was 18.94% as of Feb. 28, 2022. The year-to-date return, as of Feb. 28, 2022, was -6.67%. The Bloomberg U.S. Convertible Cash Pay Bond &gt; $250MM Index had a return of -13.17% over the same period. Therefore, the alpha for ICVT was 6.5% compared to the Bloomberg U.S. Aggregate Index and a three-year standard deviation of 18.97%.<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_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> However, since the aggregate bond index is not the proper benchmark for ICVT (it should be the Bloomberg Convertible index), this alpha may not be as large as initially thought; in fact, it may be misattributed since <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertiblebond.asp">convertible bonds</a> have far riskier profiles than plain vanilla bonds. </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 WisdomTree U.S. Quality Dividend Growth Fund (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=dgrw">DGRW</a>) is an equity investment with higher market risk that seeks to invest in dividend growth equities. Its holdings track a customized index called the WisdomTree U.S. Quality Dividend Growth Index. It had a three-year annualized standard deviation of 10.58%, higher than ICVT.<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_53-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> As of Feb. 28, 2022, DGRW’s annualized return was 18.1%, which was also higher than the S&amp;P 500 at 16.4%, so it had an alpha of 1.7% compared to the S&amp;P 500. But again, the S&amp;P 500 may not be the correct benchmark for this ETF, since dividend-paying growth stocks are a very particular subset of the overall stock market, and may not even be inclusive of the 500 most valuable stocks in the United States.<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_55-0"></div> <span class="heading-toc" id="toc-alpha-considerations"></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"> Alpha Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> While alpha has been called the “holy grail” of investing, and as such receives a lot of attention from investors and advisors alike, there are a couple of important considerations that one should take into account when using alpha. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_58-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> <li>A basic calculation of alpha subtracts the total return of an investment from a comparable benchmark in its asset category. This alpha calculation is primarily only used against a comparable asset category benchmark, as noted in the examples above. Therefore, it does not measure the outperformance of an equity ETF vs. a fixed-income benchmark. This alpha is also best used when comparing the performance of similar asset investments. Thus, the alpha of the equity ETF, DGRW, is not relatively comparable to the alpha of the fixed-income ETF, ICVT.</li> <li>Some references to alpha may refer to a more advanced technique. Jensen’s alpha takes into consideration CAPM theory and risk-adjusted measures by utilizing the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk-freerate.asp">risk-free rate</a> and beta.</li> </ol> <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"> When using a generated alpha calculation, it is important to understand the calculations involved. Alpha can be calculated using various different index benchmarks within an asset class. In some cases, there might not be a suitable preexisting index, in which case advisors may use <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/algorithm.asp">algorithms</a> and other models to simulate an index for comparative alpha calculation purposes. </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"> Alpha can also refer to the abnormal rate of return on a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">security</a> or portfolio in excess of what would be predicted by an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equilibrium.asp">equilibrium</a> model like CAPM. In this instance, a CAPM might aim to estimate returns for investors at various points along an <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/efficientfrontier.asp">efficient frontier</a>. The CAPM analysis might estimate that a portfolio should earn 10% based on the portfolio’s risk profile. If the portfolio actually earns 15%, the portfolio’s alpha would be 5.0, or +5% over what was predicted in the CAPM. </p> <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-alpha-and-beta-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Alpha and Beta in Finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Alpha measures the excess return above a benchmark for an investment, while beta is the measure of volatility, also known as risk. Active investors seek to achieve alpha returns by employing unique strategies.</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-a-good-alpha-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Good Alpha in Finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In finance, specifically in trading and investing, what is considered a good alpha will vary depending on the goal of the investor and the risk tolerance. Generally, a good alpha is one that is greater than zero when adjusted for risk.</p></div> </div> <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-what-does-a-negative-alpha-mean-in-stocks"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Does a Negative Alpha Mean in Stocks?</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/ask/answers/021015/does-negative-alpha-automatically-mean-i-should-sell.asp">negative alpha</a> in stocks means that a stock is underperforming the benchmark when adjusted for risk. If an investor is intending to match or outperform a specific benchmark and their investment portfolio is performing under that rate, then their alpha is negative.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_70-0"></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_71-0"> <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_72-0"> The goal of 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> is to achieve the highest returns possible. Alpha is a measure of performance regarding investment returns that are better when compared to a benchmark when adjusted for risk. Active investors seek to achieve returns that are higher than a benchmark and can employ a variety of strategies to do so. Many funds, such as hedge funds, have the purpose of achieving alpha and charge high management fees for doing so. </p></div>

## What Is Alpha? Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market, or its “edge.” Alpha is thus also often referred to as [excess return](https://www.investopedia.com/terms/e/excessreturn.asp) or the [abnormal rate of return](https://www.investopedia.com/terms/a/abnormalreturn.asp) in relation to a benchmark, when adjusted for risk. Alpha is often used in conjunction with [beta](https://www.investopedia.com/terms/b/beta.asp) (the Greek letter β), which measures the broad market’s overall [volatility](https://www.investopedia.com/terms/v/volatility.asp) or risk, known as [systematic market risk](https://www.investopedia.com/terms/s/systematicrisk.asp). Alpha is used in finance as a measure of [performance](https://www.investopedia.com/terms/f/financialperformance.asp), indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the [active return](https://www.investopedia.com/terms/a/active-return.asp) on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole. The excess return of an investment relative to the [return](https://www.investopedia.com/terms/r/return.asp) of a benchmark index is the investment’s alpha. Alpha may be positive or negative and is the result of active investing. Beta, on the other hand, can be earned through passive [index investing](https://www.investopedia.com/terms/i/index-investing.asp). ### Key Takeaways * Alpha refers to excess returns earned on an investment above the benchmark return when adjusted for risk. * Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk. * Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return. * Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation. ![Alpha]() :max_bytes(150000):strip_icc()/alpha_definition_v1-e2fc096b73fd4d15975d7406c84071cc.jpg) Sydney Saporito / Investopedia ## Understanding Alpha Alpha is one of five popular technical investment [risk ratios](https://www.investopedia.com/terms/r/riskrewardratio.asp). The others are beta, [standard deviation](https://www.investopedia.com/terms/s/standarddeviation.asp), [R-squared](https://www.investopedia.com/terms/r/r-squared.asp), and the [Sharpe ratio](https://www.investopedia.com/terms/s/sharperatio.asp). These are all statistical measurements used in [modern portfolio theory (MPT)](https://www.investopedia.com/terms/m/modernportfoliotheory.asp). All of these indicators are intended to help investors determine the risk-return profile of an investment. Active portfolio managers seek to generate alpha in diversified portfolios, with [diversification](https://www.investopedia.com/terms/d/diversification.asp) intended to eliminate [unsystematic risk](https://www.investopedia.com/terms/u/unsystematicrisk.asp). Because alpha represents the performance of a [portfolio](https://www.investopedia.com/terms/p/portfolio.asp) relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return. In other words, alpha is the return on an investment that is not a result of a general movement in the greater market. As such, an alpha of zero would indicate that the portfolio or fund is tracking perfectly with the benchmark index and that the manager has not added or lost any additional value compared to the broad market. ## Applying Alpha to Investing The concept of alpha became more popular with the advent of [smart beta](https://www.investopedia.com/terms/s/smart-beta.asp) index funds tied to indexes like the Standard & Poor’s 500 index and the Wilshire 5000 Total Market Index. These funds attempt to enhance the performance of a portfolio that tracks a targeted subset of the market. Despite the considerable desirability of alpha in a portfolio, many index benchmarks manage to beat asset managers the vast majority of the time. Due in part to a growing lack of faith in traditional financial advising brought about by this trend, more and more investors are switching to low-cost, [passive](https://www.investopedia.com/terms/p/passiveinvesting.asp) online advisors (often called [robo-advisors](https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp)​) who exclusively or almost exclusively invest clients’ capital into index-tracking funds, the rationale being that if they [cannot beat the market](https://www.investopedia.com/articles/trading/10/beat-the-market.asp), they may as well join it. Moreover, because most traditional financial advisors charge a fee, when one manages a portfolio and nets an alpha of zero, it actually represents a slight [net loss](https://www.investopedia.com/terms/n/netloss.asp) for the investor. For example, suppose that Jim, a financial advisor, charges 1% of a portfolio’s value for his services and that during a 12-month period, Jim managed to produce an alpha of 0.75 for the portfolio of one of his clients, Frank. While Jim has indeed helped the performance of Frank’s portfolio, the fee that Jim charges is in excess of the alpha he has generated, so Frank’s portfolio has experienced a net loss. For investors, the example highlights the importance of considering fees in conjunction with performance returns and alpha. ## Efficient Market Hypothesis The [efficient market hypothesis (EMH)](https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp) postulates that market prices incorporate all available information at all times, so securities are always properly priced (the market is efficient). Therefore, according to the EMH, there is no way to systematically identify and take advantage of mispricings in the market because they do not exist. If mispricings are identified, they are quickly [arbitraged](https://www.investopedia.com/terms/a/arbitrage.asp) away, so persistent patterns of market anomalies that can be taken advantage of tend to be few and far between. Empirical evidence comparing historical returns of active mutual funds relative to their passive benchmarks indicates that fewer than 10% of all active funds are able to earn a positive alpha over a 10-plus-year time period, and this percentage falls once taxes and fees are taken into consideration. In other words, alpha is hard to come by, especially after taxes and fees. Because beta risk can be isolated by diversifying and [hedging](https://www.investopedia.com/terms/h/hedge.asp) various risks (which comes with various transaction costs), some have proposed that alpha does not really exist, but simply represents the compensation for taking some unhedged risk that hadn’t been identified or was overlooked. ## Seeking Investment Alpha Alpha is commonly used to rank active mutual funds as well as all other types of investments. It is often represented as a single number (like +3.0 or -5.0) and typically refers to a percentage measuring how the portfolio or fund performed compared to the referenced benchmark index (i.e., 3% better or 5% worse). A deeper analysis of alpha may also include [Jensen’s alpha](https://www.investopedia.com/terms/j/jensensmeasure.asp). Jensen’s alpha takes into consideration the [capital asset pricing model (CAPM)](https://www.investopedia.com/terms/c/capm.asp) market theory and includes a risk-adjusted component in its calculation. Beta (or the beta coefficient) is used in the CAPM, which calculates the expected return of an asset based on its own particular beta and the expected market returns. [Alpha and beta](https://www.investopedia.com/articles/07/alphabeta.asp) are used together by investment managers to calculate, compare, and analyze returns. The entire investing universe offers a broad range of securities, investment products, and advisory options for investors to consider. Different market cycles also have an influence on the alpha of investments across different asset classes. This is why risk-return metrics are important to consider in conjunction with alpha. ## Example of Alpha Alpha is illustrated in the following two historical examples of a fixed-income [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) and an equity ETF: The [iShares](https://www.investopedia.com/terms/i/ishares.asp) Convertible Bond ETF ([ICVT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=icvt)) is a fixed-income investment with low risk. It tracks a customized index called the Bloomberg U.S. Convertible Cash Pay Bond > $250MM Index. The three-year standard deviation was 18.94% as of Feb. 28, 2022. The year-to-date return, as of Feb. 28, 2022, was -6.67%. The Bloomberg U.S. Convertible Cash Pay Bond > $250MM Index had a return of -13.17% over the same period. Therefore, the alpha for ICVT was 6.5% compared to the Bloomberg U.S. Aggregate Index and a three-year standard deviation of 18.97%. However, since the aggregate bond index is not the proper benchmark for ICVT (it should be the Bloomberg Convertible index), this alpha may not be as large as initially thought; in fact, it may be misattributed since [convertible bonds](https://www.investopedia.com/terms/c/convertiblebond.asp) have far riskier profiles than plain vanilla bonds. The WisdomTree U.S. Quality Dividend Growth Fund ([DGRW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=dgrw)) is an equity investment with higher market risk that seeks to invest in dividend growth equities. Its holdings track a customized index called the WisdomTree U.S. Quality Dividend Growth Index. It had a three-year annualized standard deviation of 10.58%, higher than ICVT. As of Feb. 28, 2022, DGRW’s annualized return was 18.1%, which was also higher than the S&P 500 at 16.4%, so it had an alpha of 1.7% compared to the S&P 500. But again, the S&P 500 may not be the correct benchmark for this ETF, since dividend-paying growth stocks are a very particular subset of the overall stock market, and may not even be inclusive of the 500 most valuable stocks in the United States. ## Alpha Considerations While alpha has been called the “holy grail” of investing, and as such receives a lot of attention from investors and advisors alike, there are a couple of important considerations that one should take into account when using alpha. 1. A basic calculation of alpha subtracts the total return of an investment from a comparable benchmark in its asset category. This alpha calculation is primarily only used against a comparable asset category benchmark, as noted in the examples above. Therefore, it does not measure the outperformance of an equity ETF vs. a fixed-income benchmark. This alpha is also best used when comparing the performance of similar asset investments. Thus, the alpha of the equity ETF, DGRW, is not relatively comparable to the alpha of the fixed-income ETF, ICVT. 2. Some references to alpha may refer to a more advanced technique. Jensen’s alpha takes into consideration CAPM theory and risk-adjusted measures by utilizing the [risk-free rate](https://www.investopedia.com/terms/r/risk-freerate.asp) and beta. When using a generated alpha calculation, it is important to understand the calculations involved. Alpha can be calculated using various different index benchmarks within an asset class. In some cases, there might not be a suitable preexisting index, in which case advisors may use [algorithms](https://www.investopedia.com/terms/a/algorithm.asp) and other models to simulate an index for comparative alpha calculation purposes. Alpha can also refer to the abnormal rate of return on a [security](https://www.investopedia.com/terms/s/security.asp) or portfolio in excess of what would be predicted by an [equilibrium](https://www.investopedia.com/terms/e/equilibrium.asp) model like CAPM. In this instance, a CAPM might aim to estimate returns for investors at various points along an [efficient frontier](https://www.investopedia.com/terms/e/efficientfrontier.asp). The CAPM analysis might estimate that a portfolio should earn 10% based on the portfolio’s risk profile. If the portfolio actually earns 15%, the portfolio’s alpha would be 5.0, or +5% over what was predicted in the CAPM. ## What Are Alpha and Beta in Finance? Alpha measures the excess return above a benchmark for an investment, while beta is the measure of volatility, also known as risk. Active investors seek to achieve alpha returns by employing unique strategies. ## What Is a Good Alpha in Finance? In finance, specifically in trading and investing, what is considered a good alpha will vary depending on the goal of the investor and the risk tolerance. Generally, a good alpha is one that is greater than zero when adjusted for risk. ## What Does a Negative Alpha Mean in Stocks? A [negative alpha](https://www.investopedia.com/ask/answers/021015/does-negative-alpha-automatically-mean-i-should-sell.asp) in stocks means that a stock is underperforming the benchmark when adjusted for risk. If an investor is intending to match or outperform a specific benchmark and their investment portfolio is performing under that rate, then their alpha is negative. ## The Bottom Line The goal of an [investor](https://www.investopedia.com/terms/i/investor.asp) is to achieve the highest returns possible. Alpha is a measure of performance regarding investment returns that are better when compared to a benchmark when adjusted for risk. Active investors seek to achieve returns that are higher than a benchmark and can employ a variety of strategies to do so. Many funds, such as hedge funds, have the purpose of achieving alpha and charge high management fees for doing so.

What Is Alpha? Alpha (α) is a term used in investing to describe an investment strategy’s ability to beat the market, or its “edge.” Alpha is thus also often referred to as excess return or the abnormal rate of return in relation to a benchmark, when adjusted for risk. Alpha is often used in conjunction with beta (the Greek letter β), which measures the broad market’s overall volatility or risk, known as systematic market risk. Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return or other benchmark over some period. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole. The excess return of an investment relative to the return of a benchmark index is the investment’s alpha. Alpha may be positive or negative and is the result of active investing. Beta, on the other hand, can be earned through passive index investing. Key Takeaways Alpha refers to excess returns earned on an investment above the benchmark return when adjusted for risk.Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk.Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return.Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) and includes a risk-adjusted component in its calculation. Sydney Saporito / Investopedia Understanding Alpha Alpha is one of five popular technical investment risk ratios. The others are beta, standard deviation, R-squared, and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these indicators are intended to help investors determine the risk-return profile of an investment. Active portfolio managers seek to generate alpha in diversified portfolios, with diversification intended to eliminate unsystematic risk. Because alpha represents the performance of a portfolio relative to a benchmark, it is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return. In other words, alpha is the return on an investment that is not a result of a general movement in the greater market. As such, an alpha of zero would indicate that the portfolio or fund is tracking perfectly with the benchmark index and that the manager has not added or lost any additional value compared to the broad market. Applying Alpha to Investing The concept of alpha became more popular with the advent of smart beta index funds tied to indexes like the Standard & Poor’s 500 index and the Wilshire 5000 Total Market Index. These funds attempt to enhance the performance of a portfolio that tracks a targeted subset of the market. Despite the considerable desirability of alpha in a portfolio, many index benchmarks manage to beat asset managers the vast majority of the time. Due in part to a growing lack of faith in traditional financial advising brought about by this trend, more and more investors are switching to low-cost, passive online advisors (often called robo-advisors​) who exclusively or almost exclusively invest clients’ capital into index-tracking funds, the rationale being that if they cannot beat the market, they may as well join it. Moreover, because most traditional financial advisors charge a fee, when one manages a portfolio and nets an alpha of zero, it actually represents a slight net loss for the investor. For example, suppose that Jim, a financial advisor, charges 1% of a portfolio’s value for his services and that during a 12-month period, Jim managed to produce an alpha of 0.75 for the portfolio of one of his clients, Frank. While Jim has indeed helped the performance of Frank’s portfolio, the fee that Jim charges is in excess of the alpha he has generated, so Frank’s portfolio has experienced a net loss. For investors, the example highlights the importance of considering fees in conjunction with performance returns and alpha. Efficient Market Hypothesis The efficient market hypothesis (EMH) postulates that market prices incorporate all available information at all times, so securities are always properly priced (the market is efficient). Therefore, according to the EMH, there is no way to systematically identify and take advantage of mispricings in the market because they do not exist. If mispricings are identified, they are quickly arbitraged away, so persistent patterns of market anomalies that can be taken advantage of tend to be few and far between. Empirical evidence comparing historical returns of active mutual funds relative to their passive benchmarks indicates that fewer than 10% of all active funds are able to earn a positive alpha over a 10-plus-year time period, and this percentage falls once taxes and fees are taken into consideration. In other words, alpha is hard to come by, especially after taxes and fees. Because beta risk can be isolated by diversifying and hedging various risks (which comes with various transaction costs), some have proposed that alpha does not really exist, but simply represents the compensation for taking some unhedged risk that hadn’t been identified or was overlooked. Seeking Investment Alpha Alpha is commonly used to rank active mutual funds as well as all other types of investments. It is often represented as a single number (like +3.0 or -5.0) and typically refers to a percentage measuring how the portfolio or fund performed compared to the referenced benchmark index (i.e., 3% better or 5% worse). A deeper analysis of alpha may also include Jensen’s alpha. Jensen’s alpha takes into consideration the capital asset pricing model (CAPM) market theory and includes a risk-adjusted component in its calculation. Beta (or the beta coefficient) is used in the CAPM, which calculates the expected return of an asset based on its own particular beta and the expected market returns. Alpha and beta are used together by investment managers to calculate, compare, and analyze returns. The entire investing universe offers a broad range of securities, investment products, and advisory options for investors to consider. Different market cycles also have an influence on the alpha of investments across different asset classes. This is why risk-return metrics are important to consider in conjunction with alpha. Example of Alpha Alpha is illustrated in the following two historical examples of a fixed-income exchange-traded fund (ETF) and an equity ETF: The iShares Convertible Bond ETF (ICVT) is a fixed-income investment with low risk. It tracks a customized index called the Bloomberg U.S. Convertible Cash Pay Bond > $250MM Index. The three-year standard deviation was 18.94% as of Feb. 28, 2022. The year-to-date return, as of Feb. 28, 2022, was -6.67%. The Bloomberg U.S. Convertible Cash Pay Bond > $250MM Index had a return of -13.17% over the same period. Therefore, the alpha for ICVT was 6.5% compared to the Bloomberg U.S. Aggregate Index and a three-year standard deviation of 18.97%. However, since the aggregate bond index is not the proper benchmark for ICVT (it should be the Bloomberg Convertible index), this alpha may not be as large as initially thought; in fact, it may be misattributed since convertible bonds have far riskier profiles than plain vanilla bonds. The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) is an equity investment with higher market risk that seeks to invest in dividend growth equities. Its holdings track a customized index called the WisdomTree U.S. Quality Dividend Growth Index. It had a three-year annualized standard deviation of 10.58%, higher than ICVT. As of Feb. 28, 2022, DGRW’s annualized return was 18.1%, which was also higher than the S&P 500 at 16.4%, so it had an alpha of 1.7% compared to the S&P 500. But again, the S&P 500 may not be the correct benchmark for this ETF, since dividend-paying growth stocks are a very particular subset of the overall stock market, and may not even be inclusive of the 500 most valuable stocks in the United States. Alpha Considerations While alpha has been called the “holy grail” of investing, and as such receives a lot of attention from investors and advisors alike, there are a couple of important considerations that one should take into account when using alpha. A basic calculation of alpha subtracts the total return of an investment from a comparable benchmark in its asset category. This alpha calculation is primarily only used against a comparable asset category benchmark, as noted in the examples above. Therefore, it does not measure the outperformance of an equity ETF vs. a fixed-income benchmark. This alpha is also best used when comparing the performance of similar asset investments. Thus, the alpha of the equity ETF, DGRW, is not relatively comparable to the alpha of the fixed-income ETF, ICVT. Some references to alpha may refer to a more advanced technique. Jensen’s alpha takes into consideration CAPM theory and risk-adjusted measures by utilizing the risk-free rate and beta. When using a generated alpha calculation, it is important to understand the calculations involved. Alpha can be calculated using various different index benchmarks within an asset class. In some cases, there might not be a suitable preexisting index, in which case advisors may use algorithms and other models to simulate an index for comparative alpha calculation purposes. Alpha can also refer to the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like CAPM. In this instance, a CAPM might aim to estimate returns for investors at various points along an efficient frontier. The CAPM analysis might estimate that a portfolio should earn 10% based on the portfolio’s risk profile. If the portfolio actually earns 15%, the portfolio’s alpha would be 5.0, or +5% over what was predicted in the CAPM. What Are Alpha and Beta in Finance? Alpha measures the excess return above a benchmark for an investment, while beta is the measure of volatility, also known as risk. Active investors seek to achieve alpha returns by employing unique strategies. What Is a Good Alpha in Finance? In finance, specifically in trading and investing, what is considered a good alpha will vary depending on the goal of the investor and the risk tolerance. Generally, a good alpha is one that is greater than zero when adjusted for risk. What Does a Negative Alpha Mean in Stocks? A negative alpha in stocks means that a stock is underperforming the benchmark when adjusted for risk. If an investor is intending to match or outperform a specific benchmark and their investment portfolio is performing under that rate, then their alpha is negative. The Bottom Line The goal of an investor is to achieve the highest returns possible. Alpha is a measure of performance regarding investment returns that are better when compared to a benchmark when adjusted for risk. Active investors seek to achieve returns that are higher than a benchmark and can employ a variety of strategies to do so. Many funds, such as hedge funds, have the purpose of achieving alpha and charge high management fees for doing so.

https://www.investopedia.com/what-happens-inside-the-fed-meetings-where-decisions-on-us-interest-rates-are-made-8549999

What Happens Inside the Fed Meetings Where Decisions on US Interest Rates are Made?

<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>Behind the closed doors of meetings of the Federal Open Market Committee (FOMC), policymakers debate the course of benchmark interest rates.</li><li>Policymakers are intentional with the wording of the statement and work painstakingly to craft the message.<br/></li><li>The committee rarely goes against what the chairman wants to do, though individual members sometimes voice disagreement.</li><li>The FOMC will meet this week for the first time this year. Market participants expect no change in the benchmark rate, but will be closely watching what the Fed says about the possibility of future rate cuts.<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"> You’ll never get to attend a meeting of the Federal Open Market Committee (FOMC), where the fate of the economy is plotted, though your finances will certainly feel the effects of the decisions made there.<br/><br/>Eight times a year, the committee meets over a two-day period to set the Federal Reserve’s benchmark <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>, one of the most important numbers in the entire economy. It influences the interest rates you’re offered on all kinds of credit, not to mention is used as a tool to temper inflation. </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"> Unlike many government deliberations, however, the meetings where this all-important rate is determined take place outside of the public eye: Minutes from the meetings aren’t released until weeks afterward, and full transcripts are only made available five years later.<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_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Fed policy makers will gather on Tuesday and Wednesday this week for the first time in 2024. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-far-away-are-lower-interest-rates-fed-meeting-next-week-may-provide-clues-8550462">Market participants expect</a> the FOMC will stand pat on interest rates this week, as it has at its <a data-component="link" data-ordinal="2" 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">past two meetings</a>, but they will be closely watching what Fed Chairman <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/jerome-powell-5210572">Jerome Powell</a> and the rest of the committee say about the possibility of rate cuts at subsequent meetings. </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"> To learn more about how this all-important decision is made, we bring you inside the Federal Reserve’s Martin building where the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fomc.asp">FOMC</a> meets. </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"> We interviewed former members and looked at meeting minutes and transcripts to get an idea of what it's like to sit around the big square table and make open market decisions. You'll hear from two former members of the committee—James Bullard and Jeffrey Lacker. </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"> Bullard was president of 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-stlouis.asp">Federal Reserve Bank of St. Louis</a> from 2008 until August 2023, when he retired to become the dean of Purdue University’s Daniels School of Business. Lacker was president of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/federal-reserve-bank-of-richmond.asp">Richmond Fed</a> from 2004 through 2017 and is now a professor of economics at the Virginia Commonwealth University School of Business. </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-decisions-are-usually-inevitable-before-the-meeting"></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"> Decisions are Usually Inevitable Before the Meeting </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The Federal Reserve has a dual mandate to achieve maximum employment and keep prices stable, goals that are sometimes at odds with one another. If the economy heats up too much, boosting employment, inflation can sometimes rise to undesirable levels. </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 FOMC, through its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/monetarypolicy.asp">monetary policy</a> decisions, plays a central role in either promoting economic growth via low interest rates, which can spur inflation, or squashing inflation through higher rates, potentially causing the economy to languish. The FOMC is now at a turning point. After nearly two years of raising and maintaining high rates to tame inflation, the Fed appears poised to start cutting rates soon. </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 main decision the FOMC must make at any meeting is whether to be "<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hawk.asp">hawkish</a>” or “<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dove.asp">dovish</a>” when setting the benchmark interest rate. Hawkish policy favors keeping rates higher to contain price pressures, while dovish policy focuses on low rates to support growth and employment.<br/> </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 week before the meeting, the FOMC members are given three options for what policy rate they’ll set, and what statement they’ll publicize alongside it, created by the chairperson and their staff, according to interviews with former members and released transcripts. </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"> Alternative B is the default choice, and represents what the chair wants to do. Alternative A is more dovish, that is, setting a lower rate, or possibly keeping the same rate but with a statement indicating an inclination for lower rates or slower rate increases in the future. </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"> Alternative C either sets a higher rate or sets a more hawkish tone in the statement. </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"> The meetings are highly structured. For example, each participant gets a chance to give their assessment of the economy. That process takes an hour and a half or more, even with people sticking to an informal time limit of about 10 minutes, Bullard said. </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"> At the end of the meeting, after much deliberation, each member votes. Almost every time, they select Alternative B. Only once during Lacker’s tenure—which overlapped with former Fed chairs <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benbernanke.asp">Ben Bernanke</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/101613/janet-yellen-background-and-philosophy.asp">Janet Yellen</a>, but ended before Powell became chairman in 2018—did they pick a different one. </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 I joke with people that you don't really have to do much because you know Option B is going to be the answer,” said Bullard, who served as an FOMC member under Bernanke, Yellen and Powell. “But there's a lot of method to the madness.” </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-message-is-painstakingly-devised"></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 Message is Painstakingly Devised </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> While the policy rate is usually set in stone, the statement is often revised, with members sometimes taking sentences or language from other statements and putting them into Alternative B. Sometimes, during periods when the Fed is holding its interest rate steady, the result is a statement nearly identical to the previous one with perhaps just a word or two changed.<br/><br/>The Fed’s interest rate policy at any given meeting is usually predictable and well-known to markets. The committee makes decisions based on publicly available economic data, and FOMC members give frequent public appearances where they air their thoughts on the appropriate interest rate policy.<br/><br/>“The debate on monetary policy is going on 365 days a year for 24 hours a day, all around the world,” Bullard said. “The meetings are definitely important, but they're a snapshot of the ongoing debate.”<br/><br/>The debate didn’t always happen out in public. The FOMC only began explaining its rate decisions and creating meeting transcripts in 1994 under then-chairman <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alangreenspan.asp">Alan Greenspan</a>, and the tradition of the Federal Reserve chair holding a press conference after each meeting began in 2011, when Bernanke was chairman. </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"> Until the 1990s, the central bank’s leaders were notoriously secretive, believing that monetary policy would be more effective if it came as a surprise to markets. That began to change under Greenspan, who over time came to believe in more transparency during his tenure, which lasted from 1987 through 2006.<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_38-0"></div> <span class="heading-toc" id="toc-theres-very-little-dissent-in-the-ranks"></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"> There's Very Little Dissent in the Ranks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Occasionally, some members vote against the consensus, and those dissents, and the reasons for them, are noted in the publicly available policy statement. </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"> For example, Lacker dissented at all eight meetings in 2012, when Fed policy was extremely dovish, holding its interest rate near zero. The dissents are more about making a statement than overriding the chairman’s preference, and playing a long game of attempting to influence the committee’s thinking, Lacker said.<span class="ql-inline-citation" data-cite="3"></span><br><br>“The chairman doesn’t get outvoted. It just doesn’t happen,” he said.<br><br>The disagreements are polite and never get heated, said Lacker, who was one of the Fed’s most frequent dissenters.<br><br>“I never detected any impoliteness or hostility,” he said.<br><br>The last time a member dissented was in June 2022, when the Fed was in the midst of a campaign of rapidly hiking its interest rate to combat inflation. At that meeting, the committee voted to raise its interest rate by three-quarters of a point, but Esther George, president of the Kansas City Fed, preferred a slower half-a-point increase.<span class="ql-inline-citation" data-cite="4"></span> </br></br></br></br></br></br></br></br></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, Jan. 29, 2024</strong> — This article has been corrected to state which member of the FOMC voted for a lower rate increase at the June 2022 meeting. It was Esther George.</em><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 * Behind the closed doors of meetings of the Federal Open Market Committee (FOMC), policymakers debate the course of benchmark interest rates. * Policymakers are intentional with the wording of the statement and work painstakingly to craft the message. * The committee rarely goes against what the chairman wants to do, though individual members sometimes voice disagreement. * The FOMC will meet this week for the first time this year. Market participants expect no change in the benchmark rate, but will be closely watching what the Fed says about the possibility of future rate cuts. You’ll never get to attend a meeting of the Federal Open Market Committee (FOMC), where the fate of the economy is plotted, though your finances will certainly feel the effects of the decisions made there. Eight times a year, the committee meets over a two-day period to set the Federal Reserve’s benchmark [federal funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp), one of the most important numbers in the entire economy. It influences the interest rates you’re offered on all kinds of credit, not to mention is used as a tool to temper inflation. Unlike many government deliberations, however, the meetings where this all-important rate is determined take place outside of the public eye: Minutes from the meetings aren’t released until weeks afterward, and full transcripts are only made available five years later. Fed policy makers will gather on Tuesday and Wednesday this week for the first time in 2024. [Market participants expect](https://www.investopedia.com/how-far-away-are-lower-interest-rates-fed-meeting-next-week-may-provide-clues-8550462) the FOMC will stand pat on interest rates this week, as it has at its [past two meetings](https://www.investopedia.com/fed-keeps-interest-rate-unchanged-at-22-year-high-but-signals-cuts-next-year-8414895), but they will be closely watching what Fed Chairman [Jerome Powell](https://www.investopedia.com/jerome-powell-5210572) and the rest of the committee say about the possibility of rate cuts at subsequent meetings. To learn more about how this all-important decision is made, we bring you inside the Federal Reserve’s Martin building where the [FOMC](https://www.investopedia.com/terms/f/fomc.asp) meets. We interviewed former members and looked at meeting minutes and transcripts to get an idea of what it's like to sit around the big square table and make open market decisions. You'll hear from two former members of the committee—James Bullard and Jeffrey Lacker. Bullard was president of the [Federal Reserve Bank of St. Louis](https://www.investopedia.com/terms/f/federal-reserve-bank-of-stlouis.asp) from 2008 until August 2023, when he retired to become the dean of Purdue University’s Daniels School of Business. Lacker was president of the [Richmond Fed](https://www.investopedia.com/terms/f/federal-reserve-bank-of-richmond.asp) from 2004 through 2017 and is now a professor of economics at the Virginia Commonwealth University School of Business. ## Decisions are Usually Inevitable Before the Meeting The Federal Reserve has a dual mandate to achieve maximum employment and keep prices stable, goals that are sometimes at odds with one another. If the economy heats up too much, boosting employment, inflation can sometimes rise to undesirable levels. The FOMC, through its [monetary policy](https://www.investopedia.com/terms/m/monetarypolicy.asp) decisions, plays a central role in either promoting economic growth via low interest rates, which can spur inflation, or squashing inflation through higher rates, potentially causing the economy to languish. The FOMC is now at a turning point. After nearly two years of raising and maintaining high rates to tame inflation, the Fed appears poised to start cutting rates soon. The main decision the FOMC must make at any meeting is whether to be "[hawkish](https://www.investopedia.com/terms/h/hawk.asp)” or “[dovish](https://www.investopedia.com/terms/d/dove.asp)” when setting the benchmark interest rate. Hawkish policy favors keeping rates higher to contain price pressures, while dovish policy focuses on low rates to support growth and employment. The week before the meeting, the FOMC members are given three options for what policy rate they’ll set, and what statement they’ll publicize alongside it, created by the chairperson and their staff, according to interviews with former members and released transcripts. Alternative B is the default choice, and represents what the chair wants to do. Alternative A is more dovish, that is, setting a lower rate, or possibly keeping the same rate but with a statement indicating an inclination for lower rates or slower rate increases in the future. Alternative C either sets a higher rate or sets a more hawkish tone in the statement. The meetings are highly structured. For example, each participant gets a chance to give their assessment of the economy. That process takes an hour and a half or more, even with people sticking to an informal time limit of about 10 minutes, Bullard said. At the end of the meeting, after much deliberation, each member votes. Almost every time, they select Alternative B. Only once during Lacker’s tenure—which overlapped with former Fed chairs [Ben Bernanke](https://www.investopedia.com/terms/b/benbernanke.asp) and [Janet Yellen](https://www.investopedia.com/articles/investing/101613/janet-yellen-background-and-philosophy.asp), but ended before Powell became chairman in 2018—did they pick a different one. “Sometimes I joke with people that you don't really have to do much because you know Option B is going to be the answer,” said Bullard, who served as an FOMC member under Bernanke, Yellen and Powell. “But there's a lot of method to the madness.” ## The Message is Painstakingly Devised While the policy rate is usually set in stone, the statement is often revised, with members sometimes taking sentences or language from other statements and putting them into Alternative B. Sometimes, during periods when the Fed is holding its interest rate steady, the result is a statement nearly identical to the previous one with perhaps just a word or two changed. The Fed’s interest rate policy at any given meeting is usually predictable and well-known to markets. The committee makes decisions based on publicly available economic data, and FOMC members give frequent public appearances where they air their thoughts on the appropriate interest rate policy. “The debate on monetary policy is going on 365 days a year for 24 hours a day, all around the world,” Bullard said. “The meetings are definitely important, but they're a snapshot of the ongoing debate.” The debate didn’t always happen out in public. The FOMC only began explaining its rate decisions and creating meeting transcripts in 1994 under then-chairman [Alan Greenspan](https://www.investopedia.com/terms/a/alangreenspan.asp), and the tradition of the Federal Reserve chair holding a press conference after each meeting began in 2011, when Bernanke was chairman. Until the 1990s, the central bank’s leaders were notoriously secretive, believing that monetary policy would be more effective if it came as a surprise to markets. That began to change under Greenspan, who over time came to believe in more transparency during his tenure, which lasted from 1987 through 2006.  ## There's Very Little Dissent in the Ranks Occasionally, some members vote against the consensus, and those dissents, and the reasons for them, are noted in the publicly available policy statement. For example, Lacker dissented at all eight meetings in 2012, when Fed policy was extremely dovish, holding its interest rate near zero. The dissents are more about making a statement than overriding the chairman’s preference, and playing a long game of attempting to influence the committee’s thinking, Lacker said. “The chairman doesn’t get outvoted. It just doesn’t happen,” he said. The disagreements are polite and never get heated, said Lacker, who was one of the Fed’s most frequent dissenters. “I never detected any impoliteness or hostility,” he said. The last time a member dissented was in June 2022, when the Fed was in the midst of a campaign of rapidly hiking its interest rate to combat inflation. At that meeting, the committee voted to raise its interest rate by three-quarters of a point, but Esther George, president of the Kansas City Fed, preferred a slower half-a-point increase. ***Correction, Jan. 29, 2024** — This article has been corrected to state which member of the FOMC voted for a lower rate increase at the June 2022 meeting. It was Esther George.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Behind the closed doors of meetings of the Federal Open Market Committee (FOMC), policymakers debate the course of benchmark interest rates.Policymakers are intentional with the wording of the statement and work painstakingly to craft the message.The committee rarely goes against what the chairman wants to do, though individual members sometimes voice disagreement.The FOMC will meet this week for the first time this year. Market participants expect no change in the benchmark rate, but will be closely watching what the Fed says about the possibility of future rate cuts. You’ll never get to attend a meeting of the Federal Open Market Committee (FOMC), where the fate of the economy is plotted, though your finances will certainly feel the effects of the decisions made there.Eight times a year, the committee meets over a two-day period to set the Federal Reserve’s benchmark federal funds rate, one of the most important numbers in the entire economy. It influences the interest rates you’re offered on all kinds of credit, not to mention is used as a tool to temper inflation. Unlike many government deliberations, however, the meetings where this all-important rate is determined take place outside of the public eye: Minutes from the meetings aren’t released until weeks afterward, and full transcripts are only made available five years later. Fed policy makers will gather on Tuesday and Wednesday this week for the first time in 2024. Market participants expect the FOMC will stand pat on interest rates this week, as it has at its past two meetings, but they will be closely watching what Fed Chairman Jerome Powell and the rest of the committee say about the possibility of rate cuts at subsequent meetings. To learn more about how this all-important decision is made, we bring you inside the Federal Reserve’s Martin building where the FOMC meets. We interviewed former members and looked at meeting minutes and transcripts to get an idea of what it's like to sit around the big square table and make open market decisions. You'll hear from two former members of the committee—James Bullard and Jeffrey Lacker. Bullard was president of the Federal Reserve Bank of St. Louis from 2008 until August 2023, when he retired to become the dean of Purdue University’s Daniels School of Business. Lacker was president of the Richmond Fed from 2004 through 2017 and is now a professor of economics at the Virginia Commonwealth University School of Business. Decisions are Usually Inevitable Before the Meeting The Federal Reserve has a dual mandate to achieve maximum employment and keep prices stable, goals that are sometimes at odds with one another. If the economy heats up too much, boosting employment, inflation can sometimes rise to undesirable levels. The FOMC, through its monetary policy decisions, plays a central role in either promoting economic growth via low interest rates, which can spur inflation, or squashing inflation through higher rates, potentially causing the economy to languish. The FOMC is now at a turning point. After nearly two years of raising and maintaining high rates to tame inflation, the Fed appears poised to start cutting rates soon. The main decision the FOMC must make at any meeting is whether to be "hawkish” or “dovish” when setting the benchmark interest rate. Hawkish policy favors keeping rates higher to contain price pressures, while dovish policy focuses on low rates to support growth and employment. The week before the meeting, the FOMC members are given three options for what policy rate they’ll set, and what statement they’ll publicize alongside it, created by the chairperson and their staff, according to interviews with former members and released transcripts. Alternative B is the default choice, and represents what the chair wants to do. Alternative A is more dovish, that is, setting a lower rate, or possibly keeping the same rate but with a statement indicating an inclination for lower rates or slower rate increases in the future. Alternative C either sets a higher rate or sets a more hawkish tone in the statement. The meetings are highly structured. For example, each participant gets a chance to give their assessment of the economy. That process takes an hour and a half or more, even with people sticking to an informal time limit of about 10 minutes, Bullard said. At the end of the meeting, after much deliberation, each member votes. Almost every time, they select Alternative B. Only once during Lacker’s tenure—which overlapped with former Fed chairs Ben Bernanke and Janet Yellen, but ended before Powell became chairman in 2018—did they pick a different one. “Sometimes I joke with people that you don't really have to do much because you know Option B is going to be the answer,” said Bullard, who served as an FOMC member under Bernanke, Yellen and Powell. “But there's a lot of method to the madness.” The Message is Painstakingly Devised While the policy rate is usually set in stone, the statement is often revised, with members sometimes taking sentences or language from other statements and putting them into Alternative B. Sometimes, during periods when the Fed is holding its interest rate steady, the result is a statement nearly identical to the previous one with perhaps just a word or two changed.The Fed’s interest rate policy at any given meeting is usually predictable and well-known to markets. The committee makes decisions based on publicly available economic data, and FOMC members give frequent public appearances where they air their thoughts on the appropriate interest rate policy.“The debate on monetary policy is going on 365 days a year for 24 hours a day, all around the world,” Bullard said. “The meetings are definitely important, but they're a snapshot of the ongoing debate.”The debate didn’t always happen out in public. The FOMC only began explaining its rate decisions and creating meeting transcripts in 1994 under then-chairman Alan Greenspan, and the tradition of the Federal Reserve chair holding a press conference after each meeting began in 2011, when Bernanke was chairman. Until the 1990s, the central bank’s leaders were notoriously secretive, believing that monetary policy would be more effective if it came as a surprise to markets. That began to change under Greenspan, who over time came to believe in more transparency during his tenure, which lasted from 1987 through 2006.  There's Very Little Dissent in the Ranks Occasionally, some members vote against the consensus, and those dissents, and the reasons for them, are noted in the publicly available policy statement. For example, Lacker dissented at all eight meetings in 2012, when Fed policy was extremely dovish, holding its interest rate near zero. The dissents are more about making a statement than overriding the chairman’s preference, and playing a long game of attempting to influence the committee’s thinking, Lacker said.“The chairman doesn’t get outvoted. It just doesn’t happen,” he said.The disagreements are polite and never get heated, said Lacker, who was one of the Fed’s most frequent dissenters.“I never detected any impoliteness or hostility,” he said.The last time a member dissented was in June 2022, when the Fed was in the midst of a campaign of rapidly hiking its interest rate to combat inflation. At that meeting, the committee voted to raise its interest rate by three-quarters of a point, but Esther George, president of the Kansas City Fed, preferred a slower half-a-point increase. Correction, Jan. 29, 2024 — This article has been corrected to state which member of the FOMC voted for a lower rate increase at the June 2022 meeting. It was Esther George. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

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

Foreign Currency Fixed Deposit (FCFD): Meaning, Benefits, 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-foreign-currency-fixed-deposit-fcfd"></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 Foreign Currency Fixed Deposit (FCFD)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A Foreign Currency Fixed Deposit (FCFD) is a fixed investment instrument in which a specific sum of money that is poised to earn interest is deposited into a bank. </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"> Although fixed deposits have virtually no risk, foreign currency fixed deposits introduce an element of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/forex/082515/how-avoid-exchange-rate-risk.asp">exchange rate risk</a> because investors must exchange their currency into the target currency and then convert it back again once the term is over. </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 foreign currency fixed deposit is a fixed-income investment for keeping foreign currency. </li><li>The money deposited in an FCFD earns interest but comes with some currency exchange risk. </li><li>Money in an FCFD account can’t be withdrawn until the fixed term is up. </li><li>Investors use FCFD accounts to diversify or hedge against foreign currency movements. </li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-foreign-currency-fixed-deposit-fcfd"></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 Foreign Currency Fixed Deposit (FCFD) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> A foreign currency fixed deposit is a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timedeposit.asp">time deposit</a> issued by banks to investors who would like to keep foreign currency for future use or hedge against foreign currency fluctuation. The money deposited in the FCFD account cannot be withdrawn until the agreed fixed term has expired.  </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 foreign currency fixed deposits are larger and longer in duration, they receive much higher interest rates. An FCFD can be a very useful and safe way to invest your money. However, depositors must make sure that they do not need that money for the entire duration of the term. If an investor withdraws the funds prior to maturity, 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</a> penalty would apply, which is often steep and set at the discretion of the bank. </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 early redemption of a foreign currency fixed deposit will very likely result in the partial loss of the principal sum due to the combined effects of the redemption charges and bid-ask spread charges. </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-benefits-of-a-foreign-currency-fixed-deposit"></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"> Benefits of a Foreign Currency Fixed Deposit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> There are a number of reasons why an FCFD investment appeals to certain investors. Investors who want some diversification in their portfolios may opt for FCFDs in another currency. Companies looking to <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 foreign exchange movements may use the FCFD as a hedging tool. For such companies, an FCFD is used to facilitate <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cross-currency-swap.asp">cross-currency swaps</a>. Investors who want exposure to a target currency because they invest abroad, have children studying in a given country, or conduct business in another country may invest in FCFDs. </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"> An FCFD can be invested in two ways—opening a local account that offers deposits in the foreign currency that the investor would like to gain exposure to or opening an account in the foreign country itself. Interest rates, minimum deposits, tenure periods, and available currencies vary from bank to bank. </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-example-of-a-foreign-currency-fixed-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"> Example of a Foreign Currency Fixed Deposit </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> For example, A Canadian investor who has CAD dollars but wants to hold U.S. dollars can deposit USD into a US dollar-denominated FCFD paying a higher interest rate than a local Canadian savings account. To do this, the investor will have to purchase US dollars from the issuing bank using his Canadian dollars. After the US dollars are purchased, they are deposited into the FCFD. </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/forex/u/usd-cad-us-dollar-canadian-dollar-currency-pair.asp">USD/CAD</a> is quoted as 1.29 from an FCFD issuing bank. An investor that wants to deposit $100,000 will buy USD at the rate of 1.29 from the bank by selling CAD 129,000. The $100,000 is deposited in the FCFD account for one year and earns an annual interest of 1.5%. After the tenure ends, the USD is sold for CAD at the prevailing foreign exchange rate offered by the issuing bank.  </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"> Investors who do not expect foreign exchange rates to move against them will typically use an FCFD. However, all FCFD investors face <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/foreignexchangerisk.asp">foreign exchange risk</a> given that if there is an adverse movement in the exchange rate, the transaction costs and exchange rate difference might negate any excess interest returns or even put the investor in losses.  </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"> Following our example above, at the end of the term, the investor earns 1.5% x $100,000 = $1,500. However, the bank is only willing to purchase USD at a rate of 1.21. This means that the investor will receive Canadian dollars worth $101,500 x 1.21 = CAD 122,815. As you can tell, this amount is below the investor’s original investment amount of CAD 129,000.<br/> </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-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 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>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 Foreign Currency Fixed Deposit (FCFD)? A Foreign Currency Fixed Deposit (FCFD) is a fixed investment instrument in which a specific sum of money that is poised to earn interest is deposited into a bank. Although fixed deposits have virtually no risk, foreign currency fixed deposits introduce an element of [exchange rate risk](https://www.investopedia.com/articles/forex/082515/how-avoid-exchange-rate-risk.asp) because investors must exchange their currency into the target currency and then convert it back again once the term is over. ### Key Takeaways * A foreign currency fixed deposit is a fixed-income investment for keeping foreign currency. * The money deposited in an FCFD earns interest but comes with some currency exchange risk. * Money in an FCFD account can’t be withdrawn until the fixed term is up. * Investors use FCFD accounts to diversify or hedge against foreign currency movements. ## Understanding a Foreign Currency Fixed Deposit (FCFD) A foreign currency fixed deposit is a type of [time deposit](https://www.investopedia.com/terms/t/timedeposit.asp) issued by banks to investors who would like to keep foreign currency for future use or hedge against foreign currency fluctuation. The money deposited in the FCFD account cannot be withdrawn until the agreed fixed term has expired.  When foreign currency fixed deposits are larger and longer in duration, they receive much higher interest rates. An FCFD can be a very useful and safe way to invest your money. However, depositors must make sure that they do not need that money for the entire duration of the term. If an investor withdraws the funds prior to maturity, an [early withdrawal](https://www.investopedia.com/terms/e/earlywithdrawal.asp) penalty would apply, which is often steep and set at the discretion of the bank. The early redemption of a foreign currency fixed deposit will very likely result in the partial loss of the principal sum due to the combined effects of the redemption charges and bid-ask spread charges. ## Benefits of a Foreign Currency Fixed Deposit There are a number of reasons why an FCFD investment appeals to certain investors. Investors who want some diversification in their portfolios may opt for FCFDs in another currency. Companies looking to [hedge](https://www.investopedia.com/terms/h/hedge.asp) against foreign exchange movements may use the FCFD as a hedging tool. For such companies, an FCFD is used to facilitate [cross-currency swaps](https://www.investopedia.com/terms/c/cross-currency-swap.asp). Investors who want exposure to a target currency because they invest abroad, have children studying in a given country, or conduct business in another country may invest in FCFDs. An FCFD can be invested in two ways—opening a local account that offers deposits in the foreign currency that the investor would like to gain exposure to or opening an account in the foreign country itself. Interest rates, minimum deposits, tenure periods, and available currencies vary from bank to bank. ## Example of a Foreign Currency Fixed Deposit For example, A Canadian investor who has CAD dollars but wants to hold U.S. dollars can deposit USD into a US dollar-denominated FCFD paying a higher interest rate than a local Canadian savings account. To do this, the investor will have to purchase US dollars from the issuing bank using his Canadian dollars. After the US dollars are purchased, they are deposited into the FCFD. [USD/CAD](https://www.investopedia.com/terms/forex/u/usd-cad-us-dollar-canadian-dollar-currency-pair.asp) is quoted as 1.29 from an FCFD issuing bank. An investor that wants to deposit $100,000 will buy USD at the rate of 1.29 from the bank by selling CAD 129,000. The $100,000 is deposited in the FCFD account for one year and earns an annual interest of 1.5%. After the tenure ends, the USD is sold for CAD at the prevailing foreign exchange rate offered by the issuing bank.  Investors who do not expect foreign exchange rates to move against them will typically use an FCFD. However, all FCFD investors face [foreign exchange risk](https://www.investopedia.com/terms/f/foreignexchangerisk.asp) given that if there is an adverse movement in the exchange rate, the transaction costs and exchange rate difference might negate any excess interest returns or even put the investor in losses.  Following our example above, at the end of the term, the investor earns 1.5% x $100,000 = $1,500. However, the bank is only willing to purchase USD at a rate of 1.21. This means that the investor will receive Canadian dollars worth $101,500 x 1.21 = CAD 122,815. As you can tell, this amount is below the investor’s original investment amount of CAD 129,000. ### 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 Foreign Currency Fixed Deposit (FCFD)? A Foreign Currency Fixed Deposit (FCFD) is a fixed investment instrument in which a specific sum of money that is poised to earn interest is deposited into a bank. Although fixed deposits have virtually no risk, foreign currency fixed deposits introduce an element of exchange rate risk because investors must exchange their currency into the target currency and then convert it back again once the term is over. Key Takeaways A foreign currency fixed deposit is a fixed-income investment for keeping foreign currency. The money deposited in an FCFD earns interest but comes with some currency exchange risk. Money in an FCFD account can’t be withdrawn until the fixed term is up. Investors use FCFD accounts to diversify or hedge against foreign currency movements.  Understanding a Foreign Currency Fixed Deposit (FCFD) A foreign currency fixed deposit is a type of time deposit issued by banks to investors who would like to keep foreign currency for future use or hedge against foreign currency fluctuation. The money deposited in the FCFD account cannot be withdrawn until the agreed fixed term has expired.  When foreign currency fixed deposits are larger and longer in duration, they receive much higher interest rates. An FCFD can be a very useful and safe way to invest your money. However, depositors must make sure that they do not need that money for the entire duration of the term. If an investor withdraws the funds prior to maturity, an early withdrawal penalty would apply, which is often steep and set at the discretion of the bank. The early redemption of a foreign currency fixed deposit will very likely result in the partial loss of the principal sum due to the combined effects of the redemption charges and bid-ask spread charges. Benefits of a Foreign Currency Fixed Deposit There are a number of reasons why an FCFD investment appeals to certain investors. Investors who want some diversification in their portfolios may opt for FCFDs in another currency. Companies looking to hedge against foreign exchange movements may use the FCFD as a hedging tool. For such companies, an FCFD is used to facilitate cross-currency swaps. Investors who want exposure to a target currency because they invest abroad, have children studying in a given country, or conduct business in another country may invest in FCFDs. An FCFD can be invested in two ways—opening a local account that offers deposits in the foreign currency that the investor would like to gain exposure to or opening an account in the foreign country itself. Interest rates, minimum deposits, tenure periods, and available currencies vary from bank to bank. Example of a Foreign Currency Fixed Deposit For example, A Canadian investor who has CAD dollars but wants to hold U.S. dollars can deposit USD into a US dollar-denominated FCFD paying a higher interest rate than a local Canadian savings account. To do this, the investor will have to purchase US dollars from the issuing bank using his Canadian dollars. After the US dollars are purchased, they are deposited into the FCFD. USD/CAD is quoted as 1.29 from an FCFD issuing bank. An investor that wants to deposit $100,000 will buy USD at the rate of 1.29 from the bank by selling CAD 129,000. The $100,000 is deposited in the FCFD account for one year and earns an annual interest of 1.5%. After the tenure ends, the USD is sold for CAD at the prevailing foreign exchange rate offered by the issuing bank.  Investors who do not expect foreign exchange rates to move against them will typically use an FCFD. However, all FCFD investors face foreign exchange risk given that if there is an adverse movement in the exchange rate, the transaction costs and exchange rate difference might negate any excess interest returns or even put the investor in losses.  Following our example above, at the end of the term, the investor earns 1.5% x $100,000 = $1,500. However, the bank is only willing to purchase USD at a rate of 1.21. This means that the investor will receive Canadian dollars worth $101,500 x 1.21 = CAD 122,815. As you can tell, this amount is below the investor’s original investment amount of CAD 129,000. 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/terms/s/security.asp

What are Financial Securities? Examples, Types, Regulation, and Importance

<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-security"></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 Security? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term "security" refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or corporation in the form of a bond, or rights to ownership in the form of an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/calloption.asp">option</a>. </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>Securities are fungible and tradable financial instruments used to raise capital in public and private markets.</li><li>There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity.</li><li>Public sales of securities are regulated by the SEC. </li><li>Self-regulatory organizations such as NASD, NFA, and FINRA also play an important role in regulating derivative securities.</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="Security" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/jIK9PqhshX6xbOg9HjJGmpKVqFY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/jIK9PqhshX6xbOg9HjJGmpKVqFY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.jpg" data-srcset="https://www.investopedia.com/thmb/xj4zeAySjhl3rhObAFxOazDkHys=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Security" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/jIK9PqhshX6xbOg9HjJGmpKVqFY=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.jpg" srcset="https://www.investopedia.com/thmb/xj4zeAySjhl3rhObAFxOazDkHys=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.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 / Daniel Fishel</p></span> </figcaption></figure> <span class="heading-toc" id="toc-understanding-securities"></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"> Understanding Securities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securitiesact1933.asp">Securities Act of 1933</a> is the first federal legislation to regulate the U.S. stock market, an authority that was previously regulated at the state level. Under the law, anyone who wishes to sell investment contracts to the public must publish certain information regarding the proposed offering, the company making the offering, and the principal figures of that company. </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"> These requirements are intended to protect the investing public from deceptive or misleading marketing practices. The company and its leading figures are strictly liable for any inaccuracy in its financial statements, whether intentional or not. Later legislation created the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/securitiesact1933.asp">Securities and Exchange Commission</a> (SEC), which is responsible for regulations and enforcement. </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"> Although the term "securities" is commonly associated with stocks, bonds, and similar instruments, the U.S. Supreme Court gives the term a much broader interpretation. In the case of Howey vs. SEC (1946), the court found that the plaintiff's sale of land and agricultural services constituted an "investment contract"—even though there was no trace of a stock or bond. </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"> This case established the four-prong <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/howey-test.asp">Howey Test</a>, which states that an investment can be regulated as a security if: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_15-0"></div> <ol class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> <li>There is an investment of money.</li><li>The investment is made into a "common enterprise."</li><li>The investors expect to make a profit from their investment.</li><li>Any expected profits or returns are due to the actions of a third party or promoter.</li> </ol> <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"> Under this rule, it does not matter if a securities offering is formalized with a legal contract or stock certificates; <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/simple-agreement-future-tokens-saft.asp">any type of investment offering</a> can be a security. On several occasions, courts have enforced securities provisions on unconventional assets such as whiskey, beavers, and chinchillas. The SEC has also sought enforcement against issuers of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrencies</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/non-fungible-tokens-nft-5115211">non-fungible tokens</a>.<span class="ql-inline-citation" data-cite="4"></span><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_19-0"></div> <span class="heading-toc" id="toc-types-of-securities"></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 Securities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Securities can be broadly categorized into two distinct types: equity and debt. However, some hybrid securities combine elements of both equities and debts. </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"> Equity Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> An equity security represents ownership interest held by shareholders in an entity (a company, partnership, or trust), realized in the form of shares of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalstock.asp">capital stock</a>, which includes shares of both common and preferred stock. </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"> Holders of equity securities are typically not entitled to regular payments—although equity securities often do pay out dividends—but they are able to profit from <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> when they sell the securities (assuming they've increased in value). </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"> Equity securities do entitle the holder to some control of the company on a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pro-rata.asp">pro rata basis</a>, via <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/votingright.asp">voting rights</a>. In the case of bankruptcy, they share only in <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/residualinterest.asp">residual interest</a> after all obligations have been paid out to creditors. They are sometimes offered as <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/paymentinkind.asp">payment-in-kind</a>. </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"> Debt Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> A debt security represents borrowed money that must be repaid, with terms that stipulate the size of the loan, interest rate, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity</a> or renewal date. </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"> Debt securities, which include government and corporate bonds, certificates of deposit (CDs), and collateralized securities (such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cdo.asp">CDOs</a>​ and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cmo.asp">CMOs</a>​), generally entitle their holder to the regular payment of interest and repayment of principal (regardless of the issuer's performance), along with any other stipulated contractual rights (which do not include voting rights). </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"> They are typically <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity-linked-security.asp">issued for a fixed term</a>, at the end of which they can be redeemed by the issuer. Debt securities can be secured (backed by collateral) or unsecured, and, if secured, may be contractually prioritized over other unsecured, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/subordinateddebt.asp">subordinated debt</a> in the case of bankruptcy.  </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"> Hybrid Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hybridsecurity.asp">Hybrid securities</a>, as the name suggests, combine some of the characteristics of both debt and equity securities. </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"> Examples of hybrid securities include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/warrant.asp">equity warrants</a> (options issued by the company itself that give shareholders the right to purchase stock within a certain timeframe and at a specific price), <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertiblebond.asp">convertible bonds</a> (bonds that can be converted into shares of common stock in the issuing company), and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preference-shares.asp">preference shares</a> (company stocks whose payments of interest, dividends, or other returns of capital can be prioritized over those of other stockholders). </p> <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-callout mntl-block" id="mntl-sc-block_42-0"><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_43-0"><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>Although preferred stock is technically classified as an equity security, it is often treated as a debt security because it "behaves like a bond." Preferred shares offer a fixed dividend rate and are popular instruments for income-seeking investors. They are essentially fixed-income securities.</p></div></div></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"> Derivative Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> A derivative is a type of financial contract whose price is determined by the value of some underlying asset, such as a stock, bond, or commodity. Among the most commonly traded derivatives are <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>, which gain value if the underlying asset appreciates, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/putoption.asp">put options</a>, which gain value when the underlying asset loses value.<br/> </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"> Asset-Backed Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset-backedsecurity.asp">asset-backed security</a> represents a part of a large basket of similar assets, such as loans, leases, credit card debts, mortgages, or anything else that generates income. Over time, the cash flow from these assets is pooled and distributed among the different investors.<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_49-0"></div> <span class="heading-toc" id="toc-how-securities-trade"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_50-0"> <span class="mntl-sc-block-heading__text"> How Securities Trade </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Publicly traded securities are listed on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/exchange.asp">stock exchanges</a>, where issuers can seek security listings and attract investors by ensuring a liquid and regulated market in which to trade. Informal electronic trading systems have become more common in recent years, and securities are now often traded "<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 directly among investors either online or over the phone. </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"> An initial public offering (IPO) represents a company's first major sale of equity securities to the public. Following an IPO, any newly issued stock, while still sold in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/primarymarket.asp">primary market</a>, is referred to as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/secondaryoffering.asp">secondary offering</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"> Alternatively, securities may be offered privately to a restricted and qualified group in what is known as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/privateplacement.asp">private placement</a>—an important distinction in terms of both company law and securities regulation. Sometimes companies sell stock in a combination of a public and private placement. </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"> In the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/secondarymarket.asp">secondary market</a>, also known as the aftermarket, securities are simply transferred as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">assets </a>from one investor to another: shareholders can sell their securities to other investors for cash and/or capital gain. </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"> The secondary market thus supplements the primary. The secondary market is less liquid for privately placed securities since they are not publicly tradable and can only be transferred among qualified investors. </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-investing-in-securities"></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"> Investing in Securities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> The entity that creates the securities for sale is known as the issuer, and those who buy them are, of course, investors. Generally, securities represent an investment and a means by which municipalities, companies, and other commercial enterprises can raise new capital. Companies can generate a lot of money when they go public, selling stock in an initial public offering (IPO), for example. </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"> City, state, or county governments can raise funds for a particular project by floating a municipal bond issue. Depending on an institution's market demand or pricing structure, raising capital through securities can be a preferred alternative to financing through a bank loan. </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"> On the other hand, purchasing securities with borrowed money, an act known as <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/buying-on-margin.asp">buying on a margin</a>, is a popular investment technique. In essence, a company may deliver property rights, in the form of cash or other securities, either at inception or in default, to pay its debt or other obligation to another entity. These collateral arrangements have been growing of late, especially among institutional investors. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_67-0"></div> <span class="heading-toc" id="toc-regulation-of-securities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-heading__text"> Regulation of Securities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> In the United States, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">U.S. Securities and Exchange Commission</a> (SEC) regulates the public offer and sale of securities.  </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"> Public offerings, sales, and trades of U.S. securities must be registered and filed with the SEC's state securities departments. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sro.asp">Self-regulatory organizations</a> (SROs) within the brokerage industry often take on regulatory positions as well. Examples of SROs include the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasd.asp">National Association of Securities Dealers</a> (NASD) and the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/finra.asp">Financial Industry Regulatory Authority</a> (FINRA). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></div> <span class="heading-toc" id="toc-residual-securities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_73-0"> <span class="mntl-sc-block-heading__text"> Residual Securities </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Residual securities are a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/convertible-security.asp">convertible security</a>—that is, they can be changed into another form, usually that of common stock. A convertible bond, for example, is a residual security because it allows the bondholder to convert the security into common shares. </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"> Preferred stock may also have a convertible feature. Corporations may offer residual securities to attract investment capital when competition for funds is intense. </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"> When a residual security is converted or exercised, it increases the number of current outstanding common shares. This can dilute the total share pool and their price also. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dilution.asp">Dilution</a> also affects financial analysis metrics, 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</a>, because a company's earnings have to be divided by a greater number of shares. </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"> In contrast, if a publicly traded company takes measures to reduce the total number of its outstanding shares, the company is said to have consolidated them. The net effect of this action is to increase the value of each individual share. This is often done to attract more or larger investors, such as mutual funds. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></div> <span class="heading-toc" id="toc-other-types-of-securities"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_82-0"> <span class="mntl-sc-block-heading__text"> Other Types of Securities </span> </h2> <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"> Certificated Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificatedstock.asp">Certificated securities</a> are those represented in physical, paper form. Securities may also be held in the direct registration system, which records shares of stock in book-entry form. In other words, a transfer agent maintains the shares on the company's behalf without the need for physical certificates. </p> <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"> Modern technology and policies have, in most cases, eliminated the need for certificates and for the issuer to maintain a complete security register. A system has developed wherein issuers can deposit a single global certificate representing all outstanding securities into a universal depository known as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dtc.asp">Depository Trust Company</a> (DTC). </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"> All securities traded through the DTC are held in electronic form. It is important to note that certificated and un-certificated securities do not differ in terms of the rights or privileges of the shareholder or issuer. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_89-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_90-0"> <span class="mntl-sc-block-subheading__text"> Bearer Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_91-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bearer-instrument.asp">Bearer securities</a> are those that are negotiable and entitle the shareholder to the rights under the security. They are transferred from investor to investor, in certain cases by endorsement and delivery. In terms of proprietary nature, pre-electronic bearer securities were always divided, meaning each security constituted a separate asset, legally distinct from others in the same issue. </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"> Depending on market practice, divided security assets can be fungible or (less commonly) non-fungible, meaning that upon lending, the borrower can return assets equivalent either to the original asset or to a specific identical asset at the end of the loan. In some cases, bearer securities may be used to aid tax evasion, and thus can sometimes be viewed negatively by issuers, shareholders, and fiscal regulatory bodies alike. They are rare in the United States. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_94-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_95-0"> <span class="mntl-sc-block-subheading__text"> Registered Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_96-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/registeredsecurity.asp">Registered securities</a> bear the name of the holder and other necessary details maintained in a register by the issuer. Transfers of registered securities occur through amendments to the register. Registered debt securities are always undivided, meaning the entire issue makes up one single asset, with each security being a part of the whole. Undivided securities are fungible by nature. Secondary market shares are also always undivided.  </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_97-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_98-0"> <span class="mntl-sc-block-subheading__text"> Letter Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_99-0"> Letter securities are not registered with the SEC and cannot be sold publicly in the marketplace. A letter security—also known as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/restrictedstock.asp">restricted security</a>, letter stock, or letter bond—is sold directly by the issuer to the investor. The term is derived from the SEC requirement for an "investment letter" from the purchaser, stating that the purchase is for investment purposes and is not intended for resale. When changing hands, these letters often require an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/form4.asp">SEC Form 4</a>. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_100-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_101-0"> <span class="mntl-sc-block-subheading__text"> Cabinet Securities </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_102-0"> Cabinet securities are listed under a major financial exchange, such as the NYSE, but are not actively traded. Held by an inactive investment crowd, they are more likely to be a bond than a stock. The "cabinet" refers to the physical place where bond orders were historically stored off of the trading floor. The cabinets would typically hold limit orders, and the orders were kept on hand until they expired or were executed. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_103-0"></div> <span class="heading-toc" id="toc-issuing-securities-examples"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_104-0"> <span class="mntl-sc-block-heading__text"> Issuing Securities: Examples </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_105-0"> Consider the case of XYZ, a successful startup interested in raising capital to spur its next stage of growth. Up until now, the startup's ownership has been divided between its two founders. It has a couple of options to access capital. It can tap public markets by conducting an IPO or it can raise money by offering its shares to investors in a private placement. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_106-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_107-0"> The former method enables the company to generate more capital, but it comes saddled with hefty fees and disclosure requirements. In the latter method, shares are traded on secondary markets and are not subject to public scrutiny. Both cases, however, involve the distribution of shares that dilute the stake of founders and confer ownership rights on investors. This is an example of an equity security. </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"> Next, consider a government interested in raising money to revive its economy. It uses bonds (debt securities) to raise that amount, promising regular payments to holders of the coupon. </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"> Finally, look at the case of startup ABC. It raises money from private investors, including family and friends. The startup's founders offer their investors a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/senior-convertible-note.asp">convertible note</a> that converts into shares of the startup at a later event. Most such events are funding events. The note is essentially a debt security because it is a loan made by investors to the startup's founders. </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"> At a later stage, the note turns into equity in the form of a predefined number of shares that give a slice of the company to investors. This is an example of a hybrid security. </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-what-is-the-difference-between-stocks-and-securities"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between Stocks and Securities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Stocks, or equity shares, are one type of security. Each stock share represents fractional ownership of a public corporation, which may include the right to vote for company directors or to receive a small slice of the profits. There are many other types of securities, such as bonds, derivatives, and asset-backed securities.</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-what-are-marketable-securities"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Marketable Securities?</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/terms/m/marketablesecurities.asp">marketable security</a> is any type of stock, bond, or other security that can easily be bought or sold on a public exchange. For example, the shares of public companies can be traded on a stock exchange, and treasury bonds can be bought and sold on the bond market.</p><p>In contrast, a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/non-marketable_securities.asp">non-marketable security</a> is one that cannot be legally sold to the public. For example, shares in non-public companies can only be bought or sold in very limited circumstances.</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-are-treasury-securities"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Treasury Securities?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Treasury securities are debt securities issued by the U.S. Treasury Department to raise money for the government. Since they are backed by the government, these bonds are considered very low-risk and highly desirable for risk-averse investors.</p></div> </div> <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"> Securities represent the most common investment contracts. When saving for retirement, most people choose to put a portion of their savings in equity or debt securities. These securities markets are also important for the market as a whole, in that they allow companies to raise capital from the public. </p></div>

## What Is a Security? The term "security" refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or corporation in the form of a bond, or rights to ownership in the form of an [option](https://www.investopedia.com/terms/c/calloption.asp). ### Key Takeaways * Securities are fungible and tradable financial instruments used to raise capital in public and private markets. * There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity. * Public sales of securities are regulated by the SEC. * Self-regulatory organizations such as NASD, NFA, and FINRA also play an important role in regulating derivative securities. ![Security]() :max_bytes(150000):strip_icc()/Terms_s_security_FINAL-8dd9fbfea9004d4089e361976aa60aef.jpg) Investopedia / Daniel Fishel ## Understanding Securities The [Securities Act of 1933](https://www.investopedia.com/terms/s/securitiesact1933.asp) is the first federal legislation to regulate the U.S. stock market, an authority that was previously regulated at the state level. Under the law, anyone who wishes to sell investment contracts to the public must publish certain information regarding the proposed offering, the company making the offering, and the principal figures of that company. These requirements are intended to protect the investing public from deceptive or misleading marketing practices. The company and its leading figures are strictly liable for any inaccuracy in its financial statements, whether intentional or not. Later legislation created the [Securities and Exchange Commission](https://www.investopedia.com/terms/s/securitiesact1933.asp) (SEC), which is responsible for regulations and enforcement. Although the term "securities" is commonly associated with stocks, bonds, and similar instruments, the U.S. Supreme Court gives the term a much broader interpretation. In the case of Howey vs. SEC (1946), the court found that the plaintiff's sale of land and agricultural services constituted an "investment contract"—even though there was no trace of a stock or bond. This case established the four-prong [Howey Test](https://www.investopedia.com/terms/h/howey-test.asp), which states that an investment can be regulated as a security if: 1. There is an investment of money. 2. The investment is made into a "common enterprise." 3. The investors expect to make a profit from their investment. 4. Any expected profits or returns are due to the actions of a third party or promoter. Under this rule, it does not matter if a securities offering is formalized with a legal contract or stock certificates; [any type of investment offering](https://www.investopedia.com/terms/s/simple-agreement-future-tokens-saft.asp) can be a security. On several occasions, courts have enforced securities provisions on unconventional assets such as whiskey, beavers, and chinchillas. The SEC has also sought enforcement against issuers of [cryptocurrencies](https://www.investopedia.com/terms/c/cryptocurrency.asp) and [non-fungible tokens](https://www.investopedia.com/non-fungible-tokens-nft-5115211). ## Types of Securities Securities can be broadly categorized into two distinct types: equity and debt. However, some hybrid securities combine elements of both equities and debts. ### Equity Securities An equity security represents ownership interest held by shareholders in an entity (a company, partnership, or trust), realized in the form of shares of [capital stock](https://www.investopedia.com/terms/c/capitalstock.asp), which includes shares of both common and preferred stock. Holders of equity securities are typically not entitled to regular payments—although equity securities often do pay out dividends—but they are able to profit from [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) when they sell the securities (assuming they've increased in value). Equity securities do entitle the holder to some control of the company on a [pro rata basis](https://www.investopedia.com/terms/p/pro-rata.asp), via [voting rights](https://www.investopedia.com/terms/v/votingright.asp). In the case of bankruptcy, they share only in [residual interest](https://www.investopedia.com/terms/r/residualinterest.asp) after all obligations have been paid out to creditors. They are sometimes offered as [payment-in-kind](https://www.investopedia.com/terms/p/paymentinkind.asp). ### Debt Securities A debt security represents borrowed money that must be repaid, with terms that stipulate the size of the loan, interest rate, and [maturity](https://www.investopedia.com/terms/m/maturitydate.asp) or renewal date. Debt securities, which include government and corporate bonds, certificates of deposit (CDs), and collateralized securities (such as [CDOs](https://www.investopedia.com/terms/c/cdo.asp)​ and [CMOs](https://www.investopedia.com/terms/c/cmo.asp)​), generally entitle their holder to the regular payment of interest and repayment of principal (regardless of the issuer's performance), along with any other stipulated contractual rights (which do not include voting rights). They are typically [issued for a fixed term](https://www.investopedia.com/terms/e/equity-linked-security.asp), at the end of which they can be redeemed by the issuer. Debt securities can be secured (backed by collateral) or unsecured, and, if secured, may be contractually prioritized over other unsecured, [subordinated debt](https://www.investopedia.com/terms/s/subordinateddebt.asp) in the case of bankruptcy.  ### Hybrid Securities [Hybrid securities](https://www.investopedia.com/terms/h/hybridsecurity.asp), as the name suggests, combine some of the characteristics of both debt and equity securities. Examples of hybrid securities include [equity warrants](https://www.investopedia.com/terms/w/warrant.asp) (options issued by the company itself that give shareholders the right to purchase stock within a certain timeframe and at a specific price), [convertible bonds](https://www.investopedia.com/terms/c/convertiblebond.asp) (bonds that can be converted into shares of common stock in the issuing company), and [preference shares](https://www.investopedia.com/terms/p/preference-shares.asp) (company stocks whose payments of interest, dividends, or other returns of capital can be prioritized over those of other stockholders). ### Although preferred stock is technically classified as an equity security, it is often treated as a debt security because it "behaves like a bond." Preferred shares offer a fixed dividend rate and are popular instruments for income-seeking investors. They are essentially fixed-income securities. ### Derivative Securities A derivative is a type of financial contract whose price is determined by the value of some underlying asset, such as a stock, bond, or commodity. Among the most commonly traded derivatives are [call options](https://www.investopedia.com/terms/c/calloption.asp), which gain value if the underlying asset appreciates, and [put options](https://www.investopedia.com/terms/p/putoption.asp), which gain value when the underlying asset loses value. ### Asset-Backed Securities An [asset-backed security](https://www.investopedia.com/terms/a/asset-backedsecurity.asp) represents a part of a large basket of similar assets, such as loans, leases, credit card debts, mortgages, or anything else that generates income. Over time, the cash flow from these assets is pooled and distributed among the different investors. ## How Securities Trade Publicly traded securities are listed on [stock exchanges](https://www.investopedia.com/terms/e/exchange.asp), where issuers can seek security listings and attract investors by ensuring a liquid and regulated market in which to trade. Informal electronic trading systems have become more common in recent years, and securities are now often traded "[over-the-counter](https://www.investopedia.com/terms/o/otc.asp)," or directly among investors either online or over the phone. An initial public offering (IPO) represents a company's first major sale of equity securities to the public. Following an IPO, any newly issued stock, while still sold in the [primary market](https://www.investopedia.com/terms/p/primarymarket.asp), is referred to as a [secondary offering](https://www.investopedia.com/terms/s/secondaryoffering.asp). Alternatively, securities may be offered privately to a restricted and qualified group in what is known as a [private placement](https://www.investopedia.com/terms/p/privateplacement.asp)—an important distinction in terms of both company law and securities regulation. Sometimes companies sell stock in a combination of a public and private placement. In the [secondary market](https://www.investopedia.com/terms/s/secondarymarket.asp), also known as the aftermarket, securities are simply transferred as [assets](https://www.investopedia.com/terms/a/asset.asp)from one investor to another: shareholders can sell their securities to other investors for cash and/or capital gain. The secondary market thus supplements the primary. The secondary market is less liquid for privately placed securities since they are not publicly tradable and can only be transferred among qualified investors. ## Investing in Securities The entity that creates the securities for sale is known as the issuer, and those who buy them are, of course, investors. Generally, securities represent an investment and a means by which municipalities, companies, and other commercial enterprises can raise new capital. Companies can generate a lot of money when they go public, selling stock in an initial public offering (IPO), for example. City, state, or county governments can raise funds for a particular project by floating a municipal bond issue. Depending on an institution's market demand or pricing structure, raising capital through securities can be a preferred alternative to financing through a bank loan. On the other hand, purchasing securities with borrowed money, an act known as [buying on a margin](https://www.investopedia.com/terms/b/buying-on-margin.asp), is a popular investment technique. In essence, a company may deliver property rights, in the form of cash or other securities, either at inception or in default, to pay its debt or other obligation to another entity. These collateral arrangements have been growing of late, especially among institutional investors. ## Regulation of Securities In the United States, the [U.S. Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) regulates the public offer and sale of securities.  Public offerings, sales, and trades of U.S. securities must be registered and filed with the SEC's state securities departments. [Self-regulatory organizations](https://www.investopedia.com/terms/s/sro.asp) (SROs) within the brokerage industry often take on regulatory positions as well. Examples of SROs include the [National Association of Securities Dealers](https://www.investopedia.com/terms/n/nasd.asp) (NASD) and the [Financial Industry Regulatory Authority](https://www.investopedia.com/terms/f/finra.asp) (FINRA). ## Residual Securities Residual securities are a type of [convertible security](https://www.investopedia.com/terms/c/convertible-security.asp)—that is, they can be changed into another form, usually that of common stock. A convertible bond, for example, is a residual security because it allows the bondholder to convert the security into common shares. Preferred stock may also have a convertible feature. Corporations may offer residual securities to attract investment capital when competition for funds is intense. When a residual security is converted or exercised, it increases the number of current outstanding common shares. This can dilute the total share pool and their price also. [Dilution](https://www.investopedia.com/terms/d/dilution.asp) also affects financial analysis metrics, such as [earnings per share](https://www.investopedia.com/terms/e/eps.asp), because a company's earnings have to be divided by a greater number of shares. In contrast, if a publicly traded company takes measures to reduce the total number of its outstanding shares, the company is said to have consolidated them. The net effect of this action is to increase the value of each individual share. This is often done to attract more or larger investors, such as mutual funds. ## Other Types of Securities ### Certificated Securities [Certificated securities](https://www.investopedia.com/terms/c/certificatedstock.asp) are those represented in physical, paper form. Securities may also be held in the direct registration system, which records shares of stock in book-entry form. In other words, a transfer agent maintains the shares on the company's behalf without the need for physical certificates. Modern technology and policies have, in most cases, eliminated the need for certificates and for the issuer to maintain a complete security register. A system has developed wherein issuers can deposit a single global certificate representing all outstanding securities into a universal depository known as the [Depository Trust Company](https://www.investopedia.com/terms/d/dtc.asp) (DTC). All securities traded through the DTC are held in electronic form. It is important to note that certificated and un-certificated securities do not differ in terms of the rights or privileges of the shareholder or issuer. ### Bearer Securities [Bearer securities](https://www.investopedia.com/terms/b/bearer-instrument.asp) are those that are negotiable and entitle the shareholder to the rights under the security. They are transferred from investor to investor, in certain cases by endorsement and delivery. In terms of proprietary nature, pre-electronic bearer securities were always divided, meaning each security constituted a separate asset, legally distinct from others in the same issue. Depending on market practice, divided security assets can be fungible or (less commonly) non-fungible, meaning that upon lending, the borrower can return assets equivalent either to the original asset or to a specific identical asset at the end of the loan. In some cases, bearer securities may be used to aid tax evasion, and thus can sometimes be viewed negatively by issuers, shareholders, and fiscal regulatory bodies alike. They are rare in the United States. ### Registered Securities [Registered securities](https://www.investopedia.com/terms/r/registeredsecurity.asp) bear the name of the holder and other necessary details maintained in a register by the issuer. Transfers of registered securities occur through amendments to the register. Registered debt securities are always undivided, meaning the entire issue makes up one single asset, with each security being a part of the whole. Undivided securities are fungible by nature. Secondary market shares are also always undivided.  ### Letter Securities Letter securities are not registered with the SEC and cannot be sold publicly in the marketplace. A letter security—also known as a [restricted security](https://www.investopedia.com/terms/r/restrictedstock.asp), letter stock, or letter bond—is sold directly by the issuer to the investor. The term is derived from the SEC requirement for an "investment letter" from the purchaser, stating that the purchase is for investment purposes and is not intended for resale. When changing hands, these letters often require an [SEC Form 4](https://www.investopedia.com/terms/f/form4.asp). ### Cabinet Securities Cabinet securities are listed under a major financial exchange, such as the NYSE, but are not actively traded. Held by an inactive investment crowd, they are more likely to be a bond than a stock. The "cabinet" refers to the physical place where bond orders were historically stored off of the trading floor. The cabinets would typically hold limit orders, and the orders were kept on hand until they expired or were executed. ## Issuing Securities: Examples Consider the case of XYZ, a successful startup interested in raising capital to spur its next stage of growth. Up until now, the startup's ownership has been divided between its two founders. It has a couple of options to access capital. It can tap public markets by conducting an IPO or it can raise money by offering its shares to investors in a private placement. The former method enables the company to generate more capital, but it comes saddled with hefty fees and disclosure requirements. In the latter method, shares are traded on secondary markets and are not subject to public scrutiny. Both cases, however, involve the distribution of shares that dilute the stake of founders and confer ownership rights on investors. This is an example of an equity security. Next, consider a government interested in raising money to revive its economy. It uses bonds (debt securities) to raise that amount, promising regular payments to holders of the coupon. Finally, look at the case of startup ABC. It raises money from private investors, including family and friends. The startup's founders offer their investors a [convertible note](https://www.investopedia.com/terms/s/senior-convertible-note.asp) that converts into shares of the startup at a later event. Most such events are funding events. The note is essentially a debt security because it is a loan made by investors to the startup's founders. At a later stage, the note turns into equity in the form of a predefined number of shares that give a slice of the company to investors. This is an example of a hybrid security. ## What Is the Difference Between Stocks and Securities? Stocks, or equity shares, are one type of security. Each stock share represents fractional ownership of a public corporation, which may include the right to vote for company directors or to receive a small slice of the profits. There are many other types of securities, such as bonds, derivatives, and asset-backed securities. ## What Are Marketable Securities? A [marketable security](https://www.investopedia.com/terms/m/marketablesecurities.asp) is any type of stock, bond, or other security that can easily be bought or sold on a public exchange. For example, the shares of public companies can be traded on a stock exchange, and treasury bonds can be bought and sold on the bond market. In contrast, a [non-marketable security](https://www.investopedia.com/terms/n/non-marketable_securities.asp) is one that cannot be legally sold to the public. For example, shares in non-public companies can only be bought or sold in very limited circumstances. ## What Are Treasury Securities? Treasury securities are debt securities issued by the U.S. Treasury Department to raise money for the government. Since they are backed by the government, these bonds are considered very low-risk and highly desirable for risk-averse investors. ## The Bottom Line Securities represent the most common investment contracts. When saving for retirement, most people choose to put a portion of their savings in equity or debt securities. These securities markets are also important for the market as a whole, in that they allow companies to raise capital from the public.

What Is a Security? The term "security" refers to a multitude of different investments, such as stocks, bonds, investment contracts, notes, and derivatives. For example, a security can represent ownership in a corporation in the form of stock, a creditor relationship with a governmental body or corporation in the form of a bond, or rights to ownership in the form of an option. Key Takeaways Securities are fungible and tradable financial instruments used to raise capital in public and private markets.There are primarily three types of securities: equity—which provides ownership rights to holders; debt—essentially loans repaid with periodic payments; and hybrids—which combine aspects of debt and equity.Public sales of securities are regulated by the SEC. Self-regulatory organizations such as NASD, NFA, and FINRA also play an important role in regulating derivative securities. Investopedia / Daniel Fishel Understanding Securities The Securities Act of 1933 is the first federal legislation to regulate the U.S. stock market, an authority that was previously regulated at the state level. Under the law, anyone who wishes to sell investment contracts to the public must publish certain information regarding the proposed offering, the company making the offering, and the principal figures of that company. These requirements are intended to protect the investing public from deceptive or misleading marketing practices. The company and its leading figures are strictly liable for any inaccuracy in its financial statements, whether intentional or not. Later legislation created the Securities and Exchange Commission (SEC), which is responsible for regulations and enforcement. Although the term "securities" is commonly associated with stocks, bonds, and similar instruments, the U.S. Supreme Court gives the term a much broader interpretation. In the case of Howey vs. SEC (1946), the court found that the plaintiff's sale of land and agricultural services constituted an "investment contract"—even though there was no trace of a stock or bond. This case established the four-prong Howey Test, which states that an investment can be regulated as a security if: There is an investment of money.The investment is made into a "common enterprise."The investors expect to make a profit from their investment.Any expected profits or returns are due to the actions of a third party or promoter. Under this rule, it does not matter if a securities offering is formalized with a legal contract or stock certificates; any type of investment offering can be a security. On several occasions, courts have enforced securities provisions on unconventional assets such as whiskey, beavers, and chinchillas. The SEC has also sought enforcement against issuers of cryptocurrencies and non-fungible tokens. Types of Securities Securities can be broadly categorized into two distinct types: equity and debt. However, some hybrid securities combine elements of both equities and debts. Equity Securities An equity security represents ownership interest held by shareholders in an entity (a company, partnership, or trust), realized in the form of shares of capital stock, which includes shares of both common and preferred stock. Holders of equity securities are typically not entitled to regular payments—although equity securities often do pay out dividends—but they are able to profit from capital gains when they sell the securities (assuming they've increased in value). Equity securities do entitle the holder to some control of the company on a pro rata basis, via voting rights. In the case of bankruptcy, they share only in residual interest after all obligations have been paid out to creditors. They are sometimes offered as payment-in-kind. Debt Securities A debt security represents borrowed money that must be repaid, with terms that stipulate the size of the loan, interest rate, and maturity or renewal date. Debt securities, which include government and corporate bonds, certificates of deposit (CDs), and collateralized securities (such as CDOs​ and CMOs​), generally entitle their holder to the regular payment of interest and repayment of principal (regardless of the issuer's performance), along with any other stipulated contractual rights (which do not include voting rights). They are typically issued for a fixed term, at the end of which they can be redeemed by the issuer. Debt securities can be secured (backed by collateral) or unsecured, and, if secured, may be contractually prioritized over other unsecured, subordinated debt in the case of bankruptcy.  Hybrid Securities Hybrid securities, as the name suggests, combine some of the characteristics of both debt and equity securities. Examples of hybrid securities include equity warrants (options issued by the company itself that give shareholders the right to purchase stock within a certain timeframe and at a specific price), convertible bonds (bonds that can be converted into shares of common stock in the issuing company), and preference shares (company stocks whose payments of interest, dividends, or other returns of capital can be prioritized over those of other stockholders). Although preferred stock is technically classified as an equity security, it is often treated as a debt security because it "behaves like a bond." Preferred shares offer a fixed dividend rate and are popular instruments for income-seeking investors. They are essentially fixed-income securities. Derivative Securities A derivative is a type of financial contract whose price is determined by the value of some underlying asset, such as a stock, bond, or commodity. Among the most commonly traded derivatives are call options, which gain value if the underlying asset appreciates, and put options, which gain value when the underlying asset loses value. Asset-Backed Securities An asset-backed security represents a part of a large basket of similar assets, such as loans, leases, credit card debts, mortgages, or anything else that generates income. Over time, the cash flow from these assets is pooled and distributed among the different investors. How Securities Trade Publicly traded securities are listed on stock exchanges, where issuers can seek security listings and attract investors by ensuring a liquid and regulated market in which to trade. Informal electronic trading systems have become more common in recent years, and securities are now often traded "over-the-counter," or directly among investors either online or over the phone. An initial public offering (IPO) represents a company's first major sale of equity securities to the public. Following an IPO, any newly issued stock, while still sold in the primary market, is referred to as a secondary offering. Alternatively, securities may be offered privately to a restricted and qualified group in what is known as a private placement—an important distinction in terms of both company law and securities regulation. Sometimes companies sell stock in a combination of a public and private placement. In the secondary market, also known as the aftermarket, securities are simply transferred as assets from one investor to another: shareholders can sell their securities to other investors for cash and/or capital gain. The secondary market thus supplements the primary. The secondary market is less liquid for privately placed securities since they are not publicly tradable and can only be transferred among qualified investors. Investing in Securities The entity that creates the securities for sale is known as the issuer, and those who buy them are, of course, investors. Generally, securities represent an investment and a means by which municipalities, companies, and other commercial enterprises can raise new capital. Companies can generate a lot of money when they go public, selling stock in an initial public offering (IPO), for example. City, state, or county governments can raise funds for a particular project by floating a municipal bond issue. Depending on an institution's market demand or pricing structure, raising capital through securities can be a preferred alternative to financing through a bank loan. On the other hand, purchasing securities with borrowed money, an act known as buying on a margin, is a popular investment technique. In essence, a company may deliver property rights, in the form of cash or other securities, either at inception or in default, to pay its debt or other obligation to another entity. These collateral arrangements have been growing of late, especially among institutional investors. Regulation of Securities In the United States, the U.S. Securities and Exchange Commission (SEC) regulates the public offer and sale of securities.  Public offerings, sales, and trades of U.S. securities must be registered and filed with the SEC's state securities departments. Self-regulatory organizations (SROs) within the brokerage industry often take on regulatory positions as well. Examples of SROs include the National Association of Securities Dealers (NASD) and the Financial Industry Regulatory Authority (FINRA). Residual Securities Residual securities are a type of convertible security—that is, they can be changed into another form, usually that of common stock. A convertible bond, for example, is a residual security because it allows the bondholder to convert the security into common shares. Preferred stock may also have a convertible feature. Corporations may offer residual securities to attract investment capital when competition for funds is intense. When a residual security is converted or exercised, it increases the number of current outstanding common shares. This can dilute the total share pool and their price also. Dilution also affects financial analysis metrics, such as earnings per share, because a company's earnings have to be divided by a greater number of shares. In contrast, if a publicly traded company takes measures to reduce the total number of its outstanding shares, the company is said to have consolidated them. The net effect of this action is to increase the value of each individual share. This is often done to attract more or larger investors, such as mutual funds. Other Types of Securities Certificated Securities Certificated securities are those represented in physical, paper form. Securities may also be held in the direct registration system, which records shares of stock in book-entry form. In other words, a transfer agent maintains the shares on the company's behalf without the need for physical certificates. Modern technology and policies have, in most cases, eliminated the need for certificates and for the issuer to maintain a complete security register. A system has developed wherein issuers can deposit a single global certificate representing all outstanding securities into a universal depository known as the Depository Trust Company (DTC). All securities traded through the DTC are held in electronic form. It is important to note that certificated and un-certificated securities do not differ in terms of the rights or privileges of the shareholder or issuer. Bearer Securities Bearer securities are those that are negotiable and entitle the shareholder to the rights under the security. They are transferred from investor to investor, in certain cases by endorsement and delivery. In terms of proprietary nature, pre-electronic bearer securities were always divided, meaning each security constituted a separate asset, legally distinct from others in the same issue. Depending on market practice, divided security assets can be fungible or (less commonly) non-fungible, meaning that upon lending, the borrower can return assets equivalent either to the original asset or to a specific identical asset at the end of the loan. In some cases, bearer securities may be used to aid tax evasion, and thus can sometimes be viewed negatively by issuers, shareholders, and fiscal regulatory bodies alike. They are rare in the United States. Registered Securities Registered securities bear the name of the holder and other necessary details maintained in a register by the issuer. Transfers of registered securities occur through amendments to the register. Registered debt securities are always undivided, meaning the entire issue makes up one single asset, with each security being a part of the whole. Undivided securities are fungible by nature. Secondary market shares are also always undivided.  Letter Securities Letter securities are not registered with the SEC and cannot be sold publicly in the marketplace. A letter security—also known as a restricted security, letter stock, or letter bond—is sold directly by the issuer to the investor. The term is derived from the SEC requirement for an "investment letter" from the purchaser, stating that the purchase is for investment purposes and is not intended for resale. When changing hands, these letters often require an SEC Form 4. Cabinet Securities Cabinet securities are listed under a major financial exchange, such as the NYSE, but are not actively traded. Held by an inactive investment crowd, they are more likely to be a bond than a stock. The "cabinet" refers to the physical place where bond orders were historically stored off of the trading floor. The cabinets would typically hold limit orders, and the orders were kept on hand until they expired or were executed. Issuing Securities: Examples Consider the case of XYZ, a successful startup interested in raising capital to spur its next stage of growth. Up until now, the startup's ownership has been divided between its two founders. It has a couple of options to access capital. It can tap public markets by conducting an IPO or it can raise money by offering its shares to investors in a private placement. The former method enables the company to generate more capital, but it comes saddled with hefty fees and disclosure requirements. In the latter method, shares are traded on secondary markets and are not subject to public scrutiny. Both cases, however, involve the distribution of shares that dilute the stake of founders and confer ownership rights on investors. This is an example of an equity security. Next, consider a government interested in raising money to revive its economy. It uses bonds (debt securities) to raise that amount, promising regular payments to holders of the coupon. Finally, look at the case of startup ABC. It raises money from private investors, including family and friends. The startup's founders offer their investors a convertible note that converts into shares of the startup at a later event. Most such events are funding events. The note is essentially a debt security because it is a loan made by investors to the startup's founders. At a later stage, the note turns into equity in the form of a predefined number of shares that give a slice of the company to investors. This is an example of a hybrid security. What Is the Difference Between Stocks and Securities? Stocks, or equity shares, are one type of security. Each stock share represents fractional ownership of a public corporation, which may include the right to vote for company directors or to receive a small slice of the profits. There are many other types of securities, such as bonds, derivatives, and asset-backed securities. What Are Marketable Securities? A marketable security is any type of stock, bond, or other security that can easily be bought or sold on a public exchange. For example, the shares of public companies can be traded on a stock exchange, and treasury bonds can be bought and sold on the bond market.In contrast, a non-marketable security is one that cannot be legally sold to the public. For example, shares in non-public companies can only be bought or sold in very limited circumstances. What Are Treasury Securities? Treasury securities are debt securities issued by the U.S. Treasury Department to raise money for the government. Since they are backed by the government, these bonds are considered very low-risk and highly desirable for risk-averse investors. The Bottom Line Securities represent the most common investment contracts. When saving for retirement, most people choose to put a portion of their savings in equity or debt securities. These securities markets are also important for the market as a whole, in that they allow companies to raise capital from the public.

https://www.investopedia.com/top-cd-rates-today-april-4-2024-leading-18-month-rate-falls-8625041

Top CDs Today, April 4, 2024 - Leading 18-Month Rate Falls

<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 highest nationally available rate in the 18-month term fell today from 5.35% to 5.25% APY, offered by <a 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.nasafcu.com/personal/checking-savings/certificates&amp;lender=NASA%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">NASA Federal Credit Union</a> for 15 months or <a data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://figfcu.org/flex-term-certificate&amp;lender=Farmers%20Insurance%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">Farmers Insurance Federal Credit Union</a> for 18 months.</li> <li>Overall, the best CD rate in the country remains 5.65%, unveiled yesterday by <a data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.mutualone.com/client-services/rates-calculators/deposit-rates/&amp;lender=MutualOne%20Bank&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">MutualOne Bank</a> for a 3-month term.</li> <li>A total of 16 CDs currently pay 5.40% or better, on terms up to 12 months.</li> <li>CDs ranging from 2 years to 5 years are paying top rates of 4.70% to 5.20% APY.</li> <li>The <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214">best CD rates</a> have been gradually inching lower for months. But they'll begin falling faster once the Fed appears ready to make a rate cut—something that's expected later this year.</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_3-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:79.3%;"> <img alt="Bar graph showing the top nationally available APY per CD term, which range from 4.70% to 5.65% APY - Rates current as of April 4, 2024" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/DSZIHJ6NWmGBfM0KI6KztH6b948=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/DSZIHJ6NWmGBfM0KI6KztH6b948=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png" data-srcset="https://www.investopedia.com/thmb/4So_0fjMFm54ah35Tbi0tFBqgCU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png 750w" data-tracking-container="true" height="1968" id="mntl-sc-block-image_1-0" width="2480"/> <noscript> <img alt="Bar graph showing the top nationally available APY per CD term, which range from 4.70% to 5.65% APY - Rates current as of April 4, 2024" class="img--noscript universal-image__image" height="1968" sizes="750px" src="https://www.investopedia.com/thmb/DSZIHJ6NWmGBfM0KI6KztH6b948=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png" srcset="https://www.investopedia.com/thmb/4So_0fjMFm54ah35Tbi0tFBqgCU=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png 750w" width="2480"/> </noscript> </div> </div> </figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Below you'll find featured rates available from our partners, followed by details from our ranking of the best CDs available nationwide. </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 mntl-sc-block-tool mntl-block mntl-sc-block--ma-rate-table--finance-mma" id="mntl-sc-block_6-0"><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_7-0"></div> <span class="heading-toc" id="toc-lock-in-540-to-565-apy-for-3-to-12-months"></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"> Lock In 5.40% to 5.65% APY for 3 to 12 Months </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The top rate on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-18-month-cd-rates-5272348">18-month certificates</a> took a tumble today, with the previous 5.35% rate leader coming off the market. The most you can now earn on a nationally available 18-month CD is 5.25%, which you can have two ways. NASA Federal Credit Union is paying that yield on a 15-month certificate, while Farmers Insurance Federal Credit Union lets you lock in that rate for 18 months. </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 highest CD returns are available on short-term certificates. After two weeks of the nation-leading rate being <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-6-month-cd-rates-4783267">5.55% APY on a 6-month certificate</a>, still available from Newtek Bank, a new CD took the rate crown yesterday. MutualOne Bank is offering 5.65% APY on a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-3-month-cd-rates-5272288">3-month term</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"> In addition to those top two rates, 14 more CDs are paying 5.40% APY or more, with terms of 3 to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-1-year-cd-rates-4796650">12 months</a>. Four of those are 5-7 month CDs paying 5.50% APY.<br/> </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_15-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/TmpTt/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Ranges of the Top 15 CD rates by term"></iframe></div> <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-longer-terms-secure-your-rate-to-2026-and-beyond"></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"> Longer Terms Secure Your Rate to 2026 and Beyond </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Want to guarantee your CD rate even longer? You can choose a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-2-year-cd-rates-4801682">top 2-year CD</a> paying 5.20%, locking it up until 2026. Or secure a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-3-year-cd-rates-4782938">5.00% rate as far as 2027</a>. Though that's the longest term offering a rate of 5% or better, you can alternatively opt to guarantee a high-4% rate for as far as 4 to 5 years into the future. </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="width: 101px;"></colgroup> <colgroup span="1" style="width: 108px;"></colgroup> <colgroup span="1" style="width: 107px;"></colgroup> <colgroup span="1" style="width: 126px;"></colgroup> <colgroup span="1" style=""></colgroup> <tbody data-check="-1"> <tr> <td><b>CD Terms</b></td> <td><b>Yesterday's Top National Rate</b></td> <td><b>Today's Top National Rate</b></td> <td><b>Day's Change </b>(percentage points)</td> <td><b>Top Rate Provider</b></td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-3-month-cd-rates-5272288" rel="noopener noreferrer">3 months</a></td> <td>5.65% APY</td> <td>5.65% APY</td> <td>No change</td> <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.mutualone.com/client-services/rates-calculators/deposit-rates/&amp;lender=MutualOne%20Bank&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">MutualOne Bank</a></td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-6-month-cd-rates-4783267" rel="noopener noreferrer">6 months</a></td> <td>5.55% APY</td> <td>5.55% APY</td> <td>No change</td> <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.newtekbank.com/certificate-of-deposit/&amp;lender=Newtek%20Bank&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">Newtek Bank</a></td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-1-year-cd-rates-4796650" rel="noopener noreferrer">1 year</a></td> <td>5.40% APY</td> <td>5.40% APY</td> <td>No change</td> <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.cfg.bank/personal-banking/personal-deposit-rates/&amp;lender=CFG%20Bank&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">CFG Bank</a> and 3 more</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-18-month-cd-rates-5272348" rel="noopener noreferrer">18 months</a></td> <td>5.35% APY</td> <td>5.25% APY</td> <td>- 0.10</td> <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.nasafcu.com/personal/checking-savings/certificates&amp;lender=NASA%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">NASA Federal Credit Union</a> and <a class="null" data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://figfcu.org/flex-term-certificate&amp;lender=Farmers%20Insurance%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">Farmers Insurance Federal Credit Union</a></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.xcelfcu.org/Explore/Resources/Rates&amp;lender=XCEL%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">2 years</a></td> <td>5.20% APY</td> <td>5.20% APY</td> <td>No change</td> <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="nofollow">Credit Human</a></td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-3-year-cd-rates-4782938" rel="noopener noreferrer">3 years</a></td> <td>5.00% APY</td> <td>5.00% APY</td> <td>No change</td> <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> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-5-year-cd-rates-4801473" rel="noopener noreferrer">4 years</a></td> <td>4.80% APY</td> <td>4.80% APY</td> <td>No change</td> <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.pelicanstatecu.com/rates&amp;lender=Pelican%20State%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">Pelican State Credit Union</a></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.lfcu.org/rates/personal-certificate-rates/&amp;lender=Lafayette%20Federal%20Credit%20Union&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">5 years</a></td> <td>4.70% APY</td> <td>4.70% APY</td> <td>No change</td> <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="nofollow">Credit Human</a></td> </tr> </tbody> </table> <figcaption>To view the top 15–20 nationwide rates in any term, click on the desired term length in the left column above.</figcaption> </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-cd-rates-are-still-near-historic-highs"></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"> CD Rates Are Still Near Historic Highs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <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) rates</a> have softened since climbing to a record high of 6.50% in October. At the start of February, the number of CDs in our daily ranking that paid a least 5.50% APY was 30. Including today's new top offer, that count is down to six. </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"> But don't lose sight of how high CD returns still are relative to the past 20 years. Locking in a yield in the 4% to 5% range for a year or more down the road is still a great earning opportunity. </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"> Also keep in mind that snagging the absolute <em>highest</em> APY isn't the only way to win with today's CDs. Since CD rates could fall quite substantially in 2024 and 2025, locking in a long-term rate now— before rates move lower—can be a smart move.<br> </br></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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_29-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/v64Fl/2/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="Today's CD rates vs. fall peak vs. 2022"></iframe></div> <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-jumbo-deposits-can-provide-more-cd-options"></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"> Jumbo Deposits Can Provide More CD Options </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The top two jumbo CDs let you earn more than you can with a standard CD. <a 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://statebnk.com/sbotrates/&amp;lender=State%20Bank%20Credit%20Texas&amp;type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ" rel="nofollow">State Bank of Texas</a> is paying 5.50% APY on a 12-month certificate, while <a data-affiliate-link-rewriter="sub_1=${REQUEST_ID}&amp;sub_2=${DOC_ID}" data-component="link" data-ordinal="2" 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="nofollow">My eBanc</a> offers 5.49% APY for 6 months. </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"> Beware that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-jumbo-cd-rates-4797766">the best jumbo CD rates</a> don't <em>always</em> pay more than standard certificates. Often, you can do just as well—or better—with a standard CD. That's the case right now in six of the terms below, so it's always wise to shop both certificate types before making a final decision. </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-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_36-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style="width: 92px;"></colgroup> <colgroup span="1" style="width: 147px;"></colgroup> <colgroup span="1" style="width: 159px;"></colgroup> <colgroup span="1" style="width: 144px;"></colgroup> <tbody data-check="-1"> <tr> <td><b>CD Term</b></td> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-bank-cd-rates-4801462" rel="noopener noreferrer">Today's Top National Bank Rate</a></b></td> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-cd-rates-4770214" rel="noopener noreferrer">Today's Top National Credit Union Rate</a></b></td> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-jumbo-cd-rates-4797766" rel="noopener noreferrer">Today's Top National Jumbo Rate</a></b></td> </tr> <tr> <td>3 months</td> <td>5.65% APY*</td> <td>5.30% APY</td> <td>5.20% APY</td> </tr> <tr> <td>6 months</td> <td>5.55% APY*</td> <td>5.50% APY</td> <td>5.49% APY</td> </tr> <tr> <td>1 year</td> <td>5.40% APY</td> <td>5.40% APY</td> <td>5.50% APY*</td> </tr> <tr> <td>18 months</td> <td>5.15% APY</td> <td>5.25% APY</td> <td>5.41% APY*</td> </tr> <tr> <td>2 years</td> <td>4.85% APY</td> <td>5.20% APY*</td> <td>4.96% APY</td> </tr> <tr> <td>3 years</td> <td>5.00% APY*</td> <td>5.00% APY*</td> <td>4.97% APY</td> </tr> <tr> <td>4 years</td> <td>4.55% APY</td> <td>4.80% APY*</td> <td>4.48% APY</td> </tr> <tr> <td>5 years</td> <td>4.55% APY</td> <td>4.70% APY*</td> <td>4.37% APY</td> </tr> </tbody> </table> <figcaption>*Indicates the highest APY offered in each term. To view our lists of the top-paying CDs across terms for bank, credit union, and jumbo certificates, click on the column headers above.</figcaption> </div></figure> <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-where-are-cd-rates-headed-in-2024"></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"> Where Are CD Rates Headed in 2024? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> CD rates are expected to fall further this year. The question is when exactly. The answer depends on moves by the Federal Reserve, which controls 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>, which in turn heavily influences CD rates. </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 Fed announced on March 20 that it is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/federal-reserve-fomc-meeting-march-2024-8611723">maintaining the fed fund rate at its current level</a>, the fifth meeting in a row it's done so.<span class="ql-inline-citation" data-cite="32"></span> To combat decades-high inflation, the Fed had aggressively hiked interest rates between March 2022 and July 2023, raising the fed funds rate to its highest level in 22 years. </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"> This created historically favorable conditions for CD shoppers, as well as for anyone holding cash in a <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>. Rates on CDs continued rising to a peak this fall, reaching their highest levels in two decades. </p> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_45-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/Lme15/1/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="Top CD Rates Since December 2021"></iframe></div> <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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inflation.asp">Inflation</a> has since been cooling, allowing the Fed to stop raising interest rates. But further inflation progress has been elusive, putting the central bank in wait-and-see mode as it looks for evidence that inflation is falling enough to justify lowering the federal funds rate. Reiterating the Fed's recent meeting statement, Fed Chair Jerome Powell spoke today about how the first rate cut could still be a ways off. </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"> "We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy," Powell said in prepared remarks.<span class="ql-inline-citation" data-cite="43"></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"> Federal Reserve Gov. Chris Waller expressed a similar sentiment last week, saying inflation and job gains data from this quarter have reinforced his earlier view that "there is no rush" to cut interest rates.<span class="ql-inline-citation" data-cite="45"></span> That was before economic indicators were released later in the week showed that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-march-28-8621483">GDP growth in the fourth quarter of last year was higher than expected</a>, and the number of people filing for unemployment fell in the week ending March 23.<span class="ql-inline-citation" data-cite="46"></span> That's just more data backing up the argument that the economy is running strong and a rate cut isn't needed right away. </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"> At its March 20 meeting, the median prediction from members of the Fed's rate-setting committee was for three rate reductions this year.<span class="ql-inline-citation" data-cite="41"></span> Financial markets still currently agree, betting on at least three rate decreases this calendar year, according to the CME Group's FedWatch Tool. A majority of traders believe the first cut will arrive in June.<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_54-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> Of course, what markets predict today and what the Fed ultimately does may or may not align. But given an assumption of a reduced fed funds rate sometime this year, CD rates are likely to continue drifting lower. Then once it appears a Fed rate decrease is actually forthcoming, CD rate declines will accelerate. </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"> The central bank will hold six more rate-setting meetings in 2024, with the next one scheduled for April 30 through May 1.<span class="ql-inline-citation" data-cite="42"></span><br/> </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 mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_60-0"><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-high-yield-savings-accounts-4770633" id="mntl-sc-block-featuredlink__link_1-0" rel="nocaes"><span class="link__wrapper">Best High-Yield Savings Accounts for May 2024—Up to 5.55%</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_62-0"><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-cd-rates-4770214" id="mntl-sc-block-featuredlink__link_2-0" rel="nocaes"><span class="link__wrapper">Best CD Rates for May 2024: Up to 5.51%</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_64-0"><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_3-0" 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_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-important" 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" 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>Note that the "top rates" quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher.</p></div></div></div> <span class="heading-toc" id="toc-how-we-find-the-best-cd-rates"></span><h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_68-0"> <span class="mntl-sc-block-heading__text"> How We Find the Best CD Rates </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> 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> <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"> 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>.<br/> </p></div>

### Key Takeaways * The highest nationally available rate in the 18-month term fell today from 5.35% to 5.25% APY, offered by [NASA Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.nasafcu.com/personal/checking-savings/certificates&lender=NASA%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) for 15 months or [Farmers Insurance Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://figfcu.org/flex-term-certificate&lender=Farmers%20Insurance%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) for 18 months. * Overall, the best CD rate in the country remains 5.65%, unveiled yesterday by [MutualOne Bank](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.mutualone.com/client-services/rates-calculators/deposit-rates/&lender=MutualOne%20Bank&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) for a 3-month term. * A total of 16 CDs currently pay 5.40% or better, on terms up to 12 months. * CDs ranging from 2 years to 5 years are paying top rates of 4.70% to 5.20% APY. * The [best CD rates](https://www.investopedia.com/best-cd-rates-4770214) have been gradually inching lower for months. But they'll begin falling faster once the Fed appears ready to make a rate cut—something that's expected later this year. ![Bar graph showing the top nationally available APY per CD term, which range from 4.70% to 5.65% APY - Rates current as of April 4, 2024]() :max_bytes(150000):strip_icc()/4-4-99f03283813e407186cd395cb032499f.png) Below you'll find featured rates available from our partners, followed by details from our ranking of the best CDs available nationwide. ## Lock In 5.40% to 5.65% APY for 3 to 12 Months The top rate on [18-month certificates](https://www.investopedia.com/best-18-month-cd-rates-5272348) took a tumble today, with the previous 5.35% rate leader coming off the market. The most you can now earn on a nationally available 18-month CD is 5.25%, which you can have two ways. NASA Federal Credit Union is paying that yield on a 15-month certificate, while Farmers Insurance Federal Credit Union lets you lock in that rate for 18 months. The highest CD returns are available on short-term certificates. After two weeks of the nation-leading rate being [5.55% APY on a 6-month certificate](https://www.investopedia.com/best-6-month-cd-rates-4783267), still available from Newtek Bank, a new CD took the rate crown yesterday. MutualOne Bank is offering 5.65% APY on a [3-month term](https://www.investopedia.com/best-3-month-cd-rates-5272288). In addition to those top two rates, 14 more CDs are paying 5.40% APY or more, with terms of 3 to [12 months](https://www.investopedia.com/best-1-year-cd-rates-4796650). Four of those are 5-7 month CDs paying 5.50% APY. ## Longer Terms Secure Your Rate to 2026 and Beyond Want to guarantee your CD rate even longer? You can choose a [top 2-year CD](https://www.investopedia.com/best-2-year-cd-rates-4801682) paying 5.20%, locking it up until 2026. Or secure a [5.00% rate as far as 2027](https://www.investopedia.com/best-3-year-cd-rates-4782938). Though that's the longest term offering a rate of 5% or better, you can alternatively opt to guarantee a high-4% rate for as far as 4 to 5 years into the future. | **CD Terms** | **Yesterday's Top National Rate** | **Today's Top National Rate** | **Day's Change** (percentage points) | **Top Rate Provider** | | --- | --- | --- | --- | --- | | [3 months](https://www.investopedia.com/best-3-month-cd-rates-5272288) | 5.65% APY | 5.65% APY | No change | [MutualOne Bank](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.mutualone.com/client-services/rates-calculators/deposit-rates/&lender=MutualOne%20Bank&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | | [6 months](https://www.investopedia.com/best-6-month-cd-rates-4783267) | 5.55% APY | 5.55% APY | No change | [Newtek Bank](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.newtekbank.com/certificate-of-deposit/&lender=Newtek%20Bank&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | | [1 year](https://www.investopedia.com/best-1-year-cd-rates-4796650) | 5.40% APY | 5.40% APY | No change | [CFG Bank](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.cfg.bank/personal-banking/personal-deposit-rates/&lender=CFG%20Bank&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) and 3 more | | [18 months](https://www.investopedia.com/best-18-month-cd-rates-5272348) | 5.35% APY | 5.25% APY | - 0.10 | [NASA Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.nasafcu.com/personal/checking-savings/certificates&lender=NASA%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) and [Farmers Insurance Federal Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://figfcu.org/flex-term-certificate&lender=Farmers%20Insurance%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | | [2 years](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.xcelfcu.org/Explore/Resources/Rates&lender=XCEL%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 5.20% APY | 5.20% APY | No change | [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) | | [3 years](https://www.investopedia.com/best-3-year-cd-rates-4782938) | 5.00% APY | 5.00% APY | No change | [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) | | [4 years](https://www.investopedia.com/best-5-year-cd-rates-4801473) | 4.80% APY | 4.80% APY | No change | [Pelican State Credit Union](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.pelicanstatecu.com/rates&lender=Pelican%20State%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | | [5 years](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://www.lfcu.org/rates/personal-certificate-rates/&lender=Lafayette%20Federal%20Credit%20Union&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) | 4.70% APY | 4.70% APY | No change | [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) | To view the top 15–20 nationwide rates in any term, click on the desired term length in the left column above. ## CD Rates Are Still Near Historic Highs [Certificate of deposit (CD) rates](https://www.investopedia.com/terms/c/certificateofdeposit.asp) have softened since climbing to a record high of 6.50% in October. At the start of February, the number of CDs in our daily ranking that paid a least 5.50% APY was 30. Including today's new top offer, that count is down to six. But don't lose sight of how high CD returns still are relative to the past 20 years. Locking in a yield in the 4% to 5% range for a year or more down the road is still a great earning opportunity. Also keep in mind that snagging the absolute *highest* APY isn't the only way to win with today's CDs. Since CD rates could fall quite substantially in 2024 and 2025, locking in a long-term rate now— before rates move lower—can be a smart move. ## Jumbo Deposits Can Provide More CD Options The top two jumbo CDs let you earn more than you can with a standard CD. [State Bank of Texas](https://finance.mediaalpha.com/dotdash/direct-link.html?cu=https://statebnk.com/sbotrates/&lender=State%20Bank%20Credit%20Texas&type=CD;rENpvBV_7IwwTpHRgbEQg9JlSH1hUgpLivAI0es52Cmr1l6igsUu2KIAy6Xb-greXxpicNNpXRTca2hxVAxvB75b-Hs8JQ) is paying 5.50% APY on a 12-month certificate, while [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) offers 5.49% APY for 6 months. Beware that [the best jumbo CD rates](https://www.investopedia.com/best-jumbo-cd-rates-4797766) don't *always* pay more than standard certificates. Often, you can do just as well—or better—with a standard CD. That's the case right now in six of the terms below, so it's always wise to shop both certificate types before making a final decision. | **CD Term** | **[Today's Top National Bank Rate](https://www.investopedia.com/best-bank-cd-rates-4801462)** | **[Today's Top National Credit Union Rate](https://www.investopedia.com/best-cd-rates-4770214)** | **[Today's Top National Jumbo Rate](https://www.investopedia.com/best-jumbo-cd-rates-4797766)** | | --- | --- | --- | --- | | 3 months | 5.65% APY\* | 5.30% APY | 5.20% APY | | 6 months | 5.55% APY\* | 5.50% APY | 5.49% APY | | 1 year | 5.40% APY | 5.40% APY | 5.50% APY\* | | 18 months | 5.15% APY | 5.25% APY | 5.41% APY\* | | 2 years | 4.85% APY | 5.20% APY\* | 4.96% APY | | 3 years | 5.00% APY\* | 5.00% APY\* | 4.97% APY | | 4 years | 4.55% APY | 4.80% APY\* | 4.48% APY | | 5 years | 4.55% APY | 4.70% APY\* | 4.37% APY | \*Indicates the highest APY offered in each term. To view our lists of the top-paying CDs across terms for bank, credit union, and jumbo certificates, click on the column headers above. ## Where Are CD Rates Headed in 2024? CD rates are expected to fall further this year. The question is when exactly. The answer depends on moves by the Federal Reserve, which controls the [federal funds rate](https://www.investopedia.com/terms/f/federalfundsrate.asp), which in turn heavily influences CD rates. The Fed announced on March 20 that it is [maintaining the fed fund rate at its current level](https://www.investopedia.com/federal-reserve-fomc-meeting-march-2024-8611723), the fifth meeting in a row it's done so. To combat decades-high inflation, the Fed had aggressively hiked interest rates between March 2022 and July 2023, raising the fed funds rate to its highest level in 22 years. This created historically favorable conditions for CD shoppers, as well as for anyone holding cash in a [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). Rates on CDs continued rising to a peak this fall, reaching their highest levels in two decades. [Inflation](https://www.investopedia.com/terms/i/inflation.asp) has since been cooling, allowing the Fed to stop raising interest rates. But further inflation progress has been elusive, putting the central bank in wait-and-see mode as it looks for evidence that inflation is falling enough to justify lowering the federal funds rate. Reiterating the Fed's recent meeting statement, Fed Chair Jerome Powell spoke today about how the first rate cut could still be a ways off. "We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy," Powell said in prepared remarks. Federal Reserve Gov. Chris Waller expressed a similar sentiment last week, saying inflation and job gains data from this quarter have reinforced his earlier view that "there is no rush" to cut interest rates. That was before economic indicators were released later in the week showed that [GDP growth in the fourth quarter of last year was higher than expected](https://www.investopedia.com/us-economy-news-today-march-28-8621483), and the number of people filing for unemployment fell in the week ending March 23. That's just more data backing up the argument that the economy is running strong and a rate cut isn't needed right away. At its March 20 meeting, the median prediction from members of the Fed's rate-setting committee was for three rate reductions this year. Financial markets still currently agree, betting on at least three rate decreases this calendar year, according to the CME Group's FedWatch Tool. A majority of traders believe the first cut will arrive in June. Of course, what markets predict today and what the Fed ultimately does may or may not align. But given an assumption of a reduced fed funds rate sometime this year, CD rates are likely to continue drifting lower. Then once it appears a Fed rate decrease is actually forthcoming, CD rate declines will accelerate. The central bank will hold six more rate-setting meetings in 2024, with the next one scheduled for April 30 through May 1. [Best High-Yield Savings Accounts for May 2024—Up to 5.55%](https://www.investopedia.com/best-high-yield-savings-accounts-4770633) [Best CD Rates for May 2024: Up to 5.51%](https://www.investopedia.com/best-cd-rates-4770214) [Best Money Market Account Rates for May 2024—Up to 5.35%](https://www.investopedia.com/best-money-market-accounts-5096917) ### Note that the "top rates" quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher. ## How We Find the Best 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).

Key Takeaways The highest nationally available rate in the 18-month term fell today from 5.35% to 5.25% APY, offered by NASA Federal Credit Union for 15 months or Farmers Insurance Federal Credit Union for 18 months. Overall, the best CD rate in the country remains 5.65%, unveiled yesterday by MutualOne Bank for a 3-month term. A total of 16 CDs currently pay 5.40% or better, on terms up to 12 months. CDs ranging from 2 years to 5 years are paying top rates of 4.70% to 5.20% APY. The best CD rates have been gradually inching lower for months. But they'll begin falling faster once the Fed appears ready to make a rate cut—something that's expected later this year. Below you'll find featured rates available from our partners, followed by details from our ranking of the best CDs available nationwide. Lock In 5.40% to 5.65% APY for 3 to 12 Months The top rate on 18-month certificates took a tumble today, with the previous 5.35% rate leader coming off the market. The most you can now earn on a nationally available 18-month CD is 5.25%, which you can have two ways. NASA Federal Credit Union is paying that yield on a 15-month certificate, while Farmers Insurance Federal Credit Union lets you lock in that rate for 18 months. The highest CD returns are available on short-term certificates. After two weeks of the nation-leading rate being 5.55% APY on a 6-month certificate, still available from Newtek Bank, a new CD took the rate crown yesterday. MutualOne Bank is offering 5.65% APY on a 3-month term. In addition to those top two rates, 14 more CDs are paying 5.40% APY or more, with terms of 3 to 12 months. Four of those are 5-7 month CDs paying 5.50% APY. Longer Terms Secure Your Rate to 2026 and Beyond Want to guarantee your CD rate even longer? You can choose a top 2-year CD paying 5.20%, locking it up until 2026. Or secure a 5.00% rate as far as 2027. Though that's the longest term offering a rate of 5% or better, you can alternatively opt to guarantee a high-4% rate for as far as 4 to 5 years into the future. CD Terms Yesterday's Top National Rate Today's Top National Rate Day's Change (percentage points) Top Rate Provider 3 months 5.65% APY 5.65% APY No change MutualOne Bank 6 months 5.55% APY 5.55% APY No change Newtek Bank 1 year 5.40% APY 5.40% APY No change CFG Bank and 3 more 18 months 5.35% APY 5.25% APY - 0.10 NASA Federal Credit Union and Farmers Insurance Federal Credit Union 2 years 5.20% APY 5.20% APY No change Credit Human 3 years 5.00% APY 5.00% APY No change DollarSavingsDirect 4 years 4.80% APY 4.80% APY No change Pelican State Credit Union 5 years 4.70% APY 4.70% APY No change Credit Human To view the top 15–20 nationwide rates in any term, click on the desired term length in the left column above. CD Rates Are Still Near Historic Highs Certificate of deposit (CD) rates have softened since climbing to a record high of 6.50% in October. At the start of February, the number of CDs in our daily ranking that paid a least 5.50% APY was 30. Including today's new top offer, that count is down to six. But don't lose sight of how high CD returns still are relative to the past 20 years. Locking in a yield in the 4% to 5% range for a year or more down the road is still a great earning opportunity. Also keep in mind that snagging the absolute highest APY isn't the only way to win with today's CDs. Since CD rates could fall quite substantially in 2024 and 2025, locking in a long-term rate now— before rates move lower—can be a smart move. Jumbo Deposits Can Provide More CD Options The top two jumbo CDs let you earn more than you can with a standard CD. State Bank of Texas is paying 5.50% APY on a 12-month certificate, while My eBanc offers 5.49% APY for 6 months. Beware that the best jumbo CD rates don't always pay more than standard certificates. Often, you can do just as well—or better—with a standard CD. That's the case right now in six of the terms below, so it's always wise to shop both certificate types before making a final decision. CD Term Today's Top National Bank Rate Today's Top National Credit Union Rate Today's Top National Jumbo Rate 3 months 5.65% APY* 5.30% APY 5.20% APY 6 months 5.55% APY* 5.50% APY 5.49% APY 1 year 5.40% APY 5.40% APY 5.50% APY* 18 months 5.15% APY 5.25% APY 5.41% APY* 2 years 4.85% APY 5.20% APY* 4.96% APY 3 years 5.00% APY* 5.00% APY* 4.97% APY 4 years 4.55% APY 4.80% APY* 4.48% APY 5 years 4.55% APY 4.70% APY* 4.37% APY *Indicates the highest APY offered in each term. To view our lists of the top-paying CDs across terms for bank, credit union, and jumbo certificates, click on the column headers above. Where Are CD Rates Headed in 2024? CD rates are expected to fall further this year. The question is when exactly. The answer depends on moves by the Federal Reserve, which controls the federal funds rate, which in turn heavily influences CD rates. The Fed announced on March 20 that it is maintaining the fed fund rate at its current level, the fifth meeting in a row it's done so. To combat decades-high inflation, the Fed had aggressively hiked interest rates between March 2022 and July 2023, raising the fed funds rate to its highest level in 22 years. This created historically favorable conditions for CD shoppers, as well as for anyone holding cash in a high-yield savings or money market account. Rates on CDs continued rising to a peak this fall, reaching their highest levels in two decades. Inflation has since been cooling, allowing the Fed to stop raising interest rates. But further inflation progress has been elusive, putting the central bank in wait-and-see mode as it looks for evidence that inflation is falling enough to justify lowering the federal funds rate. Reiterating the Fed's recent meeting statement, Fed Chair Jerome Powell spoke today about how the first rate cut could still be a ways off. "We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy," Powell said in prepared remarks. Federal Reserve Gov. Chris Waller expressed a similar sentiment last week, saying inflation and job gains data from this quarter have reinforced his earlier view that "there is no rush" to cut interest rates. That was before economic indicators were released later in the week showed that GDP growth in the fourth quarter of last year was higher than expected, and the number of people filing for unemployment fell in the week ending March 23. That's just more data backing up the argument that the economy is running strong and a rate cut isn't needed right away. At its March 20 meeting, the median prediction from members of the Fed's rate-setting committee was for three rate reductions this year. Financial markets still currently agree, betting on at least three rate decreases this calendar year, according to the CME Group's FedWatch Tool. A majority of traders believe the first cut will arrive in June. Of course, what markets predict today and what the Fed ultimately does may or may not align. But given an assumption of a reduced fed funds rate sometime this year, CD rates are likely to continue drifting lower. Then once it appears a Fed rate decrease is actually forthcoming, CD rate declines will accelerate. The central bank will hold six more rate-setting meetings in 2024, with the next one scheduled for April 30 through May 1. Best High-Yield Savings Accounts for May 2024—Up to 5.55% Best CD Rates for May 2024: Up to 5.51% Best Money Market Account Rates for May 2024—Up to 5.35% Note that the "top rates" quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher. How We Find the Best 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.

https://www.investopedia.com/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955

Foreign Transaction Fee vs. Currency Conversion Fee

<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 you use your credit or debit card in a foreign country, or online with a foreign merchant, your card issuer, usually a bank, may charge a <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 fee</a> of 2% to 3% of the purchase price. At the same time, the credit card payment processor, such as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/visa-card.asp">Visa</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mastercard-card.asp">Mastercard</a>, may tack on an additional 1% <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/currency-conversion-fee-definition-4768870">currency conversion fee</a>. Here is how these fees work and what you can do to avoid or at least lessen them. </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>Using a credit or debit card in another country can result in foreign transaction fees as well as currency exchange fees.</li><li>The two fees are often combined and referred to as a single foreign transaction fee.</li><li>Some merchants offer dynamic currency conversion (DCC), which shows purchase prices in U.S. dollars rather than the local currency.</li><li>DCC is almost always more expensive, sometimes considerably so.</li><li>These fees can be avoided or minimized, particularly by choosing cards without them.</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_5-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Foreign Transaction Fee vs. Currency Conversion Fee" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/rA8YUqvmLN7224BCH5H_NSONpoE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/rA8YUqvmLN7224BCH5H_NSONpoE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png" data-srcset="https://www.investopedia.com/thmb/sjBWfQlrqzOP_u61ZwOs0GAVMDE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png 750w" data-tracking-container="true" height="4000" id="mntl-sc-block-image_1-0" width="6000"/> <noscript> <img alt="Foreign Transaction Fee vs. Currency Conversion Fee" class="img--noscript universal-image__image" height="4000" sizes="750px" src="https://www.investopedia.com/thmb/rA8YUqvmLN7224BCH5H_NSONpoE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png" srcset="https://www.investopedia.com/thmb/sjBWfQlrqzOP_u61ZwOs0GAVMDE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png 750w" width="6000"/> </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 / Hilary Allison</p></span> </figcaption></figure> <span class="heading-toc" id="toc-what-is-a-foreign-transaction-fee"></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"> What Is a Foreign Transaction Fee? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Many, but not all, credit and debit card issuers and ATM networks charge a per-transaction fee on purchases or withdrawals made overseas or when ordering online with a foreign merchant. The fee varies but typically runs between 2% and 3% of the dollar amount of the purchase or withdrawal. </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, suppose you travel to Paris, spend the equivalent of $1,000 in a department store, and charge the purchase to your credit card or pay for it with your debit card. With a 3% foreign transaction fee, you will notice a $30 surcharge when you receive your statement. That's the result of a foreign transaction fee imposed by the card issuer. </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"> Alternatively, suppose you run out of cash and decide to use an ATM that charges a 3% transaction fee to obtain $1,000 (dollar equivalent) in euros. The actual cost to you will be $1,030 for $1,000 worth of euros. By the way, sometimes the foreign transaction fee is called a foreign exchange fee. At one time it was called a currency conversion fee, but that fee is now something completely different (see below). </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-what-is-a-currency-conversion-fee"></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"> What Is a Currency Conversion Fee? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> A currency conversion fee is an additional charge for converting a transaction from one currency to another, such as from the local currency of the country you are visiting to U.S. dollars. There are two types of currency conversion fees: those charged by a credit or debit card payment processor or ATM network and those charged through a process known as <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 (DCC)</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"> When the conversion is done by your card's payment processor, the charge is typically 1% of the purchase amount. When the conversion happens through DCC, the charge is usually more—up to 12%, according to one study cited by the European Consumer Organisation. It calls DCC "a scam."<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_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Another difference between the two types of currency conversion has to do with how soon you will know the cost of the conversion. When your card's payment processor levies the charge, you will not know the true cost of your purchase in dollars until your statement arrives or posts online. (You can get around this by using a currency exchange rate app, such as the Xe Currency Converter, and adding your card's foreign transaction fee to the purchase price.) With DCC, you will see the difference immediately on your receipt or on a terminal at the point of sale. </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 DCC usually costs more, it's up to you to decide if the potentially whopping extra charge is worth knowing the cost immediately. Keep in mind that DCC does not replace your card's foreign transaction fee. You will still pay that fee in addition to the DCC fee. The merchant cannot simply use DCC without your consent. You have the right to refuse. </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-how-the-fees-can-add-up"></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"> How the Fees Can Add Up </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Here's where it gets a little complicated: Often the foreign transaction fee you pay will have the currency conversion fee built in. For example, your total fee might be 3%, with 1% consisting of the currency conversion fee and 2% accounting for the transaction fee. </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"> Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee. Some card issuers, especially those that offer <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/travel-4689716">cards geared toward frequent travelers</a>, charge no fee at all. </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 table below shows the main types of foreign credit and debit card fees, who charges them, and how much they typically are. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_28-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_29-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style="width: 146px;"></colgroup> <colgroup span="1" style="width: 223px;"></colgroup> <colgroup span="1" style="width: 113px;"></colgroup> <colgroup span="1" style="width: 45px;"></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="4">Types of Foreign Credit Card Fees</th> </tr> </thead> <tbody data-check="-1"> <tr> <td>Type of Fee</td> <td>Imposed On</td> <td>Imposed By</td> <td>Rate</td> </tr> <tr> <td>Foreign Transaction</td> <td>Overseas credit card transactions</td> <td>Issuer</td> <td>2% to 3%</td> </tr> <tr> <td>Currency Conversion</td> <td>Overseas currency conversion</td> <td>Processor</td> <td>1%</td> </tr> <tr> <td>Dynamic Currency Conversion</td> <td>Overseas point-of-sale conversion</td> <td>Merchant</td> <td>3% to 12%</td> </tr> </tbody> </table> </div></figure> <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-avoiding-or-minimizing-these-fees"></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"> Avoiding (or Minimizing) These Fees </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Whether it's a foreign transaction or currency conversion fee, it's always better to pay no fee. Here are some ways to avoid or minimize fees when traveling and spending abroad: </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>Check your card's fees under "terms and conditions" and, if appropriate, apply for a card with zero foreign transaction fees <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 travel</a>.</li> <li>Get some cash before you leave home to minimize trips to an ATM and the resulting fees.</li> <li>Check whether your bank is part of a "no fee" or "low cost" global ATM network.</li> <li>Beware of deceptive ATMs and terminals that try to disguise DCC.</li> <li>Always pay in local currency with your cards and decline DCC if a merchant offers it to you.</li> <li>You'll also avoid fees if you pay in cash, although you may not want to carry a lot of it for security reasons.</li> </ul> <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-who-sets-the-interest-rate-on-dynamic-currency-conversions"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Sets the Interest Rate on Dynamic Currency Conversions?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In a dynamic currency conversion (DCC), the merchant and their bank set the rate, so it may vary from one store to another. DCC transactions can be more profitable for merchants, which is a major reason they may try to push them.<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_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-is-it-better-to-use-a-credit-or-debit-card-abroad"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is It Better to Use a Credit or Debit Card Abroad?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Credit cards have a couple of advantages over debit cards for overseas travel. One is that they are more likely to offer rewards like cash back or airline miles on purchases (although some debit cards now have this feature, as well). More important, credit cards have greater consumer protections. In most cases your liability for fraudulent purchases is limited to $50, and some card issuers have $0 liability policies. With debit cards, a thief could potentially drain your entire bank account.<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_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-can-you-just-use-us-dollars-in-other-countries"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Just Use U.S. Dollars in Other Countries?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, the U.S. dollar is widely accepted by merchants in many countries, including Canada, Mexico, and various popular vacation spots.<span class="ql-inline-citation" data-cite="9"></span> In some countries, the U.S. dollar is even the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/forex/040915/countries-use-us-dollar.asp">official local currency</a>. But you'll want to find out before you go.</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"> If you're heading overseas (or across the U.S. border) for travel, you can make your money go a lot further if you avoid foreign transaction fees whenever possible. Spend the money on fun instead. </p></div>

When you use your credit or debit card in a foreign country, or online with a foreign merchant, your card issuer, usually a bank, may charge a [foreign transaction fee](https://www.investopedia.com/terms/f/foreign-transaction-fee.asp) of 2% to 3% of the purchase price. At the same time, the credit card payment processor, such as [Visa](https://www.investopedia.com/terms/v/visa-card.asp) or [Mastercard](https://www.investopedia.com/terms/m/mastercard-card.asp), may tack on an additional 1% [currency conversion fee](https://www.investopedia.com/currency-conversion-fee-definition-4768870). Here is how these fees work and what you can do to avoid or at least lessen them. ### Key Takeaways * Using a credit or debit card in another country can result in foreign transaction fees as well as currency exchange fees. * The two fees are often combined and referred to as a single foreign transaction fee. * Some merchants offer dynamic currency conversion (DCC), which shows purchase prices in U.S. dollars rather than the local currency. * DCC is almost always more expensive, sometimes considerably so. * These fees can be avoided or minimized, particularly by choosing cards without them. ![Foreign Transaction Fee vs. Currency Conversion Fee]() :max_bytes(150000):strip_icc()/foreign-transaction-fee-vs-currency-conversion-fee-know-the-difference-4768955_V1-bb8bc0fcc5e24003896141fea9febd39.png) Investopedia / Hilary Allison ## What Is a Foreign Transaction Fee? Many, but not all, credit and debit card issuers and ATM networks charge a per-transaction fee on purchases or withdrawals made overseas or when ordering online with a foreign merchant. The fee varies but typically runs between 2% and 3% of the dollar amount of the purchase or withdrawal. For example, suppose you travel to Paris, spend the equivalent of $1,000 in a department store, and charge the purchase to your credit card or pay for it with your debit card. With a 3% foreign transaction fee, you will notice a $30 surcharge when you receive your statement. That's the result of a foreign transaction fee imposed by the card issuer. Alternatively, suppose you run out of cash and decide to use an ATM that charges a 3% transaction fee to obtain $1,000 (dollar equivalent) in euros. The actual cost to you will be $1,030 for $1,000 worth of euros. By the way, sometimes the foreign transaction fee is called a foreign exchange fee. At one time it was called a currency conversion fee, but that fee is now something completely different (see below). ## What Is a Currency Conversion Fee? A currency conversion fee is an additional charge for converting a transaction from one currency to another, such as from the local currency of the country you are visiting to U.S. dollars. There are two types of currency conversion fees: those charged by a credit or debit card payment processor or ATM network and those charged through a process known as [dynamic currency conversion (DCC)](https://www.investopedia.com/dynamic-currency-conversion-dcc-term-4769305). When the conversion is done by your card's payment processor, the charge is typically 1% of the purchase amount. When the conversion happens through DCC, the charge is usually more—up to 12%, according to one study cited by the European Consumer Organisation. It calls DCC "a scam." Another difference between the two types of currency conversion has to do with how soon you will know the cost of the conversion. When your card's payment processor levies the charge, you will not know the true cost of your purchase in dollars until your statement arrives or posts online. (You can get around this by using a currency exchange rate app, such as the Xe Currency Converter, and adding your card's foreign transaction fee to the purchase price.) With DCC, you will see the difference immediately on your receipt or on a terminal at the point of sale. As DCC usually costs more, it's up to you to decide if the potentially whopping extra charge is worth knowing the cost immediately. Keep in mind that DCC does not replace your card's foreign transaction fee. You will still pay that fee in addition to the DCC fee. The merchant cannot simply use DCC without your consent. You have the right to refuse. ## How the Fees Can Add Up Here's where it gets a little complicated: Often the foreign transaction fee you pay will have the currency conversion fee built in. For example, your total fee might be 3%, with 1% consisting of the currency conversion fee and 2% accounting for the transaction fee. Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee. Some card issuers, especially those that offer [cards geared toward frequent travelers](https://www.investopedia.com/travel-4689716), charge no fee at all. The table below shows the main types of foreign credit and debit card fees, who charges them, and how much they typically are. | Types of Foreign Credit Card Fees | | | | | --- | --- | --- | --- | | Type of Fee | Imposed On | Imposed By | Rate | | Foreign Transaction | Overseas credit card transactions | Issuer | 2% to 3% | | Currency Conversion | Overseas currency conversion | Processor | 1% | | Dynamic Currency Conversion | Overseas point-of-sale conversion | Merchant | 3% to 12% | ## Avoiding (or Minimizing) These Fees Whether it's a foreign transaction or currency conversion fee, it's always better to pay no fee. Here are some ways to avoid or minimize fees when traveling and spending abroad: * Check your card's fees under "terms and conditions" and, if appropriate, apply for a card with zero foreign transaction fees [before you travel](https://www.investopedia.com/financial-edge/1212/3-banking-moves-you-should-make-before-traveling.aspx). * Get some cash before you leave home to minimize trips to an ATM and the resulting fees. * Check whether your bank is part of a "no fee" or "low cost" global ATM network. * Beware of deceptive ATMs and terminals that try to disguise DCC. * Always pay in local currency with your cards and decline DCC if a merchant offers it to you. * You'll also avoid fees if you pay in cash, although you may not want to carry a lot of it for security reasons. ## Who Sets the Interest Rate on Dynamic Currency Conversions? In a dynamic currency conversion (DCC), the merchant and their bank set the rate, so it may vary from one store to another. DCC transactions can be more profitable for merchants, which is a major reason they may try to push them. ## Is It Better to Use a Credit or Debit Card Abroad? Credit cards have a couple of advantages over debit cards for overseas travel. One is that they are more likely to offer rewards like cash back or airline miles on purchases (although some debit cards now have this feature, as well). More important, credit cards have greater consumer protections. In most cases your liability for fraudulent purchases is limited to $50, and some card issuers have $0 liability policies. With debit cards, a thief could potentially drain your entire bank account. ## Can You Just Use U.S. Dollars in Other Countries? Yes, the U.S. dollar is widely accepted by merchants in many countries, including Canada, Mexico, and various popular vacation spots. In some countries, the U.S. dollar is even the [official local currency](https://www.investopedia.com/articles/forex/040915/countries-use-us-dollar.asp). But you'll want to find out before you go. ## The Bottom Line If you're heading overseas (or across the U.S. border) for travel, you can make your money go a lot further if you avoid foreign transaction fees whenever possible. Spend the money on fun instead.

When you use your credit or debit card in a foreign country, or online with a foreign merchant, your card issuer, usually a bank, may charge a foreign transaction fee of 2% to 3% of the purchase price. At the same time, the credit card payment processor, such as Visa or Mastercard, may tack on an additional 1% currency conversion fee. Here is how these fees work and what you can do to avoid or at least lessen them. Key Takeaways Using a credit or debit card in another country can result in foreign transaction fees as well as currency exchange fees.The two fees are often combined and referred to as a single foreign transaction fee.Some merchants offer dynamic currency conversion (DCC), which shows purchase prices in U.S. dollars rather than the local currency.DCC is almost always more expensive, sometimes considerably so.These fees can be avoided or minimized, particularly by choosing cards without them. Investopedia / Hilary Allison What Is a Foreign Transaction Fee? Many, but not all, credit and debit card issuers and ATM networks charge a per-transaction fee on purchases or withdrawals made overseas or when ordering online with a foreign merchant. The fee varies but typically runs between 2% and 3% of the dollar amount of the purchase or withdrawal. For example, suppose you travel to Paris, spend the equivalent of $1,000 in a department store, and charge the purchase to your credit card or pay for it with your debit card. With a 3% foreign transaction fee, you will notice a $30 surcharge when you receive your statement. That's the result of a foreign transaction fee imposed by the card issuer. Alternatively, suppose you run out of cash and decide to use an ATM that charges a 3% transaction fee to obtain $1,000 (dollar equivalent) in euros. The actual cost to you will be $1,030 for $1,000 worth of euros. By the way, sometimes the foreign transaction fee is called a foreign exchange fee. At one time it was called a currency conversion fee, but that fee is now something completely different (see below). What Is a Currency Conversion Fee? A currency conversion fee is an additional charge for converting a transaction from one currency to another, such as from the local currency of the country you are visiting to U.S. dollars. There are two types of currency conversion fees: those charged by a credit or debit card payment processor or ATM network and those charged through a process known as dynamic currency conversion (DCC). When the conversion is done by your card's payment processor, the charge is typically 1% of the purchase amount. When the conversion happens through DCC, the charge is usually more—up to 12%, according to one study cited by the European Consumer Organisation. It calls DCC "a scam." Another difference between the two types of currency conversion has to do with how soon you will know the cost of the conversion. When your card's payment processor levies the charge, you will not know the true cost of your purchase in dollars until your statement arrives or posts online. (You can get around this by using a currency exchange rate app, such as the Xe Currency Converter, and adding your card's foreign transaction fee to the purchase price.) With DCC, you will see the difference immediately on your receipt or on a terminal at the point of sale. As DCC usually costs more, it's up to you to decide if the potentially whopping extra charge is worth knowing the cost immediately. Keep in mind that DCC does not replace your card's foreign transaction fee. You will still pay that fee in addition to the DCC fee. The merchant cannot simply use DCC without your consent. You have the right to refuse. How the Fees Can Add Up Here's where it gets a little complicated: Often the foreign transaction fee you pay will have the currency conversion fee built in. For example, your total fee might be 3%, with 1% consisting of the currency conversion fee and 2% accounting for the transaction fee. Visa and MasterCard charge a 1% currency conversion fee to the card issuer. The issuer has the option to pass along that fee, along with any additional fees it decides to add, and call the whole thing a foreign transaction fee. Some card issuers, especially those that offer cards geared toward frequent travelers, charge no fee at all. The table below shows the main types of foreign credit and debit card fees, who charges them, and how much they typically are. Types of Foreign Credit Card Fees Type of Fee Imposed On Imposed By Rate Foreign Transaction Overseas credit card transactions Issuer 2% to 3% Currency Conversion Overseas currency conversion Processor 1% Dynamic Currency Conversion Overseas point-of-sale conversion Merchant 3% to 12% Avoiding (or Minimizing) These Fees Whether it's a foreign transaction or currency conversion fee, it's always better to pay no fee. Here are some ways to avoid or minimize fees when traveling and spending abroad: Check your card's fees under "terms and conditions" and, if appropriate, apply for a card with zero foreign transaction fees before you travel. Get some cash before you leave home to minimize trips to an ATM and the resulting fees. Check whether your bank is part of a "no fee" or "low cost" global ATM network. Beware of deceptive ATMs and terminals that try to disguise DCC. Always pay in local currency with your cards and decline DCC if a merchant offers it to you. You'll also avoid fees if you pay in cash, although you may not want to carry a lot of it for security reasons. Who Sets the Interest Rate on Dynamic Currency Conversions? In a dynamic currency conversion (DCC), the merchant and their bank set the rate, so it may vary from one store to another. DCC transactions can be more profitable for merchants, which is a major reason they may try to push them. Is It Better to Use a Credit or Debit Card Abroad? Credit cards have a couple of advantages over debit cards for overseas travel. One is that they are more likely to offer rewards like cash back or airline miles on purchases (although some debit cards now have this feature, as well). More important, credit cards have greater consumer protections. In most cases your liability for fraudulent purchases is limited to $50, and some card issuers have $0 liability policies. With debit cards, a thief could potentially drain your entire bank account. Can You Just Use U.S. Dollars in Other Countries? Yes, the U.S. dollar is widely accepted by merchants in many countries, including Canada, Mexico, and various popular vacation spots. In some countries, the U.S. dollar is even the official local currency. But you'll want to find out before you go. The Bottom Line If you're heading overseas (or across the U.S. border) for travel, you can make your money go a lot further if you avoid foreign transaction fees whenever possible. Spend the money on fun instead.

https://www.investopedia.com/investors-aren-t-worried-right-now-but-they-re-not-buying-either-8642075

Investors Say They're Not Worried Right Now, But They’re Not Buying Either

<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>While most investors still describe themselves as “cautiously optimistic”, the latest Investopedia Investor Sentiment Survey found they’re still less inclined to invest more money right now, and have pulled back from riskier assets.</li> <li>Only 21% of respondents are expecting the S&amp;P 500 to gain 5% or more in the next six months, a drop from 33% in early March.</li> <li>Nearly half, or 48%, believe the stock market is overvalued, and that <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-ai-stocks-8549813">A.I. related stocks</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/megacap.asp">mega-cap</a> tech are the most frothy, according to the survey.</li> <li>Inflation is once again the top concern for investors, with 2 in 3 readers worried about its impact on their portfolios.</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 recent <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 the stock market and renewed concerns about inflation has curbed individual investors’ enthusiasm for the prospect of future returns, despite claims they're not extremely concerned. According to Investopedia’s latest sentiment survey, readers say they’re less inclined to invest more right now, and have pulled back from riskier investments—but investors still claim they’re “cautiously optimistic." </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/db3fG/4/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Emoji-meter: 🙂 Readers Are Cautiously Optimistic"></iframe></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-muted-expectations-for-future-returns"></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"> Muted Expectations for Future Returns </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Only 21% of respondents are expecting the S&amp;P 500 to gain 5% or more in the next six months, a drop from 33% in early March. After reaching multiple record highs in March, the stock market has fallen 3.7% amid a rise in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybond.asp">Treasury bond yields</a> and a slowdown in first quarter GDP. Some of the most widely-held stocks, including 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>) and Nvidia (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>), have suffered steep corrections, which may have contributed to this recent shift in sentiment.<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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_10-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/zUl6X/3/" frameborder="0" id="mntl-sc-block-iframe__uri_2-0" title="Recent Dip In Reader Worries"></iframe></div> <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-investing-less-given-uncertainty"></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"> Investing Less Given Uncertainty </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> While 37% of respondents describe themselves as “somewhat worried” about recent market events—a drop of five percentage points from early March—only 14% of respondents say they will be investing more, given the recent pullback. That’s down from 22% in early March, and evident in recent fund flows by retail investors. <br> </br></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-leaning-into-etfs-amid-volatility"></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"> Leaning Into ETFs Amid Volatility </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> While individual investors are still leaning more into <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">ETFs</a> than <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/money-marketfund.asp">money market funds</a>, CDs, and stocks, their appetite for exchange traded products and individual equities has waned since the end of the first quarter. ETFs remain their asset of choice, according to the survey, but only 25% of respondents selected it as their first choice, down from 32% in early March, while their appetite for equities has also decreased by ten percentage points in that time frame.                         </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/s1QY1/1/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="Fewer Readers Are Leaning into ETFs &amp; Stocks This Wave"></iframe></div> <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-bubbles-bangles-bright-shiny-things"></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"> Bubbles, Bangles, Bright Shiny Things… </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Investors’ reluctance to fully commit to stocks may also be influenced by the fact that many still believe there is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/froth.asp">frothiness</a> in several sectors of the market. Nearly half, or 48%, believe the stock market is overvalued, and that <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-ai-stocks-8549813">A.I. related stocks</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/megacap.asp">mega-cap</a> tech are the most frothy, according to the survey. That’s noteworthy, given that most respondents hold many stocks from those sectors in their portfolios.  </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_23-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/a8Cu8/1/" frameborder="0" id="mntl-sc-block-iframe__uri_4-0" title="3 in 5 Readers Say A.I. Related Stocks Are Overvalued"></iframe></div> <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-inflation-tops-investors-concerns"></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"> Inflation Tops Investors Concerns </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Investors and households have been wrestling with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-heated-up-in-march-8629363">persistent inflation</a> for the past several years. But it was not our readers top concern for the past several months as the upcoming presidential election has been their number one cause for anxiety about their portfolios. As the Federal Reserve has <a data-component="link" data-ordinal="2" 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">turned more hawkish</a> given the stickiness of inflation, persistently high prices have now reclaimed that top spot, followed by the election and the war in the Middle East. </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_28-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/gLrbk/2/" frameborder="0" id="mntl-sc-block-iframe__uri_5-0" title="2 in 3 Readers Worried About Inflation Impacting Their Portfolios"></iframe></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-what-would-you-do-with-an-extra-10000"></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"> What Would You Do with an Extra $10,000? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Despite investors’ concerns about inflation, bubbles in the stock market, and geopolitical uncertainty, stocks would be their top choices of what they would do if they had an extra $10,000. While only 14% of respondents said they are investing more given the recent volatility, it’s notable that equities are still their top asset of choice if they had extra funds to deploy. ETFs and CDs are tied for second on their purchase wish-list.  </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_33-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/jJY4b/2/" frameborder="0" id="mntl-sc-block-iframe__uri_6-0" title="1 in 5 Readers Would Put An Extra $10,000 into Stocks Followed by ETFs"></iframe></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-whats-in-your-portfolio"></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"> What’s in Your Portfolio? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> Even though mega-cap tech, internet, and communications stocks have been among the worst performers year-to-date, our readers have remained faithful to their old favorites. Apple (<a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL">AAPL</a>), Microsoft (<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 Nvidia (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA">NVDA</a>) remain their top stocks, mirroring some of the most popular index funds and ETFs like (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPY">SPY</a>) and (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=QQQ">QQQ</a>). Meta (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=META">META</a>) and AT&amp;T (<a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=T">T</a>), have made slight gains among respondents’ top choices. </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_38-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/FlU7p/1/" frameborder="0" id="mntl-sc-block-iframe__uri_7-0" title="Top Reader Stocks: April, 2024"></iframe></div> <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-stocks-to-buy-and-hold-for-the-next-decade"></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"> Stocks to Buy and Hold for the Next Decade </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> As for the stocks our readers would buy and hold for another ten years, the list looks a lot like what they are currently holding. Berkshire Hathaway (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.A">BRK</a>) and Walmart (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=WMT">WMT</a>), are on their buy and hold lists, however, replacing Exxon-Mobil (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=XOM">XOM</a>) and AT&amp;T (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=T">T</a>).  </p> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_43-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/kLE56/1/" frameborder="0" id="mntl-sc-block-iframe__uri_8-0" title="Stocks Readers Would Buy &amp; Hold For The Next Decade? Mostly Tech"></iframe></div> <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-methodology"></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"> Methodology </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> This survey was fielded online to Investopedia readers 18+ living in the U.S. from April 24-29, 2024. Readers must currently hold and manage investments to qualify.  Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base. </p></div>

### Key Takeaways * While most investors still describe themselves as “cautiously optimistic”, the latest Investopedia Investor Sentiment Survey found they’re still less inclined to invest more money right now, and have pulled back from riskier assets. * Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March. * Nearly half, or 48%, believe the stock market is overvalued, and that [A.I. related stocks](https://www.investopedia.com/best-ai-stocks-8549813) and [mega-cap](https://www.investopedia.com/terms/m/megacap.asp) tech are the most frothy, according to the survey. * Inflation is once again the top concern for investors, with 2 in 3 readers worried about its impact on their portfolios. The recent [reversal](https://www.investopedia.com/terms/r/reversal.asp) in the stock market and renewed concerns about inflation has curbed individual investors’ enthusiasm for the prospect of future returns, despite claims they're not extremely concerned. According to Investopedia’s latest sentiment survey, readers say they’re less inclined to invest more right now, and have pulled back from riskier investments—but investors still claim they’re “cautiously optimistic." ## Muted Expectations for Future Returns Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March. After reaching multiple record highs in March, the stock market has fallen 3.7% amid a rise in [Treasury bond yields](https://www.investopedia.com/terms/t/treasurybond.asp) and a slowdown in first quarter GDP. Some of the most widely-held stocks, including Apple ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) and Nvidia ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)), have suffered steep corrections, which may have contributed to this recent shift in sentiment. ## Investing Less Given Uncertainty While 37% of respondents describe themselves as “somewhat worried” about recent market events—a drop of five percentage points from early March—only 14% of respondents say they will be investing more, given the recent pullback. That’s down from 22% in early March, and evident in recent fund flows by retail investors.  ## Leaning Into ETFs Amid Volatility While individual investors are still leaning more into [ETFs](https://www.investopedia.com/terms/e/etf.asp) than [money market funds](https://www.investopedia.com/terms/m/money-marketfund.asp), CDs, and stocks, their appetite for exchange traded products and individual equities has waned since the end of the first quarter. ETFs remain their asset of choice, according to the survey, but only 25% of respondents selected it as their first choice, down from 32% in early March, while their appetite for equities has also decreased by ten percentage points in that time frame.                         ## Bubbles, Bangles, Bright Shiny Things… Investors’ reluctance to fully commit to stocks may also be influenced by the fact that many still believe there is [frothiness](https://www.investopedia.com/terms/f/froth.asp) in several sectors of the market. Nearly half, or 48%, believe the stock market is overvalued, and that [A.I. related stocks](https://www.investopedia.com/best-ai-stocks-8549813) and [mega-cap](https://www.investopedia.com/terms/m/megacap.asp) tech are the most frothy, according to the survey. That’s noteworthy, given that most respondents hold many stocks from those sectors in their portfolios.  ## Inflation Tops Investors Concerns Investors and households have been wrestling with [persistent inflation](https://www.investopedia.com/inflation-heated-up-in-march-8629363) for the past several years. But it was not our readers top concern for the past several months as the upcoming presidential election has been their number one cause for anxiety about their portfolios. As the Federal Reserve has [turned more hawkish](https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952) given the stickiness of inflation, persistently high prices have now reclaimed that top spot, followed by the election and the war in the Middle East. ## What Would You Do with an Extra $10,000? Despite investors’ concerns about inflation, bubbles in the stock market, and geopolitical uncertainty, stocks would be their top choices of what they would do if they had an extra $10,000. While only 14% of respondents said they are investing more given the recent volatility, it’s notable that equities are still their top asset of choice if they had extra funds to deploy. ETFs and CDs are tied for second on their purchase wish-list.  ## What’s in Your Portfolio? Even though mega-cap tech, internet, and communications stocks have been among the worst performers year-to-date, our readers have remained faithful to their old favorites. Apple ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)), Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)), and Nvidia ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NVDA)) remain their top stocks, mirroring some of the most popular index funds and ETFs like ([SPY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=SPY)) and ([QQQ](https://www.investopedia.com/markets/quote?tvwidgetsymbol=QQQ)). Meta ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)) and AT&T ([T](https://www.investopedia.com/markets/quote?tvwidgetsymbol=T)), have made slight gains among respondents’ top choices. ## Stocks to Buy and Hold for the Next Decade As for the stocks our readers would buy and hold for another ten years, the list looks a lot like what they are currently holding. Berkshire Hathaway ([BRK](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.A)) and Walmart ([WMT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=WMT)), are on their buy and hold lists, however, replacing Exxon-Mobil ([XOM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=XOM)) and AT&T ([T](https://www.investopedia.com/markets/quote?tvwidgetsymbol=T)).  ## Methodology This survey was fielded online to Investopedia readers 18+ living in the U.S. from April 24-29, 2024. Readers must currently hold and manage investments to qualify.  Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base.

Key Takeaways While most investors still describe themselves as “cautiously optimistic”, the latest Investopedia Investor Sentiment Survey found they’re still less inclined to invest more money right now, and have pulled back from riskier assets. Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March. Nearly half, or 48%, believe the stock market is overvalued, and that A.I. related stocks and mega-cap tech are the most frothy, according to the survey. Inflation is once again the top concern for investors, with 2 in 3 readers worried about its impact on their portfolios. The recent reversal in the stock market and renewed concerns about inflation has curbed individual investors’ enthusiasm for the prospect of future returns, despite claims they're not extremely concerned. According to Investopedia’s latest sentiment survey, readers say they’re less inclined to invest more right now, and have pulled back from riskier investments—but investors still claim they’re “cautiously optimistic." Muted Expectations for Future Returns Only 21% of respondents are expecting the S&P 500 to gain 5% or more in the next six months, a drop from 33% in early March. After reaching multiple record highs in March, the stock market has fallen 3.7% amid a rise in Treasury bond yields and a slowdown in first quarter GDP. Some of the most widely-held stocks, including Apple (AAPL) and Nvidia (NVDA), have suffered steep corrections, which may have contributed to this recent shift in sentiment. Investing Less Given Uncertainty While 37% of respondents describe themselves as “somewhat worried” about recent market events—a drop of five percentage points from early March—only 14% of respondents say they will be investing more, given the recent pullback. That’s down from 22% in early March, and evident in recent fund flows by retail investors.  Leaning Into ETFs Amid Volatility While individual investors are still leaning more into ETFs than money market funds, CDs, and stocks, their appetite for exchange traded products and individual equities has waned since the end of the first quarter. ETFs remain their asset of choice, according to the survey, but only 25% of respondents selected it as their first choice, down from 32% in early March, while their appetite for equities has also decreased by ten percentage points in that time frame.                         Bubbles, Bangles, Bright Shiny Things… Investors’ reluctance to fully commit to stocks may also be influenced by the fact that many still believe there is frothiness in several sectors of the market. Nearly half, or 48%, believe the stock market is overvalued, and that A.I. related stocks and mega-cap tech are the most frothy, according to the survey. That’s noteworthy, given that most respondents hold many stocks from those sectors in their portfolios.  Inflation Tops Investors Concerns Investors and households have been wrestling with persistent inflation for the past several years. But it was not our readers top concern for the past several months as the upcoming presidential election has been their number one cause for anxiety about their portfolios. As the Federal Reserve has turned more hawkish given the stickiness of inflation, persistently high prices have now reclaimed that top spot, followed by the election and the war in the Middle East. What Would You Do with an Extra $10,000? Despite investors’ concerns about inflation, bubbles in the stock market, and geopolitical uncertainty, stocks would be their top choices of what they would do if they had an extra $10,000. While only 14% of respondents said they are investing more given the recent volatility, it’s notable that equities are still their top asset of choice if they had extra funds to deploy. ETFs and CDs are tied for second on their purchase wish-list.  What’s in Your Portfolio? Even though mega-cap tech, internet, and communications stocks have been among the worst performers year-to-date, our readers have remained faithful to their old favorites. Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) remain their top stocks, mirroring some of the most popular index funds and ETFs like (SPY) and (QQQ). Meta (META) and AT&T (T), have made slight gains among respondents’ top choices. Stocks to Buy and Hold for the Next Decade As for the stocks our readers would buy and hold for another ten years, the list looks a lot like what they are currently holding. Berkshire Hathaway (BRK) and Walmart (WMT), are on their buy and hold lists, however, replacing Exxon-Mobil (XOM) and AT&T (T).  Methodology This survey was fielded online to Investopedia readers 18+ living in the U.S. from April 24-29, 2024. Readers must currently hold and manage investments to qualify.  Participation in the survey is entirely voluntary; sample composition reflects U.S. 18+ reader base.

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

Futures Prices Converge Upon Spot Prices

<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"> It's a fairly safe bet that the price of a future will inch toward its spot price as the delivery month of a futures contract approaches, and it could even match the price. This is a very strong trend that occurs regardless of the contract's underlying asset. </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"> The convergence is easily explained by a combination of arbitrage interest and the law of supply and demand. </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 futures price of a commodity is set in advance between producer and buyer.</li><li>The spot price is the commodity's value when it is ready for delivery.</li><li>The difference in the two values is where arbitrage traders make their money.</li></ul></div></div></div> <span class="heading-toc" id="toc-defining-futures-prices-and-spot-prices"></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"> Defining Futures Prices and Spot Prices </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Investors in futures commit to buying or selling a quantity of something, generally a commodity like corn, at a set price for delivery at a future date. The origin of this market, and its practical use, is to help farmers and other producers of raw goods agree in advance with wholesale buyers on a reasonable price for a commodity. </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"> Both sides benefit. Producers have a ready buyer and can proceed with their work, and get financing for their operations as needed. Wholesale buyers know what they'll be spending for supplies in the coming period, and can budget accordingly. </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"> But that "reasonable" price may change repeatedly between the time that it is set and the time that the commodity is actually ready to deliver. A storm or a pest may reduce the supply of a crop and drive prices up. A recession may reduce consumer demand for precious metals and drive prices down. </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"> Futures traders try to make a profit off of the difference between the futures price that has been set and the value of the commodity at the time it is actually ready for delivery. </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-how-arbitrage-affects-price"></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"> How Arbitrage Affects Price </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Suppose that the futures contract for corn is priced higher than the spot price as the contract's month of delivery approaches. When this happens, traders see an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/arbitrage.asp">arbitrage</a> opportunity. That is, they will short futures contracts, buying the underlying asset, and then make the delivery. </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-important" 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>As arbitrageurs short futures contracts, futures prices drop because the supply of contracts available for trade increases.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The trader profits because the amount of money received by shorting the contracts exceeds the amount spent buying the underlying asset to cover the position. </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 for the pressure of supply and demand, the effect of arbitrageurs shorting futures contracts causes a drop in futures prices because it creates an increase in the supply of contracts available for trade. Subsequently, buying the underlying asset causes an increase in the overall demand for the asset and the spot price of the underlying asset will increase as a result. </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"> As arbitragers continue to do this, the futures price and the spot price will slowly converge until they are equal, or close to equal. The same sort of effect occurs when spot prices are higher than futures, except that arbitrageurs would in that case <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shortselling.asp">short sell</a> the underlying asset and long the futures contracts. </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"> <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>

It's a fairly safe bet that the price of a future will inch toward its spot price as the delivery month of a futures contract approaches, and it could even match the price. This is a very strong trend that occurs regardless of the contract's underlying asset. The convergence is easily explained by a combination of arbitrage interest and the law of supply and demand. ### Key Takeaways * The futures price of a commodity is set in advance between producer and buyer. * The spot price is the commodity's value when it is ready for delivery. * The difference in the two values is where arbitrage traders make their money. ## Defining Futures Prices and Spot Prices Investors in futures commit to buying or selling a quantity of something, generally a commodity like corn, at a set price for delivery at a future date. The origin of this market, and its practical use, is to help farmers and other producers of raw goods agree in advance with wholesale buyers on a reasonable price for a commodity. Both sides benefit. Producers have a ready buyer and can proceed with their work, and get financing for their operations as needed. Wholesale buyers know what they'll be spending for supplies in the coming period, and can budget accordingly. But that "reasonable" price may change repeatedly between the time that it is set and the time that the commodity is actually ready to deliver. A storm or a pest may reduce the supply of a crop and drive prices up. A recession may reduce consumer demand for precious metals and drive prices down. Futures traders try to make a profit off of the difference between the futures price that has been set and the value of the commodity at the time it is actually ready for delivery. ## How Arbitrage Affects Price Suppose that the futures contract for corn is priced higher than the spot price as the contract's month of delivery approaches. When this happens, traders see an [arbitrage](https://www.investopedia.com/terms/a/arbitrage.asp) opportunity. That is, they will short futures contracts, buying the underlying asset, and then make the delivery. ### As arbitrageurs short futures contracts, futures prices drop because the supply of contracts available for trade increases. The trader profits because the amount of money received by shorting the contracts exceeds the amount spent buying the underlying asset to cover the position. As for the pressure of supply and demand, the effect of arbitrageurs shorting futures contracts causes a drop in futures prices because it creates an increase in the supply of contracts available for trade. Subsequently, buying the underlying asset causes an increase in the overall demand for the asset and the spot price of the underlying asset will increase as a result. As arbitragers continue to do this, the futures price and the spot price will slowly converge until they are equal, or close to equal. The same sort of effect occurs when spot prices are higher than futures, except that arbitrageurs would in that case [short sell](https://www.investopedia.com/terms/s/shortselling.asp) the underlying asset and long the futures contracts. *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.*

It's a fairly safe bet that the price of a future will inch toward its spot price as the delivery month of a futures contract approaches, and it could even match the price. This is a very strong trend that occurs regardless of the contract's underlying asset. The convergence is easily explained by a combination of arbitrage interest and the law of supply and demand. Key Takeaways The futures price of a commodity is set in advance between producer and buyer.The spot price is the commodity's value when it is ready for delivery.The difference in the two values is where arbitrage traders make their money. Defining Futures Prices and Spot Prices Investors in futures commit to buying or selling a quantity of something, generally a commodity like corn, at a set price for delivery at a future date. The origin of this market, and its practical use, is to help farmers and other producers of raw goods agree in advance with wholesale buyers on a reasonable price for a commodity. Both sides benefit. Producers have a ready buyer and can proceed with their work, and get financing for their operations as needed. Wholesale buyers know what they'll be spending for supplies in the coming period, and can budget accordingly. But that "reasonable" price may change repeatedly between the time that it is set and the time that the commodity is actually ready to deliver. A storm or a pest may reduce the supply of a crop and drive prices up. A recession may reduce consumer demand for precious metals and drive prices down. Futures traders try to make a profit off of the difference between the futures price that has been set and the value of the commodity at the time it is actually ready for delivery. How Arbitrage Affects Price Suppose that the futures contract for corn is priced higher than the spot price as the contract's month of delivery approaches. When this happens, traders see an arbitrage opportunity. That is, they will short futures contracts, buying the underlying asset, and then make the delivery. As arbitrageurs short futures contracts, futures prices drop because the supply of contracts available for trade increases. The trader profits because the amount of money received by shorting the contracts exceeds the amount spent buying the underlying asset to cover the position. As for the pressure of supply and demand, the effect of arbitrageurs shorting futures contracts causes a drop in futures prices because it creates an increase in the supply of contracts available for trade. Subsequently, buying the underlying asset causes an increase in the overall demand for the asset and the spot price of the underlying asset will increase as a result. As arbitragers continue to do this, the futures price and the spot price will slowly converge until they are equal, or close to equal. The same sort of effect occurs when spot prices are higher than futures, except that arbitrageurs would in that case short sell the underlying asset and long the futures contracts. 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/best-online-gold-dealers-5095874

Best Online Gold Dealers 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="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"> Online gold dealers, like many web-based investing platforms, have benefited greatly from how technology has helped level the playing field for investors. With gold prices reaching new highs in May 2024, these online platforms allow investors to research and buy physical gold from the comfort of their homes, all while charging lower prices than brick-and-mortar establishments. </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"> While buying gold in person at your local gold dealer does have some advantages—like making it possible for investors to inspect the quality of the gold before taking it home the same day—online gold buying has other benefits. Just be aware that not all online gold dealers are the same, so investors should research their options carefully and only buy from reputable websites. </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"> APMEX  (American Precious Metals Exchange) tops our list as the best overall online gold dealer for its solid track record, strong customer service, and broad product offering. We evaluated top companies based on their reputations, competitive and transparent prices, customer service, and more to find the best online gold dealers. </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 Online Gold Dealers 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="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://apmex.sjv.io/c/2104074/1055574/13444" rel="nofollow noskim noopener nocaes" target="_blank"> APMEX (American Precious Metals Exchange)</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 Customer Experience:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="clickref=${DOC_ID}&amp;clickref2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://www.awin1.com/cread.php?awinmid=22685&amp;awinaffid=713679" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> JM Bullion</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 Gold Coins:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=585446&amp;u=2366409&amp;m=52536&amp;urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> BGASC</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 Buybacks:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=696067&amp;u=2366409&amp;m=57542&amp;urllink=www%2Emoneymetals%2Ecom%2F" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> Money Metals Exchange</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 Low-Price Option:</strong> <a class="summary-list__item-top-pick" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-tracking-container="true" data-tracking-id="PRM Roundup | Summary List" href="https://shareasale.com/r.cfm?b=1531669&amp;u=2366409&amp;m=96929&amp;urllink=&amp;afftrack=" rel="nofollow noskim noopener sponsored nocaes" target="_blank"> SD Bullion</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 Reputation:</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://secure.money.com/pr/df814f70e4b1" rel="nofollow noskim noopener nocaes" target="_blank"> Golden Eagle Coins</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><!-- 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 Online Gold Dealers 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-Best Online Gold Dealers 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"> Best Online Gold Dealers 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 mntl-toc__list-item" data-click-action="OnPageClick-APMEX (American Precious Metals Exchange)" 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-APMEX (American Precious Metals Exchange)" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-overall-apmex-american-precious-metals-exchange" rel="nocaes"> <span class="link__wrapper">APMEX (American Precious Metals Exchange)</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-JM Bullion" 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-JM Bullion" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-customer-experience-jm-bullion" rel="nocaes"> <span class="link__wrapper">JM Bullion</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-BGASC" 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-BGASC" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-gold-coins-bgasc" rel="nocaes"> <span class="link__wrapper">BGASC</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-Money Metals Exchange" 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-Money Metals Exchange" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-for-buybacks-money-metals-exchange" rel="nocaes"> <span class="link__wrapper">Money Metals Exchange</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-SD Bullion" 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-SD Bullion" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-low-price-option-sd-bullion" rel="nocaes"> <span class="link__wrapper">SD Bullion</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-Golden Eagle Coins" 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-Golden Eagle Coins" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-best-reputation-golden-eagle-coins" rel="nocaes"> <span class="link__wrapper">Golden Eagle Coins</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-Compare Dealers" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-compare-the-best-online-gold-dealers" id="mntl-toc__list-item-link_1-0-1" rel="nocaes"><span class="link__wrapper">Compare Dealers</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-What to Look for When Buying Gold" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-what-to-look-for-when-buying-gold" id="mntl-toc__list-item-link_1-0-2" rel="nocaes"><span class="link__wrapper">What to Look for When Buying Gold</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-Pros and Cons of Investing in Physical Gold" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-pros-and-cons-of-investing-in-physical-gold" id="mntl-toc__list-item-link_1-0-3" rel="nocaes"><span class="link__wrapper">Pros and Cons of Investing in Physical Gold</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-Why You Should Trust Us" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-why-you-should-trust-us" id="mntl-toc__list-item-link_1-0-4" rel="nocaes"><span class="link__wrapper">Why You Should Trust Us</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-FAQ" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-faq-f62f095f-6eb9-4118-a209-9416abbaed5d" id="mntl-toc__list-item-link_1-0-5" 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 --> <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-Methodology" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-methodology" id="mntl-toc__list-item-link_1-0-6" 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 --> <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-Learn More About Buying Gold" data-tracking-container="true" data-tracking-id="PRM Roundup | Table of Contents" href="#toc-learn-more-about-buying-gold" id="mntl-toc__list-item-link_1-0-7" rel="nocaes"><span class="link__wrapper">Learn More About Buying Gold</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-apmex-american-precious-metals-exchange"></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"> APMEX (American Precious Metals Exchange)</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: 317px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="APMEX" 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/ShWAI8VkAYJuq1avE7tfpmrFVWg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Apmex-47644019c0ed4a73a115af8ed30ad713.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="APMEX" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/ShWAI8VkAYJuq1avE7tfpmrFVWg=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Apmex-47644019c0ed4a73a115af8ed30ad713.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> APMEX</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>Shipping policy:</strong> Free for orders $199 and up</li><li><strong>Storage:</strong> Through a partner</li><li><strong>Return policy:</strong> 7 days (10% restocking fee, minimum $50)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-2"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at APMEX" data-retailer-type="other" data-tracking-container="true" href="https://apmex.sjv.io/c/2104074/1055574/13444" id="button_1-0" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-4"> With a solid track record, strong customer service, and more than 20,000 products to offer, APMEX (the largest online precious metals dealer globally) is our choice for Best Overall online gold dealer.<span class="ql-inline-citation" data-cite="3"></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_3-0-6"> <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>Extensive product selection</p></li> <li><p>7-day return policy</p></li> <li><p>Robust customer service</p></li> <li><p>Solid online reputation</p></li> <li><p>Long track record</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>Different prices depending on your payment method</p></li> <li><p>Additional fee to store your gold</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_3-0-8"> American Precious Metals Exchange (APMEX) has built itself into a global precious metals powerhouse since its founding in 2000. It's not surprising that it has the largest selection of precious metals products. </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"> In addition to a wide range of gold and silver bullion and coin products, APMEX also has an extensive selection of platinum and palladium products. Its coin selection is a virtual United Nations, representing coins from the United States, Canada, Australia, South Africa, Mexico, and beyond. APMEX is also one of the best sources for collectors, offering a wide variety of coins and old banknotes. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-10"> While APMEX doesn't have the lowest prices around, its significant sales volume allows it to at least be competitive. A major drawback is that they charge different prices for different payment methods. APMEX also offers volume-based pricing and bulk discounts on bullion and coins on purchases. The quantity tiers are 1-9, 10-19, 20-99, and 100+. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-11"> Ease-of-use is also a strength of APMEX, with easy navigation to browse products and a quick four-step checkout process. Once you begin an order, you have 10 minutes to finalize the purchase to lock in current pricing. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-12"> Another key advantage is APMEX's free shipping on any order over $199. There is no minimum order requirement. Orders under $199 are charged a $9.95 shipping fee. Insurance is included on all shipped packages. Orders paid by credit card, PayPal, cryptocurrency, and wire transfers may qualify for APMEX's QuickShip Program, which provides next-day processing for U.S. orders. </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"> If you want your gold stored, APMEX will ship it to Citadel Global Depository Services, one of the world's largest private storage facilities where it will be stored for an annual fee.<span class="ql-inline-citation" data-cite="4"></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_3-0-14"> You have many payment options with APMEX, including credit or debit cards, paper checks, bank wire transfers, PayPal, bitcoin, and eCheck. Payments may take up to five days to clear depending on your payment method, but some methods clear faster. </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"> APMEX offers a seven-day return and refund on any order but reserves the right to charge a restocking fee of $50 or 10% of the purchase amount. It also provides customers with a quick and easy buyback process. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-16"> APMEX is committed to providing excellent customer service and education. Customers can contact its service center via live chat, email, or phone during business hours but may place orders 24/7 all week long. New investors will appreciate APMEX's resource center on its website, providing educational information along with current insights on buying gold. </p><!-- 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-customer-experience-jm-bullion"></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 Customer Experience</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> JM Bullion</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 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_3-0-17" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="JM Bullion" 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/udqEw-vTGyag4EiLNeZZM3QT398=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/JM_Bullion-b2e86148373243fea8b60a05b8965827.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-1" width="1500"/> <noscript> <img alt="JM Bullion" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/udqEw-vTGyag4EiLNeZZM3QT398=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/JM_Bullion-b2e86148373243fea8b60a05b8965827.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>JM Bullion</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_3-0-18"> <li><strong>Shipping policy:</strong> Free over $199</li><li><strong>Storage:</strong> Through a partner</li><li><strong>Return policy:</strong> Within 5 business days of delivery</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-19"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-1"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="clickref=${DOC_ID}&amp;clickref2=${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at JM Bullion" data-retailer-type="other" data-tracking-container="true" href="https://www.awin1.com/cread.php?awinmid=22685&amp;awinaffid=713679" id="button_1-0-1" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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"> JM Bullion provides its customers with a user-friendly website, transparent pricing structure, dedicated customer support, and investor-friendly features, making it our choice as the online gold dealer with the best customer experience. </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>Low shipping costs and low free shipping threshold</p></li> <li><p>Clean and easy-to-use shopping site</p></li> <li><p>Several hundred thousand positive reviews</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 sell internationally</p></li> <li><p>If returned, buyer is responsible for market losses</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"> Since its founding in 2011, JM Bullion has quickly grown to become Inc.com's "fastest-growing precious metals company" in the U.S. That growth can be attributed to JM Bullion's commitment to offering a wide selection of products, transparent pricing, dedicated customer support, and a simple purchasing process. </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"> Its product selection is extensive, with a wide variety of gold, silver, platinum, copper, palladium coins, and bars, priced without commissions or additional fees. Different payment methods have different prices. JM Bullion offers members of the military the same discount it offers on bulk purchases.  </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"> Payments can be made by ACH transfer (up to $100,000), Bitcoin (up to $1,000,000), paper check (up to $100,000), credit or debit card (up to $100,000), PayPal (up to $250,000), and bank wire transfer (up to $1,000,000). Credit card and PayPal payments are charged 4% more and cryptocurrency 1% more via a "discount" for the other methods. </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"> Shipping is free for orders of $199 or more and includes insurance costs. For orders less than $199, you'll pay $9.95 (more if you upgrade your shipping method at checkout). You can also choose to have their gold shipped free to JM Bullion's storage partner, TDS Vaults, a high-security depositary with several locations worldwide.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-29"> JM Bullion offers a five-day return policy. While it doesn't indicate on its website whether there is a restocking fee, you are responsible for market losses. The online dealer has a minimum buyback policy of $1,000. You can visit its website to see its current buyback prices. </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"> JM Bullion prides itself on its dedicated customer support, which is accessible during business hours via live chat, email, and phone. </p><!-- 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-for-gold-coins-bgasc"></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 Gold Coins</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> BGASC</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_3-0-31" style="--imgWidth: 569px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="BGASC" 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/eolM8IXSF_LKwnOBch2P5Qnm0ZA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BGASC-85aa9a4b3b064c5f84d4c9e38d948451.jpg" data-tracking-container="false" height="1000" id="mntl-sc-block-image_1-0-2" width="1500"/> <noscript> <img alt="BGASC" class="img--noscript universal-image__image" height="1000" src="https://www.investopedia.com/thmb/eolM8IXSF_LKwnOBch2P5Qnm0ZA=/fit-in/1500x1000/filters:format(png):fill(white):max_bytes(150000):strip_icc()/BGASC-85aa9a4b3b064c5f84d4c9e38d948451.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> BGASC</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_3-0-32"> <li><strong>Shipping policy:</strong> Free over $199</li><li><strong>Storage:</strong> No</li><li><strong>Return policy:</strong> Within 5 business days of delivery</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-33"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-2"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at BGASC" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=585446&amp;u=2366409&amp;m=52536&amp;urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold" id="button_1-0-2" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-35"> As its name implies, BGASC (Buying Gold and Silver Coins) is one of the best sources for buying gold bullion coins sold at reasonable prices, making it our choice for the best online gold dealer for coins. </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_3-0-37"> <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>Best selection of gold coins</p></li> <li><p>Competitive pricing on gold coins</p></li> <li><p>Excellent customer support</p></li> <li><p>Solid online reputation</p></li> <li><p>Fast shipping</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 payment options</p></li> <li><p>Limited bullion offering</p></li> <li><p>No live chat</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_3-0-39"> Although BGASC offers a complete lineup of gold products, its primary focus is on selling gold bullion coins. Its selection of coins is vast, prices are highly competitive, and customer service is excellent. </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"> BGASC has managed to build a solid reputation, especially as a gold coin dealer. In addition to a great selection of all the essential standbys—such as American Eagles, Canadian Gold Maples, South African Krugerrands, Pre-1933 U.S. Gold, and Australian Gold Kangaroos—it maintains an extensive inventory of premium and rare medals, coins and paper currency. The study and collection of these rare materials is called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="http://numismatics.org/" rel="sponsored nofollow">numismatics</a>. Additionally, BGASC offers gold bars in all standard sizes.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-41"> The company's products are also priced very competitively. Its 1 oz. Gold American Eagle Coin was the cheapest of the vendors in this article. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-42"> One of the downsides of BGASC is its limited payment options. Currently, it only allows payments with paper checks (maximum of $100,000), PayPal (maximum $250,000), credit and debit cards (maximum of $100,000). </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-43"> Shipping is free for orders of $199 and over. BGASC offers a five-day return policy and will buy gold and silver from you at the current prices listed on its website. </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"> Customer reviews also praise BGASC's customer service, touting knowledgeable reps and quick response times (though they don't have live chat). As with most other online gold dealers, customer service is accessible during business hours.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-45"> BGASC is a Certified Coin Exchange (CCE) member and an authorized dealer for the Numismatic Guaranty Corporation (NGC). </p><!-- 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-buybacks-money-metals-exchange"></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 Buybacks</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Money Metals Exchange</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_3-0-46" style="--imgWidth: 0px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Money Metals Exchange" 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/hkgu_y0o3e6inDWqQGZexQ6ETJA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MOney_Metals-8d61f21ca1e541bcb9f501533a9680d7.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-3" width="1500"/> <noscript> <img alt="Money Metals Exchange" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/hkgu_y0o3e6inDWqQGZexQ6ETJA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/MOney_Metals-8d61f21ca1e541bcb9f501533a9680d7.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>Money Metals Exchange</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_3-0-47"> <li><strong>Shipping policy:</strong> Free over $199</li><li><strong>Storage:</strong> Yes</li><li><strong>Return policy:</strong> 3 days (5% restocking fee)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-48"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-3"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at Money Metals" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=696067&amp;u=2366409&amp;m=57542&amp;urllink=www%2Emoneymetals%2Ecom%2F" id="button_1-0-3" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-50"> Money Metals Exchange is tops in this category because it pays the highest buyback prices among its competitors.  </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_3-0-52"> <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 pricing</p></li> <li><p>Free shipping on orders of $199 or more</p></li> <li><p>Automated monthly savings plan</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>Purchasing limits apply depending on your payment method and some are very low</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_3-0-54"> Founded in 2010, Money Metals Exchange has quickly amassed a customer base of more than 500,000 customers. Its customer-centric focus has translated into highly competitive pricing, personalized service, a pathway for new investors, and one of the best online reputations. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-55"> Customers can easily navigate its website to shop for coins and bullion by category and weight. Beginning investors can get their feet wet in gold investing with an automatic monthly savings plan starting at $100 a month. They advertise the price to be as low as $105 over spot pricing on a 1oz Gold American Eagle Coin.<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_3-0-56"> Money Metals locks in your price for 10 minutes to allow you to finish entering your information and payment method, which can be bank wire transfer, bitcoin, credit or debit card, money order, PayPal, or check. There is a 4% processing fee on PayPal and card orders. All payment types have different purchase limits. Cards are limited to $1,700, PayPal is limited to $3,000, and ACH is limited to $10,000. Other methods have much higher limits. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-57"> Shipping is free on all orders over $199. For orders under $199, the shipping charge is $7.97. Money Metals offers a three-day return policy and may apply a 5% restocking fee on credit card orders. The dealer also offers a buyback program claiming to pay the highest price among 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_3-0-58"> Money Metals offers vault storage in Delaware, Idaho and Massachusetts in Class 3 vaults. Your metals are fully segregated and fully insured. They also provide responsive customer service during business hours via live chat, phone, or email. Its website also has an extensive resource library to help new investors learn and experienced investors stay on top of the market. Money Metals also provides price alerts for investors waiting for their price to buy.  </p><!-- 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-low-price-option-sd-bullion"></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 Low-Price Option</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> SD Bullion</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-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_3-0-59" style="--imgWidth: 195px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="SD Bullion" 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/kNlhoCh4M2JqUeUBRKRzOQtBCEA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/SD_Bullion-065f552aa7ed479b99dac8bcbda0f170.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-4" width="1500"/> <noscript> <img alt="SD Bullion" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/kNlhoCh4M2JqUeUBRKRzOQtBCEA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/SD_Bullion-065f552aa7ed479b99dac8bcbda0f170.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> SD Bullion</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_3-0-60"> <li><strong>Shipping policy:</strong> Free over $199</li><li><strong>Storage:</strong> Yes</li><li><strong>Return policy:</strong> 3 days (5% restocking fee, minimum $35)</li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <div class="comp mntl-sc-block prm-sc-block-commerce--finance prm-sc-block-commerce mntl-sc-block-commerce--universal-image mntl-sc-block-commerce mntl-block" data-click-tracked="true" data-link-closest-header="false" data-tracking-container="true" data-tracking-id="PRM Roundup | ProductCard - Button" data-use-child-url=".mntl-sc-block-commerce__button" data-use-external-image="false" id="mntl-sc-block_3-0-61"> <div class="comp mntl-sc-block-commerce-button-list mntl-commerce-button-list-block mntl-block" id="mntl-sc-block-commerce-button-list_1-0-4"> <a class="button mntl-commerce-button js-extended-commerce__button mntl-sc-block-commerce__button" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-click-action="OffPageClick - External" data-retailer-caption="at SD Bullion" data-retailer-type="other" data-tracking-container="true" href="https://shareasale.com/r.cfm?b=1531669&amp;u=2366409&amp;m=96929&amp;urllink=&amp;afftrack=" id="button_1-0-4" rel="noskim noopener nofollow sponsored nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-63"> SD Bullion offers low prices compared to the other dealers on this list, and it backs that up with a low-price guarantee. </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_3-0-65"> <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-price guarantee</p></li> <li><p>Low-cost direct storage</p></li> <li><p>Solid online reputation</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>Three-day return policy</p></li> <li><p>Stiff order cancellation fee</p></li> <li><p>Product offering somewhat 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_3-0-67"> If a dealer asserts itself as the "lowest cost" online gold dealer in the U.S., it should back its claim with a low-price guarantee and that's just what SD Bullion does. </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"> SD Bullion offers a full array of precious metals, including gold, silver, platinum, copper, and palladium, but its selection of products is more limited than some of its top competitors. For investors looking for the best deal with no brand preference, SD Bullion can't be beaten. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-69"> The company offers free shipping on orders over $199 ($9.95 flat rate for orders under $199). As we've already stated, it offers great prices and if a customer spies a price lower than SD Bullion's, the dealer will match it.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-70"> If payment is not received by the payment deadline, your order will be subject to a market loss fee, a 5% cancellation fee, and any collection expenses incurred by SD Bullion. SD Bullion offers a full array of payment options, 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_3-0-71"> <li>Bitcoin (up to $250,000)</li><li>Cashier's check (up to $20,000)</li><li>Credit or debit card (up to $5,000)</li><li>E-check (up to $10,000)</li><li>PayPal (up to $5,000)</li><li>Personal check (up to $20,000)</li><li>Wire transfer ($20,000 and up)</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_3-0-72"> PayPal and credit card payments are charged a 4% processing fee and Bitcoin 1%. If you choose to have your gold stored, you can open a storage depository account and have your gold stored directly with SD Bullion and fully insured by Lloyd's of London. The cost is free for the first three months; storage fees are as low as $9.99 a month based on the amount stored.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-73"> Returns are accepted within three days of delivery, but refunds are not guaranteed. SD Bullion will determine if it will accept your return request. A stocking fee—5% of the purchase or $35, whichever is higher—is charged, and SD Bullion may require you to cover the cost of any market loss. SD Bullion will purchase your gold, though buyback prices are not published. Payments are issued within one to three days after SD Bullion receives the item.<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_3-0-74"> SD Bullion's customer service reviews are generally positive, with customers reporting good access to representatives through chat, email, and phone. Many of the comments highlight the speedy ordering process and reasonably quick deliveries. </p><!-- 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-reputation-golden-eagle-coins"></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 Reputation</span> </span> </span>: <span class="split-text__item"> <span class="split-text__secondary-wrapper"> <span class="split-text__item-secondary"> Golden Eagle Coins</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 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_3-0-75" style="--imgWidth: 502px"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:50.0%;"> <img alt="Gold Eagle Coin" 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/8dQMMVpwrbsSB6g6qPIV2lgCwrA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Golden_Eagle-92f37c1c31b045d9926377f185a931af.jpg" data-tracking-container="false" height="750" id="mntl-sc-block-image_1-0-5" width="1500"/> <noscript> <img alt="Gold Eagle Coin" class="img--noscript universal-image__image" height="750" src="https://www.investopedia.com/thmb/8dQMMVpwrbsSB6g6qPIV2lgCwrA=/fit-in/1500x750/filters:format(png):fill(white):max_bytes(150000):strip_icc()/Golden_Eagle-92f37c1c31b045d9926377f185a931af.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> Gold Eagle Coin</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_3-0-76"> <li><strong>Shipping policy:</strong> Free over $99</li><li><strong>Storage:</strong> No</li><li><strong>Return policy:</strong> 7 days (5% restocking fee)</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_3-0-77"> <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 Golden Eagle Coins" data-retailer-type="other" data-tracking-container="true" href="https://secure.money.com/pr/df814f70e4b1" id="button_1-0-5" rel="noskim noopener nofollow nocaes" target="_blank"><span class="link__wrapper">Learn More</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">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_3-0-79"> Established as a family-owned business, Golden Eagle Coins has a nearly unblemished track record with thousands of positive reviews. </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_3-0-81"> <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>In business since 1974</p></li> <li><p>Extensive selection of gold coins</p></li> <li><p>Solid online reputation</p></li> <li><p>Excellent customer service</p></li> <li><p>Seven-day return policy</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 selection of gold bars</p></li> <li><p>No live chat support</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_3-0-83"> Known primarily for its vast selection of gold coins, including collectible and numismatic coins, Golden Eagle Coins' started in 1974 and maintains a track record of customer satisfaction that is unmatched. </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"> You can't help but marvel at Golden Eagle Coins' extensive selection. In addition to popular coins, such as American Eagles, South African Krugerrands, and Canadian Maple Leafs, investors can also find a great selection of pre-1933 coins, commemoratives, mint sets, and foreign coins from many countries. Golden Eagle Coins also sells silver, platinum, palladium, and copper coins. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-85"> Also, you won't find too many dealers that offer historical currency, such as Confederate notes and Colonial currency. Collectors are also impressed with its selection of ancient Arabic, Greek, Roman, and medieval coins.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-86"> Golden Eagle Coins' pricing is low and competitive, but not quite as cheap as BGASC or SD Bullion. You go to Golden Eagle Coins for its selection and service, not necessarily for its pricing.  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_3-0-87"> Golden Eagle Coins offers all the standard payment options, including Bitcoin, paper checks, credit cards, PayPal, and bank wire transfers. There's a $1,500 purchase limit for credit cards and a $1,500 minimum for bank wire transfers. Other minimums and maximums apply as well. PayPal and credit card orders are charged more as a type of fee.<span class="ql-inline-citation" data-cite="7"></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_3-0-88"> Standard shipping is free for orders of $99 or more and $9.95 for orders under $99. You can upgrade your shipping speed to priority mail for $14.95 or express mail for $24.94. Golden Eagle Coins accepts returns for seven days following delivery, plus a 5% restocking fee. Gold buying prices are listed on its website.<span class="ql-inline-citation" data-cite="8"></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_3-0-89"> Though it doesn't offer live chat, Golden Eagle Coins receives high marks for its customer service from thousands of customer reviews. Response times to phone and email inquiries are fast, and the service is very responsive. Golden Eagle Coins' online reputation is impeccable. It scores highly on multiple online review sites. </p><!-- 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"> The online gold dealers above are reputable, reliable, transparent, and fair. But there are significant differences between the top dealers that attract investors for different reasons. </p><!-- 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_4-0-2"> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"> <p>Not all precious metal dealers are trustworthy. Before you purchase, do your research, be wary of anyone promising easy profits, and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_preciousmetals.html" rel="noopener noreferrer">learn to spot the signs of a scam</a>.</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 --> <p class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-3"> Many gold investors diversify by buying from several sources. If you're looking for the widest array of products in all categories, APMEX should be your first stop. If you value an exceptional overall customer experience, you should also check out JM Bullion. Additionally, few gold dealers can beat SD Bullion if you're most concerned about pricing, while Money Metals Exchange offers top buyback prices. </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-compare-the-best-online-gold-dealers"></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"> Compare the Best Online Gold Dealers </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_4-0-5"> <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>Shipping Policy</b></th> <th>Storage</th> <th>Returns</th> </tr> </thead> <tbody data-check="0"> <tr> <td><a class="null" data-affiliate-link-rewriter="subid1=${DOC_ID}&amp;subid2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://apmex.sjv.io/c/2104074/1055574/13444" rel="nofollow">APMEX</a> <br/><b>Best Overall</b></td> <td>Free for orders $199 and up</td> <td>Through a partner</td> <td>7 days (10% restocking fee, minimum $50)</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="clickref=${DOC_ID}&amp;clickref2=${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.awin1.com/cread.php?awinmid=22685&amp;awinaffid=713679" rel="sponsored nofollow">JM Bullion</a> <br/><b>Best Customer Experience</b></td> <td>Free over $199</td> <td>Through a partner</td> <td>Within 5 business days of delivery</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=585446&amp;u=2366409&amp;m=52536&amp;urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold" rel="sponsored nofollow">BGASC</a> <br/><b>Best for Gold Coins</b></td> <td>Free over $199</td> <td>No</td> <td>Within 5 business days of delivery</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=696067&amp;u=2366409&amp;m=57542&amp;urllink=www%2Emoneymetals%2Ecom%2F" rel="sponsored nofollow">Money Metals Exchange</a> <br/><b>Best Overall</b></td> <td>Free over $199</td> <td>Yes</td> <td>3 days (5% restocking fee)</td> </tr> <tr> <td><a class="null" data-affiliate-link-rewriter="afftrack=${DOC_ID}-${REQUEST_ID}" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareasale.com/r.cfm?b=1531669&amp;u=2366409&amp;m=96929&amp;urllink=&amp;afftrack=" rel="sponsored nofollow">SD Bullion</a> <br/><b>Best Low-Price Option</b></td> <td>Free over $199</td> <td>Yes</td> <td>3 days (5% restocking fee, minimum $35)</td> </tr> <tr> <td><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.goldeneaglecoin.com/" rel="sponsored nofollow">Golden Eagle Coins</a> <br/><b>Best Reputation</b></td> <td>Free over $99</td> <td>No</td> <td>7 days (5% restocking fee)</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-what-to-look-for-when-buying-gold"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-6"> <span class="mntl-sc-block-heading__text"> What to Look for When Buying Gold<br> </br></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_4-0-7"> Investing in physical gold is a popular method for diversifying your portfolio. But before adding physical gold to your portfolio, you should know what to look for when buying gold. </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"> <strong>Here is a list of the best practices for buying gold online</strong>:  </p><!-- end: comp mntl-sc-block mntl-sc-block-html --> <ul class="comp mntl-sc-block mntl-sc-block-html" id="mntl-sc-block_4-0-9"> <li><strong>Buy from trusted online gold dealers</strong>: Unfortunately, there are many scams that investors should be aware of when purchasing gold online. To ensure investors are buying from a reputable company, check to see that the company has been business for a long time. Most of the companies on our list of best online gold dealers have been operating for more than 10 years. In addition, investors should look to see that the company maintains good standing with the Better Business Bureau.</li><li><strong>Compare premium and spot price: </strong>Spot price is the market price for a commodity such as gold, which can change daily. The premium associated with gold refers to the additional cost incurred over and above the spot price. When buying gold, investors should understand how much premium they are paying and whether it is reasonable. </li><li><strong>Ensure the gold investment's authenticity</strong>: Investors need to recognize popular gold brands for two reasons: the added premium and the authenticity of these gold bars. Trusted brands like PAMP Suisse, Credit Suisse, and the U.S. Mint have iconic designs and are often serialized, showcasing their credibility. It's also advisable to test your gold to ensure it's genuine; one of the most popular tests is the magnet test. Real gold is not magnetic and should not react to a magnet. However, some fake gold has become sophisticated, and if you are still having doubts you can always buy a gold testing tool. </li><li><strong>Understand the gold investment's purity and weight</strong>: The highest purity level for gold is 24-karat, which is the purity level investors should look for when deciding to diversify their portfolio. Another metric investors should understand is the various weights that gold can come in. For instance, gold can be purchased in grams, fractional troy ounces, troy ounces, and kilos. The higher the weight of the gold, the more expensive it will be. <br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-pros-and-cons-of-investing-in-physical-gold"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-10"> <span class="mntl-sc-block-heading__text"> Pros and Cons of Investing in Physical Gold<br> </br></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_4-0-11"> The appeal of gold has enticed investors for centuries in terms of its value and function within our society. Unlike stocks or bonds, gold's value is not primarily tied to its monetary worth; it is a tangible asset that serves vital industries such as technology and medicine. Before investors buy gold for their portfolio, they should understand the pros and cons of investing in the precious metal and determine if it's the right fit for their portfolio.  </p><!-- 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_4-0-12"> <span class="mntl-sc-block-subheading__text"> Pros<br> </br></span> </h3><!-- end: comp 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_4-0-13"> <li><strong>Portfolio diversification:</strong> Regardless of your risk appetite for investing, diversifying your portfolio is fundamental to managing your finances. No investor can predict the future of the financial markets and the fluctuations they endure. Investors recognize gold as an essential anchor for their portfolios, helping stabilize their finances during market volatility. <br/></li> <li><strong>Hedge against inflation</strong>: Inflation occurs when the dollar's value decreases and the price of goods increases, causing economic hardship for businesses and consumers. Historically, gold has been an exceptional barrier against inflation. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx">Gold</a>, a finite tangible asset, can increase in value when inflation affects the economy. </li> <li><strong>Flexible buying process</strong>: Despite the cost of gold, buying the precious asset is relatively easy. Investors do not need a brokerage, cash management, or bank account to hold gold. Investors can hold gold in the comfort of their own homes. However, storing it in a safe or a safety deposit box is advisable, but it may increase the overall cost of investing in gold.<br/></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_4-0-14"> <span class="mntl-sc-block-subheading__text"> Cons<br> </br></span> </h3><!-- end: comp 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_4-0-15"> <li><strong>Gold is illiquid</strong>: While gold may be easy for investors to buy, it's challenging to sell if cash is needed immediately. It's also important to note that gold dealers generally purchase gold from the seller at a reduced rate, which means investors may have to sell the asset for less than its worth. If investors need to sell their gold, it would be advisable to research local and online dealers to see what they are willing to pay.</li><li><strong>Gold does not generate income</strong>: Gold does not have any ability to pay dividends or interest. The only type of return gold investors can hope to obtain is through capital gains. However, for investors to expect any capital appreciation, they would have to hold onto the gold investment long-term, and even then, like all investments, it's not guaranteed that a profit will occur. </li><li><strong>Investment and security costs</strong>: Investors should expect to pay a premium when buying gold. A premium is a cost above the spot price that a gold dealer charges to make a profit on the sale. Premiums are primarily correlated to the supply and demand of gold. However, there is no regulation regarding how much a gold dealer charges. Aside from the cost of premiums, investors should consider the cost of protecting these precious metals. Standard methods of safeguarding gold include buying a safe and insuring it from theft or damage. These expenses can be costly and eat into any profit an investor hopes to gain.<br/></li> </ul><!-- end: comp mntl-sc-block mntl-sc-block-html --> <span class="heading-toc" id="toc-why-you-should-trust-us"></span> <h2 class="comp mntl-sc-block prm-sc-block-heading mntl-sc-block-heading" id="mntl-sc-block_4-0-16"> <span class="mntl-sc-block-heading__text"> Why You Should Trust Us </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_4-0-17"> Investopedia collected key data points from several online gold dealers to identify the most important factors for readers choosing the right company to fit their needs. We used this data to review each company for their pricing, customer support, transparency, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best online gold dealers since 2021. </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_4-0-18"> <span class="heading-toc" id="toc-faq-f62f095f-6eb9-4118-a209-9416abbaed5d"></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">How Do You Buy Gold Online?</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/articles/investing/072316/how-do-you-purchase-physical-gold-bars.asp">Buying gold online</a> can be as easy as point-and-click. The most reputable dealers have a well-organized website with easy navigation to find and compare products by category (e.g., bullion by weight, coins, out-of-mint coins, etc.). With most dealers, once you find the product you want and start the checkout process your price is locked in for a short period, typically 10 to 15 minutes. You need to complete your purchase before the pricing expires, or you may see the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/031915/what-moves-gold-prices.asp">price adjusted up or down</a> based on how the market is moving. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-1" tabindex="-1"> <h3 class="accordion__title">Can You Store Gold at Home?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Yes, you can store your gold at home (except in the case of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-gold-ira-companies-5087720">Gold IRAs</a>). For those who prefer to keep their gold close to them, the ideal place to store it is a well-hidden, at-home safe. If you do store your gold at home, be sure to check that your homeowner's insurance covers its potential loss or damage. If not, you may need to purchase additional coverage. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-2" tabindex="-1"> <h3 class="accordion__title">Is Buying Gold Online Safe?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Buying gold online is as safe as any other transaction you make over the internet as long as you know you're dealing with a reputable company. As with any online purchase, adequately researching these online retailers is your first and last line of defense against scammers. The best dealers use SSL encryption and are PCI-compliant. Plus, all their shipments are insured for their full value. </p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-3" tabindex="-1"> <h3 class="accordion__title">How Do You Choose a Reputable Gold Dealer?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Unquestionably, a company's reputation is the number one criterion to evaluate and compare gold dealers. The single best measure of a company's reputation is its transaction history, which can be assessed by customer reviews. Companies with a large number of reviews are typically more established (they have long term track records) or have built up their trust and reputation through a greater number of transactions. </p><p>Additionally, you should look for a proven track record, physical company headquarters, clear return and buyback policies, transparent pricing, and multiple payment options.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <li class="accordion__item js-accordion-item is-active"> <div class="accordion__header js-accordion-trigger" id="mntl-sc-block-faq__content_1-section-4" tabindex="-1"> <h3 class="accordion__title">Do Gold Dealers Report to the IRS?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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>Yes, gold dealers report to the IRS. These companies are required to report when a customer makes a cash payment of $10,000 or more, or when they sell a large amount of bulk gold or silver pieces. Gold dealers either report using the IRS form 1099-B or 8300.<span class="ql-inline-citation" data-cite="2"></span></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content --> </div><!--end accordion__body--> </li><!--end accordion__item--> <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">Is Gold a Good Investment?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-5"> <div class="faq-accordion__item-answer"> <p>Like any investment, the potential for gold to deliver positive returns varies <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/020915/has-gold-been-good-investment-over-long-term.asp">depending on the time period under consideration</a>. Gold investors have long relied on the yellow metal for the diversification it lends to a well-balanced portfolio. In addition, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp">using gold as a financial hedge</a> during periods of heightened market volatility is also a popular strategy. However, whether buying physical gold or investing in gold using one of the many publicly traded <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a> products, it is important to understand that gold is not an income-generating asset. Unlike stocks and bonds, the returns investors get is based entirely on the appreciation in gold prices.</p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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 Is Gold Bullion?</h3> </div><!--end accordion__header--> <div class="accordion__body"> <div class="comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$Faq mntl-sc-block-faq__accordion-content" id="mntl-sc-block-faq__accordion-content_1-0-section-6"> <div class="faq-accordion__item-answer"> <p>Gold bullion refers to gold bars or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ingot.asp">ingots</a> that are made almost entirely of pure gold (typically 99.5% to 99.99% pure). These bars are typically stamped with the weight and purity of the gold they contain by the mints that produce them, making their value easy to determine. Bullion is most commonly used for investment purposes, either as a hedge against inflation or economic uncertainty or for potential price appreciation over time.</p><p><br/></p> </div> </div><!-- end: comp class com.about.mantle.model.extended.docv2.sc.blocks.StructuredContentFaqEx$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-methodology"></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"> 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_4-0-20"> We reviewed 13 of the top dealers and applied our criteria of online reputation, length of track record, price transparency, payment options, shipping speed, absence of commissions and hidden fees, and customer service to narrow our choices for the best in six different categories. 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Online gold dealers, like many web-based investing platforms, have benefited greatly from how technology has helped level the playing field for investors. With gold prices reaching new highs in May 2024, these online platforms allow investors to research and buy physical gold from the comfort of their homes, all while charging lower prices than brick-and-mortar establishments. While buying gold in person at your local gold dealer does have some advantages—like making it possible for investors to inspect the quality of the gold before taking it home the same day—online gold buying has other benefits. Just be aware that not all online gold dealers are the same, so investors should research their options carefully and only buy from reputable websites. APMEX  (American Precious Metals Exchange) tops our list as the best overall online gold dealer for its solid track record, strong customer service, and broad product offering. We evaluated top companies based on their reputations, competitive and transparent prices, customer service, and more to find the best online gold dealers. ## Best Online Gold Dealers for May 2024 * **Best Overall:** [APMEX (American Precious Metals Exchange)](https://apmex.sjv.io/c/2104074/1055574/13444) * **Best Customer Experience:** [JM Bullion](https://www.awin1.com/cread.php?awinmid=22685&awinaffid=713679) * **Best for Gold Coins:** [BGASC](https://shareasale.com/r.cfm?b=585446&u=2366409&m=52536&urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold) * **Best for Buybacks:** [Money Metals Exchange](https://shareasale.com/r.cfm?b=696067&u=2366409&m=57542&urllink=www%2Emoneymetals%2Ecom%2F) * **Best Low-Price Option:** [SD Bullion](https://shareasale.com/r.cfm?b=1531669&u=2366409&m=96929&urllink=&afftrack=) * **Best Reputation:** [Golden Eagle Coins](https://secure.money.com/pr/df814f70e4b1) Best Online Gold Dealers for May 2024 Expand Best Online Gold Dealers for May 2024 * [Our Top Picks](#summary-list) * [APMEX (American Precious Metals Exchange)](#toc-best-overall-apmex-american-precious-metals-exchange) * [JM Bullion](#toc-best-customer-experience-jm-bullion) * [BGASC](#toc-best-for-gold-coins-bgasc) * [Money Metals Exchange](#toc-best-for-buybacks-money-metals-exchange) * [SD Bullion](#toc-best-low-price-option-sd-bullion) * [Golden Eagle Coins](#toc-best-reputation-golden-eagle-coins) * See More (3) * [Final Verdict](#toc-final-verdict) * [Compare Dealers](#toc-compare-the-best-online-gold-dealers) * [What to Look for When Buying Gold](#toc-what-to-look-for-when-buying-gold) * [Pros and Cons of Investing in Physical Gold](#toc-pros-and-cons-of-investing-in-physical-gold) * [Why You Should Trust Us](#toc-why-you-should-trust-us) * [FAQ](#toc-faq-f62f095f-6eb9-4118-a209-9416abbaed5d) * [Methodology](#toc-methodology) * [Learn More About Buying Gold](#toc-learn-more-about-buying-gold) ### Best Overall : APMEX (American Precious Metals Exchange) --- ![APMEX]() :fill(white):max_bytes(150000):strip_icc()/Apmex-47644019c0ed4a73a115af8ed30ad713.jpg)  APMEX * **Shipping policy:** Free for orders $199 and up * **Storage:** Through a partner * **Return policy:** 7 days (10% restocking fee, minimum $50) [Learn More](https://apmex.sjv.io/c/2104074/1055574/13444) Why We Chose It With a solid track record, strong customer service, and more than 20,000 products to offer, APMEX (the largest online precious metals dealer globally) is our choice for Best Overall online gold dealer. Pros & Cons Pros * Extensive product selection * 7-day return policy * Robust customer service * Solid online reputation * Long track record Cons * Different prices depending on your payment method * Additional fee to store your gold Overview American Precious Metals Exchange (APMEX) has built itself into a global precious metals powerhouse since its founding in 2000. It's not surprising that it has the largest selection of precious metals products. In addition to a wide range of gold and silver bullion and coin products, APMEX also has an extensive selection of platinum and palladium products. Its coin selection is a virtual United Nations, representing coins from the United States, Canada, Australia, South Africa, Mexico, and beyond. APMEX is also one of the best sources for collectors, offering a wide variety of coins and old banknotes. While APMEX doesn't have the lowest prices around, its significant sales volume allows it to at least be competitive. A major drawback is that they charge different prices for different payment methods. APMEX also offers volume-based pricing and bulk discounts on bullion and coins on purchases. The quantity tiers are 1-9, 10-19, 20-99, and 100+. Ease-of-use is also a strength of APMEX, with easy navigation to browse products and a quick four-step checkout process. Once you begin an order, you have 10 minutes to finalize the purchase to lock in current pricing. Another key advantage is APMEX's free shipping on any order over $199. There is no minimum order requirement. Orders under $199 are charged a $9.95 shipping fee. Insurance is included on all shipped packages. Orders paid by credit card, PayPal, cryptocurrency, and wire transfers may qualify for APMEX's QuickShip Program, which provides next-day processing for U.S. orders. If you want your gold stored, APMEX will ship it to Citadel Global Depository Services, one of the world's largest private storage facilities where it will be stored for an annual fee. You have many payment options with APMEX, including credit or debit cards, paper checks, bank wire transfers, PayPal, bitcoin, and eCheck. Payments may take up to five days to clear depending on your payment method, but some methods clear faster. APMEX offers a seven-day return and refund on any order but reserves the right to charge a restocking fee of $50 or 10% of the purchase amount. It also provides customers with a quick and easy buyback process. APMEX is committed to providing excellent customer service and education. Customers can contact its service center via live chat, email, or phone during business hours but may place orders 24/7 all week long. New investors will appreciate APMEX's resource center on its website, providing educational information along with current insights on buying gold. ### Best Customer Experience : JM Bullion --- ![JM Bullion]() :fill(white):max_bytes(150000):strip_icc()/JM_Bullion-b2e86148373243fea8b60a05b8965827.jpg) JM Bullion * **Shipping policy:** Free over $199 * **Storage:** Through a partner * **Return policy:** Within 5 business days of delivery [Learn More](https://www.awin1.com/cread.php?awinmid=22685&awinaffid=713679) Why We Chose It JM Bullion provides its customers with a user-friendly website, transparent pricing structure, dedicated customer support, and investor-friendly features, making it our choice as the online gold dealer with the best customer experience. Pros & Cons Pros * Low shipping costs and low free shipping threshold * Clean and easy-to-use shopping site * Several hundred thousand positive reviews Cons * Doesn't sell internationally * If returned, buyer is responsible for market losses Overview Since its founding in 2011, JM Bullion has quickly grown to become Inc.com's "fastest-growing precious metals company" in the U.S. That growth can be attributed to JM Bullion's commitment to offering a wide selection of products, transparent pricing, dedicated customer support, and a simple purchasing process. Its product selection is extensive, with a wide variety of gold, silver, platinum, copper, palladium coins, and bars, priced without commissions or additional fees. Different payment methods have different prices. JM Bullion offers members of the military the same discount it offers on bulk purchases.  Payments can be made by ACH transfer (up to $100,000), Bitcoin (up to $1,000,000), paper check (up to $100,000), credit or debit card (up to $100,000), PayPal (up to $250,000), and bank wire transfer (up to $1,000,000). Credit card and PayPal payments are charged 4% more and cryptocurrency 1% more via a "discount" for the other methods. Shipping is free for orders of $199 or more and includes insurance costs. For orders less than $199, you'll pay $9.95 (more if you upgrade your shipping method at checkout). You can also choose to have their gold shipped free to JM Bullion's storage partner, TDS Vaults, a high-security depositary with several locations worldwide.  JM Bullion offers a five-day return policy. While it doesn't indicate on its website whether there is a restocking fee, you are responsible for market losses. The online dealer has a minimum buyback policy of $1,000. You can visit its website to see its current buyback prices. JM Bullion prides itself on its dedicated customer support, which is accessible during business hours via live chat, email, and phone. ### Best for Gold Coins : BGASC --- ![BGASC]() :fill(white):max_bytes(150000):strip_icc()/BGASC-85aa9a4b3b064c5f84d4c9e38d948451.jpg)  BGASC * **Shipping policy:** Free over $199 * **Storage:** No * **Return policy:** Within 5 business days of delivery [Learn More](https://shareasale.com/r.cfm?b=585446&u=2366409&m=52536&urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold) Why We Chose It As its name implies, BGASC (Buying Gold and Silver Coins) is one of the best sources for buying gold bullion coins sold at reasonable prices, making it our choice for the best online gold dealer for coins. Pros & Cons Pros * Best selection of gold coins * Competitive pricing on gold coins * Excellent customer support * Solid online reputation * Fast shipping Cons * Limited payment options * Limited bullion offering * No live chat Overview Although BGASC offers a complete lineup of gold products, its primary focus is on selling gold bullion coins. Its selection of coins is vast, prices are highly competitive, and customer service is excellent. BGASC has managed to build a solid reputation, especially as a gold coin dealer. In addition to a great selection of all the essential standbys—such as American Eagles, Canadian Gold Maples, South African Krugerrands, Pre-1933 U.S. Gold, and Australian Gold Kangaroos—it maintains an extensive inventory of premium and rare medals, coins and paper currency. The study and collection of these rare materials is called [numismatics](http://numismatics.org/). Additionally, BGASC offers gold bars in all standard sizes.  The company's products are also priced very competitively. Its 1 oz. Gold American Eagle Coin was the cheapest of the vendors in this article. One of the downsides of BGASC is its limited payment options. Currently, it only allows payments with paper checks (maximum of $100,000), PayPal (maximum $250,000), credit and debit cards (maximum of $100,000). Shipping is free for orders of $199 and over. BGASC offers a five-day return policy and will buy gold and silver from you at the current prices listed on its website. Customer reviews also praise BGASC's customer service, touting knowledgeable reps and quick response times (though they don't have live chat). As with most other online gold dealers, customer service is accessible during business hours.  BGASC is a Certified Coin Exchange (CCE) member and an authorized dealer for the Numismatic Guaranty Corporation (NGC). ### Best for Buybacks : Money Metals Exchange --- ![Money Metals Exchange]() :fill(white):max_bytes(150000):strip_icc()/MOney_Metals-8d61f21ca1e541bcb9f501533a9680d7.jpg) Money Metals Exchange * **Shipping policy:** Free over $199 * **Storage:** Yes * **Return policy:** 3 days (5% restocking fee) [Learn More](https://shareasale.com/r.cfm?b=696067&u=2366409&m=57542&urllink=www%2Emoneymetals%2Ecom%2F) Why We Chose It Money Metals Exchange is tops in this category because it pays the highest buyback prices among its competitors.  Pros & Cons Pros * Competitive pricing * Free shipping on orders of $199 or more * Automated monthly savings plan Cons * Purchasing limits apply depending on your payment method and some are very low Overview Founded in 2010, Money Metals Exchange has quickly amassed a customer base of more than 500,000 customers. Its customer-centric focus has translated into highly competitive pricing, personalized service, a pathway for new investors, and one of the best online reputations. Customers can easily navigate its website to shop for coins and bullion by category and weight. Beginning investors can get their feet wet in gold investing with an automatic monthly savings plan starting at $100 a month. They advertise the price to be as low as $105 over spot pricing on a 1oz Gold American Eagle Coin. Money Metals locks in your price for 10 minutes to allow you to finish entering your information and payment method, which can be bank wire transfer, bitcoin, credit or debit card, money order, PayPal, or check. There is a 4% processing fee on PayPal and card orders. All payment types have different purchase limits. Cards are limited to $1,700, PayPal is limited to $3,000, and ACH is limited to $10,000. Other methods have much higher limits. Shipping is free on all orders over $199. For orders under $199, the shipping charge is $7.97. Money Metals offers a three-day return policy and may apply a 5% restocking fee on credit card orders. The dealer also offers a buyback program claiming to pay the highest price among its competitors.  Money Metals offers vault storage in Delaware, Idaho and Massachusetts in Class 3 vaults. Your metals are fully segregated and fully insured. They also provide responsive customer service during business hours via live chat, phone, or email. Its website also has an extensive resource library to help new investors learn and experienced investors stay on top of the market. Money Metals also provides price alerts for investors waiting for their price to buy.  ### Best Low-Price Option : SD Bullion --- ![SD Bullion]() :fill(white):max_bytes(150000):strip_icc()/SD_Bullion-065f552aa7ed479b99dac8bcbda0f170.jpg)  SD Bullion * **Shipping policy:** Free over $199 * **Storage:** Yes * **Return policy:** 3 days (5% restocking fee, minimum $35) [Learn More](https://shareasale.com/r.cfm?b=1531669&u=2366409&m=96929&urllink=&afftrack=) Why We Chose It SD Bullion offers low prices compared to the other dealers on this list, and it backs that up with a low-price guarantee. Pros & Cons Pros * Low-price guarantee * Low-cost direct storage * Solid online reputation Cons * Three-day return policy * Stiff order cancellation fee * Product offering somewhat limited Overview If a dealer asserts itself as the "lowest cost" online gold dealer in the U.S., it should back its claim with a low-price guarantee and that's just what SD Bullion does. SD Bullion offers a full array of precious metals, including gold, silver, platinum, copper, and palladium, but its selection of products is more limited than some of its top competitors. For investors looking for the best deal with no brand preference, SD Bullion can't be beaten. The company offers free shipping on orders over $199 ($9.95 flat rate for orders under $199). As we've already stated, it offers great prices and if a customer spies a price lower than SD Bullion's, the dealer will match it.  If payment is not received by the payment deadline, your order will be subject to a market loss fee, a 5% cancellation fee, and any collection expenses incurred by SD Bullion. SD Bullion offers a full array of payment options, including: * Bitcoin (up to $250,000) * Cashier's check (up to $20,000) * Credit or debit card (up to $5,000) * E-check (up to $10,000) * PayPal (up to $5,000) * Personal check (up to $20,000) * Wire transfer ($20,000 and up) PayPal and credit card payments are charged a 4% processing fee and Bitcoin 1%. If you choose to have your gold stored, you can open a storage depository account and have your gold stored directly with SD Bullion and fully insured by Lloyd's of London. The cost is free for the first three months; storage fees are as low as $9.99 a month based on the amount stored.  Returns are accepted within three days of delivery, but refunds are not guaranteed. SD Bullion will determine if it will accept your return request. A stocking fee—5% of the purchase or $35, whichever is higher—is charged, and SD Bullion may require you to cover the cost of any market loss. SD Bullion will purchase your gold, though buyback prices are not published. Payments are issued within one to three days after SD Bullion receives the item. SD Bullion's customer service reviews are generally positive, with customers reporting good access to representatives through chat, email, and phone. Many of the comments highlight the speedy ordering process and reasonably quick deliveries. ### Best Reputation : Golden Eagle Coins --- ![Gold Eagle Coin]() :fill(white):max_bytes(150000):strip_icc()/Golden_Eagle-92f37c1c31b045d9926377f185a931af.jpg)  Gold Eagle Coin * **Shipping policy:** Free over $99 * **Storage:** No * **Return policy:** 7 days (5% restocking fee) [Learn More](https://secure.money.com/pr/df814f70e4b1) Why We Chose It Established as a family-owned business, Golden Eagle Coins has a nearly unblemished track record with thousands of positive reviews. Pros & Cons Pros * In business since 1974 * Extensive selection of gold coins * Solid online reputation * Excellent customer service * Seven-day return policy Cons * Limited selection of gold bars * No live chat support Overview Known primarily for its vast selection of gold coins, including collectible and numismatic coins, Golden Eagle Coins' started in 1974 and maintains a track record of customer satisfaction that is unmatched. You can't help but marvel at Golden Eagle Coins' extensive selection. In addition to popular coins, such as American Eagles, South African Krugerrands, and Canadian Maple Leafs, investors can also find a great selection of pre-1933 coins, commemoratives, mint sets, and foreign coins from many countries. Golden Eagle Coins also sells silver, platinum, palladium, and copper coins. Also, you won't find too many dealers that offer historical currency, such as Confederate notes and Colonial currency. Collectors are also impressed with its selection of ancient Arabic, Greek, Roman, and medieval coins.  Golden Eagle Coins' pricing is low and competitive, but not quite as cheap as BGASC or SD Bullion. You go to Golden Eagle Coins for its selection and service, not necessarily for its pricing.  Golden Eagle Coins offers all the standard payment options, including Bitcoin, paper checks, credit cards, PayPal, and bank wire transfers. There's a $1,500 purchase limit for credit cards and a $1,500 minimum for bank wire transfers. Other minimums and maximums apply as well. PayPal and credit card orders are charged more as a type of fee. Standard shipping is free for orders of $99 or more and $9.95 for orders under $99. You can upgrade your shipping speed to priority mail for $14.95 or express mail for $24.94. Golden Eagle Coins accepts returns for seven days following delivery, plus a 5% restocking fee. Gold buying prices are listed on its website. Though it doesn't offer live chat, Golden Eagle Coins receives high marks for its customer service from thousands of customer reviews. Response times to phone and email inquiries are fast, and the service is very responsive. Golden Eagle Coins' online reputation is impeccable. It scores highly on multiple online review sites. ## Final Verdict The online gold dealers above are reputable, reliable, transparent, and fair. But there are significant differences between the top dealers that attract investors for different reasons. Not all precious metal dealers are trustworthy. Before you purchase, do your research, be wary of anyone promising easy profits, and [learn to spot the signs of a scam](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/fraudadv_preciousmetals.html). Many gold investors diversify by buying from several sources. If you're looking for the widest array of products in all categories, APMEX should be your first stop. If you value an exceptional overall customer experience, you should also check out JM Bullion. Additionally, few gold dealers can beat SD Bullion if you're most concerned about pricing, while Money Metals Exchange offers top buyback prices. ## Compare the Best Online Gold Dealers | **Category** | **Shipping Policy** | Storage | Returns | | --- | --- | --- | --- | | [APMEX](https://apmex.sjv.io/c/2104074/1055574/13444) **Best Overall** | Free for orders $199 and up | Through a partner | 7 days (10% restocking fee, minimum $50) | | [JM Bullion](https://www.awin1.com/cread.php?awinmid=22685&awinaffid=713679) **Best Customer Experience** | Free over $199 | Through a partner | Within 5 business days of delivery | | [BGASC](https://shareasale.com/r.cfm?b=585446&u=2366409&m=52536&urllink=www%2Ebgasc%2Ecom%2Fcategory%2Fbuy%2Dgold) **Best for Gold Coins** | Free over $199 | No | Within 5 business days of delivery | | [Money Metals Exchange](https://shareasale.com/r.cfm?b=696067&u=2366409&m=57542&urllink=www%2Emoneymetals%2Ecom%2F) **Best Overall** | Free over $199 | Yes | 3 days (5% restocking fee) | | [SD Bullion](https://shareasale.com/r.cfm?b=1531669&u=2366409&m=96929&urllink=&afftrack=) **Best Low-Price Option** | Free over $199 | Yes | 3 days (5% restocking fee, minimum $35) | | [Golden Eagle Coins](https://www.goldeneaglecoin.com/) **Best Reputation** | Free over $99 | No | 7 days (5% restocking fee) | ## What to Look for When Buying Gold Investing in physical gold is a popular method for diversifying your portfolio. But before adding physical gold to your portfolio, you should know what to look for when buying gold. **Here is a list of the best practices for buying gold online**:  * **Buy from trusted online gold dealers**: Unfortunately, there are many scams that investors should be aware of when purchasing gold online. To ensure investors are buying from a reputable company, check to see that the company has been business for a long time. Most of the companies on our list of best online gold dealers have been operating for more than 10 years. In addition, investors should look to see that the company maintains good standing with the Better Business Bureau. * **Compare premium and spot price:** Spot price is the market price for a commodity such as gold, which can change daily. The premium associated with gold refers to the additional cost incurred over and above the spot price. When buying gold, investors should understand how much premium they are paying and whether it is reasonable. * **Ensure the gold investment's authenticity**: Investors need to recognize popular gold brands for two reasons: the added premium and the authenticity of these gold bars. Trusted brands like PAMP Suisse, Credit Suisse, and the U.S. Mint have iconic designs and are often serialized, showcasing their credibility. It's also advisable to test your gold to ensure it's genuine; one of the most popular tests is the magnet test. Real gold is not magnetic and should not react to a magnet. However, some fake gold has become sophisticated, and if you are still having doubts you can always buy a gold testing tool. * **Understand the gold investment's purity and weight**: The highest purity level for gold is 24-karat, which is the purity level investors should look for when deciding to diversify their portfolio. Another metric investors should understand is the various weights that gold can come in. For instance, gold can be purchased in grams, fractional troy ounces, troy ounces, and kilos. The higher the weight of the gold, the more expensive it will be. ## Pros and Cons of Investing in Physical Gold The appeal of gold has enticed investors for centuries in terms of its value and function within our society. Unlike stocks or bonds, gold's value is not primarily tied to its monetary worth; it is a tangible asset that serves vital industries such as technology and medicine. Before investors buy gold for their portfolio, they should understand the pros and cons of investing in the precious metal and determine if it's the right fit for their portfolio.  ### Pros * **Portfolio diversification:** Regardless of your risk appetite for investing, diversifying your portfolio is fundamental to managing your finances. No investor can predict the future of the financial markets and the fluctuations they endure. Investors recognize gold as an essential anchor for their portfolios, helping stabilize their finances during market volatility. * **Hedge against inflation**: Inflation occurs when the dollar's value decreases and the price of goods increases, causing economic hardship for businesses and consumers. Historically, gold has been an exceptional barrier against inflation. [Gold](https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx), a finite tangible asset, can increase in value when inflation affects the economy. * **Flexible buying process**: Despite the cost of gold, buying the precious asset is relatively easy. Investors do not need a brokerage, cash management, or bank account to hold gold. Investors can hold gold in the comfort of their own homes. However, storing it in a safe or a safety deposit box is advisable, but it may increase the overall cost of investing in gold. ### Cons * **Gold is illiquid**: While gold may be easy for investors to buy, it's challenging to sell if cash is needed immediately. It's also important to note that gold dealers generally purchase gold from the seller at a reduced rate, which means investors may have to sell the asset for less than its worth. If investors need to sell their gold, it would be advisable to research local and online dealers to see what they are willing to pay. * **Gold does not generate income**: Gold does not have any ability to pay dividends or interest. The only type of return gold investors can hope to obtain is through capital gains. However, for investors to expect any capital appreciation, they would have to hold onto the gold investment long-term, and even then, like all investments, it's not guaranteed that a profit will occur. * **Investment and security costs**: Investors should expect to pay a premium when buying gold. A premium is a cost above the spot price that a gold dealer charges to make a profit on the sale. Premiums are primarily correlated to the supply and demand of gold. However, there is no regulation regarding how much a gold dealer charges. Aside from the cost of premiums, investors should consider the cost of protecting these precious metals. Standard methods of safeguarding gold include buying a safe and insuring it from theft or damage. These expenses can be costly and eat into any profit an investor hopes to gain. ## Why You Should Trust Us Investopedia collected key data points from several online gold dealers to identify the most important factors for readers choosing the right company to fit their needs. We used this data to review each company for their pricing, customer support, transparency, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best online gold dealers since 2021. ## Frequently Asked Questions * ### How Do You Buy Gold Online? [Buying gold online](https://www.investopedia.com/articles/investing/072316/how-do-you-purchase-physical-gold-bars.asp) can be as easy as point-and-click. The most reputable dealers have a well-organized website with easy navigation to find and compare products by category (e.g., bullion by weight, coins, out-of-mint coins, etc.). With most dealers, once you find the product you want and start the checkout process your price is locked in for a short period, typically 10 to 15 minutes. You need to complete your purchase before the pricing expires, or you may see the [price adjusted up or down](https://www.investopedia.com/articles/active-trading/031915/what-moves-gold-prices.asp) based on how the market is moving. * ### Can You Store Gold at Home? Yes, you can store your gold at home (except in the case of [Gold IRAs](https://www.investopedia.com/best-gold-ira-companies-5087720)). For those who prefer to keep their gold close to them, the ideal place to store it is a well-hidden, at-home safe. If you do store your gold at home, be sure to check that your homeowner's insurance covers its potential loss or damage. If not, you may need to purchase additional coverage. * ### Is Buying Gold Online Safe? Buying gold online is as safe as any other transaction you make over the internet as long as you know you're dealing with a reputable company. As with any online purchase, adequately researching these online retailers is your first and last line of defense against scammers. The best dealers use SSL encryption and are PCI-compliant. Plus, all their shipments are insured for their full value. * ### How Do You Choose a Reputable Gold Dealer? Unquestionably, a company's reputation is the number one criterion to evaluate and compare gold dealers. The single best measure of a company's reputation is its transaction history, which can be assessed by customer reviews. Companies with a large number of reviews are typically more established (they have long term track records) or have built up their trust and reputation through a greater number of transactions.  Additionally, you should look for a proven track record, physical company headquarters, clear return and buyback policies, transparent pricing, and multiple payment options. * ### Do Gold Dealers Report to the IRS? Yes, gold dealers report to the IRS. These companies are required to report when a customer makes a cash payment of $10,000 or more, or when they sell a large amount of bulk gold or silver pieces. Gold dealers either report using the IRS form 1099-B or 8300. * ### Is Gold a Good Investment? Like any investment, the potential for gold to deliver positive returns varies [depending on the time period under consideration](https://www.investopedia.com/ask/answers/020915/has-gold-been-good-investment-over-long-term.asp). Gold investors have long relied on the yellow metal for the diversification it lends to a well-balanced portfolio. In addition, [using gold as a financial hedge](https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp) during periods of heightened market volatility is also a popular strategy. However, whether buying physical gold or investing in gold using one of the many publicly traded [derivatives](https://www.investopedia.com/terms/d/derivative.asp) products, it is important to understand that gold is not an income-generating asset. Unlike stocks and bonds, the returns investors get is based entirely on the appreciation in gold prices. * ### What Is Gold Bullion? Gold bullion refers to gold bars or [ingots](https://www.investopedia.com/terms/i/ingot.asp) that are made almost entirely of pure gold (typically 99.5% to 99.99% pure). These bars are typically stamped with the weight and purity of the gold they contain by the mints that produce them, making their value easy to determine. Bullion is most commonly used for investment purposes, either as a hedge against inflation or economic uncertainty or for potential price appreciation over time. ## Methodology We reviewed 13 of the top dealers and applied our criteria of online reputation, length of track record, price transparency, payment options, shipping speed, absence of commissions and hidden fees, and customer service to narrow our choices for the best in six different categories. Depending on your specific needs and preferences, you can't go wrong with any of them. *Correction—Feb. 29, 2024:* This article was corrected to state that Money Metals Exchange's shipping fees are free for orders over $199. ## Learn More About Buying Gold * [What is the gold standard?](https://www.investopedia.com/ask/answers/09/gold-standard.asp) * [How to invest in gold](https://www.investopedia.com/how-to-invest-in-gold-and-silver-7369625) * [Ways to buy gold](https://www.investopedia.com/articles/basics/11/best-bets-buying-gold.asp) * [How to buy gold bars](https://www.investopedia.com/articles/investing/072316/how-do-you-purchase-physical-gold-bars.asp) * [How to trade gold](https://www.investopedia.com/articles/investing/100915/learn-how-trade-gold-4-steps.asp) * [How to gift gold](https://www.investopedia.com/how-to-give-gold-or-silver-as-a-gift-6745272) * [Reasons to own gold](https://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp) * [What drives the price of gold?](https://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx) * [Physical gold vs gold ETF](https://www.investopedia.com/articles/investing/031913/most-affordable-way-buy-gold-physical-gold-or-etfs.asp) * [Gold ETFs vs gold futures](https://www.investopedia.com/articles/exchangetradedfunds/08/gold-etf-gold-futures-showdown.asp) * [Best gold ira companies](https://www.investopedia.com/best-gold-ira-companies-5087720) * [Top gold ETFs](https://www.investopedia.com/articles/etfs/top-gold-etfs/) :max_bytes(150000):strip_icc()/GoldOnline_Busakorn-Pongparnit-9918e77f62594b8085b8e66636474f68.jpg) :max_bytes(150000):strip_icc()/GoldOnline_Busakorn-Pongparnit-9918e77f62594b8085b8e66636474f68.jpg) Getty Images / Busakorn Pongparnit 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. APMEX. "[About APMEX.](https://www.apmex.com/aboutus)" 2. APMEX. "[Trusted Storage Solutions.](https://www.apmex.com/storage/gold-and-silver-storage)" 3. Money Metals. "[Monthly Program.](https://www.moneymetals.com/programs/monthly-program)" 4. SD Bullion. "[Returns & Refunds.](https://sdbullion.com/returns-refunds)" 5. Golden Eagle Coins. "[Pricing and Methods.](https://www.goldeneaglecoin.com/FAQ/Pricing?gad_source=1&gclid=CjwKCAjwtqmwBhBVEiwAL-WAYQVzijEry55aXCaSm3wrGvP7YmBLVZu8X4TFEqe6IeR9GvTnt0LbRRoCGkwQAvD_BwE)" 6. Golden Eagle Coins. "[Shipping](https://www.goldeneaglecoin.com/FAQ/Shipping)." 7. JM Bullion. "[Reportable Bullion Transactions Infographic](https://www.jmbullion.com/reportable-bullion-transactions-infographic/)." 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[more](https://www.investopedia.com/terms/k/krugerrand-gold-coin.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) [Precious Metals ETFs: What They Are and How They Work](https://www.investopedia.com/precious-metals-etfs-8549823) Precious metals exchange-traded funds (ETFs) invest in assets like gold, silver, and platinum, offering exposure to these markets without having to physically own and store them. [more](https://www.investopedia.com/precious-metals-etfs-8549823) [Gold ETFs and Gold Mining ETFs: What They Are and How They Work](https://www.investopedia.com/gold-and-gold-mining-etfs-8431193) Gold ETFs track the price of physical gold, while gold mining ETFs track companies in the gold mining sector. 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Online gold dealers, like many web-based investing platforms, have benefited greatly from how technology has helped level the playing field for investors. With gold prices reaching new highs in May 2024, these online platforms allow investors to research and buy physical gold from the comfort of their homes, all while charging lower prices than brick-and-mortar establishments. While buying gold in person at your local gold dealer does have some advantages—like making it possible for investors to inspect the quality of the gold before taking it home the same day—online gold buying has other benefits. Just be aware that not all online gold dealers are the same, so investors should research their options carefully and only buy from reputable websites. APMEX  (American Precious Metals Exchange) tops our list as the best overall online gold dealer for its solid track record, strong customer service, and broad product offering. We evaluated top companies based on their reputations, competitive and transparent prices, customer service, and more to find the best online gold dealers. Best Online Gold Dealers for May 2024 Best Overall: APMEX (American Precious Metals Exchange) Best Customer Experience: JM Bullion Best for Gold Coins: BGASC Best for Buybacks: Money Metals Exchange Best Low-Price Option: SD Bullion Best Reputation: Golden Eagle Coins Best Online Gold Dealers for May 2024 Expand Best Online Gold Dealers for May 2024 Our Top Picks APMEX (American Precious Metals Exchange) JM Bullion BGASC Money Metals Exchange SD Bullion Golden Eagle Coins See More (3) Final Verdict Compare Dealers What to Look for When Buying Gold Pros and Cons of Investing in Physical Gold Why You Should Trust Us FAQ Methodology Learn More About Buying Gold Best Overall : APMEX (American Precious Metals Exchange)  APMEX Shipping policy: Free for orders $199 and upStorage: Through a partnerReturn policy: 7 days (10% restocking fee, minimum $50) Learn More Why We Chose It With a solid track record, strong customer service, and more than 20,000 products to offer, APMEX (the largest online precious metals dealer globally) is our choice for Best Overall online gold dealer. Pros & Cons Pros Extensive product selection 7-day return policy Robust customer service Solid online reputation Long track record Cons Different prices depending on your payment method Additional fee to store your gold Overview American Precious Metals Exchange (APMEX) has built itself into a global precious metals powerhouse since its founding in 2000. It's not surprising that it has the largest selection of precious metals products. In addition to a wide range of gold and silver bullion and coin products, APMEX also has an extensive selection of platinum and palladium products. Its coin selection is a virtual United Nations, representing coins from the United States, Canada, Australia, South Africa, Mexico, and beyond. APMEX is also one of the best sources for collectors, offering a wide variety of coins and old banknotes. While APMEX doesn't have the lowest prices around, its significant sales volume allows it to at least be competitive. A major drawback is that they charge different prices for different payment methods. APMEX also offers volume-based pricing and bulk discounts on bullion and coins on purchases. The quantity tiers are 1-9, 10-19, 20-99, and 100+. Ease-of-use is also a strength of APMEX, with easy navigation to browse products and a quick four-step checkout process. Once you begin an order, you have 10 minutes to finalize the purchase to lock in current pricing. Another key advantage is APMEX's free shipping on any order over $199. There is no minimum order requirement. Orders under $199 are charged a $9.95 shipping fee. Insurance is included on all shipped packages. Orders paid by credit card, PayPal, cryptocurrency, and wire transfers may qualify for APMEX's QuickShip Program, which provides next-day processing for U.S. orders. If you want your gold stored, APMEX will ship it to Citadel Global Depository Services, one of the world's largest private storage facilities where it will be stored for an annual fee. You have many payment options with APMEX, including credit or debit cards, paper checks, bank wire transfers, PayPal, bitcoin, and eCheck. Payments may take up to five days to clear depending on your payment method, but some methods clear faster. APMEX offers a seven-day return and refund on any order but reserves the right to charge a restocking fee of $50 or 10% of the purchase amount. It also provides customers with a quick and easy buyback process. APMEX is committed to providing excellent customer service and education. Customers can contact its service center via live chat, email, or phone during business hours but may place orders 24/7 all week long. New investors will appreciate APMEX's resource center on its website, providing educational information along with current insights on buying gold. Best Customer Experience : JM Bullion JM Bullion Shipping policy: Free over $199Storage: Through a partnerReturn policy: Within 5 business days of delivery Learn More Why We Chose It JM Bullion provides its customers with a user-friendly website, transparent pricing structure, dedicated customer support, and investor-friendly features, making it our choice as the online gold dealer with the best customer experience. Pros & Cons Pros Low shipping costs and low free shipping threshold Clean and easy-to-use shopping site Several hundred thousand positive reviews Cons Doesn't sell internationally If returned, buyer is responsible for market losses Overview Since its founding in 2011, JM Bullion has quickly grown to become Inc.com's "fastest-growing precious metals company" in the U.S. That growth can be attributed to JM Bullion's commitment to offering a wide selection of products, transparent pricing, dedicated customer support, and a simple purchasing process. Its product selection is extensive, with a wide variety of gold, silver, platinum, copper, palladium coins, and bars, priced without commissions or additional fees. Different payment methods have different prices. JM Bullion offers members of the military the same discount it offers on bulk purchases.  Payments can be made by ACH transfer (up to $100,000), Bitcoin (up to $1,000,000), paper check (up to $100,000), credit or debit card (up to $100,000), PayPal (up to $250,000), and bank wire transfer (up to $1,000,000). Credit card and PayPal payments are charged 4% more and cryptocurrency 1% more via a "discount" for the other methods. Shipping is free for orders of $199 or more and includes insurance costs. For orders less than $199, you'll pay $9.95 (more if you upgrade your shipping method at checkout). You can also choose to have their gold shipped free to JM Bullion's storage partner, TDS Vaults, a high-security depositary with several locations worldwide.  JM Bullion offers a five-day return policy. While it doesn't indicate on its website whether there is a restocking fee, you are responsible for market losses. The online dealer has a minimum buyback policy of $1,000. You can visit its website to see its current buyback prices. JM Bullion prides itself on its dedicated customer support, which is accessible during business hours via live chat, email, and phone. Best for Gold Coins : BGASC  BGASC Shipping policy: Free over $199Storage: NoReturn policy: Within 5 business days of delivery Learn More Why We Chose It As its name implies, BGASC (Buying Gold and Silver Coins) is one of the best sources for buying gold bullion coins sold at reasonable prices, making it our choice for the best online gold dealer for coins. Pros & Cons Pros Best selection of gold coins Competitive pricing on gold coins Excellent customer support Solid online reputation Fast shipping Cons Limited payment options Limited bullion offering No live chat Overview Although BGASC offers a complete lineup of gold products, its primary focus is on selling gold bullion coins. Its selection of coins is vast, prices are highly competitive, and customer service is excellent. BGASC has managed to build a solid reputation, especially as a gold coin dealer. In addition to a great selection of all the essential standbys—such as American Eagles, Canadian Gold Maples, South African Krugerrands, Pre-1933 U.S. Gold, and Australian Gold Kangaroos—it maintains an extensive inventory of premium and rare medals, coins and paper currency. The study and collection of these rare materials is called numismatics. Additionally, BGASC offers gold bars in all standard sizes.  The company's products are also priced very competitively. Its 1 oz. Gold American Eagle Coin was the cheapest of the vendors in this article. One of the downsides of BGASC is its limited payment options. Currently, it only allows payments with paper checks (maximum of $100,000), PayPal (maximum $250,000), credit and debit cards (maximum of $100,000). Shipping is free for orders of $199 and over. BGASC offers a five-day return policy and will buy gold and silver from you at the current prices listed on its website. Customer reviews also praise BGASC's customer service, touting knowledgeable reps and quick response times (though they don't have live chat). As with most other online gold dealers, customer service is accessible during business hours.  BGASC is a Certified Coin Exchange (CCE) member and an authorized dealer for the Numismatic Guaranty Corporation (NGC). Best for Buybacks : Money Metals Exchange Money Metals Exchange Shipping policy: Free over $199Storage: YesReturn policy: 3 days (5% restocking fee) Learn More Why We Chose It Money Metals Exchange is tops in this category because it pays the highest buyback prices among its competitors.  Pros & Cons Pros Competitive pricing Free shipping on orders of $199 or more Automated monthly savings plan Cons Purchasing limits apply depending on your payment method and some are very low Overview Founded in 2010, Money Metals Exchange has quickly amassed a customer base of more than 500,000 customers. Its customer-centric focus has translated into highly competitive pricing, personalized service, a pathway for new investors, and one of the best online reputations. Customers can easily navigate its website to shop for coins and bullion by category and weight. Beginning investors can get their feet wet in gold investing with an automatic monthly savings plan starting at $100 a month. They advertise the price to be as low as $105 over spot pricing on a 1oz Gold American Eagle Coin. Money Metals locks in your price for 10 minutes to allow you to finish entering your information and payment method, which can be bank wire transfer, bitcoin, credit or debit card, money order, PayPal, or check. There is a 4% processing fee on PayPal and card orders. All payment types have different purchase limits. Cards are limited to $1,700, PayPal is limited to $3,000, and ACH is limited to $10,000. Other methods have much higher limits. Shipping is free on all orders over $199. For orders under $199, the shipping charge is $7.97. Money Metals offers a three-day return policy and may apply a 5% restocking fee on credit card orders. The dealer also offers a buyback program claiming to pay the highest price among its competitors.  Money Metals offers vault storage in Delaware, Idaho and Massachusetts in Class 3 vaults. Your metals are fully segregated and fully insured. They also provide responsive customer service during business hours via live chat, phone, or email. Its website also has an extensive resource library to help new investors learn and experienced investors stay on top of the market. Money Metals also provides price alerts for investors waiting for their price to buy.  Best Low-Price Option : SD Bullion  SD Bullion Shipping policy: Free over $199Storage: YesReturn policy: 3 days (5% restocking fee, minimum $35) Learn More Why We Chose It SD Bullion offers low prices compared to the other dealers on this list, and it backs that up with a low-price guarantee. Pros & Cons Pros Low-price guarantee Low-cost direct storage Solid online reputation Cons Three-day return policy Stiff order cancellation fee Product offering somewhat limited Overview If a dealer asserts itself as the "lowest cost" online gold dealer in the U.S., it should back its claim with a low-price guarantee and that's just what SD Bullion does. SD Bullion offers a full array of precious metals, including gold, silver, platinum, copper, and palladium, but its selection of products is more limited than some of its top competitors. For investors looking for the best deal with no brand preference, SD Bullion can't be beaten. The company offers free shipping on orders over $199 ($9.95 flat rate for orders under $199). As we've already stated, it offers great prices and if a customer spies a price lower than SD Bullion's, the dealer will match it.  If payment is not received by the payment deadline, your order will be subject to a market loss fee, a 5% cancellation fee, and any collection expenses incurred by SD Bullion. SD Bullion offers a full array of payment options, including: Bitcoin (up to $250,000)Cashier's check (up to $20,000)Credit or debit card (up to $5,000)E-check (up to $10,000)PayPal (up to $5,000)Personal check (up to $20,000)Wire transfer ($20,000 and up) PayPal and credit card payments are charged a 4% processing fee and Bitcoin 1%. If you choose to have your gold stored, you can open a storage depository account and have your gold stored directly with SD Bullion and fully insured by Lloyd's of London. The cost is free for the first three months; storage fees are as low as $9.99 a month based on the amount stored.  Returns are accepted within three days of delivery, but refunds are not guaranteed. SD Bullion will determine if it will accept your return request. A stocking fee—5% of the purchase or $35, whichever is higher—is charged, and SD Bullion may require you to cover the cost of any market loss. SD Bullion will purchase your gold, though buyback prices are not published. Payments are issued within one to three days after SD Bullion receives the item. SD Bullion's customer service reviews are generally positive, with customers reporting good access to representatives through chat, email, and phone. Many of the comments highlight the speedy ordering process and reasonably quick deliveries. Best Reputation : Golden Eagle Coins  Gold Eagle Coin Shipping policy: Free over $99Storage: NoReturn policy: 7 days (5% restocking fee) Learn More Why We Chose It Established as a family-owned business, Golden Eagle Coins has a nearly unblemished track record with thousands of positive reviews. Pros & Cons Pros In business since 1974 Extensive selection of gold coins Solid online reputation Excellent customer service Seven-day return policy Cons Limited selection of gold bars No live chat support Overview Known primarily for its vast selection of gold coins, including collectible and numismatic coins, Golden Eagle Coins' started in 1974 and maintains a track record of customer satisfaction that is unmatched. You can't help but marvel at Golden Eagle Coins' extensive selection. In addition to popular coins, such as American Eagles, South African Krugerrands, and Canadian Maple Leafs, investors can also find a great selection of pre-1933 coins, commemoratives, mint sets, and foreign coins from many countries. Golden Eagle Coins also sells silver, platinum, palladium, and copper coins. Also, you won't find too many dealers that offer historical currency, such as Confederate notes and Colonial currency. Collectors are also impressed with its selection of ancient Arabic, Greek, Roman, and medieval coins.  Golden Eagle Coins' pricing is low and competitive, but not quite as cheap as BGASC or SD Bullion. You go to Golden Eagle Coins for its selection and service, not necessarily for its pricing.  Golden Eagle Coins offers all the standard payment options, including Bitcoin, paper checks, credit cards, PayPal, and bank wire transfers. There's a $1,500 purchase limit for credit cards and a $1,500 minimum for bank wire transfers. Other minimums and maximums apply as well. PayPal and credit card orders are charged more as a type of fee. Standard shipping is free for orders of $99 or more and $9.95 for orders under $99. You can upgrade your shipping speed to priority mail for $14.95 or express mail for $24.94. Golden Eagle Coins accepts returns for seven days following delivery, plus a 5% restocking fee. Gold buying prices are listed on its website. Though it doesn't offer live chat, Golden Eagle Coins receives high marks for its customer service from thousands of customer reviews. Response times to phone and email inquiries are fast, and the service is very responsive. Golden Eagle Coins' online reputation is impeccable. It scores highly on multiple online review sites. Final Verdict The online gold dealers above are reputable, reliable, transparent, and fair. But there are significant differences between the top dealers that attract investors for different reasons. Not all precious metal dealers are trustworthy. Before you purchase, do your research, be wary of anyone promising easy profits, and learn to spot the signs of a scam. Many gold investors diversify by buying from several sources. If you're looking for the widest array of products in all categories, APMEX should be your first stop. If you value an exceptional overall customer experience, you should also check out JM Bullion. Additionally, few gold dealers can beat SD Bullion if you're most concerned about pricing, while Money Metals Exchange offers top buyback prices. Compare the Best Online Gold Dealers Category Shipping Policy Storage Returns APMEX Best Overall Free for orders $199 and up Through a partner 7 days (10% restocking fee, minimum $50) JM Bullion Best Customer Experience Free over $199 Through a partner Within 5 business days of delivery BGASC Best for Gold Coins Free over $199 No Within 5 business days of delivery Money Metals Exchange Best Overall Free over $199 Yes 3 days (5% restocking fee) SD Bullion Best Low-Price Option Free over $199 Yes 3 days (5% restocking fee, minimum $35) Golden Eagle Coins Best Reputation Free over $99 No 7 days (5% restocking fee) What to Look for When Buying Gold Investing in physical gold is a popular method for diversifying your portfolio. But before adding physical gold to your portfolio, you should know what to look for when buying gold. Here is a list of the best practices for buying gold online:  Buy from trusted online gold dealers: Unfortunately, there are many scams that investors should be aware of when purchasing gold online. To ensure investors are buying from a reputable company, check to see that the company has been business for a long time. Most of the companies on our list of best online gold dealers have been operating for more than 10 years. In addition, investors should look to see that the company maintains good standing with the Better Business Bureau.Compare premium and spot price: Spot price is the market price for a commodity such as gold, which can change daily. The premium associated with gold refers to the additional cost incurred over and above the spot price. When buying gold, investors should understand how much premium they are paying and whether it is reasonable. Ensure the gold investment's authenticity: Investors need to recognize popular gold brands for two reasons: the added premium and the authenticity of these gold bars. Trusted brands like PAMP Suisse, Credit Suisse, and the U.S. Mint have iconic designs and are often serialized, showcasing their credibility. It's also advisable to test your gold to ensure it's genuine; one of the most popular tests is the magnet test. Real gold is not magnetic and should not react to a magnet. However, some fake gold has become sophisticated, and if you are still having doubts you can always buy a gold testing tool. Understand the gold investment's purity and weight: The highest purity level for gold is 24-karat, which is the purity level investors should look for when deciding to diversify their portfolio. Another metric investors should understand is the various weights that gold can come in. For instance, gold can be purchased in grams, fractional troy ounces, troy ounces, and kilos. The higher the weight of the gold, the more expensive it will be.  Pros and Cons of Investing in Physical Gold The appeal of gold has enticed investors for centuries in terms of its value and function within our society. Unlike stocks or bonds, gold's value is not primarily tied to its monetary worth; it is a tangible asset that serves vital industries such as technology and medicine. Before investors buy gold for their portfolio, they should understand the pros and cons of investing in the precious metal and determine if it's the right fit for their portfolio.  Pros Portfolio diversification: Regardless of your risk appetite for investing, diversifying your portfolio is fundamental to managing your finances. No investor can predict the future of the financial markets and the fluctuations they endure. Investors recognize gold as an essential anchor for their portfolios, helping stabilize their finances during market volatility.  Hedge against inflation: Inflation occurs when the dollar's value decreases and the price of goods increases, causing economic hardship for businesses and consumers. Historically, gold has been an exceptional barrier against inflation. Gold, a finite tangible asset, can increase in value when inflation affects the economy.  Flexible buying process: Despite the cost of gold, buying the precious asset is relatively easy. Investors do not need a brokerage, cash management, or bank account to hold gold. Investors can hold gold in the comfort of their own homes. However, storing it in a safe or a safety deposit box is advisable, but it may increase the overall cost of investing in gold. Cons Gold is illiquid: While gold may be easy for investors to buy, it's challenging to sell if cash is needed immediately. It's also important to note that gold dealers generally purchase gold from the seller at a reduced rate, which means investors may have to sell the asset for less than its worth. If investors need to sell their gold, it would be advisable to research local and online dealers to see what they are willing to pay.Gold does not generate income: Gold does not have any ability to pay dividends or interest. The only type of return gold investors can hope to obtain is through capital gains. However, for investors to expect any capital appreciation, they would have to hold onto the gold investment long-term, and even then, like all investments, it's not guaranteed that a profit will occur. Investment and security costs: Investors should expect to pay a premium when buying gold. A premium is a cost above the spot price that a gold dealer charges to make a profit on the sale. Premiums are primarily correlated to the supply and demand of gold. However, there is no regulation regarding how much a gold dealer charges. Aside from the cost of premiums, investors should consider the cost of protecting these precious metals. Standard methods of safeguarding gold include buying a safe and insuring it from theft or damage. These expenses can be costly and eat into any profit an investor hopes to gain. Why You Should Trust Us Investopedia collected key data points from several online gold dealers to identify the most important factors for readers choosing the right company to fit their needs. We used this data to review each company for their pricing, customer support, transparency, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999, and has been helping readers find the best online gold dealers since 2021. Frequently Asked Questions How Do You Buy Gold Online? Buying gold online can be as easy as point-and-click. The most reputable dealers have a well-organized website with easy navigation to find and compare products by category (e.g., bullion by weight, coins, out-of-mint coins, etc.). With most dealers, once you find the product you want and start the checkout process your price is locked in for a short period, typically 10 to 15 minutes. You need to complete your purchase before the pricing expires, or you may see the price adjusted up or down based on how the market is moving.  Can You Store Gold at Home? Yes, you can store your gold at home (except in the case of Gold IRAs). For those who prefer to keep their gold close to them, the ideal place to store it is a well-hidden, at-home safe. If you do store your gold at home, be sure to check that your homeowner's insurance covers its potential loss or damage. If not, you may need to purchase additional coverage.  Is Buying Gold Online Safe? Buying gold online is as safe as any other transaction you make over the internet as long as you know you're dealing with a reputable company. As with any online purchase, adequately researching these online retailers is your first and last line of defense against scammers. The best dealers use SSL encryption and are PCI-compliant. Plus, all their shipments are insured for their full value.  How Do You Choose a Reputable Gold Dealer? Unquestionably, a company's reputation is the number one criterion to evaluate and compare gold dealers. The single best measure of a company's reputation is its transaction history, which can be assessed by customer reviews. Companies with a large number of reviews are typically more established (they have long term track records) or have built up their trust and reputation through a greater number of transactions. Additionally, you should look for a proven track record, physical company headquarters, clear return and buyback policies, transparent pricing, and multiple payment options. Do Gold Dealers Report to the IRS? Yes, gold dealers report to the IRS. These companies are required to report when a customer makes a cash payment of $10,000 or more, or when they sell a large amount of bulk gold or silver pieces. Gold dealers either report using the IRS form 1099-B or 8300. Is Gold a Good Investment? Like any investment, the potential for gold to deliver positive returns varies depending on the time period under consideration. Gold investors have long relied on the yellow metal for the diversification it lends to a well-balanced portfolio. In addition, using gold as a financial hedge during periods of heightened market volatility is also a popular strategy. However, whether buying physical gold or investing in gold using one of the many publicly traded derivatives products, it is important to understand that gold is not an income-generating asset. Unlike stocks and bonds, the returns investors get is based entirely on the appreciation in gold prices. What Is Gold Bullion? Gold bullion refers to gold bars or ingots that are made almost entirely of pure gold (typically 99.5% to 99.99% pure). These bars are typically stamped with the weight and purity of the gold they contain by the mints that produce them, making their value easy to determine. Bullion is most commonly used for investment purposes, either as a hedge against inflation or economic uncertainty or for potential price appreciation over time. Methodology  We reviewed 13 of the top dealers and applied our criteria of online reputation, length of track record, price transparency, payment options, shipping speed, absence of commissions and hidden fees, and customer service to narrow our choices for the best in six different categories. Depending on your specific needs and preferences, you can't go wrong with any of them. Correction—Feb. 29, 2024: This article was corrected to state that Money Metals Exchange's shipping fees are free for orders over $199. Learn More About Buying Gold What is the gold standard? How to invest in gold Ways to buy gold How to buy gold bars How to trade gold How to gift gold  Reasons to own gold What drives the price of gold? Physical gold vs gold ETF Gold ETFs vs gold futures Best gold ira companies Top gold ETFs Getty Images / Busakorn Pongparnit 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. APMEX. "About APMEX." APMEX. "Trusted Storage Solutions." Money Metals. "Monthly Program." SD Bullion. "Returns & Refunds." Golden Eagle Coins. "Pricing and Methods." Golden Eagle Coins. "Shipping." JM Bullion. "Reportable Bullion Transactions Infographic." Related Articles 5 Best Gold IRA Companies for May 2024 How to Invest in Gold and Silver How to Invest in Gold: An Investor’s Guide How to Buy Gold Bars 4 Ways to Buy Gold The Most Affordable Way to Buy Gold: Physical Gold or ETFs? Related Terms Krugerrands: Gold Coins Minted by South Africa Krugerrands are South African gold coins that were minted in 1967 and remain popular among gold investors today. 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 Precious Metals ETFs: What They Are and How They Work Precious metals exchange-traded funds (ETFs) invest in assets like gold, silver, and platinum, offering exposure to these markets without having to physically own and store them. more Gold ETFs and Gold Mining ETFs: What They Are and How They Work Gold ETFs track the price of physical gold, while gold mining ETFs track companies in the gold mining sector. more Gold IRA: What It Is, How It Works, Risks A gold IRA is a retirement investment vehicle used by individuals who hold gold bullion, coins, or other approved precious metals. more Precious Metals: Definition, How to Invest, and Example Precious metals are rare metals that have a high economic value, such as gold, silver, and platinum. more

https://www.investopedia.com/cryptocurrency-market-news-transaction-fees-spike-bitcoin-halving-8636756

Cryptocurrency Market News: Bitcoin Halving Steadies Price, Network Transaction Fees Spike

<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 experienced its fourth halving on Friday, with the amount of bitcoin created roughly every 10 minutes dropping to 3.125.</li><li>Following the halving, the bitcoin price stabilized; however, fees on the network spiked in relation to the launch of a new protocol for issuing tokens.</li><li>The fees associated with Grayscale's second spot bitcoin ETF product have been disclosed, and they'll make the Bitcoin Mini Trust the cheapest offering on the market.</li><li>A jury in New York found a man guilty of fraud and market manipulation in a $110 million scheme on the Mango Markets DeFi platform.</li><li>This week, analysts are continuing to track the aftereffects of the bitcoin halving, including the long-term effects of a falling block subsidy with the network's overall security.</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 fourth 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>) <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bitcoin-halving-2024-what-next-8636072">halving event</a> occurred Friday evening without much immediate effect on its price, though by Monday the cryptocurrency was trading higher at above $66,000. A sudden spike in Bitcoin network transaction fees around the halving was observed and that was credited to the launch of Runes, a new meta protocol for issuing tokens on top of the Bitcoin <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/blockchain.asp">blockchain</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"> Outside of the halving, the low fees associated with Grayscale's new spot bitcoin <a 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> offering, the Bitcoin Mini Trust, were disclosed. Additionally, the crypto world experienced the first conviction in a case involving market manipulation. </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-bitcoin-network-transaction-fees-spike-after-halving"></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"> Bitcoin Network Transaction Fees Spike After Halving </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/bitcoin-halving-4843769">bitcoin halving</a> event was much anticipated and closely watched by investors and miners alike.<br/>Halvings are significant because they reduce by half the rate at which new bitcoins are generated and rewarded to bitcoin miners roughly every 10 minutes. This most recent halving reduced the block reward to 3.125 bitcoins per block. </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"> While there were no immediate price swings for bitcoin, there was a sudden jump in transaction fees on the network. The halving block was mined by mining pool ViaBTC. Notably, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tech/how-does-bitcoin-mining-work/">miner</a> earned more than 40 bitcoins in block subsidy and fees from this single block—significantly more than the average reward preceding the halving. This was due to a massive spike in transaction fees, possibly due to higher demand to be included in this historic block and a new development. </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 Runes protocol, launched around the time of halving, led to higher fees on the Bitcoin network because it introduced a system in which participants could mint digital tokens directly on Bitcoin's blockchain. This new capability sparked intense competition among users to register unique asset names first, causing them to pay increasingly higher transaction fees to prioritize their transactions in the Bitcoin network. </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 day after the halving, the average Bitcoin transaction fee surged to an all-time high, according to Kaiko Research, one that's more than seven times the rate a day prior and double the previous record.<br> </br></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-grayscales-btc-to-be-cheapest-spot-bitcoin-etf"></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"> Grayscale's BTC To Be Cheapest Spot Bitcoin ETF </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Digital asset manager Grayscale previously <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">filed</a> for an alternative to its current high-cost spot bitcoin ETF, known as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/news/why-buy-expensive-bitcoin-etf-instead-actual-bitcoin/">Grayscale Bitcoin Trust</a> (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC">GBTC</a>). The new offering will carry a management fee of only 0.15%, positioning it as the most affordable option in the market, according to a recent filing.<span class="ql-inline-citation" data-cite="2"></span> The existing GBTC, known for its 1.5% fee, will transition 10% of its assets to the new BTC Mini Trust as part of this strategic move. This transition will also include an automatic issuance and distribution of BTC trust shares to existing GBTC shareholders.<br/> </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"> This initiative is designed to align Grayscale’s offerings more competitively with other recently approved bitcoin ETFs with lower fees. According to data from Blockworks, the lowest-cost spot bitcoin ETF available is the Franklin Bitcoin ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=EZBC">EZBC</a>), which has a fee of 0.19%.<span class="ql-inline-citation" data-cite="3"></span> In addition, for GBTC’s existing shareholders, this spinoff won't trigger a taxable event, meaning they won't face <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capital_gains_tax.asp">capital gains tax</a> for transferring their holdings to the new fund. </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"> As of now, GBTC holds approximately $19.6 billion in assets, which makes it the largest spot bitcoin ETF on the market.<span class="ql-inline-citation" data-cite="7"></span> GBTC's closest competitor is BlackRock’s iShares Bitcoin Trust (IBIT), which has assets totaling just over $17.5 billion.<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_22-0"></div> <span class="heading-toc" id="toc-cryptos-first-market-manipulation-conviction"></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"> Crypto's First Market Manipulation Conviction </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> On Thursday, Avraham Eisenberg was found guilty by a jury on all three charges of fraud and market manipulation in a $110 million scheme on the Mango Markets platform.<span class="ql-inline-citation" data-cite="4"></span> The charges stem from when Eisenberg engaged in trades that artificially inflated the value of Mango Markets' native token, MNGO, and its associated futures contracts. He then leveraged these overvalued <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/110614/futures-derivatives-and-liquidity-more-or-less-risky.asp">futures</a> as collateral to withdraw substantial amounts of other cryptocurrencies from the platform.<br/> </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"> According to U.S. Attorney Damian Williams, this was the first conviction for market manipulation in the crypto arena. “If you engage in fraudulent activity, whether that be in the cryptocurrency space or through other forms of market manipulation, you will be held accountable for your ill-gotten gains," said FBI Criminal, Cyber, Response, and Services Executive Assistant Director Timothy Langan. </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"> Eisenberg now faces up to 20 years in prison, signaling a significant precedent for the enforcement of U.S. laws in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/decentralized-finance-defi-5113835">decentralized finance (DeFi)</a> ecosystem. </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-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_30-0"> <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_31-0"> hThis week, crypto market observers are still tracking the lingering effects of the bitcoin halving. While the price is obviously a key area of attention, the potential for meta layers, such as Runes and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-are-bitcoin-ordinals-7486436">Ordinals</a>, to help provide long-term security for the Bitcoin network via increased demand for block space will also be a key phenomenon to watch. Also, it's possible that higher fees at the base layer could foster greater adoption of various <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-are-layer-1-and-layer-2-blockchain-scaling-solutions-7104877">Layer 2</a> networks such as the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lightning-network.asp">Lightning Network</a> and sidechains. </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"> While a report from CoinShares indicates some miners may shift to artificial intelligence (AI) as the halving leads to lower revenue, there are a number of factors that could more than <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/3-ways-bitcoin-miners-could-make-up-for-lost-revenue-after-the-halving-8628609">make up for the lost earnings caused by the halving</a>.<span class="ql-inline-citation" data-cite="9"></span> Shares of bitcoin miners such as Riot Platforms (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=RIOT">RIOT</a>), Hut8 (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=HUT">HUT</a>), and Marathon Digital (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MARA">MARA</a>) traded substantially higher on Monday. </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"> It remains to be seen whether the fourth halving will lead to another massive bull run—as was the case with previous halvings; <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-you-need-to-know-ahead-of-the-bitcoin-halving-8634750">reports</a> from Deutsche Bank and JPMorgan have said that the event may already be priced into the market. </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 experienced its fourth halving on Friday, with the amount of bitcoin created roughly every 10 minutes dropping to 3.125. * Following the halving, the bitcoin price stabilized; however, fees on the network spiked in relation to the launch of a new protocol for issuing tokens. * The fees associated with Grayscale's second spot bitcoin ETF product have been disclosed, and they'll make the Bitcoin Mini Trust the cheapest offering on the market. * A jury in New York found a man guilty of fraud and market manipulation in a $110 million scheme on the Mango Markets DeFi platform. * This week, analysts are continuing to track the aftereffects of the bitcoin halving, including the long-term effects of a falling block subsidy with the network's overall security. The fourth bitcoin ([BTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BTCUSD)) [halving event](https://www.investopedia.com/bitcoin-halving-2024-what-next-8636072) occurred Friday evening without much immediate effect on its price, though by Monday the cryptocurrency was trading higher at above $66,000. A sudden spike in Bitcoin network transaction fees around the halving was observed and that was credited to the launch of Runes, a new meta protocol for issuing tokens on top of the Bitcoin [blockchain](https://www.investopedia.com/terms/b/blockchain.asp). Outside of the halving, the low fees associated with Grayscale's new spot bitcoin [exchange-traded fund (ETF)](https://www.investopedia.com/terms/e/etf.asp) offering, the Bitcoin Mini Trust, were disclosed. Additionally, the crypto world experienced the first conviction in a case involving market manipulation. ## Bitcoin Network Transaction Fees Spike After Halving The [bitcoin halving](https://www.investopedia.com/bitcoin-halving-4843769) event was much anticipated and closely watched by investors and miners alike. Halvings are significant because they reduce by half the rate at which new bitcoins are generated and rewarded to bitcoin miners roughly every 10 minutes. This most recent halving reduced the block reward to 3.125 bitcoins per block. While there were no immediate price swings for bitcoin, there was a sudden jump in transaction fees on the network. The halving block was mined by mining pool ViaBTC. Notably, the [miner](https://www.investopedia.com/tech/how-does-bitcoin-mining-work/) earned more than 40 bitcoins in block subsidy and fees from this single block—significantly more than the average reward preceding the halving. This was due to a massive spike in transaction fees, possibly due to higher demand to be included in this historic block and a new development. The Runes protocol, launched around the time of halving, led to higher fees on the Bitcoin network because it introduced a system in which participants could mint digital tokens directly on Bitcoin's blockchain. This new capability sparked intense competition among users to register unique asset names first, causing them to pay increasingly higher transaction fees to prioritize their transactions in the Bitcoin network. The day after the halving, the average Bitcoin transaction fee surged to an all-time high, according to Kaiko Research, one that's more than seven times the rate a day prior and double the previous record. ## Grayscale's BTC To Be Cheapest Spot Bitcoin ETF Digital asset manager Grayscale previously [filed](https://www.investopedia.com/grayscale-wants-to-launch-a-mini-bitcoin-fund-amid-gbtc-outflows-8607872) for an alternative to its current high-cost spot bitcoin ETF, known as the [Grayscale Bitcoin Trust](https://www.investopedia.com/news/why-buy-expensive-bitcoin-etf-instead-actual-bitcoin/) ([GBTC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=GBTC)). The new offering will carry a management fee of only 0.15%, positioning it as the most affordable option in the market, according to a recent filing. The existing GBTC, known for its 1.5% fee, will transition 10% of its assets to the new BTC Mini Trust as part of this strategic move. This transition will also include an automatic issuance and distribution of BTC trust shares to existing GBTC shareholders. This initiative is designed to align Grayscale’s offerings more competitively with other recently approved bitcoin ETFs with lower fees. According to data from Blockworks, the lowest-cost spot bitcoin ETF available is the Franklin Bitcoin ETF ([EZBC](https://www.investopedia.com/markets/quote?tvwidgetsymbol=EZBC)), which has a fee of 0.19%. In addition, for GBTC’s existing shareholders, this spinoff won't trigger a taxable event, meaning they won't face [capital gains tax](https://www.investopedia.com/terms/c/capital_gains_tax.asp) for transferring their holdings to the new fund. As of now, GBTC holds approximately $19.6 billion in assets, which makes it the largest spot bitcoin ETF on the market. GBTC's closest competitor is BlackRock’s iShares Bitcoin Trust (IBIT), which has assets totaling just over $17.5 billion. ## Crypto's First Market Manipulation Conviction On Thursday, Avraham Eisenberg was found guilty by a jury on all three charges of fraud and market manipulation in a $110 million scheme on the Mango Markets platform. The charges stem from when Eisenberg engaged in trades that artificially inflated the value of Mango Markets' native token, MNGO, and its associated futures contracts. He then leveraged these overvalued [futures](https://www.investopedia.com/articles/active-trading/110614/futures-derivatives-and-liquidity-more-or-less-risky.asp) as collateral to withdraw substantial amounts of other cryptocurrencies from the platform. According to U.S. Attorney Damian Williams, this was the first conviction for market manipulation in the crypto arena. “If you engage in fraudulent activity, whether that be in the cryptocurrency space or through other forms of market manipulation, you will be held accountable for your ill-gotten gains," said FBI Criminal, Cyber, Response, and Services Executive Assistant Director Timothy Langan. Eisenberg now faces up to 20 years in prison, signaling a significant precedent for the enforcement of U.S. laws in the [decentralized finance (DeFi)](https://www.investopedia.com/decentralized-finance-defi-5113835) ecosystem. ## What To Expect in the Markets This Week hThis week, crypto market observers are still tracking the lingering effects of the bitcoin halving. While the price is obviously a key area of attention, the potential for meta layers, such as Runes and [Ordinals](https://www.investopedia.com/what-are-bitcoin-ordinals-7486436), to help provide long-term security for the Bitcoin network via increased demand for block space will also be a key phenomenon to watch. Also, it's possible that higher fees at the base layer could foster greater adoption of various [Layer 2](https://www.investopedia.com/what-are-layer-1-and-layer-2-blockchain-scaling-solutions-7104877) networks such as the [Lightning Network](https://www.investopedia.com/terms/l/lightning-network.asp) and sidechains. While a report from CoinShares indicates some miners may shift to artificial intelligence (AI) as the halving leads to lower revenue, there are a number of factors that could more than [make up for the lost earnings caused by the halving](https://www.investopedia.com/3-ways-bitcoin-miners-could-make-up-for-lost-revenue-after-the-halving-8628609). Shares of bitcoin miners such as Riot Platforms ([RIOT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=RIOT)), Hut8 ([HUT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=HUT)), and Marathon Digital ([MARA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MARA)) traded substantially higher on Monday. It remains to be seen whether the fourth halving will lead to another massive bull run—as was the case with previous halvings; [reports](https://www.investopedia.com/what-you-need-to-know-ahead-of-the-bitcoin-halving-8634750) from Deutsche Bank and JPMorgan have said that the event may already be priced into the market. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Bitcoin experienced its fourth halving on Friday, with the amount of bitcoin created roughly every 10 minutes dropping to 3.125.Following the halving, the bitcoin price stabilized; however, fees on the network spiked in relation to the launch of a new protocol for issuing tokens.The fees associated with Grayscale's second spot bitcoin ETF product have been disclosed, and they'll make the Bitcoin Mini Trust the cheapest offering on the market.A jury in New York found a man guilty of fraud and market manipulation in a $110 million scheme on the Mango Markets DeFi platform.This week, analysts are continuing to track the aftereffects of the bitcoin halving, including the long-term effects of a falling block subsidy with the network's overall security. The fourth bitcoin (BTC) halving event occurred Friday evening without much immediate effect on its price, though by Monday the cryptocurrency was trading higher at above $66,000. A sudden spike in Bitcoin network transaction fees around the halving was observed and that was credited to the launch of Runes, a new meta protocol for issuing tokens on top of the Bitcoin blockchain. Outside of the halving, the low fees associated with Grayscale's new spot bitcoin exchange-traded fund (ETF) offering, the Bitcoin Mini Trust, were disclosed. Additionally, the crypto world experienced the first conviction in a case involving market manipulation. Bitcoin Network Transaction Fees Spike After Halving The bitcoin halving event was much anticipated and closely watched by investors and miners alike.Halvings are significant because they reduce by half the rate at which new bitcoins are generated and rewarded to bitcoin miners roughly every 10 minutes. This most recent halving reduced the block reward to 3.125 bitcoins per block. While there were no immediate price swings for bitcoin, there was a sudden jump in transaction fees on the network. The halving block was mined by mining pool ViaBTC. Notably, the miner earned more than 40 bitcoins in block subsidy and fees from this single block—significantly more than the average reward preceding the halving. This was due to a massive spike in transaction fees, possibly due to higher demand to be included in this historic block and a new development. The Runes protocol, launched around the time of halving, led to higher fees on the Bitcoin network because it introduced a system in which participants could mint digital tokens directly on Bitcoin's blockchain. This new capability sparked intense competition among users to register unique asset names first, causing them to pay increasingly higher transaction fees to prioritize their transactions in the Bitcoin network. The day after the halving, the average Bitcoin transaction fee surged to an all-time high, according to Kaiko Research, one that's more than seven times the rate a day prior and double the previous record. Grayscale's BTC To Be Cheapest Spot Bitcoin ETF Digital asset manager Grayscale previously filed for an alternative to its current high-cost spot bitcoin ETF, known as the Grayscale Bitcoin Trust (GBTC). The new offering will carry a management fee of only 0.15%, positioning it as the most affordable option in the market, according to a recent filing. The existing GBTC, known for its 1.5% fee, will transition 10% of its assets to the new BTC Mini Trust as part of this strategic move. This transition will also include an automatic issuance and distribution of BTC trust shares to existing GBTC shareholders. This initiative is designed to align Grayscale’s offerings more competitively with other recently approved bitcoin ETFs with lower fees. According to data from Blockworks, the lowest-cost spot bitcoin ETF available is the Franklin Bitcoin ETF (EZBC), which has a fee of 0.19%. In addition, for GBTC’s existing shareholders, this spinoff won't trigger a taxable event, meaning they won't face capital gains tax for transferring their holdings to the new fund. As of now, GBTC holds approximately $19.6 billion in assets, which makes it the largest spot bitcoin ETF on the market. GBTC's closest competitor is BlackRock’s iShares Bitcoin Trust (IBIT), which has assets totaling just over $17.5 billion. Crypto's First Market Manipulation Conviction On Thursday, Avraham Eisenberg was found guilty by a jury on all three charges of fraud and market manipulation in a $110 million scheme on the Mango Markets platform. The charges stem from when Eisenberg engaged in trades that artificially inflated the value of Mango Markets' native token, MNGO, and its associated futures contracts. He then leveraged these overvalued futures as collateral to withdraw substantial amounts of other cryptocurrencies from the platform. According to U.S. Attorney Damian Williams, this was the first conviction for market manipulation in the crypto arena. “If you engage in fraudulent activity, whether that be in the cryptocurrency space or through other forms of market manipulation, you will be held accountable for your ill-gotten gains," said FBI Criminal, Cyber, Response, and Services Executive Assistant Director Timothy Langan. Eisenberg now faces up to 20 years in prison, signaling a significant precedent for the enforcement of U.S. laws in the decentralized finance (DeFi) ecosystem. What To Expect in the Markets This Week hThis week, crypto market observers are still tracking the lingering effects of the bitcoin halving. While the price is obviously a key area of attention, the potential for meta layers, such as Runes and Ordinals, to help provide long-term security for the Bitcoin network via increased demand for block space will also be a key phenomenon to watch. Also, it's possible that higher fees at the base layer could foster greater adoption of various Layer 2 networks such as the Lightning Network and sidechains. While a report from CoinShares indicates some miners may shift to artificial intelligence (AI) as the halving leads to lower revenue, there are a number of factors that could more than make up for the lost earnings caused by the halving. Shares of bitcoin miners such as Riot Platforms (RIOT), Hut8 (HUT), and Marathon Digital (MARA) traded substantially higher on Monday. It remains to be seen whether the fourth halving will lead to another massive bull run—as was the case with previous halvings; reports from Deutsche Bank and JPMorgan have said that the event may already be priced into the market. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/financial-edge/0912/best-part-time-jobs-for-college-students.aspx

Best Part-Time Jobs for College Students

<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"> College shouldn't be about making money, but with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/saving-for-college-4689712">cost of tuition and fees rising</a> every year, working while in school has become a necessity for many.<span class="ql-inline-citation" data-cite="10"></span> One problem that college students face is finding a part-time job that fits into a schedule that is non-traditional but frequently changes. On top of that, finding a job that pays enough to make it worth investing the time can be a challenge as well. If you're looking for that perfect part-time college job, here are a few ideas. </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"> <em>All salary ranges are as of March 2024. </em> </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 plenty of part-time jobs for students in college, ranging from on-campus work-study jobs to paid jobs at local businesses.</li><li>The best part-time jobs for college students are flexible and related to a student's intended area of study, allowing them to both make money and get more experience in their field.</li><li>Some of the best part-time jobs include being an administrative assistant, babysitting, tutoring, or working as a fitness instructor.</li></ul></div></div></div> <span class="heading-toc" id="toc-administrative-assistant"></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"> Administrative Assistant </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> You might think of an administrative assistant as somebody who sits at a desk all day, answers phones, and types letters. While that is true of some administrative roles, some executives are looking for part-time help when their workload is unusually high. Technology even allows administrative assistants to work remotely as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/virtual-assistant.asp">virtual assistants</a>. Salaries range between $15 and $30 per hour, but there is a wide range depending on the type of work needed.<span class="ql-inline-citation" data-cite="2"></span> A similar on-campus job can include working at the library front desk or help desks, often meaning that simple jobs such as filing books or simply manning one area of the library can allow you to study when there are fewer people around. </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-aerobics-instructor"></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"> Aerobics Instructor </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Do some people call you a "gym rat?" If you love fitness and like to teach others, a part-time job as an aerobics instructor or personal trainer may be an ideal part-time job for you. Personal trainers require additional certifications, but teaching a fitness class does not.<span class="ql-inline-citation" data-cite="11"></span> The average hourly pay for this position ranges between $16 and $31 and you receive the added benefit of being paid to work out!<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_12-0"></div> <span class="heading-toc" id="toc-residence-advisor-ra"></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"> Residence Advisor (RA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> How about making money by saving money? Some colleges and universities offer free or discounted housing to those who will work in their residence hall. Divide the amount of money you would save with free or discounted housing by the number of hours you would have worked at another job to figure out the average hourly rate. The only catch is that these jobs are considered work-study and are not available to all students. Still, if you love meeting others and can see yourself as a friendly face within a college community, the job of an RA may be for you. </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-computer-tech"></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"> Computer Tech </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> If you're a technology guru, look for a job either on or off-campus as a tech support worker or retail clerk in a computer store. Especially for those pursuing degrees in areas like computer science, tech support can offer valuable insight into the kinds of issues the average computer user encounters. The hourly salary ranges between $17 and $21, plus this knowledge is helpful for those who may later develop software applications as well.<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_18-0"></div> <span class="heading-toc" id="toc-bank-teller"></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"> Bank Teller </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Many bank tellers work full-time but part-time positions are available. For those in the finance field, becoming a teller is an entry-level position that may result in an even better position upon graduation. The average salary may only be about $17 per hour, but it's a great way to start a career in the financial industry.<span class="ql-inline-citation" data-cite="4"></span> Some banks have branch locations on the campuses of local universities, making it a good job for students without a car. </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-babysitter"></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"> Babysitter </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Of all of the jobs here, this may be the one of the better paying jobs, and you're sure to find a lot of work if you're reliable, trustworthy, and good with children. If you're concerned about getting your homework done, look for parents working second or third shifts. Once the kids go to bed, get to work. The national average hourly rate for a babysitter is about $21 per hour, but combining babysitting with tutoring can yield even better rates.<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> <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-how-many-hours-should-i-work-each-week-while-in-college"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Many Hours Should I Work Each Week While in College?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Working between 10 and 20 hours weekly is optimal when students are enrolled full-time. In fact, the Federal Work-Study Program from the U.S. Department of Education offers eligible students the opportunity to work part-time for their schools up to 20 hours a week.<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_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-whats-the-best-way-to-find-a-job-on-campus"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Best Way to Find a Job on Campus?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Start by checking the bulletin boards in your department. They may contain flyers and ads for jobs available on campus. You can also visit the career services office and ask about any work-study programs available. Finally, joining student organizations or networking with students can offer you some insights into jobs available on campus.</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-whats-the-average-cost-of-college-tuition-and-fees"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Average Cost of College Tuition and Fees?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>This is the average price of tuition and fees for the 2023-2024 academic year: $41,540 at private colleges, $11,260 at public colleges (in-state residents), and $29,150 at public colleges (out-of-state residents).<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_30-0"></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_31-0"> <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_32-0"> Before looking for part-time <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/0909/14-unconventional-ways-for-students-to-make-money.aspx">work while in school</a>, search for a job that is related to your field. Even if it pays little or no money, ask people that you know if they can find work for you, as most people are more comfortable with hiring individuals they know rather than reading resumes and going through the interview process. By landing a job in your area of study, you can learn more about your potential career path while making some extra money on the side. An internship or low-paying job in a field related to your future career is likely a better choice than taking a job that provides you with no contacts in your field of choice. </p></div>

College shouldn't be about making money, but with the [cost of tuition and fees rising](https://www.investopedia.com/saving-for-college-4689712) every year, working while in school has become a necessity for many. One problem that college students face is finding a part-time job that fits into a schedule that is non-traditional but frequently changes. On top of that, finding a job that pays enough to make it worth investing the time can be a challenge as well. If you're looking for that perfect part-time college job, here are a few ideas. *All salary ranges are as of March 2024.* ### Key Takeaways * There are plenty of part-time jobs for students in college, ranging from on-campus work-study jobs to paid jobs at local businesses. * The best part-time jobs for college students are flexible and related to a student's intended area of study, allowing them to both make money and get more experience in their field. * Some of the best part-time jobs include being an administrative assistant, babysitting, tutoring, or working as a fitness instructor. ## Administrative Assistant You might think of an administrative assistant as somebody who sits at a desk all day, answers phones, and types letters. While that is true of some administrative roles, some executives are looking for part-time help when their workload is unusually high. Technology even allows administrative assistants to work remotely as [virtual assistants](https://www.investopedia.com/terms/v/virtual-assistant.asp). Salaries range between $15 and $30 per hour, but there is a wide range depending on the type of work needed. A similar on-campus job can include working at the library front desk or help desks, often meaning that simple jobs such as filing books or simply manning one area of the library can allow you to study when there are fewer people around. ## Aerobics Instructor Do some people call you a "gym rat?" If you love fitness and like to teach others, a part-time job as an aerobics instructor or personal trainer may be an ideal part-time job for you. Personal trainers require additional certifications, but teaching a fitness class does not. The average hourly pay for this position ranges between $16 and $31 and you receive the added benefit of being paid to work out! ## Residence Advisor (RA) How about making money by saving money? Some colleges and universities offer free or discounted housing to those who will work in their residence hall. Divide the amount of money you would save with free or discounted housing by the number of hours you would have worked at another job to figure out the average hourly rate. The only catch is that these jobs are considered work-study and are not available to all students. Still, if you love meeting others and can see yourself as a friendly face within a college community, the job of an RA may be for you. ## Computer Tech If you're a technology guru, look for a job either on or off-campus as a tech support worker or retail clerk in a computer store. Especially for those pursuing degrees in areas like computer science, tech support can offer valuable insight into the kinds of issues the average computer user encounters. The hourly salary ranges between $17 and $21, plus this knowledge is helpful for those who may later develop software applications as well. ## Bank Teller Many bank tellers work full-time but part-time positions are available. For those in the finance field, becoming a teller is an entry-level position that may result in an even better position upon graduation. The average salary may only be about $17 per hour, but it's a great way to start a career in the financial industry. Some banks have branch locations on the campuses of local universities, making it a good job for students without a car. ## Babysitter Of all of the jobs here, this may be the one of the better paying jobs, and you're sure to find a lot of work if you're reliable, trustworthy, and good with children. If you're concerned about getting your homework done, look for parents working second or third shifts. Once the kids go to bed, get to work. The national average hourly rate for a babysitter is about $21 per hour, but combining babysitting with tutoring can yield even better rates. ## How Many Hours Should I Work Each Week While in College? Working between 10 and 20 hours weekly is optimal when students are enrolled full-time. In fact, the Federal Work-Study Program from the U.S. Department of Education offers eligible students the opportunity to work part-time for their schools up to 20 hours a week. ## What's the Best Way to Find a Job on Campus? Start by checking the bulletin boards in your department. They may contain flyers and ads for jobs available on campus. You can also visit the career services office and ask about any work-study programs available. Finally, joining student organizations or networking with students can offer you some insights into jobs available on campus. ## What's the Average Cost of College Tuition and Fees? This is the average price of tuition and fees for the 2023-2024 academic year: $41,540 at private colleges, $11,260 at public colleges (in-state residents), and $29,150 at public colleges (out-of-state residents). ## The Bottom Line Before looking for part-time [work while in school](https://www.investopedia.com/financial-edge/0909/14-unconventional-ways-for-students-to-make-money.aspx), search for a job that is related to your field. Even if it pays little or no money, ask people that you know if they can find work for you, as most people are more comfortable with hiring individuals they know rather than reading resumes and going through the interview process. By landing a job in your area of study, you can learn more about your potential career path while making some extra money on the side. An internship or low-paying job in a field related to your future career is likely a better choice than taking a job that provides you with no contacts in your field of choice.

College shouldn't be about making money, but with the cost of tuition and fees rising every year, working while in school has become a necessity for many. One problem that college students face is finding a part-time job that fits into a schedule that is non-traditional but frequently changes. On top of that, finding a job that pays enough to make it worth investing the time can be a challenge as well. If you're looking for that perfect part-time college job, here are a few ideas. All salary ranges are as of March 2024. Key Takeaways There are plenty of part-time jobs for students in college, ranging from on-campus work-study jobs to paid jobs at local businesses.The best part-time jobs for college students are flexible and related to a student's intended area of study, allowing them to both make money and get more experience in their field.Some of the best part-time jobs include being an administrative assistant, babysitting, tutoring, or working as a fitness instructor. Administrative Assistant You might think of an administrative assistant as somebody who sits at a desk all day, answers phones, and types letters. While that is true of some administrative roles, some executives are looking for part-time help when their workload is unusually high. Technology even allows administrative assistants to work remotely as virtual assistants. Salaries range between $15 and $30 per hour, but there is a wide range depending on the type of work needed. A similar on-campus job can include working at the library front desk or help desks, often meaning that simple jobs such as filing books or simply manning one area of the library can allow you to study when there are fewer people around. Aerobics Instructor Do some people call you a "gym rat?" If you love fitness and like to teach others, a part-time job as an aerobics instructor or personal trainer may be an ideal part-time job for you. Personal trainers require additional certifications, but teaching a fitness class does not. The average hourly pay for this position ranges between $16 and $31 and you receive the added benefit of being paid to work out! Residence Advisor (RA) How about making money by saving money? Some colleges and universities offer free or discounted housing to those who will work in their residence hall. Divide the amount of money you would save with free or discounted housing by the number of hours you would have worked at another job to figure out the average hourly rate. The only catch is that these jobs are considered work-study and are not available to all students. Still, if you love meeting others and can see yourself as a friendly face within a college community, the job of an RA may be for you. Computer Tech If you're a technology guru, look for a job either on or off-campus as a tech support worker or retail clerk in a computer store. Especially for those pursuing degrees in areas like computer science, tech support can offer valuable insight into the kinds of issues the average computer user encounters. The hourly salary ranges between $17 and $21, plus this knowledge is helpful for those who may later develop software applications as well. Bank Teller Many bank tellers work full-time but part-time positions are available. For those in the finance field, becoming a teller is an entry-level position that may result in an even better position upon graduation. The average salary may only be about $17 per hour, but it's a great way to start a career in the financial industry. Some banks have branch locations on the campuses of local universities, making it a good job for students without a car. Babysitter Of all of the jobs here, this may be the one of the better paying jobs, and you're sure to find a lot of work if you're reliable, trustworthy, and good with children. If you're concerned about getting your homework done, look for parents working second or third shifts. Once the kids go to bed, get to work. The national average hourly rate for a babysitter is about $21 per hour, but combining babysitting with tutoring can yield even better rates. How Many Hours Should I Work Each Week While in College? Working between 10 and 20 hours weekly is optimal when students are enrolled full-time. In fact, the Federal Work-Study Program from the U.S. Department of Education offers eligible students the opportunity to work part-time for their schools up to 20 hours a week. What's the Best Way to Find a Job on Campus? Start by checking the bulletin boards in your department. They may contain flyers and ads for jobs available on campus. You can also visit the career services office and ask about any work-study programs available. Finally, joining student organizations or networking with students can offer you some insights into jobs available on campus. What's the Average Cost of College Tuition and Fees? This is the average price of tuition and fees for the 2023-2024 academic year: $41,540 at private colleges, $11,260 at public colleges (in-state residents), and $29,150 at public colleges (out-of-state residents). The Bottom Line Before looking for part-time work while in school, search for a job that is related to your field. Even if it pays little or no money, ask people that you know if they can find work for you, as most people are more comfortable with hiring individuals they know rather than reading resumes and going through the interview process. By landing a job in your area of study, you can learn more about your potential career path while making some extra money on the side. An internship or low-paying job in a field related to your future career is likely a better choice than taking a job that provides you with no contacts in your field of choice.

https://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp

ETFs vs. Index Mutual 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-etfs-vs-index-mutual-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"> ETFs vs. Index Mutual 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 exchange-traded funds (ETFs) and index mutual funds are popular forms of <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passiveinvesting.asp">passive investing</a>, a term for an investment strategy that aims to match—not beat—the performance of a benchmark. Such passive strategies may use ETFs and index mutual funds to replicate the performance of a financial market index, such as the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">S&amp;P 500 Index</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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/activemanagement.asp">Active investing</a> strategies require expensive portfolio management teams that try to beat stock market returns and take advantage of short-term price fluctuations. </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"> Of note, passive strategies that involve <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">ETFs</a> and index mutual funds have grown dramatically in popularity versus active strategies. That's not only due to the cost benefits of lower management fees, but also to higher returns on investment.<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_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Index investing has been the most common form of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passiveinvesting.asp">passive investing</a> since 1976, when <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/john_bogle.asp">Jack Bogle</a>, founder of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/111715/how-vanguard-index-funds-work.asp">Vanguard</a>, created the first index mutual fund.<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 market for ETFs (the second most popular form of passive investing) has grown significantly since they were first launched in the 1990s as a way to allow investment firms to create “baskets” of major stocks aligned to a specific index or sector.<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_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Both <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/033015/whats-difference-between-index-fund-and-etf.asp">ETFs and index mutual funds</a> are <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pooledfunds.asp">pooled investment vehicles</a> that are passively managed. The key difference between them (discussed below) is that ETFs can be bought and sold on the stock exchange (just like individual stocks)—and index mutual funds cannot.<br/> </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-whatyouneedtoknow" 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_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>Index investing has been the most common form of passive investing since 1976, when Vanguard founder Jack Bogle created the first index fund.</li><li>ETFs have grown significantly since they were first launched in the 1990s.</li><li>Because ETFs can be traded throughout the day, they appeal to a broad segment of the investing public, including active and passive investors.</li><li>Passive retail investors often choose index funds for their simplicity and low cost.</li><li>Typically, the choice between ETFs and index mutual funds comes down to management fees, shareholder transaction costs, taxation, and other qualitative differences.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The investing strategy behind an index fund—whether ETF or mutual fund—is that a portfolio that matches the composition of a certain index (without variation) will also match the performance of that index. Moreover, the overall market will outperform any single investment over the long term. </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-exchange-traded-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"> Exchange-Traded Funds </span> </h2> <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"> Diversification </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> In particular, an ETF is comprised of a portfolio of stocks, bonds, or other securities of a particular index and tracks the returns of that index. For example, ETFs can be structured to track a particular broad market index or a sector, an individual <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/commodity.asp">commodity</a> or a diverse collection of securities, a specific investment strategy, or even another fund. </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 ETF offers investors major diversification by providing exposure to a wide range of assets. </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"> Intraday Trading </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Unlike index mutual funds, ETFs are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/flexible_fund.asp">flexible investment vehicles</a> that are highly <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquid</a>. They can be bought and sold on a stock exchange throughout the trading day, just like individual stocks. </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"> Because investors can enter or exit an ETF position whenever the market is open, ETFs are attractive to a broad range of the investing public, including active traders (like <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>) as well as passive investors (like <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>). </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"> Derivatives </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Another reason why ETFs attract passive and active investors is that certain ETFs include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/derivative.asp">derivatives</a>—a financial instrument whose price is derived from the price of an underlying asset. </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 most common ETFs that invest in derivatives are those that hold <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/futures.asp">futures</a>—agreements between buyer and seller to trade certain assets at a predetermined price on a predetermined future date. Other such ETFs may invest in options. </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"> Available at a Brokerage </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Another benefit of ETFs is that—because they can be traded like stocks—it is possible to invest in them with a basic <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokerageaccount.asp">brokerage account</a>. There is no need to create a special account, and they can be purchased in small batches without special documentation or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rollover.asp">rollover</a> costs. </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-note" 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 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>Investment research firms report that few (if any) active funds perform better than passive funds over the long term.<span class="ql-inline-citation" data-cite="5"></span> In addition, compared to actively managed funds, passive ETFs and index mutual funds are low-cost investment options.</p></div></div></div> <span class="heading-toc" id="toc-index-mutual-funds"></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"> Index Mutual Funds </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Similar to an ETF, an index mutual fund is designed to track the components of a financial market index. Index mutual funds must follow their benchmarks passively, without reacting to market conditions. Orders to buy or sell them can be executed only once a day after the market closes. </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"> An index mutual fund can track any financial market, such as: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_43-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> <li>The S&amp;P 500 (the most popular in the U.S.) </li> <li>The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wilshire5000equityindex.asp#:~:text=The%20FT%20Wilshire%205000%20Index%20%28FTW5000%29%20seeks%20to%20capture%20100,but%20currently%20has%20just%203%2C687.">FT Wilshire 5000 Index</a> (the largest U.S. equities index) </li> <li>The <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lehmanaggregatebondindex.asp#:~:text=The%20Bloomberg%20Aggregate%20Bond%20Index%20or%20%22the%20Agg%22%20is%20a,is%20to%20the%20equity%20market.">Bloomberg Aggregate Bond Index</a> </li> <li>The <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/eafe_index.asp#:~:text=What%20Is%20the%20EAFE%20Index,Australasia%2C%20and%20the%20Middle%20East.">MSCI EAFE Index</a> (European, Australasian, and Middle Eastern stocks) </li> <li>The <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp">Nasdaq Composite Index</a> </li> <li>The <a class="pseudoStyle" data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/djia.asp#:~:text=The%20Dow%20Jones%20Industrial%20Average%20%28DJIA%29%20is%20a%20widely%2D,%28NYSE%29%20and%20the%20Nasdaq.">Dow Jones Industrial Average (DJIA)</a> (30 large-cap companies)</li> </ul> <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"> For example, an index mutual fund tracking the DJIA invests in the same 30 companies that comprise that index—and the fund portfolio changes only if the DJIA changes its composition. </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"> If an index mutual fund is following a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/priceweightedindex.asp">price-weighted index</a>—an index in which the stocks are <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio-weight.asp#:~:text=What%20Is%20Portfolio%20Weight%3F,dollar%20value%20of%20the%20portfolio.">weighted</a> in proportion to their price per share—the fund manager will periodically rebalance the securities to reflect their weight in the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/benchmark.asp#:~:text=What%20Is%20a%20Benchmark%3F,are%20used%20for%20this%20purpose.">benchmark</a>. </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"> Potential for Strong Returns </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> Although they are less flexible than ETFs, index mutual funds can deliver the same strong returns over the long term. </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"> Easy Accessibility </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Another benefit of index mutual funds that makes them ideal for many buy-and-hold investors is their ease of access. For example, index mutual funds can be purchased through an investor’s bank or directly from the fund. There's no need for a brokerage account. This accessibility has been a key driver of their popularity. </p> <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-key-differences"></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"> Key Differences </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> Certain features of each type of fund (described above) result in index mutual funds being less liquid than ETFs and lacking ETFs' intraday trading flexibility.  </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"> In addition, different factors related to index tracking and trading give ETFs a cost and potential tax advantage over index mutual funds: </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>For example, ETFs don't have the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/redemption.asp#:~:text=In%2Dkind%20redemptions%20are%20non,redemptions%20hurt%20long%2Dterm%20investors.">redemption</a> fees that some index mutual funds may charge. Redemption fees are paid by an investor whenever shares are sold.</li> <li>Additionally, the constant rebalancing that occurs within index mutual funds results in <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/explicitcost.asp">explicit costs</a> (e.g., commissions) and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/implicitcost.asp">implicit costs</a> (trade fees). ETFs avoid these costs by using <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/redemption.asp#:~:text=In%2Dkind%20redemptions%20are%20non,redemptions%20hurt%20long%2Dterm%20investors.">in-kind redemptions</a> rather than monetary payments for exited securities. This strategy can limit capital gains distributions for shareholders (but of course, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalgain.asp#:~:text=A%20capital%20gain%20is%20the,be%20claimed%20on%20income%20taxes.">capital gains</a> taxes may still be owed when investors themselves sell their shares).<span class="ql-inline-citation" data-cite="11"></span><span class="ql-inline-citation" data-cite="4"></span></li> <li>ETFs have less <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/performance_drag.asp#:~:text=Cash%3A%20%22Cash%20drag%22%20is,this%20portion%20in%20the%20market.">cash drag</a> than index mutual funds. A cash drag is a type of <a class="pseudoStyle" data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/performance_drag.asp#:~:text=Performance%20drag%20is%20the%20difference,performance%20drag%20does%20not%20exist.">performance drag</a> that occurs when cash is held to pay for the daily net redemptions that happen in mutual funds. Cash has very low (or even negative) real returns due to inflation, so ETFs—with their in-kind redemption process—are able to earn better returns by investing all cash in the market.</li> <li>ETFs are more tax efficient than index funds because they are structured to have fewer <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxableevent.asp">taxable events</a>. As mentioned previously, an index mutual fund must constantly rebalance to match the tracked index and therefore generates taxable capital gains for shareholders. An ETF minimizes this activity by trading baskets of assets. In turn, this limits exposure to capital gains on any individual security in the ETF portfolio.<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_62-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_63-0"><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_64-0"><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>In 2023, ETFs attracted $598 billion in assets while mutual funds saw $440 billion in outflows. In 2021, they attracted close to a $1 trillion.<span class="ql-inline-citation" data-cite="14"></span></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_65-0"> <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_66-0"> The benefits and drawbacks of ETFs versus index mutual funds have been debated in the investment industry for decades, but—as always with investment products—the choice of one over the other depends on the investor. </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"> Typically, it comes down to preferences related to management fees, shareholder transaction costs, taxation, and other qualitative differences. </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"> Despite the lower expense ratios and tax advantages of ETFs, many retail investors (non-professional, individual investors) prefer index mutual funds. They like their simplicity and their shareholder services (such as phone support and check writing) as well as investment options that facilitate automatic contributions. </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"> While increased awareness of ETFs by retail investors and their financial advisers has grown significantly, the primary drivers of demand have been institutional investors seeking ETFs as convenient vehicles for participating in (or hedging against) broad movements in the market.<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_73-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> The convenience, ease, and flexibility of ETFs allow for the superior liquidity management, transition management (from one manager to another), and tactical portfolio adjustments that are cited as the top reasons institutional investors use ETFs.<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_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-the-biggest-difference-between-etfs-and-index-mutual-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Biggest Difference Between ETFs and Index Mutual Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The biggest difference is that ETFs can be bought and sold on a stock exchange (just like individual stocks) and index mutual funds cannot.</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-which-has-higher-returns-etfs-or-index-mutual-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Has Higher Returns: ETFs or Index Mutual Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>ETFs and index funds deliver similar returns over the long term. Of note, investment research firms report that few (if any) active funds perform better than passive funds like ETFs and index mutual funds.<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_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-triggers-taxable-events-in-index-mutual-funds"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Triggers Taxable Events in Index Mutual Funds?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>In nearly all cases, the need to sell securities triggers taxable events in index mutual funds. The in-kind redemption feature of ETFs eliminates the need to sell securities, so fewer taxable events occur. Of course, investors in either fund may owe capital gains taxes after selling their shares in the fund.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_81-0"></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_82-0"> <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_83-0"> ETFs and index mutual funds can be two smart choices for investors saving for the long run. Both are used in passive investing strategies. </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"> The biggest difference between them is that ETFs trade intraday at various prices during exchange hours and index mutual funds can be bought or sold only after the market closes each day, at a fund's net asset value. </p></div>

## ETFs vs. Index Mutual Funds: An Overview Both exchange-traded funds (ETFs) and index mutual funds are popular forms of [passive investing](https://www.investopedia.com/terms/p/passiveinvesting.asp), a term for an investment strategy that aims to match—not beat—the performance of a benchmark. Such passive strategies may use ETFs and index mutual funds to replicate the performance of a financial market index, such as the [S&P 500 Index](https://www.investopedia.com/terms/s/sp500.asp). [Active investing](https://www.investopedia.com/terms/a/activemanagement.asp) strategies require expensive portfolio management teams that try to beat stock market returns and take advantage of short-term price fluctuations. Of note, passive strategies that involve [ETFs](https://www.investopedia.com/terms/e/etf.asp) and index mutual funds have grown dramatically in popularity versus active strategies. That's not only due to the cost benefits of lower management fees, but also to higher returns on investment. Index investing has been the most common form of [passive investing](https://www.investopedia.com/terms/p/passiveinvesting.asp) since 1976, when [Jack Bogle](https://www.investopedia.com/terms/j/john_bogle.asp), founder of [Vanguard](https://www.investopedia.com/articles/investing/111715/how-vanguard-index-funds-work.asp), created the first index mutual fund. The market for ETFs (the second most popular form of passive investing) has grown significantly since they were first launched in the 1990s as a way to allow investment firms to create “baskets” of major stocks aligned to a specific index or sector. Both [ETFs and index mutual funds](https://www.investopedia.com/ask/answers/033015/whats-difference-between-index-fund-and-etf.asp) are [pooled investment vehicles](https://www.investopedia.com/terms/p/pooledfunds.asp) that are passively managed. The key difference between them (discussed below) is that ETFs can be bought and sold on the stock exchange (just like individual stocks)—and index mutual funds cannot. ### Key Takeaways * Index investing has been the most common form of passive investing since 1976, when Vanguard founder Jack Bogle created the first index fund. * ETFs have grown significantly since they were first launched in the 1990s. * Because ETFs can be traded throughout the day, they appeal to a broad segment of the investing public, including active and passive investors. * Passive retail investors often choose index funds for their simplicity and low cost. * Typically, the choice between ETFs and index mutual funds comes down to management fees, shareholder transaction costs, taxation, and other qualitative differences. The investing strategy behind an index fund—whether ETF or mutual fund—is that a portfolio that matches the composition of a certain index (without variation) will also match the performance of that index. Moreover, the overall market will outperform any single investment over the long term. ## Exchange-Traded Funds ### Diversification In particular, an ETF is comprised of a portfolio of stocks, bonds, or other securities of a particular index and tracks the returns of that index. For example, ETFs can be structured to track a particular broad market index or a sector, an individual [commodity](https://www.investopedia.com/terms/c/commodity.asp) or a diverse collection of securities, a specific investment strategy, or even another fund. An ETF offers investors major diversification by providing exposure to a wide range of assets. ### Intraday Trading Unlike index mutual funds, ETFs are [flexible investment vehicles](https://www.investopedia.com/terms/f/flexible_fund.asp) that are highly [liquid](https://www.investopedia.com/terms/l/liquidity.asp). They can be bought and sold on a stock exchange throughout the trading day, just like individual stocks. Because investors can enter or exit an ETF position whenever the market is open, ETFs are attractive to a broad range of the investing public, including active traders (like [hedge funds](https://www.investopedia.com/terms/h/hedgefund.asp)) as well as passive investors (like [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp)). ### Derivatives Another reason why ETFs attract passive and active investors is that certain ETFs include [derivatives](https://www.investopedia.com/terms/d/derivative.asp)—a financial instrument whose price is derived from the price of an underlying asset. The most common ETFs that invest in derivatives are those that hold [futures](https://www.investopedia.com/terms/f/futures.asp)—agreements between buyer and seller to trade certain assets at a predetermined price on a predetermined future date. Other such ETFs may invest in options. ### Available at a Brokerage Another benefit of ETFs is that—because they can be traded like stocks—it is possible to invest in them with a basic [brokerage account](https://www.investopedia.com/terms/b/brokerageaccount.asp). There is no need to create a special account, and they can be purchased in small batches without special documentation or [rollover](https://www.investopedia.com/terms/r/rollover.asp) costs. ### Investment research firms report that few (if any) active funds perform better than passive funds over the long term. In addition, compared to actively managed funds, passive ETFs and index mutual funds are low-cost investment options. ## Index Mutual Funds Similar to an ETF, an index mutual fund is designed to track the components of a financial market index. Index mutual funds must follow their benchmarks passively, without reacting to market conditions. Orders to buy or sell them can be executed only once a day after the market closes. An index mutual fund can track any financial market, such as: * The S&P 500 (the most popular in the U.S.) * The [FT Wilshire 5000 Index](https://www.investopedia.com/terms/w/wilshire5000equityindex.asp#:~:text=The%20FT%20Wilshire%205000%20Index%20%28FTW5000%29%20seeks%20to%20capture%20100,but%20currently%20has%20just%203%2C687.) (the largest U.S. equities index) * The [Bloomberg Aggregate Bond Index](https://www.investopedia.com/terms/l/lehmanaggregatebondindex.asp#:~:text=The%20Bloomberg%20Aggregate%20Bond%20Index%20or%20%22the%20Agg%22%20is%20a,is%20to%20the%20equity%20market.) * The [MSCI EAFE Index](https://www.investopedia.com/terms/e/eafe_index.asp#:~:text=What%20Is%20the%20EAFE%20Index,Australasia%2C%20and%20the%20Middle%20East.) (European, Australasian, and Middle Eastern stocks) * The [Nasdaq Composite Index](https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp) * The [Dow Jones Industrial Average (DJIA)](https://www.investopedia.com/terms/d/djia.asp#:~:text=The%20Dow%20Jones%20Industrial%20Average%20%28DJIA%29%20is%20a%20widely%2D,%28NYSE%29%20and%20the%20Nasdaq.) (30 large-cap companies) For example, an index mutual fund tracking the DJIA invests in the same 30 companies that comprise that index—and the fund portfolio changes only if the DJIA changes its composition. If an index mutual fund is following a [price-weighted index](https://www.investopedia.com/terms/p/priceweightedindex.asp)—an index in which the stocks are [weighted](https://www.investopedia.com/terms/p/portfolio-weight.asp#:~:text=What%20Is%20Portfolio%20Weight%3F,dollar%20value%20of%20the%20portfolio.) in proportion to their price per share—the fund manager will periodically rebalance the securities to reflect their weight in the [benchmark](https://www.investopedia.com/terms/b/benchmark.asp#:~:text=What%20Is%20a%20Benchmark%3F,are%20used%20for%20this%20purpose.). ### Potential for Strong Returns Although they are less flexible than ETFs, index mutual funds can deliver the same strong returns over the long term. ### Easy Accessibility Another benefit of index mutual funds that makes them ideal for many buy-and-hold investors is their ease of access. For example, index mutual funds can be purchased through an investor’s bank or directly from the fund. There's no need for a brokerage account. This accessibility has been a key driver of their popularity. ## Key Differences Certain features of each type of fund (described above) result in index mutual funds being less liquid than ETFs and lacking ETFs' intraday trading flexibility.  In addition, different factors related to index tracking and trading give ETFs a cost and potential tax advantage over index mutual funds: * For example, ETFs don't have the [redemption](https://www.investopedia.com/terms/r/redemption.asp#:~:text=In%2Dkind%20redemptions%20are%20non,redemptions%20hurt%20long%2Dterm%20investors.) fees that some index mutual funds may charge. Redemption fees are paid by an investor whenever shares are sold. * Additionally, the constant rebalancing that occurs within index mutual funds results in [explicit costs](https://www.investopedia.com/terms/e/explicitcost.asp) (e.g., commissions) and [implicit costs](https://www.investopedia.com/terms/i/implicitcost.asp) (trade fees). ETFs avoid these costs by using [in-kind redemptions](https://www.investopedia.com/terms/r/redemption.asp#:~:text=In%2Dkind%20redemptions%20are%20non,redemptions%20hurt%20long%2Dterm%20investors.) rather than monetary payments for exited securities. This strategy can limit capital gains distributions for shareholders (but of course, [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp#:~:text=A%20capital%20gain%20is%20the,be%20claimed%20on%20income%20taxes.) taxes may still be owed when investors themselves sell their shares). * ETFs have less [cash drag](https://www.investopedia.com/terms/p/performance_drag.asp#:~:text=Cash%3A%20%22Cash%20drag%22%20is,this%20portion%20in%20the%20market.) than index mutual funds. A cash drag is a type of [performance drag](https://www.investopedia.com/terms/p/performance_drag.asp#:~:text=Performance%20drag%20is%20the%20difference,performance%20drag%20does%20not%20exist.) that occurs when cash is held to pay for the daily net redemptions that happen in mutual funds. Cash has very low (or even negative) real returns due to inflation, so ETFs—with their in-kind redemption process—are able to earn better returns by investing all cash in the market. * ETFs are more tax efficient than index funds because they are structured to have fewer [taxable events](https://www.investopedia.com/terms/t/taxableevent.asp). As mentioned previously, an index mutual fund must constantly rebalance to match the tracked index and therefore generates taxable capital gains for shareholders. An ETF minimizes this activity by trading baskets of assets. In turn, this limits exposure to capital gains on any individual security in the ETF portfolio. ### In 2023, ETFs attracted $598 billion in assets while mutual funds saw $440 billion in outflows. In 2021, they attracted close to a $1 trillion. ## Special Considerations The benefits and drawbacks of ETFs versus index mutual funds have been debated in the investment industry for decades, but—as always with investment products—the choice of one over the other depends on the investor. Typically, it comes down to preferences related to management fees, shareholder transaction costs, taxation, and other qualitative differences. Despite the lower expense ratios and tax advantages of ETFs, many retail investors (non-professional, individual investors) prefer index mutual funds. They like their simplicity and their shareholder services (such as phone support and check writing) as well as investment options that facilitate automatic contributions. While increased awareness of ETFs by retail investors and their financial advisers has grown significantly, the primary drivers of demand have been institutional investors seeking ETFs as convenient vehicles for participating in (or hedging against) broad movements in the market. The convenience, ease, and flexibility of ETFs allow for the superior liquidity management, transition management (from one manager to another), and tactical portfolio adjustments that are cited as the top reasons institutional investors use ETFs. ## What Is the Biggest Difference Between ETFs and Index Mutual Funds? The biggest difference is that ETFs can be bought and sold on a stock exchange (just like individual stocks) and index mutual funds cannot. ## Which Has Higher Returns: ETFs or Index Mutual Funds? ETFs and index funds deliver similar returns over the long term. Of note, investment research firms report that few (if any) active funds perform better than passive funds like ETFs and index mutual funds. ## What Triggers Taxable Events in Index Mutual Funds? In nearly all cases, the need to sell securities triggers taxable events in index mutual funds. The in-kind redemption feature of ETFs eliminates the need to sell securities, so fewer taxable events occur. Of course, investors in either fund may owe capital gains taxes after selling their shares in the fund. ## The Bottom Line ETFs and index mutual funds can be two smart choices for investors saving for the long run. Both are used in passive investing strategies. The biggest difference between them is that ETFs trade intraday at various prices during exchange hours and index mutual funds can be bought or sold only after the market closes each day, at a fund's net asset value.

ETFs vs. Index Mutual Funds: An Overview Both exchange-traded funds (ETFs) and index mutual funds are popular forms of passive investing, a term for an investment strategy that aims to match—not beat—the performance of a benchmark. Such passive strategies may use ETFs and index mutual funds to replicate the performance of a financial market index, such as the S&P 500 Index. Active investing strategies require expensive portfolio management teams that try to beat stock market returns and take advantage of short-term price fluctuations. Of note, passive strategies that involve ETFs and index mutual funds have grown dramatically in popularity versus active strategies. That's not only due to the cost benefits of lower management fees, but also to higher returns on investment. Index investing has been the most common form of passive investing since 1976, when Jack Bogle, founder of Vanguard, created the first index mutual fund. The market for ETFs (the second most popular form of passive investing) has grown significantly since they were first launched in the 1990s as a way to allow investment firms to create “baskets” of major stocks aligned to a specific index or sector. Both ETFs and index mutual funds are pooled investment vehicles that are passively managed. The key difference between them (discussed below) is that ETFs can be bought and sold on the stock exchange (just like individual stocks)—and index mutual funds cannot. Key Takeaways Index investing has been the most common form of passive investing since 1976, when Vanguard founder Jack Bogle created the first index fund.ETFs have grown significantly since they were first launched in the 1990s.Because ETFs can be traded throughout the day, they appeal to a broad segment of the investing public, including active and passive investors.Passive retail investors often choose index funds for their simplicity and low cost.Typically, the choice between ETFs and index mutual funds comes down to management fees, shareholder transaction costs, taxation, and other qualitative differences. The investing strategy behind an index fund—whether ETF or mutual fund—is that a portfolio that matches the composition of a certain index (without variation) will also match the performance of that index. Moreover, the overall market will outperform any single investment over the long term. Exchange-Traded Funds Diversification In particular, an ETF is comprised of a portfolio of stocks, bonds, or other securities of a particular index and tracks the returns of that index. For example, ETFs can be structured to track a particular broad market index or a sector, an individual commodity or a diverse collection of securities, a specific investment strategy, or even another fund. An ETF offers investors major diversification by providing exposure to a wide range of assets. Intraday Trading Unlike index mutual funds, ETFs are flexible investment vehicles that are highly liquid. They can be bought and sold on a stock exchange throughout the trading day, just like individual stocks. Because investors can enter or exit an ETF position whenever the market is open, ETFs are attractive to a broad range of the investing public, including active traders (like hedge funds) as well as passive investors (like institutional investors). Derivatives Another reason why ETFs attract passive and active investors is that certain ETFs include derivatives—a financial instrument whose price is derived from the price of an underlying asset. The most common ETFs that invest in derivatives are those that hold futures—agreements between buyer and seller to trade certain assets at a predetermined price on a predetermined future date. Other such ETFs may invest in options. Available at a Brokerage Another benefit of ETFs is that—because they can be traded like stocks—it is possible to invest in them with a basic brokerage account. There is no need to create a special account, and they can be purchased in small batches without special documentation or rollover costs. Investment research firms report that few (if any) active funds perform better than passive funds over the long term. In addition, compared to actively managed funds, passive ETFs and index mutual funds are low-cost investment options. Index Mutual Funds Similar to an ETF, an index mutual fund is designed to track the components of a financial market index. Index mutual funds must follow their benchmarks passively, without reacting to market conditions. Orders to buy or sell them can be executed only once a day after the market closes. An index mutual fund can track any financial market, such as: The S&P 500 (the most popular in the U.S.) The FT Wilshire 5000 Index (the largest U.S. equities index) The Bloomberg Aggregate Bond Index The MSCI EAFE Index (European, Australasian, and Middle Eastern stocks) The Nasdaq Composite Index The Dow Jones Industrial Average (DJIA) (30 large-cap companies) For example, an index mutual fund tracking the DJIA invests in the same 30 companies that comprise that index—and the fund portfolio changes only if the DJIA changes its composition. If an index mutual fund is following a price-weighted index—an index in which the stocks are weighted in proportion to their price per share—the fund manager will periodically rebalance the securities to reflect their weight in the benchmark. Potential for Strong Returns Although they are less flexible than ETFs, index mutual funds can deliver the same strong returns over the long term. Easy Accessibility Another benefit of index mutual funds that makes them ideal for many buy-and-hold investors is their ease of access. For example, index mutual funds can be purchased through an investor’s bank or directly from the fund. There's no need for a brokerage account. This accessibility has been a key driver of their popularity. Key Differences Certain features of each type of fund (described above) result in index mutual funds being less liquid than ETFs and lacking ETFs' intraday trading flexibility.  In addition, different factors related to index tracking and trading give ETFs a cost and potential tax advantage over index mutual funds: For example, ETFs don't have the redemption fees that some index mutual funds may charge. Redemption fees are paid by an investor whenever shares are sold. Additionally, the constant rebalancing that occurs within index mutual funds results in explicit costs (e.g., commissions) and implicit costs (trade fees). ETFs avoid these costs by using in-kind redemptions rather than monetary payments for exited securities. This strategy can limit capital gains distributions for shareholders (but of course, capital gains taxes may still be owed when investors themselves sell their shares). ETFs have less cash drag than index mutual funds. A cash drag is a type of performance drag that occurs when cash is held to pay for the daily net redemptions that happen in mutual funds. Cash has very low (or even negative) real returns due to inflation, so ETFs—with their in-kind redemption process—are able to earn better returns by investing all cash in the market. ETFs are more tax efficient than index funds because they are structured to have fewer taxable events. As mentioned previously, an index mutual fund must constantly rebalance to match the tracked index and therefore generates taxable capital gains for shareholders. An ETF minimizes this activity by trading baskets of assets. In turn, this limits exposure to capital gains on any individual security in the ETF portfolio. In 2023, ETFs attracted $598 billion in assets while mutual funds saw $440 billion in outflows. In 2021, they attracted close to a $1 trillion. Special Considerations The benefits and drawbacks of ETFs versus index mutual funds have been debated in the investment industry for decades, but—as always with investment products—the choice of one over the other depends on the investor. Typically, it comes down to preferences related to management fees, shareholder transaction costs, taxation, and other qualitative differences. Despite the lower expense ratios and tax advantages of ETFs, many retail investors (non-professional, individual investors) prefer index mutual funds. They like their simplicity and their shareholder services (such as phone support and check writing) as well as investment options that facilitate automatic contributions. While increased awareness of ETFs by retail investors and their financial advisers has grown significantly, the primary drivers of demand have been institutional investors seeking ETFs as convenient vehicles for participating in (or hedging against) broad movements in the market. The convenience, ease, and flexibility of ETFs allow for the superior liquidity management, transition management (from one manager to another), and tactical portfolio adjustments that are cited as the top reasons institutional investors use ETFs. What Is the Biggest Difference Between ETFs and Index Mutual Funds? The biggest difference is that ETFs can be bought and sold on a stock exchange (just like individual stocks) and index mutual funds cannot. Which Has Higher Returns: ETFs or Index Mutual Funds? ETFs and index funds deliver similar returns over the long term. Of note, investment research firms report that few (if any) active funds perform better than passive funds like ETFs and index mutual funds. What Triggers Taxable Events in Index Mutual Funds? In nearly all cases, the need to sell securities triggers taxable events in index mutual funds. The in-kind redemption feature of ETFs eliminates the need to sell securities, so fewer taxable events occur. Of course, investors in either fund may owe capital gains taxes after selling their shares in the fund. The Bottom Line ETFs and index mutual funds can be two smart choices for investors saving for the long run. Both are used in passive investing strategies. The biggest difference between them is that ETFs trade intraday at various prices during exchange hours and index mutual funds can be bought or sold only after the market closes each day, at a fund's net asset value.

https://www.investopedia.com/super-micro-computer-stock-rebounds-20-percent-leading-into-quarterly-earnings-8640226

Super Micro Computer Stock Rebounds 20% in Week Ahead of Its Quarterly Earnings

<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>Super Micro Computer shares rebounded 20% last week ahead of the company’s earnings report due Tuesday, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence.</li><li>Analysts expect the company's net sales to have grown more than 200% from last year's corresponding quarter.</li><li>Super Micro Computer's stock price price recently broke down below a head and shoulders pattern and the 50-day simple moving average, with the formation's neckline in focus after the company reports earnings.</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"> Shares of server and data storage provider Super Micro Computer (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=smci">SMCI</a>) remain in focus on Monday after recovering 20% last week ahead of the company’s earnings report due after Tuesday's close, amid expectations of quarterly sales growth driven by soaring demand for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-invest-in-ai-7504987">artificial intelligence (AI)</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_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Since reaching a record high in early March, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/super-micro-stock-dips-after-it-joined-the-s-and-p-500-today-8610544#:~:text=Key%20Takeaways,of%20artificial%20intelligence%20%28AI%29.">S&amp;P 500 constituent stock</a> has fallen as much as 45% over the past two months as investors may have used announcements of a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/super-micro-computer-to-raise-usd2-billion-in-equity-sale-shares-sink-8610912">share offering</a> and the company’s decision to break away from its recent pattern of <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/super-micro-computer-doesn-t-preannounce-financial-results-and-stock-sinks-8636159">disclosing its preliminary results</a> to take some profits off the table.<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"> However, Super Micro Computer bulls returned from the sidelines last week to bid up the tech infrastructure company’s share price leading into earnings, halting three consecutive weeks of declines. Analysts expect Super Micro Computer to post fiscal third quarter <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/netsales.asp">net sales</a> of $3.99 billion, indicating staggering <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/difference-between-bottom-line-and-top-line-growth/">top-line growth</a> of 212% from last year’s corresponding quarter and a 9% jump from second quarter revenue of $3.66 billion.<span class="ql-inline-citation" data-cite="5"></span><span class="ql-inline-citation" data-cite="4"></span><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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Last week, KeyBanc analyst Tom Blakey presented his bull and bear case for the stock some market commentators are calling the next 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>). The analyst anticipates Super Micro Computer shares climbing as high as $1,173 over the next year if AI use cases fuel accelerated infrastructure demand, helping the company expand capacity and grow its <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketshare.asp">market share</a>. However, Blakey put a <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pricetarget.asp">price target</a> on the stock at $268 if legacy server companies, such as Hewlett Packard Enterprise (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=hpe">HPE</a>), Dell (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=dell">DELL</a>), and Lenovo (<a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LNVGY">LNVGV</a>) ramp up competition and demand for AI hardware weakens.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Taking a look at the chart, the share price broke down below a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/head-shoulders.asp">head and shoulders</a> pattern and 50-day moving average earlier this month, indicating a potential top in the stock.  </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"> After the company’s earnings release, investors could monitor if the price can close above the pattern’s <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/neckline.asp">neckline</a> around $925, a move which could possibly lead to a retest of the all-time high reached in March this year at $1,229. A failure to reclaim this key chart level could spark another wave of selling down to the 200-day moving average, which currently sits at $478.90, around 44% below Friday’s closing price of $857.44. </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"> <em>The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer">warranty and liability disclaimer</a> for more info.</em> </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"> <em>As of the date this article was written, the author does not own any of the above securities.</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? 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### Key Takeaways * Super Micro Computer shares rebounded 20% last week ahead of the company’s earnings report due Tuesday, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence. * Analysts expect the company's net sales to have grown more than 200% from last year's corresponding quarter. * Super Micro Computer's stock price price recently broke down below a head and shoulders pattern and the 50-day simple moving average, with the formation's neckline in focus after the company reports earnings. Shares of server and data storage provider Super Micro Computer ([SMCI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=smci)) remain in focus on Monday after recovering 20% last week ahead of the company’s earnings report due after Tuesday's close, amid expectations of quarterly sales growth driven by soaring demand for [artificial intelligence (AI)](https://www.investopedia.com/how-to-invest-in-ai-7504987). Since reaching a record high in early March, the [S&P 500 constituent stock](https://www.investopedia.com/super-micro-stock-dips-after-it-joined-the-s-and-p-500-today-8610544#:~:text=Key%20Takeaways,of%20artificial%20intelligence%20%28AI%29.) has fallen as much as 45% over the past two months as investors may have used announcements of a [share offering](https://www.investopedia.com/super-micro-computer-to-raise-usd2-billion-in-equity-sale-shares-sink-8610912) and the company’s decision to break away from its recent pattern of [disclosing its preliminary results](https://www.investopedia.com/super-micro-computer-doesn-t-preannounce-financial-results-and-stock-sinks-8636159) to take some profits off the table. However, Super Micro Computer bulls returned from the sidelines last week to bid up the tech infrastructure company’s share price leading into earnings, halting three consecutive weeks of declines. Analysts expect Super Micro Computer to post fiscal third quarter [net sales](https://www.investopedia.com/terms/n/netsales.asp) of $3.99 billion, indicating staggering [top-line growth](https://www.investopedia.com/ask/answers/difference-between-bottom-line-and-top-line-growth/) of 212% from last year’s corresponding quarter and a 9% jump from second quarter revenue of $3.66 billion. Last week, KeyBanc analyst Tom Blakey presented his bull and bear case for the stock some market commentators are calling the next Nvidia ([NVDA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=nvda)). The analyst anticipates Super Micro Computer shares climbing as high as $1,173 over the next year if AI use cases fuel accelerated infrastructure demand, helping the company expand capacity and grow its [market share](https://www.investopedia.com/terms/m/marketshare.asp). However, Blakey put a [price target](https://www.investopedia.com/terms/p/pricetarget.asp) on the stock at $268 if legacy server companies, such as Hewlett Packard Enterprise ([HPE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=hpe)), Dell ([DELL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=dell)), and Lenovo ([LNVGV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LNVGY)) ramp up competition and demand for AI hardware weakens. Taking a look at the chart, the share price broke down below a [head and shoulders](https://www.investopedia.com/terms/h/head-shoulders.asp) pattern and 50-day moving average earlier this month, indicating a potential top in the stock.  After the company’s earnings release, investors could monitor if the price can close above the pattern’s [neckline](https://www.investopedia.com/terms/n/neckline.asp) around $925, a move which could possibly lead to a retest of the all-time high reached in March this year at $1,229. A failure to reclaim this key chart level could spark another wave of selling down to the 200-day moving average, which currently sits at $478.90, around 44% below Friday’s closing price of $857.44. *The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our [warranty and liability disclaimer](https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer) for more info.* *As of the date this article was written, the author does not own any of the above securities.* Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Super Micro Computer shares rebounded 20% last week ahead of the company’s earnings report due Tuesday, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence.Analysts expect the company's net sales to have grown more than 200% from last year's corresponding quarter.Super Micro Computer's stock price price recently broke down below a head and shoulders pattern and the 50-day simple moving average, with the formation's neckline in focus after the company reports earnings. Shares of server and data storage provider Super Micro Computer (SMCI) remain in focus on Monday after recovering 20% last week ahead of the company’s earnings report due after Tuesday's close, amid expectations of quarterly sales growth driven by soaring demand for artificial intelligence (AI). Since reaching a record high in early March, the S&P 500 constituent stock has fallen as much as 45% over the past two months as investors may have used announcements of a share offering and the company’s decision to break away from its recent pattern of disclosing its preliminary results to take some profits off the table. However, Super Micro Computer bulls returned from the sidelines last week to bid up the tech infrastructure company’s share price leading into earnings, halting three consecutive weeks of declines. Analysts expect Super Micro Computer to post fiscal third quarter net sales of $3.99 billion, indicating staggering top-line growth of 212% from last year’s corresponding quarter and a 9% jump from second quarter revenue of $3.66 billion. Last week, KeyBanc analyst Tom Blakey presented his bull and bear case for the stock some market commentators are calling the next Nvidia (NVDA). The analyst anticipates Super Micro Computer shares climbing as high as $1,173 over the next year if AI use cases fuel accelerated infrastructure demand, helping the company expand capacity and grow its market share. However, Blakey put a price target on the stock at $268 if legacy server companies, such as Hewlett Packard Enterprise (HPE), Dell (DELL), and Lenovo (LNVGV) ramp up competition and demand for AI hardware weakens. Taking a look at the chart, the share price broke down below a head and shoulders pattern and 50-day moving average earlier this month, indicating a potential top in the stock.  After the company’s earnings release, investors could monitor if the price can close above the pattern’s neckline around $925, a move which could possibly lead to a retest of the all-time high reached in March this year at $1,229. A failure to reclaim this key chart level could spark another wave of selling down to the 200-day moving average, which currently sits at $478.90, around 44% below Friday’s closing price of $857.44. The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own any of the above securities. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/f/forward-delivery.asp

Forward Delivery: What it Means, 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-forward-delivery"></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 Forward Delivery? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Forward delivery is the final stage in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/forwardcontract.asp">forward contract</a> when one party supplies the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underlying-asset.asp">underlying asset</a> and the other pays for and takes possession of the asset. Delivery, price, and all other terms must be written into the original forward contract at its inception. </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>Forward delivery is when the underlying asset of a forward is delivered at the delivery date.</li><li>Forwards can be delivered or settled in cash.</li><li>Forwards are contracts to buy or sell an asset at a future date for a specified price.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-forward-delivery"></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 Forward Delivery </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Forward delivery is when the underlying asset is delivered to the receiving party in exchange for payment. </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"> A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date.<span class="ql-inline-citation" data-cite="2"></span> Forward contracts are used for <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hedge.asp">hedging</a> or speculation. A forward contract can be customized for any asset, for any amount, and for any <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deliverydate.asp">delivery date</a>. The parties can settle in cash, paying out the net benefit/loss on the contract, or deliver the underlying. When the contract settles in delivery of the underlying asset, that final stage is called forward delivery. </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 forward contracts market is large, as many corporations use forwards to hedge <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interestraterisk.asp">interest rate risks</a> and currency fluctuations. The actual size of the market can only be estimated since forwards don't trade on exchanges and are typically private deals. </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 main problem with the forward contract market is <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>. One party may not follow through on their half of the transaction and that could lead to losses for the other party. </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-forwards-vs-futures"></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"> Forwards Vs. Futures </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Because futures contracts are standardized and traded on exchanges, counterparty risk is mitigated by the exchange's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/clearing.asp">clearing</a> mechanism. Further, there is a ready trading market should either the buyer or the seller decide to close out their position ahead of expiration. This is not the case with forwards. </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"> Tighter regulation of futures ensures a fair market, and daily <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> protects traders from running up huge, unrealized losses. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/margin.asp">Margin</a> requirements prevent this. Again, forwards don't have this. Forward contracts trade over the counter with fewer safeguards.<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"> Another important difference is the upfront cost. The buyer of a futures contract must maintain a portion of the cost of the contract in the account at all times, referred to as margin. The buyer of a forward contract does not necessarily have to pay or put any capital upfront but is still locked into the price they will pay (or the amount of asset they will have to deliver) later.<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"> Because of the increased counterparty risk, the seller of the forward contract could be stuck with a large amount of the underlying asset should the buyer fail to meet their obligations. This is why forwards typically trade between institutions with solid credit and that can afford to meet their obligations. Institutions or individuals with poor credit or who are in poor financial situations will have a hard time finding institutions to conduct forwards with them. </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-forward-delivery-example"></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"> Forward Delivery Example </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Assume a simple situation in which Company A needs to buy 15,236 ounces of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/08/invest-in-gold.asp">gold</a> one year from now. A futures contract isn't that specific, and buying so many futures contracts (each representing 100 ounces) could incur <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/slippage.asp">slippage</a> and transaction costs. Therefore, Company A chooses a forward over the futures market. </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 current price of gold is $1,500. Company B agrees to sell Company A 15,236 ounces of gold in one year, but at a cost of $1,575 an ounce. The two parties agree on the price and the date of delivery. The forward rate, which is higher than the current rate, factors for storage costs while the gold is being held by Company B and risk factors. </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"> In one year, the price of gold could be higher or lower than $1,575, but the two parties are locked in at the $1,575 rate. </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"> Forward delivery is made by Company B providing Company A with 15,236 ounces of gold. In exchange, Company A provides Company B with $23,996,700 (15,236 x $1,575). </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"> If the current rate is higher than $1,575, then Company A will be happy they locked in the rate they did, while Company B won't be so happy. </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 current rate is lower than $1,575, then Company A could have been better not entering into the contract, but Company B will be happy they made the deal. </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"> That said, typically these types of deals are not meant to speculate, but rather lock in a rate on an asset that is required in the future. </p></div>

## What Is Forward Delivery? Forward delivery is the final stage in a [forward contract](https://www.investopedia.com/terms/f/forwardcontract.asp) when one party supplies the [underlying asset](https://www.investopedia.com/terms/u/underlying-asset.asp) and the other pays for and takes possession of the asset. Delivery, price, and all other terms must be written into the original forward contract at its inception. ### Key Takeaways * Forward delivery is when the underlying asset of a forward is delivered at the delivery date. * Forwards can be delivered or settled in cash. * Forwards are contracts to buy or sell an asset at a future date for a specified price. ## Understanding Forward Delivery Forward delivery is when the underlying asset is delivered to the receiving party in exchange for payment. A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. Forward contracts are used for [hedging](https://www.investopedia.com/terms/h/hedge.asp) or speculation. A forward contract can be customized for any asset, for any amount, and for any [delivery date](https://www.investopedia.com/terms/d/deliverydate.asp). The parties can settle in cash, paying out the net benefit/loss on the contract, or deliver the underlying. When the contract settles in delivery of the underlying asset, that final stage is called forward delivery. The forward contracts market is large, as many corporations use forwards to hedge [interest rate risks](https://www.investopedia.com/terms/i/interestraterisk.asp) and currency fluctuations. The actual size of the market can only be estimated since forwards don't trade on exchanges and are typically private deals. The main problem with the forward contract market is [counterparty risk](https://www.investopedia.com/terms/c/counterpartyrisk.asp). One party may not follow through on their half of the transaction and that could lead to losses for the other party. ## Forwards Vs. Futures Because futures contracts are standardized and traded on exchanges, counterparty risk is mitigated by the exchange's [clearing](https://www.investopedia.com/terms/c/clearing.asp) mechanism. Further, there is a ready trading market should either the buyer or the seller decide to close out their position ahead of expiration. This is not the case with forwards. Tighter regulation of futures ensures a fair market, and daily [mark to market](https://www.investopedia.com/terms/m/marktomarket.asp) protects traders from running up huge, unrealized losses. [Margin](https://www.investopedia.com/terms/m/margin.asp) requirements prevent this. Again, forwards don't have this. Forward contracts trade over the counter with fewer safeguards. Another important difference is the upfront cost. The buyer of a futures contract must maintain a portion of the cost of the contract in the account at all times, referred to as margin. The buyer of a forward contract does not necessarily have to pay or put any capital upfront but is still locked into the price they will pay (or the amount of asset they will have to deliver) later. Because of the increased counterparty risk, the seller of the forward contract could be stuck with a large amount of the underlying asset should the buyer fail to meet their obligations. This is why forwards typically trade between institutions with solid credit and that can afford to meet their obligations. Institutions or individuals with poor credit or who are in poor financial situations will have a hard time finding institutions to conduct forwards with them. ## Forward Delivery Example Assume a simple situation in which Company A needs to buy 15,236 ounces of [gold](https://www.investopedia.com/articles/basics/08/invest-in-gold.asp) one year from now. A futures contract isn't that specific, and buying so many futures contracts (each representing 100 ounces) could incur [slippage](https://www.investopedia.com/terms/s/slippage.asp) and transaction costs. Therefore, Company A chooses a forward over the futures market. The current price of gold is $1,500. Company B agrees to sell Company A 15,236 ounces of gold in one year, but at a cost of $1,575 an ounce. The two parties agree on the price and the date of delivery. The forward rate, which is higher than the current rate, factors for storage costs while the gold is being held by Company B and risk factors. In one year, the price of gold could be higher or lower than $1,575, but the two parties are locked in at the $1,575 rate. Forward delivery is made by Company B providing Company A with 15,236 ounces of gold. In exchange, Company A provides Company B with $23,996,700 (15,236 x $1,575). If the current rate is higher than $1,575, then Company A will be happy they locked in the rate they did, while Company B won't be so happy. If the current rate is lower than $1,575, then Company A could have been better not entering into the contract, but Company B will be happy they made the deal. That said, typically these types of deals are not meant to speculate, but rather lock in a rate on an asset that is required in the future.

What Is Forward Delivery? Forward delivery is the final stage in a forward contract when one party supplies the underlying asset and the other pays for and takes possession of the asset. Delivery, price, and all other terms must be written into the original forward contract at its inception. Key Takeaways Forward delivery is when the underlying asset of a forward is delivered at the delivery date.Forwards can be delivered or settled in cash.Forwards are contracts to buy or sell an asset at a future date for a specified price. Understanding Forward Delivery Forward delivery is when the underlying asset is delivered to the receiving party in exchange for payment. A forward contract is a contract between two parties to buy or sell an asset at a specified price on a future date. Forward contracts are used for hedging or speculation. A forward contract can be customized for any asset, for any amount, and for any delivery date. The parties can settle in cash, paying out the net benefit/loss on the contract, or deliver the underlying. When the contract settles in delivery of the underlying asset, that final stage is called forward delivery. The forward contracts market is large, as many corporations use forwards to hedge interest rate risks and currency fluctuations. The actual size of the market can only be estimated since forwards don't trade on exchanges and are typically private deals. The main problem with the forward contract market is counterparty risk. One party may not follow through on their half of the transaction and that could lead to losses for the other party. Forwards Vs. Futures Because futures contracts are standardized and traded on exchanges, counterparty risk is mitigated by the exchange's clearing mechanism. Further, there is a ready trading market should either the buyer or the seller decide to close out their position ahead of expiration. This is not the case with forwards. Tighter regulation of futures ensures a fair market, and daily mark to market protects traders from running up huge, unrealized losses. Margin requirements prevent this. Again, forwards don't have this. Forward contracts trade over the counter with fewer safeguards. Another important difference is the upfront cost. The buyer of a futures contract must maintain a portion of the cost of the contract in the account at all times, referred to as margin. The buyer of a forward contract does not necessarily have to pay or put any capital upfront but is still locked into the price they will pay (or the amount of asset they will have to deliver) later. Because of the increased counterparty risk, the seller of the forward contract could be stuck with a large amount of the underlying asset should the buyer fail to meet their obligations. This is why forwards typically trade between institutions with solid credit and that can afford to meet their obligations. Institutions or individuals with poor credit or who are in poor financial situations will have a hard time finding institutions to conduct forwards with them. Forward Delivery Example Assume a simple situation in which Company A needs to buy 15,236 ounces of gold one year from now. A futures contract isn't that specific, and buying so many futures contracts (each representing 100 ounces) could incur slippage and transaction costs. Therefore, Company A chooses a forward over the futures market. The current price of gold is $1,500. Company B agrees to sell Company A 15,236 ounces of gold in one year, but at a cost of $1,575 an ounce. The two parties agree on the price and the date of delivery. The forward rate, which is higher than the current rate, factors for storage costs while the gold is being held by Company B and risk factors. In one year, the price of gold could be higher or lower than $1,575, but the two parties are locked in at the $1,575 rate. Forward delivery is made by Company B providing Company A with 15,236 ounces of gold. In exchange, Company A provides Company B with $23,996,700 (15,236 x $1,575). If the current rate is higher than $1,575, then Company A will be happy they locked in the rate they did, while Company B won't be so happy. If the current rate is lower than $1,575, then Company A could have been better not entering into the contract, but Company B will be happy they made the deal. That said, typically these types of deals are not meant to speculate, but rather lock in a rate on an asset that is required in the future.

https://www.investopedia.com/terms/t/transaction-deposit.asp

Transaction: What it Means, 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-transaction-deposit"></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 Transaction Deposit? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The term transaction deposit refers to a deposit made to a transaction account, such as 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>. Transaction deposits are liquid, which means the account holder can access the funds right away without any delays, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/waiting-period.asp">waiting periods</a>, or penalties. As such, a transaction deposit can be used for other transactions at the request of the account holder. Banks may put restrictions on how and when certain deposits can be used, such as large deposits that are put on hold. Transaction deposits work differently than non-transaction deposits, which are made into accounts that mature after a period of time. </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 transaction deposit is a deposit made to a transaction account, such as a checking account.</li><li>Transaction deposits and accounts are liquid, which means the money deposited is available instantly upon request.</li><li>Transaction deposits can be made in person at a bank, through an ATM, or via electronic transfer. </li><li>Some banks may impose restrictions or waiting periods on certain deposits made to transaction accounts, such as a large check that requires verification. </li><li>Deposits to non-transaction accounts are not fully liquid, which means withdrawals may require some notice or a waiting period.<br/></li></ul></div></div></div> <span class="heading-toc" id="toc-how-transaction-deposits-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 Transaction Deposits Work </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, transaction deposits are any deposits that are made to transaction accounts. Also called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/demanddeposit.asp">demand deposits</a>, they are <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquidity.asp">liquid</a>, which makes them easily accessible by the account holder. This means that if a consumer needs access to their money, they don't need to provide the bank or account provider with any advanced notice. </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"> Deposits can be made in bank branches, at <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp">automated teller machines (ATMs)</a>, and by transferring funds from another account. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">Direct deposits</a> also qualify as transaction deposits. Individuals who wish to access their transaction deposits can do so in one of several ways, including: </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>In-branch withdrawals</li> <li>ATM withdrawals</li> <li>Transfers to another account</li> <li>Check-writing</li> <li>Bill payments</li> <li>Wire payments</li> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/ach.asp">Automated clearing house (ACH)</a> transfers</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"> Given how liquid they are, transaction <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deposit.asp">deposits</a> allow individuals to meet their day-to-day banking needs whenever they wish. There are generally no limitations on these deposits unless otherwise indicated in the account agreement or its terms and conditions.<br/> </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-special-considerations"></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"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> In order to be considered a transaction account, an account must allow unrestricted transfers and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/withdrawal.asp">withdrawals</a>, deposits must not have a <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>, and allow debit transactions on demand within a seven-day period. There must also be no eligibility requirements for this type of account.<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"> Some <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank.asp">banks</a> may place certain restrictions on transaction deposits and accounts. A bank may put <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/account-hold.asp">a partial or full hold</a> on large or unusual deposits for a certain period of time. This may be the case for a customer who deposits a large check to their account that needs to be verified before the funds are released. They may also do this for new accounts that don't have an established history. Once the hold period is up, though, the funds are fully accessible.<br/> </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-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><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>Savings accounts that allow account holders with unlimited access are also considered transaction accounts.</p></div></div></div> <span class="heading-toc" id="toc-transaction-deposits-vs-non-transaction-deposits"></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"> Transaction Deposits vs. Non-Transaction Deposits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Transaction deposits are the opposite of non-transaction deposits. These are deposits that are made to non-transaction accounts, such as savings accounts, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/moneymarketaccount.asp">money market accounts (MMAs)</a>, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/certificateofdeposit.asp">certificates of deposit (CDs)</a>. These accounts generate interest, giving the account holder a return on their investment. </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"> The difference between these two types of deposits is the ease and speed at which funds can be accessed from the account. Unlike transaction deposits, non-transaction deposits are not nearly as liquid because account holders are either limited or restricted from accessing all or part of the funds in the account. Or they must make a request for a withdrawal. </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"> For instance, CDs require investors to lock up their money for a specified period of time, from several months to several years. Early withdrawals may be permitted, but the account holder may forfeit any interest and may have a fee deducted from their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/principal.asp">principal</a> balance. Similarly, some banks may limit the number of debit transactions from savings or MMAs every month. If they go over that limit, the bank may charge them a withdrawal fee. </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"> The Federal Reserve's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/this-government-regulation-restricts-how-often-you-can-move-money-out-of-your-savings-account-4589978">Regulation D</a> restricted withdrawals from MMAs and savings accounts to six per month. Individuals who went over this limit were charged a service fee while banks were able to revoke and convert these vehicles to regular accounts for people who consistently went over the six withdrawal limit. This was put in place to help financial institutions meet their <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/requiredreserves.asp">reserve requirements</a>. The Fed lifted these restrictions in April 2020, giving banks the authority to decide how to manage customer withdrawals from these accounts.<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_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-note" 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 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>Non-transaction deposits may also be referred to as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timedeposit.asp">time deposits</a> or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/termdeposit.asp">term deposits</a>.</p></div></div></div> <span class="heading-toc" id="toc-example-of-transaction-deposits"></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"> Example of Transaction Deposits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Funds in a checking account are examples of transaction deposits because they can be used for daily expenses or may be withdrawn from an account by the holder of the account. In contrast, time-based deposits, such as a CD, are examples of non-transaction deposits because they cannot be transferred or withdrawn at a moment's notice. </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-what-conditions-must-an-account-meet-to-be-considered-a-transaction-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Conditions Must an Account Meet to Be Considered a Transaction Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>According to the Federal Reserve, transaction or demand deposit accounts must allow for unrestricted withdrawals and transfers on demand within a seven-day period, they must not have a maturity period, and there must be no eligibility requirements.<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_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-the-difference-between-a-transaction-and-non-transaction-deposit"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Difference Between a Transaction and Non-Transaction Deposit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Transaction deposits are made to transaction accounts, such as checking accounts. Individuals have easy access to these funds on demand without restriction. Non-transaction accounts, on the other hand, may come with limitations on how and when the funds can be withdrawn. For instance, a bank may restrict holders of a savings account to a certain number of withdrawals per month.</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-what-is-a-time-deposit"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Time Deposit?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A time deposit is a deposit made to a non-transaction account. This type of account is normally interest-bearing and generally has a maturity date. Withdrawals may be restricted when it comes to these kinds of accounts. Some savings accounts may qualify as non-transaction accounts, as do CDs.</p></div> </div></div>

## What Is a Transaction Deposit? The term transaction deposit refers to a deposit made to a transaction account, such as a [checking account](https://www.investopedia.com/terms/c/checkingaccount.asp). Transaction deposits are liquid, which means the account holder can access the funds right away without any delays, [waiting periods](https://www.investopedia.com/terms/w/waiting-period.asp), or penalties. As such, a transaction deposit can be used for other transactions at the request of the account holder. Banks may put restrictions on how and when certain deposits can be used, such as large deposits that are put on hold. Transaction deposits work differently than non-transaction deposits, which are made into accounts that mature after a period of time. ### Key Takeaways * A transaction deposit is a deposit made to a transaction account, such as a checking account. * Transaction deposits and accounts are liquid, which means the money deposited is available instantly upon request. * Transaction deposits can be made in person at a bank, through an ATM, or via electronic transfer. * Some banks may impose restrictions or waiting periods on certain deposits made to transaction accounts, such as a large check that requires verification. * Deposits to non-transaction accounts are not fully liquid, which means withdrawals may require some notice or a waiting period. ## How Transaction Deposits Work As noted above, transaction deposits are any deposits that are made to transaction accounts. Also called [demand deposits](https://www.investopedia.com/terms/d/demanddeposit.asp), they are [liquid](https://www.investopedia.com/terms/l/liquidity.asp), which makes them easily accessible by the account holder. This means that if a consumer needs access to their money, they don't need to provide the bank or account provider with any advanced notice. Deposits can be made in bank branches, at [automated teller machines (ATMs)](https://www.investopedia.com/terms/a/atm.asp), and by transferring funds from another account. [Direct deposits](https://www.investopedia.com/terms/d/directdeposit.asp) also qualify as transaction deposits. Individuals who wish to access their transaction deposits can do so in one of several ways, including: * In-branch withdrawals * ATM withdrawals * Transfers to another account * Check-writing * Bill payments * Wire payments * [Automated clearing house (ACH)](https://www.investopedia.com/terms/a/ach.asp) transfers Given how liquid they are, transaction [deposits](https://www.investopedia.com/terms/d/deposit.asp) allow individuals to meet their day-to-day banking needs whenever they wish. There are generally no limitations on these deposits unless otherwise indicated in the account agreement or its terms and conditions. ## Special Considerations In order to be considered a transaction account, an account must allow unrestricted transfers and [withdrawals](https://www.investopedia.com/terms/w/withdrawal.asp), deposits must not have a [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp), and allow debit transactions on demand within a seven-day period. There must also be no eligibility requirements for this type of account. Some [banks](https://www.investopedia.com/terms/b/bank.asp) may place certain restrictions on transaction deposits and accounts. A bank may put [a partial or full hold](https://www.investopedia.com/terms/a/account-hold.asp) on large or unusual deposits for a certain period of time. This may be the case for a customer who deposits a large check to their account that needs to be verified before the funds are released. They may also do this for new accounts that don't have an established history. Once the hold period is up, though, the funds are fully accessible. ### Savings accounts that allow account holders with unlimited access are also considered transaction accounts. ## Transaction Deposits vs. Non-Transaction Deposits Transaction deposits are the opposite of non-transaction deposits. These are deposits that are made to non-transaction accounts, such as savings accounts, [money market accounts (MMAs)](https://www.investopedia.com/terms/m/moneymarketaccount.asp), and [certificates of deposit (CDs)](https://www.investopedia.com/terms/c/certificateofdeposit.asp). These accounts generate interest, giving the account holder a return on their investment. The difference between these two types of deposits is the ease and speed at which funds can be accessed from the account. Unlike transaction deposits, non-transaction deposits are not nearly as liquid because account holders are either limited or restricted from accessing all or part of the funds in the account. Or they must make a request for a withdrawal. For instance, CDs require investors to lock up their money for a specified period of time, from several months to several years. Early withdrawals may be permitted, but the account holder may forfeit any interest and may have a fee deducted from their [principal](https://www.investopedia.com/terms/p/principal.asp) balance. Similarly, some banks may limit the number of debit transactions from savings or MMAs every month. If they go over that limit, the bank may charge them a withdrawal fee. The Federal Reserve's [Regulation D](https://www.investopedia.com/this-government-regulation-restricts-how-often-you-can-move-money-out-of-your-savings-account-4589978) restricted withdrawals from MMAs and savings accounts to six per month. Individuals who went over this limit were charged a service fee while banks were able to revoke and convert these vehicles to regular accounts for people who consistently went over the six withdrawal limit. This was put in place to help financial institutions meet their [reserve requirements](https://www.investopedia.com/terms/r/requiredreserves.asp). The Fed lifted these restrictions in April 2020, giving banks the authority to decide how to manage customer withdrawals from these accounts. ### Non-transaction deposits may also be referred to as [time deposits](https://www.investopedia.com/terms/t/timedeposit.asp) or [term deposits](https://www.investopedia.com/terms/t/termdeposit.asp). ## Example of Transaction Deposits Funds in a checking account are examples of transaction deposits because they can be used for daily expenses or may be withdrawn from an account by the holder of the account. In contrast, time-based deposits, such as a CD, are examples of non-transaction deposits because they cannot be transferred or withdrawn at a moment's notice. ## What Conditions Must an Account Meet to Be Considered a Transaction Account? According to the Federal Reserve, transaction or demand deposit accounts must allow for unrestricted withdrawals and transfers on demand within a seven-day period, they must not have a maturity period, and there must be no eligibility requirements. ## What Is the Difference Between a Transaction and Non-Transaction Deposit? Transaction deposits are made to transaction accounts, such as checking accounts. Individuals have easy access to these funds on demand without restriction. Non-transaction accounts, on the other hand, may come with limitations on how and when the funds can be withdrawn. For instance, a bank may restrict holders of a savings account to a certain number of withdrawals per month. ## What Is a Time Deposit? A time deposit is a deposit made to a non-transaction account. This type of account is normally interest-bearing and generally has a maturity date. Withdrawals may be restricted when it comes to these kinds of accounts. Some savings accounts may qualify as non-transaction accounts, as do CDs.

What Is a Transaction Deposit? The term transaction deposit refers to a deposit made to a transaction account, such as a checking account. Transaction deposits are liquid, which means the account holder can access the funds right away without any delays, waiting periods, or penalties. As such, a transaction deposit can be used for other transactions at the request of the account holder. Banks may put restrictions on how and when certain deposits can be used, such as large deposits that are put on hold. Transaction deposits work differently than non-transaction deposits, which are made into accounts that mature after a period of time. Key Takeaways A transaction deposit is a deposit made to a transaction account, such as a checking account.Transaction deposits and accounts are liquid, which means the money deposited is available instantly upon request.Transaction deposits can be made in person at a bank, through an ATM, or via electronic transfer. Some banks may impose restrictions or waiting periods on certain deposits made to transaction accounts, such as a large check that requires verification. Deposits to non-transaction accounts are not fully liquid, which means withdrawals may require some notice or a waiting period. How Transaction Deposits Work As noted above, transaction deposits are any deposits that are made to transaction accounts. Also called demand deposits, they are liquid, which makes them easily accessible by the account holder. This means that if a consumer needs access to their money, they don't need to provide the bank or account provider with any advanced notice. Deposits can be made in bank branches, at automated teller machines (ATMs), and by transferring funds from another account. Direct deposits also qualify as transaction deposits. Individuals who wish to access their transaction deposits can do so in one of several ways, including: In-branch withdrawals ATM withdrawals Transfers to another account Check-writing Bill payments Wire payments Automated clearing house (ACH) transfers Given how liquid they are, transaction deposits allow individuals to meet their day-to-day banking needs whenever they wish. There are generally no limitations on these deposits unless otherwise indicated in the account agreement or its terms and conditions. Special Considerations In order to be considered a transaction account, an account must allow unrestricted transfers and withdrawals, deposits must not have a maturity date, and allow debit transactions on demand within a seven-day period. There must also be no eligibility requirements for this type of account. Some banks may place certain restrictions on transaction deposits and accounts. A bank may put a partial or full hold on large or unusual deposits for a certain period of time. This may be the case for a customer who deposits a large check to their account that needs to be verified before the funds are released. They may also do this for new accounts that don't have an established history. Once the hold period is up, though, the funds are fully accessible. Savings accounts that allow account holders with unlimited access are also considered transaction accounts. Transaction Deposits vs. Non-Transaction Deposits Transaction deposits are the opposite of non-transaction deposits. These are deposits that are made to non-transaction accounts, such as savings accounts, money market accounts (MMAs), and certificates of deposit (CDs). These accounts generate interest, giving the account holder a return on their investment. The difference between these two types of deposits is the ease and speed at which funds can be accessed from the account. Unlike transaction deposits, non-transaction deposits are not nearly as liquid because account holders are either limited or restricted from accessing all or part of the funds in the account. Or they must make a request for a withdrawal. For instance, CDs require investors to lock up their money for a specified period of time, from several months to several years. Early withdrawals may be permitted, but the account holder may forfeit any interest and may have a fee deducted from their principal balance. Similarly, some banks may limit the number of debit transactions from savings or MMAs every month. If they go over that limit, the bank may charge them a withdrawal fee. The Federal Reserve's Regulation D restricted withdrawals from MMAs and savings accounts to six per month. Individuals who went over this limit were charged a service fee while banks were able to revoke and convert these vehicles to regular accounts for people who consistently went over the six withdrawal limit. This was put in place to help financial institutions meet their reserve requirements. The Fed lifted these restrictions in April 2020, giving banks the authority to decide how to manage customer withdrawals from these accounts. Non-transaction deposits may also be referred to as time deposits or term deposits. Example of Transaction Deposits Funds in a checking account are examples of transaction deposits because they can be used for daily expenses or may be withdrawn from an account by the holder of the account. In contrast, time-based deposits, such as a CD, are examples of non-transaction deposits because they cannot be transferred or withdrawn at a moment's notice. What Conditions Must an Account Meet to Be Considered a Transaction Account? According to the Federal Reserve, transaction or demand deposit accounts must allow for unrestricted withdrawals and transfers on demand within a seven-day period, they must not have a maturity period, and there must be no eligibility requirements. What Is the Difference Between a Transaction and Non-Transaction Deposit? Transaction deposits are made to transaction accounts, such as checking accounts. Individuals have easy access to these funds on demand without restriction. Non-transaction accounts, on the other hand, may come with limitations on how and when the funds can be withdrawn. For instance, a bank may restrict holders of a savings account to a certain number of withdrawals per month. What Is a Time Deposit? A time deposit is a deposit made to a non-transaction account. This type of account is normally interest-bearing and generally has a maturity date. Withdrawals may be restricted when it comes to these kinds of accounts. Some savings accounts may qualify as non-transaction accounts, as do CDs.

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Why U.S. Healthcare Spending Is Rising So Fast

<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"> U.S. healthcare expenditures greatly <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/072116/us-healthcare-costs-compared-other-countries.asp">exceed those of other developed countries</a>. They are projected to increase at a substantial rate but produce no better—and indeed sometimes worse—outcomes, according to research sponsored by the Peter G. Peterson Foundation.<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"> With national healthcare expenditure (NHE) estimated to reach $6.2 trillion by 2028, public policy experts, government officials, healthcare-sector leaders, business executives, and ordinary citizens share mounting concerns about the country’s ability to provide healthcare services that are fiscally responsible and attain acceptable levels of quality, effectiveness, and equity.<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_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Proposals to counter the increasing levels of U.S. healthcare expenditures abound. They include policies intended to achieve price transparency; alternatives to fee-for-service compensation, such as price controls based on Medicare fees or a percentage of negotiated in-network rates, as well as value-based and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitation-payments.asp">capitation</a> systems, antitrust enforcement, simplification of administration, and a wholesale restructuring of the sector’s present complex arrangements in favor of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/112713/drawbacks-singlepayer-healthcare.asp">a single-payer, governmental system</a> for the entire population. </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"> Efforts to reduce healthcare spending—even if they’re aimed at reducing the future rate of increase in expenditures—are bound to provoke the powerful groups comprising the healthcare sector. Deciding whose revenue would be cut and how reductions would be allocated among different healthcare interests will require widespread agreement on the necessity, urgency, and inevitability of these reductions—coupled with exceptional political leadership.    </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>Currently, U.S. healthcare costs are growing 1.1% faster than the annual GDP is.<span class="ql-inline-citation" data-cite="2"></span></li><li>By 2028 U.S. healthcare spending will reach $6.2 trillion and account for almost 20% of the GDP.<span class="ql-inline-citation" data-cite="2"></span></li><li>The complexity of the health sector and the political clout of major groups challenge cost-cutting efforts.</li></ul></div></div></div> <span class="heading-toc" id="toc-pandemic-reveals-systemic-problems"></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"> Pandemic Reveals Systemic Problems </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The COVID-19 pandemic has altered the patterns and distributions of healthcare services and expenditures, at least for 2020 and 2021. It has spotlighted systemic deficiencies and inequities that existed long before the pandemic, continued to exist throughout it, and will probably exist for long after it’s over. </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 pandemic and the development of vaccines have confirmed the importance of investment in basic scientific research. It has advanced innovation, particularly in the provision and distribution of services, through <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/telehealth-5115239">telehealth</a> expansion, retail clinic and urgent care utilization, and outreach to rural and underserved communities through mobile health units. Recognizing the widespread acceptance of telehealth, Walmart has purchased a telehealth provider and plans to expand its service nationwide, while Amazon is expanding its Amazon Care from being available only to employees and their families in Washington state to being available in all 50 states.<span class="ql-inline-citation" data-cite="41"></span><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_15-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> The pandemic has also revealed substantial weaknesses in crisis preparedness; inadequate and inequitable supply, facility, and professional resources; and insufficient coordination and communication capability.  At the very time that policymakers are compelled to address the rising cost of healthcare, the pandemic is requiring them to face long-latent, systemic inadequacies along with the continuing internal and external causes of increasing healthcare expenditures.<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_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> The necessity of federal financial support and technical assistance for providing free vaccines, various pricing directives for testing, and eventual supply and equipment aid to improve access and affordability for addressing COVID-19 were widely recognized. However, general acceptance of these government interventions seems unlikely to carry forward and expand price regulation and equitable access policies broadly beyond the pandemic. Increasing healthcare costs will continue to challenge individuals, the healthcare sector, and the general U.S. economy.   </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-annual-us-healthcare-costs"></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"> Annual U.S. Healthcare Costs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Experts look at healthcare costs both in terms of NHE—which includes costs at every level—and federal-government health spending. Here’s how both are rising. </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"> National Health Costs and the GDP </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Healthcare payers, providers, and patients consider the mounting cost of U.S. healthcare and its increasing demands on the American economy unsustainable. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/us-centers-medicare-and-medicaid-services-cms.asp">Centers for Medicare &amp; Medicaid Services</a> (CMS) annually produces yearly NHE estimates and 10-year national healthcare expenditure projections reflecting total nationwide costs.<span class="ql-inline-citation" data-cite="50"></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"> These comprehensive, national statistics pertain to total U.S. spending and thus include spending by federal, state, and local governments, households, and employers. In 2020, NHE grew 9.7% to $4.1 trillion, an amount representing 19.7% of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gdp.asp">gross domestic product</a> (GDP). Spending per person was $12,530.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Current levels of U.S. healthcare spending—both on a per-person basis and as a share of GDP—far exceed those of comparable countries.<span class="ql-inline-citation" data-cite="8"></span> The country with the second-highest expenditure per person was Norway, with a 2020 per capita cost of approximately $6,748 and total healthcare spending constituting an 11.3% share of its GDP. Germany is just behind Norway, spending approximately 12.5% of its GDP, averaging $6,731 per person.<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_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> A number of factors contribute to the higher cost of U.S. healthcare. Generally, healthcare prices are higher in the U.S. for professional services, hospitalizations, and medical supplies and drugs. Higher administrative costs in the U.S. account for one-quarter to one-third of all U.S. healthcare spending.<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> <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"> Health Spending by the Federal Government </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> In addition to reporting NHE, CMS also estimates the subset of expenditures that makes up federal healthcare spending. In 2020 the federal government was responsible for 36.3% of NHE. The rest of NHE was divided among households, which accounted for 26.1%, private business at 16.7%, state and local governments at 14.3%, and other private revenue sources at 6.5%.<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_34-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Total federal government expenditures include Medicare, Medicaid, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/childrens-health-insurance-program-chip.asp">Children’s Health Insurance Program</a> (CHIP), Affordable Care Act (ACA) Marketplace <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/101413/lowering-your-costs-marketplace-health-insurance-coverage.asp">premium subsidies</a>, the Veterans Administration, U.S. Department of Defense healthcare programs, support for healthcare professionals, and hospitals providing uncompensated care, and other federal programs. </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"> Medicare represented 21% of total NHE in 2019; it accounted for the largest share of federal healthcare spending, a total of $799.4 billion.<span class="ql-inline-citation" data-cite="57"></span> CMS projects that Medicare spending will grow 7.6% annually between 2019 and 2028.<span class="ql-inline-citation" data-cite="2"></span> Medicaid accounted for $613.5 billion, 16% of NHE in 2019.<span class="ql-inline-citation" data-cite="57"></span> That same year, private health insurance spending amounted to $1,195.1 billion, 31% of NHE, and out-of-pocket expenditures were $406.5 billion, 11% of NHE. From 2018 to 2019, spending for hospitals increased 6.2%, while prescription-drug spending rose 5.7%, and spending for physician and clinical services grew 4.6%.<span class="ql-inline-citation" data-cite="57"></span> CMS has projected the average annual rate of growth for NHE during the period of 2019 to 2028 to be 5.4%.<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_38-0"></div> <span class="heading-toc" id="toc-us-health-outcomes-lag-behind-those-of-other-countries"></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"> U.S. Health Outcomes Lag Behind Those of Other Countries </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Despite Americans spending significantly more on healthcare compared with the residents of other developed countries, they do not enjoy better outcomes. In fact, the U.S. lags behind other countries when common health metrics are considered.<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_41-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Among the wealthier European countries of the current 38 Organisation for Economic Cooperation and Development (OECD) members the life expectancy for individuals born in 2020 is much higher than in the U.S. In Switzerland, it is 83.2 years, while in France it is 82.3 years, and 80.4 years in the United Kingdom. The life expectancy for U.S. residents, at 77.3 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_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 American health system falls short of other national systems in cost and results, with costs far exceeding those of other wealthy countries. Americans also pay more for healthcare than residents of other major countries do, though residents of comparable countries enjoy better healthcare outcomes and live longer.</p></div></div></div> <span class="heading-toc" id="toc-national-health-expense-ever-higher"></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"> National Health Expense: Ever Higher </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> CMS projects that U.S. healthcare spending will grow at a rate 1.1% faster than that of the annual GDP and is expected to increase from 17.7% of the GDP in 2018 to 19.7% by 2028. Two reasons for this are that health-sector wages are anticipated to increase faster than the GDP will, and the prices for medical goods and services are projected to grow by an average of 2.4% annually by 2028. With the aging baby boom generation greatly increasing Medicare enrollment, Medicare spending is expected to grow 7.6% annually over the decade. Spending for all categories of healthcare expenditures is expected to grow faster between 2019 and 2028 than in earlier years.<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"> Even with overall growth, some trends with cost-reduction potential were underway before the COVID-19 pandemic. Increasingly, Americans were seeking healthcare services in places other than traditional professional offices, emergency rooms, and hospitals. As health systems diversified their service locations beyond hospital facilities—and insurers directed plan members to lower-cost service—the number and utilization of ambulatory surgery centers, urgent care facilities, and retail clinics grew.<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_50-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> The use of telehealth services, both video and telephonic, which was significant even before the pandemic, became many times greater after social distancing became an imperative.<span class="ql-inline-citation" data-cite="18"></span> Given telehealth’s convenience for providers and patients—and especially its advantages for remote and underserved communities—its usage likely will expand. Although professional fee schedules for telehealth so far seem unlikely to vary from in-office fees, telehealth may reduce medical-facility costs for providers. Walmart’s and Amazon’s investments to add telehealth operations to their consumer healthcare offerings confirm expectations for this model of care. </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-causes-of-higher-spending"></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"> Causes of Higher Spending </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> Studies of healthcare spending tend to focus on factors internal to the healthcare sector that contribute to higher costs—in particular, prices and administrative costs. Even though changes in these areas would be opposed by powerful interests, significant cost savings are imaginable, even if not easy. Less amenable to change are external conditions that increase costs but cannot be avoided, including basic economic principles and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/demographics.asp">demographics</a>.          </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_55-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_56-0"> <span class="mntl-sc-block-subheading__text"> External Cost Factors: Basic Economics and Demographics </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> CMS estimates, as well as other projections of future increases in U.S. health spending, assume that the current structure of the healthcare sector generally will continue. These projections also take into account external developments that impact costs. </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"> Although academic, political, and industry sources are generating many proposals for cost savings—including significant structural changes—the prospect for substantial change is uncertain. Certain externalities, particularly demographics, will challenge <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/u-s-healthcare-strategies-for-containing-costs-5186588">cost-containment efforts</a>. </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"> <strong>Supply and demand: </strong>Healthcare spending is subject to the basic economic principles of supply and demand. As the population grows and more individuals enjoy better access to care because of developments such as the Affordable Care Act, increased Medicare enrollment, and expanded Medicaid and other government programs in some states, expenditures will rise. What’s more, limitations on current and future supply, particularly with respect to the education and licensing of medical professionals, may result in unmet demand that could easily lead to rising prices.  </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"> In addition, the increase in the production of expensive drugs protected by patents will also cause spending increases unless cost-containment measures—much if not all of which will probably require legislation—are adopted.<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_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> <strong>Baby boomers and the larger insured population: </strong>Demographics constitute a significant contributor to the rapid ascent of healthcare costs and will have a substantial, immediate impact. As increasing numbers of the baby boom population born between 1946 and 1964 reach Medicare age, that program is projected to experience its highest-ever rate of spending growth among healthcare payers—7.6%—between 2019 and 2028.<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_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> Based on the distribution of births between 1946 and 1964, the peak year for new Medicare enrollment likely will be 2022, 65 years after 1957, the year the greatest number of boomers were born.<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_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> As of the 2020 Census, 10,000 baby boomers were aging into the program every day.<span class="ql-inline-citation" data-cite="42"></span> And as years pass, the Medicare program will have an increasing number of older—and thus more expensive—beneficiaries. </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"> With per-person healthcare expenditures for individuals age 65 and older estimated at five times the spending per child and almost three times the amount per working-age person, the impact of the older cohort is obvious. </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"> In 2019 the average Medicare expenditure per enrollee was $13,276, while overall the national average per-person spending was $11,582. Private insurers, who generally pay higher fees than Medicare does but whose enrollees are typically younger and less expensive than the Medicare population, spent $5,927 per person in 2019. Medicaid, which covers individuals of all ages, spent an average of $8,485 per person.<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_74-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_75-0"> During periods of increased enrollment in private insurance and public programs, healthcare costs generally can be expected to increase as more people take advantage of their coverage. Assuming enrollees continue their insurance coverage indefinitely and preventive care reduces the severity and cost of later healthcare needs, individual healthcare costs may decline. </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"> However, longer-term savings may not be realized because of terminated insurance coverage (for example, when job loss ends employer coverage or individuals lose government benefits). In addition, high deductibles and copays may discourage the use of covered services by lower-income enrollees and limit their access to long-term and continuing coverage, thereby preventing comprehensive care.<span class="ql-inline-citation" data-cite="27"></span> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_78-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_79-0"> <span class="mntl-sc-block-subheading__text"> Internal Factors: Prices, Administration, and Anticompetitive Trends </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_80-0"> Factors internal to the healthcare system also affect increasing prices. </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"> <strong>Prices and administrative costs: </strong>Analyses of increasing healthcare spending generally cite prices as the leading cause. In particular, they emphasize trends in pricing for professional and facility services, prescription drugs, and durable medical equipment (DME). </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_83-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> More-detailed studies also acknowledge the significant role of administrative costs, which, like prices, are higher in the U.S. than in other developed countries. These studies often emphasize that the administrative costs for private insurance substantially exceed the costs of Medicare administration. </p> <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"> The comparative complexity of the U.S. health system—with its mix of government programs, private insurance, and uninsured individuals—entails varied and duplicative administrative requirements that significantly add to expenditures. These include expenses incurred by physicians’ practices for billing, obtaining pre-approval for services, and record-keeping required by multiple payers whose enrollment, coverage, patient benefits, authorization, payment, and other standards can vary greatly. </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"> Insurers and plan managers incur their own administrative costs. Employers and other plan sponsors bear consulting, broker, and administrative expenses for their employee health plans. Although government programs generally spend less on administration and pay providers lower fees than private health plans do, the scale of federal and state programs adds significantly to overall national expenditures. </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"> <strong>Anticompetitive trends: </strong>The impact of greater consolidation in the healthcare sector, both vertically and horizontally, has raised concerns about adverse effects on competition and potential increases in consumer costs, as reported in the New York Times.<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_91-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_92-0"> Investment funds increasingly see the healthcare sector as an attractive investment opportunity and are viewed as influencing rising prices, according to the Harvard Business Review.<span class="ql-inline-citation" data-cite="52"></span> Private equity has a growing presence in the health sector, says Institutional Investor.<span class="ql-inline-citation" data-cite="53"></span> Firms are investing in pharma, biotech, technical equipment, facilities from nursing homes to surgery centers, and professional provider groups, including ER, anesthesiology, and other specialist practices serving hospitals.<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_93-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_94-0"> Doctors and hospitals view insurer consolidation as anticompetitive and are challenging companies for lowering fee schedules and forcing provider groups and hospitals out of network, according to reports in the New York Times and Kaiser Health News.<span class="ql-inline-citation" data-cite="55"></span><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_95-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_96-0"> HealthLeaders Media reported on a hearing of the House Judiciary Committee at which public officials criticized mergers of provider organizations, insurance company acquisitions of professional provider groups, pharmacy benefit managers, and healthcare-related analytics and consulting organizations.<span class="ql-inline-citation" data-cite="56"></span><span class="ql-inline-citation" data-cite="43"></span> </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"> In Jan. 2021, as litigation and regulatory actions challenged insurer mergers and business practices, government officials reacted. Congress unanimously passed a new law repealing a long-standing federal antitrust exemption for medical and dental insurers, which was then signed by President Trump.<span class="ql-inline-citation" data-cite="45"></span><span class="ql-inline-citation" data-cite="44"></span> Thus, federal authorities, as well as state regulators, can now investigate antitrust issues in the health insurance industry.  </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_100-0"><span class="heading-toc" id="toc-how-much-does-the-us-spend-on-healthcare"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Does the U.S. Spend on Healthcare?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The U.S. is projected to spend $6.2 trillion on healthcare by 2028. In 2020, per-person spending was $12,530.<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_101-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_102-0"><span class="heading-toc" id="toc-how-do-us-healthcare-costs-compare-with-other-countries"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do U.S. Healthcare Costs Compare With Other Countries?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Healthcare in the U.S. is considerably more expensive than in other comparable developed countries, and yet the outcomes are not as good. Life expectancy in the U.S. for people born in 2020 is roughly 77 years, whereas the likes of Norway and Switzerland boast expectancies over 83 years.<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_103-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_104-0"><span class="heading-toc" id="toc-why-is-us-healthcare-so-expensive"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Is U.S. Healthcare so Expensive?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>While there are a number of factors that make U.S. healthcare so costly, one of the major expenses is administrative costs, which account for between one-quarter to one-third of U.S. healthcare expenses.<span class="ql-inline-citation" data-cite="11"></span> This is in part due to the complexity of the healthcare system, which combines government programs, private insurance, uninsured individuals, and many duplicative regulatory requirements. Another factor is high drug prices, which are subject to the law of supply and demand in a capitalistic system.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_105-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_106-0"><span class="heading-toc" id="toc-what-are-the-prospects-for-changing-the-system-to-reduce-costs"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Prospects for Changing the System to Reduce Costs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The best answer to this is uncertain. It is possible to imagine changes that would bring down administrative and drug costs, but they are opposed by powerful forces intent on maintaining high-profit margins. In addition, the graying of the large baby boomer generation is straining the system and driving costs up. A single-payer system, popular in Europe and elsewhere where healthcare costs are so much lower, doesn’t seem likely in the current social and political environment.</p></div> </div> <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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_109-0"> Both the Biden administration and the Congress that took office in 2021 recognize the need to address widely held <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp">concerns about the cost of healthcare</a> in the U.S. With the COVID-19 pandemic’s exposure of critical weaknesses in the healthcare sector, officials are challenged not only to contain costs but also to develop policies that assure equitable access to quality healthcare.  </p></div>

U.S. healthcare expenditures greatly [exceed those of other developed countries](https://www.investopedia.com/articles/personal-finance/072116/us-healthcare-costs-compared-other-countries.asp). They are projected to increase at a substantial rate but produce no better—and indeed sometimes worse—outcomes, according to research sponsored by the Peter G. Peterson Foundation.   With national healthcare expenditure (NHE) estimated to reach $6.2 trillion by 2028, public policy experts, government officials, healthcare-sector leaders, business executives, and ordinary citizens share mounting concerns about the country’s ability to provide healthcare services that are fiscally responsible and attain acceptable levels of quality, effectiveness, and equity. Proposals to counter the increasing levels of U.S. healthcare expenditures abound. They include policies intended to achieve price transparency; alternatives to fee-for-service compensation, such as price controls based on Medicare fees or a percentage of negotiated in-network rates, as well as value-based and [capitation](https://www.investopedia.com/terms/c/capitation-payments.asp) systems, antitrust enforcement, simplification of administration, and a wholesale restructuring of the sector’s present complex arrangements in favor of [a single-payer, governmental system](https://www.investopedia.com/articles/personal-finance/112713/drawbacks-singlepayer-healthcare.asp) for the entire population. Efforts to reduce healthcare spending—even if they’re aimed at reducing the future rate of increase in expenditures—are bound to provoke the powerful groups comprising the healthcare sector. Deciding whose revenue would be cut and how reductions would be allocated among different healthcare interests will require widespread agreement on the necessity, urgency, and inevitability of these reductions—coupled with exceptional political leadership.    ### Key Takeaways * Currently, U.S. healthcare costs are growing 1.1% faster than the annual GDP is. * By 2028 U.S. healthcare spending will reach $6.2 trillion and account for almost 20% of the GDP. * The complexity of the health sector and the political clout of major groups challenge cost-cutting efforts. ## Pandemic Reveals Systemic Problems The COVID-19 pandemic has altered the patterns and distributions of healthcare services and expenditures, at least for 2020 and 2021. It has spotlighted systemic deficiencies and inequities that existed long before the pandemic, continued to exist throughout it, and will probably exist for long after it’s over. The pandemic and the development of vaccines have confirmed the importance of investment in basic scientific research. It has advanced innovation, particularly in the provision and distribution of services, through [telehealth](https://www.investopedia.com/telehealth-5115239) expansion, retail clinic and urgent care utilization, and outreach to rural and underserved communities through mobile health units. Recognizing the widespread acceptance of telehealth, Walmart has purchased a telehealth provider and plans to expand its service nationwide, while Amazon is expanding its Amazon Care from being available only to employees and their families in Washington state to being available in all 50 states. The pandemic has also revealed substantial weaknesses in crisis preparedness; inadequate and inequitable supply, facility, and professional resources; and insufficient coordination and communication capability.  At the very time that policymakers are compelled to address the rising cost of healthcare, the pandemic is requiring them to face long-latent, systemic inadequacies along with the continuing internal and external causes of increasing healthcare expenditures.  The necessity of federal financial support and technical assistance for providing free vaccines, various pricing directives for testing, and eventual supply and equipment aid to improve access and affordability for addressing COVID-19 were widely recognized. However, general acceptance of these government interventions seems unlikely to carry forward and expand price regulation and equitable access policies broadly beyond the pandemic. Increasing healthcare costs will continue to challenge individuals, the healthcare sector, and the general U.S. economy.   ## Annual U.S. Healthcare Costs Experts look at healthcare costs both in terms of NHE—which includes costs at every level—and federal-government health spending. Here’s how both are rising. ### National Health Costs and the GDP Healthcare payers, providers, and patients consider the mounting cost of U.S. healthcare and its increasing demands on the American economy unsustainable. The [Centers for Medicare & Medicaid Services](https://www.investopedia.com/terms/u/us-centers-medicare-and-medicaid-services-cms.asp) (CMS) annually produces yearly NHE estimates and 10-year national healthcare expenditure projections reflecting total nationwide costs. These comprehensive, national statistics pertain to total U.S. spending and thus include spending by federal, state, and local governments, households, and employers. In 2020, NHE grew 9.7% to $4.1 trillion, an amount representing 19.7% of the [gross domestic product](https://www.investopedia.com/terms/g/gdp.asp) (GDP). Spending per person was $12,530. Current levels of U.S. healthcare spending—both on a per-person basis and as a share of GDP—far exceed those of comparable countries. The country with the second-highest expenditure per person was Norway, with a 2020 per capita cost of approximately $6,748 and total healthcare spending constituting an 11.3% share of its GDP. Germany is just behind Norway, spending approximately 12.5% of its GDP, averaging $6,731 per person. A number of factors contribute to the higher cost of U.S. healthcare. Generally, healthcare prices are higher in the U.S. for professional services, hospitalizations, and medical supplies and drugs. Higher administrative costs in the U.S. account for one-quarter to one-third of all U.S. healthcare spending. ### Health Spending by the Federal Government In addition to reporting NHE, CMS also estimates the subset of expenditures that makes up federal healthcare spending. In 2020 the federal government was responsible for 36.3% of NHE. The rest of NHE was divided among households, which accounted for 26.1%, private business at 16.7%, state and local governments at 14.3%, and other private revenue sources at 6.5%.  Total federal government expenditures include Medicare, Medicaid, the [Children’s Health Insurance Program](https://www.investopedia.com/terms/c/childrens-health-insurance-program-chip.asp) (CHIP), Affordable Care Act (ACA) Marketplace [premium subsidies](https://www.investopedia.com/articles/personal-finance/101413/lowering-your-costs-marketplace-health-insurance-coverage.asp), the Veterans Administration, U.S. Department of Defense healthcare programs, support for healthcare professionals, and hospitals providing uncompensated care, and other federal programs. Medicare represented 21% of total NHE in 2019; it accounted for the largest share of federal healthcare spending, a total of $799.4 billion. CMS projects that Medicare spending will grow 7.6% annually between 2019 and 2028. Medicaid accounted for $613.5 billion, 16% of NHE in 2019. That same year, private health insurance spending amounted to $1,195.1 billion, 31% of NHE, and out-of-pocket expenditures were $406.5 billion, 11% of NHE. From 2018 to 2019, spending for hospitals increased 6.2%, while prescription-drug spending rose 5.7%, and spending for physician and clinical services grew 4.6%. CMS has projected the average annual rate of growth for NHE during the period of 2019 to 2028 to be 5.4%. ## U.S. Health Outcomes Lag Behind Those of Other Countries Despite Americans spending significantly more on healthcare compared with the residents of other developed countries, they do not enjoy better outcomes. In fact, the U.S. lags behind other countries when common health metrics are considered.  Among the wealthier European countries of the current 38 Organisation for Economic Cooperation and Development (OECD) members the life expectancy for individuals born in 2020 is much higher than in the U.S. In Switzerland, it is 83.2 years, while in France it is 82.3 years, and 80.4 years in the United Kingdom. The life expectancy for U.S. residents, at 77.3 years. ### The American health system falls short of other national systems in cost and results, with costs far exceeding those of other wealthy countries. Americans also pay more for healthcare than residents of other major countries do, though residents of comparable countries enjoy better healthcare outcomes and live longer. ## National Health Expense: Ever Higher CMS projects that U.S. healthcare spending will grow at a rate 1.1% faster than that of the annual GDP and is expected to increase from 17.7% of the GDP in 2018 to 19.7% by 2028. Two reasons for this are that health-sector wages are anticipated to increase faster than the GDP will, and the prices for medical goods and services are projected to grow by an average of 2.4% annually by 2028. With the aging baby boom generation greatly increasing Medicare enrollment, Medicare spending is expected to grow 7.6% annually over the decade. Spending for all categories of healthcare expenditures is expected to grow faster between 2019 and 2028 than in earlier years.   Even with overall growth, some trends with cost-reduction potential were underway before the COVID-19 pandemic. Increasingly, Americans were seeking healthcare services in places other than traditional professional offices, emergency rooms, and hospitals. As health systems diversified their service locations beyond hospital facilities—and insurers directed plan members to lower-cost service—the number and utilization of ambulatory surgery centers, urgent care facilities, and retail clinics grew. The use of telehealth services, both video and telephonic, which was significant even before the pandemic, became many times greater after social distancing became an imperative. Given telehealth’s convenience for providers and patients—and especially its advantages for remote and underserved communities—its usage likely will expand. Although professional fee schedules for telehealth so far seem unlikely to vary from in-office fees, telehealth may reduce medical-facility costs for providers. Walmart’s and Amazon’s investments to add telehealth operations to their consumer healthcare offerings confirm expectations for this model of care. ## Causes of Higher Spending Studies of healthcare spending tend to focus on factors internal to the healthcare sector that contribute to higher costs—in particular, prices and administrative costs. Even though changes in these areas would be opposed by powerful interests, significant cost savings are imaginable, even if not easy. Less amenable to change are external conditions that increase costs but cannot be avoided, including basic economic principles and [demographics](https://www.investopedia.com/terms/d/demographics.asp).          ### External Cost Factors: Basic Economics and Demographics CMS estimates, as well as other projections of future increases in U.S. health spending, assume that the current structure of the healthcare sector generally will continue. These projections also take into account external developments that impact costs. Although academic, political, and industry sources are generating many proposals for cost savings—including significant structural changes—the prospect for substantial change is uncertain. Certain externalities, particularly demographics, will challenge [cost-containment efforts](https://www.investopedia.com/u-s-healthcare-strategies-for-containing-costs-5186588). **Supply and demand:** Healthcare spending is subject to the basic economic principles of supply and demand. As the population grows and more individuals enjoy better access to care because of developments such as the Affordable Care Act, increased Medicare enrollment, and expanded Medicaid and other government programs in some states, expenditures will rise. What’s more, limitations on current and future supply, particularly with respect to the education and licensing of medical professionals, may result in unmet demand that could easily lead to rising prices.  In addition, the increase in the production of expensive drugs protected by patents will also cause spending increases unless cost-containment measures—much if not all of which will probably require legislation—are adopted. **Baby boomers and the larger insured population:** Demographics constitute a significant contributor to the rapid ascent of healthcare costs and will have a substantial, immediate impact. As increasing numbers of the baby boom population born between 1946 and 1964 reach Medicare age, that program is projected to experience its highest-ever rate of spending growth among healthcare payers—7.6%—between 2019 and 2028. Based on the distribution of births between 1946 and 1964, the peak year for new Medicare enrollment likely will be 2022, 65 years after 1957, the year the greatest number of boomers were born. As of the 2020 Census, 10,000 baby boomers were aging into the program every day. And as years pass, the Medicare program will have an increasing number of older—and thus more expensive—beneficiaries. With per-person healthcare expenditures for individuals age 65 and older estimated at five times the spending per child and almost three times the amount per working-age person, the impact of the older cohort is obvious. In 2019 the average Medicare expenditure per enrollee was $13,276, while overall the national average per-person spending was $11,582. Private insurers, who generally pay higher fees than Medicare does but whose enrollees are typically younger and less expensive than the Medicare population, spent $5,927 per person in 2019. Medicaid, which covers individuals of all ages, spent an average of $8,485 per person. During periods of increased enrollment in private insurance and public programs, healthcare costs generally can be expected to increase as more people take advantage of their coverage. Assuming enrollees continue their insurance coverage indefinitely and preventive care reduces the severity and cost of later healthcare needs, individual healthcare costs may decline. However, longer-term savings may not be realized because of terminated insurance coverage (for example, when job loss ends employer coverage or individuals lose government benefits). In addition, high deductibles and copays may discourage the use of covered services by lower-income enrollees and limit their access to long-term and continuing coverage, thereby preventing comprehensive care. ### Internal Factors: Prices, Administration, and Anticompetitive Trends Factors internal to the healthcare system also affect increasing prices. **Prices and administrative costs:** Analyses of increasing healthcare spending generally cite prices as the leading cause. In particular, they emphasize trends in pricing for professional and facility services, prescription drugs, and durable medical equipment (DME). More-detailed studies also acknowledge the significant role of administrative costs, which, like prices, are higher in the U.S. than in other developed countries. These studies often emphasize that the administrative costs for private insurance substantially exceed the costs of Medicare administration. The comparative complexity of the U.S. health system—with its mix of government programs, private insurance, and uninsured individuals—entails varied and duplicative administrative requirements that significantly add to expenditures. These include expenses incurred by physicians’ practices for billing, obtaining pre-approval for services, and record-keeping required by multiple payers whose enrollment, coverage, patient benefits, authorization, payment, and other standards can vary greatly. Insurers and plan managers incur their own administrative costs. Employers and other plan sponsors bear consulting, broker, and administrative expenses for their employee health plans. Although government programs generally spend less on administration and pay providers lower fees than private health plans do, the scale of federal and state programs adds significantly to overall national expenditures. **Anticompetitive trends:** The impact of greater consolidation in the healthcare sector, both vertically and horizontally, has raised concerns about adverse effects on competition and potential increases in consumer costs, as reported in the New York Times. Investment funds increasingly see the healthcare sector as an attractive investment opportunity and are viewed as influencing rising prices, according to the Harvard Business Review. Private equity has a growing presence in the health sector, says Institutional Investor. Firms are investing in pharma, biotech, technical equipment, facilities from nursing homes to surgery centers, and professional provider groups, including ER, anesthesiology, and other specialist practices serving hospitals. Doctors and hospitals view insurer consolidation as anticompetitive and are challenging companies for lowering fee schedules and forcing provider groups and hospitals out of network, according to reports in the New York Times and Kaiser Health News. HealthLeaders Media reported on a hearing of the House Judiciary Committee at which public officials criticized mergers of provider organizations, insurance company acquisitions of professional provider groups, pharmacy benefit managers, and healthcare-related analytics and consulting organizations. In Jan. 2021, as litigation and regulatory actions challenged insurer mergers and business practices, government officials reacted. Congress unanimously passed a new law repealing a long-standing federal antitrust exemption for medical and dental insurers, which was then signed by President Trump. Thus, federal authorities, as well as state regulators, can now investigate antitrust issues in the health insurance industry.  ## How Much Does the U.S. Spend on Healthcare? The U.S. is projected to spend $6.2 trillion on healthcare by 2028. In 2020, per-person spending was $12,530. ## How Do U.S. Healthcare Costs Compare With Other Countries? Healthcare in the U.S. is considerably more expensive than in other comparable developed countries, and yet the outcomes are not as good. Life expectancy in the U.S. for people born in 2020 is roughly 77 years, whereas the likes of Norway and Switzerland boast expectancies over 83 years. ## Why Is U.S. Healthcare so Expensive? While there are a number of factors that make U.S. healthcare so costly, one of the major expenses is administrative costs, which account for between one-quarter to one-third of U.S. healthcare expenses. This is in part due to the complexity of the healthcare system, which combines government programs, private insurance, uninsured individuals, and many duplicative regulatory requirements. Another factor is high drug prices, which are subject to the law of supply and demand in a capitalistic system. ## What Are the Prospects for Changing the System to Reduce Costs? The best answer to this is uncertain. It is possible to imagine changes that would bring down administrative and drug costs, but they are opposed by powerful forces intent on maintaining high-profit margins. In addition, the graying of the large baby boomer generation is straining the system and driving costs up. A single-payer system, popular in Europe and elsewhere where healthcare costs are so much lower, doesn’t seem likely in the current social and political environment. ## The Bottom Line Both the Biden administration and the Congress that took office in 2021 recognize the need to address widely held [concerns about the cost of healthcare](https://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp) in the U.S. With the COVID-19 pandemic’s exposure of critical weaknesses in the healthcare sector, officials are challenged not only to contain costs but also to develop policies that assure equitable access to quality healthcare. 

U.S. healthcare expenditures greatly exceed those of other developed countries. They are projected to increase at a substantial rate but produce no better—and indeed sometimes worse—outcomes, according to research sponsored by the Peter G. Peterson Foundation.   With national healthcare expenditure (NHE) estimated to reach $6.2 trillion by 2028, public policy experts, government officials, healthcare-sector leaders, business executives, and ordinary citizens share mounting concerns about the country’s ability to provide healthcare services that are fiscally responsible and attain acceptable levels of quality, effectiveness, and equity. Proposals to counter the increasing levels of U.S. healthcare expenditures abound. They include policies intended to achieve price transparency; alternatives to fee-for-service compensation, such as price controls based on Medicare fees or a percentage of negotiated in-network rates, as well as value-based and capitation systems, antitrust enforcement, simplification of administration, and a wholesale restructuring of the sector’s present complex arrangements in favor of a single-payer, governmental system for the entire population. Efforts to reduce healthcare spending—even if they’re aimed at reducing the future rate of increase in expenditures—are bound to provoke the powerful groups comprising the healthcare sector. Deciding whose revenue would be cut and how reductions would be allocated among different healthcare interests will require widespread agreement on the necessity, urgency, and inevitability of these reductions—coupled with exceptional political leadership.    Key Takeaways Currently, U.S. healthcare costs are growing 1.1% faster than the annual GDP is.By 2028 U.S. healthcare spending will reach $6.2 trillion and account for almost 20% of the GDP.The complexity of the health sector and the political clout of major groups challenge cost-cutting efforts. Pandemic Reveals Systemic Problems The COVID-19 pandemic has altered the patterns and distributions of healthcare services and expenditures, at least for 2020 and 2021. It has spotlighted systemic deficiencies and inequities that existed long before the pandemic, continued to exist throughout it, and will probably exist for long after it’s over. The pandemic and the development of vaccines have confirmed the importance of investment in basic scientific research. It has advanced innovation, particularly in the provision and distribution of services, through telehealth expansion, retail clinic and urgent care utilization, and outreach to rural and underserved communities through mobile health units. Recognizing the widespread acceptance of telehealth, Walmart has purchased a telehealth provider and plans to expand its service nationwide, while Amazon is expanding its Amazon Care from being available only to employees and their families in Washington state to being available in all 50 states. The pandemic has also revealed substantial weaknesses in crisis preparedness; inadequate and inequitable supply, facility, and professional resources; and insufficient coordination and communication capability.  At the very time that policymakers are compelled to address the rising cost of healthcare, the pandemic is requiring them to face long-latent, systemic inadequacies along with the continuing internal and external causes of increasing healthcare expenditures.  The necessity of federal financial support and technical assistance for providing free vaccines, various pricing directives for testing, and eventual supply and equipment aid to improve access and affordability for addressing COVID-19 were widely recognized. However, general acceptance of these government interventions seems unlikely to carry forward and expand price regulation and equitable access policies broadly beyond the pandemic. Increasing healthcare costs will continue to challenge individuals, the healthcare sector, and the general U.S. economy.   Annual U.S. Healthcare Costs Experts look at healthcare costs both in terms of NHE—which includes costs at every level—and federal-government health spending. Here’s how both are rising. National Health Costs and the GDP Healthcare payers, providers, and patients consider the mounting cost of U.S. healthcare and its increasing demands on the American economy unsustainable. The Centers for Medicare & Medicaid Services (CMS) annually produces yearly NHE estimates and 10-year national healthcare expenditure projections reflecting total nationwide costs. These comprehensive, national statistics pertain to total U.S. spending and thus include spending by federal, state, and local governments, households, and employers. In 2020, NHE grew 9.7% to $4.1 trillion, an amount representing 19.7% of the gross domestic product (GDP). Spending per person was $12,530. Current levels of U.S. healthcare spending—both on a per-person basis and as a share of GDP—far exceed those of comparable countries. The country with the second-highest expenditure per person was Norway, with a 2020 per capita cost of approximately $6,748 and total healthcare spending constituting an 11.3% share of its GDP. Germany is just behind Norway, spending approximately 12.5% of its GDP, averaging $6,731 per person. A number of factors contribute to the higher cost of U.S. healthcare. Generally, healthcare prices are higher in the U.S. for professional services, hospitalizations, and medical supplies and drugs. Higher administrative costs in the U.S. account for one-quarter to one-third of all U.S. healthcare spending. Health Spending by the Federal Government In addition to reporting NHE, CMS also estimates the subset of expenditures that makes up federal healthcare spending. In 2020 the federal government was responsible for 36.3% of NHE. The rest of NHE was divided among households, which accounted for 26.1%, private business at 16.7%, state and local governments at 14.3%, and other private revenue sources at 6.5%.  Total federal government expenditures include Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), Affordable Care Act (ACA) Marketplace premium subsidies, the Veterans Administration, U.S. Department of Defense healthcare programs, support for healthcare professionals, and hospitals providing uncompensated care, and other federal programs. Medicare represented 21% of total NHE in 2019; it accounted for the largest share of federal healthcare spending, a total of $799.4 billion. CMS projects that Medicare spending will grow 7.6% annually between 2019 and 2028. Medicaid accounted for $613.5 billion, 16% of NHE in 2019. That same year, private health insurance spending amounted to $1,195.1 billion, 31% of NHE, and out-of-pocket expenditures were $406.5 billion, 11% of NHE. From 2018 to 2019, spending for hospitals increased 6.2%, while prescription-drug spending rose 5.7%, and spending for physician and clinical services grew 4.6%. CMS has projected the average annual rate of growth for NHE during the period of 2019 to 2028 to be 5.4%. U.S. Health Outcomes Lag Behind Those of Other Countries Despite Americans spending significantly more on healthcare compared with the residents of other developed countries, they do not enjoy better outcomes. In fact, the U.S. lags behind other countries when common health metrics are considered.  Among the wealthier European countries of the current 38 Organisation for Economic Cooperation and Development (OECD) members the life expectancy for individuals born in 2020 is much higher than in the U.S. In Switzerland, it is 83.2 years, while in France it is 82.3 years, and 80.4 years in the United Kingdom. The life expectancy for U.S. residents, at 77.3 years. The American health system falls short of other national systems in cost and results, with costs far exceeding those of other wealthy countries. Americans also pay more for healthcare than residents of other major countries do, though residents of comparable countries enjoy better healthcare outcomes and live longer. National Health Expense: Ever Higher CMS projects that U.S. healthcare spending will grow at a rate 1.1% faster than that of the annual GDP and is expected to increase from 17.7% of the GDP in 2018 to 19.7% by 2028. Two reasons for this are that health-sector wages are anticipated to increase faster than the GDP will, and the prices for medical goods and services are projected to grow by an average of 2.4% annually by 2028. With the aging baby boom generation greatly increasing Medicare enrollment, Medicare spending is expected to grow 7.6% annually over the decade. Spending for all categories of healthcare expenditures is expected to grow faster between 2019 and 2028 than in earlier years.   Even with overall growth, some trends with cost-reduction potential were underway before the COVID-19 pandemic. Increasingly, Americans were seeking healthcare services in places other than traditional professional offices, emergency rooms, and hospitals. As health systems diversified their service locations beyond hospital facilities—and insurers directed plan members to lower-cost service—the number and utilization of ambulatory surgery centers, urgent care facilities, and retail clinics grew. The use of telehealth services, both video and telephonic, which was significant even before the pandemic, became many times greater after social distancing became an imperative. Given telehealth’s convenience for providers and patients—and especially its advantages for remote and underserved communities—its usage likely will expand. Although professional fee schedules for telehealth so far seem unlikely to vary from in-office fees, telehealth may reduce medical-facility costs for providers. Walmart’s and Amazon’s investments to add telehealth operations to their consumer healthcare offerings confirm expectations for this model of care. Causes of Higher Spending Studies of healthcare spending tend to focus on factors internal to the healthcare sector that contribute to higher costs—in particular, prices and administrative costs. Even though changes in these areas would be opposed by powerful interests, significant cost savings are imaginable, even if not easy. Less amenable to change are external conditions that increase costs but cannot be avoided, including basic economic principles and demographics.          External Cost Factors: Basic Economics and Demographics CMS estimates, as well as other projections of future increases in U.S. health spending, assume that the current structure of the healthcare sector generally will continue. These projections also take into account external developments that impact costs. Although academic, political, and industry sources are generating many proposals for cost savings—including significant structural changes—the prospect for substantial change is uncertain. Certain externalities, particularly demographics, will challenge cost-containment efforts. Supply and demand: Healthcare spending is subject to the basic economic principles of supply and demand. As the population grows and more individuals enjoy better access to care because of developments such as the Affordable Care Act, increased Medicare enrollment, and expanded Medicaid and other government programs in some states, expenditures will rise. What’s more, limitations on current and future supply, particularly with respect to the education and licensing of medical professionals, may result in unmet demand that could easily lead to rising prices.  In addition, the increase in the production of expensive drugs protected by patents will also cause spending increases unless cost-containment measures—much if not all of which will probably require legislation—are adopted. Baby boomers and the larger insured population: Demographics constitute a significant contributor to the rapid ascent of healthcare costs and will have a substantial, immediate impact. As increasing numbers of the baby boom population born between 1946 and 1964 reach Medicare age, that program is projected to experience its highest-ever rate of spending growth among healthcare payers—7.6%—between 2019 and 2028. Based on the distribution of births between 1946 and 1964, the peak year for new Medicare enrollment likely will be 2022, 65 years after 1957, the year the greatest number of boomers were born. As of the 2020 Census, 10,000 baby boomers were aging into the program every day. And as years pass, the Medicare program will have an increasing number of older—and thus more expensive—beneficiaries. With per-person healthcare expenditures for individuals age 65 and older estimated at five times the spending per child and almost three times the amount per working-age person, the impact of the older cohort is obvious. In 2019 the average Medicare expenditure per enrollee was $13,276, while overall the national average per-person spending was $11,582. Private insurers, who generally pay higher fees than Medicare does but whose enrollees are typically younger and less expensive than the Medicare population, spent $5,927 per person in 2019. Medicaid, which covers individuals of all ages, spent an average of $8,485 per person. During periods of increased enrollment in private insurance and public programs, healthcare costs generally can be expected to increase as more people take advantage of their coverage. Assuming enrollees continue their insurance coverage indefinitely and preventive care reduces the severity and cost of later healthcare needs, individual healthcare costs may decline. However, longer-term savings may not be realized because of terminated insurance coverage (for example, when job loss ends employer coverage or individuals lose government benefits). In addition, high deductibles and copays may discourage the use of covered services by lower-income enrollees and limit their access to long-term and continuing coverage, thereby preventing comprehensive care. Internal Factors: Prices, Administration, and Anticompetitive Trends Factors internal to the healthcare system also affect increasing prices. Prices and administrative costs: Analyses of increasing healthcare spending generally cite prices as the leading cause. In particular, they emphasize trends in pricing for professional and facility services, prescription drugs, and durable medical equipment (DME). More-detailed studies also acknowledge the significant role of administrative costs, which, like prices, are higher in the U.S. than in other developed countries. These studies often emphasize that the administrative costs for private insurance substantially exceed the costs of Medicare administration. The comparative complexity of the U.S. health system—with its mix of government programs, private insurance, and uninsured individuals—entails varied and duplicative administrative requirements that significantly add to expenditures. These include expenses incurred by physicians’ practices for billing, obtaining pre-approval for services, and record-keeping required by multiple payers whose enrollment, coverage, patient benefits, authorization, payment, and other standards can vary greatly. Insurers and plan managers incur their own administrative costs. Employers and other plan sponsors bear consulting, broker, and administrative expenses for their employee health plans. Although government programs generally spend less on administration and pay providers lower fees than private health plans do, the scale of federal and state programs adds significantly to overall national expenditures. Anticompetitive trends: The impact of greater consolidation in the healthcare sector, both vertically and horizontally, has raised concerns about adverse effects on competition and potential increases in consumer costs, as reported in the New York Times. Investment funds increasingly see the healthcare sector as an attractive investment opportunity and are viewed as influencing rising prices, according to the Harvard Business Review. Private equity has a growing presence in the health sector, says Institutional Investor. Firms are investing in pharma, biotech, technical equipment, facilities from nursing homes to surgery centers, and professional provider groups, including ER, anesthesiology, and other specialist practices serving hospitals. Doctors and hospitals view insurer consolidation as anticompetitive and are challenging companies for lowering fee schedules and forcing provider groups and hospitals out of network, according to reports in the New York Times and Kaiser Health News. HealthLeaders Media reported on a hearing of the House Judiciary Committee at which public officials criticized mergers of provider organizations, insurance company acquisitions of professional provider groups, pharmacy benefit managers, and healthcare-related analytics and consulting organizations. In Jan. 2021, as litigation and regulatory actions challenged insurer mergers and business practices, government officials reacted. Congress unanimously passed a new law repealing a long-standing federal antitrust exemption for medical and dental insurers, which was then signed by President Trump. Thus, federal authorities, as well as state regulators, can now investigate antitrust issues in the health insurance industry.  How Much Does the U.S. Spend on Healthcare? The U.S. is projected to spend $6.2 trillion on healthcare by 2028. In 2020, per-person spending was $12,530. How Do U.S. Healthcare Costs Compare With Other Countries? Healthcare in the U.S. is considerably more expensive than in other comparable developed countries, and yet the outcomes are not as good. Life expectancy in the U.S. for people born in 2020 is roughly 77 years, whereas the likes of Norway and Switzerland boast expectancies over 83 years. Why Is U.S. Healthcare so Expensive? While there are a number of factors that make U.S. healthcare so costly, one of the major expenses is administrative costs, which account for between one-quarter to one-third of U.S. healthcare expenses. This is in part due to the complexity of the healthcare system, which combines government programs, private insurance, uninsured individuals, and many duplicative regulatory requirements. Another factor is high drug prices, which are subject to the law of supply and demand in a capitalistic system. What Are the Prospects for Changing the System to Reduce Costs? The best answer to this is uncertain. It is possible to imagine changes that would bring down administrative and drug costs, but they are opposed by powerful forces intent on maintaining high-profit margins. In addition, the graying of the large baby boomer generation is straining the system and driving costs up. A single-payer system, popular in Europe and elsewhere where healthcare costs are so much lower, doesn’t seem likely in the current social and political environment. The Bottom Line Both the Biden administration and the Congress that took office in 2021 recognize the need to address widely held concerns about the cost of healthcare in the U.S. With the COVID-19 pandemic’s exposure of critical weaknesses in the healthcare sector, officials are challenged not only to contain costs but also to develop policies that assure equitable access to quality healthcare. 

https://www.investopedia.com/us-economy-news-today-may-1-8641676

US Economy News Today: Powell Dismisses the Need for Additional Rate Hikes

<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, the Federal Reserve concluded its two-day Open Markets Committee meeting by leaving interest rates untouched, as expected, and saying it will likely stay that way for longer than previously anticipated. </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-2024-05-01t191855036z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_1-0"><p><strong>Rate Hike 'Unlikely' in This Cycle, Powell Says</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_1-0">May 01, 2024 03:18 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-1-8641676#toc-2024-05-01t191855036z" id="mntl-blogpost__copylink_1-0"> </button> <div class="comp mntl-sc-block finance-sc-block-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_3-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://www.youtube.com/embed/o0unztmcLvA?si=jPWI5CKEsX7p9E-W" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="May 1, 2024 live stream"></iframe></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> <em>You can rewatch the full press conference above. </em><br/> </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> While Federal Reserve Chair Jerome Powell downplayed the possibility of rate cuts anytime soon, rate hikes don’t seem to be in the cards either.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> “I think it's unlikely that the next policy rate move will be a hike,” Powell told reporters at Wednesday’s post-FOMC-statement press conference.<br/><br/>Powell’s remark contrasts with Fed Governor Michelle Bowman, a voting member of the Fed’s policy committee, who earlier this month <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">raised the possibility of hiking the fed funds rate again</a>, in response to inflation that stubbornly resisted falling in the first quarter.<br/><br/>The Fed hasn’t touched the rate since last July, when it capped off a rate hike campaign that began in March 2022 by raising it for an 11th time to its highest since 2001.<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-2024-05-01t191047540z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_2-0"><p><strong>U.S. Economy in Stagflation? ‘I Don’t See The Stag Or The Flation,’ Powell says</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_2-0">May 01, 2024 03:10 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-1-8641676#toc-2024-05-01t191047540z" 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"> Federal Reserve chair Jerome Powell waved away concerns that the U.S. economy is in a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/is-the-us-economy-headed-for-a-bout-of-stagflation-8639192">state of stagnation</a> while having too high inflation, a doomsday economic scenario known by the portmanteau “<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stagflation.asp">stagflation</a>.” </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> When asked about such a possibility by a reporter, Powell pointed out that inflation is far lower than in the infamous episode of stagflation in the 1970s, while unemployment is near historic lows. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> “I don’t see the stag or the flation, actually” he said. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Fears of stagflation were stoked last week when the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/gdp-growth-slowed-to-2-2-in-q1-as-high-interest-rates-drag-economy-8638775">first quarter gross domestic product report</a> showed economic growth weakening and inflation higher than economists predicted. </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-2024-05-01t190411358z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_3-0"><p><strong>Economists Surprised By Fed's Lack of Hawkish Language in Statement</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_3-0">May 01, 2024 03:04 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-1-8641676#toc-2024-05-01t190411358z" 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_11-0"> Economists thought the Fed could have been more <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hawk.asp">hawkish</a> in tone in their prepared statement following their meeting. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Below we have compiled economists' reactions to today's announcement and Powell's presser. This post will be updated as new analysis comes in. </p> <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-pullquote" 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_1-0">Diane Swonk, chief economist at KPMG US on Bloomberg</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><p>"Well, one of the things that I'm surprised at—that they could have gotten more hawkish on, and I think the nod to inflation taking out more recently was the compromise—is that they left that they're waiting to decide when to reduce rates [in the statement]."</p></div></div></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-pullquote" 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">Ryan Sweet, chief U.S. economist at Oxford Economics</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>"The changes to the statement were not as hawkish as they could have been. The Fed not taking the opportunity to strike a hawkish tone in the statement suggests that rate cuts this year are still on the table and that rate hikes are not unless inflation takes an unexpected turn for the worse."</p></div></div></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_3-0">Ernie Tedeschi, former chief economist at the White House Council of Economic Advisors</h3></div></div> <div class="comp mntl-sc-block mntl-sc-block-embed" id="mntl-sc-block_19-0"><iframe allowfullscreen="false" class="mntl-sc-block-embed--iframe lazyload" data-expand="300" data-src="/embed?url=https%3A%2F%2Fx.com%2Fernietedeschi%2Fstatus%2F1785732431779082382&amp;id=mntl-sc-block_19-0-iframe&amp;options=e30%3D&amp;docId=8641676" frameborder="0" id="mntl-sc-block_19-0-iframe" sandbox="allow-forms allow-popups allow-popups-to-escape-sandbox allow-same-origin allow-scripts allow-top-navigation-by-user-activation" title="Ernie Tedeschi, former chief economist at the White House Council of Economic Advisors Tweet"></iframe></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_4-0">Michael Gregory, deputy chief economist at BMO Analytics</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>"Added in the opening paragraph was the phrase: 'In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.' Assuming it’s going to take at least three months of good inflation performance to potentially turn this phrase around, this means the Fed has moved further away from cutting rates any time soon. It’s also a subtle walking back of the scenario portrayed in March’s Summary of Economic Projections in which the median fed funds call was for three rate cuts this year."</p></div></div></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_22-0"><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_23-0"><h3 class="comp mntl-sc-block-callout-heading mntl-text-block" id="mntl-sc-block-callout-heading_5-0">Quincy Krosby, chief global strategist for LPL Financial</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>"This was—at the margin—a more dovish FOMC statement and the reaction in markets, both equity and Treasury yields reflect the Fed's message that they need more data before an initial rate cut. The statement wasn't as hawkish as market participants anticipated as there wasn't a hint of a potential rate hike, just a suggestion of remaining higher for perhaps longer than an eager market is comfortable with."</p></div></div></div></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-2024-05-01t185349358z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_4-0"><p><strong>Powell Dials Back Talk Of Rate Cuts</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_4-0">May 01, 2024 02:53 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-1-8641676#toc-2024-05-01t185349358z" 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_24-0"> Talk of the Federal Reserve cutting its key interest rate this year was conspicuously absent from Federal Reserve Chair Jerome Powell’s prepared remarks in a press conference following the Fed’s official announcement on its interest rate decision. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Earlier this year, Powell had said the fed funds rate was likely at its peak, and the Fed was weighing when to cut rates. But three months of worse-than-expected inflation data at the start of the year has shifted his stance to one of keeping rates higher for longer until inflation is quelled. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> “My colleagues and I today said that we didn’t see progress in the first quarter,” he told reporters who asked him about the omission. “And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” </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-2024-05-01t184533862z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_5-0"><p><strong>Powell Says Committee Is Still Searching For Confidence That Inflation Is Falling</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_5-0">May 01, 2024 02:45 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-1-8641676#toc-2024-05-01t184533862z" id="mntl-blogpost__copylink_5-0"> </button> <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_27-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/HNR-hC4Qco0B8aEvDKnjBNvMRmQ=/1024x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/-TRJ9OHZd7DLcnMNsNqs1ZKqDxQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg" data-srcset="https://www.investopedia.com/thmb/XM6SbWaGY0X95twh98dBbc3qvw4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg 750w" data-tracking-container="true" height="683" id="mntl-sc-block-image_1-0" width="1024"/> <noscript> <img alt="Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC." class="img--noscript universal-image__image" height="683" sizes="750px" src="https://www.investopedia.com/thmb/-TRJ9OHZd7DLcnMNsNqs1ZKqDxQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg" srcset="https://www.investopedia.com/thmb/XM6SbWaGY0X95twh98dBbc3qvw4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg 750w" width="1024"/> </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">Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC.</span> <span class="figure-article-caption-owner"><p>Chip Somodevilla/Getty Images</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The setbacks in the central bank's fight against inflation so far this year are likely to keep the fed funds rate higher for longer than previously thought, Federal Reserve Chair Jerome Powell said at the beginning of his press conference.<br><br>"We've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%," He said. "So far this year, the data have not given us that greater confidence. ...It is likely that gaining such greater confidence will take longer than previously expected." </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 class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_6-0"><span class="heading-toc" id="toc-2024-05-01t183903304z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_6-0"><p><strong>Markets Stutter After Fed Outlines Plans to Slow Decline in Security Holdings</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_6-0">May 01, 2024 02:39 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-1-8641676#toc-2024-05-01t183903304z" id="mntl-blogpost__copylink_6-0"> </button> <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_29-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:40.2%;"> <img alt="A chart shows the movements of the S&amp;P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/T3UIsMw2LmApdSfzO62L3O1c9uU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/T3UIsMw2LmApdSfzO62L3O1c9uU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png" data-srcset="https://www.investopedia.com/thmb/-RewL50djvBe8a3lc5rE9wGOSOk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png 750w" data-tracking-container="true" height="1034" id="mntl-sc-block-image_2-0" width="2566"/> <noscript> <img alt="A chart shows the movements of the S&amp;P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference." class="img--noscript universal-image__image" height="1034" sizes="750px" src="https://www.investopedia.com/thmb/T3UIsMw2LmApdSfzO62L3O1c9uU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png" srcset="https://www.investopedia.com/thmb/-RewL50djvBe8a3lc5rE9wGOSOk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png 750w" width="2566"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-text">A chart shows the movements of the S&amp;P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference.</span> <span class="figure-article-caption-owner"><p>Investopedia via TradingView</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> U.S. stocks briefly spiked and then fell, resulting in a mixed outcome Wednesday after the Federal Reserve's announcement. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/djia.asp">Dow Jones Industrial Average</a> traded 0.4% higher Wednesday afternoon, while the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp">Nasdaq Composite</a> slipped 0.1% and the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">S&amp;P 500</a> dropped 0.2%. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Investors seemed particularly interested in 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</a>'s plans to slow the pace of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/insights/how-will-fed-reduce-balance-sheet/">balance sheet run-off</a>, one aspect of easing monetary policy, in June. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> The central bank said it was slowing down the pace at which it was selling off securities from its balance sheet to $25 billion per month from $60 billion per month. This process, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-federal-reserve-could-ease-this-anti-inflation-policy-before-cutting-rates-8619154">known as "quantitative tightening</a>," removes money from financial markets. This is a reversal of the "quantitative easing" campaign it engaged in during the pandemic, when it did the opposite, buying assets such as mortgage-backed securities in order to stimulate markets, and the economy, with more money. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> Market participants will likely pay particular attention to Chair Jerome Powell's press conference to glean more insight into the path ahead for officials.<br> </br></p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="6" id="mntl-sc-block-adslot_6-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_7-0"><span class="heading-toc" id="toc-2024-05-01t182952965z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_7-0"><p><strong>Fed Adds Language About Inflation's Path So Far This Year To Statement</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_7-0">May 01, 2024 02:29 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-1-8641676#toc-2024-05-01t182952965z" id="mntl-blogpost__copylink_7-0"> </button> <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_35-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:48.5%;"> <img alt="An image shows the previous statement (left) and current statement (right) with differences highlighted." class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/gMfyH7qYsgGKChTTFEBskitJFEo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/gMfyH7qYsgGKChTTFEBskitJFEo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png" data-srcset="https://www.investopedia.com/thmb/0vV_lnECiQA_N2SmDw58cF-wyMo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png 750w" data-tracking-container="true" height="1096" id="mntl-sc-block-image_3-0" width="2256"/> <noscript> <img alt="An image shows the previous statement (left) and current statement (right) with differences highlighted." class="img--noscript universal-image__image" height="1096" sizes="750px" src="https://www.investopedia.com/thmb/gMfyH7qYsgGKChTTFEBskitJFEo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png" srcset="https://www.investopedia.com/thmb/0vV_lnECiQA_N2SmDw58cF-wyMo=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png 750w" width="2256"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_3-0"> <span class="figure-article-caption-text">An image shows the previous statement (left) and current statement (right) with differences highlighted.</span> <span class="figure-article-caption-owner"><p>Investopedia via <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.diffchecker.com/" rel="nofollow">Diffchecker.com</a></p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> In their official statement, the Federal Open Markets Committee officials acknowledged progress against inflation has stalled, necessitating holding interest rates high to discourage borrowing and spending and cool down the economy.<br><br>“In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.” the Federal Open Market Committee said in a statement, adding language that was absent from the statement the group made when it previously met in March. </br></br></p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Fed officials spend a good portion of their meetings <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/what-happens-inside-the-fed-meetings-where-decisions-on-us-interest-rates-are-made-8549999">crafting the statement</a> to strike the exact right tone they want to convey to markets, former members of the committee have said. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> This month's statement also de-emphasized inflation's movements over the year and prioritized the long-term progress that has been made. </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="7" id="mntl-sc-block-adslot_7-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_8-0"><span class="heading-toc" id="toc-2024-05-01t180252268z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_8-0"><p><strong>Federal Reserve Leaves Interest Rates Higher-For-Longer As Predicted</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_8-0">May 01, 2024 02:02 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-1-8641676#toc-2024-05-01t180252268z" id="mntl-blogpost__copylink_8-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> It wasn't too long ago that many forecasters thought today's meeting would be the last time interest rates would be held at their more than two-decades high. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> Today, the Federal Reserve held their interest rates at the current level of 5.25% to 5.50%, however, it likely will stay there for much longer.<span class="ql-inline-citation" data-cite="4"></span> Fed officials are content to keep the interest rate higher for longer on the back of surprisingly strong inflation data that has remained stubborn so far this year, as forecasters expected headed into the meeting. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," officials said in their statement. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> Before the decision was released, traders were pricing in a 6.4% chance the Fed would lower its influential fed funds rate in June and 20% in July and 44% for August, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.<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_43-0"> Immediately after the decision, those chances were 6.4%, 21.8% and 46.9% respectively. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Read more about the decision <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">here</a>. </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="8" id="mntl-sc-block-adslot_8-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_9-0"><span class="heading-toc" id="toc-2024-05-01t154820627z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_9-0"><p><strong>Hiring, Firing, And Quitting All Fell In March As Labor Market Shows Signs of Gridlock</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_9-0">May 01, 2024 11:48 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-1-8641676#toc-2024-05-01t154820627z" id="mntl-blogpost__copylink_9-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_45-0"> The labor market may be hot by historical standards, but it’s getting colder for job seekers, who saw the pickings in “help wanted” ads get slimmer, while fewer people were hired, fired, or switched jobs.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> There were 8.5 million job openings that month, down from 8.8 million in February, and the fewest since February 2021, the Bureau of Labor Statistics said Wednesday. That was less than the 8.7 million forecasters had expected according to a survey of economists by Dow Jones Newswires and the <em>Wall Street Journal</em>. It meant there were 1.3 job openings per unemployed worker, slightly above the ratio of 1.2 that was typical just ahead of the pandemic.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Overall, the report painted a picture of a labor market where more people are increasingly stuck in place, with hiring, firing, and quitting all declining. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> “Low hires, quits and layoffs are an unusual combination that points to a certain ‘lock-in’ in the job market,” Daniel Zhao, lead economist at job site Glassdoor, posted on social media platform X.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_49-0"> Read more about how the labor market could be entering into a gridlock <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">here</a>.<br/> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="9" id="mntl-sc-block-adslot_9-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_10-0"><span class="heading-toc" id="toc-2024-05-01t153245719z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_10-0"><p><strong>Higher Commodity Prices Weigh on Manufacturing Sector</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_10-0">May 01, 2024 11:32 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-1-8641676#toc-2024-05-01t153245719z" id="mntl-blogpost__copylink_10-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Activity in the manufacturing sector stepped back in April, with the latest surveys showing a drop in new orders and increasing commodity prices, showing inflation pressures may be pushing on the manufacturing sector.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_51-0"> The S&amp;P Global Manufacturing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/pmi.asp">Purchasing Managers Index (PMI)</a> came in at 50.0 to indicate no change in business conditions in April, breaking a three-month streak of improving conditions.<span class="ql-inline-citation" data-cite="2"></span> Meanwhile, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/institute-for-supply-management.asp">Institute of Supply Management’s (ISM)</a> manufacturing survey registered 49.2% in April, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-1-8622839#toc-2024-04-01t151200145z">a drop of more than one percentage point from March</a>.<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_52-0"> “Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers,” said Chris Williamson, S&amp;P Global chief business economist. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> By dropping below 50%, the ISM survey showed a manufacturing sector where business was contracting, driven lower by a drop in both new orders and exports. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> “The U.S. manufacturing sector dropped back into contraction after growing in March, the first time since September 2022 that the sector reported expansion,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> There were indications that prices continued to increase, with the S&amp;P Global survey showing a sharp increase in input costs, while the ISM report showed its prices index moved higher as commodity costs continued to climb. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> “From an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp">inflation</a> perspective, it was also reassuring to see prices charged for goods rise at a slower rate than the 11-month high seen in March,” Williamson wrote. “The rate of increase nevertheless remains elevated by historical standards—and well above the average seen in the decade prior to the pandemic—as firms continued to pass higher commodity prices on to customers.” </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> That could be bad news for the Federal Reserve, which is closely watching for indications of inflation as it <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/federal-reserve-preferred-inflation-measure-heated-u">continues to receive data</a> showing that prices are moving higher in 2024.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> <em>-Terry Lane</em> </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="10" id="mntl-sc-block-adslot_10-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_11-0"><span class="heading-toc" id="toc-2024-05-01t131900603z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_11-0"><p><strong>Private Businesses Stayed In Hiring Mode In April</strong></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_11-0">May 01, 2024 09:19 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-1-8641676#toc-2024-05-01t131900603z" id="mntl-blogpost__copylink_11-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Private businesses hired at faster-than-expected pace in April, adding 192,000 jobs, down from the upwardly-revised 208,000 jobs added in March, payroll services company ADP said Wednesday.<br/><br/>Despite the slowdown, the hiring exceeded the 183,000 jobs that forecasters had expected according to a survey of economists by Dow Jones Newswires and the <em>Wall Street Journal</em>. Every industry added jobs other than information, which includes the media and telecommunications.<br/><br/>The jobs report stuck to the theme set by recent official government surveys on job growth, which have shown employers hiring at <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">a rapid pace</a> in spite of high <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-may-2024-meeting-preview-8639782">interest rates set by the Federal Reserve</a> intended to cool the economy. Economists, however, typically take the ADP survey numbers with a grain of salt since they have a spotty track record when it comes to predicting what official numbers from the Bureau of Labor Statistics will show.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_60-0"> The BLS jobs report, which comes out on Friday, is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/march-2024-jobs-report-preview-8623194">also expected to show the labor market staying hot</a>.  </p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="11" id="mntl-sc-block-adslot_11-0"></div> <div class="comp mntl-liveblog-item mntl-block" id="mntl-liveblog-item_12-0"><span class="heading-toc" id="toc-2024-05-01t124601818z"></span> <h2 class="comp mntl-blogpost__headline mntl-text-block" id="mntl-blogpost__headline_12-0"><p><strong>Mortgage Demand Lower as Rates Climb Again</strong><br/></p></h2> <div class="comp mntl-blogpost__publishedDate mntl-text-block" id="mntl-blogpost__publishedDate_12-0">May 01, 2024 08:46 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-1-8641676#toc-2024-05-01t124601818z" id="mntl-blogpost__copylink_12-0"> </button> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> Higher borrowing costs continue to drive down demand for home loans, with the number of mortgage applications lower again this week. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp">Mortgage</a> applications fell 2.3% compared with last week, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-april-24-8638000#toc-2024-04-24t121913160z">second week of declining demand</a>, according to data from the Mortgage Brokers Association. The drop was spurred by the fourth straight week of rising rates, with the 30-year, fixed-rate mortgage moving up to 7.29% its highest levels since November 2023.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> “Inflation remains stubbornly high, and this trend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets,” said Mike Fratantoni, MBA senior vice president and chief economist. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Application volume for both purchases and refinancing were lower, with both below last year’s pace. As <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage rates</a> moved higher this week, so did the share of adjustable rate mortgages (ARMs), which are now 7.8% of mortgage applications, its highest level in 2024. </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> “Prospective homebuyers are looking for ways to improve affordability, and switching to an ARM is one means of doing that, with ARM rates in the mid-6% range for loans with an initial fixed period of 5 years,” Fratantoni said.  </p> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_66-0"> <em>-Terry Lane</em><br> </br></p></div> <div class="comp mntl-sc-block-adslot mntl-block" data-item-index="12" id="mntl-sc-block-adslot_12-0"></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, the Federal Reserve concluded its two-day Open Markets Committee meeting by leaving interest rates untouched, as expected, and saying it will likely stay that way for longer than previously anticipated. ## **Rate Hike 'Unlikely' in This Cycle, Powell Says** May 01, 2024 03:18 PM EDT *You can rewatch the full press conference above.* While Federal Reserve Chair Jerome Powell downplayed the possibility of rate cuts anytime soon, rate hikes don’t seem to be in the cards either.  “I think it's unlikely that the next policy rate move will be a hike,” Powell told reporters at Wednesday’s post-FOMC-statement press conference. Powell’s remark contrasts with Fed Governor Michelle Bowman, a voting member of the Fed’s policy committee, who earlier this month [raised the possibility of hiking the fed funds rate again](https://www.investopedia.com/us-economy-news-today-april-5-8625276), in response to inflation that stubbornly resisted falling in the first quarter. The Fed hasn’t touched the rate since last July, when it capped off a rate hike campaign that began in March 2022 by raising it for an 11th time to its highest since 2001. ## **U.S. Economy in Stagflation? ‘I Don’t See The Stag Or The Flation,’ Powell says** May 01, 2024 03:10 PM EDT Federal Reserve chair Jerome Powell waved away concerns that the U.S. economy is in a [state of stagnation](https://www.investopedia.com/is-the-us-economy-headed-for-a-bout-of-stagflation-8639192) while having too high inflation, a doomsday economic scenario known by the portmanteau “[stagflation](https://www.investopedia.com/terms/s/stagflation.asp).” When asked about such a possibility by a reporter, Powell pointed out that inflation is far lower than in the infamous episode of stagflation in the 1970s, while unemployment is near historic lows. “I don’t see the stag or the flation, actually” he said. Fears of stagflation were stoked last week when the [first quarter gross domestic product report](https://www.investopedia.com/gdp-growth-slowed-to-2-2-in-q1-as-high-interest-rates-drag-economy-8638775) showed economic growth weakening and inflation higher than economists predicted. ## **Economists Surprised By Fed's Lack of Hawkish Language in Statement** May 01, 2024 03:04 PM EDT Economists thought the Fed could have been more [hawkish](https://www.investopedia.com/terms/h/hawk.asp) in tone in their prepared statement following their meeting. Below we have compiled economists' reactions to today's announcement and Powell's presser. This post will be updated as new analysis comes in. ### Diane Swonk, chief economist at KPMG US on Bloomberg "Well, one of the things that I'm surprised at—that they could have gotten more hawkish on, and I think the nod to inflation taking out more recently was the compromise—is that they left that they're waiting to decide when to reduce rates [in the statement]." ### Ryan Sweet, chief U.S. economist at Oxford Economics "The changes to the statement were not as hawkish as they could have been. The Fed not taking the opportunity to strike a hawkish tone in the statement suggests that rate cuts this year are still on the table and that rate hikes are not unless inflation takes an unexpected turn for the worse." ### Ernie Tedeschi, former chief economist at the White House Council of Economic Advisors ### Michael Gregory, deputy chief economist at BMO Analytics "Added in the opening paragraph was the phrase: 'In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.' Assuming it’s going to take at least three months of good inflation performance to potentially turn this phrase around, this means the Fed has moved further away from cutting rates any time soon. It’s also a subtle walking back of the scenario portrayed in March’s Summary of Economic Projections in which the median fed funds call was for three rate cuts this year." ### Quincy Krosby, chief global strategist for LPL Financial "This was—at the margin—a more dovish FOMC statement and the reaction in markets, both equity and Treasury yields reflect the Fed's message that they need more data before an initial rate cut. The statement wasn't as hawkish as market participants anticipated as there wasn't a hint of a potential rate hike, just a suggestion of remaining higher for perhaps longer than an eager market is comfortable with." ## **Powell Dials Back Talk Of Rate Cuts** May 01, 2024 02:53 PM EDT Talk of the Federal Reserve cutting its key interest rate this year was conspicuously absent from Federal Reserve Chair Jerome Powell’s prepared remarks in a press conference following the Fed’s official announcement on its interest rate decision. Earlier this year, Powell had said the fed funds rate was likely at its peak, and the Fed was weighing when to cut rates. But three months of worse-than-expected inflation data at the start of the year has shifted his stance to one of keeping rates higher for longer until inflation is quelled. “My colleagues and I today said that we didn’t see progress in the first quarter,” he told reporters who asked him about the omission. “And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” ## **Powell Says Committee Is Still Searching For Confidence That Inflation Is Falling** May 01, 2024 02:45 PM EDT ![Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC.]() :max_bytes(150000):strip_icc()/GettyImages-2151004310-a82e1c667c604fd2b46563c326671c1f.jpg) Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC. Chip Somodevilla/Getty Images The setbacks in the central bank's fight against inflation so far this year are likely to keep the fed funds rate higher for longer than previously thought, Federal Reserve Chair Jerome Powell said at the beginning of his press conference. "We've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%," He said. "So far this year, the data have not given us that greater confidence. ...It is likely that gaining such greater confidence will take longer than previously expected." ## **Markets Stutter After Fed Outlines Plans to Slow Decline in Security Holdings** May 01, 2024 02:39 PM EDT ![A chart shows the movements of the S&P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference.]() :max_bytes(150000):strip_icc()/NDX_2024-05-01_14-58-51-3fcedc34cd1741fe9eca2a1559206c98.png) A chart shows the movements of the S&P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference. Investopedia via TradingView U.S. stocks briefly spiked and then fell, resulting in a mixed outcome Wednesday after the Federal Reserve's announcement. The [Dow Jones Industrial Average](https://www.investopedia.com/terms/d/djia.asp) traded 0.4% higher Wednesday afternoon, while the [Nasdaq Composite](https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp) slipped 0.1% and the [S&P 500](https://www.investopedia.com/terms/s/sp500.asp) dropped 0.2%. Investors seemed particularly interested in the [Federal Open Market Committee](https://www.investopedia.com/terms/f/fomc.asp)'s plans to slow the pace of [balance sheet run-off](https://www.investopedia.com/insights/how-will-fed-reduce-balance-sheet/), one aspect of easing monetary policy, in June. The central bank said it was slowing down the pace at which it was selling off securities from its balance sheet to $25 billion per month from $60 billion per month. This process, [known as "quantitative tightening](https://www.investopedia.com/the-federal-reserve-could-ease-this-anti-inflation-policy-before-cutting-rates-8619154)," removes money from financial markets. This is a reversal of the "quantitative easing" campaign it engaged in during the pandemic, when it did the opposite, buying assets such as mortgage-backed securities in order to stimulate markets, and the economy, with more money. Market participants will likely pay particular attention to Chair Jerome Powell's press conference to glean more insight into the path ahead for officials. ## **Fed Adds Language About Inflation's Path So Far This Year To Statement** May 01, 2024 02:29 PM EDT ![An image shows the previous statement (left) and current statement (right) with differences highlighted.]() :max_bytes(150000):strip_icc()/Screenshot2024-05-01at2.02.36PM-b8c0c31913d1412283eedb5ac23cfe08.png) An image shows the previous statement (left) and current statement (right) with differences highlighted. Investopedia via [Diffchecker.com](https://www.diffchecker.com/) In their official statement, the Federal Open Markets Committee officials acknowledged progress against inflation has stalled, necessitating holding interest rates high to discourage borrowing and spending and cool down the economy. “In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.” the Federal Open Market Committee said in a statement, adding language that was absent from the statement the group made when it previously met in March. Fed officials spend a good portion of their meetings [crafting the statement](https://www.investopedia.com/what-happens-inside-the-fed-meetings-where-decisions-on-us-interest-rates-are-made-8549999) to strike the exact right tone they want to convey to markets, former members of the committee have said. This month's statement also de-emphasized inflation's movements over the year and prioritized the long-term progress that has been made. ## **Federal Reserve Leaves Interest Rates Higher-For-Longer As Predicted** May 01, 2024 02:02 PM EDT It wasn't too long ago that many forecasters thought today's meeting would be the last time interest rates would be held at their more than two-decades high. Today, the Federal Reserve held their interest rates at the current level of 5.25% to 5.50%, however, it likely will stay there for much longer. Fed officials are content to keep the interest rate higher for longer on the back of surprisingly strong inflation data that has remained stubborn so far this year, as forecasters expected headed into the meeting. "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," officials said in their statement. Before the decision was released, traders were pricing in a 6.4% chance the Fed would lower its influential fed funds rate in June and 20% in July and 44% for August, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Immediately after the decision, those chances were 6.4%, 21.8% and 46.9% respectively. Read more about the decision [here](https://www.investopedia.com/fed-holds-interest-rate-steady-and-confirms-it-will-be-higher-for-longer-8641952). ## **Hiring, Firing, And Quitting All Fell In March As Labor Market Shows Signs of Gridlock** May 01, 2024 11:48 AM EDT The labor market may be hot by historical standards, but it’s getting colder for job seekers, who saw the pickings in “help wanted” ads get slimmer, while fewer people were hired, fired, or switched jobs.  There were 8.5 million job openings that month, down from 8.8 million in February, and the fewest since February 2021, the Bureau of Labor Statistics said Wednesday. That was less than the 8.7 million forecasters had expected according to a survey of economists by Dow Jones Newswires and the *Wall Street Journal*. It meant there were 1.3 job openings per unemployed worker, slightly above the ratio of 1.2 that was typical just ahead of the pandemic.  Overall, the report painted a picture of a labor market where more people are increasingly stuck in place, with hiring, firing, and quitting all declining. “Low hires, quits and layoffs are an unusual combination that points to a certain ‘lock-in’ in the job market,” Daniel Zhao, lead economist at job site Glassdoor, posted on social media platform X.  Read more about how the labor market could be entering into a gridlock [here](https://www.investopedia.com/the-job-market-is-getting-stuck-hiring-firing-and-quitting-all-fell-in-march-8641816). ## **Higher Commodity Prices Weigh on Manufacturing Sector** May 01, 2024 11:32 AM EDT Activity in the manufacturing sector stepped back in April, with the latest surveys showing a drop in new orders and increasing commodity prices, showing inflation pressures may be pushing on the manufacturing sector.  The S&P Global Manufacturing [Purchasing Managers Index (PMI)](https://www.investopedia.com/terms/p/pmi.asp) came in at 50.0 to indicate no change in business conditions in April, breaking a three-month streak of improving conditions. Meanwhile, the [Institute of Supply Management’s (ISM)](https://www.investopedia.com/terms/i/institute-for-supply-management.asp) manufacturing survey registered 49.2% in April, [a drop of more than one percentage point from March](https://www.investopedia.com/us-economy-news-today-april-1-8622839#toc-2024-04-01t151200145z).  “Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers,” said Chris Williamson, S&P Global chief business economist. By dropping below 50%, the ISM survey showed a manufacturing sector where business was contracting, driven lower by a drop in both new orders and exports. “The U.S. manufacturing sector dropped back into contraction after growing in March, the first time since September 2022 that the sector reported expansion,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. There were indications that prices continued to increase, with the S&P Global survey showing a sharp increase in input costs, while the ISM report showed its prices index moved higher as commodity costs continued to climb. “From an [inflation](https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp) perspective, it was also reassuring to see prices charged for goods rise at a slower rate than the 11-month high seen in March,” Williamson wrote. “The rate of increase nevertheless remains elevated by historical standards—and well above the average seen in the decade prior to the pandemic—as firms continued to pass higher commodity prices on to customers.” That could be bad news for the Federal Reserve, which is closely watching for indications of inflation as it [continues to receive data](https://www.investopedia.com/federal-reserve-preferred-inflation-measure-heated-u) showing that prices are moving higher in 2024.  *-Terry Lane* ## **Private Businesses Stayed In Hiring Mode In April** May 01, 2024 09:19 AM EDT Private businesses hired at faster-than-expected pace in April, adding 192,000 jobs, down from the upwardly-revised 208,000 jobs added in March, payroll services company ADP said Wednesday. Despite the slowdown, the hiring exceeded the 183,000 jobs that forecasters had expected according to a survey of economists by Dow Jones Newswires and the *Wall Street Journal*. Every industry added jobs other than information, which includes the media and telecommunications. The jobs report stuck to the theme set by recent official government surveys on job growth, which have shown employers hiring at [a rapid pace](https://www.investopedia.com/employers-hired-far-more-than-expected-in-march-8625280) in spite of high [interest rates set by the Federal Reserve](https://www.investopedia.com/fed-may-2024-meeting-preview-8639782) intended to cool the economy. Economists, however, typically take the ADP survey numbers with a grain of salt since they have a spotty track record when it comes to predicting what official numbers from the Bureau of Labor Statistics will show.  The BLS jobs report, which comes out on Friday, is [also expected to show the labor market staying hot](https://www.investopedia.com/march-2024-jobs-report-preview-8623194).  ## **Mortgage Demand Lower as Rates Climb Again** May 01, 2024 08:46 AM EDT Higher borrowing costs continue to drive down demand for home loans, with the number of mortgage applications lower again this week. [Mortgage](https://www.investopedia.com/terms/m/mortgage.asp) applications fell 2.3% compared with last week, the [second week of declining demand](https://www.investopedia.com/us-economy-news-today-april-24-8638000#toc-2024-04-24t121913160z), according to data from the Mortgage Brokers Association. The drop was spurred by the fourth straight week of rising rates, with the 30-year, fixed-rate mortgage moving up to 7.29% its highest levels since November 2023.  “Inflation remains stubbornly high, and this trend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets,” said Mike Fratantoni, MBA senior vice president and chief economist. Application volume for both purchases and refinancing were lower, with both below last year’s pace. As [mortgage rates](https://www.investopedia.com/terms/m/mortgage.asp) moved higher this week, so did the share of adjustable rate mortgages (ARMs), which are now 7.8% of mortgage applications, its highest level in 2024. “Prospective homebuyers are looking for ways to improve affordability, and switching to an ARM is one means of doing that, with ARM rates in the mid-6% range for loans with an initial fixed period of 5 years,” Fratantoni said.  *-Terry Lane*

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, the Federal Reserve concluded its two-day Open Markets Committee meeting by leaving interest rates untouched, as expected, and saying it will likely stay that way for longer than previously anticipated. Rate Hike 'Unlikely' in This Cycle, Powell Says May 01, 2024 03:18 PM EDT You can rewatch the full press conference above.  While Federal Reserve Chair Jerome Powell downplayed the possibility of rate cuts anytime soon, rate hikes don’t seem to be in the cards either.  “I think it's unlikely that the next policy rate move will be a hike,” Powell told reporters at Wednesday’s post-FOMC-statement press conference.Powell’s remark contrasts with Fed Governor Michelle Bowman, a voting member of the Fed’s policy committee, who earlier this month raised the possibility of hiking the fed funds rate again, in response to inflation that stubbornly resisted falling in the first quarter.The Fed hasn’t touched the rate since last July, when it capped off a rate hike campaign that began in March 2022 by raising it for an 11th time to its highest since 2001. U.S. Economy in Stagflation? ‘I Don’t See The Stag Or The Flation,’ Powell says May 01, 2024 03:10 PM EDT Federal Reserve chair Jerome Powell waved away concerns that the U.S. economy is in a state of stagnation while having too high inflation, a doomsday economic scenario known by the portmanteau “stagflation.” When asked about such a possibility by a reporter, Powell pointed out that inflation is far lower than in the infamous episode of stagflation in the 1970s, while unemployment is near historic lows. “I don’t see the stag or the flation, actually” he said. Fears of stagflation were stoked last week when the first quarter gross domestic product report showed economic growth weakening and inflation higher than economists predicted. Economists Surprised By Fed's Lack of Hawkish Language in Statement May 01, 2024 03:04 PM EDT Economists thought the Fed could have been more hawkish in tone in their prepared statement following their meeting. Below we have compiled economists' reactions to today's announcement and Powell's presser. This post will be updated as new analysis comes in. Diane Swonk, chief economist at KPMG US on Bloomberg "Well, one of the things that I'm surprised at—that they could have gotten more hawkish on, and I think the nod to inflation taking out more recently was the compromise—is that they left that they're waiting to decide when to reduce rates [in the statement]." Ryan Sweet, chief U.S. economist at Oxford Economics "The changes to the statement were not as hawkish as they could have been. The Fed not taking the opportunity to strike a hawkish tone in the statement suggests that rate cuts this year are still on the table and that rate hikes are not unless inflation takes an unexpected turn for the worse." Ernie Tedeschi, former chief economist at the White House Council of Economic Advisors Michael Gregory, deputy chief economist at BMO Analytics "Added in the opening paragraph was the phrase: 'In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.' Assuming it’s going to take at least three months of good inflation performance to potentially turn this phrase around, this means the Fed has moved further away from cutting rates any time soon. It’s also a subtle walking back of the scenario portrayed in March’s Summary of Economic Projections in which the median fed funds call was for three rate cuts this year." Quincy Krosby, chief global strategist for LPL Financial "This was—at the margin—a more dovish FOMC statement and the reaction in markets, both equity and Treasury yields reflect the Fed's message that they need more data before an initial rate cut. The statement wasn't as hawkish as market participants anticipated as there wasn't a hint of a potential rate hike, just a suggestion of remaining higher for perhaps longer than an eager market is comfortable with." Powell Dials Back Talk Of Rate Cuts May 01, 2024 02:53 PM EDT Talk of the Federal Reserve cutting its key interest rate this year was conspicuously absent from Federal Reserve Chair Jerome Powell’s prepared remarks in a press conference following the Fed’s official announcement on its interest rate decision. Earlier this year, Powell had said the fed funds rate was likely at its peak, and the Fed was weighing when to cut rates. But three months of worse-than-expected inflation data at the start of the year has shifted his stance to one of keeping rates higher for longer until inflation is quelled. “My colleagues and I today said that we didn’t see progress in the first quarter,” he told reporters who asked him about the omission. “And I’ve said that it appears then that it’s going to take longer for us to reach that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.” Powell Says Committee Is Still Searching For Confidence That Inflation Is Falling May 01, 2024 02:45 PM EDT Federal Reserve Bank Chair Jerome Powell arrives for a press conference where he announced that interest rates will remain unchanged during a news conference at the bank's William McChesney Martin building on May 01, 2024 in Washington, DC. Chip Somodevilla/Getty Images The setbacks in the central bank's fight against inflation so far this year are likely to keep the fed funds rate higher for longer than previously thought, Federal Reserve Chair Jerome Powell said at the beginning of his press conference."We've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%," He said. "So far this year, the data have not given us that greater confidence. ...It is likely that gaining such greater confidence will take longer than previously expected." Markets Stutter After Fed Outlines Plans to Slow Decline in Security Holdings May 01, 2024 02:39 PM EDT A chart shows the movements of the S&P 500, Nadsaq and Dow around the Federal Reserve's decision and subsequent press conference. Investopedia via TradingView U.S. stocks briefly spiked and then fell, resulting in a mixed outcome Wednesday after the Federal Reserve's announcement. The Dow Jones Industrial Average traded 0.4% higher Wednesday afternoon, while the Nasdaq Composite slipped 0.1% and the S&P 500 dropped 0.2%. Investors seemed particularly interested in the Federal Open Market Committee's plans to slow the pace of balance sheet run-off, one aspect of easing monetary policy, in June. The central bank said it was slowing down the pace at which it was selling off securities from its balance sheet to $25 billion per month from $60 billion per month. This process, known as "quantitative tightening," removes money from financial markets. This is a reversal of the "quantitative easing" campaign it engaged in during the pandemic, when it did the opposite, buying assets such as mortgage-backed securities in order to stimulate markets, and the economy, with more money. Market participants will likely pay particular attention to Chair Jerome Powell's press conference to glean more insight into the path ahead for officials. Fed Adds Language About Inflation's Path So Far This Year To Statement May 01, 2024 02:29 PM EDT An image shows the previous statement (left) and current statement (right) with differences highlighted. Investopedia via Diffchecker.com In their official statement, the Federal Open Markets Committee officials acknowledged progress against inflation has stalled, necessitating holding interest rates high to discourage borrowing and spending and cool down the economy.“In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.” the Federal Open Market Committee said in a statement, adding language that was absent from the statement the group made when it previously met in March. Fed officials spend a good portion of their meetings crafting the statement to strike the exact right tone they want to convey to markets, former members of the committee have said. This month's statement also de-emphasized inflation's movements over the year and prioritized the long-term progress that has been made. Federal Reserve Leaves Interest Rates Higher-For-Longer As Predicted May 01, 2024 02:02 PM EDT It wasn't too long ago that many forecasters thought today's meeting would be the last time interest rates would be held at their more than two-decades high. Today, the Federal Reserve held their interest rates at the current level of 5.25% to 5.50%, however, it likely will stay there for much longer. Fed officials are content to keep the interest rate higher for longer on the back of surprisingly strong inflation data that has remained stubborn so far this year, as forecasters expected headed into the meeting. "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," officials said in their statement. Before the decision was released, traders were pricing in a 6.4% chance the Fed would lower its influential fed funds rate in June and 20% in July and 44% for August, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Immediately after the decision, those chances were 6.4%, 21.8% and 46.9% respectively. Read more about the decision here. Hiring, Firing, And Quitting All Fell In March As Labor Market Shows Signs of Gridlock May 01, 2024 11:48 AM EDT The labor market may be hot by historical standards, but it’s getting colder for job seekers, who saw the pickings in “help wanted” ads get slimmer, while fewer people were hired, fired, or switched jobs.  There were 8.5 million job openings that month, down from 8.8 million in February, and the fewest since February 2021, the Bureau of Labor Statistics said Wednesday. That was less than the 8.7 million forecasters had expected according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. It meant there were 1.3 job openings per unemployed worker, slightly above the ratio of 1.2 that was typical just ahead of the pandemic.  Overall, the report painted a picture of a labor market where more people are increasingly stuck in place, with hiring, firing, and quitting all declining. “Low hires, quits and layoffs are an unusual combination that points to a certain ‘lock-in’ in the job market,” Daniel Zhao, lead economist at job site Glassdoor, posted on social media platform X.  Read more about how the labor market could be entering into a gridlock here. Higher Commodity Prices Weigh on Manufacturing Sector May 01, 2024 11:32 AM EDT Activity in the manufacturing sector stepped back in April, with the latest surveys showing a drop in new orders and increasing commodity prices, showing inflation pressures may be pushing on the manufacturing sector.  The S&P Global Manufacturing Purchasing Managers Index (PMI) came in at 50.0 to indicate no change in business conditions in April, breaking a three-month streak of improving conditions. Meanwhile, the Institute of Supply Management’s (ISM) manufacturing survey registered 49.2% in April, a drop of more than one percentage point from March.  “Business conditions stagnated in April, failing to improve for the first time in four months and pointing to a weak start to the second quarter for manufacturers,” said Chris Williamson, S&P Global chief business economist. By dropping below 50%, the ISM survey showed a manufacturing sector where business was contracting, driven lower by a drop in both new orders and exports. “The U.S. manufacturing sector dropped back into contraction after growing in March, the first time since September 2022 that the sector reported expansion,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee. There were indications that prices continued to increase, with the S&P Global survey showing a sharp increase in input costs, while the ISM report showed its prices index moved higher as commodity costs continued to climb. “From an inflation perspective, it was also reassuring to see prices charged for goods rise at a slower rate than the 11-month high seen in March,” Williamson wrote. “The rate of increase nevertheless remains elevated by historical standards—and well above the average seen in the decade prior to the pandemic—as firms continued to pass higher commodity prices on to customers.” That could be bad news for the Federal Reserve, which is closely watching for indications of inflation as it continues to receive data showing that prices are moving higher in 2024.  -Terry Lane Private Businesses Stayed In Hiring Mode In April May 01, 2024 09:19 AM EDT Private businesses hired at faster-than-expected pace in April, adding 192,000 jobs, down from the upwardly-revised 208,000 jobs added in March, payroll services company ADP said Wednesday.Despite the slowdown, the hiring exceeded the 183,000 jobs that forecasters had expected according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. Every industry added jobs other than information, which includes the media and telecommunications.The jobs report stuck to the theme set by recent official government surveys on job growth, which have shown employers hiring at a rapid pace in spite of high interest rates set by the Federal Reserve intended to cool the economy. Economists, however, typically take the ADP survey numbers with a grain of salt since they have a spotty track record when it comes to predicting what official numbers from the Bureau of Labor Statistics will show.  The BLS jobs report, which comes out on Friday, is also expected to show the labor market staying hot.  Mortgage Demand Lower as Rates Climb Again May 01, 2024 08:46 AM EDT Higher borrowing costs continue to drive down demand for home loans, with the number of mortgage applications lower again this week. Mortgage applications fell 2.3% compared with last week, the second week of declining demand, according to data from the Mortgage Brokers Association. The drop was spurred by the fourth straight week of rising rates, with the 30-year, fixed-rate mortgage moving up to 7.29% its highest levels since November 2023.  “Inflation remains stubbornly high, and this trend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets,” said Mike Fratantoni, MBA senior vice president and chief economist. Application volume for both purchases and refinancing were lower, with both below last year’s pace. As mortgage rates moved higher this week, so did the share of adjustable rate mortgages (ARMs), which are now 7.8% of mortgage applications, its highest level in 2024. “Prospective homebuyers are looking for ways to improve affordability, and switching to an ARM is one means of doing that, with ARM rates in the mid-6% range for loans with an initial fixed period of 5 years,” Fratantoni said.  -Terry Lane

https://www.investopedia.com/terms/s/stripped-mbs.asp

Stripped MBS: What It Means, 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-a-stripped-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 a Stripped MBS? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A stripped mortgage-backed security (MBS) is a type of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mbs.asp">mortgage-backed security</a> that is split into <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/postrips.asp">principal-only</a> and <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/iostrips.asp">interest-only</a> <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/strip.asp">strips</a>. They derive their cash flows either from principal or interest payments on the underlying mortgages, unlike conventional MBSs that generate income from both of these two sources. </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"> Stripped MBSs are very sensitive to <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> changes, making them popular among<strong> </strong>investors who believe they can predict the future cost of borrowing. </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 stripped mortgage-backed security (MBS) segregates the principal and interest portions of the MBS into individual securities.</li><li>Income is derived either from principal or interest payments on the underlying mortgages, unlike conventional MBSs whose cash flows are based on both.</li><li>The profitability of principal-only strips and interest-only strips hinges primarily on the direction of interest rates.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-stripped-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"> Understanding Stripped MBS </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> Mortgage-backed securities (MBSs) are investments made up of a bundle of home <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/loan.asp">loans</a> bought from the banks that issued them. Investing in an MBS means purchasing the rights to these various mortgages. If all goes to plan and the homebuyers don't <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/default2.asp">default</a>, they should pay out regular monthly interest payments, the amount the lender<strong> </strong>charges to borrow the money, as well as the actual repayment of the loan, otherwise known as the principal. </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"> Stripped MBSs were created to appeal to different types of investors, giving them the option to get their hands on either the interest or the principal payments, rather than both. The investor is free to decide which strategy to pursue, based on his or her income needs and the market outlook. Specifically, this requires <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/impact-rising-mortgage-rates-etfs/">predicting where interest rates are heading</a>. </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-principal-only-strips-vs-interest-only-strips"></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"> Principal-Only Strips vs. Interest-Only Strips </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> There are some fundamental differences between principal-only strips and interest-only strips.  </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"> Principal-only strips consist of a known dollar amount but an unknown payment timing. They are sold to investors at a discount on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/facevalue.asp">face value</a>, which is determined by interest rates and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/prepayment.asp">prepayment</a> speed.  </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"> Interest-only strips, on the other hand, generate high levels of cash flow in the earlier years and substantially lower cash flows in the later years. Investors can choose between the principal-only strips and the interest-only strips based on what they think interest rates will do in the future. </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-special-considerations"></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"> Special Considerations </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"> Interest Rates </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Because of their structure, interest rate changes have an opposite effect on principal-only and interest-only strips. Rising rates increase the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discountrate.asp">discount rate</a> applied to cash flows, reducing the price of principal-only strips. </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 <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yield.asp">yield</a> on principal-only strips is affected directly by the prepayment speed—the faster the prepayment on the principal, the higher the overall yield for the principal-only strip investor. Since prepayment increases as interest rates fall, principal-only investors yearn for lower interest rates. </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 contrast, interest-only strips rise in price when interest rates are pushed up. Higher interest rates also reduce prepayment levels, leading the mortgages to last longer. Under these circumstances, the interest-only strips will climb in value because they will be collecting interest over a lengthier period of time. </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-important" 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_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>A stripped MBS can be tailored to consist of more interest or more principal, offering the investor a customized amount of <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>.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Simply put, when interest rates are falling, principal-only strips will rise in price and interest-only strips will decline. Conversely, when interest rates are rising, interest-only strips climb in price and principal-only strips will decline. In other words, if an investor believes interest rates are on the rise, they will buy the interest-only strips. If instead, an investor believes interest rates will decline, they will buy the principal-only strips. </p></div>

## What Is a Stripped MBS? A stripped mortgage-backed security (MBS) is a type of [mortgage-backed security](https://www.investopedia.com/terms/m/mbs.asp) that is split into [principal-only](https://www.investopedia.com/terms/p/postrips.asp) and [interest-only](https://www.investopedia.com/terms/i/iostrips.asp) [strips](https://www.investopedia.com/terms/s/strip.asp). They derive their cash flows either from principal or interest payments on the underlying mortgages, unlike conventional MBSs that generate income from both of these two sources. Stripped MBSs are very sensitive to [interest rate](https://www.investopedia.com/terms/i/interestrate.asp) changes, making them popular amonginvestors who believe they can predict the future cost of borrowing. ### Key Takeaways * A stripped mortgage-backed security (MBS) segregates the principal and interest portions of the MBS into individual securities. * Income is derived either from principal or interest payments on the underlying mortgages, unlike conventional MBSs whose cash flows are based on both. * The profitability of principal-only strips and interest-only strips hinges primarily on the direction of interest rates. ## Understanding Stripped MBS Mortgage-backed securities (MBSs) are investments made up of a bundle of home [loans](https://www.investopedia.com/terms/l/loan.asp) bought from the banks that issued them. Investing in an MBS means purchasing the rights to these various mortgages. If all goes to plan and the homebuyers don't [default](https://www.investopedia.com/terms/d/default2.asp), they should pay out regular monthly interest payments, the amount the lendercharges to borrow the money, as well as the actual repayment of the loan, otherwise known as the principal. Stripped MBSs were created to appeal to different types of investors, giving them the option to get their hands on either the interest or the principal payments, rather than both. The investor is free to decide which strategy to pursue, based on his or her income needs and the market outlook. Specifically, this requires [predicting where interest rates are heading](https://www.investopedia.com/investing/impact-rising-mortgage-rates-etfs/). ## Principal-Only Strips vs. Interest-Only Strips There are some fundamental differences between principal-only strips and interest-only strips.  Principal-only strips consist of a known dollar amount but an unknown payment timing. They are sold to investors at a discount on [face value](https://www.investopedia.com/terms/f/facevalue.asp), which is determined by interest rates and [prepayment](https://www.investopedia.com/terms/p/prepayment.asp) speed.  Interest-only strips, on the other hand, generate high levels of cash flow in the earlier years and substantially lower cash flows in the later years. Investors can choose between the principal-only strips and the interest-only strips based on what they think interest rates will do in the future. ## Special Considerations ### Interest Rates Because of their structure, interest rate changes have an opposite effect on principal-only and interest-only strips. Rising rates increase the [discount rate](https://www.investopedia.com/terms/d/discountrate.asp) applied to cash flows, reducing the price of principal-only strips. The [yield](https://www.investopedia.com/terms/y/yield.asp) on principal-only strips is affected directly by the prepayment speed—the faster the prepayment on the principal, the higher the overall yield for the principal-only strip investor. Since prepayment increases as interest rates fall, principal-only investors yearn for lower interest rates. In contrast, interest-only strips rise in price when interest rates are pushed up. Higher interest rates also reduce prepayment levels, leading the mortgages to last longer. Under these circumstances, the interest-only strips will climb in value because they will be collecting interest over a lengthier period of time. ### A stripped MBS can be tailored to consist of more interest or more principal, offering the investor a customized amount of [interest rate risk](https://www.investopedia.com/terms/i/interestraterisk.asp). Simply put, when interest rates are falling, principal-only strips will rise in price and interest-only strips will decline. Conversely, when interest rates are rising, interest-only strips climb in price and principal-only strips will decline. In other words, if an investor believes interest rates are on the rise, they will buy the interest-only strips. If instead, an investor believes interest rates will decline, they will buy the principal-only strips.

What Is a Stripped MBS? A stripped mortgage-backed security (MBS) is a type of mortgage-backed security that is split into principal-only and interest-only strips. They derive their cash flows either from principal or interest payments on the underlying mortgages, unlike conventional MBSs that generate income from both of these two sources. Stripped MBSs are very sensitive to interest rate changes, making them popular among investors who believe they can predict the future cost of borrowing. Key Takeaways A stripped mortgage-backed security (MBS) segregates the principal and interest portions of the MBS into individual securities.Income is derived either from principal or interest payments on the underlying mortgages, unlike conventional MBSs whose cash flows are based on both.The profitability of principal-only strips and interest-only strips hinges primarily on the direction of interest rates. Understanding Stripped MBS Mortgage-backed securities (MBSs) are investments made up of a bundle of home loans bought from the banks that issued them. Investing in an MBS means purchasing the rights to these various mortgages. If all goes to plan and the homebuyers don't default, they should pay out regular monthly interest payments, the amount the lender charges to borrow the money, as well as the actual repayment of the loan, otherwise known as the principal. Stripped MBSs were created to appeal to different types of investors, giving them the option to get their hands on either the interest or the principal payments, rather than both. The investor is free to decide which strategy to pursue, based on his or her income needs and the market outlook. Specifically, this requires predicting where interest rates are heading. Principal-Only Strips vs. Interest-Only Strips There are some fundamental differences between principal-only strips and interest-only strips.  Principal-only strips consist of a known dollar amount but an unknown payment timing. They are sold to investors at a discount on face value, which is determined by interest rates and prepayment speed.  Interest-only strips, on the other hand, generate high levels of cash flow in the earlier years and substantially lower cash flows in the later years. Investors can choose between the principal-only strips and the interest-only strips based on what they think interest rates will do in the future. Special Considerations Interest Rates Because of their structure, interest rate changes have an opposite effect on principal-only and interest-only strips. Rising rates increase the discount rate applied to cash flows, reducing the price of principal-only strips. The yield on principal-only strips is affected directly by the prepayment speed—the faster the prepayment on the principal, the higher the overall yield for the principal-only strip investor. Since prepayment increases as interest rates fall, principal-only investors yearn for lower interest rates. In contrast, interest-only strips rise in price when interest rates are pushed up. Higher interest rates also reduce prepayment levels, leading the mortgages to last longer. Under these circumstances, the interest-only strips will climb in value because they will be collecting interest over a lengthier period of time. A stripped MBS can be tailored to consist of more interest or more principal, offering the investor a customized amount of interest rate risk. Simply put, when interest rates are falling, principal-only strips will rise in price and interest-only strips will decline. Conversely, when interest rates are rising, interest-only strips climb in price and principal-only strips will decline. In other words, if an investor believes interest rates are on the rise, they will buy the interest-only strips. If instead, an investor believes interest rates will decline, they will buy the principal-only strips.

https://www.investopedia.com/tesla-recall-7110749

Tesla Recalls 360,000 Cars Equipped with Full Self-Driving Beta Software

<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"> 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>) will recall 362,758 cars after federal regulators found its Full Self-Driving (FSD) Beta software could cause crashes, accounting for about 90% of Tesla vehicles using the software for city streets.<span class="ql-inline-citation" data-cite="1"></span><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_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>Tesla to recall more than 360,000 cars after regulators found Full Self-Driving Beta software can cause crashes.</li><li>The recall affects 2016-2023 Model S and Model X, 2017-2023 Model 3, and 2020-2023 Model Y cars with the software or those pending software installation.</li><li>Regulators said the software caused cars to exceed speed limits, or behave in an unsafe or unpredictable manner while navigating intersections.<br/></li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The software caused the Tesla cars to "exceed speed limits" or travel in an "unsafe" or "unpredictable" manner while navigating intersections, according to a recall notice posted on the National Highway Traffic Safety Administration's (NHTSA) website Thursday.<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_6-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> "The FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution. In addition, the system may respond insufficiently to changes in posted speed limits or not adequately account for the driver's adjustment of the vehicle's speed to exceed posted speed limits," said the NHTSA. </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 recall will impact cars that have deployed the FSD beta software or are pending installation. The recall applies to vehicles of the following years and models: 2016-2023 Model S; 2017-2023 Model X and Model 3; 2020-2023 Model Y. The company will deploy a free "over-the-air (OTA) software update" and notify car owners via letter by April 15. </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"> FSD Beta is Tesla's most advanced autopilot software, giving drivers access to features that aren't fully debugged. Drivers can pay a $15,000 lump sum to activate FSD Beta or subscribe for $99/month or $199/month depending on their prior purchases.<span class="ql-inline-citation" data-cite="2"></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_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Tesla reported $324 million of FSD-related revenue in the fourth quarter of 2022, according to SEC filings.<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_14-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> This isn't the first time Tesla has had to recall cars due to issues with FSD software. Tesla recalled almost 54,000 cars last year after the NHTSA found FSD Beta could allow a car to perform a rolling stop, in which it fails to make a complete stop at a stop sign.<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_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Tesla stock fell more than 5% on Thursday, ending a run of gains that helped it reach a three-month high on Wednesday. </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>

Tesla, Inc. ([TSLA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=tsla)) will recall 362,758 cars after federal regulators found its Full Self-Driving (FSD) Beta software could cause crashes, accounting for about 90% of Tesla vehicles using the software for city streets. ### Key Takeaways * Tesla to recall more than 360,000 cars after regulators found Full Self-Driving Beta software can cause crashes. * The recall affects 2016-2023 Model S and Model X, 2017-2023 Model 3, and 2020-2023 Model Y cars with the software or those pending software installation. * Regulators said the software caused cars to exceed speed limits, or behave in an unsafe or unpredictable manner while navigating intersections. The software caused the Tesla cars to "exceed speed limits" or travel in an "unsafe" or "unpredictable" manner while navigating intersections, according to a recall notice posted on the National Highway Traffic Safety Administration's (NHTSA) website Thursday. "The FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution. In addition, the system may respond insufficiently to changes in posted speed limits or not adequately account for the driver's adjustment of the vehicle's speed to exceed posted speed limits," said the NHTSA. The recall will impact cars that have deployed the FSD beta software or are pending installation. The recall applies to vehicles of the following years and models: 2016-2023 Model S; 2017-2023 Model X and Model 3; 2020-2023 Model Y. The company will deploy a free "over-the-air (OTA) software update" and notify car owners via letter by April 15. FSD Beta is Tesla's most advanced autopilot software, giving drivers access to features that aren't fully debugged. Drivers can pay a $15,000 lump sum to activate FSD Beta or subscribe for $99/month or $199/month depending on their prior purchases. Tesla reported $324 million of FSD-related revenue in the fourth quarter of 2022, according to SEC filings. This isn't the first time Tesla has had to recall cars due to issues with FSD software. Tesla recalled almost 54,000 cars last year after the NHTSA found FSD Beta could allow a car to perform a rolling stop, in which it fails to make a complete stop at a stop sign. Tesla stock fell more than 5% on Thursday, ending a run of gains that helped it reach a three-month high on Wednesday. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Tesla, Inc. (TSLA) will recall 362,758 cars after federal regulators found its Full Self-Driving (FSD) Beta software could cause crashes, accounting for about 90% of Tesla vehicles using the software for city streets. Key Takeaways Tesla to recall more than 360,000 cars after regulators found Full Self-Driving Beta software can cause crashes.The recall affects 2016-2023 Model S and Model X, 2017-2023 Model 3, and 2020-2023 Model Y cars with the software or those pending software installation.Regulators said the software caused cars to exceed speed limits, or behave in an unsafe or unpredictable manner while navigating intersections. The software caused the Tesla cars to "exceed speed limits" or travel in an "unsafe" or "unpredictable" manner while navigating intersections, according to a recall notice posted on the National Highway Traffic Safety Administration's (NHTSA) website Thursday. "The FSD Beta system may allow the vehicle to act unsafe around intersections, such as traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution. In addition, the system may respond insufficiently to changes in posted speed limits or not adequately account for the driver's adjustment of the vehicle's speed to exceed posted speed limits," said the NHTSA. The recall will impact cars that have deployed the FSD beta software or are pending installation. The recall applies to vehicles of the following years and models: 2016-2023 Model S; 2017-2023 Model X and Model 3; 2020-2023 Model Y. The company will deploy a free "over-the-air (OTA) software update" and notify car owners via letter by April 15. FSD Beta is Tesla's most advanced autopilot software, giving drivers access to features that aren't fully debugged. Drivers can pay a $15,000 lump sum to activate FSD Beta or subscribe for $99/month or $199/month depending on their prior purchases. Tesla reported $324 million of FSD-related revenue in the fourth quarter of 2022, according to SEC filings. This isn't the first time Tesla has had to recall cars due to issues with FSD software. Tesla recalled almost 54,000 cars last year after the NHTSA found FSD Beta could allow a car to perform a rolling stop, in which it fails to make a complete stop at a stop sign. Tesla stock fell more than 5% on Thursday, ending a run of gains that helped it reach a three-month high on Wednesday. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/gold-roundup-for-may-17-price-nears-all-time-high-amid-hopes-of-fed-rate-cuts-8650301

Gold Roundup For May 17: Price Nears All-Time High Amid Hopes of Fed Rate Cuts

<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 spot price of gold climbed above $2,400 an ounce Friday, nearing its all-time high reached in April.</li><li>Recent gains for gold have been fueled in part by economic data raising hopes the Federal Reserve could move to cut interest rates.</li><li>Surging gold prices have helped boost gold mining stocks like Newmont Corporation.</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 spot price of gold climbed above $2,400 an ounce Friday to $2,417.54 as of 2:50 p.m. ET, nearing an all-time high reached in April. The recent gains for gold have been fueled in part by economic data suggesting inflation may have slowed enough for the Federal Reserve to cut interest rates soon. </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-hopes-of-fed-rate-cuts-help-send-gold-higher"></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"> Hopes of Fed Rate Cuts Help Send Gold Higher </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> This week's report on consumer prices showed <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/inflation-ticked-downward-in-april-2024-8648737">inflation slowed</a> in April from the month before, lifting optimism the Fed may be prepared to lower borrowing costs as the economy slows. In addition, a report showed retail sales in April were <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/april-2024-retail-sales-soft-consumers-reaching-limit-8648861">virtually unchanged</a> from the month before and well below expectations, leading to speculation that consumers may be pulling back. Today, the Conference Board said its <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/us-economy-news-today-out-of-sync-leading-economic-index-falls-again-8650246">Leading Economic Index</a> declined 0.6% in April from March, in another sign the U.S. economy is slowing.<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_7-0"></div> <span class="heading-toc" id="toc-gold-miner-stocks-boosted-by-surge-in-gold-price"></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"> Gold Miner Stocks Boosted by Surge in Gold Price </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The recent gains for gold have helped drive up prices of gold miner stocks such as Newmont Corporation (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=NEM">NEM</a>), with its shares on pace to close at their highest level since last summer. The World Gold Council said Thursday that higher gold prices have helped ease pressures on producers' margins, though producers' costs have climbed as well.<span class="ql-inline-citation" data-cite="3"></span><br/> </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-landscape figure-high-res" id="mntl-sc-block_11-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:76.9%;"> <img alt="XAUUSD" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/rKYf_KAT_YTOlz7zZy4AeUKh89s=/1396x0/filters:no_upscale():max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/4wU8HFBUNLRC5dKIsFsX473CjkI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png" data-srcset="https://www.investopedia.com/thmb/OxGDy40bLhPOgkJQVmhLjRYIzI4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png 750w" data-tracking-container="true" height="1074" id="mntl-sc-block-image_1-0" width="1396"/> <noscript> <img alt="XAUUSD" class="img--noscript universal-image__image" height="1074" sizes="750px" src="https://www.investopedia.com/thmb/4wU8HFBUNLRC5dKIsFsX473CjkI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png" srcset="https://www.investopedia.com/thmb/OxGDy40bLhPOgkJQVmhLjRYIzI4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png 750w" width="1396"/> </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>

### Key Takeaways * The spot price of gold climbed above $2,400 an ounce Friday, nearing its all-time high reached in April. * Recent gains for gold have been fueled in part by economic data raising hopes the Federal Reserve could move to cut interest rates. * Surging gold prices have helped boost gold mining stocks like Newmont Corporation. The spot price of gold climbed above $2,400 an ounce Friday to $2,417.54 as of 2:50 p.m. ET, nearing an all-time high reached in April. The recent gains for gold have been fueled in part by economic data suggesting inflation may have slowed enough for the Federal Reserve to cut interest rates soon. ## Hopes of Fed Rate Cuts Help Send Gold Higher This week's report on consumer prices showed [inflation slowed](https://www.investopedia.com/inflation-ticked-downward-in-april-2024-8648737) in April from the month before, lifting optimism the Fed may be prepared to lower borrowing costs as the economy slows. In addition, a report showed retail sales in April were [virtually unchanged](https://www.investopedia.com/april-2024-retail-sales-soft-consumers-reaching-limit-8648861) from the month before and well below expectations, leading to speculation that consumers may be pulling back. Today, the Conference Board said its [Leading Economic Index](https://www.investopedia.com/us-economy-news-today-out-of-sync-leading-economic-index-falls-again-8650246) declined 0.6% in April from March, in another sign the U.S. economy is slowing. ## Gold Miner Stocks Boosted by Surge in Gold Price The recent gains for gold have helped drive up prices of gold miner stocks such as Newmont Corporation ([NEM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=NEM)), with its shares on pace to close at their highest level since last summer. The World Gold Council said Thursday that higher gold prices have helped ease pressures on producers' margins, though producers' costs have climbed as well. ![XAUUSD]() :max_bytes(150000):strip_icc()/XAUUSD_2024-05-17_14-51-19-7515000f34634def8e086c83ff22dbd6.png) TradingView

Key Takeaways The spot price of gold climbed above $2,400 an ounce Friday, nearing its all-time high reached in April.Recent gains for gold have been fueled in part by economic data raising hopes the Federal Reserve could move to cut interest rates.Surging gold prices have helped boost gold mining stocks like Newmont Corporation. The spot price of gold climbed above $2,400 an ounce Friday to $2,417.54 as of 2:50 p.m. ET, nearing an all-time high reached in April. The recent gains for gold have been fueled in part by economic data suggesting inflation may have slowed enough for the Federal Reserve to cut interest rates soon. Hopes of Fed Rate Cuts Help Send Gold Higher This week's report on consumer prices showed inflation slowed in April from the month before, lifting optimism the Fed may be prepared to lower borrowing costs as the economy slows. In addition, a report showed retail sales in April were virtually unchanged from the month before and well below expectations, leading to speculation that consumers may be pulling back. Today, the Conference Board said its Leading Economic Index declined 0.6% in April from March, in another sign the U.S. economy is slowing. Gold Miner Stocks Boosted by Surge in Gold Price The recent gains for gold have helped drive up prices of gold miner stocks such as Newmont Corporation (NEM), with its shares on pace to close at their highest level since last summer. The World Gold Council said Thursday that higher gold prices have helped ease pressures on producers' margins, though producers' costs have climbed as well. TradingView

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

Composite Index: Definition, Types, 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-composite-index"></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 Composite Index? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A composite index is a statistical tool that groups together many different <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equity.asp" rel="noopener noreferrer">equities</a>, securities, or indexes in order to create a representation of overall market or sector performance. Typically, the elements of a composite index are combined in a standardized way so that large amounts of data can be presented easily. </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 composite index is a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance.</li><li>Composite indexes are used to conduct investment analyses, measure economic trends, and forecast market activity.</li><li>The goal of a well-diversified portfolio is usually to outperform the main composite indexes—the Nasdaq Composite, the Dow, and the S&amp;P 500.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-a-composite-index"></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 a Composite Index </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Composite indexes are created to conduct investment analysis, measure economic trends, and forecast market activity. </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"> They are also used as tools for tracking securities' price changes relative to an entire stock market or sector. They thus provide a useful benchmark against which to measure an investor's portfolio. The goal of a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/diversification.asp" rel="noopener noreferrer">well-diversified portfolio</a> is usually to outperform the main composite indexes. Three of the most-followed indexes in the United States are the Nasdaq Composite, Dow Jones Industrial Average (the Dow), and the Standard &amp; Poor's 500 Index (S&amp;P 500). </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-types-of-composite-indexes"></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"> Types of Composite Indexes </span> </h2> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_12-0"> <span class="mntl-sc-block-subheading__text"> The Nasdaq Composite </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp">Nasdaq Composite</a> was first established in 1971 with only 50 companies. Today, it is an index that includes more than 3,000 individual, common equities that are listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated using a <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> (market cap)-weighted methodology (also referred to as a cap-weighted methodology).<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_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"> Standard &amp; Poor's 500 Index </span> </h3> <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/s/sp500.asp">Standard &amp; Poor's 500 Index</a> (S&amp;P 500) is widely regarded as the best barometer of large U.S. equities. It contains the 500 largest, U.S. publicly-traded companies by <a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketvalue.asp">market value</a>. The S&amp;P 500 is also a cap-weighted index.<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_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"> Dow Jones Industrial Average </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> The Dow Jones Industrial Average (also referred to simply as "the Dow" or "the Dow Jones") is a price-weighted composite index.<span class="ql-inline-citation" data-cite="7"></span> When you read in the news that the "market is up," they are generally referring to the Dow. </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-cap-weighted-index-vs-price-weighted-index"></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"> Cap-Weighted Index vs. Price-Weighted Index </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> Unlike the Dow (which is a price-weighted index), the Nasdaq and the S&amp;P 500 are both cap-weighted indexes.<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_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> With cap-weighted indexes, each component's total market capitalization is proportionately used to determine the index level. In this methodology, components with a higher market capitalization will have more weight in the composite, and components with a lower market capitalization will have less weight in the composite. For a stock to arrive at a cap-weighted index's total market capitalization, the price per share of each company is multiplied by its total number of shares outstanding: </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"> Example of a Cap-Weighted Composite Index </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> <li>Stock A: Price per share equals $25 and total shares outstanding equal 1,000,000</li><li>Stock B: Price per share equals $50 and total shares outstanding equal 500,000</li><li>Stock C: Price per share equals $50 and total shares outstanding equal 1,000,000</li> </ul> <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"> Their respective market caps would be: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_30-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> <li>Stock A = $25 x 1,000,000 = $25,000,000</li><li>Stock B = $50 x 500,000 = $25,000,000</li><li>Stock C = $50 x 1,000,000 = $50,000,000</li> </ul> <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"> Thus, the total market capitalization of the composite would be $100,000,000. Stock A's weight would be 25%, Stock B's weight would be 25%, and Stock C's weight would be 50%. Typically, an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indexdivisor.asp" rel="noopener noreferrer">index divisor</a> would be used to render the index manageable for reporting purposes. In this case, the divisor would be $100,000, and the initial composite level would be equal to $100,000,000 / $100,000 = 1,000. </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 a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/priceweightedindex.asp" rel="noopener noreferrer">price-weighted index</a>, components are weighted by price (not by market capitalization or by the number of shares outstanding). Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock at a lower price, and therefore, that particular stock will have a greater impact on the index’s overall performance. </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"> Example of a Price-Weighted Composite Index </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_38-0"> In a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/priceweightedindex.asp" rel="noopener noreferrer">price-weighted index</a>, components are weighted by price, not by market capitalization or shares outstanding. Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock with a lower price, and will thus have a greater say in the index’s performance: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_39-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> <li>Stock A: price equals $3</li><li>Stock B: price equals $6</li><li>Stock C: price equals $30</li><li>Stock D: price equals $10</li><li>Stock E: price equals $1</li> </ul> <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"> The composite level would be found by adding the components, then dividing that sum by the number of components. In this case, the composite level would be $10 ($50 / 5 = $10). </p></div>

## What Is a Composite Index? A composite index is a statistical tool that groups together many different [equities](https://www.investopedia.com/terms/e/equity.asp), securities, or indexes in order to create a representation of overall market or sector performance. Typically, the elements of a composite index are combined in a standardized way so that large amounts of data can be presented easily. ### Key Takeaways * A composite index is a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance. * Composite indexes are used to conduct investment analyses, measure economic trends, and forecast market activity. * The goal of a well-diversified portfolio is usually to outperform the main composite indexes—the Nasdaq Composite, the Dow, and the S&P 500. ## Understanding a Composite Index Composite indexes are created to conduct investment analysis, measure economic trends, and forecast market activity. They are also used as tools for tracking securities' price changes relative to an entire stock market or sector. They thus provide a useful benchmark against which to measure an investor's portfolio. The goal of a [well-diversified portfolio](https://www.investopedia.com/terms/d/diversification.asp) is usually to outperform the main composite indexes. Three of the most-followed indexes in the United States are the Nasdaq Composite, Dow Jones Industrial Average (the Dow), and the Standard & Poor's 500 Index (S&P 500). ## Types of Composite Indexes ### The Nasdaq Composite The [Nasdaq Composite](https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp) was first established in 1971 with only 50 companies. Today, it is an index that includes more than 3,000 individual, common equities that are listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated using a [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp) (market cap)-weighted methodology (also referred to as a cap-weighted methodology). ### Standard & Poor's 500 Index The [Standard & Poor's 500 Index](https://www.investopedia.com/terms/s/sp500.asp) (S&P 500) is widely regarded as the best barometer of large U.S. equities. It contains the 500 largest, U.S. publicly-traded companies by [market value](https://www.investopedia.com/terms/m/marketvalue.asp). The S&P 500 is also a cap-weighted index.  ### Dow Jones Industrial Average The Dow Jones Industrial Average (also referred to simply as "the Dow" or "the Dow Jones") is a price-weighted composite index. When you read in the news that the "market is up," they are generally referring to the Dow. ## Cap-Weighted Index vs. Price-Weighted Index Unlike the Dow (which is a price-weighted index), the Nasdaq and the S&P 500 are both cap-weighted indexes. With cap-weighted indexes, each component's total market capitalization is proportionately used to determine the index level. In this methodology, components with a higher market capitalization will have more weight in the composite, and components with a lower market capitalization will have less weight in the composite. For a stock to arrive at a cap-weighted index's total market capitalization, the price per share of each company is multiplied by its total number of shares outstanding: ### Example of a Cap-Weighted Composite Index * Stock A: Price per share equals $25 and total shares outstanding equal 1,000,000 * Stock B: Price per share equals $50 and total shares outstanding equal 500,000 * Stock C: Price per share equals $50 and total shares outstanding equal 1,000,000 Their respective market caps would be: * Stock A = $25 x 1,000,000 = $25,000,000 * Stock B = $50 x 500,000 = $25,000,000 * Stock C = $50 x 1,000,000 = $50,000,000 Thus, the total market capitalization of the composite would be $100,000,000. Stock A's weight would be 25%, Stock B's weight would be 25%, and Stock C's weight would be 50%. Typically, an [index divisor](https://www.investopedia.com/terms/i/indexdivisor.asp) would be used to render the index manageable for reporting purposes. In this case, the divisor would be $100,000, and the initial composite level would be equal to $100,000,000 / $100,000 = 1,000. In a [price-weighted index](https://www.investopedia.com/terms/p/priceweightedindex.asp), components are weighted by price (not by market capitalization or by the number of shares outstanding). Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock at a lower price, and therefore, that particular stock will have a greater impact on the index’s overall performance. ### Example of a Price-Weighted Composite Index In a [price-weighted index](https://www.investopedia.com/terms/p/priceweightedindex.asp), components are weighted by price, not by market capitalization or shares outstanding. Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock with a lower price, and will thus have a greater say in the index’s performance: * Stock A: price equals $3 * Stock B: price equals $6 * Stock C: price equals $30 * Stock D: price equals $10 * Stock E: price equals $1 The composite level would be found by adding the components, then dividing that sum by the number of components. In this case, the composite level would be $10 ($50 / 5 = $10).

What Is a Composite Index? A composite index is a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance. Typically, the elements of a composite index are combined in a standardized way so that large amounts of data can be presented easily. Key Takeaways A composite index is a statistical tool that groups together many different equities, securities, or indexes in order to create a representation of overall market or sector performance.Composite indexes are used to conduct investment analyses, measure economic trends, and forecast market activity.The goal of a well-diversified portfolio is usually to outperform the main composite indexes—the Nasdaq Composite, the Dow, and the S&P 500. Understanding a Composite Index Composite indexes are created to conduct investment analysis, measure economic trends, and forecast market activity. They are also used as tools for tracking securities' price changes relative to an entire stock market or sector. They thus provide a useful benchmark against which to measure an investor's portfolio. The goal of a well-diversified portfolio is usually to outperform the main composite indexes. Three of the most-followed indexes in the United States are the Nasdaq Composite, Dow Jones Industrial Average (the Dow), and the Standard & Poor's 500 Index (S&P 500). Types of Composite Indexes The Nasdaq Composite The Nasdaq Composite was first established in 1971 with only 50 companies. Today, it is an index that includes more than 3,000 individual, common equities that are listed on the Nasdaq Stock Market. The Nasdaq Composite is calculated using a market capitalization (market cap)-weighted methodology (also referred to as a cap-weighted methodology). Standard & Poor's 500 Index The Standard & Poor's 500 Index (S&P 500) is widely regarded as the best barometer of large U.S. equities. It contains the 500 largest, U.S. publicly-traded companies by market value. The S&P 500 is also a cap-weighted index.  Dow Jones Industrial Average The Dow Jones Industrial Average (also referred to simply as "the Dow" or "the Dow Jones") is a price-weighted composite index. When you read in the news that the "market is up," they are generally referring to the Dow. Cap-Weighted Index vs. Price-Weighted Index Unlike the Dow (which is a price-weighted index), the Nasdaq and the S&P 500 are both cap-weighted indexes. With cap-weighted indexes, each component's total market capitalization is proportionately used to determine the index level. In this methodology, components with a higher market capitalization will have more weight in the composite, and components with a lower market capitalization will have less weight in the composite. For a stock to arrive at a cap-weighted index's total market capitalization, the price per share of each company is multiplied by its total number of shares outstanding: Example of a Cap-Weighted Composite Index Stock A: Price per share equals $25 and total shares outstanding equal 1,000,000Stock B: Price per share equals $50 and total shares outstanding equal 500,000Stock C: Price per share equals $50 and total shares outstanding equal 1,000,000 Their respective market caps would be: Stock A = $25 x 1,000,000 = $25,000,000Stock B = $50 x 500,000 = $25,000,000Stock C = $50 x 1,000,000 = $50,000,000 Thus, the total market capitalization of the composite would be $100,000,000. Stock A's weight would be 25%, Stock B's weight would be 25%, and Stock C's weight would be 50%. Typically, an index divisor would be used to render the index manageable for reporting purposes. In this case, the divisor would be $100,000, and the initial composite level would be equal to $100,000,000 / $100,000 = 1,000. In a price-weighted index, components are weighted by price (not by market capitalization or by the number of shares outstanding). Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock at a lower price, and therefore, that particular stock will have a greater impact on the index’s overall performance. Example of a Price-Weighted Composite Index In a price-weighted index, components are weighted by price, not by market capitalization or shares outstanding. Each stock influences the index in proportion to its price per share. A stock with a higher price will be given more weight than a stock with a lower price, and will thus have a greater say in the index’s performance: Stock A: price equals $3Stock B: price equals $6Stock C: price equals $30Stock D: price equals $10Stock E: price equals $1 The composite level would be found by adding the components, then dividing that sum by the number of components. In this case, the composite level would be $10 ($50 / 5 = $10).

https://www.investopedia.com/programmer-who-built-robintrack-5025228

The 23-Year-Old Programmer Behind Robintrack

<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 the Robinhood trader has become symbolic of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/robinhood-and-its-merry-traders-steal-the-show-4847193">young retail investors thronging to the stock market</a> during this volatile period, it is because financial media and Wall Street had a window into the activity on the platform, which has over 13 million users. Everyone, from analysts at Goldman Sachs and Barclays, to Bloomberg, CNBC and Investopedia, have to thank a 23-year-old with a deep interest in building, maintaining and sharing data-based tools on his own computer. </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-robintracknet"></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"> Robintrack.net </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> In March 2018, Casey Primozic, an undergraduate student at Valparaiso University built Robintrack as a side project while he worked part-time at a cryptocurrency startup. As the name suggests, the website tracks the number of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/robinhood-review-4587919">Robinhood</a> users holding different stocks over time. This information can be used to chart the relationship between price and popularity of a particular stock and build lists that rank the largest changes in popularity in a day, a week, or even a month. It’s a simple idea, but no one else thought to do it. Not even the hedge funds who the creator says visit Robintrack now to download its data. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_5-0"></div> <blockquote class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> "The data was sort of just hidden on the Robinhood site..." </blockquote> <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 had built other tracking websites for video games and music, and I saw an opportunity to do the same thing for Robinhood traders. The data was sort of just hidden on the Robinhood site, it was kind of nestled in there. I didn’t see anyone doing anything with it, but it seemed like it could have some value," said Primozic, a Seattle resident, whose name you’ll find at the bottom of the Robintrack page in its signature neon pink font. He has been a user on the trading platform for years. </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"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Retail trading activity has soared during the pandemic</li><li>Robinhood added 3 million users in the first 4 months of 2020</li><li>Robintrack was built as a side project by a college student in March 2018</li><li>It is used as a data source by financial institutions, media, the general public</li><li>The website now sees 165,000 individual users visit a week</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"> "Robinhood publishes that popularity number publicly. You don’t have to have a Robinhood account to access it or anything like that. They have provided a service to the community, which I really admire. I just collect that data from their API hourly for all the different stocks available on their platform," he explained. </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"> There’s nothing stopping financial institutions sending their tech teams after the data from Robinhood today, but Primozic has been collecting it for years and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://cprimozic.net/" rel="nofollow">https://cprimozic.net/</a><span class="ql-inline-citation" data-cite="1"></span> has the historical data that paints the complete picture they are after. "As far as I know, I'm the only person who's been collecting this data for any meaningful amount of time," he said. </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:37.0%;"> <img alt="Robintrack" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/EnqRZ8L9PhUo31rzur0jG20Va0k=/1410x0/filters:no_upscale():max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/AR5JiRsfAnJglWPGbQ8R_jPrhTc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png" data-srcset="https://www.investopedia.com/thmb/bkozfXE1uztTwA4JTE5PnsiG7Xg=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png 750w" data-tracking-container="true" height="523" id="mntl-sc-block-image_1-0" width="1410"/> <noscript> <img alt="Robintrack" class="img--noscript universal-image__image" height="523" sizes="750px" src="https://www.investopedia.com/thmb/AR5JiRsfAnJglWPGbQ8R_jPrhTc=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png" srcset="https://www.investopedia.com/thmb/bkozfXE1uztTwA4JTE5PnsiG7Xg=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png 750w" width="1410"/> </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">Hertz stock price and popularity since 2018. Source: Robintrack.</span> </figcaption></figure> <span class="heading-toc" id="toc-programming-and-building"></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"> Programming and Building </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Growing up as the son of a former IBM executive and an editor, Primozic was always around computers at an early age and developed a love for programming. He was also inspired by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cryptocurrency.asp">cryptocurrency</a> community. "There's a lot of innovation going on," he said. "A lot of people building stuff who are regular people who work in tech rather than people who are parts of big institutional firms and whatnot." </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"> Robintrack is one of many projects he has shared online, but none have seen anything close to its success. In the week before I spoke with him, the website saw 165,000 different users visit and close to 300,000 sessions. It experienced a surge in traffic starting in April as interest in retail investors grew and more people began citing Robintrack. The Twitter page, which automatically shares changes in stock popularity on Robinhood in the day, now has over 31,000 followers. </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"> "It’s definitely kind of a stars aligned situation where the data I’m providing is both of high interest to the public and as well as all the retail traders entering the market," said Primozic commenting on the success. It’s all still new and exciting enough that he tells his mother the number of people that visited the site that day when they talk on the phone. </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-square figure-high-res" id="mntl-sc-block_24-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:93.9%;"> <img alt="Robintrack" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/_KR5aAKb3cP4WJfpTSFkcYhz9JY=/1186x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/hc9eEDzLy_nbgPRHw7BUygYD_NE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png" data-srcset="https://www.investopedia.com/thmb/_LhgtGUz1-V319QQYAWtUpmEnbA=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png 750w" data-tracking-container="true" height="1114" id="mntl-sc-block-image_2-0" width="1186"/> <noscript> <img alt="Robintrack" class="img--noscript universal-image__image" height="1114" sizes="750px" src="https://www.investopedia.com/thmb/hc9eEDzLy_nbgPRHw7BUygYD_NE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png" srcset="https://www.investopedia.com/thmb/_LhgtGUz1-V319QQYAWtUpmEnbA=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png 750w" width="1186"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-text">Stocks with the biggest popularity increases in the last month. Source: Robintrack.</span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> "The most recent increase in visitors has definitely been motivating me to write a few improvements and features for the site," said Alex Jensen, Primozic's childhood friend who helped build certain aspects of the website. "He had made a few similar sites previously - mostly for online games. Robintrack stood out from those as being for a more general audience. I remember wanting him to push it live as fast as possible." </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-wall-street-comes-knocking"></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"> Wall Street Comes Knocking </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> One of the things financial historians will note about this time is the fascination with small investors. The media and Wall Street are used to following "smart money," but very rarely do they pay this much attention to, and comment on, the decisions of retail investors as a group. </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"> When Robintrack, a website run by a young individual holding a full-time job elsewhere, looked like a great way to gain insight, it had to go through some vetting. "There’s been several different banks and hedge funds who have reached out to me to get more information from a regulatory aspect, trying to figure out how I’m sourcing the data, trying to figure out if it’s something they can actually use or if it’s a valid source for them," said Primozic, who feels a big sense of responsibility now to keep his data accurate and convey no bias. </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"> He also doesn’t plan on ever charging for access to the website because he wants to keep the data accessible. He runs advertising on it to pay for things like server costs, but believes subscriptions would go against what Robinhood is trying to do. He said, "I wanted to match the fact that they’re providing the data free for anyone to use to try and make the markets more transparent. Hedge funds and other big institutions, they’ll have access to things like this in other ways." </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></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_34-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:76.2%;"> <img alt="Robintrack creator Casey Primozic" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/8qGBwoH9khBhyybbK67VJknviYs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/8qGBwoH9khBhyybbK67VJknviYs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg" data-srcset="https://www.investopedia.com/thmb/mmzb42zMcXqzz8oT0vBiQeyXsrk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg 750w" data-tracking-container="true" height="2265" id="mntl-sc-block-image_3-0" width="2972"/> <noscript> <img alt="Robintrack creator Casey Primozic" class="img--noscript universal-image__image" height="2265" sizes="750px" src="https://www.investopedia.com/thmb/8qGBwoH9khBhyybbK67VJknviYs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg" srcset="https://www.investopedia.com/thmb/mmzb42zMcXqzz8oT0vBiQeyXsrk=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg 750w" width="2972"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_3-0"> <span class="figure-article-caption-text">23-year-old Casey Primozic, Robintrack's creator.</span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Robinhood, of course, knows about the website. An employee spotted it its early days and shared it on the company Slack. It was impressive enough that a recruiter at the company reached out and called Primozic in for an interview. As the site gains more followers, many have gotten in touch, including those in high places. </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"> "The biggest impact it’s had for me personally is the amount of people I’ve got to meet and get in contact with. People who run ETF-issuing funds and people working at prominent financial institutions and people trading. All these high-profile Twitter accounts retweet my content, stuff like that," he said. </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"> The fact that what he built was a big deal really dawned on him when the Robintrack Twitter account posted on a day the stock markets were closed. It indicated all values as zero since there were no changes. "Previously no one really cared, I only had a couple hundred people following. Now that I have tens of thousands of followers it was seen as a comedic event, a corporate flub in a way. It was the most popular tweet of the entire month!" </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>

If the Robinhood trader has become symbolic of the [young retail investors thronging to the stock market](https://www.investopedia.com/robinhood-and-its-merry-traders-steal-the-show-4847193) during this volatile period, it is because financial media and Wall Street had a window into the activity on the platform, which has over 13 million users. Everyone, from analysts at Goldman Sachs and Barclays, to Bloomberg, CNBC and Investopedia, have to thank a 23-year-old with a deep interest in building, maintaining and sharing data-based tools on his own computer. ## Robintrack.net In March 2018, Casey Primozic, an undergraduate student at Valparaiso University built Robintrack as a side project while he worked part-time at a cryptocurrency startup. As the name suggests, the website tracks the number of [Robinhood](https://www.investopedia.com/robinhood-review-4587919) users holding different stocks over time. This information can be used to chart the relationship between price and popularity of a particular stock and build lists that rank the largest changes in popularity in a day, a week, or even a month. It’s a simple idea, but no one else thought to do it. Not even the hedge funds who the creator says visit Robintrack now to download its data. > "The data was sort of just hidden on the Robinhood site..." "I had built other tracking websites for video games and music, and I saw an opportunity to do the same thing for Robinhood traders. The data was sort of just hidden on the Robinhood site, it was kind of nestled in there. I didn’t see anyone doing anything with it, but it seemed like it could have some value," said Primozic, a Seattle resident, whose name you’ll find at the bottom of the Robintrack page in its signature neon pink font. He has been a user on the trading platform for years. ### * Retail trading activity has soared during the pandemic * Robinhood added 3 million users in the first 4 months of 2020 * Robintrack was built as a side project by a college student in March 2018 * It is used as a data source by financial institutions, media, the general public * The website now sees 165,000 individual users visit a week "Robinhood publishes that popularity number publicly. You don’t have to have a Robinhood account to access it or anything like that. They have provided a service to the community, which I really admire. I just collect that data from their API hourly for all the different stocks available on their platform," he explained. There’s nothing stopping financial institutions sending their tech teams after the data from Robinhood today, but Primozic has been collecting it for years and <https://cprimozic.net/> has the historical data that paints the complete picture they are after. "As far as I know, I'm the only person who's been collecting this data for any meaningful amount of time," he said. ![Robintrack]() :max_bytes(150000):strip_icc()/echarts3-791826e2841041bba3ee812003ba41b4.png) Hertz stock price and popularity since 2018. Source: Robintrack. ## Programming and Building Growing up as the son of a former IBM executive and an editor, Primozic was always around computers at an early age and developed a love for programming. He was also inspired by the [cryptocurrency](https://www.investopedia.com/terms/c/cryptocurrency.asp) community. "There's a lot of innovation going on," he said. "A lot of people building stuff who are regular people who work in tech rather than people who are parts of big institutional firms and whatnot." Robintrack is one of many projects he has shared online, but none have seen anything close to its success. In the week before I spoke with him, the website saw 165,000 different users visit and close to 300,000 sessions. It experienced a surge in traffic starting in April as interest in retail investors grew and more people began citing Robintrack. The Twitter page, which automatically shares changes in stock popularity on Robinhood in the day, now has over 31,000 followers. "It’s definitely kind of a stars aligned situation where the data I’m providing is both of high interest to the public and as well as all the retail traders entering the market," said Primozic commenting on the success. It’s all still new and exciting enough that he tells his mother the number of people that visited the site that day when they talk on the phone. ![Robintrack]() :max_bytes(150000):strip_icc()/ScreenShot2020-06-18at12.10.44PM-6c05128ac56f4dec87597e647230fd43.png) Stocks with the biggest popularity increases in the last month. Source: Robintrack. "The most recent increase in visitors has definitely been motivating me to write a few improvements and features for the site," said Alex Jensen, Primozic's childhood friend who helped build certain aspects of the website. "He had made a few similar sites previously - mostly for online games. Robintrack stood out from those as being for a more general audience. I remember wanting him to push it live as fast as possible." ## Wall Street Comes Knocking One of the things financial historians will note about this time is the fascination with small investors. The media and Wall Street are used to following "smart money," but very rarely do they pay this much attention to, and comment on, the decisions of retail investors as a group. When Robintrack, a website run by a young individual holding a full-time job elsewhere, looked like a great way to gain insight, it had to go through some vetting. "There’s been several different banks and hedge funds who have reached out to me to get more information from a regulatory aspect, trying to figure out how I’m sourcing the data, trying to figure out if it’s something they can actually use or if it’s a valid source for them," said Primozic, who feels a big sense of responsibility now to keep his data accurate and convey no bias. He also doesn’t plan on ever charging for access to the website because he wants to keep the data accessible. He runs advertising on it to pay for things like server costs, but believes subscriptions would go against what Robinhood is trying to do. He said, "I wanted to match the fact that they’re providing the data free for anyone to use to try and make the markets more transparent. Hedge funds and other big institutions, they’ll have access to things like this in other ways." ![Robintrack creator Casey Primozic]() :max_bytes(150000):strip_icc()/caseyp-eb58572a45cc4c0b87110823e72e2c41.jpg) 23-year-old Casey Primozic, Robintrack's creator. Robinhood, of course, knows about the website. An employee spotted it its early days and shared it on the company Slack. It was impressive enough that a recruiter at the company reached out and called Primozic in for an interview. As the site gains more followers, many have gotten in touch, including those in high places. "The biggest impact it’s had for me personally is the amount of people I’ve got to meet and get in contact with. People who run ETF-issuing funds and people working at prominent financial institutions and people trading. All these high-profile Twitter accounts retweet my content, stuff like that," he said. The fact that what he built was a big deal really dawned on him when the Robintrack Twitter account posted on a day the stock markets were closed. It indicated all values as zero since there were no changes. "Previously no one really cared, I only had a couple hundred people following. Now that I have tens of thousands of followers it was seen as a comedic event, a corporate flub in a way. It was the most popular tweet of the entire month!" Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

If the Robinhood trader has become symbolic of the young retail investors thronging to the stock market during this volatile period, it is because financial media and Wall Street had a window into the activity on the platform, which has over 13 million users. Everyone, from analysts at Goldman Sachs and Barclays, to Bloomberg, CNBC and Investopedia, have to thank a 23-year-old with a deep interest in building, maintaining and sharing data-based tools on his own computer. Robintrack.net In March 2018, Casey Primozic, an undergraduate student at Valparaiso University built Robintrack as a side project while he worked part-time at a cryptocurrency startup. As the name suggests, the website tracks the number of Robinhood users holding different stocks over time. This information can be used to chart the relationship between price and popularity of a particular stock and build lists that rank the largest changes in popularity in a day, a week, or even a month. It’s a simple idea, but no one else thought to do it. Not even the hedge funds who the creator says visit Robintrack now to download its data. "The data was sort of just hidden on the Robinhood site..." "I had built other tracking websites for video games and music, and I saw an opportunity to do the same thing for Robinhood traders. The data was sort of just hidden on the Robinhood site, it was kind of nestled in there. I didn’t see anyone doing anything with it, but it seemed like it could have some value," said Primozic, a Seattle resident, whose name you’ll find at the bottom of the Robintrack page in its signature neon pink font. He has been a user on the trading platform for years. Retail trading activity has soared during the pandemicRobinhood added 3 million users in the first 4 months of 2020Robintrack was built as a side project by a college student in March 2018It is used as a data source by financial institutions, media, the general publicThe website now sees 165,000 individual users visit a week "Robinhood publishes that popularity number publicly. You don’t have to have a Robinhood account to access it or anything like that. They have provided a service to the community, which I really admire. I just collect that data from their API hourly for all the different stocks available on their platform," he explained. There’s nothing stopping financial institutions sending their tech teams after the data from Robinhood today, but Primozic has been collecting it for years and https://cprimozic.net/ has the historical data that paints the complete picture they are after. "As far as I know, I'm the only person who's been collecting this data for any meaningful amount of time," he said. Hertz stock price and popularity since 2018. Source: Robintrack. Programming and Building Growing up as the son of a former IBM executive and an editor, Primozic was always around computers at an early age and developed a love for programming. He was also inspired by the cryptocurrency community. "There's a lot of innovation going on," he said. "A lot of people building stuff who are regular people who work in tech rather than people who are parts of big institutional firms and whatnot." Robintrack is one of many projects he has shared online, but none have seen anything close to its success. In the week before I spoke with him, the website saw 165,000 different users visit and close to 300,000 sessions. It experienced a surge in traffic starting in April as interest in retail investors grew and more people began citing Robintrack. The Twitter page, which automatically shares changes in stock popularity on Robinhood in the day, now has over 31,000 followers. "It’s definitely kind of a stars aligned situation where the data I’m providing is both of high interest to the public and as well as all the retail traders entering the market," said Primozic commenting on the success. It’s all still new and exciting enough that he tells his mother the number of people that visited the site that day when they talk on the phone. Stocks with the biggest popularity increases in the last month. Source: Robintrack. "The most recent increase in visitors has definitely been motivating me to write a few improvements and features for the site," said Alex Jensen, Primozic's childhood friend who helped build certain aspects of the website. "He had made a few similar sites previously - mostly for online games. Robintrack stood out from those as being for a more general audience. I remember wanting him to push it live as fast as possible." Wall Street Comes Knocking One of the things financial historians will note about this time is the fascination with small investors. The media and Wall Street are used to following "smart money," but very rarely do they pay this much attention to, and comment on, the decisions of retail investors as a group. When Robintrack, a website run by a young individual holding a full-time job elsewhere, looked like a great way to gain insight, it had to go through some vetting. "There’s been several different banks and hedge funds who have reached out to me to get more information from a regulatory aspect, trying to figure out how I’m sourcing the data, trying to figure out if it’s something they can actually use or if it’s a valid source for them," said Primozic, who feels a big sense of responsibility now to keep his data accurate and convey no bias. He also doesn’t plan on ever charging for access to the website because he wants to keep the data accessible. He runs advertising on it to pay for things like server costs, but believes subscriptions would go against what Robinhood is trying to do. He said, "I wanted to match the fact that they’re providing the data free for anyone to use to try and make the markets more transparent. Hedge funds and other big institutions, they’ll have access to things like this in other ways." 23-year-old Casey Primozic, Robintrack's creator. Robinhood, of course, knows about the website. An employee spotted it its early days and shared it on the company Slack. It was impressive enough that a recruiter at the company reached out and called Primozic in for an interview. As the site gains more followers, many have gotten in touch, including those in high places. "The biggest impact it’s had for me personally is the amount of people I’ve got to meet and get in contact with. People who run ETF-issuing funds and people working at prominent financial institutions and people trading. All these high-profile Twitter accounts retweet my content, stuff like that," he said. The fact that what he built was a big deal really dawned on him when the Robintrack Twitter account posted on a day the stock markets were closed. It indicated all values as zero since there were no changes. "Previously no one really cared, I only had a couple hundred people following. Now that I have tens of thousands of followers it was seen as a comedic event, a corporate flub in a way. It was the most popular tweet of the entire month!" Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/a-guide-to-veteran-affairs-loan-closing-costs-5194259

A Guide to Veteran Affairs Loan Closing Costs

<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 they're stationed abroad or serving stateside, the American armed forces get to enjoy a bevy of benefits when their tenure in the military ends, such as specially catered health benefits and free college through the Post-9/11 GI Bill.<span class="ql-inline-citation" data-cite="2"></span> These benefits also extend to housing assistance through Veterans Affairs-backed home loans. And although those loans come with great terms and no need for a down payment, they still have some added costs attached. </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 Department of Veterans Affairs offers home purchase loans, refinancing loans, and a direct loan for Native American veterans.</li><li>Funding fees for VA-backed construction and home purchase loans range anywhere from 1.4% to 2.3% for the first use. Rates remain largely flat after first use.<span class="ql-inline-citation" data-cite="1"></span></li><li>Certain costs are only paid by the seller, while others will be up to the buyer and the seller to negotiate who pays.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-are-mortgage-closing-costs"></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 Are Mortgage Closing Costs? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> Though the homebuying process is already an expensive effort, mortgage <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/closingcosts.asp">closing costs</a> close the gap between the property's final price and the added expenses that complete the purchase. Those additional costs, which are sometimes called settlement charges, are paid to the mortgage lender for creating and servicing the loan. Closing costs may include <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/origination-fee.asp">origination fees</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/home-appraisal-checklist-5085295">appraisal fees</a>, land surveys, taxes, and other associated charges. Though the buyer will be responsible for paying a majority of these fees, some costs are covered by the seller, while others can be negotiated. </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 2021, the average closing costs for a homebuyer rose 13.4% from the previous year, with an average cost of $6,905.<span class="ql-inline-citation" data-cite="6"></span> According to the National Association of Realtors, the median existing-home sales price in April 2022 was $391,200. If someone bought a home at that price and the mortgage had 5% in closing costs attached to it, the final cost would be an additional $19,560.<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_9-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> An outline of these costs is included in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/loan-estimate-5120625">loan estimate</a> that lenders are required to provide within three business days of receiving a mortgage application.<span class="ql-inline-citation" data-cite="3"></span> In many cases, those initial closing cost estimates may increase or decrease slightly. If that's the case, the final amount will be disclosed next to the original estimate, along with a column outlining the difference, in the lender's <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/closingstatement.asp">closing disclosure form</a>, which is provided at least three days prior to <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/closing.asp">closing</a>. </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-what-makes-va-closing-costs-different"></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"> What Makes VA Closing Costs Different? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Mortgages backed by the VA are inherently different from standard mortgages because the Department of Veteran Affairs (VA) promises lenders that they will be able to recoup some—or all—of the loan if the home goes into foreclosure. That kind of backing significantly lowers the amount of risk the lender anticipates by providing the loan, thus allowing veterans to get approved even if they don't offer a down payment. </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"> Because lenders generally see them as a safer bet, VA-backed mortgages offer lower closing costs. Though typical closing costs range anywhere from 2% to 5% of the home's purchase price, similar costs for VA-backed loans have a funding fee rate that sits between 1.4% and 2.3%, according to the VA.<span class="ql-inline-citation" data-cite="8"></span> Using that same example from above, a home listed at $391,200 would have only $8,998 in closing costs.<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> <span class="heading-toc" id="toc-common-va-loan-closing-costs-and-who-pays-them"></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"> Common VA Loan Closing Costs and Who Pays Them </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Though they largely function the same way other mortgages do, VA-backed mortgages feature many of the same closing costs. Still, there's some variation between the costs linked to VA-backed mortgages and regular mortgages. It's important to note that according to the VA, a seller cannot pay more than 4% of the total loan in fees, otherwise known as seller's concessions. That rule only applies to some closing costs, such as the VA funding fee. The rule doesn't cover loan discount points.<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"> Below are some of the closing costs you can expect to see on a loan estimate for a VA-backed mortgage. </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"> Fees the seller must cover </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <li><strong>Real estate professionals' commission fees. </strong>Realtors have to get paid too, so any commission fees they would collect from the sale of a home or property are covered by the seller.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Buyer broker fee. </strong>Similar to the commission fees listed above, this covers any brokerage fees a real estate broker may charge. In most cases, both the listing broker and the buyer's agent's broker share in the commission.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Brokerage fee. </strong>A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokerage-fee.asp">brokerage fee</a> is required when a broker is engaged to complete transactions or fulfill other specialized needs, including purchases, sales, and negotiations.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Termite report. </strong>No one wants to get a house that's at risk of a termite infestation. Because the seller is trying to leave that home, they are responsible for proving that the house is structurally sound and not getting eaten away by the voracious bugs. This is always the seller's responsibility unless the buyer is using a reference loan.<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_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"> Fees the buyer can cover </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <li><strong>VA funding fee. </strong>This is a one-time payment that the veteran, service member, or survivor pays on a VA-backed loan. According to the VA, the fee "helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance."<span class="ql-inline-citation" data-cite="8"></span></li> <li><strong>Loan origination fee. </strong>This is simply the fee that a lender charges when processing a loan application. This kind of fee is generally based on the total loan amount and can be negotiated.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Loan discount points. </strong>These points can serve as a sort of tradeoff between the buyer's initial costs and their monthly payment moving forward. These points come at a financial cost, which is calculated in comparison to the loan amount. Using these points can result in a lower interest rate because you're paying more up front.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>VA appraisal fee. </strong>If you're going to use the VA's money to buy your new house, the property is going to need to be appraised by someone certified through the VA.<span class="ql-inline-citation" data-cite="5"></span> This fee helps cover that appraiser's time, travel, and other needs for the assessment. Unlike some of the other fees, this one can potentially be negotiated with the seller to be added to their list of concessions.<span class="ql-inline-citation" data-cite="1"></span></li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><strong>Hazard and title insurance, state and local taxes, and real estate taxes. </strong>As the soon-to-be new owner of the property or home, the buyer will have to pay for continued hazard insurance coverage, as well as the annual taxes associated with the property.<span class="ql-inline-citation" data-cite="1"></span></li> <li><strong>Recording fee. </strong>When the sale is complete, a record of its completion will need to be noted by the local government. A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/recordingfee.asp">recording fee</a> is charged so the transaction can become part of the public record.<span class="ql-inline-citation" data-cite="1"></span></li> </ul></div>

Whether they're stationed abroad or serving stateside, the American armed forces get to enjoy a bevy of benefits when their tenure in the military ends, such as specially catered health benefits and free college through the Post-9/11 GI Bill. These benefits also extend to housing assistance through Veterans Affairs-backed home loans. And although those loans come with great terms and no need for a down payment, they still have some added costs attached. ### Key Takeaways * The Department of Veterans Affairs offers home purchase loans, refinancing loans, and a direct loan for Native American veterans. * Funding fees for VA-backed construction and home purchase loans range anywhere from 1.4% to 2.3% for the first use. Rates remain largely flat after first use. * Certain costs are only paid by the seller, while others will be up to the buyer and the seller to negotiate who pays. ## What Are Mortgage Closing Costs? Though the homebuying process is already an expensive effort, mortgage [closing costs](https://www.investopedia.com/terms/c/closingcosts.asp) close the gap between the property's final price and the added expenses that complete the purchase. Those additional costs, which are sometimes called settlement charges, are paid to the mortgage lender for creating and servicing the loan. Closing costs may include [origination fees](https://www.investopedia.com/terms/o/origination-fee.asp), [appraisal fees](https://www.investopedia.com/home-appraisal-checklist-5085295), land surveys, taxes, and other associated charges. Though the buyer will be responsible for paying a majority of these fees, some costs are covered by the seller, while others can be negotiated. In 2021, the average closing costs for a homebuyer rose 13.4% from the previous year, with an average cost of $6,905. According to the National Association of Realtors, the median existing-home sales price in April 2022 was $391,200. If someone bought a home at that price and the mortgage had 5% in closing costs attached to it, the final cost would be an additional $19,560. An outline of these costs is included in the [loan estimate](https://www.investopedia.com/loan-estimate-5120625) that lenders are required to provide within three business days of receiving a mortgage application. In many cases, those initial closing cost estimates may increase or decrease slightly. If that's the case, the final amount will be disclosed next to the original estimate, along with a column outlining the difference, in the lender's [closing disclosure form](https://www.investopedia.com/terms/c/closingstatement.asp), which is provided at least three days prior to [closing](https://www.investopedia.com/terms/c/closing.asp). ## What Makes VA Closing Costs Different? Mortgages backed by the VA are inherently different from standard mortgages because the Department of Veteran Affairs (VA) promises lenders that they will be able to recoup some—or all—of the loan if the home goes into foreclosure. That kind of backing significantly lowers the amount of risk the lender anticipates by providing the loan, thus allowing veterans to get approved even if they don't offer a down payment. Because lenders generally see them as a safer bet, VA-backed mortgages offer lower closing costs. Though typical closing costs range anywhere from 2% to 5% of the home's purchase price, similar costs for VA-backed loans have a funding fee rate that sits between 1.4% and 2.3%, according to the VA. Using that same example from above, a home listed at $391,200 would have only $8,998 in closing costs. ## Common VA Loan Closing Costs and Who Pays Them Though they largely function the same way other mortgages do, VA-backed mortgages feature many of the same closing costs. Still, there's some variation between the costs linked to VA-backed mortgages and regular mortgages. It's important to note that according to the VA, a seller cannot pay more than 4% of the total loan in fees, otherwise known as seller's concessions. That rule only applies to some closing costs, such as the VA funding fee. The rule doesn't cover loan discount points. Below are some of the closing costs you can expect to see on a loan estimate for a VA-backed mortgage. ### Fees the seller must cover * **Real estate professionals' commission fees.** Realtors have to get paid too, so any commission fees they would collect from the sale of a home or property are covered by the seller. * **Buyer broker fee.** Similar to the commission fees listed above, this covers any brokerage fees a real estate broker may charge. In most cases, both the listing broker and the buyer's agent's broker share in the commission. * **Brokerage fee.** A [brokerage fee](https://www.investopedia.com/terms/b/brokerage-fee.asp) is required when a broker is engaged to complete transactions or fulfill other specialized needs, including purchases, sales, and negotiations. * **Termite report.** No one wants to get a house that's at risk of a termite infestation. Because the seller is trying to leave that home, they are responsible for proving that the house is structurally sound and not getting eaten away by the voracious bugs. This is always the seller's responsibility unless the buyer is using a reference loan. ### Fees the buyer can cover * **VA funding fee.** This is a one-time payment that the veteran, service member, or survivor pays on a VA-backed loan. According to the VA, the fee "helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance." * **Loan origination fee.** This is simply the fee that a lender charges when processing a loan application. This kind of fee is generally based on the total loan amount and can be negotiated. * **Loan discount points.** These points can serve as a sort of tradeoff between the buyer's initial costs and their monthly payment moving forward. These points come at a financial cost, which is calculated in comparison to the loan amount. Using these points can result in a lower interest rate because you're paying more up front. * **VA appraisal fee.** If you're going to use the VA's money to buy your new house, the property is going to need to be appraised by someone certified through the VA. This fee helps cover that appraiser's time, travel, and other needs for the assessment. Unlike some of the other fees, this one can potentially be negotiated with the seller to be added to their list of concessions. * **Hazard and title insurance, state and local taxes, and real estate taxes.** As the soon-to-be new owner of the property or home, the buyer will have to pay for continued hazard insurance coverage, as well as the annual taxes associated with the property. * **Recording fee.** When the sale is complete, a record of its completion will need to be noted by the local government. A [recording fee](https://www.investopedia.com/terms/r/recordingfee.asp) is charged so the transaction can become part of the public record.

Whether they're stationed abroad or serving stateside, the American armed forces get to enjoy a bevy of benefits when their tenure in the military ends, such as specially catered health benefits and free college through the Post-9/11 GI Bill. These benefits also extend to housing assistance through Veterans Affairs-backed home loans. And although those loans come with great terms and no need for a down payment, they still have some added costs attached. Key Takeaways The Department of Veterans Affairs offers home purchase loans, refinancing loans, and a direct loan for Native American veterans.Funding fees for VA-backed construction and home purchase loans range anywhere from 1.4% to 2.3% for the first use. Rates remain largely flat after first use.Certain costs are only paid by the seller, while others will be up to the buyer and the seller to negotiate who pays. What Are Mortgage Closing Costs? Though the homebuying process is already an expensive effort, mortgage closing costs close the gap between the property's final price and the added expenses that complete the purchase. Those additional costs, which are sometimes called settlement charges, are paid to the mortgage lender for creating and servicing the loan. Closing costs may include origination fees, appraisal fees, land surveys, taxes, and other associated charges. Though the buyer will be responsible for paying a majority of these fees, some costs are covered by the seller, while others can be negotiated. In 2021, the average closing costs for a homebuyer rose 13.4% from the previous year, with an average cost of $6,905. According to the National Association of Realtors, the median existing-home sales price in April 2022 was $391,200. If someone bought a home at that price and the mortgage had 5% in closing costs attached to it, the final cost would be an additional $19,560. An outline of these costs is included in the loan estimate that lenders are required to provide within three business days of receiving a mortgage application. In many cases, those initial closing cost estimates may increase or decrease slightly. If that's the case, the final amount will be disclosed next to the original estimate, along with a column outlining the difference, in the lender's closing disclosure form, which is provided at least three days prior to closing. What Makes VA Closing Costs Different? Mortgages backed by the VA are inherently different from standard mortgages because the Department of Veteran Affairs (VA) promises lenders that they will be able to recoup some—or all—of the loan if the home goes into foreclosure. That kind of backing significantly lowers the amount of risk the lender anticipates by providing the loan, thus allowing veterans to get approved even if they don't offer a down payment. Because lenders generally see them as a safer bet, VA-backed mortgages offer lower closing costs. Though typical closing costs range anywhere from 2% to 5% of the home's purchase price, similar costs for VA-backed loans have a funding fee rate that sits between 1.4% and 2.3%, according to the VA. Using that same example from above, a home listed at $391,200 would have only $8,998 in closing costs. Common VA Loan Closing Costs and Who Pays Them Though they largely function the same way other mortgages do, VA-backed mortgages feature many of the same closing costs. Still, there's some variation between the costs linked to VA-backed mortgages and regular mortgages. It's important to note that according to the VA, a seller cannot pay more than 4% of the total loan in fees, otherwise known as seller's concessions. That rule only applies to some closing costs, such as the VA funding fee. The rule doesn't cover loan discount points. Below are some of the closing costs you can expect to see on a loan estimate for a VA-backed mortgage. Fees the seller must cover Real estate professionals' commission fees. Realtors have to get paid too, so any commission fees they would collect from the sale of a home or property are covered by the seller. Buyer broker fee. Similar to the commission fees listed above, this covers any brokerage fees a real estate broker may charge. In most cases, both the listing broker and the buyer's agent's broker share in the commission. Brokerage fee. A brokerage fee is required when a broker is engaged to complete transactions or fulfill other specialized needs, including purchases, sales, and negotiations. Termite report. No one wants to get a house that's at risk of a termite infestation. Because the seller is trying to leave that home, they are responsible for proving that the house is structurally sound and not getting eaten away by the voracious bugs. This is always the seller's responsibility unless the buyer is using a reference loan. Fees the buyer can cover VA funding fee. This is a one-time payment that the veteran, service member, or survivor pays on a VA-backed loan. According to the VA, the fee "helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance." Loan origination fee. This is simply the fee that a lender charges when processing a loan application. This kind of fee is generally based on the total loan amount and can be negotiated. Loan discount points. These points can serve as a sort of tradeoff between the buyer's initial costs and their monthly payment moving forward. These points come at a financial cost, which is calculated in comparison to the loan amount. Using these points can result in a lower interest rate because you're paying more up front. VA appraisal fee. If you're going to use the VA's money to buy your new house, the property is going to need to be appraised by someone certified through the VA. This fee helps cover that appraiser's time, travel, and other needs for the assessment. Unlike some of the other fees, this one can potentially be negotiated with the seller to be added to their list of concessions. Hazard and title insurance, state and local taxes, and real estate taxes. As the soon-to-be new owner of the property or home, the buyer will have to pay for continued hazard insurance coverage, as well as the annual taxes associated with the property. Recording fee. When the sale is complete, a record of its completion will need to be noted by the local government. A recording fee is charged so the transaction can become part of the public record.

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

Greenmail: Definition, How It Works, Example, Legality

<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-greenmail"></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 Greenmail? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Greenmail is the practice of buying enough shares in a company to threaten a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/hostiletakeover.asp" rel="noopener noreferrer">hostile takeover</a> so that the target company will instead repurchase its shares at a premium. Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure to stop the takeover bid. The target company must repurchase the stock at a substantial premium to thwart the takeover, which results in a considerable profit for the greenmailer. </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>Greenmail is a practice whereby a greenmailer buys up a substantial block of a company's shares and threatens a hostile takeover.</li><li>The target company can resist the takeover attempt by repurchasing its shares at a premium from the greenmailer.</li><li>Greenmail became more frequent and controversial during the 1980s.</li><li>Anti-greenmail provisions, laws, regulations, and taxes made greenmail more difficult after the 1980s.<span class="ql-inline-citation" data-cite="1"></span></li><li>Critics see greenmail as a predatory practice similar to extortion, but it can be defended as a free-market solution to disputes between shareholders.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-greenmail"></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 Greenmail </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Like blackmail, greenmail is money paid to an entity to stop or prevent aggressive behavior. In mergers and acquisitions, it is an anti-takeover measure in which the target company pays a premium, known as greenmail, to purchase its own shares back at inflated prices from a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/corporate-raider.asp" rel="noopener noreferrer">corporate raider</a>. After accepting the greenmail payment, the raider generally agrees to discontinue the takeover and not buy any more shares for a specific time. </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 term "greenmail" stems from a combination of blackmail and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/greenback.asp" rel="noopener noreferrer">greenbacks</a> (U.S. dollars). The high number of corporate mergers that occurred during the 1980s led to a wave of greenmail. During that time, it was suspected that some corporate raiders, seeking only to profit, initiated takeover bids with no intention of following through on the takeover. </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-important" 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_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Greenmail is much less common today because of laws, regulations, taxes, and anti-greenmail provisions.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Although greenmail still occurs tacitly in various forms, several federal and state regulations made it much more difficult. In 1987, 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">Internal Revenue Service (IRS)</a> introduced an excise tax of 50% on greenmail profits.<span class="ql-inline-citation" data-cite="1"></span> Furthermore, companies have introduced various defense mechanisms, referred to as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/poisonpill.asp" rel="noopener noreferrer">poison pills</a>, to deter activist investors from making hostile takeover bids. </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"> An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/anti-greenmailprovision.asp" rel="noopener noreferrer">anti-greenmail provision</a> is a special clause in a firm's corporate charter that prevents the board of directors from approving greenmail payments. An anti-greenmail rule will remove the possibility that a board takes the expedient way out and pays off an unwelcome acquirer of the company's shares, leaving <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shareholder.asp" rel="noopener noreferrer">shareholders</a> worse off. </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-criticism-of-greenmail"></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"> Criticism of Greenmail </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> Greenmail is often seen as a predatory practice, bordering on <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/extortion.asp" rel="noopener noreferrer">extortion</a>. In this view, the greenmailer who buys up shares does not intend to participate in the company's operations as a shareholder. Instead, the greenmailer buys the shares intending only to threaten management with a hostile takeover or other actions. If successful, critics believe that the greenmailer profits at the company's expense while providing nothing in return. </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-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><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>Greenmail is conceptually similar to blackmail, but "green" denotes legitimate money.</p></div></div></div> <span class="heading-toc" id="toc-benefits-of-greenmail"></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"> Benefits of Greenmail </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Despite its sinister reputation, some forms of greenmail can be seen as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/freemarket.asp" rel="noopener noreferrer">free-market</a> solutions to real disputes between shareholders. A corporate raider may genuinely believe that resources within the company are not used effectively. One solution may be to sell off assets at a profit to other firms, which can presumably put them to better use. This arrangement could be beneficial to the corporate raider, other shareholders, and society as a whole. </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"> However, the firm's management may not share the corporate raider's view that their assets would be put to better use by others. Suppose that management can come up with the funds to pay greenmail instead. That provides a sort of free-market proof that the assets should remain under the firm's control. The corporate raider forgoes the profits that could be made selling off assets by selling shares instead. If the raider can make more money selling the assets, greenmail does not occur because it would be unprofitable and economically inefficient. Hence, greenmail only takes place when it is beneficial in this view. </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-real-world-example"></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"> Real World Example </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Sir James Goldsmith was a notorious corporate raider in the 1980s. He orchestrated two high-profile greenmail campaigns against St. Regis Paper Company and Goodyear Tire and Rubber Company (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=gt" rel="noopener noreferrer">GT</a>). Goldsmith earned $51 million from his St. Regis venture and $93 million from his Goodyear raid, which took only two months. </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"> In October 1986, Goldsmith purchased an 11.5% stake in Goodyear at an average cost of $42 per share. He also filed plans to finance a takeover of the company with the <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 (SEC)</a>. Part of his plan was to have the company sell off all its assets except its tire business. This plan was not well-received among Goodyear executives. </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"> In response to Goodyear's resistance, Goldsmith proposed to sell his stake back to the company for $49.50 a share. This type of strong-arm proposal is often referred to as the ransom or the goodbye kiss. Eventually, Goodyear accepted and subsequently repurchased 40 million shares from shareholders at $50 per share, which cost the company $2.9 billion. Goodyear's share price fell to $42 immediately following the repurchase. </p></div>

## What Is Greenmail? Greenmail is the practice of buying enough shares in a company to threaten a [hostile takeover](https://www.investopedia.com/terms/h/hostiletakeover.asp) so that the target company will instead repurchase its shares at a premium. Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure to stop the takeover bid. The target company must repurchase the stock at a substantial premium to thwart the takeover, which results in a considerable profit for the greenmailer. ### Key Takeaways * Greenmail is a practice whereby a greenmailer buys up a substantial block of a company's shares and threatens a hostile takeover. * The target company can resist the takeover attempt by repurchasing its shares at a premium from the greenmailer. * Greenmail became more frequent and controversial during the 1980s. * Anti-greenmail provisions, laws, regulations, and taxes made greenmail more difficult after the 1980s. * Critics see greenmail as a predatory practice similar to extortion, but it can be defended as a free-market solution to disputes between shareholders. ## Understanding Greenmail Like blackmail, greenmail is money paid to an entity to stop or prevent aggressive behavior. In mergers and acquisitions, it is an anti-takeover measure in which the target company pays a premium, known as greenmail, to purchase its own shares back at inflated prices from a [corporate raider](https://www.investopedia.com/terms/c/corporate-raider.asp). After accepting the greenmail payment, the raider generally agrees to discontinue the takeover and not buy any more shares for a specific time. The term "greenmail" stems from a combination of blackmail and [greenbacks](https://www.investopedia.com/terms/g/greenback.asp) (U.S. dollars). The high number of corporate mergers that occurred during the 1980s led to a wave of greenmail. During that time, it was suspected that some corporate raiders, seeking only to profit, initiated takeover bids with no intention of following through on the takeover. ### Greenmail is much less common today because of laws, regulations, taxes, and anti-greenmail provisions. Although greenmail still occurs tacitly in various forms, several federal and state regulations made it much more difficult. In 1987, the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) introduced an excise tax of 50% on greenmail profits. Furthermore, companies have introduced various defense mechanisms, referred to as [poison pills](https://www.investopedia.com/terms/p/poisonpill.asp), to deter activist investors from making hostile takeover bids. An [anti-greenmail provision](https://www.investopedia.com/terms/a/anti-greenmailprovision.asp) is a special clause in a firm's corporate charter that prevents the board of directors from approving greenmail payments. An anti-greenmail rule will remove the possibility that a board takes the expedient way out and pays off an unwelcome acquirer of the company's shares, leaving [shareholders](https://www.investopedia.com/terms/s/shareholder.asp) worse off. ## Criticism of Greenmail Greenmail is often seen as a predatory practice, bordering on [extortion](https://www.investopedia.com/terms/e/extortion.asp). In this view, the greenmailer who buys up shares does not intend to participate in the company's operations as a shareholder. Instead, the greenmailer buys the shares intending only to threaten management with a hostile takeover or other actions. If successful, critics believe that the greenmailer profits at the company's expense while providing nothing in return. ### Greenmail is conceptually similar to blackmail, but "green" denotes legitimate money. ## Benefits of Greenmail Despite its sinister reputation, some forms of greenmail can be seen as [free-market](https://www.investopedia.com/terms/f/freemarket.asp) solutions to real disputes between shareholders. A corporate raider may genuinely believe that resources within the company are not used effectively. One solution may be to sell off assets at a profit to other firms, which can presumably put them to better use. This arrangement could be beneficial to the corporate raider, other shareholders, and society as a whole. However, the firm's management may not share the corporate raider's view that their assets would be put to better use by others. Suppose that management can come up with the funds to pay greenmail instead. That provides a sort of free-market proof that the assets should remain under the firm's control. The corporate raider forgoes the profits that could be made selling off assets by selling shares instead. If the raider can make more money selling the assets, greenmail does not occur because it would be unprofitable and economically inefficient. Hence, greenmail only takes place when it is beneficial in this view. ## Real World Example Sir James Goldsmith was a notorious corporate raider in the 1980s. He orchestrated two high-profile greenmail campaigns against St. Regis Paper Company and Goodyear Tire and Rubber Company ([GT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=gt)). Goldsmith earned $51 million from his St. Regis venture and $93 million from his Goodyear raid, which took only two months. In October 1986, Goldsmith purchased an 11.5% stake in Goodyear at an average cost of $42 per share. He also filed plans to finance a takeover of the company with the [Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp). Part of his plan was to have the company sell off all its assets except its tire business. This plan was not well-received among Goodyear executives. In response to Goodyear's resistance, Goldsmith proposed to sell his stake back to the company for $49.50 a share. This type of strong-arm proposal is often referred to as the ransom or the goodbye kiss. Eventually, Goodyear accepted and subsequently repurchased 40 million shares from shareholders at $50 per share, which cost the company $2.9 billion. Goodyear's share price fell to $42 immediately following the repurchase.

What Is Greenmail? Greenmail is the practice of buying enough shares in a company to threaten a hostile takeover so that the target company will instead repurchase its shares at a premium. Regarding mergers and acquisitions, the company makes a greenmail payment as a defensive measure to stop the takeover bid. The target company must repurchase the stock at a substantial premium to thwart the takeover, which results in a considerable profit for the greenmailer. Key Takeaways Greenmail is a practice whereby a greenmailer buys up a substantial block of a company's shares and threatens a hostile takeover.The target company can resist the takeover attempt by repurchasing its shares at a premium from the greenmailer.Greenmail became more frequent and controversial during the 1980s.Anti-greenmail provisions, laws, regulations, and taxes made greenmail more difficult after the 1980s.Critics see greenmail as a predatory practice similar to extortion, but it can be defended as a free-market solution to disputes between shareholders. Understanding Greenmail Like blackmail, greenmail is money paid to an entity to stop or prevent aggressive behavior. In mergers and acquisitions, it is an anti-takeover measure in which the target company pays a premium, known as greenmail, to purchase its own shares back at inflated prices from a corporate raider. After accepting the greenmail payment, the raider generally agrees to discontinue the takeover and not buy any more shares for a specific time. The term "greenmail" stems from a combination of blackmail and greenbacks (U.S. dollars). The high number of corporate mergers that occurred during the 1980s led to a wave of greenmail. During that time, it was suspected that some corporate raiders, seeking only to profit, initiated takeover bids with no intention of following through on the takeover. Greenmail is much less common today because of laws, regulations, taxes, and anti-greenmail provisions. Although greenmail still occurs tacitly in various forms, several federal and state regulations made it much more difficult. In 1987, the Internal Revenue Service (IRS) introduced an excise tax of 50% on greenmail profits. Furthermore, companies have introduced various defense mechanisms, referred to as poison pills, to deter activist investors from making hostile takeover bids. An anti-greenmail provision is a special clause in a firm's corporate charter that prevents the board of directors from approving greenmail payments. An anti-greenmail rule will remove the possibility that a board takes the expedient way out and pays off an unwelcome acquirer of the company's shares, leaving shareholders worse off. Criticism of Greenmail Greenmail is often seen as a predatory practice, bordering on extortion. In this view, the greenmailer who buys up shares does not intend to participate in the company's operations as a shareholder. Instead, the greenmailer buys the shares intending only to threaten management with a hostile takeover or other actions. If successful, critics believe that the greenmailer profits at the company's expense while providing nothing in return. Greenmail is conceptually similar to blackmail, but "green" denotes legitimate money. Benefits of Greenmail Despite its sinister reputation, some forms of greenmail can be seen as free-market solutions to real disputes between shareholders. A corporate raider may genuinely believe that resources within the company are not used effectively. One solution may be to sell off assets at a profit to other firms, which can presumably put them to better use. This arrangement could be beneficial to the corporate raider, other shareholders, and society as a whole. However, the firm's management may not share the corporate raider's view that their assets would be put to better use by others. Suppose that management can come up with the funds to pay greenmail instead. That provides a sort of free-market proof that the assets should remain under the firm's control. The corporate raider forgoes the profits that could be made selling off assets by selling shares instead. If the raider can make more money selling the assets, greenmail does not occur because it would be unprofitable and economically inefficient. Hence, greenmail only takes place when it is beneficial in this view. Real World Example Sir James Goldsmith was a notorious corporate raider in the 1980s. He orchestrated two high-profile greenmail campaigns against St. Regis Paper Company and Goodyear Tire and Rubber Company (GT). Goldsmith earned $51 million from his St. Regis venture and $93 million from his Goodyear raid, which took only two months. In October 1986, Goldsmith purchased an 11.5% stake in Goodyear at an average cost of $42 per share. He also filed plans to finance a takeover of the company with the Securities and Exchange Commission (SEC). Part of his plan was to have the company sell off all its assets except its tire business. This plan was not well-received among Goodyear executives. In response to Goodyear's resistance, Goldsmith proposed to sell his stake back to the company for $49.50 a share. This type of strong-arm proposal is often referred to as the ransom or the goodbye kiss. Eventually, Goodyear accepted and subsequently repurchased 40 million shares from shareholders at $50 per share, which cost the company $2.9 billion. Goodyear's share price fell to $42 immediately following the repurchase.

https://www.investopedia.com/the-green-investor-podcast-episode-25-7111904

Following the Trillions of Dollars in Sustainable Infrastructure Government Projects

<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 today's episode of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/the-green-investor-podcast-5215576">The Green Investor</a> podcast, we speak with Chris Lewis, head of Global Infrastructure at EY, to talk about the ways governments are investing in sustainable infrastructure projects. Chris talks about which countries are doing it right, which industries have the most wind and money at their backs, and what governments need to do in order to accelerate progress. Plus, Big Money is putting big money to work in ESG funds and ETFs despite the backlash against the theme. We'll name names, and follow the money. </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-meet-chris-lewis"></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"> Meet Chris Lewis </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_4-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:66.6%;"> <img alt="Chris Lewis, EY Global Infrastructure Leader" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/95WtoxBZaD-khgmz-Ygde3Rgm4g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/95WtoxBZaD-khgmz-Ygde3Rgm4g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg" data-srcset="https://www.investopedia.com/thmb/SsSB5WeldsjqGOe6L8gjlhGZi9M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg 750w" data-tracking-container="true" height="2560" id="mntl-sc-block-image_1-0" width="3840"/> <noscript> <img alt="Chris Lewis, EY Global Infrastructure Leader" class="img--noscript universal-image__image" height="2560" sizes="750px" src="https://www.investopedia.com/thmb/95WtoxBZaD-khgmz-Ygde3Rgm4g=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg" srcset="https://www.investopedia.com/thmb/SsSB5WeldsjqGOe6L8gjlhGZi9M=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg 750w" width="3840"/> </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>EY</p></span> </figcaption></figure> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Chris Lewis leads the global infrastructure team at EY (Ernst &amp; Young), working closely with governments as the key advisor to major projects in nuclear, carbon capture, water, road, rail and renewables. With more than 25 years of industry experience, he is helping private and public sector organizations take projects from inception to financial close. </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"> Chris completed a Master’s degree in Economics at Cambridge University. Early in his career, Chris advised oil and gas clients on investment programs across their downstream and upstream operations. He joined EY in 2006 to establish the organization’s new consulting business and focus on building an infrastructure advisory practice. </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-iframe mntl-sc-block-iframe mntl-block megaphone" id="mntl-sc-block_9-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://playlist.megaphone.fm/?e=MERE9643549523" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="Following the Trillions of Dollars in Sustainable Infrastructure Government Projects"></iframe></div> <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"> <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-green-investor/id1592318137" rel="nofollow">Apple Podcasts</a> / <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="externalLink" href="https://open.spotify.com/show/61F1GYs47N7yUVZLwdoQDf" rel="nofollow">Spotify</a> / <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="externalLink" href="https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5tZWdhcGhvbmUuZm0vaW52ZXN0b3BlZGlhZ3JlZW5pbnZlc3Rvcg">Google Podcasts</a> / <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="externalLink" href="https://player.fm/series/the-green-investor">PlayerFM</a><br/> </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-links-for-show-notes"></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"> Links for Show Notes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.morganstanley.com/im/en-gb/intermediary-investor/investment-ideas/calvert.html" rel="nofollow">Calvert: ESG Investing at Morgan Stanley</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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.iea.org/commentaries/the-global-energy-crisis-pushed-fossil-fuel-consumption-subsidies-to-an-all-time-high-in-2022">International Energy Agency: Fossil Fuel Consumption at All-Time High in 2022</a> </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.cdp.net/en/companies/companies-scores">CDP Disclosure Insight Action: The A List 2022—Company Scores</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="externalLink" href="https://www.netzeroassetmanagers.org/signatories/" rel="nofollow">Net Zero Asset Managers: Signatories</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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://shareaction.org/" rel="nofollow">ShareAction: Harnessing the Power of Investment</a> </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 data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://mn.gov/commerce/news/?id=17-563384">Commerce Department of Minnesota: Governor Tim Walz Signs Bill Moving Minnesota to 100 Percent Clean Energy by 2040</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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.flgov.com/2023/01/17/governor-ron-desantis-further-prohibits-woke-esg-considerations-from-state-investments/">Florida Governor Ron DeSantis Further Prohibits Woke ESG Considerations from State Investments</a><br/> </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://justcapital.com/">Just Capital</a> </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.ey.com/en_gl/people/chris-c-lewis" rel="nofollow">Chris Lewis: EY Global Infrastructure Leader</a> </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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.shell.com/investors/news-and-filings/sec-filings.html">Shell Global Inc: SEC Filings</a> </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>

In today's episode of [The Green Investor](https://www.investopedia.com/the-green-investor-podcast-5215576) podcast, we speak with Chris Lewis, head of Global Infrastructure at EY, to talk about the ways governments are investing in sustainable infrastructure projects. Chris talks about which countries are doing it right, which industries have the most wind and money at their backs, and what governments need to do in order to accelerate progress. Plus, Big Money is putting big money to work in ESG funds and ETFs despite the backlash against the theme. We'll name names, and follow the money. ## Meet Chris Lewis ![Chris Lewis, EY Global Infrastructure Leader]() :max_bytes(150000):strip_icc()/ey-chris-lewis-01-v2.jpg.rendition.3840.2560-e216409f2be942d8a89e1a1b2d75c634.jpg) EY Chris Lewis leads the global infrastructure team at EY (Ernst & Young), working closely with governments as the key advisor to major projects in nuclear, carbon capture, water, road, rail and renewables. With more than 25 years of industry experience, he is helping private and public sector organizations take projects from inception to financial close. Chris completed a Master’s degree in Economics at Cambridge University. Early in his career, Chris advised oil and gas clients on investment programs across their downstream and upstream operations. He joined EY in 2006 to establish the organization’s new consulting business and focus on building an infrastructure advisory practice. **Subscribe Now:** [Apple Podcasts](https://podcasts.apple.com/us/podcast/the-green-investor/id1592318137) / [Spotify](https://open.spotify.com/show/61F1GYs47N7yUVZLwdoQDf) / [Google Podcasts](https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5tZWdhcGhvbmUuZm0vaW52ZXN0b3BlZGlhZ3JlZW5pbnZlc3Rvcg) / [PlayerFM](https://player.fm/series/the-green-investor) ## Links for Show Notes [Calvert: ESG Investing at Morgan Stanley](https://www.morganstanley.com/im/en-gb/intermediary-investor/investment-ideas/calvert.html) [International Energy Agency: Fossil Fuel Consumption at All-Time High in 2022](https://www.iea.org/commentaries/the-global-energy-crisis-pushed-fossil-fuel-consumption-subsidies-to-an-all-time-high-in-2022) [CDP Disclosure Insight Action: The A List 2022—Company Scores](https://www.cdp.net/en/companies/companies-scores) [Net Zero Asset Managers: Signatories](https://www.netzeroassetmanagers.org/signatories/) [ShareAction: Harnessing the Power of Investment](https://shareaction.org/) [Commerce Department of Minnesota: Governor Tim Walz Signs Bill Moving Minnesota to 100 Percent Clean Energy by 2040](https://mn.gov/commerce/news/?id=17-563384) [Florida Governor Ron DeSantis Further Prohibits Woke ESG Considerations from State Investments](https://www.flgov.com/2023/01/17/governor-ron-desantis-further-prohibits-woke-esg-considerations-from-state-investments/) [Just Capital](https://justcapital.com/) [Chris Lewis: EY Global Infrastructure Leader](https://www.ey.com/en_gl/people/chris-c-lewis) [Shell Global Inc: SEC Filings](https://www.shell.com/investors/news-and-filings/sec-filings.html) Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

In today's episode of The Green Investor podcast, we speak with Chris Lewis, head of Global Infrastructure at EY, to talk about the ways governments are investing in sustainable infrastructure projects. Chris talks about which countries are doing it right, which industries have the most wind and money at their backs, and what governments need to do in order to accelerate progress. Plus, Big Money is putting big money to work in ESG funds and ETFs despite the backlash against the theme. We'll name names, and follow the money. Meet Chris Lewis EY Chris Lewis leads the global infrastructure team at EY (Ernst & Young), working closely with governments as the key advisor to major projects in nuclear, carbon capture, water, road, rail and renewables. With more than 25 years of industry experience, he is helping private and public sector organizations take projects from inception to financial close. Chris completed a Master’s degree in Economics at Cambridge University. Early in his career, Chris advised oil and gas clients on investment programs across their downstream and upstream operations. He joined EY in 2006 to establish the organization’s new consulting business and focus on building an infrastructure advisory practice. Subscribe Now: Apple Podcasts / Spotify / Google Podcasts / PlayerFM Links for Show Notes Calvert: ESG Investing at Morgan Stanley International Energy Agency: Fossil Fuel Consumption at All-Time High in 2022 CDP Disclosure Insight Action: The A List 2022—Company Scores Net Zero Asset Managers: Signatories ShareAction: Harnessing the Power of Investment Commerce Department of Minnesota: Governor Tim Walz Signs Bill Moving Minnesota to 100 Percent Clean Energy by 2040 Florida Governor Ron DeSantis Further Prohibits Woke ESG Considerations from State Investments Just Capital Chris Lewis: EY Global Infrastructure Leader Shell Global Inc: SEC Filings Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/articles/08/performance-measure.asp

Measuring a Portfolio's 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"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treynorratio.asp">Treynor</a>, Sharpe, and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jensensmeasure.asp">Jensen ratios</a> combine risk and return performance into a single value to measure portfolio performance. Historically, many investors mistakenly based the success of their portfolios on returns alone. Few investors considered the risk involved in achieving those returns. </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 which is best? Should you use more than one or all three? Learn more about these measurements and how to use them to evaluate portfolios.<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>Portfolio performance measures are a key factor in the investment decision.</li><li>There are three popular performance measurement tools that assist with portfolio evaluations—the Treynor, Sharpe, and Jensen ratios.</li><li>Portfolio returns are only part of the story—without evaluating risk-adjusted returns, an investor cannot possibly see the whole investment picture.</li></ul></div></div></div> <span class="heading-toc" id="toc-treynor-ratio"></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"> Treynor Ratio </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Jack L. Treynor was the first to provide investors with a composite measure of portfolio performance that also included risk. Treynor's objective was to find a performance measure that could apply to all investors regardless of their personal risk preferences. Treynor suggested that there were really two components of risk: the risk produced by fluctuations 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> and the risk arising from the fluctuations of individual <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/security.asp">securities</a>.</p> <p>Treynor introduced the concept of the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sml.asp">security market line</a>, which defines the relationship between portfolio returns and market rates of returns whereby the slope of the line measures the relative volatility between the portfolio and the market (as represented by <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/beta.asp">beta</a>). The beta coefficient is the volatility measure of a stock portfolio to the market itself. The greater the line's slope, the better the risk-return tradeoff.</p> <p>The Treynor measure, also known as the reward-to-<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility-ratio.asp">volatility ratio</a>, is defined as:</p> <p><span data-value="\begin{aligned} &amp;\text{Treynor Measure} = \frac{PR - RFR}{\beta}\\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;RFR=\text{risk-free rate}\\ &amp;\beta=\text{beta}\\ \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> Treynor Measure </mtext> <mo> = </mo> <mfrac> <mrow> <mi> P </mi> <mi> R </mi> <mo> − </mo> <mi> R </mi> <mi> F </mi> <mi> R </mi> </mrow> <mi> β </mi> </mfrac> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mtext> where: </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> P </mi> <mi> R </mi> <mo> = </mo> <mtext> portfolio return </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> R </mi> <mi> F </mi> <mi> R </mi> <mo> = </mo> <mtext> risk-free rate </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> β </mi> <mo> = </mo> <mtext> beta </mtext> </mrow> </mstyle> </mtd> </mtr> </mtable> <annotation encoding="application/x-tex"> \begin{aligned} &amp;\text{Treynor Measure} = \frac{PR - RFR}{\beta}\\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;RFR=\text{risk-free rate}\\ &amp;\beta=\text{beta}\\ \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 class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><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">Treynor Measure</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 mathnormal">β</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 mathnormal">PR</span><span class="mspace"></span><span class="mbin">−</span><span class="mspace"></span><span class="mord mathnormal">RFR</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 class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord text"><span class="mord textbf">where:</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">PR</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">portfolio return</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">RFR</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">risk-free rate</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">β</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">beta</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><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <p>The numerator identifies excess returns (also called <a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskpremium.asp">risk premium</a>), and the denominator corresponds to the portfolio's sensitivity to the overall market's movements (also called the portfolio's risk). The resulting value represents the portfolio's <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/appraisalratio.asp">return per unit of risk</a>.</p> <p>To illustrate, suppose that the 10-year annual return for the <a data-component="link" data-ordinal="8" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp.asp">S&amp;P</a> 500 (market portfolio) is 10% while the average annual return on <a data-component="link" data-ordinal="9" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/treasurybill.asp">Treasury bills</a> (a good proxy for the <a data-component="link" data-ordinal="10" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk-freerate.asp">risk-free rate</a>) is 5%. As a reminder, a beta of one means the portfolio moves in concert with the overall market. Less than one means it is less volatile, and a beta of more than one means it is more volatile. Assume the evaluation is of three distinct <a data-component="link" data-ordinal="11" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfoliomanager.asp">portfolio managers</a> with the following 10-year results: </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> <tbody data-check="-1"> <tr> <td><strong>Managers</strong></td> <td><strong>Average Annual Return</strong></td> <td><strong>Beta</strong></td> </tr> <tr> <td>Manager A</td> <td>10%</td> <td>0.90</td> </tr> <tr> <td>Manager B</td> <td>14%</td> <td>1.03</td> </tr> <tr> <td>Manager C</td> <td>15%</td> <td>1.20</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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The Treynor value for each is as follows: </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> <tbody data-check="-1"> <tr> <td> </td> <td>Calculation</td> <td>Treynor Value</td> </tr> <tr> <td>T(market)</td> <td>(0.10-0.05)/1 </td> <td>0.05</td> </tr> <tr> <td>T(manager A)</td> <td>(0.10-0.05)/0.90 </td> <td>0.056</td> </tr> <tr> <td>T(manager B)</td> <td>(0.14-0.05)/1.03 </td> <td>0.087</td> </tr> <tr> <td>T(manager C)</td> <td>(0.15-0.05)/1.20</td> <td>0.083</td> </tr> </tbody> </table> </div></figure> <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 higher the Treynor measure, the better the portfolio. If the portfolio manager (or portfolio) is evaluated on performance alone, manager C seems to have yielded the best results (a 15% return). However, when considering the risks that each manager took to attain their respective returns, Manager B demonstrated a better outcome. In this case, all three managers performed better than the aggregate market. </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"> Because this measure only uses <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/systematicrisk.asp">systematic risk</a>, it assumes that the investor already has an adequately diversified portfolio and, therefore, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/unsystematicrisk.asp">unsystematic risk</a> (also known as diversifiable risk) is not considered. As a result, this performance measure is most applicable to investors who hold diversified portfolios. </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-sharpe-ratio"></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"> Sharpe Ratio </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The Sharpe ratio is almost identical to the Treynor measure, except that the risk measure is the standard deviation of the portfolio instead of considering only the systematic risk as represented by beta. Conceived by Bill Sharpe, this measure closely follows his work on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capm.asp">capital asset pricing model</a> (CAPM) and, by extension, uses total risk to compare portfolios to the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/cml.asp">capital market line</a>.</p> <p>The Sharpe ratio is defined as:</p> <p><span data-value="\begin{aligned} &amp;\text{Sharpe ratio} = \frac{PR - RFR}{SD}\\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;RFR=\text{risk-free rate}\\ &amp;SD=\text{standard deviation}\\ \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> Sharpe ratio </mtext> <mo> = </mo> <mfrac> <mrow> <mi> P </mi> <mi> R </mi> <mo> − </mo> <mi> R </mi> <mi> F </mi> <mi> R </mi> </mrow> <mrow> <mi> S </mi> <mi> D </mi> </mrow> </mfrac> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mtext> where: </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> P </mi> <mi> R </mi> <mo> = </mo> <mtext> portfolio return </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> R </mi> <mi> F </mi> <mi> R </mi> <mo> = </mo> <mtext> risk-free rate </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> S </mi> <mi> D </mi> <mo> = </mo> <mtext> standard deviation </mtext> </mrow> </mstyle> </mtd> </mtr> </mtable> <annotation encoding="application/x-tex"> \begin{aligned} &amp;\text{Sharpe ratio} = \frac{PR - RFR}{SD}\\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;RFR=\text{risk-free rate}\\ &amp;SD=\text{standard deviation}\\ \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 class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><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">Sharpe ratio</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 mathnormal">S</span><span class="mord mathnormal">D</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 mathnormal">PR</span><span class="mspace"></span><span class="mbin">−</span><span class="mspace"></span><span class="mord mathnormal">RFR</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 class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord text"><span class="mord textbf">where:</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">PR</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">portfolio return</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">RFR</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">risk-free rate</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">S</span><span class="mord mathnormal">D</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">standard deviation</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><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <p>So, assuming that the <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sp500.asp">S&amp;P 500</a> had a standard deviation of 18% over a 10-year period, a return of 10%, and the risk-free rate of 5%, we can determine the Sharpe ratios for the following portfolio managers: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_22-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_23-0"> <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><strong>Manager</strong></td> <td><strong>Annual Return</strong></td> <td><strong>Portfolio Standard Deviation</strong></td> </tr> <tr> <td>Manager X</td> <td>14%</td> <td>0.11</td> </tr> <tr> <td>Manager Y</td> <td>17%</td> <td>0.20</td> </tr> <tr> <td>Manager Z</td> <td>19%</td> <td>0.27</td> </tr> </tbody> </table> </div></figure> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_25-0"> <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>S(market)</td> <td>(0.10-0.05)/0.18</td> <td>0.278</td> </tr> <tr> <td>S(manager X)</td> <td>(0.14-0.05)/0.11 </td> <td>0.818</td> </tr> <tr> <td>S(manager Y)</td> <td>(0.17-0.05)/0.20 </td> <td>0.600</td> </tr> <tr> <td>S(manager Z)</td> <td>(0.19-0.05)/0.27</td> <td>0.519</td> </tr> </tbody> </table> </div></figure> <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"> Again, we find that the best portfolio is not necessarily the portfolio with the highest return. Instead, a superior portfolio has the superior <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/riskadjustedreturn.asp">risk-adjusted return</a> or, in this case, the fund headed by manager X. </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"> Unlike the Treynor measure, the Sharpe ratio evaluates the portfolio manager on the basis of both the <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> and diversification (it considers total portfolio risk as measured by the standard deviation in its denominator). Therefore, the Sharpe ratio is more appropriate for <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/investing/importance-diversification/">well-diversified</a> portfolios because it more accurately takes into account the risks of the portfolio. </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-jensens-alpha"></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"> Jensen's Alpha </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Similar to the previous performance measures discussed, the Jensen measure is calculated using the CAPM. Named after its creator, Michael C. Jensen, the Jensen ratio calculates the excess return that a portfolio generates over its <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>. This measure of return is also known as <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/alpha.asp">alpha</a>.<span class="ql-inline-citation" data-cite="4"></span></p> <p>The Jensen ratio measures how much of the portfolio's rate of return is attributable to the manager's ability to deliver above-average returns, adjusted for <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/marketrisk.asp">market risk</a>. The higher the ratio, the better the risk-adjusted returns. A portfolio with a consistently positive excess return will have a positive alpha, while a portfolio with a consistently negative excess return will have a negative alpha.</p> <p>The formula is broken down as follows:</p> <p><span data-value="\begin{aligned} &amp;\text{Jenson's alpha} = PR - CAPM \\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;CAPM=\text{risk-free rate} + \beta(\text{return of market risk-free rate of return})\\ \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> Jenson’s alpha </mtext> <mo> = </mo> <mi> P </mi> <mi> R </mi> <mo> − </mo> <mi> C </mi> <mi> A </mi> <mi> P </mi> <mi> M </mi> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mtext> where: </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> P </mi> <mi> R </mi> <mo> = </mo> <mtext> portfolio return </mtext> </mrow> </mstyle> </mtd> </mtr> <mtr> <mtd> <mstyle> <mrow></mrow> </mstyle> </mtd> <mtd> <mstyle> <mrow> <mrow></mrow> <mi> C </mi> <mi> A </mi> <mi> P </mi> <mi> M </mi> <mo> = </mo> <mtext> risk-free rate </mtext> <mo> + </mo> <mi> β </mi> <mo> ( </mo> <mtext> return of market risk-free rate of return </mtext> <mo> ) </mo> </mrow> </mstyle> </mtd> </mtr> </mtable> <annotation encoding="application/x-tex"> \begin{aligned} &amp;\text{Jenson's alpha} = PR - CAPM \\ &amp;\textbf{where:}\\ &amp;PR=\text{portfolio return}\\ &amp;CAPM=\text{risk-free rate} + \beta(\text{return of market risk-free rate of return})\\ \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 class=""><span class="pstrut"></span><span class="mord"></span></span><span class=""><span class="pstrut"></span><span class="mord"></span></span><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">Jenson’s alpha</span></span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord mathnormal">PR</span><span class="mspace"></span><span class="mbin">−</span><span class="mspace"></span><span class="mord mathnormal">C</span><span class="mord mathnormal">A</span><span class="mord mathnormal">PM</span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord text"><span class="mord textbf">where:</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">PR</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">portfolio return</span></span></span></span><span class=""><span class="pstrut"></span><span class="mord"><span class="mord"></span><span class="mord mathnormal">C</span><span class="mord mathnormal">A</span><span class="mord mathnormal">PM</span><span class="mspace"></span><span class="mrel">=</span><span class="mspace"></span><span class="mord text"><span class="mord">risk-free rate</span></span><span class="mspace"></span><span class="mbin">+</span><span class="mspace"></span><span class="mord mathnormal">β</span><span class="mopen">(</span><span class="mord text"><span class="mord">return of market risk-free rate of return</span></span><span class="mclose">)</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>If we assume a risk-free rate of 5% and a market return of 10%, what is the alpha for the following funds? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_33-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_34-0"> <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><strong>Manager</strong></td> <td><strong>Average Annual Return</strong></td> <td><strong>Beta</strong></td> </tr> <tr> <td>Manager D</td> <td>11%</td> <td>0.90</td> </tr> <tr> <td>Manager E</td> <td>15%</td> <td>1.10</td> </tr> <tr> <td>Manager F</td> <td>15%</td> <td>1.20</td> </tr> </tbody> </table> </div></figure> <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"> We calculate the portfolio's expected return (CAPM): </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_37-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_38-0"> <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>ER(D)</td> <td>0.05 + 0.90 (0.10-0.05) </td> <td>0.0950 or 9.5% return</td> </tr> <tr> <td>ER(E)</td> <td>0.05 + 1.10 (0.10-0.05) </td> <td>0.1050 or 10.5% return</td> </tr> <tr> <td>ER(F)</td> <td>0.05 + 1.20 (0.10-0.05) </td> <td>0.1100 or 11% return</td> </tr> </tbody> </table> </div></figure> <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"> We calculate the portfolio's alpha by subtracting the expected return of the portfolio from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/actualreturn.asp">actual return</a>: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_41-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_42-0"> <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>Alpha D</td> <td>11%- 9.5% </td> <td>1.5%</td> </tr> <tr> <td>Alpha E</td> <td>15%- 10.5% </td> <td>4.5%</td> </tr> <tr> <td>Alpha F</td> <td>15%- 11% </td> <td>4.0%</td> </tr> </tbody> </table> </div></figure> <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"> Which manager did the best? Manager E did best because although Manager F had the same annual return, it was expected that Manager E would <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yield.asp">yield</a> a lower return because the portfolio's beta was significantly lower than that of portfolio F. </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"> Both the rate of return and risk for securities (or portfolios) will vary by time period. The Jensen measure requires the use of a different risk-free rate of return for each time interval. To evaluate the performance of a fund manager for a five-year period using annual intervals would also require examining the fund's annual returns minus the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/risk-freereturn.asp">risk-free return</a> for each year and relating it to the annual return on the market portfolio minus the same risk-free rate. </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"> Conversely, the Treynor and Sharpe ratios examine average returns for the <em>total period</em> under consideration for all variables in the formula (the portfolio, market, and risk-free <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/asset.asp">asset</a>). Similar to the Treynor measure, however, Jensen's alpha calculates risk premiums in terms of beta (systematic, undiversifiable risk) and, therefore, assumes the portfolio is already adequately diversified. As a result, this ratio is best applied to an investment such as a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mutualfund.asp">mutual fund</a>. </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-how-do-you-measure-the-performance-of-a-portfolio"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do You Measure the Performance of a Portfolio?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There are several ways to measure a portfolio's performance. Some of the most popular methods are the Sharpe, Jensen, and Treynor ratios.</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-what-determines-portfolio-performance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Determines Portfolio Performance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The best performance indicator measures a portfolio's returns against a benchmark and the risks. You can use only returns as a performance indicator, but this limits your view because risk is not considered.</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-what-is-the-portfolio-performance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is the Portfolio Performance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Portfolio performance measures give you information about <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/k/kratio.asp">how effective your investments are</a>.</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"> Portfolio performance measures are a key factor in the investment decision. These tools provide the necessary information for investors to assess how effectively their money has been invested (or may be invested). Remember, portfolio returns are only part of the story. Without <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/021315/what-difference-between-sharpe-ratio-and-alpha.asp">evaluating risk-adjusted returns</a>, an investor cannot possibly see the whole <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/investment.asp">investment</a> picture, which may inadvertently lead to clouded decisions. </p></div>

The [Treynor](https://www.investopedia.com/terms/t/treynorratio.asp), Sharpe, and [Jensen ratios](https://www.investopedia.com/terms/j/jensensmeasure.asp) combine risk and return performance into a single value to measure portfolio performance. Historically, many investors mistakenly based the success of their portfolios on returns alone. Few investors considered the risk involved in achieving those returns. But which is best? Should you use more than one or all three? Learn more about these measurements and how to use them to evaluate portfolios. ### Key Takeaways * Portfolio performance measures are a key factor in the investment decision. * There are three popular performance measurement tools that assist with portfolio evaluations—the Treynor, Sharpe, and Jensen ratios. * Portfolio returns are only part of the story—without evaluating risk-adjusted returns, an investor cannot possibly see the whole investment picture. ## Treynor Ratio Jack L. Treynor was the first to provide investors with a composite measure of portfolio performance that also included risk. Treynor's objective was to find a performance measure that could apply to all investors regardless of their personal risk preferences. Treynor suggested that there were really two components of risk: the risk produced by fluctuations in the [stock market](https://www.investopedia.com/terms/s/stockmarket.asp) and the risk arising from the fluctuations of individual [securities](https://www.investopedia.com/terms/s/security.asp). Treynor introduced the concept of the [security market line](https://www.investopedia.com/terms/s/sml.asp), which defines the relationship between portfolio returns and market rates of returns whereby the slope of the line measures the relative volatility between the portfolio and the market (as represented by [beta](https://www.investopedia.com/terms/b/beta.asp)). The beta coefficient is the volatility measure of a stock portfolio to the market itself. The greater the line's slope, the better the risk-return tradeoff. The Treynor measure, also known as the reward-to-[volatility ratio](https://www.investopedia.com/terms/v/volatility-ratio.asp), is defined as: Treynor Measure = P R − R F R β where: P R = portfolio return R F R = risk-free rate β = beta \begin{aligned} &\text{Treynor Measure} = \frac{PR - RFR}{\beta}\\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &RFR=\text{risk-free rate}\\ &\beta=\text{beta}\\ \end{aligned} ​Treynor Measure=βPR−RFR​where:PR=portfolio returnRFR=risk-free rateβ=beta​ The numerator identifies excess returns (also called [risk premium](https://www.investopedia.com/terms/r/riskpremium.asp)), and the denominator corresponds to the portfolio's sensitivity to the overall market's movements (also called the portfolio's risk). The resulting value represents the portfolio's [return per unit of risk](https://www.investopedia.com/terms/a/appraisalratio.asp). To illustrate, suppose that the 10-year annual return for the [S&P](https://www.investopedia.com/terms/s/sp.asp) 500 (market portfolio) is 10% while the average annual return on [Treasury bills](https://www.investopedia.com/terms/t/treasurybill.asp) (a good proxy for the [risk-free rate](https://www.investopedia.com/terms/r/risk-freerate.asp)) is 5%. As a reminder, a beta of one means the portfolio moves in concert with the overall market. Less than one means it is less volatile, and a beta of more than one means it is more volatile. Assume the evaluation is of three distinct [portfolio managers](https://www.investopedia.com/terms/p/portfoliomanager.asp) with the following 10-year results: | **Managers** | **Average Annual Return** | **Beta** | | --- | --- | --- | | Manager A | 10% | 0.90 | | Manager B | 14% | 1.03 | | Manager C | 15% | 1.20 | The Treynor value for each is as follows: | | Calculation | Treynor Value | | --- | --- | --- | | T(market) | (0.10-0.05)/1 | 0.05 | | T(manager A) | (0.10-0.05)/0.90 | 0.056 | | T(manager B) | (0.14-0.05)/1.03 | 0.087 | | T(manager C) | (0.15-0.05)/1.20 | 0.083 | The higher the Treynor measure, the better the portfolio. If the portfolio manager (or portfolio) is evaluated on performance alone, manager C seems to have yielded the best results (a 15% return). However, when considering the risks that each manager took to attain their respective returns, Manager B demonstrated a better outcome. In this case, all three managers performed better than the aggregate market. Because this measure only uses [systematic risk](https://www.investopedia.com/terms/s/systematicrisk.asp), it assumes that the investor already has an adequately diversified portfolio and, therefore, [unsystematic risk](https://www.investopedia.com/terms/u/unsystematicrisk.asp) (also known as diversifiable risk) is not considered. As a result, this performance measure is most applicable to investors who hold diversified portfolios. ## Sharpe Ratio The Sharpe ratio is almost identical to the Treynor measure, except that the risk measure is the standard deviation of the portfolio instead of considering only the systematic risk as represented by beta. Conceived by Bill Sharpe, this measure closely follows his work on the [capital asset pricing model](https://www.investopedia.com/terms/c/capm.asp) (CAPM) and, by extension, uses total risk to compare portfolios to the [capital market line](https://www.investopedia.com/terms/c/cml.asp). The Sharpe ratio is defined as: Sharpe ratio = P R − R F R S D where: P R = portfolio return R F R = risk-free rate S D = standard deviation \begin{aligned} &\text{Sharpe ratio} = \frac{PR - RFR}{SD}\\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &RFR=\text{risk-free rate}\\ &SD=\text{standard deviation}\\ \end{aligned} ​Sharpe ratio=SDPR−RFR​where:PR=portfolio returnRFR=risk-free rateSD=standard deviation​ So, assuming that the [S&P 500](https://www.investopedia.com/terms/s/sp500.asp) had a standard deviation of 18% over a 10-year period, a return of 10%, and the risk-free rate of 5%, we can determine the Sharpe ratios for the following portfolio managers: | **Manager** | **Annual Return** | **Portfolio Standard Deviation** | | --- | --- | --- | | Manager X | 14% | 0.11 | | Manager Y | 17% | 0.20 | | Manager Z | 19% | 0.27 | | S(market) | (0.10-0.05)/0.18 | 0.278 | | --- | --- | --- | | S(manager X) | (0.14-0.05)/0.11 | 0.818 | | S(manager Y) | (0.17-0.05)/0.20 | 0.600 | | S(manager Z) | (0.19-0.05)/0.27 | 0.519 | Again, we find that the best portfolio is not necessarily the portfolio with the highest return. Instead, a superior portfolio has the superior [risk-adjusted return](https://www.investopedia.com/terms/r/riskadjustedreturn.asp) or, in this case, the fund headed by manager X. Unlike the Treynor measure, the Sharpe ratio evaluates the portfolio manager on the basis of both the [rate of return](https://www.investopedia.com/terms/r/rateofreturn.asp) and diversification (it considers total portfolio risk as measured by the standard deviation in its denominator). Therefore, the Sharpe ratio is more appropriate for [well-diversified](https://www.investopedia.com/investing/importance-diversification/) portfolios because it more accurately takes into account the risks of the portfolio. ## Jensen's Alpha Similar to the previous performance measures discussed, the Jensen measure is calculated using the CAPM. Named after its creator, Michael C. Jensen, the Jensen ratio calculates the excess return that a portfolio generates over its [expected return](https://www.investopedia.com/terms/e/expectedreturn.asp). This measure of return is also known as [alpha](https://www.investopedia.com/terms/a/alpha.asp). The Jensen ratio measures how much of the portfolio's rate of return is attributable to the manager's ability to deliver above-average returns, adjusted for [market risk](https://www.investopedia.com/terms/m/marketrisk.asp). The higher the ratio, the better the risk-adjusted returns. A portfolio with a consistently positive excess return will have a positive alpha, while a portfolio with a consistently negative excess return will have a negative alpha. The formula is broken down as follows: Jenson’s alpha = P R − C A P M where: P R = portfolio return C A P M = risk-free rate + β ( return of market risk-free rate of return ) \begin{aligned} &\text{Jenson's alpha} = PR - CAPM \\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &CAPM=\text{risk-free rate} + \beta(\text{return of market risk-free rate of return})\\ \end{aligned} ​Jenson’s alpha=PR−CAPMwhere:PR=portfolio returnCAPM=risk-free rate+β(return of market risk-free rate of return)​ If we assume a risk-free rate of 5% and a market return of 10%, what is the alpha for the following funds? | **Manager** | **Average Annual Return** | **Beta** | | --- | --- | --- | | Manager D | 11% | 0.90 | | Manager E | 15% | 1.10 | | Manager F | 15% | 1.20 | We calculate the portfolio's expected return (CAPM): | ER(D) | 0.05 + 0.90 (0.10-0.05) | 0.0950 or 9.5% return | | --- | --- | --- | | ER(E) | 0.05 + 1.10 (0.10-0.05) | 0.1050 or 10.5% return | | ER(F) | 0.05 + 1.20 (0.10-0.05) | 0.1100 or 11% return | We calculate the portfolio's alpha by subtracting the expected return of the portfolio from the [actual return](https://www.investopedia.com/terms/a/actualreturn.asp): | Alpha D | 11%- 9.5% | 1.5% | | --- | --- | --- | | Alpha E | 15%- 10.5% | 4.5% | | Alpha F | 15%- 11% | 4.0% | Which manager did the best? Manager E did best because although Manager F had the same annual return, it was expected that Manager E would [yield](https://www.investopedia.com/terms/y/yield.asp) a lower return because the portfolio's beta was significantly lower than that of portfolio F. Both the rate of return and risk for securities (or portfolios) will vary by time period. The Jensen measure requires the use of a different risk-free rate of return for each time interval. To evaluate the performance of a fund manager for a five-year period using annual intervals would also require examining the fund's annual returns minus the [risk-free return](https://www.investopedia.com/terms/r/risk-freereturn.asp) for each year and relating it to the annual return on the market portfolio minus the same risk-free rate. Conversely, the Treynor and Sharpe ratios examine average returns for the *total period* under consideration for all variables in the formula (the portfolio, market, and risk-free [asset](https://www.investopedia.com/terms/a/asset.asp)). Similar to the Treynor measure, however, Jensen's alpha calculates risk premiums in terms of beta (systematic, undiversifiable risk) and, therefore, assumes the portfolio is already adequately diversified. As a result, this ratio is best applied to an investment such as a [mutual fund](https://www.investopedia.com/terms/m/mutualfund.asp). ## How Do You Measure the Performance of a Portfolio? There are several ways to measure a portfolio's performance. Some of the most popular methods are the Sharpe, Jensen, and Treynor ratios. ## What Determines Portfolio Performance? The best performance indicator measures a portfolio's returns against a benchmark and the risks. You can use only returns as a performance indicator, but this limits your view because risk is not considered. ## What Is the Portfolio Performance? Portfolio performance measures give you information about [how effective your investments are](https://www.investopedia.com/terms/k/kratio.asp). ## The Bottom Line Portfolio performance measures are a key factor in the investment decision. These tools provide the necessary information for investors to assess how effectively their money has been invested (or may be invested). Remember, portfolio returns are only part of the story. Without [evaluating risk-adjusted returns](https://www.investopedia.com/ask/answers/021315/what-difference-between-sharpe-ratio-and-alpha.asp), an investor cannot possibly see the whole [investment](https://www.investopedia.com/terms/i/investment.asp) picture, which may inadvertently lead to clouded decisions.

The Treynor, Sharpe, and Jensen ratios combine risk and return performance into a single value to measure portfolio performance. Historically, many investors mistakenly based the success of their portfolios on returns alone. Few investors considered the risk involved in achieving those returns. But which is best? Should you use more than one or all three? Learn more about these measurements and how to use them to evaluate portfolios. Key Takeaways Portfolio performance measures are a key factor in the investment decision.There are three popular performance measurement tools that assist with portfolio evaluations—the Treynor, Sharpe, and Jensen ratios.Portfolio returns are only part of the story—without evaluating risk-adjusted returns, an investor cannot possibly see the whole investment picture. Treynor Ratio Jack L. Treynor was the first to provide investors with a composite measure of portfolio performance that also included risk. Treynor's objective was to find a performance measure that could apply to all investors regardless of their personal risk preferences. Treynor suggested that there were really two components of risk: the risk produced by fluctuations in the stock market and the risk arising from the fluctuations of individual securities. Treynor introduced the concept of the security market line, which defines the relationship between portfolio returns and market rates of returns whereby the slope of the line measures the relative volatility between the portfolio and the market (as represented by beta). The beta coefficient is the volatility measure of a stock portfolio to the market itself. The greater the line's slope, the better the risk-return tradeoff. The Treynor measure, also known as the reward-to-volatility ratio, is defined as: Treynor Measure = P R − R F R β where: P R = portfolio return R F R = risk-free rate β = beta \begin{aligned} &\text{Treynor Measure} = \frac{PR - RFR}{\beta}\\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &RFR=\text{risk-free rate}\\ &\beta=\text{beta}\\ \end{aligned} ​Treynor Measure=βPR−RFR​where:PR=portfolio returnRFR=risk-free rateβ=beta​ The numerator identifies excess returns (also called risk premium), and the denominator corresponds to the portfolio's sensitivity to the overall market's movements (also called the portfolio's risk). The resulting value represents the portfolio's return per unit of risk. To illustrate, suppose that the 10-year annual return for the S&P 500 (market portfolio) is 10% while the average annual return on Treasury bills (a good proxy for the risk-free rate) is 5%. As a reminder, a beta of one means the portfolio moves in concert with the overall market. Less than one means it is less volatile, and a beta of more than one means it is more volatile. Assume the evaluation is of three distinct portfolio managers with the following 10-year results: Managers Average Annual Return Beta Manager A 10% 0.90 Manager B 14% 1.03 Manager C 15% 1.20 The Treynor value for each is as follows:   Calculation Treynor Value T(market) (0.10-0.05)/1  0.05 T(manager A) (0.10-0.05)/0.90  0.056 T(manager B) (0.14-0.05)/1.03  0.087 T(manager C) (0.15-0.05)/1.20 0.083 The higher the Treynor measure, the better the portfolio. If the portfolio manager (or portfolio) is evaluated on performance alone, manager C seems to have yielded the best results (a 15% return). However, when considering the risks that each manager took to attain their respective returns, Manager B demonstrated a better outcome. In this case, all three managers performed better than the aggregate market. Because this measure only uses systematic risk, it assumes that the investor already has an adequately diversified portfolio and, therefore, unsystematic risk (also known as diversifiable risk) is not considered. As a result, this performance measure is most applicable to investors who hold diversified portfolios. Sharpe Ratio The Sharpe ratio is almost identical to the Treynor measure, except that the risk measure is the standard deviation of the portfolio instead of considering only the systematic risk as represented by beta. Conceived by Bill Sharpe, this measure closely follows his work on the capital asset pricing model (CAPM) and, by extension, uses total risk to compare portfolios to the capital market line. The Sharpe ratio is defined as: Sharpe ratio = P R − R F R S D where: P R = portfolio return R F R = risk-free rate S D = standard deviation \begin{aligned} &\text{Sharpe ratio} = \frac{PR - RFR}{SD}\\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &RFR=\text{risk-free rate}\\ &SD=\text{standard deviation}\\ \end{aligned} ​Sharpe ratio=SDPR−RFR​where:PR=portfolio returnRFR=risk-free rateSD=standard deviation​ So, assuming that the S&P 500 had a standard deviation of 18% over a 10-year period, a return of 10%, and the risk-free rate of 5%, we can determine the Sharpe ratios for the following portfolio managers: Manager Annual Return Portfolio Standard Deviation Manager X 14% 0.11 Manager Y 17% 0.20 Manager Z 19% 0.27 S(market) (0.10-0.05)/0.18 0.278 S(manager X) (0.14-0.05)/0.11  0.818 S(manager Y) (0.17-0.05)/0.20  0.600 S(manager Z) (0.19-0.05)/0.27 0.519 Again, we find that the best portfolio is not necessarily the portfolio with the highest return. Instead, a superior portfolio has the superior risk-adjusted return or, in this case, the fund headed by manager X. Unlike the Treynor measure, the Sharpe ratio evaluates the portfolio manager on the basis of both the rate of return and diversification (it considers total portfolio risk as measured by the standard deviation in its denominator). Therefore, the Sharpe ratio is more appropriate for well-diversified portfolios because it more accurately takes into account the risks of the portfolio. Jensen's Alpha Similar to the previous performance measures discussed, the Jensen measure is calculated using the CAPM. Named after its creator, Michael C. Jensen, the Jensen ratio calculates the excess return that a portfolio generates over its expected return. This measure of return is also known as alpha. The Jensen ratio measures how much of the portfolio's rate of return is attributable to the manager's ability to deliver above-average returns, adjusted for market risk. The higher the ratio, the better the risk-adjusted returns. A portfolio with a consistently positive excess return will have a positive alpha, while a portfolio with a consistently negative excess return will have a negative alpha. The formula is broken down as follows: Jenson’s alpha = P R − C A P M where: P R = portfolio return C A P M = risk-free rate + β ( return of market risk-free rate of return ) \begin{aligned} &\text{Jenson's alpha} = PR - CAPM \\ &\textbf{where:}\\ &PR=\text{portfolio return}\\ &CAPM=\text{risk-free rate} + \beta(\text{return of market risk-free rate of return})\\ \end{aligned} ​Jenson’s alpha=PR−CAPMwhere:PR=portfolio returnCAPM=risk-free rate+β(return of market risk-free rate of return)​ If we assume a risk-free rate of 5% and a market return of 10%, what is the alpha for the following funds? Manager Average Annual Return Beta Manager D 11% 0.90 Manager E 15% 1.10 Manager F 15% 1.20 We calculate the portfolio's expected return (CAPM): ER(D) 0.05 + 0.90 (0.10-0.05)  0.0950 or 9.5% return ER(E) 0.05 + 1.10 (0.10-0.05)  0.1050 or 10.5% return ER(F) 0.05 + 1.20 (0.10-0.05)  0.1100 or 11% return We calculate the portfolio's alpha by subtracting the expected return of the portfolio from the actual return: Alpha D 11%- 9.5%  1.5% Alpha E 15%- 10.5%  4.5% Alpha F 15%- 11%  4.0% Which manager did the best? Manager E did best because although Manager F had the same annual return, it was expected that Manager E would yield a lower return because the portfolio's beta was significantly lower than that of portfolio F. Both the rate of return and risk for securities (or portfolios) will vary by time period. The Jensen measure requires the use of a different risk-free rate of return for each time interval. To evaluate the performance of a fund manager for a five-year period using annual intervals would also require examining the fund's annual returns minus the risk-free return for each year and relating it to the annual return on the market portfolio minus the same risk-free rate. Conversely, the Treynor and Sharpe ratios examine average returns for the total period under consideration for all variables in the formula (the portfolio, market, and risk-free asset). Similar to the Treynor measure, however, Jensen's alpha calculates risk premiums in terms of beta (systematic, undiversifiable risk) and, therefore, assumes the portfolio is already adequately diversified. As a result, this ratio is best applied to an investment such as a mutual fund. How Do You Measure the Performance of a Portfolio? There are several ways to measure a portfolio's performance. Some of the most popular methods are the Sharpe, Jensen, and Treynor ratios. What Determines Portfolio Performance? The best performance indicator measures a portfolio's returns against a benchmark and the risks. You can use only returns as a performance indicator, but this limits your view because risk is not considered. What Is the Portfolio Performance? Portfolio performance measures give you information about how effective your investments are. The Bottom Line Portfolio performance measures are a key factor in the investment decision. These tools provide the necessary information for investors to assess how effectively their money has been invested (or may be invested). Remember, portfolio returns are only part of the story. Without evaluating risk-adjusted returns, an investor cannot possibly see the whole investment picture, which may inadvertently lead to clouded decisions.

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

Joint

<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-joint"></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 Joint? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Joint is a legal term describing a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/transaction.asp">transaction</a> or agreement where two or more parties act in unison. </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>Joint refers to transactions involving two or more parties.</li><li>Joint can also refer to liability such as when two people share a debt.</li><li>Joint is used in many situations ranging from joint accounts to joint ventures.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-joint"></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 Joint </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> In addition to pertaining to accounts or ownership in real <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/property.asp">property</a>, joint can also refer to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liability.asp">liability</a>. Joint liability exists in situations where two or more people share the burden of a debt. For example, if a husband and wife have joint liability for a debt, each is responsible for the entire amount of the debt. Several liability, on the other hand, would limit liability to each person's respective obligations. </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-examples-of-joint"></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"> Examples of Joint </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> Joint, as a term, can be used in a variety of situations, including:  </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><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jointaccount.asp">joint accounts</a>, where two or more parties share a single account, such as a bank or brokerage account. In this case, the law considers both parties to be equal owners, no matter who started the account or who contributes more money. Co-owners can spend or transfer funds to other accounts without the consent of the other account holder. Most joint accounts have rights of survivorship, which means that if one account holder dies, the other will automatically retain rights to the account funds.</li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/joint-tenancy.asp">joint tenancies</a>, where two or more parties share equal shares of ownership in property with the same deed at the same time. This type of holding title is most common between husbands and wives and among family members since there are <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jtwros.asp">rights of survivorship</a>, similar to joint accounts. This differs from a tenancy in common, whereby tenants may have different shares of ownership, which may be obtained at different times.</li> <li>joint annuities, such as <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jointandsurvivorannuity.asp">joint and survivor annuities,</a> insurance products that continue regular payments as long as one of the annuitants is alive. A joint and survivor <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/annuity.asp">annuity</a> must have two or more annuitants. This is usually a wise choice for married couples who want to guarantee that, in the case of death, the surviving spouse receives regular income for life, though monthly payments are typically reduced by one-third or one-half for the surviving annuitant. </li><span class="mntl-sc-block-adslot mntl-sc-block-adslot-inline"></span> <li><a data-component="link" data-ordinal="6" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/j/jointventure.asp">joint ventures</a>, where two unaffiliated companies contribute financial and/or physical assets, as well as personnel, to a new company. Although joint ventures are generally thought of as partnerships, they can take on any legal structure. Corporations, partnerships, <a data-component="link" data-ordinal="7" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/llc.asp">limited liability companies (LLCs)</a> and other business entities can all be involved in joint ventures, the agreements of which take into account: the number of parties involved, the scope in which the joint venture will operate, the terms of each party’s role and contribution, the ownership split, and how the joint ventures will be administered, managed and staffed.</li> </ul></div>

## What Is Joint? Joint is a legal term describing a [transaction](https://www.investopedia.com/terms/t/transaction.asp) or agreement where two or more parties act in unison. ### Key Takeaways * Joint refers to transactions involving two or more parties. * Joint can also refer to liability such as when two people share a debt. * Joint is used in many situations ranging from joint accounts to joint ventures. ## Understanding Joint In addition to pertaining to accounts or ownership in real [property](https://www.investopedia.com/terms/p/property.asp), joint can also refer to [liability](https://www.investopedia.com/terms/l/liability.asp). Joint liability exists in situations where two or more people share the burden of a debt. For example, if a husband and wife have joint liability for a debt, each is responsible for the entire amount of the debt. Several liability, on the other hand, would limit liability to each person's respective obligations. ## Examples of Joint Joint, as a term, can be used in a variety of situations, including:  * [joint accounts](https://www.investopedia.com/terms/j/jointaccount.asp), where two or more parties share a single account, such as a bank or brokerage account. In this case, the law considers both parties to be equal owners, no matter who started the account or who contributes more money. Co-owners can spend or transfer funds to other accounts without the consent of the other account holder. Most joint accounts have rights of survivorship, which means that if one account holder dies, the other will automatically retain rights to the account funds. * [joint tenancies](https://www.investopedia.com/terms/j/joint-tenancy.asp), where two or more parties share equal shares of ownership in property with the same deed at the same time. This type of holding title is most common between husbands and wives and among family members since there are [rights of survivorship](https://www.investopedia.com/terms/j/jtwros.asp), similar to joint accounts. This differs from a tenancy in common, whereby tenants may have different shares of ownership, which may be obtained at different times. * joint annuities, such as [joint and survivor annuities,](https://www.investopedia.com/terms/j/jointandsurvivorannuity.asp) insurance products that continue regular payments as long as one of the annuitants is alive. A joint and survivor [annuity](https://www.investopedia.com/terms/a/annuity.asp) must have two or more annuitants. This is usually a wise choice for married couples who want to guarantee that, in the case of death, the surviving spouse receives regular income for life, though monthly payments are typically reduced by one-third or one-half for the surviving annuitant. * [joint ventures](https://www.investopedia.com/terms/j/jointventure.asp), where two unaffiliated companies contribute financial and/or physical assets, as well as personnel, to a new company. Although joint ventures are generally thought of as partnerships, they can take on any legal structure. Corporations, partnerships, [limited liability companies (LLCs)](https://www.investopedia.com/terms/l/llc.asp) and other business entities can all be involved in joint ventures, the agreements of which take into account: the number of parties involved, the scope in which the joint venture will operate, the terms of each party’s role and contribution, the ownership split, and how the joint ventures will be administered, managed and staffed.

What Is Joint? Joint is a legal term describing a transaction or agreement where two or more parties act in unison. Key Takeaways Joint refers to transactions involving two or more parties.Joint can also refer to liability such as when two people share a debt.Joint is used in many situations ranging from joint accounts to joint ventures. Understanding Joint In addition to pertaining to accounts or ownership in real property, joint can also refer to liability. Joint liability exists in situations where two or more people share the burden of a debt. For example, if a husband and wife have joint liability for a debt, each is responsible for the entire amount of the debt. Several liability, on the other hand, would limit liability to each person's respective obligations. Examples of Joint Joint, as a term, can be used in a variety of situations, including:  joint accounts, where two or more parties share a single account, such as a bank or brokerage account. In this case, the law considers both parties to be equal owners, no matter who started the account or who contributes more money. Co-owners can spend or transfer funds to other accounts without the consent of the other account holder. Most joint accounts have rights of survivorship, which means that if one account holder dies, the other will automatically retain rights to the account funds. joint tenancies, where two or more parties share equal shares of ownership in property with the same deed at the same time. This type of holding title is most common between husbands and wives and among family members since there are rights of survivorship, similar to joint accounts. This differs from a tenancy in common, whereby tenants may have different shares of ownership, which may be obtained at different times. joint annuities, such as joint and survivor annuities, insurance products that continue regular payments as long as one of the annuitants is alive. A joint and survivor annuity must have two or more annuitants. This is usually a wise choice for married couples who want to guarantee that, in the case of death, the surviving spouse receives regular income for life, though monthly payments are typically reduced by one-third or one-half for the surviving annuitant.  joint ventures, where two unaffiliated companies contribute financial and/or physical assets, as well as personnel, to a new company. Although joint ventures are generally thought of as partnerships, they can take on any legal structure. Corporations, partnerships, limited liability companies (LLCs) and other business entities can all be involved in joint ventures, the agreements of which take into account: the number of parties involved, the scope in which the joint venture will operate, the terms of each party’s role and contribution, the ownership split, and how the joint ventures will be administered, managed and staffed.

https://www.investopedia.com/articles/personal-finance/123115/best-ways-invest-500-5000.asp

Best Ways to Invest Money on a Small Budget

<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 common myth about investing is that you need a big, fat bank account to get started. In reality, building a solid portfolio can begin with a few thousand—or even a few hundred—dollars. Starting small with your investments isn't a bad thing. The key is just starting, period, and investing your money wisely. </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 is some specific advice about the best small investments that can make money, organized by the amount you may have available to begin your investments. This article will also cover some smart moves low-rollers can make to kick-start a savings and investment program. </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>Regularly set aside a certain amount to save.</li><li>Look into savings apps that round up your purchases and save the small change.</li><li>Pay off high-interest debt first.</li><li>Take advantage of retirement plans.</li><li>Think about the level of risk you are comfortable with and how that changes over time.</li><li>Trade up to better choices as your investment pot grows.</li></ul></div></div></div> <span class="heading-toc" id="toc-best-ways-to-invest-with-little-money"></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"> Best Ways to Invest with Little Money </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Whether you’re planning to invest a little or a lot, engage in safe bets or high-risk gambles, these steps should help get your plans off on the right track. </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"> Automatic Savings </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The diligence to set aside a certain amount in monthly savings will reap rewards in the long run. If you lack the willpower or organization to do that on your own, help is available via smartphone and computer apps. </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 apps that make saving the least painful are those that round up your purchases and other transactions to the nearest dollar and put aside the “savings.” Acorns, Qapital, and Chime all offer ways to round up transactions from your credit or debit cards and return the money to you in savings-friendly vehicles. </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"> Acorns, for example, puts the money into one of several low-cost exchange-traded funds (ETFs); these are good vehicles for small savers.<span class="ql-inline-citation" data-cite="14"></span> Qapital adds the option to transfer money based on your chosen rules automatically. The money in a Federal Deposit Insurance Corporation-insured Qapital account is held with one of its banking partners.<span class="ql-inline-citation" data-cite="8"></span> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-chime-makes-money-4796705">Chime, an online bank and app</a>, offers a savings account that automatically sets aside a percentage of every paycheck you deposit, among its other features.<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"> Short of using these apps, check with your bank about its own apps and other ways you might automatically transfer funds from non-savings accounts to those better suited to savings and investment. </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"> Deal With Your Debts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> Before you begin to save, analyze what it costs to carry your debt, and consider how rapidly you can be rid of it. After all, high-interest credit cards carry rates of 20% or more, and some student loans have interest rates over 10%. Those rates are higher than the average annual earnings of 9.2% or so that the U.S. stock market has returned over time.<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_21-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> If you’re carrying a lot of high-interest debt, it makes more sense to pay off at least some of it before investing. While you can’t predict the exact return on most of your investments, you can be sure that retiring debt with a 20% interest rate one year early is as good as earning a 20% return on your money. </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"> After that, you’ll need to avoid high-interest debt by building an emergency fund. </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 first and best place to start investing is to ensure you have enough in your emergency savings,” says Jeremy Keil, a certified financial planner from New Berlin, Wisconsin. “Half of all Americans have less than $1,000 saved, and they are just one medical, credit card, or car bill away from big financial problems.” </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_2-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>Always contribute enough money to your 401(k) to qualify for your employer’s matching contribution—it’s free money. Even if your employer doesn’t offer any match on your 401(k) contributions, a plan is still a good deal.</p></div></div></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"> Consider Your Retirement </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> A key goal of saving and investing, even at an early age, should be to ensure that you have enough money after you stop working. One priority would be to take advantage of the inducements dangled by governments and employers to encourage retirement savings. If your company offers 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>retirement plan, don’t overlook it. That’s especially the case if your company matches part or all of your contributions. </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"> For example, if you have an income of $50,000 and contribute $3,000, or 6% of your income, to your 401(k) plan, your employer might match that by contributing an additional $3,000. A less generous employer might contribute up to only 3%, adding $1,500 to your $3,000 contribution. You’ll always want to put enough into your 401(k) to get the total amount of your employer’s match. Not doing so is essentially throwing money away. </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"> Additionally, 401(k)s and other retirement vehicles are good investments because of their favorable tax treatment. Many allow you to contribute with pretax dollars, which reduces your tax burden in the years you contribute.<span class="ql-inline-citation" data-cite="10"></span> For other investment vehicles, such as Roth 401(k)s and individual retirement accounts (IRAs), you contribute with after-tax income but withdraw the funds without tax, which will reduce your tax hit the year you take out your funds.<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_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> “Once your emergency fund is set you could consider a Roth IRA, which helps you save for retirement, and allows your earnings to grow tax-free,” Keil says. “You would generally want a ‘<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/target-date_fund.asp">target-date</a>’ fund that gives you a mix of investments based on when you might retire, or an ‘allocation fund’ that gives you a mix of investments based on the risk you’re willing to take.” </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"> Remember, if your money has grown for many years, there will be much more than you initially contributed so those tax-free withdrawals will be even more beneficial. Whether using a target-date or allocation fund, the earnings accumulate tax-free within the account.<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> <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"> Invest Your Tax Refund </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> If you find it hard to save money throughout the year, consider setting aside part or all of your tax refund as a way to get started with investing. It’s one of the few moments in the year when you’re likely to get a windfall that you didn't already plan to use on expenses. </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_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>No matter what product you're investing in, it’s vital that you understand (and do your best to minimize) the fees associated with it.</p></div></div></div> <span class="heading-toc" id="toc-best-ways-to-invest-by-starting-amount"></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"> Best Ways to Invest by Starting Amount </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> A few general points are worth underlining first. No matter your net worth, it’s essential to minimize your investment fees, whether on a checking account, a mutual fund, or any other financial product. </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"> That’s especially the case when <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/08/twenty-five-dollar-investment.asp">investing on a budget</a> because fixed fees will take a significant chunk of your savings. A $100 annual fee on a $1 million account is trivial, but a $100 fee on a $5,000 account is a financial hit. Carefully choose the costs when you put your money in an account, especially if you’re investing on a budget. </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 also need to weigh the likely returns on your investments against the level of risk you’re comfortable with and ensure that it's appropriate for your age. In general, your portfolio should become steadily less risky as you approach retirement. </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"> How to Invest $500 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_54-0"> It may seem like a small amount to work with, but $500 can go farther than you think in starting an investment portfolio. If you prefer to play it safe, park your sum in a certificate of deposit (CD) from a bank or other lender or use it to buy short-term Treasury bills, which can be purchased through an online broker. The growth potential with both options is limited, though it increases when interest rates are up, but the risks are virtually zero. It’s a way to earn a little on your money until your nest egg grows and more options become available. </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 those comfortable with a little more risk, many choices are available, even for small investors, that promise greater returns than CDs or T-bills. One is a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp">dividend reinvestment plan</a>. You buy shares of stock, and your dividends are automatically used to purchase additional or even fractional shares. This is an excellent choice for small investors because the shares are bought at a discount without paying a sales commission to a broker. Buying a single share of a company’s stock can get you started. </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"> How to Invest in ETFs </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Another option for starting small is an ETF, most of which require no minimum investment. Unlike most mutual funds, ETFs typically have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passivemanagement.asp">passive management</a> structure, which translates to lower ongoing costs. While transaction fees have been a concern when trading ETFs, many discount brokers now offer commission-free trades on ETFs, reducing the cost of buying and selling these funds. By choosing a broker that offers commission-free ETF trading, you can invest without worrying about additional transaction fees. If your broker does charge for trades, consolidating your investments into fewer, larger transactions could help reduce these costs. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_60-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_61-0"> <span class="mntl-sc-block-subheading__text"> How to Invest in Peer-to-Peer Lending and Crowdfunding </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> Near the top in risk, there’s investing in peer-to-peer lending. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/crowdfunding.asp">Crowdfunders</a> connect investors and entrepreneurs trying to fund new ventures. As the loans are repaid, investors receive a share of the interest proportional to the amount they have invested. Some crowdfunding platforms have low minimums to open an account, such as $25 for Prosper, but others may require much more money.<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_63-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_64-0"> Crowdfunding offers high risk, as many new ventures fail, but also the prospect of higher earnings. Generally, annual returns fall in the 5% to 8% range, but they can climb to 30% or more for investors who are willing to take a big risk or are simply lucky enough to back an especially profitable newcomer.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_65-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_66-0"> <span class="mntl-sc-block-subheading__text"> How to Invest $1,000 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> If you’re saving for retirement or to purchase a home that’s some years away, you might look for a low-fee target-date fund with a relatively low minimum investment, typically $1,000 or so. With this type of fund, you choose the target date. The investments in the fund are automatically adjusted over time, with the overall mix moving from riskier to safer as your target date approaches. </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"> This is important because when you’re just starting, you have time. You can make riskier investments that might earn higher returns. However, as you near your target date, especially if it’s your retirement, you want to protect yourself from sudden losses that derail your plans. </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"> With $1,000, you can also consider buying individual shares, which may have a higher risk but can generate higher returns. Investing in individual stocks that pay dividends is a smart strategy. You will have the option of receiving the dividends as cash payouts or reinvesting them in additional shares. </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"> Real Estate Crowdfunding </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_74-0"> Another option if you're interested in crowdfunding is to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790">crowdfund a real estate investment</a>. This involves working with an organization that takes funds from many investors and deploys them to purchase or upgrade real estate. </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"> On top of enabling you to get involved in real estate with relatively small amounts of money, it gives you access to investments beyond the typical single or multifamily home. Crowdfunded real estate investments can include commercial space, large apartment buildings, hotels, or industrial buildings. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_77-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_78-0"> <span class="mntl-sc-block-subheading__text"> How to Invest $3,000 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_79-0"> This investment level provides access to additional options, including more mutual funds. While some funds require a minimum investment of $1,000 or less, a larger sum is more common, such as the $3,000 required by Vanguard for most funds.<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_80-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_81-0"> The long list of funds can be intimidating. But consider first an <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/indexfund.asp">index fund</a>, a type of mutual fund that tracks a specific market index, such as the S&amp;P 500 or the Dow Jones Industrials, and offers relatively low fees. Like ETFs, index funds are passively managed, which means a lower <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expenseratio.asp">expense ratio</a>. The goal of an index fund is to match the index's performance at least. It also gives you broad exposure to several asset classes. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_82-0"></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"> How to Invest $5,000 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_84-0"> The possibilities widen at the $5,000 level. You have more options for mutual funds, individual company shares, index funds, IRAs, and for investing in real estate. While $5,000 isn’t enough to purchase property or even to make a down payment, it’s enough to get a stake in real estate in other ways. </p> <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"> The first possibility is to put money in a real estate investment trust (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/reit.asp">REIT</a>). This is a firm that owns a group of properties or mortgages that produce a continuous stream of income. As a REIT investor, you’re entitled to a share of the income generated by these underlying properties. REITs are required by law to pay 90% of their income to investors in the form of dividends annually. REITs can be traded or non-traded, with the latter carrying higher upfront fees.<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_87-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_88-0"> Real estate crowdfunding is a second option. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790">best real estate crowdfunding platforms</a> can now accept investments from both accredited and nonaccredited investors.<span class="ql-inline-citation" data-cite="12"></span> Many platforms set the minimum investment to enter private real estate deals at $5,000. </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"> Investors can also choose between <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/122315/equity-vs-debt-investments-real-estate-crowdfunding.asp">debt and equity investments</a> in commercial and residential properties, depending on the platform. Returns for debt investments range from 8% to 12% a year. Equity investments can have higher yields if the value of the property increases. Keep in mind that this type of investment carries more risks than more traditional investments. </p> <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-whats-the-best-investment-for-someone-on-a-budget"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Best Investment for Someone on a Budget?</h2> <div class="mntl-sc-block-questionandanswer__answer"><ul><li>There isn't a single best investment for someone who doesn't have a lot of money to get started. Like all investing, you need to consider your risk tolerance and goals. Try to choose an investment that offers a combination of risk and reward that matches your risk tolerance.</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-why-do-many-investments-have-minimum-investment-requirements"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Do Many Investments Have Minimum Investment Requirements?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/111714/what-minimum-amount-money-i-can-invest-mutual-fund.asp">Minimum investment amounts</a> vary significantly depending on the investment involved, but they're generally used to make sure that a large number of small transactions or short-term trades don't impact the daily management of a mutual fund or other investment.</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-is-it-better-to-invest-or-pay-off-debt"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is It Better to Invest or Pay Off Debt?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>When deciding to invest or pay off debt, you should compare the interest rate of the debt to your expected returns. Paying down debt makes more sense if the expected return from investing is less than or similar to the interest rate for the debt.</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-whats-the-smallest-amount-of-money-i-can-start-investing-with"></span> <h2 class="mntl-sc-block-questionandanswer__question">What's the Smallest Amount of Money I Can Start Investing With?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Some services let you start investing with very small amounts. For example, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/company-insights/090516/how-acorns-works-and-makes-money.asp">Acorns </a>lets you start with as little as $5. You can likely find a service that will let you start investing with whatever amount you have available.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_99-0"></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_100-0"> <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_101-0"> Investing can be quite complicated, but the basics are simple. Maximize what you save and invest and your employer’s contributions. Minimize taxes and fees. Make smart choices with your limited resources. That said, building a portfolio can become complex quickly, especially when considering your debts, specific tax incentives and obligations that might apply, and so on, let alone balancing risks and potential returns for different investment options. Consider getting help. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_102-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_103-0"> Given the technology and the fierce competition for your dollars, more resources than ever are available. Options include <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp">robo-advisors</a>, virtual assistants that can help you create a balanced portfolio at a low price, and fee-only financial advisors, which do not depend on income from commissions on the products they sell. The hardest part of investing is getting started, but the sooner you do so, the more you can accumulate. It’s as simple as that. </p></div>

A common myth about investing is that you need a big, fat bank account to get started. In reality, building a solid portfolio can begin with a few thousand—or even a few hundred—dollars. Starting small with your investments isn't a bad thing. The key is just starting, period, and investing your money wisely. Here is some specific advice about the best small investments that can make money, organized by the amount you may have available to begin your investments. This article will also cover some smart moves low-rollers can make to kick-start a savings and investment program. ### Key Takeaways * Regularly set aside a certain amount to save. * Look into savings apps that round up your purchases and save the small change. * Pay off high-interest debt first. * Take advantage of retirement plans. * Think about the level of risk you are comfortable with and how that changes over time. * Trade up to better choices as your investment pot grows. ## Best Ways to Invest with Little Money Whether you’re planning to invest a little or a lot, engage in safe bets or high-risk gambles, these steps should help get your plans off on the right track. ### Automatic Savings The diligence to set aside a certain amount in monthly savings will reap rewards in the long run. If you lack the willpower or organization to do that on your own, help is available via smartphone and computer apps. The apps that make saving the least painful are those that round up your purchases and other transactions to the nearest dollar and put aside the “savings.” Acorns, Qapital, and Chime all offer ways to round up transactions from your credit or debit cards and return the money to you in savings-friendly vehicles. Acorns, for example, puts the money into one of several low-cost exchange-traded funds (ETFs); these are good vehicles for small savers. Qapital adds the option to transfer money based on your chosen rules automatically. The money in a Federal Deposit Insurance Corporation-insured Qapital account is held with one of its banking partners. [Chime, an online bank and app](https://www.investopedia.com/how-chime-makes-money-4796705), offers a savings account that automatically sets aside a percentage of every paycheck you deposit, among its other features. Short of using these apps, check with your bank about its own apps and other ways you might automatically transfer funds from non-savings accounts to those better suited to savings and investment. ### Deal With Your Debts Before you begin to save, analyze what it costs to carry your debt, and consider how rapidly you can be rid of it. After all, high-interest credit cards carry rates of 20% or more, and some student loans have interest rates over 10%. Those rates are higher than the average annual earnings of 9.2% or so that the U.S. stock market has returned over time. If you’re carrying a lot of high-interest debt, it makes more sense to pay off at least some of it before investing. While you can’t predict the exact return on most of your investments, you can be sure that retiring debt with a 20% interest rate one year early is as good as earning a 20% return on your money. After that, you’ll need to avoid high-interest debt by building an emergency fund. “The first and best place to start investing is to ensure you have enough in your emergency savings,” says Jeremy Keil, a certified financial planner from New Berlin, Wisconsin. “Half of all Americans have less than $1,000 saved, and they are just one medical, credit card, or car bill away from big financial problems.” ### Always contribute enough money to your 401(k) to qualify for your employer’s matching contribution—it’s free money. Even if your employer doesn’t offer any match on your 401(k) contributions, a plan is still a good deal. ### Consider Your Retirement A key goal of saving and investing, even at an early age, should be to ensure that you have enough money after you stop working. One priority would be to take advantage of the inducements dangled by governments and employers to encourage retirement savings. If your company offers a [401(k)](https://www.investopedia.com/terms/1/401kplan.asp) retirement plan, don’t overlook it. That’s especially the case if your company matches part or all of your contributions. For example, if you have an income of $50,000 and contribute $3,000, or 6% of your income, to your 401(k) plan, your employer might match that by contributing an additional $3,000. A less generous employer might contribute up to only 3%, adding $1,500 to your $3,000 contribution. You’ll always want to put enough into your 401(k) to get the total amount of your employer’s match. Not doing so is essentially throwing money away. Additionally, 401(k)s and other retirement vehicles are good investments because of their favorable tax treatment. Many allow you to contribute with pretax dollars, which reduces your tax burden in the years you contribute. For other investment vehicles, such as Roth 401(k)s and individual retirement accounts (IRAs), you contribute with after-tax income but withdraw the funds without tax, which will reduce your tax hit the year you take out your funds. “Once your emergency fund is set you could consider a Roth IRA, which helps you save for retirement, and allows your earnings to grow tax-free,” Keil says. “You would generally want a ‘[target-date](https://www.investopedia.com/terms/t/target-date_fund.asp)’ fund that gives you a mix of investments based on when you might retire, or an ‘allocation fund’ that gives you a mix of investments based on the risk you’re willing to take.” Remember, if your money has grown for many years, there will be much more than you initially contributed so those tax-free withdrawals will be even more beneficial. Whether using a target-date or allocation fund, the earnings accumulate tax-free within the account. ### Invest Your Tax Refund If you find it hard to save money throughout the year, consider setting aside part or all of your tax refund as a way to get started with investing. It’s one of the few moments in the year when you’re likely to get a windfall that you didn't already plan to use on expenses. ### No matter what product you're investing in, it’s vital that you understand (and do your best to minimize) the fees associated with it. ## Best Ways to Invest by Starting Amount A few general points are worth underlining first. No matter your net worth, it’s essential to minimize your investment fees, whether on a checking account, a mutual fund, or any other financial product. That’s especially the case when [investing on a budget](https://www.investopedia.com/articles/pf/08/twenty-five-dollar-investment.asp) because fixed fees will take a significant chunk of your savings. A $100 annual fee on a $1 million account is trivial, but a $100 fee on a $5,000 account is a financial hit. Carefully choose the costs when you put your money in an account, especially if you’re investing on a budget. You also need to weigh the likely returns on your investments against the level of risk you’re comfortable with and ensure that it's appropriate for your age. In general, your portfolio should become steadily less risky as you approach retirement. ### How to Invest $500 It may seem like a small amount to work with, but $500 can go farther than you think in starting an investment portfolio. If you prefer to play it safe, park your sum in a certificate of deposit (CD) from a bank or other lender or use it to buy short-term Treasury bills, which can be purchased through an online broker. The growth potential with both options is limited, though it increases when interest rates are up, but the risks are virtually zero. It’s a way to earn a little on your money until your nest egg grows and more options become available. For those comfortable with a little more risk, many choices are available, even for small investors, that promise greater returns than CDs or T-bills. One is a [dividend reinvestment plan](https://www.investopedia.com/terms/d/dividendreinvestmentplan.asp). You buy shares of stock, and your dividends are automatically used to purchase additional or even fractional shares. This is an excellent choice for small investors because the shares are bought at a discount without paying a sales commission to a broker. Buying a single share of a company’s stock can get you started. ### How to Invest in ETFs Another option for starting small is an ETF, most of which require no minimum investment. Unlike most mutual funds, ETFs typically have a [passive management](https://www.investopedia.com/terms/p/passivemanagement.asp) structure, which translates to lower ongoing costs. While transaction fees have been a concern when trading ETFs, many discount brokers now offer commission-free trades on ETFs, reducing the cost of buying and selling these funds. By choosing a broker that offers commission-free ETF trading, you can invest without worrying about additional transaction fees. If your broker does charge for trades, consolidating your investments into fewer, larger transactions could help reduce these costs. ### How to Invest in Peer-to-Peer Lending and Crowdfunding Near the top in risk, there’s investing in peer-to-peer lending. [Crowdfunders](https://www.investopedia.com/terms/c/crowdfunding.asp) connect investors and entrepreneurs trying to fund new ventures. As the loans are repaid, investors receive a share of the interest proportional to the amount they have invested. Some crowdfunding platforms have low minimums to open an account, such as $25 for Prosper, but others may require much more money. Crowdfunding offers high risk, as many new ventures fail, but also the prospect of higher earnings. Generally, annual returns fall in the 5% to 8% range, but they can climb to 30% or more for investors who are willing to take a big risk or are simply lucky enough to back an especially profitable newcomer. ### How to Invest $1,000 If you’re saving for retirement or to purchase a home that’s some years away, you might look for a low-fee target-date fund with a relatively low minimum investment, typically $1,000 or so. With this type of fund, you choose the target date. The investments in the fund are automatically adjusted over time, with the overall mix moving from riskier to safer as your target date approaches. This is important because when you’re just starting, you have time. You can make riskier investments that might earn higher returns. However, as you near your target date, especially if it’s your retirement, you want to protect yourself from sudden losses that derail your plans. With $1,000, you can also consider buying individual shares, which may have a higher risk but can generate higher returns. Investing in individual stocks that pay dividends is a smart strategy. You will have the option of receiving the dividends as cash payouts or reinvesting them in additional shares. ### Real Estate Crowdfunding Another option if you're interested in crowdfunding is to [crowdfund a real estate investment](https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790). This involves working with an organization that takes funds from many investors and deploys them to purchase or upgrade real estate. On top of enabling you to get involved in real estate with relatively small amounts of money, it gives you access to investments beyond the typical single or multifamily home. Crowdfunded real estate investments can include commercial space, large apartment buildings, hotels, or industrial buildings. ### How to Invest $3,000 This investment level provides access to additional options, including more mutual funds. While some funds require a minimum investment of $1,000 or less, a larger sum is more common, such as the $3,000 required by Vanguard for most funds. The long list of funds can be intimidating. But consider first an [index fund](https://www.investopedia.com/terms/i/indexfund.asp), a type of mutual fund that tracks a specific market index, such as the S&P 500 or the Dow Jones Industrials, and offers relatively low fees. Like ETFs, index funds are passively managed, which means a lower [expense ratio](https://www.investopedia.com/terms/e/expenseratio.asp). The goal of an index fund is to match the index's performance at least. It also gives you broad exposure to several asset classes. ### How to Invest $5,000 The possibilities widen at the $5,000 level. You have more options for mutual funds, individual company shares, index funds, IRAs, and for investing in real estate. While $5,000 isn’t enough to purchase property or even to make a down payment, it’s enough to get a stake in real estate in other ways. The first possibility is to put money in a real estate investment trust ([REIT](https://www.investopedia.com/terms/r/reit.asp)). This is a firm that owns a group of properties or mortgages that produce a continuous stream of income. As a REIT investor, you’re entitled to a share of the income generated by these underlying properties. REITs are required by law to pay 90% of their income to investors in the form of dividends annually. REITs can be traded or non-traded, with the latter carrying higher upfront fees. Real estate crowdfunding is a second option. The [best real estate crowdfunding platforms](https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790) can now accept investments from both accredited and nonaccredited investors. Many platforms set the minimum investment to enter private real estate deals at $5,000. Investors can also choose between [debt and equity investments](https://www.investopedia.com/articles/investing/122315/equity-vs-debt-investments-real-estate-crowdfunding.asp) in commercial and residential properties, depending on the platform. Returns for debt investments range from 8% to 12% a year. Equity investments can have higher yields if the value of the property increases. Keep in mind that this type of investment carries more risks than more traditional investments. ## What's the Best Investment for Someone on a Budget? * There isn't a single best investment for someone who doesn't have a lot of money to get started. Like all investing, you need to consider your risk tolerance and goals. Try to choose an investment that offers a combination of risk and reward that matches your risk tolerance. ## Why Do Many Investments Have Minimum Investment Requirements? [Minimum investment amounts](https://www.investopedia.com/ask/answers/111714/what-minimum-amount-money-i-can-invest-mutual-fund.asp) vary significantly depending on the investment involved, but they're generally used to make sure that a large number of small transactions or short-term trades don't impact the daily management of a mutual fund or other investment. ## Is It Better to Invest or Pay Off Debt? When deciding to invest or pay off debt, you should compare the interest rate of the debt to your expected returns. Paying down debt makes more sense if the expected return from investing is less than or similar to the interest rate for the debt. ## What's the Smallest Amount of Money I Can Start Investing With? Some services let you start investing with very small amounts. For example, [Acorns](https://www.investopedia.com/articles/company-insights/090516/how-acorns-works-and-makes-money.asp) lets you start with as little as $5. You can likely find a service that will let you start investing with whatever amount you have available. ## The Bottom Line Investing can be quite complicated, but the basics are simple. Maximize what you save and invest and your employer’s contributions. Minimize taxes and fees. Make smart choices with your limited resources. That said, building a portfolio can become complex quickly, especially when considering your debts, specific tax incentives and obligations that might apply, and so on, let alone balancing risks and potential returns for different investment options. Consider getting help. Given the technology and the fierce competition for your dollars, more resources than ever are available. Options include [robo-advisors](https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp), virtual assistants that can help you create a balanced portfolio at a low price, and fee-only financial advisors, which do not depend on income from commissions on the products they sell. The hardest part of investing is getting started, but the sooner you do so, the more you can accumulate. It’s as simple as that.

A common myth about investing is that you need a big, fat bank account to get started. In reality, building a solid portfolio can begin with a few thousand—or even a few hundred—dollars. Starting small with your investments isn't a bad thing. The key is just starting, period, and investing your money wisely. Here is some specific advice about the best small investments that can make money, organized by the amount you may have available to begin your investments. This article will also cover some smart moves low-rollers can make to kick-start a savings and investment program. Key Takeaways Regularly set aside a certain amount to save.Look into savings apps that round up your purchases and save the small change.Pay off high-interest debt first.Take advantage of retirement plans.Think about the level of risk you are comfortable with and how that changes over time.Trade up to better choices as your investment pot grows. Best Ways to Invest with Little Money Whether you’re planning to invest a little or a lot, engage in safe bets or high-risk gambles, these steps should help get your plans off on the right track. Automatic Savings The diligence to set aside a certain amount in monthly savings will reap rewards in the long run. If you lack the willpower or organization to do that on your own, help is available via smartphone and computer apps. The apps that make saving the least painful are those that round up your purchases and other transactions to the nearest dollar and put aside the “savings.” Acorns, Qapital, and Chime all offer ways to round up transactions from your credit or debit cards and return the money to you in savings-friendly vehicles. Acorns, for example, puts the money into one of several low-cost exchange-traded funds (ETFs); these are good vehicles for small savers. Qapital adds the option to transfer money based on your chosen rules automatically. The money in a Federal Deposit Insurance Corporation-insured Qapital account is held with one of its banking partners. Chime, an online bank and app, offers a savings account that automatically sets aside a percentage of every paycheck you deposit, among its other features. Short of using these apps, check with your bank about its own apps and other ways you might automatically transfer funds from non-savings accounts to those better suited to savings and investment. Deal With Your Debts Before you begin to save, analyze what it costs to carry your debt, and consider how rapidly you can be rid of it. After all, high-interest credit cards carry rates of 20% or more, and some student loans have interest rates over 10%. Those rates are higher than the average annual earnings of 9.2% or so that the U.S. stock market has returned over time. If you’re carrying a lot of high-interest debt, it makes more sense to pay off at least some of it before investing. While you can’t predict the exact return on most of your investments, you can be sure that retiring debt with a 20% interest rate one year early is as good as earning a 20% return on your money. After that, you’ll need to avoid high-interest debt by building an emergency fund. “The first and best place to start investing is to ensure you have enough in your emergency savings,” says Jeremy Keil, a certified financial planner from New Berlin, Wisconsin. “Half of all Americans have less than $1,000 saved, and they are just one medical, credit card, or car bill away from big financial problems.” Always contribute enough money to your 401(k) to qualify for your employer’s matching contribution—it’s free money. Even if your employer doesn’t offer any match on your 401(k) contributions, a plan is still a good deal. Consider Your Retirement A key goal of saving and investing, even at an early age, should be to ensure that you have enough money after you stop working. One priority would be to take advantage of the inducements dangled by governments and employers to encourage retirement savings. If your company offers a 401(k) retirement plan, don’t overlook it. That’s especially the case if your company matches part or all of your contributions. For example, if you have an income of $50,000 and contribute $3,000, or 6% of your income, to your 401(k) plan, your employer might match that by contributing an additional $3,000. A less generous employer might contribute up to only 3%, adding $1,500 to your $3,000 contribution. You’ll always want to put enough into your 401(k) to get the total amount of your employer’s match. Not doing so is essentially throwing money away. Additionally, 401(k)s and other retirement vehicles are good investments because of their favorable tax treatment. Many allow you to contribute with pretax dollars, which reduces your tax burden in the years you contribute. For other investment vehicles, such as Roth 401(k)s and individual retirement accounts (IRAs), you contribute with after-tax income but withdraw the funds without tax, which will reduce your tax hit the year you take out your funds. “Once your emergency fund is set you could consider a Roth IRA, which helps you save for retirement, and allows your earnings to grow tax-free,” Keil says. “You would generally want a ‘target-date’ fund that gives you a mix of investments based on when you might retire, or an ‘allocation fund’ that gives you a mix of investments based on the risk you’re willing to take.” Remember, if your money has grown for many years, there will be much more than you initially contributed so those tax-free withdrawals will be even more beneficial. Whether using a target-date or allocation fund, the earnings accumulate tax-free within the account. Invest Your Tax Refund If you find it hard to save money throughout the year, consider setting aside part or all of your tax refund as a way to get started with investing. It’s one of the few moments in the year when you’re likely to get a windfall that you didn't already plan to use on expenses. No matter what product you're investing in, it’s vital that you understand (and do your best to minimize) the fees associated with it. Best Ways to Invest by Starting Amount A few general points are worth underlining first. No matter your net worth, it’s essential to minimize your investment fees, whether on a checking account, a mutual fund, or any other financial product. That’s especially the case when investing on a budget because fixed fees will take a significant chunk of your savings. A $100 annual fee on a $1 million account is trivial, but a $100 fee on a $5,000 account is a financial hit. Carefully choose the costs when you put your money in an account, especially if you’re investing on a budget. You also need to weigh the likely returns on your investments against the level of risk you’re comfortable with and ensure that it's appropriate for your age. In general, your portfolio should become steadily less risky as you approach retirement. How to Invest $500 It may seem like a small amount to work with, but $500 can go farther than you think in starting an investment portfolio. If you prefer to play it safe, park your sum in a certificate of deposit (CD) from a bank or other lender or use it to buy short-term Treasury bills, which can be purchased through an online broker. The growth potential with both options is limited, though it increases when interest rates are up, but the risks are virtually zero. It’s a way to earn a little on your money until your nest egg grows and more options become available. For those comfortable with a little more risk, many choices are available, even for small investors, that promise greater returns than CDs or T-bills. One is a dividend reinvestment plan. You buy shares of stock, and your dividends are automatically used to purchase additional or even fractional shares. This is an excellent choice for small investors because the shares are bought at a discount without paying a sales commission to a broker. Buying a single share of a company’s stock can get you started. How to Invest in ETFs Another option for starting small is an ETF, most of which require no minimum investment. Unlike most mutual funds, ETFs typically have a passive management structure, which translates to lower ongoing costs. While transaction fees have been a concern when trading ETFs, many discount brokers now offer commission-free trades on ETFs, reducing the cost of buying and selling these funds. By choosing a broker that offers commission-free ETF trading, you can invest without worrying about additional transaction fees. If your broker does charge for trades, consolidating your investments into fewer, larger transactions could help reduce these costs. How to Invest in Peer-to-Peer Lending and Crowdfunding Near the top in risk, there’s investing in peer-to-peer lending. Crowdfunders connect investors and entrepreneurs trying to fund new ventures. As the loans are repaid, investors receive a share of the interest proportional to the amount they have invested. Some crowdfunding platforms have low minimums to open an account, such as $25 for Prosper, but others may require much more money. Crowdfunding offers high risk, as many new ventures fail, but also the prospect of higher earnings. Generally, annual returns fall in the 5% to 8% range, but they can climb to 30% or more for investors who are willing to take a big risk or are simply lucky enough to back an especially profitable newcomer. How to Invest $1,000 If you’re saving for retirement or to purchase a home that’s some years away, you might look for a low-fee target-date fund with a relatively low minimum investment, typically $1,000 or so. With this type of fund, you choose the target date. The investments in the fund are automatically adjusted over time, with the overall mix moving from riskier to safer as your target date approaches. This is important because when you’re just starting, you have time. You can make riskier investments that might earn higher returns. However, as you near your target date, especially if it’s your retirement, you want to protect yourself from sudden losses that derail your plans. With $1,000, you can also consider buying individual shares, which may have a higher risk but can generate higher returns. Investing in individual stocks that pay dividends is a smart strategy. You will have the option of receiving the dividends as cash payouts or reinvesting them in additional shares. Real Estate Crowdfunding Another option if you're interested in crowdfunding is to crowdfund a real estate investment. This involves working with an organization that takes funds from many investors and deploys them to purchase or upgrade real estate. On top of enabling you to get involved in real estate with relatively small amounts of money, it gives you access to investments beyond the typical single or multifamily home. Crowdfunded real estate investments can include commercial space, large apartment buildings, hotels, or industrial buildings. How to Invest $3,000 This investment level provides access to additional options, including more mutual funds. While some funds require a minimum investment of $1,000 or less, a larger sum is more common, such as the $3,000 required by Vanguard for most funds. The long list of funds can be intimidating. But consider first an index fund, a type of mutual fund that tracks a specific market index, such as the S&P 500 or the Dow Jones Industrials, and offers relatively low fees. Like ETFs, index funds are passively managed, which means a lower expense ratio. The goal of an index fund is to match the index's performance at least. It also gives you broad exposure to several asset classes. How to Invest $5,000 The possibilities widen at the $5,000 level. You have more options for mutual funds, individual company shares, index funds, IRAs, and for investing in real estate. While $5,000 isn’t enough to purchase property or even to make a down payment, it’s enough to get a stake in real estate in other ways. The first possibility is to put money in a real estate investment trust (REIT). This is a firm that owns a group of properties or mortgages that produce a continuous stream of income. As a REIT investor, you’re entitled to a share of the income generated by these underlying properties. REITs are required by law to pay 90% of their income to investors in the form of dividends annually. REITs can be traded or non-traded, with the latter carrying higher upfront fees. Real estate crowdfunding is a second option. The best real estate crowdfunding platforms can now accept investments from both accredited and nonaccredited investors. Many platforms set the minimum investment to enter private real estate deals at $5,000. Investors can also choose between debt and equity investments in commercial and residential properties, depending on the platform. Returns for debt investments range from 8% to 12% a year. Equity investments can have higher yields if the value of the property increases. Keep in mind that this type of investment carries more risks than more traditional investments. What's the Best Investment for Someone on a Budget? There isn't a single best investment for someone who doesn't have a lot of money to get started. Like all investing, you need to consider your risk tolerance and goals. Try to choose an investment that offers a combination of risk and reward that matches your risk tolerance. Why Do Many Investments Have Minimum Investment Requirements? Minimum investment amounts vary significantly depending on the investment involved, but they're generally used to make sure that a large number of small transactions or short-term trades don't impact the daily management of a mutual fund or other investment. Is It Better to Invest or Pay Off Debt? When deciding to invest or pay off debt, you should compare the interest rate of the debt to your expected returns. Paying down debt makes more sense if the expected return from investing is less than or similar to the interest rate for the debt. What's the Smallest Amount of Money I Can Start Investing With? Some services let you start investing with very small amounts. For example, Acorns lets you start with as little as $5. You can likely find a service that will let you start investing with whatever amount you have available. The Bottom Line Investing can be quite complicated, but the basics are simple. Maximize what you save and invest and your employer’s contributions. Minimize taxes and fees. Make smart choices with your limited resources. That said, building a portfolio can become complex quickly, especially when considering your debts, specific tax incentives and obligations that might apply, and so on, let alone balancing risks and potential returns for different investment options. Consider getting help. Given the technology and the fierce competition for your dollars, more resources than ever are available. Options include robo-advisors, virtual assistants that can help you create a balanced portfolio at a low price, and fee-only financial advisors, which do not depend on income from commissions on the products they sell. The hardest part of investing is getting started, but the sooner you do so, the more you can accumulate. It’s as simple as that.

https://www.investopedia.com/articles/active-trading/111214/quants-what-they-do-and-how-theyve-evolved.asp

Quants: What They Do and How They've Evolved

<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/q/quantitative-trading.asp">Quantitative trading</a> (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities. At the back end, quant trading also involves research work on historical data with an aim to identify profit opportunities. </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"> Quant trading is widely used at individual and institutional levels for <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</a>, <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/algorithmictrading.asp">algorithmic</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/what-is-arbitrage/">arbitrage</a>, and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/application-programming-interface.asp">automated trading</a>. Traders involved in such <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/quantitativeanalysis.asp">quantitative analysis</a> and related trading activities are commonly referred to as "quants" or "quant traders."<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_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>Quantitative trading (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities.</li><li>Quant trading also involves research work on historical data with an aim to identify profit opportunities.</li><li>Quant trading is widely used at individual and institutional levels for high frequency, algorithmic, arbitrage, and automated trading.</li><li>In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even neural networks are taking traders' jobs at reputed trading institutions.</li><li>Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. </li></ul></div></div></div> <span class="heading-toc" id="toc-how-has-quantitative-trading-evolved"></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"> How Has Quantitative Trading Evolved? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Earlier, markets were physical and floor-based, where traders and market makers interacted, agreed on a security, price, and quantity, and settled the trade on paper. Among other qualifications, a loud clear voice and a good strong build were considered an asset for trading job aspirants because these made them impressive on the trading floor. </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"> As markets became digital with global reach and expansion, the floors emptied out. Traders who had little to offer but a loud voice began to vanish, making way for the computer-savvy techies. Electronic markets offered vast expansion, loads of trading data, new assets, and securities, and there came the opportunity for data mining, research, analysis, and automated trading systems. </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"> In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/neuralnetwork.asp" rel="noopener noreferrer">neural networks</a> are taking traders' jobs at reputed trading institutions. </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-tip" 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>In the United States, quant trading positions are most prevalent in big financial hubs such as New York and Chicago, and areas where hedge funds tend to cluster, such as Boston, Massachusetts, and Stamford, Connecticut. Globally, quant traders may find employment opportunities in major financial hubs such as London, Hong Kong, Singapore, Tokyo, and Sydney, among other regional financial centers.<span class="ql-inline-citation" data-cite="10"></span><span class="ql-inline-citation" data-cite="5"></span></p></div></div></div> <span class="heading-toc" id="toc-the-profile-of-a-quant-trader"></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"> The Profile of a Quant Trader </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> A quant trader may work for a small-, mid- or large-size trading firm for a handsome salary with high bonus payouts, based on the generated trading profits. Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. </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"> Today, getting a trader’s job at established firms often requires a specialized master’s degree in a quantitative stream (MBA, Ph.D., CFA), unless one is a seasoned trader with proven work experience. Other less experienced younger quants can start at small-sized firms, or start as junior analysts and work their way up over a long period, although it is a fiercely competitive field.<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_20-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> In addition to having a background in finance, mathematics, and computer programming, quants should have the following skills and background: </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>Expertise with computer usage</li><li>Hands-on knowledge of one or more programming languages</li><li>Familiarity with building and customizing trading systems and automation possibilities</li><li>Familiarity with data feeds and usage</li><li>Data mining, research, and analytical abilities</li><li>Risk-taking abilities and trader’s temperament</li><li>An innovative mindset to continuously discover new strategies and opportunities</li> </ul> <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-quant-trader-tools"></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"> Quant Trader Tools </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> Quants implement their own algorithms on real-time data containing prices and quotes. They need to be familiar with any associated systems that provide data feeds and content. Quant traders typically have access to these tools: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_27-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> <li>Systems for accessing market data, like the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bloomberg_terminal.asp" rel="noopener noreferrer">Bloomberg data terminal</a>, having the necessary technical and quantitative analysis tools available that fit into their stream of trading (like <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>, charts, etc.)</li> <li>Computer systems with programming language compatibility: Perl, C++, Java, Python are the common ones among the trader community</li> <li>Historical and/or real-time data availability, to backtest their identified strategies</li> <li>Automated access to brokerage/trading accounts usually through <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directmarketaccess.asp" rel="noopener noreferrer">Direct Market Access</a></li> </ul> <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-quant-trader-duties"></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"> Quant Trader Duties </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Using the above, a quant trader typical performs the following activities: </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>Identify a trading strategy: It can be based on simple price-volume numbers, or on a complex mathematical model</li> <li>Develop and build the working algorithm/program/system based on the trading strategy</li> <li>Backtest the prototype to verify practical implementation, and required customization: Once identified, it is very important to backtest the strategy on historical/live test data to assess practical feasibility. Further changes are incorporated as needed</li> <li>Include risk management criteria: perform <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/scenario_analysis.asp" rel="noopener noreferrer">scenario analysis</a>, implement <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stop-lossorder.asp" rel="noopener noreferrer">stop-loss</a> mechanisms, capital allocation limits, etc. to make the system as protective as possible</li> <li>Implement the system on live feeds for trade execution in the open market: Let the quantitative setup go live, and continued observation on profit-making potential. Further customization for identified enhancements or failures, if any</li> <li>Continued efforts on identifying new strategies</li> <li>Additionally, works in the background within the research department, and provides trading tips to the traders in the trading department</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"> A quant trader’s job is a continuous and rigorous process with long working hours. Present-day trading seems to have become a computer vs. computer market, where a human trader’s contributions are limited to building computer programs smart enough to trade better than those developed by counterparts. The more automation built in the overall market, the more efficiency is needed as profit opportunities thin out with every passing day. </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-how-much-do-quants-make"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Do Quants Make?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Compensation in the field of finance tends to be very high. According to Bureau of Labor Statistics data, the median annual pay for financial analysts in 2022 was $95,080, while the highest 10% earned more than $169,940.<span class="ql-inline-citation" data-cite="2"></span> However, in the field of quantitative analysis, it is not uncommon to find positions with posted salaries of $250,000 or more. With bonuses, the actual salary could top $500,000 per year. As with most careers, the more experience you have, the higher a salary you can command. Hedge funds or other trading firms generally pay the most, while an entry-level quant position may earn only $125,000 or $150,000.<span class="ql-inline-citation" data-cite="9"></span><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_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-how-much-do-hedge-fund-quants-make"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Much Do Hedge Fund Quants Make?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you are a quant trader, you will generally earn the highest salary working for a hedge fund. For example, based on the Selby Jennings' North American quant team salary and bonus survey for 2020, a graduate with a Ph.D. in a STEM field (science, technology engineering, or mathematics) could earn between $300,000 and $400,000 in total compensation (combined salary and bonus) at a top hedge fund or independent trading firm.<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_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-are-the-steps-to-become-a-quant"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Steps to Become a Quant?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Most firms require at least a master's degree, or preferably a Ph.D., in a quantitative subject (mathematics, economics, finance, or statistics). Master's degrees in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialengineering.asp">financial engineering</a> or computational finance may also be effective <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/entry-point.asp">entry points</a> for careers as a quant trader.</p><p>If you hold an MBA degree, you will likely also need a very strong mathematical or computational skill set, in addition to some solid experience in the real world in order to be hired as a quant trader.<span class="ql-inline-citation" data-cite="8"></span><span class="ql-inline-citation" data-cite="7"></span></p><p>Alongside their educational requirements, quant traders must also have advanced software skills. C++ is typically used for high-frequency trading applications, and offline statistical analysis would be performed in MATLAB, SAS, S-PLUS, or a similar package. Pricing knowledge may also be embedded in trading tools created with Java, .NET or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/visual-basic-for-applications-vba.asp">VBA</a>, and are often integrated with Excel. </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-area-of-statistics-is-most-useful-for-quants"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Area of Statistics Is Most Useful for Quants?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Certain aspects of statistics are the backbone of quantitative trading, including regression theory and time-series analysis. Electronic engineering techniques such as Fourier analysis and wavelet analysis are also utilized in quantitative analysis. Most of the statistics concepts you will need to understand to work in quant trading is so advanced that it is not taught at an undergraduate level. For this reason, it is important to pursue advanced study in statistics (namely Ph.D. coursework).</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-what-programming-languages-do-quants-need-to-know"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Programming Languages Do Quants Need to Know?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>C++ and Java are the main programming languages used in trading systems. Quants often need to code in C++, in addition to knowing how to use tools like R, MatLab, Stata, Python, and to a lesser extent Perl.</p></div> </div> <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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> A quant trader’s job and associated perks appear very lucrative, but the ones qualifying for this highly competitive field need multifaceted skills, knowledge, and temperament. Quantitative traders usually have a moderate success rate, and many diversify or move out to other streams after a few years due to burnout. Apart from all the necessary infrastructure, skills, and knowledge, one needs to have the right mindset to be successful as a quant. </p></div>

[Quantitative trading](https://www.investopedia.com/terms/q/quantitative-trading.asp) (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities. At the back end, quant trading also involves research work on historical data with an aim to identify profit opportunities. Quant trading is widely used at individual and institutional levels for [high frequency](https://www.investopedia.com/terms/h/high-frequency-trading.asp), [algorithmic](https://www.investopedia.com/terms/a/algorithmictrading.asp), [arbitrage](https://www.investopedia.com/ask/answers/what-is-arbitrage/), and [automated trading](https://www.investopedia.com/terms/a/application-programming-interface.asp). Traders involved in such [quantitative analysis](https://www.investopedia.com/terms/q/quantitativeanalysis.asp) and related trading activities are commonly referred to as "quants" or "quant traders." ### Key Takeaways * Quantitative trading (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities. * Quant trading also involves research work on historical data with an aim to identify profit opportunities. * Quant trading is widely used at individual and institutional levels for high frequency, algorithmic, arbitrage, and automated trading. * In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even neural networks are taking traders' jobs at reputed trading institutions. * Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. ## How Has Quantitative Trading Evolved? Earlier, markets were physical and floor-based, where traders and market makers interacted, agreed on a security, price, and quantity, and settled the trade on paper. Among other qualifications, a loud clear voice and a good strong build were considered an asset for trading job aspirants because these made them impressive on the trading floor. As markets became digital with global reach and expansion, the floors emptied out. Traders who had little to offer but a loud voice began to vanish, making way for the computer-savvy techies. Electronic markets offered vast expansion, loads of trading data, new assets, and securities, and there came the opportunity for data mining, research, analysis, and automated trading systems. In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even [neural networks](https://www.investopedia.com/terms/n/neuralnetwork.asp) are taking traders' jobs at reputed trading institutions. ### In the United States, quant trading positions are most prevalent in big financial hubs such as New York and Chicago, and areas where hedge funds tend to cluster, such as Boston, Massachusetts, and Stamford, Connecticut. Globally, quant traders may find employment opportunities in major financial hubs such as London, Hong Kong, Singapore, Tokyo, and Sydney, among other regional financial centers. ## The Profile of a Quant Trader A quant trader may work for a small-, mid- or large-size trading firm for a handsome salary with high bonus payouts, based on the generated trading profits. Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. Today, getting a trader’s job at established firms often requires a specialized master’s degree in a quantitative stream (MBA, Ph.D., CFA), unless one is a seasoned trader with proven work experience. Other less experienced younger quants can start at small-sized firms, or start as junior analysts and work their way up over a long period, although it is a fiercely competitive field. In addition to having a background in finance, mathematics, and computer programming, quants should have the following skills and background: * Expertise with computer usage * Hands-on knowledge of one or more programming languages * Familiarity with building and customizing trading systems and automation possibilities * Familiarity with data feeds and usage * Data mining, research, and analytical abilities * Risk-taking abilities and trader’s temperament * An innovative mindset to continuously discover new strategies and opportunities ## Quant Trader Tools Quants implement their own algorithms on real-time data containing prices and quotes. They need to be familiar with any associated systems that provide data feeds and content. Quant traders typically have access to these tools: * Systems for accessing market data, like the [Bloomberg data terminal](https://www.investopedia.com/terms/b/bloomberg_terminal.asp), having the necessary technical and quantitative analysis tools available that fit into their stream of trading (like [Bollinger bands](https://www.investopedia.com/terms/b/bollingerbands.asp), charts, etc.) * Computer systems with programming language compatibility: Perl, C++, Java, Python are the common ones among the trader community * Historical and/or real-time data availability, to backtest their identified strategies * Automated access to brokerage/trading accounts usually through [Direct Market Access](https://www.investopedia.com/terms/d/directmarketaccess.asp) ## Quant Trader Duties Using the above, a quant trader typical performs the following activities: * Identify a trading strategy: It can be based on simple price-volume numbers, or on a complex mathematical model * Develop and build the working algorithm/program/system based on the trading strategy * Backtest the prototype to verify practical implementation, and required customization: Once identified, it is very important to backtest the strategy on historical/live test data to assess practical feasibility. Further changes are incorporated as needed * Include risk management criteria: perform [scenario analysis](https://www.investopedia.com/terms/s/scenario_analysis.asp), implement [stop-loss](https://www.investopedia.com/terms/s/stop-lossorder.asp) mechanisms, capital allocation limits, etc. to make the system as protective as possible * Implement the system on live feeds for trade execution in the open market: Let the quantitative setup go live, and continued observation on profit-making potential. Further customization for identified enhancements or failures, if any * Continued efforts on identifying new strategies * Additionally, works in the background within the research department, and provides trading tips to the traders in the trading department A quant trader’s job is a continuous and rigorous process with long working hours. Present-day trading seems to have become a computer vs. computer market, where a human trader’s contributions are limited to building computer programs smart enough to trade better than those developed by counterparts. The more automation built in the overall market, the more efficiency is needed as profit opportunities thin out with every passing day. ## How Much Do Quants Make? Compensation in the field of finance tends to be very high. According to Bureau of Labor Statistics data, the median annual pay for financial analysts in 2022 was $95,080, while the highest 10% earned more than $169,940. However, in the field of quantitative analysis, it is not uncommon to find positions with posted salaries of $250,000 or more. With bonuses, the actual salary could top $500,000 per year. As with most careers, the more experience you have, the higher a salary you can command. Hedge funds or other trading firms generally pay the most, while an entry-level quant position may earn only $125,000 or $150,000. ## How Much Do Hedge Fund Quants Make? If you are a quant trader, you will generally earn the highest salary working for a hedge fund. For example, based on the Selby Jennings' North American quant team salary and bonus survey for 2020, a graduate with a Ph.D. in a STEM field (science, technology engineering, or mathematics) could earn between $300,000 and $400,000 in total compensation (combined salary and bonus) at a top hedge fund or independent trading firm. ## What Are the Steps to Become a Quant? Most firms require at least a master's degree, or preferably a Ph.D., in a quantitative subject (mathematics, economics, finance, or statistics). Master's degrees in [financial engineering](https://www.investopedia.com/terms/f/financialengineering.asp) or computational finance may also be effective [entry points](https://www.investopedia.com/terms/e/entry-point.asp) for careers as a quant trader. If you hold an MBA degree, you will likely also need a very strong mathematical or computational skill set, in addition to some solid experience in the real world in order to be hired as a quant trader. Alongside their educational requirements, quant traders must also have advanced software skills. C++ is typically used for high-frequency trading applications, and offline statistical analysis would be performed in MATLAB, SAS, S-PLUS, or a similar package. Pricing knowledge may also be embedded in trading tools created with Java, .NET or [VBA](https://www.investopedia.com/terms/v/visual-basic-for-applications-vba.asp), and are often integrated with Excel.  ## What Area of Statistics Is Most Useful for Quants? Certain aspects of statistics are the backbone of quantitative trading, including regression theory and time-series analysis. Electronic engineering techniques such as Fourier analysis and wavelet analysis are also utilized in quantitative analysis. Most of the statistics concepts you will need to understand to work in quant trading is so advanced that it is not taught at an undergraduate level. For this reason, it is important to pursue advanced study in statistics (namely Ph.D. coursework). ## What Programming Languages Do Quants Need to Know? C++ and Java are the main programming languages used in trading systems. Quants often need to code in C++, in addition to knowing how to use tools like R, MatLab, Stata, Python, and to a lesser extent Perl. ## The Bottom Line A quant trader’s job and associated perks appear very lucrative, but the ones qualifying for this highly competitive field need multifaceted skills, knowledge, and temperament. Quantitative traders usually have a moderate success rate, and many diversify or move out to other streams after a few years due to burnout. Apart from all the necessary infrastructure, skills, and knowledge, one needs to have the right mindset to be successful as a quant.

Quantitative trading (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities. At the back end, quant trading also involves research work on historical data with an aim to identify profit opportunities. Quant trading is widely used at individual and institutional levels for high frequency, algorithmic, arbitrage, and automated trading. Traders involved in such quantitative analysis and related trading activities are commonly referred to as "quants" or "quant traders." Key Takeaways Quantitative trading (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities.Quant trading also involves research work on historical data with an aim to identify profit opportunities.Quant trading is widely used at individual and institutional levels for high frequency, algorithmic, arbitrage, and automated trading.In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even neural networks are taking traders' jobs at reputed trading institutions.Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. How Has Quantitative Trading Evolved? Earlier, markets were physical and floor-based, where traders and market makers interacted, agreed on a security, price, and quantity, and settled the trade on paper. Among other qualifications, a loud clear voice and a good strong build were considered an asset for trading job aspirants because these made them impressive on the trading floor. As markets became digital with global reach and expansion, the floors emptied out. Traders who had little to offer but a loud voice began to vanish, making way for the computer-savvy techies. Electronic markets offered vast expansion, loads of trading data, new assets, and securities, and there came the opportunity for data mining, research, analysis, and automated trading systems. In the last two decades, MBAs and Ph.D. holders in finance, computer science, and even neural networks are taking traders' jobs at reputed trading institutions. In the United States, quant trading positions are most prevalent in big financial hubs such as New York and Chicago, and areas where hedge funds tend to cluster, such as Boston, Massachusetts, and Stamford, Connecticut. Globally, quant traders may find employment opportunities in major financial hubs such as London, Hong Kong, Singapore, Tokyo, and Sydney, among other regional financial centers. The Profile of a Quant Trader A quant trader may work for a small-, mid- or large-size trading firm for a handsome salary with high bonus payouts, based on the generated trading profits. Employers include the trading desks of global investment banks, hedge funds, or arbitrage trading firms, in addition to small-sized local trading firms. Today, getting a trader’s job at established firms often requires a specialized master’s degree in a quantitative stream (MBA, Ph.D., CFA), unless one is a seasoned trader with proven work experience. Other less experienced younger quants can start at small-sized firms, or start as junior analysts and work their way up over a long period, although it is a fiercely competitive field. In addition to having a background in finance, mathematics, and computer programming, quants should have the following skills and background: Expertise with computer usageHands-on knowledge of one or more programming languagesFamiliarity with building and customizing trading systems and automation possibilitiesFamiliarity with data feeds and usageData mining, research, and analytical abilitiesRisk-taking abilities and trader’s temperamentAn innovative mindset to continuously discover new strategies and opportunities Quant Trader Tools Quants implement their own algorithms on real-time data containing prices and quotes. They need to be familiar with any associated systems that provide data feeds and content. Quant traders typically have access to these tools: Systems for accessing market data, like the Bloomberg data terminal, having the necessary technical and quantitative analysis tools available that fit into their stream of trading (like Bollinger bands, charts, etc.) Computer systems with programming language compatibility: Perl, C++, Java, Python are the common ones among the trader community Historical and/or real-time data availability, to backtest their identified strategies Automated access to brokerage/trading accounts usually through Direct Market Access Quant Trader Duties Using the above, a quant trader typical performs the following activities: Identify a trading strategy: It can be based on simple price-volume numbers, or on a complex mathematical model Develop and build the working algorithm/program/system based on the trading strategy Backtest the prototype to verify practical implementation, and required customization: Once identified, it is very important to backtest the strategy on historical/live test data to assess practical feasibility. Further changes are incorporated as needed Include risk management criteria: perform scenario analysis, implement stop-loss mechanisms, capital allocation limits, etc. to make the system as protective as possible Implement the system on live feeds for trade execution in the open market: Let the quantitative setup go live, and continued observation on profit-making potential. Further customization for identified enhancements or failures, if any Continued efforts on identifying new strategies Additionally, works in the background within the research department, and provides trading tips to the traders in the trading department A quant trader’s job is a continuous and rigorous process with long working hours. Present-day trading seems to have become a computer vs. computer market, where a human trader’s contributions are limited to building computer programs smart enough to trade better than those developed by counterparts. The more automation built in the overall market, the more efficiency is needed as profit opportunities thin out with every passing day. How Much Do Quants Make? Compensation in the field of finance tends to be very high. According to Bureau of Labor Statistics data, the median annual pay for financial analysts in 2022 was $95,080, while the highest 10% earned more than $169,940. However, in the field of quantitative analysis, it is not uncommon to find positions with posted salaries of $250,000 or more. With bonuses, the actual salary could top $500,000 per year. As with most careers, the more experience you have, the higher a salary you can command. Hedge funds or other trading firms generally pay the most, while an entry-level quant position may earn only $125,000 or $150,000. How Much Do Hedge Fund Quants Make? If you are a quant trader, you will generally earn the highest salary working for a hedge fund. For example, based on the Selby Jennings' North American quant team salary and bonus survey for 2020, a graduate with a Ph.D. in a STEM field (science, technology engineering, or mathematics) could earn between $300,000 and $400,000 in total compensation (combined salary and bonus) at a top hedge fund or independent trading firm. What Are the Steps to Become a Quant? Most firms require at least a master's degree, or preferably a Ph.D., in a quantitative subject (mathematics, economics, finance, or statistics). Master's degrees in financial engineering or computational finance may also be effective entry points for careers as a quant trader.If you hold an MBA degree, you will likely also need a very strong mathematical or computational skill set, in addition to some solid experience in the real world in order to be hired as a quant trader.Alongside their educational requirements, quant traders must also have advanced software skills. C++ is typically used for high-frequency trading applications, and offline statistical analysis would be performed in MATLAB, SAS, S-PLUS, or a similar package. Pricing knowledge may also be embedded in trading tools created with Java, .NET or VBA, and are often integrated with Excel.  What Area of Statistics Is Most Useful for Quants? Certain aspects of statistics are the backbone of quantitative trading, including regression theory and time-series analysis. Electronic engineering techniques such as Fourier analysis and wavelet analysis are also utilized in quantitative analysis. Most of the statistics concepts you will need to understand to work in quant trading is so advanced that it is not taught at an undergraduate level. For this reason, it is important to pursue advanced study in statistics (namely Ph.D. coursework). What Programming Languages Do Quants Need to Know? C++ and Java are the main programming languages used in trading systems. Quants often need to code in C++, in addition to knowing how to use tools like R, MatLab, Stata, Python, and to a lesser extent Perl. The Bottom Line A quant trader’s job and associated perks appear very lucrative, but the ones qualifying for this highly competitive field need multifaceted skills, knowledge, and temperament. Quantitative traders usually have a moderate success rate, and many diversify or move out to other streams after a few years due to burnout. Apart from all the necessary infrastructure, skills, and knowledge, one needs to have the right mindset to be successful as a quant.

https://www.investopedia.com/everyday-activities-that-can-teach-financial-literacy-to-kids-5091909

7 Everyday Activities That Teach Kids About Money

<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"> You may have experienced the consequences of poor <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> when you fell behind on rent payments or overextended your credit card debt. To help your kids avoid these pitfalls, start teaching <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-literacy.asp">financial literacy</a> now. </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"> Research suggests that many of our financial habits are set by age seven. If good habits aren’t formed early, it becomes harder to point your offspring in the right direction. Here are seven activities to help guide them.<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_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>Having kids earn their allowance through household chores can help them build the self-reliance they’ll need later in life.</li><li>Opening a savings account or kid-friendly debit card teaches the value of saving and provides an introduction to the banking system.</li><li>Allowing your kids to observe budgeting discussions can help them learn how to spend responsibly.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-make-them-earn-their-allowance"></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. Make Them Earn Their Allowance </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> When children have to work for their money they’ll learn to use it more carefully. Many parents provide a weekly allowance as payment for doing chores. An allowance can also help <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-edge/1109/6-reasons-why-you-need-a-budget.aspx">teach budgeting skills</a>. Family-oriented apps like BusyKid and Greenlight<strong> </strong>let you assign a dollar amount to each task and send the funds to their account with a few quick taps on your phone. </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-2-encourage-part-time-gigs"></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"> 2. Encourage Part-Time Gigs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> High school can be a busy time for adolescents, with homework and extracurricular activities but if they can spare just a few hours to work at a coffee shop or retailer, they’ll probably be better for it. Your middle schooler or early high schooler can earn extra bucks by mowing lawns or walking the neighbor’s dog. Websites such as Nextdoor and the newsletter from your homeowner's association can be effective ways to connect with residents who need help. </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-3-contribute-to-purchases"></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"> 3. Contribute to Purchases </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Every parent knows what it’s like to be inundated with requests for various toys or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/video-games-teach-kids-money-5218633">video games</a>. Younger kids, in particular, don’t understand that there’s only so much money you have each month for discretionary purchases. Encouraging kids to pay half the cost for a new Lego set or an American Girl accessory will give them a better sense of what things cost. </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-4-make-it-a-game"></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. Make It a Game </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> Board games can help kids learn the importance of thriftiness. Payday is among the best for teaching kids valuable money management skills where players have to make their money cover expenses. They can purchase items, take out loans, and learn to budget. Monopoly can also provide valuable lessons, with participants choosing which properties or buying strategies yield the biggest payoffs and measuring <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/talking-to-teens-about-financial-risk-7152992">risk versus reward</a> with every move they make.  </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-5-open-a-bank-account"></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"> 5. Open a Bank Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> The piggy bank is a savings vehicle for younger children, but when they hit elementary school, consider opening a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-savings-accounts-for-kids-5179494">kids' account</a> at a bank. It’s a way to instill the importance of gradually building up their balance and an introduction to the banking industry. When they start earning a paycheck, introduce the concept of the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/timevalueofmoney.asp">time value of money</a> or <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/can-teenagers-invest-in-roth-iras-4770663">help them open a Roth IRA</a>. If you can, consider helping out with a savings match. </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-callout mntl-block" id="mntl-sc-block_22-0"><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_23-0"><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><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/greenlight-debit-card-for-kids-review-7967533">Greenlight</a> and GoHenry offer kid-friendly debit cards where kids can earn money through <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/guide-allowances-and-kids-5217591">chores or an allowance</a> and then use the cards to make purchases online or at a store. Both products emphasize transparency, giving parents control over where kids can use their cards and sending notifications after each purchase.</p></div></div></div> <span class="heading-toc" id="toc-6-introduce-investing"></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"> 6. Introduce Investing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> One of the keys to long-term financial health is knowing how to invest wisely in stocks and bonds and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/pf/07/childinvestor.asp">learning some of those tools</a> before they start their first full-time job. Open a small custodial account at a brokerage for which they help direct the investments. Eventually, those assets will fall under their control when they reach the age of majority. </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-7-have-honest-conversations-about-money"></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"> 7. Have Honest Conversations About Money </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Be open and honest about your family’s finances. Parents often worry that being too candid will only lead to worry, especially when experiencing a job loss or other family problems. Your kids will be better equipped to handle their issues if they know how to respond. Talk about sticking with your budget and cutting back on nonessentials during lean times. </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_30-0"><span class="heading-toc" id="toc-when-do-kids-start-learning-financial-habits"></span> <h2 class="mntl-sc-block-questionandanswer__question">When Do Kids Start Learning Financial Habits?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It is believed that children start grasping the basics of money at age three and by age seven many of their financial habits are set.<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_31-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_32-0"><span class="heading-toc" id="toc-what-are-some-ways-to-teach-kids-about-stocks"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are Some Ways to Teach Kids About Stocks?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you're looking for a hands-on way for them to learn about the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-teach-your-child-about-cryptocurrency-5224013">risks and rewards of investing</a>, you can open up a custodial account through a brokerage. You have control over trades, and kids can access the funds when they reach the legal age.</p></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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_34-0"><span class="heading-toc" id="toc-which-apps-are-available-to-help-kids-learn-money-management-skills"></span> <h2 class="mntl-sc-block-questionandanswer__question">Which Apps Are Available to Help Kids Learn Money Management Skills?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Greenlight and GoHenry offer kids a debit card and an app for both parents and children. Parents can see where their kids are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-ways-to-send-money-as-a-teen-7152565">spending money</a> and send them chore or allowance funds through the app.</p></div> </div> <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-the-bottom-line"></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"> The Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Earning an allowance through household chores or working at a part-time job can help kids build financial literacy. Opening a savings account, a kid-friendly debit card, or a custodial brokerage account teaches kids the value of saving and introduces them to the banking system. </p></div>

You may have experienced the consequences of poor [money management](https://www.investopedia.com/terms/m/moneymanagement.asp) when you fell behind on rent payments or overextended your credit card debt. To help your kids avoid these pitfalls, start teaching [financial literacy](https://www.investopedia.com/terms/f/financial-literacy.asp) now. Research suggests that many of our financial habits are set by age seven. If good habits aren’t formed early, it becomes harder to point your offspring in the right direction. Here are seven activities to help guide them. ### Key Takeaways * Having kids earn their allowance through household chores can help them build the self-reliance they’ll need later in life. * Opening a savings account or kid-friendly debit card teaches the value of saving and provides an introduction to the banking system. * Allowing your kids to observe budgeting discussions can help them learn how to spend responsibly. ## 1. Make Them Earn Their Allowance When children have to work for their money they’ll learn to use it more carefully. Many parents provide a weekly allowance as payment for doing chores. An allowance can also help [teach budgeting skills](https://www.investopedia.com/financial-edge/1109/6-reasons-why-you-need-a-budget.aspx). Family-oriented apps like BusyKid and Greenlightlet you assign a dollar amount to each task and send the funds to their account with a few quick taps on your phone. ## 2. Encourage Part-Time Gigs High school can be a busy time for adolescents, with homework and extracurricular activities but if they can spare just a few hours to work at a coffee shop or retailer, they’ll probably be better for it. Your middle schooler or early high schooler can earn extra bucks by mowing lawns or walking the neighbor’s dog. Websites such as Nextdoor and the newsletter from your homeowner's association can be effective ways to connect with residents who need help. ## 3. Contribute to Purchases Every parent knows what it’s like to be inundated with requests for various toys or [video games](https://www.investopedia.com/video-games-teach-kids-money-5218633). Younger kids, in particular, don’t understand that there’s only so much money you have each month for discretionary purchases. Encouraging kids to pay half the cost for a new Lego set or an American Girl accessory will give them a better sense of what things cost. ## 4. Make It a Game Board games can help kids learn the importance of thriftiness. Payday is among the best for teaching kids valuable money management skills where players have to make their money cover expenses. They can purchase items, take out loans, and learn to budget. Monopoly can also provide valuable lessons, with participants choosing which properties or buying strategies yield the biggest payoffs and measuring [risk versus reward](https://www.investopedia.com/talking-to-teens-about-financial-risk-7152992) with every move they make.  ## 5. Open a Bank Account The piggy bank is a savings vehicle for younger children, but when they hit elementary school, consider opening a [kids' account](https://www.investopedia.com/best-savings-accounts-for-kids-5179494) at a bank. It’s a way to instill the importance of gradually building up their balance and an introduction to the banking industry. When they start earning a paycheck, introduce the concept of the [time value of money](https://www.investopedia.com/terms/t/timevalueofmoney.asp) or [help them open a Roth IRA](https://www.investopedia.com/can-teenagers-invest-in-roth-iras-4770663). If you can, consider helping out with a savings match. ### Note [Greenlight](https://www.investopedia.com/greenlight-debit-card-for-kids-review-7967533) and GoHenry offer kid-friendly debit cards where kids can earn money through [chores or an allowance](https://www.investopedia.com/guide-allowances-and-kids-5217591) and then use the cards to make purchases online or at a store. Both products emphasize transparency, giving parents control over where kids can use their cards and sending notifications after each purchase. ## 6. Introduce Investing One of the keys to long-term financial health is knowing how to invest wisely in stocks and bonds and [learning some of those tools](https://www.investopedia.com/articles/pf/07/childinvestor.asp) before they start their first full-time job. Open a small custodial account at a brokerage for which they help direct the investments. Eventually, those assets will fall under their control when they reach the age of majority. ## 7. Have Honest Conversations About Money Be open and honest about your family’s finances. Parents often worry that being too candid will only lead to worry, especially when experiencing a job loss or other family problems. Your kids will be better equipped to handle their issues if they know how to respond. Talk about sticking with your budget and cutting back on nonessentials during lean times. ## When Do Kids Start Learning Financial Habits? It is believed that children start grasping the basics of money at age three and by age seven many of their financial habits are set. ## What Are Some Ways to Teach Kids About Stocks? If you're looking for a hands-on way for them to learn about the [risks and rewards of investing](https://www.investopedia.com/how-to-teach-your-child-about-cryptocurrency-5224013), you can open up a custodial account through a brokerage. You have control over trades, and kids can access the funds when they reach the legal age. ## Which Apps Are Available to Help Kids Learn Money Management Skills? Greenlight and GoHenry offer kids a debit card and an app for both parents and children. Parents can see where their kids are [spending money](https://www.investopedia.com/best-ways-to-send-money-as-a-teen-7152565) and send them chore or allowance funds through the app. ## The Bottom Line Earning an allowance through household chores or working at a part-time job can help kids build financial literacy. Opening a savings account, a kid-friendly debit card, or a custodial brokerage account teaches kids the value of saving and introduces them to the banking system.

You may have experienced the consequences of poor money management when you fell behind on rent payments or overextended your credit card debt. To help your kids avoid these pitfalls, start teaching financial literacy now. Research suggests that many of our financial habits are set by age seven. If good habits aren’t formed early, it becomes harder to point your offspring in the right direction. Here are seven activities to help guide them. Key Takeaways Having kids earn their allowance through household chores can help them build the self-reliance they’ll need later in life.Opening a savings account or kid-friendly debit card teaches the value of saving and provides an introduction to the banking system.Allowing your kids to observe budgeting discussions can help them learn how to spend responsibly. 1. Make Them Earn Their Allowance When children have to work for their money they’ll learn to use it more carefully. Many parents provide a weekly allowance as payment for doing chores. An allowance can also help teach budgeting skills. Family-oriented apps like BusyKid and Greenlight let you assign a dollar amount to each task and send the funds to their account with a few quick taps on your phone. 2. Encourage Part-Time Gigs High school can be a busy time for adolescents, with homework and extracurricular activities but if they can spare just a few hours to work at a coffee shop or retailer, they’ll probably be better for it. Your middle schooler or early high schooler can earn extra bucks by mowing lawns or walking the neighbor’s dog. Websites such as Nextdoor and the newsletter from your homeowner's association can be effective ways to connect with residents who need help. 3. Contribute to Purchases Every parent knows what it’s like to be inundated with requests for various toys or video games. Younger kids, in particular, don’t understand that there’s only so much money you have each month for discretionary purchases. Encouraging kids to pay half the cost for a new Lego set or an American Girl accessory will give them a better sense of what things cost. 4. Make It a Game Board games can help kids learn the importance of thriftiness. Payday is among the best for teaching kids valuable money management skills where players have to make their money cover expenses. They can purchase items, take out loans, and learn to budget. Monopoly can also provide valuable lessons, with participants choosing which properties or buying strategies yield the biggest payoffs and measuring risk versus reward with every move they make.  5. Open a Bank Account The piggy bank is a savings vehicle for younger children, but when they hit elementary school, consider opening a kids' account at a bank. It’s a way to instill the importance of gradually building up their balance and an introduction to the banking industry. When they start earning a paycheck, introduce the concept of the time value of money or help them open a Roth IRA. If you can, consider helping out with a savings match. Note Greenlight and GoHenry offer kid-friendly debit cards where kids can earn money through chores or an allowance and then use the cards to make purchases online or at a store. Both products emphasize transparency, giving parents control over where kids can use their cards and sending notifications after each purchase. 6. Introduce Investing One of the keys to long-term financial health is knowing how to invest wisely in stocks and bonds and learning some of those tools before they start their first full-time job. Open a small custodial account at a brokerage for which they help direct the investments. Eventually, those assets will fall under their control when they reach the age of majority. 7. Have Honest Conversations About Money Be open and honest about your family’s finances. Parents often worry that being too candid will only lead to worry, especially when experiencing a job loss or other family problems. Your kids will be better equipped to handle their issues if they know how to respond. Talk about sticking with your budget and cutting back on nonessentials during lean times. When Do Kids Start Learning Financial Habits? It is believed that children start grasping the basics of money at age three and by age seven many of their financial habits are set. What Are Some Ways to Teach Kids About Stocks? If you're looking for a hands-on way for them to learn about the risks and rewards of investing, you can open up a custodial account through a brokerage. You have control over trades, and kids can access the funds when they reach the legal age. Which Apps Are Available to Help Kids Learn Money Management Skills? Greenlight and GoHenry offer kids a debit card and an app for both parents and children. Parents can see where their kids are spending money and send them chore or allowance funds through the app. The Bottom Line Earning an allowance through household chores or working at a part-time job can help kids build financial literacy. Opening a savings account, a kid-friendly debit card, or a custodial brokerage account teaches kids the value of saving and introduces them to the banking system.

https://www.investopedia.com/articles/pf/09/high-yield-savings-account.asp

What Is a High-Yield Savings Account?

<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-high-yield-savings-account"></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 High-Yield Savings Account? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A high-yield savings account is a type of savings account that can pay up to 10 to 12 times the national average of a standard savings 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_3-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_4-0"> Traditionally, people have held a savings account at the same bank where they hold their checking account for easy transfers. But with the rise of online banks and as more traditional banks use online accounts, the competition on savings rates has skyrocketed, creating a new category 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">high-yield savings accounts</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">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 interest rates on high-yield savings accounts can be 10 to 12<strong> </strong>times higher than traditional savings account returns.</li><li>The highest rates are often available only from online banks.</li><li>Electronic transfers are easy to set up between a high-yield savings account and your checking account, even if you hold them at different banks.</li><li>When shopping for a high-yield savings account, compare factors such as initial deposit requirements, interest rates, minimum balance requirements, and fees.</li></ul></div></div></div> <span class="heading-toc" id="toc-high-yield-savings-differences"></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"> High-Yield Savings Differences </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The difference in interest between high-yield savings account rates and the national average is significant. If you're holding $5,000 in a conventional savings account, for instance, and<strong> </strong>the national average rate is 0.39% <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>, you would earn $19.50 over the course of a year.<span class="ql-inline-citation" data-cite="1"></span> If you instead put that same $5,000 in an account earning 4.5%, you'd earn $225 in 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"> To earn significantly more in interest with your savings, you may need to hold your savings account at one institution and your checking account at another. Today's availability of electronic transfers between institutions—and the speed at which those transfers can be executed—make moving money between a checking account and savings account relatively simple, no matter if they are held at different banks. </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"> Unlike traditional <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brickandmortar.asp">brick-and-mortar institutions</a> that offer a one-stop shop for all your banking needs, banks offering high-yield savings accounts typically limit their features or offer few or no other products. Many don't offer checking accounts and few provide <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp">ATM</a> cards. Generally, withdrawals and deposits are made by electronic bank transfer or mobile check deposit. </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"> One important feature is the same between traditional savings accounts and their high-yield counterparts: the federal insurance you're provided against bank failures from the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/fdic-insured-account.asp">Federal Deposit Insurance Corp. (FDIC)</a> and credit union failures from the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua-insured-institution.asp">National Credit Union Association (NCUA)</a>. Your deposits are protected for up to $250,000 per account.<span class="ql-inline-citation" data-cite="4"></span><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> <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">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="sponsored nofollow">What To Do With $10,000 magazine</a>.</p></div></div></div> <span class="heading-toc" id="toc-how-to-use-a-high-yield-savings-account"></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 to Use a High-Yield Savings Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> A high-yield savings account will likely comprise only a part of your overall <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/portfolio.asp">financial portfolio</a>. Consider how you'll best use the account in tandem with other accounts to fit your broader investment strategy. Determine how much cash to set aside according to your goals and budget. For instance, if your savings account is serving as an emergency fund, consider having at least three to six months' worth of living expenses deposited. </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 strategy may be different if you're using a high-yield account to save up for a large purchase, such as a house, a car, or a vacation. In that case, you may want to use a high-paying savings account to help you protect your principal while applying interest earnings to your savings goal. </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 may simply want to open a high-yield savings account <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/103015/cash-vs-bonds-what-pick-times-uncertainty.asp">to keep cash</a>. Most checking accounts don't pay any interest, and those that do generally offer very low interest rates, so moving extra funds into savings when you don't need them can provide a higher monthly interest payment. One thing to remember is that your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/high-yield-interest-impact-on-taxes-8414834">interest earnings will be taxed</a> each year. </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"> Many banks allow you to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-many-savings-accounts-should-i-have-7775519">open more than one savings account</a> and even give them personalized nicknames (e.g., Car Fund, Hawaii Vacation, etc.). Or you can open a high-yield savings account at more than one top-paying institution. </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>Having more than one savings accounts may help you more easily progress toward goals and keep your funds organized toward specific goals.</p></div></div></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_30-0"><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_31-0"></div> <span class="heading-toc" id="toc-what-to-look-for-in-a-high-yield-savings-account"></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"> What To Look for in a High-Yield Savings Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_33-0"> Whether you're shopping for a high-yield account at a new bank or opening one at your current bank, compare options across the marketplace. Differences in interest rates and fees can add up over time, especially if you're keeping a relatively large balance in savings. Here's what to look for and compare: </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"> 1. Interest Rate </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_36-0"> How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate? </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"> Savings account rates are generally flexible and can be changed at any time. But some accounts will specify that the currently advertised rate is only available for an initial period of time. Another factor to look for is whether there are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/minimum-balance.asp">minimum</a> or maximum balance thresholds for earning the promoted rate. </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"> 2. Required Initial Deposit </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> How much money is required to open the account? Do you want to deposit the minimum deposit requirement? </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"> 3. Minimum Balance Required </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> How much money are you required to keep in the account? Falling below the minimum deposit requirement can result in fees, which can offset the interest rate earnings. </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"> 4. Fees </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Does the bank or <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> charge any fees on this account? If so, what are the ways you can avoid them (e.g., always keeping your balance above the minimum threshold)? </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_48-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_49-0"> <span class="mntl-sc-block-subheading__text"> 5. Links to Other Banks and/or Brokerage Accounts </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> Will the bank allow you to create links between your high-yield savings account and deposit accounts at other banks or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/brokerage-company.asp">brokerage firms</a>? Are there restrictions on linking multiple accounts or is there a waiting period for new accounts? </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"> 6. Accessing Your Money </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an ATM card? </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"> 7. Deposit Options </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_56-0"> If you'll want to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deposit-slip.asp">deposit checks</a> into the account, does the bank have a smartphone app that offers mobile check deposit? Otherwise, will you be able to mail in checks or deposit them by ATM? </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"> 8. Compounding Method </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> Banks can compound interest daily, monthly, quarterly, semiannually, or annually. More frequent <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/compounding.asp">compounding</a> will theoretically increase your take-home yield. If you compare accounts by APY instead of annual interest rate, the compounding factor will already have been taken into account. </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-how-to-open-a-high-yield-savings-account"></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"> How to Open a High-Yield Savings Account </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_62-0"> If your bank offers a competitive high-yield savings account, it should be easy to open a new account. It will likely be possible with little need to enter personal information because you already will be verified with the institution. </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"> If you're opening a savings account at a new institution, the process will be more involved, but should still be simple. Almost all high-yield savings accounts can be opened online. You will likely need to fill in an electronic application with key personal information. Have your driver's license, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/ssn.asp">Social Security number</a>, and primary bank account information on hand. </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_66-0"><span class="heading-toc" id="toc-where-can-a-consumer-find-a-high-yield-savings-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">Where Can a Consumer Find a High-Yield Savings Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Online banks are offering the highest rates. Still, you may be able to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-high-yield-savings-account-4770631">open a high-yield savings account</a> where you already bank. Compare rates and terms among several accounts.</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-what-are-the-main-things-to-look-at-in-a-high-yield-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Are the Main Things To Look at in a High-Yield Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Research and compare factors such as initial deposit requirements, interest rates, minimum balance requirements, fees, links to other banks and/or brokerage accounts, access to your money, deposit options, and compounding method.</p></div> </div> <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-can-you-withdraw-money-from-a-high-yield-savings-account"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can You Withdraw Money From a High-Yield Savings Account?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Consumer banking customers can withdraw or transfer cash out of a high-yield savings account. Previously, the law allowed you to only withdraw up to six times per month from a savings account, but as of 2020, that law is no longer in effect.<span class="ql-inline-citation" data-cite="6"></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_71-0"></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_72-0"> <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_73-0"> A high-yield savings account can be an ideal place to keep money you are not using in the short term but that you want fairly easy access to. It offers higher returns than a traditional savings account and is low risk because your deposits are federally insured up to $250,000. Consider the pros and cons of high-yield savings accounts compared to your other options, such as investment accounts. Then, compare the terms of different accounts to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/invest-for-short-term-and-long-term-goals-8347417">find one that best suits your goals</a> and personal situation. </p></div>

## What Is a High-Yield Savings Account? A high-yield savings account is a type of savings account that can pay up to 10 to 12 times the national average of a standard savings account. Traditionally, people have held a savings account at the same bank where they hold their checking account for easy transfers. But with the rise of online banks and as more traditional banks use online accounts, the competition on savings rates has skyrocketed, creating a new category of "[high-yield savings accounts](https://www.investopedia.com/best-high-yield-savings-accounts-4770633)." ### Key Takeaways * The interest rates on high-yield savings accounts can be 10 to 12times higher than traditional savings account returns. * The highest rates are often available only from online banks. * Electronic transfers are easy to set up between a high-yield savings account and your checking account, even if you hold them at different banks. * When shopping for a high-yield savings account, compare factors such as initial deposit requirements, interest rates, minimum balance requirements, and fees. ## High-Yield Savings Differences The difference in interest between high-yield savings account rates and the national average is significant. If you're holding $5,000 in a conventional savings account, for instance, andthe national average rate is 0.39% [annual percentage yield (APY)](https://www.investopedia.com/terms/a/apy.asp), you would earn $19.50 over the course of a year. If you instead put that same $5,000 in an account earning 4.5%, you'd earn $225 in interest. To earn significantly more in interest with your savings, you may need to hold your savings account at one institution and your checking account at another. Today's availability of electronic transfers between institutions—and the speed at which those transfers can be executed—make moving money between a checking account and savings account relatively simple, no matter if they are held at different banks. Unlike traditional [brick-and-mortar institutions](https://www.investopedia.com/terms/b/brickandmortar.asp) that offer a one-stop shop for all your banking needs, banks offering high-yield savings accounts typically limit their features or offer few or no other products. Many don't offer checking accounts and few provide [ATM](https://www.investopedia.com/terms/a/atm.asp) cards. Generally, withdrawals and deposits are made by electronic bank transfer or mobile check deposit. One important feature is the same between traditional savings accounts and their high-yield counterparts: the federal insurance you're provided against bank failures from the [Federal Deposit Insurance Corp. (FDIC)](https://www.investopedia.com/terms/f/fdic-insured-account.asp) and credit union failures from the [National Credit Union Association (NCUA)](https://www.investopedia.com/terms/n/ncua-insured-institution.asp). Your deposits are protected for up to $250,000 per account. ### Tip Want more advice for saving money toward your financial goals? Order a copy of Investopedia's [What To Do With $10,000 magazine](https://www.amazon.com/dp/1547862912/ref=sr_1_7?keywords=investopedia&qid=1684168403&sr=8-7). ## How to Use a High-Yield Savings Account A high-yield savings account will likely comprise only a part of your overall [financial portfolio](https://www.investopedia.com/terms/p/portfolio.asp). Consider how you'll best use the account in tandem with other accounts to fit your broader investment strategy. Determine how much cash to set aside according to your goals and budget. For instance, if your savings account is serving as an emergency fund, consider having at least three to six months' worth of living expenses deposited. The strategy may be different if you're using a high-yield account to save up for a large purchase, such as a house, a car, or a vacation. In that case, you may want to use a high-paying savings account to help you protect your principal while applying interest earnings to your savings goal. You may simply want to open a high-yield savings account [to keep cash](https://www.investopedia.com/articles/investing/103015/cash-vs-bonds-what-pick-times-uncertainty.asp). Most checking accounts don't pay any interest, and those that do generally offer very low interest rates, so moving extra funds into savings when you don't need them can provide a higher monthly interest payment. One thing to remember is that your [interest earnings will be taxed](https://www.investopedia.com/high-yield-interest-impact-on-taxes-8414834) each year. Many banks allow you to [open more than one savings account](https://www.investopedia.com/how-many-savings-accounts-should-i-have-7775519) and even give them personalized nicknames (e.g., Car Fund, Hawaii Vacation, etc.). Or you can open a high-yield savings account at more than one top-paying institution. ### Having more than one savings accounts may help you more easily progress toward goals and keep your funds organized toward specific goals. ## What To Look for in a High-Yield Savings Account Whether you're shopping for a high-yield account at a new bank or opening one at your current bank, compare options across the marketplace. Differences in interest rates and fees can add up over time, especially if you're keeping a relatively large balance in savings. Here's what to look for and compare: ### 1. Interest Rate How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate? Savings account rates are generally flexible and can be changed at any time. But some accounts will specify that the currently advertised rate is only available for an initial period of time. Another factor to look for is whether there are [minimum](https://www.investopedia.com/terms/m/minimum-balance.asp) or maximum balance thresholds for earning the promoted rate. ### 2. Required Initial Deposit How much money is required to open the account? Do you want to deposit the minimum deposit requirement? ### 3. Minimum Balance Required How much money are you required to keep in the account? Falling below the minimum deposit requirement can result in fees, which can offset the interest rate earnings. ### 4. Fees Does the bank or [credit union](https://www.investopedia.com/terms/c/creditunion.asp) charge any fees on this account? If so, what are the ways you can avoid them (e.g., always keeping your balance above the minimum threshold)? ### 5. Links to Other Banks and/or Brokerage Accounts Will the bank allow you to create links between your high-yield savings account and deposit accounts at other banks or [brokerage firms](https://www.investopedia.com/terms/b/brokerage-company.asp)? Are there restrictions on linking multiple accounts or is there a waiting period for new accounts? ### 6. Accessing Your Money What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an ATM card? ### 7. Deposit Options If you'll want to [deposit checks](https://www.investopedia.com/terms/d/deposit-slip.asp) into the account, does the bank have a smartphone app that offers mobile check deposit? Otherwise, will you be able to mail in checks or deposit them by ATM? ### 8. Compounding Method Banks can compound interest daily, monthly, quarterly, semiannually, or annually. More frequent [compounding](https://www.investopedia.com/terms/c/compounding.asp) will theoretically increase your take-home yield. If you compare accounts by APY instead of annual interest rate, the compounding factor will already have been taken into account. ## How to Open a High-Yield Savings Account If your bank offers a competitive high-yield savings account, it should be easy to open a new account. It will likely be possible with little need to enter personal information because you already will be verified with the institution. If you're opening a savings account at a new institution, the process will be more involved, but should still be simple. Almost all high-yield savings accounts can be opened online. You will likely need to fill in an electronic application with key personal information. Have your driver's license, [Social Security number](https://www.investopedia.com/terms/s/ssn.asp), and primary bank account information on hand. ## Where Can a Consumer Find a High-Yield Savings Account? Online banks are offering the highest rates. Still, you may be able to [open a high-yield savings account](https://www.investopedia.com/how-to-open-a-high-yield-savings-account-4770631) where you already bank. Compare rates and terms among several accounts. ## What Are the Main Things To Look at in a High-Yield Account? Research and compare factors such as initial deposit requirements, interest rates, minimum balance requirements, fees, links to other banks and/or brokerage accounts, access to your money, deposit options, and compounding method. ## Can You Withdraw Money From a High-Yield Savings Account? Yes. Consumer banking customers can withdraw or transfer cash out of a high-yield savings account. Previously, the law allowed you to only withdraw up to six times per month from a savings account, but as of 2020, that law is no longer in effect. ## The Bottom Line A high-yield savings account can be an ideal place to keep money you are not using in the short term but that you want fairly easy access to. It offers higher returns than a traditional savings account and is low risk because your deposits are federally insured up to $250,000. Consider the pros and cons of high-yield savings accounts compared to your other options, such as investment accounts. Then, compare the terms of different accounts to [find one that best suits your goals](https://www.investopedia.com/invest-for-short-term-and-long-term-goals-8347417) and personal situation.

What Is a High-Yield Savings Account? A high-yield savings account is a type of savings account that can pay up to 10 to 12 times the national average of a standard savings account. Traditionally, people have held a savings account at the same bank where they hold their checking account for easy transfers. But with the rise of online banks and as more traditional banks use online accounts, the competition on savings rates has skyrocketed, creating a new category of "high-yield savings accounts." Key Takeaways The interest rates on high-yield savings accounts can be 10 to 12 times higher than traditional savings account returns.The highest rates are often available only from online banks.Electronic transfers are easy to set up between a high-yield savings account and your checking account, even if you hold them at different banks.When shopping for a high-yield savings account, compare factors such as initial deposit requirements, interest rates, minimum balance requirements, and fees. High-Yield Savings Differences The difference in interest between high-yield savings account rates and the national average is significant. If you're holding $5,000 in a conventional savings account, for instance, and the national average rate is 0.39% annual percentage yield (APY), you would earn $19.50 over the course of a year. If you instead put that same $5,000 in an account earning 4.5%, you'd earn $225 in interest. To earn significantly more in interest with your savings, you may need to hold your savings account at one institution and your checking account at another. Today's availability of electronic transfers between institutions—and the speed at which those transfers can be executed—make moving money between a checking account and savings account relatively simple, no matter if they are held at different banks. Unlike traditional brick-and-mortar institutions that offer a one-stop shop for all your banking needs, banks offering high-yield savings accounts typically limit their features or offer few or no other products. Many don't offer checking accounts and few provide ATM cards. Generally, withdrawals and deposits are made by electronic bank transfer or mobile check deposit. One important feature is the same between traditional savings accounts and their high-yield counterparts: the federal insurance you're provided against bank failures from the Federal Deposit Insurance Corp. (FDIC) and credit union failures from the National Credit Union Association (NCUA). Your deposits are protected for up to $250,000 per account. Tip Want more advice for saving money toward your financial goals? Order a copy of Investopedia's What To Do With $10,000 magazine. How to Use a High-Yield Savings Account A high-yield savings account will likely comprise only a part of your overall financial portfolio. Consider how you'll best use the account in tandem with other accounts to fit your broader investment strategy. Determine how much cash to set aside according to your goals and budget. For instance, if your savings account is serving as an emergency fund, consider having at least three to six months' worth of living expenses deposited. The strategy may be different if you're using a high-yield account to save up for a large purchase, such as a house, a car, or a vacation. In that case, you may want to use a high-paying savings account to help you protect your principal while applying interest earnings to your savings goal. You may simply want to open a high-yield savings account to keep cash. Most checking accounts don't pay any interest, and those that do generally offer very low interest rates, so moving extra funds into savings when you don't need them can provide a higher monthly interest payment. One thing to remember is that your interest earnings will be taxed each year. Many banks allow you to open more than one savings account and even give them personalized nicknames (e.g., Car Fund, Hawaii Vacation, etc.). Or you can open a high-yield savings account at more than one top-paying institution. Having more than one savings accounts may help you more easily progress toward goals and keep your funds organized toward specific goals. What To Look for in a High-Yield Savings Account Whether you're shopping for a high-yield account at a new bank or opening one at your current bank, compare options across the marketplace. Differences in interest rates and fees can add up over time, especially if you're keeping a relatively large balance in savings. Here's what to look for and compare: 1. Interest Rate How much interest does the account currently pay? Is it a standard rate or an introductory promotional rate? Savings account rates are generally flexible and can be changed at any time. But some accounts will specify that the currently advertised rate is only available for an initial period of time. Another factor to look for is whether there are minimum or maximum balance thresholds for earning the promoted rate. 2. Required Initial Deposit How much money is required to open the account? Do you want to deposit the minimum deposit requirement? 3. Minimum Balance Required How much money are you required to keep in the account? Falling below the minimum deposit requirement can result in fees, which can offset the interest rate earnings. 4. Fees Does the bank or credit union charge any fees on this account? If so, what are the ways you can avoid them (e.g., always keeping your balance above the minimum threshold)? 5. Links to Other Banks and/or Brokerage Accounts Will the bank allow you to create links between your high-yield savings account and deposit accounts at other banks or brokerage firms? Are there restrictions on linking multiple accounts or is there a waiting period for new accounts? 6. Accessing Your Money What additional options, if any, are available for withdrawing funds? Can you withdraw funds from savings using an ATM card? 7. Deposit Options If you'll want to deposit checks into the account, does the bank have a smartphone app that offers mobile check deposit? Otherwise, will you be able to mail in checks or deposit them by ATM? 8. Compounding Method Banks can compound interest daily, monthly, quarterly, semiannually, or annually. More frequent compounding will theoretically increase your take-home yield. If you compare accounts by APY instead of annual interest rate, the compounding factor will already have been taken into account. How to Open a High-Yield Savings Account If your bank offers a competitive high-yield savings account, it should be easy to open a new account. It will likely be possible with little need to enter personal information because you already will be verified with the institution. If you're opening a savings account at a new institution, the process will be more involved, but should still be simple. Almost all high-yield savings accounts can be opened online. You will likely need to fill in an electronic application with key personal information. Have your driver's license, Social Security number, and primary bank account information on hand. Where Can a Consumer Find a High-Yield Savings Account? Online banks are offering the highest rates. Still, you may be able to open a high-yield savings account where you already bank. Compare rates and terms among several accounts. What Are the Main Things To Look at in a High-Yield Account? Research and compare factors such as initial deposit requirements, interest rates, minimum balance requirements, fees, links to other banks and/or brokerage accounts, access to your money, deposit options, and compounding method. Can You Withdraw Money From a High-Yield Savings Account? Yes. Consumer banking customers can withdraw or transfer cash out of a high-yield savings account. Previously, the law allowed you to only withdraw up to six times per month from a savings account, but as of 2020, that law is no longer in effect. The Bottom Line  A high-yield savings account can be an ideal place to keep money you are not using in the short term but that you want fairly easy access to. It offers higher returns than a traditional savings account and is low risk because your deposits are federally insured up to $250,000. Consider the pros and cons of high-yield savings accounts compared to your other options, such as investment accounts. Then, compare the terms of different accounts to find one that best suits your goals and personal situation.

https://www.investopedia.com/terms/m/mineral-rights.asp

Mineral Rights: What it is, How it Works, Special Considerations

<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-are-mineral-rights"></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 Are Mineral Rights? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Mineral rights are the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/property_rights.asp" rel="noopener noreferrer">ownership rights</a> to underground resources such as fossil fuels (oil, natural gas, coal, etc.), metals and ores, and mineable rocks such as limestone and salt. In the United States, mineral rights are legally distinct from surface rights. Surface rights give the owner the right to use the surface of the land for residential, agricultural, commercial and other purposes. Mineral rights entitle the owner to own and exploit any natural resources found beneath the land.<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_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>Mineral rights are ownership claims against the natural resources located beneath a plot of land.</li><li>In the United States, mineral rights are separate from surface rights.<span class="ql-inline-citation" data-cite="4"></span></li><li>Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico.<span class="ql-inline-citation" data-cite="7"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-how-mineral-rights-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 Mineral Rights Work </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> In the United States, it is possible for private individuals to purchase land and own the right to develop and exploit that land, including any natural resources found beneath its surface. Other places in the world offer less freedom.<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"> Most countries allow private individuals to purchase land, but this ownership right only extends to the land's surface. Any resources found beneath that surface would be owned by the nation itself and controlled by its government. For example, in the United Kingdom, mineral rights for oil, gas, coal, gold, and silver are owned by the state. Minerals for other commodities are privately held.<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_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> The fact that mineral rights can be privately owned in the United States means that homeowners with rights to valuable resources on their property can sell those mineral rights to private corporations, sometimes generating substantial up-front or ongoing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/royalty.asp" rel="noopener noreferrer">royalty payments</a> by doing so. A common example of such transactions involves properties located on subterranean oil reserves, which can attract purchase offers from <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/active-trading/102214/economics-oil-extraction.asp" rel="noopener noreferrer">oil extraction companies</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"> Generally, the attractiveness of these mineral rights—and, therefore, the royalties that private landowners can obtain for them—is heavily dependent on the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/08/determining-oil-prices.asp" rel="noopener noreferrer">price of oil</a>. When oil prices are high, unconventional methods of oil extraction become more economical, raising the value of mineral rights. </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-special-considerations"></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"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_16-0"> Mineral rights are an important consideration when purchasing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/realestate.asp" rel="noopener noreferrer">real estate</a>. Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico.<span class="ql-inline-citation" data-cite="7"></span> In North Carolina, property sellers must disclose to buyers whether their purchase includes the mineral rights to the underlying land.<span class="ql-inline-citation" data-cite="8"></span> However, other states lack similar disclosure laws. This can cause situations in which a homeowner is made aware of valuable resources beneath their land, only to find that they are unable to benefit from those resources.  </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 mitigate against this risk, homebuyers should ensure that they carefully study their property's <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/mortgages-real-estate/08/title-ownership-property.asp" rel="noopener noreferrer">land title records</a> to verify whether the surface rights and mineral rights are included as part of their purchase. These documents are generally available through the records offices of the local property appraisal authority or the county clerk's office. </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-real-world-example-of-mineral-rights"></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"> Real-World Example of Mineral Rights </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The development of technologies such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/horizontalwell.asp" rel="noopener noreferrer">horizontal oil drilling</a> has made it increasingly common for resource-extraction companies to purchase mineral rights without necessarily needing to acquire surface rights as well. This approach is widely used in the Texas Permian <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shaleoil.asp" rel="noopener noreferrer">shale</a> basin, as well as in New Mexico, in order to extract oil and gas. </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 recent development in this sector is the involvement of large investment firms such as Texas-based EnCap Investments, which has invested in upstream companies focused on the Permian Basin and Marcellus Shale.<span class="ql-inline-citation" data-cite="3"></span> Black Stone Minerals (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=bsm" rel="noopener noreferrer">BSM</a>), also based in Texas, been concentrating its mineral rights investments within the Permian, Haynesville, and Bakken shale oil fields.<span class="ql-inline-citation" data-cite="2"></span> </p></div>

## What Are Mineral Rights? Mineral rights are the [ownership rights](https://www.investopedia.com/terms/p/property_rights.asp) to underground resources such as fossil fuels (oil, natural gas, coal, etc.), metals and ores, and mineable rocks such as limestone and salt. In the United States, mineral rights are legally distinct from surface rights. Surface rights give the owner the right to use the surface of the land for residential, agricultural, commercial and other purposes. Mineral rights entitle the owner to own and exploit any natural resources found beneath the land. ### Key Takeaways * Mineral rights are ownership claims against the natural resources located beneath a plot of land. * In the United States, mineral rights are separate from surface rights. * Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico. ## How Mineral Rights Work In the United States, it is possible for private individuals to purchase land and own the right to develop and exploit that land, including any natural resources found beneath its surface. Other places in the world offer less freedom. Most countries allow private individuals to purchase land, but this ownership right only extends to the land's surface. Any resources found beneath that surface would be owned by the nation itself and controlled by its government. For example, in the United Kingdom, mineral rights for oil, gas, coal, gold, and silver are owned by the state. Minerals for other commodities are privately held. The fact that mineral rights can be privately owned in the United States means that homeowners with rights to valuable resources on their property can sell those mineral rights to private corporations, sometimes generating substantial up-front or ongoing [royalty payments](https://www.investopedia.com/terms/r/royalty.asp) by doing so. A common example of such transactions involves properties located on subterranean oil reserves, which can attract purchase offers from [oil extraction companies](https://www.investopedia.com/articles/active-trading/102214/economics-oil-extraction.asp).  Generally, the attractiveness of these mineral rights—and, therefore, the royalties that private landowners can obtain for them—is heavily dependent on the [price of oil](https://www.investopedia.com/articles/economics/08/determining-oil-prices.asp). When oil prices are high, unconventional methods of oil extraction become more economical, raising the value of mineral rights. ## Special Considerations Mineral rights are an important consideration when purchasing [real estate](https://www.investopedia.com/terms/r/realestate.asp). Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico. In North Carolina, property sellers must disclose to buyers whether their purchase includes the mineral rights to the underlying land. However, other states lack similar disclosure laws. This can cause situations in which a homeowner is made aware of valuable resources beneath their land, only to find that they are unable to benefit from those resources.  To mitigate against this risk, homebuyers should ensure that they carefully study their property's [land title records](https://www.investopedia.com/articles/mortgages-real-estate/08/title-ownership-property.asp) to verify whether the surface rights and mineral rights are included as part of their purchase. These documents are generally available through the records offices of the local property appraisal authority or the county clerk's office. ## Real-World Example of Mineral Rights The development of technologies such as [horizontal oil drilling](https://www.investopedia.com/terms/h/horizontalwell.asp) has made it increasingly common for resource-extraction companies to purchase mineral rights without necessarily needing to acquire surface rights as well. This approach is widely used in the Texas Permian [shale](https://www.investopedia.com/terms/s/shaleoil.asp) basin, as well as in New Mexico, in order to extract oil and gas. Another recent development in this sector is the involvement of large investment firms such as Texas-based EnCap Investments, which has invested in upstream companies focused on the Permian Basin and Marcellus Shale. Black Stone Minerals ([BSM](https://www.investopedia.com/markets/quote?tvwidgetsymbol=bsm)), also based in Texas, been concentrating its mineral rights investments within the Permian, Haynesville, and Bakken shale oil fields.

What Are Mineral Rights? Mineral rights are the ownership rights to underground resources such as fossil fuels (oil, natural gas, coal, etc.), metals and ores, and mineable rocks such as limestone and salt. In the United States, mineral rights are legally distinct from surface rights. Surface rights give the owner the right to use the surface of the land for residential, agricultural, commercial and other purposes. Mineral rights entitle the owner to own and exploit any natural resources found beneath the land. Key Takeaways Mineral rights are ownership claims against the natural resources located beneath a plot of land.In the United States, mineral rights are separate from surface rights.Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico. How Mineral Rights Work In the United States, it is possible for private individuals to purchase land and own the right to develop and exploit that land, including any natural resources found beneath its surface. Other places in the world offer less freedom. Most countries allow private individuals to purchase land, but this ownership right only extends to the land's surface. Any resources found beneath that surface would be owned by the nation itself and controlled by its government. For example, in the United Kingdom, mineral rights for oil, gas, coal, gold, and silver are owned by the state. Minerals for other commodities are privately held. The fact that mineral rights can be privately owned in the United States means that homeowners with rights to valuable resources on their property can sell those mineral rights to private corporations, sometimes generating substantial up-front or ongoing royalty payments by doing so. A common example of such transactions involves properties located on subterranean oil reserves, which can attract purchase offers from oil extraction companies.  Generally, the attractiveness of these mineral rights—and, therefore, the royalties that private landowners can obtain for them—is heavily dependent on the price of oil. When oil prices are high, unconventional methods of oil extraction become more economical, raising the value of mineral rights. Special Considerations Mineral rights are an important consideration when purchasing real estate. Mineral rights are often "severed" from surface rights in states such as Texas, Oklahoma, Pennsylvania, Louisiana, Colorado, and New Mexico. In North Carolina, property sellers must disclose to buyers whether their purchase includes the mineral rights to the underlying land. However, other states lack similar disclosure laws. This can cause situations in which a homeowner is made aware of valuable resources beneath their land, only to find that they are unable to benefit from those resources.  To mitigate against this risk, homebuyers should ensure that they carefully study their property's land title records to verify whether the surface rights and mineral rights are included as part of their purchase. These documents are generally available through the records offices of the local property appraisal authority or the county clerk's office. Real-World Example of Mineral Rights The development of technologies such as horizontal oil drilling has made it increasingly common for resource-extraction companies to purchase mineral rights without necessarily needing to acquire surface rights as well. This approach is widely used in the Texas Permian shale basin, as well as in New Mexico, in order to extract oil and gas. Another recent development in this sector is the involvement of large investment firms such as Texas-based EnCap Investments, which has invested in upstream companies focused on the Permian Basin and Marcellus Shale. Black Stone Minerals (BSM), also based in Texas, been concentrating its mineral rights investments within the Permian, Haynesville, and Bakken shale oil fields.

https://www.investopedia.com/how-to-balance-checkbook-5208188

How To Balance a Checkbook

<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 <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> is an important tool for managing money. It’s useful for paying bills, depositing paychecks, sending money, and making purchases using a linked debit card. Most adults in the U.S.—81%—have at least one bank account.<span class="ql-inline-citation" data-cite="1"></span> If you’re one of them, it’s important to understand how to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-often-should-you-monitor-your-checking-account-4798537">balance a checkbook to keep track of debit and credit transactions</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"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>A checking account can be used to perform a number of financial functions, including making bill payments, sending or receiving money transfers, and spending via a linked debit card.</li><li>Balancing a checkbook simply means adding up credit and debit transactions for the month to understand how much money you have available.</li><li>It can still be helpful to know how to balance a checkbook even if you don’t write checks.</li><li>Mobile banking apps make it easy to see at a glance how much money is moving in and out of your checking account and what you have available for spending or paying bills.</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_5-0"> <div class="figure-media"> <div class="img-placeholder" style="padding-bottom:67.5%;"> <img alt="Ways to Balance a Checkbook" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/ulSh_C9m3X0xNy8bwk0I6-w6EIA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/ulSh_C9m3X0xNy8bwk0I6-w6EIA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.png" data-srcset="https://www.investopedia.com/thmb/xX1r8fvyN8cB9cmtFCwsCty5Q-Q=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.png 750w" data-tracking-container="true" height="2700" id="mntl-sc-block-image_1-0" width="4000"/> <noscript> <img alt="Ways to Balance a Checkbook" class="img--noscript universal-image__image" height="2700" sizes="750px" src="https://www.investopedia.com/thmb/ulSh_C9m3X0xNy8bwk0I6-w6EIA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.png" srcset="https://www.investopedia.com/thmb/xX1r8fvyN8cB9cmtFCwsCty5Q-Q=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.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 / Julie Bang</p></span> </figcaption></figure> <span class="heading-toc" id="toc-how-to-balance-a-checkbook-using-a-check-register"></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 To Balance a Checkbook Using a Check Register </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 new checking account, your bank may provide you with paper checks as well as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/checkbook.asp">checkbook</a> register. This register is where you can record the various credit and debit transactions for your account, including:<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> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> <li><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/directdeposit.asp">Direct deposits</a></li> <li><a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/remote-deposit-capture-definition-4684027">Mobile deposits</a></li> <li>In-person deposits (made at a teller or an ATM)</li> <li>Online bill payments</li> <li>Cash withdrawals</li> <li>Checks written</li> <li>Debit card purchases</li> </ul> <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 write your starting account balance at the top of the register. As you add or deduct money from your account, you write down each transaction in your checkbook register. Specifically, you should include the transaction: </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>Date</li><li>Description (grocery purchase, bill payment, ATM withdrawal, etc.)</li><li>Amount</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"> You add or subtract the corresponding amount to arrive at your new account balance. This can help with balancing your checkbook at the end of the month. </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 do that, you need your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bank-statement.asp">bank statement</a>. Reconcile it against the information that’s listed in your check register. This simply means going through your statement and your checkbook register line by line and matching up transactions.<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> <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-important" 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>Transactions that are listed in your checkbook register may not show up on your account statement if they’re still marked as pending with the bank.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> Assuming all the transactions from your statement and your register match, the end balance showing for each one should also be the same. If not, you need to go back and check the register for any transactions that may not have been posted to your account yet. </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 you want to match your current account balance to the balance showing on your bank statement, you can do that by factoring in transactions posted after the statement date. Once you add back withdrawals or subtract deposits, your current balance and statement balance should be the same. </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-tip" 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_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’ve combed through your account statements and still can’t get your checkbook to balance, you should call your bank to ask about any pending debit or credit charges you may have overlooked.</p></div></div></div> <span class="heading-toc" id="toc-how-to-balance-a-checkbook-without-a-check-register"></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 To Balance a Checkbook Without a Check Register </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Writing down transactions in a checkbook register is one way to keep track of them, but there are also options for balancing your checkbook digitally. </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"> Online and mobile banking </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_31-0"> Nearly 40% of Americans rely on mobile banking to manage their money.<span class="ql-inline-citation" data-cite="4"></span> If your bank offers <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/onlinebanking.asp">online banking</a> and/or <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mobile-banking.asp">mobile banking</a>, balancing your checkbook may be as simple as logging in to your account. </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"> Once logged in you can quickly scan your: </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>Current balance information</li><li>Available balance information</li><li>Debit transaction history</li><li>Credit transaction history</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"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-open-a-checking-account-online-4797805">You may prefer online and mobile banking</a> for checkbook balancing if you don’t write paper checks or only write a few each month. Keep in mind that checks won’t show up in your transaction history until the transaction has been posted, so you still need to keep track of those amounts when calculating your current balance. </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-callout mntl-block" id="mntl-sc-block_39-0"><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_40-0"><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>Setting up text or email notifications can make it easier to keep track of new credit and debit transactions without having to log in to your account.</p></div></div></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"> Budgeting apps </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_42-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/best-budgeting-apps-5085405">Budgeting apps are another option for managing checking account activity</a>. These apps link to your checking and other financial accounts (including credit cards and savings accounts) and automatically record new transactions for you. </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"> You may prefer using a budgeting app if you have multiple bank accounts or credit cards, as it’s easier to see them all in one place. Relying on these apps alone to balance your checkbook can be problematic, however, if you’re not keeping a close eye on each account individually.<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"> Spreadsheet or ledger </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_47-0"> Using a spreadsheet or <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/generalledger.asp">ledger</a> can also help you stay on top of your checking account balance. With a spreadsheet, you can record deposits and withdrawals while creating formulas that automatically repopulate your current account balance. The key to this approach is making sure that you enter new credits and debits in a timely manner. Otherwise, you might forget about a transaction, which would result in an incorrect balance. </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"> Ledgers are another way to record banking activity by hand. Using a ledger is similar to a checkbook register. You simply write down transactions as they happen, adding or subtracting the appropriate amount from your balance. At the end of the month, you compare the ledger with your account statement to balance your checkbook.<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-why-balance-a-checkbook"></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"> Why Balance a Checkbook? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_52-0"> Balancing a checkbook can seem like a tedious and time-consuming task, but it’s worthwhile for two reasons. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_53-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_54-0"> <span class="mntl-sc-block-subheading__text"> You know where your money is going </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> First, keeping a balanced checkbook means you <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041515/why-reconciliation-important-accounting.asp">know where your money is going</a> each month and how much is coming in. This can be helpful for making and sticking to a budget. More important, tracking your balance can help you avoid the possibility of having an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/o/overdraft.asp">overdraft</a> in your account. Considering that the average overdraft fee is around $35, it is better off avoided as much as possible.<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_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"> Preventing fraud </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_58-0"> The second benefit to balancing a checkbook is <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/financial-fraud-4689710">fraud</a> prevention. When you’re checking your account statements and transaction history regularly, it’s more likely that you’ll be able to spot any suspicious transactions. For example, a small deposit of a few cents or a $1 debit transaction could be evidence of a scammer testing the waters before launching a larger-scale attack on your account. Taking time to balance your checkbook could help you avoid financial headaches caused by fraud.<br/> </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_60-0"><span class="heading-toc" id="toc-is-balancing-a-checkbook-necessary"></span> <h2 class="mntl-sc-block-questionandanswer__question">Is Balancing a Checkbook Necessary?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Using a check register to balance a checkbook may not be necessary if you’re using other methods (online and mobile banking, mobile budgeting apps, etc.) to keep track of your account transactions and balance. Still, balancing a checkbook can be a valuable exercise if it helps you monitor your spending, allowing you to detect fraud and avoid overdrafts.</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-how-often-should-you-balance-your-checkbook"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Often Should You Balance Your Checkbook?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you’re using the checkbook register method and comparing transactions with your account statement, you should balance your checkbook every month. If you’re using online banking or mobile banking to track your accounts, you can log in daily to view new credit and debit transactions as well as balance information.</p></div> </div> <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-why-cant-i-balance-my-checkbook"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Can’t I Balance My Checkbook?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>If you’re having trouble balancing your checkbook, it may be because you have transactions that are unaccounted for, either on your statement or in your checkbook register. Double-checking transactions or calling the bank could help you find an overlooked credit or debit. You can also review your register for mathematical errors that would result in an incorrect balance.</p></div> </div></div>

A [checking account](https://www.investopedia.com/terms/c/checkingaccount.asp) is an important tool for managing money. It’s useful for paying bills, depositing paychecks, sending money, and making purchases using a linked debit card. Most adults in the U.S.—81%—have at least one bank account. If you’re one of them, it’s important to understand how to [balance a checkbook to keep track of debit and credit transactions](https://www.investopedia.com/how-often-should-you-monitor-your-checking-account-4798537). ### * A checking account can be used to perform a number of financial functions, including making bill payments, sending or receiving money transfers, and spending via a linked debit card. * Balancing a checkbook simply means adding up credit and debit transactions for the month to understand how much money you have available. * It can still be helpful to know how to balance a checkbook even if you don’t write checks. * Mobile banking apps make it easy to see at a glance how much money is moving in and out of your checking account and what you have available for spending or paying bills. ![Ways to Balance a Checkbook]() :max_bytes(150000):strip_icc()/how-to-balance-checkbook-5208188-final-f66e0e6bc14e4ede9f92571d1fbbd5dc.png) Investopedia / Julie Bang ## How To Balance a Checkbook Using a Check Register When you open a new checking account, your bank may provide you with paper checks as well as a [checkbook](https://www.investopedia.com/terms/c/checkbook.asp) register. This register is where you can record the various credit and debit transactions for your account, including: * [Direct deposits](https://www.investopedia.com/terms/d/directdeposit.asp) * [Mobile deposits](https://www.investopedia.com/remote-deposit-capture-definition-4684027) * In-person deposits (made at a teller or an ATM) * Online bill payments * Cash withdrawals * Checks written * Debit card purchases You write your starting account balance at the top of the register. As you add or deduct money from your account, you write down each transaction in your checkbook register. Specifically, you should include the transaction: * Date * Description (grocery purchase, bill payment, ATM withdrawal, etc.) * Amount You add or subtract the corresponding amount to arrive at your new account balance. This can help with balancing your checkbook at the end of the month. To do that, you need your [bank statement](https://www.investopedia.com/terms/b/bank-statement.asp). Reconcile it against the information that’s listed in your check register. This simply means going through your statement and your checkbook register line by line and matching up transactions. ### Transactions that are listed in your checkbook register may not show up on your account statement if they’re still marked as pending with the bank. Assuming all the transactions from your statement and your register match, the end balance showing for each one should also be the same. If not, you need to go back and check the register for any transactions that may not have been posted to your account yet. If you want to match your current account balance to the balance showing on your bank statement, you can do that by factoring in transactions posted after the statement date. Once you add back withdrawals or subtract deposits, your current balance and statement balance should be the same. ### If you’ve combed through your account statements and still can’t get your checkbook to balance, you should call your bank to ask about any pending debit or credit charges you may have overlooked. ## How To Balance a Checkbook Without a Check Register Writing down transactions in a checkbook register is one way to keep track of them, but there are also options for balancing your checkbook digitally. ### Online and mobile banking Nearly 40% of Americans rely on mobile banking to manage their money. If your bank offers [online banking](https://www.investopedia.com/terms/o/onlinebanking.asp) and/or [mobile banking](https://www.investopedia.com/terms/m/mobile-banking.asp), balancing your checkbook may be as simple as logging in to your account. Once logged in you can quickly scan your: * Current balance information * Available balance information * Debit transaction history * Credit transaction history [You may prefer online and mobile banking](https://www.investopedia.com/how-to-open-a-checking-account-online-4797805) for checkbook balancing if you don’t write paper checks or only write a few each month. Keep in mind that checks won’t show up in your transaction history until the transaction has been posted, so you still need to keep track of those amounts when calculating your current balance. ### Setting up text or email notifications can make it easier to keep track of new credit and debit transactions without having to log in to your account. ### Budgeting apps [Budgeting apps are another option for managing checking account activity](https://www.investopedia.com/best-budgeting-apps-5085405). These apps link to your checking and other financial accounts (including credit cards and savings accounts) and automatically record new transactions for you. You may prefer using a budgeting app if you have multiple bank accounts or credit cards, as it’s easier to see them all in one place. Relying on these apps alone to balance your checkbook can be problematic, however, if you’re not keeping a close eye on each account individually. ### Spreadsheet or ledger Using a spreadsheet or [ledger](https://www.investopedia.com/terms/g/generalledger.asp) can also help you stay on top of your checking account balance. With a spreadsheet, you can record deposits and withdrawals while creating formulas that automatically repopulate your current account balance. The key to this approach is making sure that you enter new credits and debits in a timely manner. Otherwise, you might forget about a transaction, which would result in an incorrect balance. Ledgers are another way to record banking activity by hand. Using a ledger is similar to a checkbook register. You simply write down transactions as they happen, adding or subtracting the appropriate amount from your balance. At the end of the month, you compare the ledger with your account statement to balance your checkbook. ## Why Balance a Checkbook? Balancing a checkbook can seem like a tedious and time-consuming task, but it’s worthwhile for two reasons. ### You know where your money is going First, keeping a balanced checkbook means you [know where your money is going](https://www.investopedia.com/ask/answers/041515/why-reconciliation-important-accounting.asp) each month and how much is coming in. This can be helpful for making and sticking to a budget. More important, tracking your balance can help you avoid the possibility of having an [overdraft](https://www.investopedia.com/terms/o/overdraft.asp) in your account. Considering that the average overdraft fee is around $35, it is better off avoided as much as possible. ### Preventing fraud The second benefit to balancing a checkbook is [fraud](https://www.investopedia.com/financial-fraud-4689710) prevention. When you’re checking your account statements and transaction history regularly, it’s more likely that you’ll be able to spot any suspicious transactions. For example, a small deposit of a few cents or a $1 debit transaction could be evidence of a scammer testing the waters before launching a larger-scale attack on your account. Taking time to balance your checkbook could help you avoid financial headaches caused by fraud. ## Is Balancing a Checkbook Necessary? Using a check register to balance a checkbook may not be necessary if you’re using other methods (online and mobile banking, mobile budgeting apps, etc.) to keep track of your account transactions and balance. Still, balancing a checkbook can be a valuable exercise if it helps you monitor your spending, allowing you to detect fraud and avoid overdrafts. ## How Often Should You Balance Your Checkbook? If you’re using the checkbook register method and comparing transactions with your account statement, you should balance your checkbook every month. If you’re using online banking or mobile banking to track your accounts, you can log in daily to view new credit and debit transactions as well as balance information. ## Why Can’t I Balance My Checkbook? If you’re having trouble balancing your checkbook, it may be because you have transactions that are unaccounted for, either on your statement or in your checkbook register. Double-checking transactions or calling the bank could help you find an overlooked credit or debit. You can also review your register for mathematical errors that would result in an incorrect balance.

A checking account is an important tool for managing money. It’s useful for paying bills, depositing paychecks, sending money, and making purchases using a linked debit card. Most adults in the U.S.—81%—have at least one bank account. If you’re one of them, it’s important to understand how to balance a checkbook to keep track of debit and credit transactions. A checking account can be used to perform a number of financial functions, including making bill payments, sending or receiving money transfers, and spending via a linked debit card.Balancing a checkbook simply means adding up credit and debit transactions for the month to understand how much money you have available.It can still be helpful to know how to balance a checkbook even if you don’t write checks.Mobile banking apps make it easy to see at a glance how much money is moving in and out of your checking account and what you have available for spending or paying bills. Investopedia / Julie Bang How To Balance a Checkbook Using a Check Register When you open a new checking account, your bank may provide you with paper checks as well as a checkbook register. This register is where you can record the various credit and debit transactions for your account, including: Direct deposits Mobile deposits In-person deposits (made at a teller or an ATM) Online bill payments Cash withdrawals Checks written Debit card purchases You write your starting account balance at the top of the register. As you add or deduct money from your account, you write down each transaction in your checkbook register. Specifically, you should include the transaction: DateDescription (grocery purchase, bill payment, ATM withdrawal, etc.)Amount You add or subtract the corresponding amount to arrive at your new account balance. This can help with balancing your checkbook at the end of the month. To do that, you need your bank statement. Reconcile it against the information that’s listed in your check register. This simply means going through your statement and your checkbook register line by line and matching up transactions. Transactions that are listed in your checkbook register may not show up on your account statement if they’re still marked as pending with the bank. Assuming all the transactions from your statement and your register match, the end balance showing for each one should also be the same. If not, you need to go back and check the register for any transactions that may not have been posted to your account yet. If you want to match your current account balance to the balance showing on your bank statement, you can do that by factoring in transactions posted after the statement date. Once you add back withdrawals or subtract deposits, your current balance and statement balance should be the same. If you’ve combed through your account statements and still can’t get your checkbook to balance, you should call your bank to ask about any pending debit or credit charges you may have overlooked. How To Balance a Checkbook Without a Check Register Writing down transactions in a checkbook register is one way to keep track of them, but there are also options for balancing your checkbook digitally. Online and mobile banking Nearly 40% of Americans rely on mobile banking to manage their money. If your bank offers online banking and/or mobile banking, balancing your checkbook may be as simple as logging in to your account. Once logged in you can quickly scan your: Current balance informationAvailable balance informationDebit transaction historyCredit transaction history You may prefer online and mobile banking for checkbook balancing if you don’t write paper checks or only write a few each month. Keep in mind that checks won’t show up in your transaction history until the transaction has been posted, so you still need to keep track of those amounts when calculating your current balance. Setting up text or email notifications can make it easier to keep track of new credit and debit transactions without having to log in to your account. Budgeting apps Budgeting apps are another option for managing checking account activity. These apps link to your checking and other financial accounts (including credit cards and savings accounts) and automatically record new transactions for you. You may prefer using a budgeting app if you have multiple bank accounts or credit cards, as it’s easier to see them all in one place. Relying on these apps alone to balance your checkbook can be problematic, however, if you’re not keeping a close eye on each account individually. Spreadsheet or ledger Using a spreadsheet or ledger can also help you stay on top of your checking account balance. With a spreadsheet, you can record deposits and withdrawals while creating formulas that automatically repopulate your current account balance. The key to this approach is making sure that you enter new credits and debits in a timely manner. Otherwise, you might forget about a transaction, which would result in an incorrect balance. Ledgers are another way to record banking activity by hand. Using a ledger is similar to a checkbook register. You simply write down transactions as they happen, adding or subtracting the appropriate amount from your balance. At the end of the month, you compare the ledger with your account statement to balance your checkbook. Why Balance a Checkbook? Balancing a checkbook can seem like a tedious and time-consuming task, but it’s worthwhile for two reasons. You know where your money is going First, keeping a balanced checkbook means you know where your money is going each month and how much is coming in. This can be helpful for making and sticking to a budget. More important, tracking your balance can help you avoid the possibility of having an overdraft in your account. Considering that the average overdraft fee is around $35, it is better off avoided as much as possible. Preventing fraud The second benefit to balancing a checkbook is fraud prevention. When you’re checking your account statements and transaction history regularly, it’s more likely that you’ll be able to spot any suspicious transactions. For example, a small deposit of a few cents or a $1 debit transaction could be evidence of a scammer testing the waters before launching a larger-scale attack on your account. Taking time to balance your checkbook could help you avoid financial headaches caused by fraud. Is Balancing a Checkbook Necessary? Using a check register to balance a checkbook may not be necessary if you’re using other methods (online and mobile banking, mobile budgeting apps, etc.) to keep track of your account transactions and balance. Still, balancing a checkbook can be a valuable exercise if it helps you monitor your spending, allowing you to detect fraud and avoid overdrafts. How Often Should You Balance Your Checkbook? If you’re using the checkbook register method and comparing transactions with your account statement, you should balance your checkbook every month. If you’re using online banking or mobile banking to track your accounts, you can log in daily to view new credit and debit transactions as well as balance information. Why Can’t I Balance My Checkbook? If you’re having trouble balancing your checkbook, it may be because you have transactions that are unaccounted for, either on your statement or in your checkbook register. Double-checking transactions or calling the bank could help you find an overlooked credit or debit. You can also review your register for mathematical errors that would result in an incorrect balance.

https://www.investopedia.com/cisco-q3-fy-2024-earnings-8649209

Cisco Stock Jumps on Revenue Beat and Raised Guidance

<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>Cisco Systems reported better-than-expected revenue in its third-quarter earnings announcement Wednesday after the bell.</li><li>The company also raised its full-year revenue guidance.</li><li>The tech company's shares rose in extended trading following the announcement.</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"> Cisco Systems (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=csco">CSCO</a>) shares surged over 4% in extended trading Wednesday after the company reported third-quarter revenue exceeding analysts' expectations and raised its full-year guidance.<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_4-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Cisco's revenue for the fourth quarter of fiscal 2024 was $12.7 billion, a 13% year-over-year decline but higher than analysts anticipated, according to estimates compiled by Visible Alpha. Net income came in at $1.88 billion or 46 cents per share, down from $3.21 billion or 78 cents per share in the year-ago quarter, and below expectations. However, adjusted earnings per share stripping out one-time items came in at 88 cents, beating expectations, though that figure also represented a decline from the year-ago period. </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"> Cisco noted it completed its <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/cisco-systems-completes-its-usd28-billion-purchase-of-splunk-8610584">acquisition of Splunk</a>, an enterprise data infrastructure solutions provider, during the quarter, which had a positive impact on Cisco's revenue but negatively impacted its earnings. "The addition of Splunk to our product line will be a catalyst for further growth," Cisco CFO Scott Herren said. </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-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_9-0"> <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> </td> <td> Q3 FY 2024</td> <td> Analyst Estimates for Q3 FY 2024</td> <td>  Q3 FY 2023</td> </tr> <tr> <td> Revenue</td> <td> $12.7 billion</td> <td> $12.54 billion</td> <td>$14.57 billion</td> </tr> <tr> <td> Diluted Earnings Per Share</td> <td> 46 cents</td> <td> 59 cents</td> <td>78 cents</td> </tr> <tr> <td> Net Income</td> <td> $1.88 billion</td> <td> $2.4 billion</td> <td>$3.21 billion</td> </tr> </tbody> </table> </div></figure> <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 company raised its full-year revenue guidance to between $53.6 billion and $53.8 billion, up from the range of $51.5 billion to $52.5 billion it issued in the second quarter and above the $53.24 billion analysts projected.<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"> "We delivered a solid Q3 performance in what remains a dynamic environment," Cisco CEO Chuck Robbins said, adding that the company's "unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era." </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"> Cisco shares were 4.3% higher at $51.80 in extended trading as of 5:40 p.m. ET Wednesday following the release. </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 * Cisco Systems reported better-than-expected revenue in its third-quarter earnings announcement Wednesday after the bell. * The company also raised its full-year revenue guidance. * The tech company's shares rose in extended trading following the announcement. Cisco Systems ([CSCO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=csco)) shares surged over 4% in extended trading Wednesday after the company reported third-quarter revenue exceeding analysts' expectations and raised its full-year guidance. Cisco's revenue for the fourth quarter of fiscal 2024 was $12.7 billion, a 13% year-over-year decline but higher than analysts anticipated, according to estimates compiled by Visible Alpha. Net income came in at $1.88 billion or 46 cents per share, down from $3.21 billion or 78 cents per share in the year-ago quarter, and below expectations. However, adjusted earnings per share stripping out one-time items came in at 88 cents, beating expectations, though that figure also represented a decline from the year-ago period. Cisco noted it completed its [acquisition of Splunk](https://www.investopedia.com/cisco-systems-completes-its-usd28-billion-purchase-of-splunk-8610584), an enterprise data infrastructure solutions provider, during the quarter, which had a positive impact on Cisco's revenue but negatively impacted its earnings. "The addition of Splunk to our product line will be a catalyst for further growth," Cisco CFO Scott Herren said. | | Q3 FY 2024 | Analyst Estimates for Q3 FY 2024 | Q3 FY 2023 | | --- | --- | --- | --- | | Revenue | $12.7 billion | $12.54 billion | $14.57 billion | | Diluted Earnings Per Share | 46 cents | 59 cents | 78 cents | | Net Income | $1.88 billion | $2.4 billion | $3.21 billion | The company raised its full-year revenue guidance to between $53.6 billion and $53.8 billion, up from the range of $51.5 billion to $52.5 billion it issued in the second quarter and above the $53.24 billion analysts projected. "We delivered a solid Q3 performance in what remains a dynamic environment," Cisco CEO Chuck Robbins said, adding that the company's "unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era." Cisco shares were 4.3% higher at $51.80 in extended trading as of 5:40 p.m. ET Wednesday following the release. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways Cisco Systems reported better-than-expected revenue in its third-quarter earnings announcement Wednesday after the bell.The company also raised its full-year revenue guidance.The tech company's shares rose in extended trading following the announcement. Cisco Systems (CSCO) shares surged over 4% in extended trading Wednesday after the company reported third-quarter revenue exceeding analysts' expectations and raised its full-year guidance. Cisco's revenue for the fourth quarter of fiscal 2024 was $12.7 billion, a 13% year-over-year decline but higher than analysts anticipated, according to estimates compiled by Visible Alpha. Net income came in at $1.88 billion or 46 cents per share, down from $3.21 billion or 78 cents per share in the year-ago quarter, and below expectations. However, adjusted earnings per share stripping out one-time items came in at 88 cents, beating expectations, though that figure also represented a decline from the year-ago period. Cisco noted it completed its acquisition of Splunk, an enterprise data infrastructure solutions provider, during the quarter, which had a positive impact on Cisco's revenue but negatively impacted its earnings. "The addition of Splunk to our product line will be a catalyst for further growth," Cisco CFO Scott Herren said.    Q3 FY 2024  Analyst Estimates for Q3 FY 2024   Q3 FY 2023  Revenue  $12.7 billion  $12.54 billion $14.57 billion  Diluted Earnings Per Share  46 cents  59 cents 78 cents  Net Income  $1.88 billion  $2.4 billion $3.21 billion The company raised its full-year revenue guidance to between $53.6 billion and $53.8 billion, up from the range of $51.5 billion to $52.5 billion it issued in the second quarter and above the $53.24 billion analysts projected. "We delivered a solid Q3 performance in what remains a dynamic environment," Cisco CEO Chuck Robbins said, adding that the company's "unique ability to bring together networking, security, observability, and data enables Cisco to offer our customers unrivaled digital resilience for the AI era." Cisco shares were 4.3% higher at $51.80 in extended trading as of 5:40 p.m. ET Wednesday following the release. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/top-money-market-etfs-for-q1-2024-8417180

Top Money Market ETFs for Q1 2024

<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"> Money market exchange-traded fund's (ETFs) invest in short-term, low-risk, interest-bearing securities like Treasury bills, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/what-does-investment-grade-mean/#:~:text=Issues%20that%20are%20investment%20grade,or%20High%2DGrade%20Bond.%22">investment grade</a> bonds, and commercial paper. They are considered low risk, making them suitable investments to preserve capital and provide income during times of market uncertainty. Investors often use money market ETFs as a cash alternative because they offer a slightly higher return than traditional savings accounts while maintaining relatively low <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatility</a> and easy access to funds. </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 2023, money market funds saw steady inflows due to the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp">Federal Reserve's rate hikes</a> which increased yields in fixed-income securities, making them more appealing than parking cash in a bank account where higher savings rates often took time to materialize.<span class="ql-inline-citation" data-cite="7"></span> These funds also gained in popularity after several prominent regional banks failed early last year, prompting many investors to look for other safe investment alternatives amid concerns over <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bankrun.asp">bank runs</a> at other smaller banks. </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>Top money market ETFs for Q1 2024 include PULS, CSHI, and GSY.</li><li>Money market ETFs are designed to preserve capital and provide income during times of market uncertainty.</li><li>These funds primarily invest in highly liquid short-term debt instruments, such as Treasury Bills and investment grade corporate bonds.</li></ul><p><br/></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Below, we present the top money market ETFs that have yielded the highest returns for investors over the past year (leaving aside leveraged and inverse ETFs, as well as those with less than $50 million in assets). For comparison, investors can use the S&amp;P U.S. Ultra Short Treasury Bill &amp; Bond Index as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/06/benchmark.asp">benchmark</a> for comparing performance to these three funds.<span class="ql-inline-citation" data-cite="8"></span> All data is as of Dec. 15.<br/> </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_8-0"></div> <h3 class="comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading" id="mntl-sc-block_9-0"> <span class="mntl-sc-block-subheading__text"> PGIM Ultra Short Bond ETF (PULS) </span> </h3> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> <li>Performance Over 1 Year: 6.23%</li><li>Expense Ratio: 0.15%</li><li>Annual Dividend Yield: 5.07%</li><li>30-Day Average Daily Volume: 1,133,438</li><li>Assets Under Management: $5.81 billion</li><li>Inception Date: April 5, 2018</li><li>Issuer: Prudential<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_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> PULS seeks to follow the performance of the ICE 0-1 Year US Corporate &amp; Government Index, a benchmark comprising of investment-grade fixed-income securities, targeting an effective duration of one year or less and a weighted average <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturity.asp">maturity</a> of less than three years. The fund holds over 20% of its assets in cash, corporate bonds, and asset-backed securities. Other top holdings include Citigroup Inc. (C) bonds, RTX, corp. (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=rtx">RTX</a>), and The Williams Companies, Inc. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmb">WMB</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_13-0"></div> <span class="heading-toc" id="toc-neos-enhanced-income-cash-alternative-etf-cshi"></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"> Neos Enhanced Income Cash Alternative ETF (CSHI) </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_15-0"> <li>Performance Over 1 Year: 6.16%</li><li>Expense Ratio: 0.38%</li><li>Annual Dividend Yield: 6.07%</li><li>30-Day Average Daily Volume: 74,716</li><li>Assets Under Management: $265.60 million</li><li>Inception Date: Aug. 29, 2022</li><li>Issuer: Neos Investments LLC<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_16-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> The ETF aims to distribute monthly income generated from investing in a portfolio of 1-3 month Treasury Bills through a U.S. large-cap <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> strategy. It may also invest in forwards, options, futures contracts, or swap agreements related to these short-term bills to achieve its objective. CSHI's top four holdings carry a cumulative portfolio weighting of nearly 60%, with maturity's primarily in early 2024.<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-invesco-ultra-short-duration-etf-gsy"></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"> Invesco Ultra Short Duration ETF (GSY) </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> <li>Performance Over 1 Year: 5.92%</li><li>Expense Ratio: 0.22%</li><li>Annual Dividend Yield: 4.6%</li><li>30-Day Average Daily Volume: 683,699</li><li>Assets Under Management: $1.83 billion</li><li>Inception Date: Feb. 12, 2008</li><li>Issuer: Invesco<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_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 seeks to outperform the Barclays Capital 1-3 Month U.S. Treasury Bill Index by investing in a diverse portfolio of investment-grade securities with an average duration of less than one year. Aside from keeping 15% of its assets in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/040915/how-much-cash-should-i-keep-bank.asp">cash</a>, other key holdings in the ETF's portfolio include a Japanese Treasury discount bill and corporate bonds issued by Marathon Oil Corporation (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=mro">MRO</a>), Mercedes-Benz Group AG (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=MBGAF">MBGAF</a>), and NextEra Energy, Inc. (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=nee">NEE</a>).<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_23-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> <em>The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer">warranty and liability disclaimer</a> for more info.</em> </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"> <em>As of the date this article was written, the author does not own any of the above securities.</em> </p></div>

Money market exchange-traded fund's (ETFs) invest in short-term, low-risk, interest-bearing securities like Treasury bills, [investment grade](https://www.investopedia.com/ask/answers/what-does-investment-grade-mean/#:~:text=Issues%20that%20are%20investment%20grade,or%20High%2DGrade%20Bond.%22) bonds, and commercial paper. They are considered low risk, making them suitable investments to preserve capital and provide income during times of market uncertainty. Investors often use money market ETFs as a cash alternative because they offer a slightly higher return than traditional savings accounts while maintaining relatively low [volatility](https://www.investopedia.com/terms/v/volatility.asp) and easy access to funds. In 2023, money market funds saw steady inflows due to the [Federal Reserve's rate hikes](https://www.investopedia.com/articles/investing/010616/impact-fed-interest-rate-hike.asp) which increased yields in fixed-income securities, making them more appealing than parking cash in a bank account where higher savings rates often took time to materialize. These funds also gained in popularity after several prominent regional banks failed early last year, prompting many investors to look for other safe investment alternatives amid concerns over [bank runs](https://www.investopedia.com/terms/b/bankrun.asp) at other smaller banks. ### Key Takeaways * Top money market ETFs for Q1 2024 include PULS, CSHI, and GSY. * Money market ETFs are designed to preserve capital and provide income during times of market uncertainty. * These funds primarily invest in highly liquid short-term debt instruments, such as Treasury Bills and investment grade corporate bonds. Below, we present the top money market ETFs that have yielded the highest returns for investors over the past year (leaving aside leveraged and inverse ETFs, as well as those with less than $50 million in assets). For comparison, investors can use the S&P U.S. Ultra Short Treasury Bill & Bond Index as a [benchmark](https://www.investopedia.com/articles/basics/06/benchmark.asp) for comparing performance to these three funds. All data is as of Dec. 15. ### PGIM Ultra Short Bond ETF (PULS) * Performance Over 1 Year: 6.23% * Expense Ratio: 0.15% * Annual Dividend Yield: 5.07% * 30-Day Average Daily Volume: 1,133,438 * Assets Under Management: $5.81 billion * Inception Date: April 5, 2018 * Issuer: Prudential PULS seeks to follow the performance of the ICE 0-1 Year US Corporate & Government Index, a benchmark comprising of investment-grade fixed-income securities, targeting an effective duration of one year or less and a weighted average [maturity](https://www.investopedia.com/terms/m/maturity.asp) of less than three years. The fund holds over 20% of its assets in cash, corporate bonds, and asset-backed securities. Other top holdings include Citigroup Inc. (C) bonds, RTX, corp. ([RTX](https://www.investopedia.com/markets/quote?tvwidgetsymbol=rtx)), and The Williams Companies, Inc. ([WMB](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmb)). ## Neos Enhanced Income Cash Alternative ETF (CSHI) * Performance Over 1 Year: 6.16% * Expense Ratio: 0.38% * Annual Dividend Yield: 6.07% * 30-Day Average Daily Volume: 74,716 * Assets Under Management: $265.60 million * Inception Date: Aug. 29, 2022 * Issuer: Neos Investments LLC The ETF aims to distribute monthly income generated from investing in a portfolio of 1-3 month Treasury Bills through a U.S. large-cap [put option](https://www.investopedia.com/terms/p/putoption.asp) strategy. It may also invest in forwards, options, futures contracts, or swap agreements related to these short-term bills to achieve its objective. CSHI's top four holdings carry a cumulative portfolio weighting of nearly 60%, with maturity's primarily in early 2024. ## Invesco Ultra Short Duration ETF (GSY) * Performance Over 1 Year: 5.92% * Expense Ratio: 0.22% * Annual Dividend Yield: 4.6% * 30-Day Average Daily Volume: 683,699 * Assets Under Management: $1.83 billion * Inception Date: Feb. 12, 2008 * Issuer: Invesco The fund seeks to outperform the Barclays Capital 1-3 Month U.S. Treasury Bill Index by investing in a diverse portfolio of investment-grade securities with an average duration of less than one year. Aside from keeping 15% of its assets in [cash](https://www.investopedia.com/articles/personal-finance/040915/how-much-cash-should-i-keep-bank.asp), other key holdings in the ETF's portfolio include a Japanese Treasury discount bill and corporate bonds issued by Marathon Oil Corporation ([MRO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=mro)), Mercedes-Benz Group AG ([MBGAF](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MBGAF)), and NextEra Energy, Inc. ([NEE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=nee)). *The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our [warranty and liability disclaimer](https://www.investopedia.com/legal-4768893#toc-warranty-and-liability-disclaimer) for more info.* *As of the date this article was written, the author does not own any of the above securities.*

Money market exchange-traded fund's (ETFs) invest in short-term, low-risk, interest-bearing securities like Treasury bills, investment grade bonds, and commercial paper. They are considered low risk, making them suitable investments to preserve capital and provide income during times of market uncertainty. Investors often use money market ETFs as a cash alternative because they offer a slightly higher return than traditional savings accounts while maintaining relatively low volatility and easy access to funds. In 2023, money market funds saw steady inflows due to the Federal Reserve's rate hikes which increased yields in fixed-income securities, making them more appealing than parking cash in a bank account where higher savings rates often took time to materialize. These funds also gained in popularity after several prominent regional banks failed early last year, prompting many investors to look for other safe investment alternatives amid concerns over bank runs at other smaller banks. Key Takeaways Top money market ETFs for Q1 2024 include PULS, CSHI, and GSY.Money market ETFs are designed to preserve capital and provide income during times of market uncertainty.These funds primarily invest in highly liquid short-term debt instruments, such as Treasury Bills and investment grade corporate bonds. Below, we present the top money market ETFs that have yielded the highest returns for investors over the past year (leaving aside leveraged and inverse ETFs, as well as those with less than $50 million in assets). For comparison, investors can use the S&P U.S. Ultra Short Treasury Bill & Bond Index as a benchmark for comparing performance to these three funds. All data is as of Dec. 15. PGIM Ultra Short Bond ETF (PULS) Performance Over 1 Year: 6.23%Expense Ratio: 0.15%Annual Dividend Yield: 5.07%30-Day Average Daily Volume: 1,133,438Assets Under Management: $5.81 billionInception Date: April 5, 2018Issuer: Prudential PULS seeks to follow the performance of the ICE 0-1 Year US Corporate & Government Index, a benchmark comprising of investment-grade fixed-income securities, targeting an effective duration of one year or less and a weighted average maturity of less than three years. The fund holds over 20% of its assets in cash, corporate bonds, and asset-backed securities. Other top holdings include Citigroup Inc. (C) bonds, RTX, corp. (RTX), and The Williams Companies, Inc. (WMB). Neos Enhanced Income Cash Alternative ETF (CSHI) Performance Over 1 Year: 6.16%Expense Ratio: 0.38%Annual Dividend Yield: 6.07%30-Day Average Daily Volume: 74,716Assets Under Management: $265.60 millionInception Date: Aug. 29, 2022Issuer: Neos Investments LLC The ETF aims to distribute monthly income generated from investing in a portfolio of 1-3 month Treasury Bills through a U.S. large-cap put option strategy. It may also invest in forwards, options, futures contracts, or swap agreements related to these short-term bills to achieve its objective. CSHI's top four holdings carry a cumulative portfolio weighting of nearly 60%, with maturity's primarily in early 2024. Invesco Ultra Short Duration ETF (GSY) Performance Over 1 Year: 5.92%Expense Ratio: 0.22%Annual Dividend Yield: 4.6%30-Day Average Daily Volume: 683,699Assets Under Management: $1.83 billionInception Date: Feb. 12, 2008Issuer: Invesco The fund seeks to outperform the Barclays Capital 1-3 Month U.S. Treasury Bill Index by investing in a diverse portfolio of investment-grade securities with an average duration of less than one year. Aside from keeping 15% of its assets in cash, other key holdings in the ETF's portfolio include a Japanese Treasury discount bill and corporate bonds issued by Marathon Oil Corporation (MRO), Mercedes-Benz Group AG (MBGAF), and NextEra Energy, Inc. (NEE). The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author does not own any of the above securities.

https://www.investopedia.com/chase-launches-ink-business-premier-credit-card-for-all-6748615

Chase Launches Ink Business Premier Credit Card for All

<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"> Chase has officially made its newest business credit card available to the public. The Chase Ink Business Premier Credit Card was quietly launched in December 2021 to select customers,<span class="ql-inline-citation" data-cite="2"></span> but now anyone can apply through the credit card issuer's website. </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"> The card offers a larger sign-up bonus and better rewards than the other Ink cash-back credit cards, but it also charges a higher annual fee, making it a better option for small businesses with a lot of large expenses. </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>Chase has officially made the new Ink Business Premier card available to all eligible applicants.</li><li>The card is designed specifically for small business owners with a lot of large expenses.</li><li>Despite its higher annual fee, the card doesn't offer the benefits of more valuable travel redemptions and transfer partners that the Ink Business Preferred provides.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-to-know-about-the-new-ink-business-premier"></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 to Know About the New Ink Business Premier </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> The Ink Business Premier Credit Card is a small business credit card that packs a big rewards punch. As a new cardholder, you'll earn $1,000 when you spend $10,000 in the first three months from account opening. </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"> On an ongoing basis, you'll earn 5% cash back on travel purchases made through Chase Ultimate Rewards, 2.5% back on every purchase of $5,000 or more and 2% back on all other purchases. With that said, the card charges a $195 annual fee, making the card less attractive for small business owners who don't make large purchases frequently. </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"> You can redeem your rewards for cash back, gift cards, travel and more, but you won't get 25% more value on travel redemptions or access to transfer partners like you would with the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/chase-ink-business-preferred-review-4800979">Ink Business Preferred Credit Card</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"> Additionally, the card is a charge card, which means you need to pay your balance in full every month unless you opt for a Chase Flex for Business plan on some of your purchases to pay them off over time. </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 card also offers: </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>No foreign transaction fees</li><li>Trip cancellation and interruption insurance</li><li>Trip delay reimbursement</li><li>Baggage delay insurance</li><li>Primary auto rental collision damage waiver</li><li>Cell phone protection</li><li>Purchase protection</li><li>Extended warranty protection<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_19-0"></div> <span class="heading-toc" id="toc-is-the-new-ink-business-premier-a-good-deal"></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"> Is the New Ink Business Premier a Good Deal? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> The Ink Business Premier Credit Card is primarily suited for small businesses with a lot of expenses, particularly those that make large purchases of $5,000 on a regular basis. </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 comparison, the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/american-express-blue-business-cash-review-4800836">American Express Blue Business Cash</a> credit card offers 2% cash back on the first $50,000 spent each calendar year, and there's no annual fee. </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"> To beat that card with the Ink Business Premier's annual fee, you'd have to spend at least $39,000 on purchases of $5,000 each year to earn the extra 0.5% back. Alternatively, you'd need to spend more than $69,500 in total each year because the Blue Business Cash reverts to 1% back after you hit the $50,000 limit. </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"> Even so, there may be other cards that offer rewards rates that better align with your business expenses and don't carry such a high annual fee. </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"> As you consider this and other business credit cards, it's important to consider your company's spending habits and your general preferences to find the best fit. </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>

Chase has officially made its newest business credit card available to the public. The Chase Ink Business Premier Credit Card was quietly launched in December 2021 to select customers, but now anyone can apply through the credit card issuer's website. The card offers a larger sign-up bonus and better rewards than the other Ink cash-back credit cards, but it also charges a higher annual fee, making it a better option for small businesses with a lot of large expenses. ### Key Takeaways * Chase has officially made the new Ink Business Premier card available to all eligible applicants. * The card is designed specifically for small business owners with a lot of large expenses. * Despite its higher annual fee, the card doesn't offer the benefits of more valuable travel redemptions and transfer partners that the Ink Business Preferred provides. ## What to Know About the New Ink Business Premier The Ink Business Premier Credit Card is a small business credit card that packs a big rewards punch. As a new cardholder, you'll earn $1,000 when you spend $10,000 in the first three months from account opening. On an ongoing basis, you'll earn 5% cash back on travel purchases made through Chase Ultimate Rewards, 2.5% back on every purchase of $5,000 or more and 2% back on all other purchases. With that said, the card charges a $195 annual fee, making the card less attractive for small business owners who don't make large purchases frequently. You can redeem your rewards for cash back, gift cards, travel and more, but you won't get 25% more value on travel redemptions or access to transfer partners like you would with the [Ink Business Preferred Credit Card](https://www.investopedia.com/chase-ink-business-preferred-review-4800979). Additionally, the card is a charge card, which means you need to pay your balance in full every month unless you opt for a Chase Flex for Business plan on some of your purchases to pay them off over time. The card also offers: * No foreign transaction fees * Trip cancellation and interruption insurance * Trip delay reimbursement * Baggage delay insurance * Primary auto rental collision damage waiver * Cell phone protection * Purchase protection * Extended warranty protection ## Is the New Ink Business Premier a Good Deal? The Ink Business Premier Credit Card is primarily suited for small businesses with a lot of expenses, particularly those that make large purchases of $5,000 on a regular basis. For comparison, the [American Express Blue Business Cash](https://www.investopedia.com/american-express-blue-business-cash-review-4800836) credit card offers 2% cash back on the first $50,000 spent each calendar year, and there's no annual fee. To beat that card with the Ink Business Premier's annual fee, you'd have to spend at least $39,000 on purchases of $5,000 each year to earn the extra 0.5% back. Alternatively, you'd need to spend more than $69,500 in total each year because the Blue Business Cash reverts to 1% back after you hit the $50,000 limit. Even so, there may be other cards that offer rewards rates that better align with your business expenses and don't carry such a high annual fee. As you consider this and other business credit cards, it's important to consider your company's spending habits and your general preferences to find the best fit. Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Chase has officially made its newest business credit card available to the public. The Chase Ink Business Premier Credit Card was quietly launched in December 2021 to select customers, but now anyone can apply through the credit card issuer's website. The card offers a larger sign-up bonus and better rewards than the other Ink cash-back credit cards, but it also charges a higher annual fee, making it a better option for small businesses with a lot of large expenses. Key Takeaways Chase has officially made the new Ink Business Premier card available to all eligible applicants.The card is designed specifically for small business owners with a lot of large expenses.Despite its higher annual fee, the card doesn't offer the benefits of more valuable travel redemptions and transfer partners that the Ink Business Preferred provides. What to Know About the New Ink Business Premier The Ink Business Premier Credit Card is a small business credit card that packs a big rewards punch. As a new cardholder, you'll earn $1,000 when you spend $10,000 in the first three months from account opening. On an ongoing basis, you'll earn 5% cash back on travel purchases made through Chase Ultimate Rewards, 2.5% back on every purchase of $5,000 or more and 2% back on all other purchases. With that said, the card charges a $195 annual fee, making the card less attractive for small business owners who don't make large purchases frequently. You can redeem your rewards for cash back, gift cards, travel and more, but you won't get 25% more value on travel redemptions or access to transfer partners like you would with the Ink Business Preferred Credit Card. Additionally, the card is a charge card, which means you need to pay your balance in full every month unless you opt for a Chase Flex for Business plan on some of your purchases to pay them off over time. The card also offers: No foreign transaction feesTrip cancellation and interruption insuranceTrip delay reimbursementBaggage delay insurancePrimary auto rental collision damage waiverCell phone protectionPurchase protectionExtended warranty protection Is the New Ink Business Premier a Good Deal? The Ink Business Premier Credit Card is primarily suited for small businesses with a lot of expenses, particularly those that make large purchases of $5,000 on a regular basis. For comparison, the American Express Blue Business Cash credit card offers 2% cash back on the first $50,000 spent each calendar year, and there's no annual fee. To beat that card with the Ink Business Premier's annual fee, you'd have to spend at least $39,000 on purchases of $5,000 each year to earn the extra 0.5% back. Alternatively, you'd need to spend more than $69,500 in total each year because the Blue Business Cash reverts to 1% back after you hit the $50,000 limit. Even so, there may be other cards that offer rewards rates that better align with your business expenses and don't carry such a high annual fee. As you consider this and other business credit cards, it's important to consider your company's spending habits and your general preferences to find the best fit. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp

'Sell in May and Go Away': Definition, Statistics, and Drawbacks

<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-sell-in-may-and-go-away"></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 "Sell in May and Go Away"? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> "Sell in May and go away" is a well known saying in finance. It is based on stocks' historical <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/underperform.asp">underperformance</a> during the six-month period from May to October. </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 historical pattern was popularized by the Stock Trader's Almanac, which found investing in stocks as represented by the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/djia.asp">Dow Jones Industrial Average</a> from November to April and switching into fixed income the other six months would have "produced reliable returns with reduced risk since 1950."<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"> The divergence has remained pronounced in recent years, with the <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 index</a> gaining an average of about 2% from May to October since 1990, compared with an average of approximately 7% from November to April, according to Fidelity Investments.<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_7-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> An academic paper that surveyed stock markets outside U.S. found the same pattern, calling the seasonal divergence trend "remarkably robust."<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> <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>"Sell in May and go away" is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year.</li><li>Since 1990, the S&amp;P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April.</li><li>The pattern did not hold in 2020, and is likely to be outweighed by more pressing considerations in other years.</li><li>Investors could try to capitalize on the pattern by rotating into less economically sensitive stocks from May to October, based on historical data. </li></ul></div></div></div> <span class="heading-toc" id="toc-theories-for-the-seasonal-divergence"></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"> Theories for the Seasonal Divergence </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> Financial markets were once influenced by the seasonal patterns tied to agriculture, but these have likely faded to insignificance given farming's dramatically reduced economic weight. </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"> Seasonality in investment flows may persist as a result of year-end financial industry and business bonuses, with the mid-April U.S. income tax filing deadline possibly contributing. </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"> Whatever fundamental considerations may be in play, the historical pattern is more pronounced as a result of the October stock-market collapses in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stock-market-crash-1987.asp">1987</a> and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp">2008</a>. </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 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 last significant stock-market decline during the period from May to October took place in 2011, with the S&amp;P 500 down 8.1%. the S&amp;P 500 declined 0.3% over the same months in 2015.</p></div></div></div> <span class="heading-toc" id="toc-why-not-sell-in-may-and-go-away"></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"> Why Not Sell in May and Go Away? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_22-0"> The only drawback of historical patterns is that they don't reliably predict the future. That's especially true of well known historical patterns. If enough people were to become convinced the 'Sell in May and Go Away" pattern is here to stay it would, in fact, promptly start to go away. Early-bird sellers would all try to sell in April, and bid against each other to buy the stocks back ahead of the pack in October. </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 seasonal tendency's averages also conceal big fluctuations from year to year, of course. In any given year, the influence of seasonality is swamped by a variety of other, often more pressing considerations. Selling in May would have done anyone following that adage no good in 2020 as the S&amp;P 500 slumped 34% over five weeks in February and March as the COVID-19 pandemic struck, only to return 12.4% from May to October. </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 fact, in the decade through 2020 the unfashionable summer half of the market year averaged a solid if unspectacular return of 3.8%, with no significant decline since 2011, according to LPL Research.<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_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="width: 46px;"></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="2">S&amp;P 500 "Sell in May" Returns (May-October)</th> </tr> <tr> <th>Year</th> <th>S&amp;P 500 "Sell in May" Return</th> </tr> </thead> <tbody data-check="0"> <tr> <td>2011</td> <td>-8.1%</td> </tr> <tr> <td>2012</td> <td>+1.0%</td> </tr> <tr> <td>2013</td> <td>+10.0%</td> </tr> <tr> <td>2014</td> <td>+7.1%</td> </tr> <tr> <td>2015</td> <td>-0.3%</td> </tr> <tr> <td>2016</td> <td>+2.9%</td> </tr> <tr> <td>2017</td> <td>+8.0%</td> </tr> <tr> <td>2018</td> <td>+2.4%</td> </tr> <tr> <td>2019</td> <td>+3.1%</td> </tr> <tr> <td>2020</td> <td>+12.3%</td> </tr> </tbody> </table> <figcaption>Source: LPL Research</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"> "Sell in May" has also been off the mark in early 2022, with the S&amp;P 500 down 8.8% in April and 13.3% since the start of the year. </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"> In summary, while the historical pattern is undeniable, its predictive power is questionable and the opportunity costs incurred potentially significant. </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-alternatives-to-sell-in-may-and-go-away"></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"> Alternatives to 'Sell in May and Go Away' </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Instead of acting on the saying literally, investors who believe the pattern will continue could rotate from the higher-risk market sectors to those that tend to outperform in periods of market weakness. </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 example, a custom index representing the strategy of rotating between healthcare and consumer staples stocks held from May to October and more economically sensitive market sectors from November to April would have significantly outperformed the S&amp;P 500 in both periods between 1990 and 2021, according to Pacer ETFs, sponsor of an exchange-traded fund attempting to execute this seasonal rotation as an investment strategy.<span class="ql-inline-citation" data-cite="9"></span> The Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=szne">SZNE</a>) had about $80 million in assets and was down more than 12% in 2022 as of April 29.<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_38-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> For many retail investors with long-term goals, a <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> strategy—hanging on to equities year-round, year after year, unless there's a change in fundamentals—remains the best course. </p></div>

## What Is "Sell in May and Go Away"? "Sell in May and go away" is a well known saying in finance. It is based on stocks' historical [underperformance](https://www.investopedia.com/terms/u/underperform.asp) during the six-month period from May to October. The historical pattern was popularized by the Stock Trader's Almanac, which found investing in stocks as represented by the [Dow Jones Industrial Average](https://www.investopedia.com/terms/d/djia.asp) from November to April and switching into fixed income the other six months would have "produced reliable returns with reduced risk since 1950." The divergence has remained pronounced in recent years, with the [S&P 500 index](https://www.investopedia.com/terms/s/sp500.asp) gaining an average of about 2% from May to October since 1990, compared with an average of approximately 7% from November to April, according to Fidelity Investments. An academic paper that surveyed stock markets outside U.S. found the same pattern, calling the seasonal divergence trend "remarkably robust." ### Key Takeaways * "Sell in May and go away" is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year. * Since 1990, the S&P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April. * The pattern did not hold in 2020, and is likely to be outweighed by more pressing considerations in other years. * Investors could try to capitalize on the pattern by rotating into less economically sensitive stocks from May to October, based on historical data. ## Theories for the Seasonal Divergence Financial markets were once influenced by the seasonal patterns tied to agriculture, but these have likely faded to insignificance given farming's dramatically reduced economic weight. Seasonality in investment flows may persist as a result of year-end financial industry and business bonuses, with the mid-April U.S. income tax filing deadline possibly contributing. Whatever fundamental considerations may be in play, the historical pattern is more pronounced as a result of the October stock-market collapses in [1987](https://www.investopedia.com/terms/s/stock-market-crash-1987.asp) and [2008](https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp). ### The last significant stock-market decline during the period from May to October took place in 2011, with the S&P 500 down 8.1%. the S&P 500 declined 0.3% over the same months in 2015. ## Why Not Sell in May and Go Away? The only drawback of historical patterns is that they don't reliably predict the future. That's especially true of well known historical patterns. If enough people were to become convinced the 'Sell in May and Go Away" pattern is here to stay it would, in fact, promptly start to go away. Early-bird sellers would all try to sell in April, and bid against each other to buy the stocks back ahead of the pack in October. The seasonal tendency's averages also conceal big fluctuations from year to year, of course. In any given year, the influence of seasonality is swamped by a variety of other, often more pressing considerations. Selling in May would have done anyone following that adage no good in 2020 as the S&P 500 slumped 34% over five weeks in February and March as the COVID-19 pandemic struck, only to return 12.4% from May to October. In fact, in the decade through 2020 the unfashionable summer half of the market year averaged a solid if unspectacular return of 3.8%, with no significant decline since 2011, according to LPL Research. | S&P 500 "Sell in May" Returns (May-October) | | | --- | --- | | Year | S&P 500 "Sell in May" Return | | 2011 | -8.1% | | 2012 | +1.0% | | 2013 | +10.0% | | 2014 | +7.1% | | 2015 | -0.3% | | 2016 | +2.9% | | 2017 | +8.0% | | 2018 | +2.4% | | 2019 | +3.1% | | 2020 | +12.3% | Source: LPL Research "Sell in May" has also been off the mark in early 2022, with the S&P 500 down 8.8% in April and 13.3% since the start of the year. In summary, while the historical pattern is undeniable, its predictive power is questionable and the opportunity costs incurred potentially significant. ## Alternatives to 'Sell in May and Go Away' Instead of acting on the saying literally, investors who believe the pattern will continue could rotate from the higher-risk market sectors to those that tend to outperform in periods of market weakness. For example, a custom index representing the strategy of rotating between healthcare and consumer staples stocks held from May to October and more economically sensitive market sectors from November to April would have significantly outperformed the S&P 500 in both periods between 1990 and 2021, according to Pacer ETFs, sponsor of an exchange-traded fund attempting to execute this seasonal rotation as an investment strategy. The Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF ([SZNE](https://www.investopedia.com/markets/quote?tvwidgetsymbol=szne)) had about $80 million in assets and was down more than 12% in 2022 as of April 29. For many retail investors with long-term goals, a [buy-and-hold](https://www.investopedia.com/terms/b/buyandhold.asp) strategy—hanging on to equities year-round, year after year, unless there's a change in fundamentals—remains the best course.

What Is "Sell in May and Go Away"? "Sell in May and go away" is a well known saying in finance. It is based on stocks' historical underperformance during the six-month period from May to October. The historical pattern was popularized by the Stock Trader's Almanac, which found investing in stocks as represented by the Dow Jones Industrial Average from November to April and switching into fixed income the other six months would have "produced reliable returns with reduced risk since 1950." The divergence has remained pronounced in recent years, with the S&P 500 index gaining an average of about 2% from May to October since 1990, compared with an average of approximately 7% from November to April, according to Fidelity Investments. An academic paper that surveyed stock markets outside U.S. found the same pattern, calling the seasonal divergence trend "remarkably robust." Key Takeaways "Sell in May and go away" is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year.Since 1990, the S&P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April.The pattern did not hold in 2020, and is likely to be outweighed by more pressing considerations in other years.Investors could try to capitalize on the pattern by rotating into less economically sensitive stocks from May to October, based on historical data. Theories for the Seasonal Divergence Financial markets were once influenced by the seasonal patterns tied to agriculture, but these have likely faded to insignificance given farming's dramatically reduced economic weight. Seasonality in investment flows may persist as a result of year-end financial industry and business bonuses, with the mid-April U.S. income tax filing deadline possibly contributing. Whatever fundamental considerations may be in play, the historical pattern is more pronounced as a result of the October stock-market collapses in 1987 and 2008. The last significant stock-market decline during the period from May to October took place in 2011, with the S&P 500 down 8.1%. the S&P 500 declined 0.3% over the same months in 2015. Why Not Sell in May and Go Away? The only drawback of historical patterns is that they don't reliably predict the future. That's especially true of well known historical patterns. If enough people were to become convinced the 'Sell in May and Go Away" pattern is here to stay it would, in fact, promptly start to go away. Early-bird sellers would all try to sell in April, and bid against each other to buy the stocks back ahead of the pack in October. The seasonal tendency's averages also conceal big fluctuations from year to year, of course. In any given year, the influence of seasonality is swamped by a variety of other, often more pressing considerations. Selling in May would have done anyone following that adage no good in 2020 as the S&P 500 slumped 34% over five weeks in February and March as the COVID-19 pandemic struck, only to return 12.4% from May to October. In fact, in the decade through 2020 the unfashionable summer half of the market year averaged a solid if unspectacular return of 3.8%, with no significant decline since 2011, according to LPL Research. S&P 500 "Sell in May" Returns (May-October) Year S&P 500 "Sell in May" Return 2011 -8.1% 2012 +1.0% 2013 +10.0% 2014 +7.1% 2015 -0.3% 2016 +2.9% 2017 +8.0% 2018 +2.4% 2019 +3.1% 2020 +12.3% Source: LPL Research "Sell in May" has also been off the mark in early 2022, with the S&P 500 down 8.8% in April and 13.3% since the start of the year. In summary, while the historical pattern is undeniable, its predictive power is questionable and the opportunity costs incurred potentially significant. Alternatives to 'Sell in May and Go Away' Instead of acting on the saying literally, investors who believe the pattern will continue could rotate from the higher-risk market sectors to those that tend to outperform in periods of market weakness. For example, a custom index representing the strategy of rotating between healthcare and consumer staples stocks held from May to October and more economically sensitive market sectors from November to April would have significantly outperformed the S&P 500 in both periods between 1990 and 2021, according to Pacer ETFs, sponsor of an exchange-traded fund attempting to execute this seasonal rotation as an investment strategy. The Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (SZNE) had about $80 million in assets and was down more than 12% in 2022 as of April 29. For many retail investors with long-term goals, a buy-and-hold strategy—hanging on to equities year-round, year after year, unless there's a change in fundamentals—remains the best course.

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

Excise Tax: What It Is and How It Works, With 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-an-excise-tax"></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 Excise Tax? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> An excise tax is a legislated tax on specific goods or services at the time they are purchased. They're intranational taxes imposed within a government <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/infrastructure.asp">infrastructure</a> rather than international taxes imposed across country borders.<span class="ql-inline-citation" data-cite="18"></span> A federal excise tax is usually collected from motor fuel sales, airline tickets, tobacco, and other goods and services.<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>Excise taxes are taxes levied on specific goods or services like fuel, tobacco, and alcohol.</li><li>They are primarily taxes that must be paid by businesses, usually increasing prices for consumers indirectly.</li><li>Excise taxes can be ad valorem (paid by percentage) or specific (cost charged by unit).</li><li>Sin taxes are a form of excise tax on goods that have a high social cost, such as alcohol and tobacco.</li><li>Some excise taxes can be required directly from the consumer like property taxes and excise tax penalties on certain retirement account activities.</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="Excise Tax" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/VUOooSP_YQAw0q7-6Ir9vYmdiRU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/VUOooSP_YQAw0q7-6Ir9vYmdiRU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.jpg" data-srcset="https://www.investopedia.com/thmb/423wkTX0_4osMt0iCm5w_XB5Zp4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Excise Tax" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/VUOooSP_YQAw0q7-6Ir9vYmdiRU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.jpg" srcset="https://www.investopedia.com/thmb/423wkTX0_4osMt0iCm5w_XB5Zp4=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.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 / Crea Taylor</p></span> </figcaption></figure> <span class="heading-toc" id="toc-how-an-excise-tax-works"></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"> How an Excise Tax Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_8-0"> Excise taxes are primarily for businesses. Many of them are paid by merchants who then pass the tax on to consumers through higher prices. Merchants pay excise taxes to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/wholesaling.asp">wholesalers</a> and consider them in product pricing which increases the retail price overall.<span class="ql-inline-citation" data-cite="2"></span> As such, consumers may or may not see the cost of most excise taxes directly. But there are some excise taxes that are paid directly by consumers, including <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/propertytax.asp">property taxes</a> and levies on certain retirement account activities. </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"> Federal, state, and local governments have the authority to institute excise taxes. While income tax is the primary <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/revenue.asp">revenue</a> generator for federal and state governments, excise tax revenue also makes up a small portion of total revenue.<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_11-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Excise taxes are primarily business taxes. They are separate from other taxes that corporations must pay, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/incometax.asp">income taxes</a>. Businesses charging and receiving excise taxes are required to file Form 720 Federal Excise Tax Return on a quarterly basis and include quarterly payments. Business collectors of excise taxes must also maintain their obligations for passing on excise taxes to state and local governments as required. Merchants may be allowed <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/tax-deductions-and-credits-4689689">deductions or credits</a> on their annual income tax returns related to excise tax payments.<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_13-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Excise taxes can fall into one of two categories: </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><strong>Ad Valorem Taxes</strong>: Excise taxes that are fixed percentage rates assessed on particular <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumer-goods.asp">goods</a> or services</li> <li><strong>Specific Taxes</strong>: Excise taxes of a fixed dollar amount applied to certain purchases<span class="ql-inline-citation" data-cite="18"></span></li> </ul> <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, governments levy excise taxes on goods that have a high social cost, such as cigarettes and alcohol. These types of excise these taxes are sometimes called <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sin_tax.asp">sin taxes</a> because the good being taxed has a reputation for being "sinful" or with negative consequences associated with it.<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_19-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_20-0"><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_21-0"><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 largest revenue-producing excise taxes in the U.S. come from motor fuel, airline tickets, tobacco, alcohol, health-related goods, and health-related services.<span class="ql-inline-citation" data-cite="2"></span></p></div></div></div> <span class="heading-toc" id="toc-ad-valorem-excise-taxes"></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"> Ad Valorem Excise Taxes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/advaloremtax.asp">Ad valorem</a> is a Latin phrase that literally means according to value.<span class="ql-inline-citation" data-cite="19"></span> An ad valorem tax is charged on a percentage basis. This results in an excise tax that is based on the value of the product or service. For example, the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a> levies a 10% excise tax on indoor tanning services.<span class="ql-inline-citation" data-cite="20"></span> This means that if a tanning salon charges $100 for a tanning session, it must pay the IRS $10 in excise tax. </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"> Other types of ad valorem excise taxes include firearms (10%), airline tickets (7.5%), and heavy trucks (12%).<span class="ql-inline-citation" data-cite="7"></span> Property taxes can also be considered a type of ad valorem excise tax. </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-specific-excise-taxes"></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"> Specific Excise Taxes </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Specific excise taxes are a set tax or fee added to a certain product on a per-unit basis. Some examples of federal, specific excise taxes as of Oct. 2023 include <a class="pseudoStyle" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets/042215/how-altria-mo-makes-its-money.asp">small cigarettes</a> ($1.01 per pack of 20), pipe tobacco ($2.83 per pound), beer ($3.50 for the first 60,000 barrels), cruise ship passengers ($3 per passenger), and gasoline ($0.183 per gallon).<span class="ql-inline-citation" data-cite="21"></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_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Sin taxes on targeted goods like beer and alcohol will often be taxed at the federal level and also taxed again by the state, making the cost of these items higher. For example, New York has a specific excise tax of $4.35 per cigarette pack of 20.<span class="ql-inline-citation" data-cite="8"></span> Combining this with the federal tax of $1.01 makes the excise taxes alone $5.36. These taxes have a considerable impact on the consumer. </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-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_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>The IRS provides guidance on excise taxes in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.irs.gov/forms-pubs/about-publication-510">Publication 510</a>.</p></div></div></div> <span class="heading-toc" id="toc-excise-taxes-on-retirement-accounts"></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"> Excise Taxes on Retirement Accounts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Excise taxes are also charged on some retirement account activities. Many people are familiar with these taxes as penalties. A 6% excise tax is applied to excess <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> contributions that are not corrected by the applicable deadline. A 10% excise tax penalty applies to distributions from certain IRAs and other qualified plans when an investor makes withdrawals before age 59½.<span class="ql-inline-citation" data-cite="11"></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_36-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> Also, a 25% excise tax penalty is charged when investors do not take the mandatory <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/requiredminimumdistribution.asp">required minimum distributions (RMDs)</a> from certain retirement accounts, though this tax is reduced to 10% if the missed distribution is taken before the end of the "correction window." The correction window starts on the date the penalty is imposed, usually January 1st after the year you missed the distribution.<span class="ql-inline-citation" data-cite="13"></span> The window ends on the earliest of: </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_39-0"> <li>The date the penalty is assessed by the IRS</li><li>The date the IRS sends a notice of deficiency<br/></li><li>The last day of the second taxable year after the penalty is imposed<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_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-note" 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 with-title" id="mntl-sc-block-callout-heading_4-0">Note</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>As of January 1, 2023, RMDs are mandatory starting at age 73 for owners of traditional IRA accounts and several other tax-deferred retirement savings plans.<span class="ql-inline-citation" data-cite="14"></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-who-pays-excise-taxes"></span> <h2 class="mntl-sc-block-questionandanswer__question">Who Pays Excise Taxes?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Excise taxes are imposed on certain goods and services, such as gasoline and alcohol. These taxes are paid directly by businesses. This tax is often passed on to the consumer, who may or may not be aware that they're paying it to the merchant because it's included in the price. This is common in the fuel industry, where companies charge excise taxes through the price you pay at the pump.</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-what-is-a-federal-excise-tax"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a Federal Excise Tax?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>A federal excise tax is charged on certain goods and services by the federal government. It may or may not be included by the merchant into the price. This means that consumers don't pay these taxes directly as they would any other type of tax, such as income taxes. Federal excise taxes are commonly imposed on things like fuel, airline tickets, tobacco, and alcohol.</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-how-is-an-excise-tax-different-from-a-sales-tax"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Is an Excise Tax Different From a Sales Tax?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Excise and sales taxes are two different types of taxes. An excise tax is imposed on specific goods and is generally the responsibility of the merchant to pay to the government. The merchant, in turn, may or may not pass the tax on to the consumer by adding it into the price. A sales tax, on the other hand, is charged on almost everything and is collected from the consumer by the merchant who passes it on to the government. The sales tax is a percentage of the price of the good or service.</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"> Excise taxes are assessed by federal and state governments on certain goods and services. They are paid by the merchants that sell them. Excise taxes can be a flat tax amount, known as a specific excise tax, or a percentage of the cost of the good, known as an ad valorem excise tax. They may also be limited only to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/102015/taxes-oregon-small-business-basics.asp">goods sold within the state</a> of the taxing authority. </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"> Businesses often add the cost of an excise tax directly onto the price of the taxed good, so the tax is passed onto the customer. Customers may or may not know they are paying the cost of the excise tax on top of the price of the good or service. Some companies are transparent about excise taxes, though, like fuel companies. Next time you go to fill up your gas tank, take a look at the pump. The company may break down how much of the price at the pump goes toward the fuel itself versus how much you pay in taxes.<br/> </p></div>

## What Is an Excise Tax? An excise tax is a legislated tax on specific goods or services at the time they are purchased. They're intranational taxes imposed within a government [infrastructure](https://www.investopedia.com/terms/i/infrastructure.asp) rather than international taxes imposed across country borders. A federal excise tax is usually collected from motor fuel sales, airline tickets, tobacco, and other goods and services. ### Key Takeaways * Excise taxes are taxes levied on specific goods or services like fuel, tobacco, and alcohol. * They are primarily taxes that must be paid by businesses, usually increasing prices for consumers indirectly. * Excise taxes can be ad valorem (paid by percentage) or specific (cost charged by unit). * Sin taxes are a form of excise tax on goods that have a high social cost, such as alcohol and tobacco. * Some excise taxes can be required directly from the consumer like property taxes and excise tax penalties on certain retirement account activities. ![Excise Tax]() :max_bytes(150000):strip_icc()/Term-Definitions_ExciseTax_V1_CT-b9400e392640438cacee433b84fb89f8.jpg) Investopedia / Crea Taylor ## How an Excise Tax Works Excise taxes are primarily for businesses. Many of them are paid by merchants who then pass the tax on to consumers through higher prices. Merchants pay excise taxes to [wholesalers](https://www.investopedia.com/terms/w/wholesaling.asp) and consider them in product pricing which increases the retail price overall. As such, consumers may or may not see the cost of most excise taxes directly. But there are some excise taxes that are paid directly by consumers, including [property taxes](https://www.investopedia.com/terms/p/propertytax.asp) and levies on certain retirement account activities. Federal, state, and local governments have the authority to institute excise taxes. While income tax is the primary [revenue](https://www.investopedia.com/terms/r/revenue.asp) generator for federal and state governments, excise tax revenue also makes up a small portion of total revenue. Excise taxes are primarily business taxes. They are separate from other taxes that corporations must pay, such as [income taxes](https://www.investopedia.com/terms/i/incometax.asp). Businesses charging and receiving excise taxes are required to file Form 720 Federal Excise Tax Return on a quarterly basis and include quarterly payments. Business collectors of excise taxes must also maintain their obligations for passing on excise taxes to state and local governments as required. Merchants may be allowed [deductions or credits](https://www.investopedia.com/tax-deductions-and-credits-4689689) on their annual income tax returns related to excise tax payments. Excise taxes can fall into one of two categories: * **Ad Valorem Taxes**: Excise taxes that are fixed percentage rates assessed on particular [goods](https://www.investopedia.com/terms/c/consumer-goods.asp) or services * **Specific Taxes**: Excise taxes of a fixed dollar amount applied to certain purchases In some cases, governments levy excise taxes on goods that have a high social cost, such as cigarettes and alcohol. These types of excise these taxes are sometimes called [sin taxes](https://www.investopedia.com/terms/s/sin_tax.asp) because the good being taxed has a reputation for being "sinful" or with negative consequences associated with it. ### The largest revenue-producing excise taxes in the U.S. come from motor fuel, airline tickets, tobacco, alcohol, health-related goods, and health-related services. ## Ad Valorem Excise Taxes [Ad valorem](https://www.investopedia.com/terms/a/advaloremtax.asp) is a Latin phrase that literally means according to value. An ad valorem tax is charged on a percentage basis. This results in an excise tax that is based on the value of the product or service. For example, the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) levies a 10% excise tax on indoor tanning services. This means that if a tanning salon charges $100 for a tanning session, it must pay the IRS $10 in excise tax. Other types of ad valorem excise taxes include firearms (10%), airline tickets (7.5%), and heavy trucks (12%). Property taxes can also be considered a type of ad valorem excise tax. ## Specific Excise Taxes Specific excise taxes are a set tax or fee added to a certain product on a per-unit basis. Some examples of federal, specific excise taxes as of Oct. 2023 include [small cigarettes](https://www.investopedia.com/articles/markets/042215/how-altria-mo-makes-its-money.asp) ($1.01 per pack of 20), pipe tobacco ($2.83 per pound), beer ($3.50 for the first 60,000 barrels), cruise ship passengers ($3 per passenger), and gasoline ($0.183 per gallon). Sin taxes on targeted goods like beer and alcohol will often be taxed at the federal level and also taxed again by the state, making the cost of these items higher. For example, New York has a specific excise tax of $4.35 per cigarette pack of 20. Combining this with the federal tax of $1.01 makes the excise taxes alone $5.36. These taxes have a considerable impact on the consumer. ### The IRS provides guidance on excise taxes in [Publication 510](https://www.irs.gov/forms-pubs/about-publication-510). ## Excise Taxes on Retirement Accounts Excise taxes are also charged on some retirement account activities. Many people are familiar with these taxes as penalties. A 6% excise tax is applied to excess [individual retirement account (IRA)](https://www.investopedia.com/terms/i/ira.asp) contributions that are not corrected by the applicable deadline. A 10% excise tax penalty applies to distributions from certain IRAs and other qualified plans when an investor makes withdrawals before age 59½. Also, a 25% excise tax penalty is charged when investors do not take the mandatory [required minimum distributions (RMDs)](https://www.investopedia.com/terms/r/requiredminimumdistribution.asp) from certain retirement accounts, though this tax is reduced to 10% if the missed distribution is taken before the end of the "correction window." The correction window starts on the date the penalty is imposed, usually January 1st after the year you missed the distribution. The window ends on the earliest of: * The date the penalty is assessed by the IRS * The date the IRS sends a notice of deficiency * The last day of the second taxable year after the penalty is imposed ### Note As of January 1, 2023, RMDs are mandatory starting at age 73 for owners of traditional IRA accounts and several other tax-deferred retirement savings plans. ## Who Pays Excise Taxes? Excise taxes are imposed on certain goods and services, such as gasoline and alcohol. These taxes are paid directly by businesses. This tax is often passed on to the consumer, who may or may not be aware that they're paying it to the merchant because it's included in the price. This is common in the fuel industry, where companies charge excise taxes through the price you pay at the pump. ## What Is a Federal Excise Tax? A federal excise tax is charged on certain goods and services by the federal government. It may or may not be included by the merchant into the price. This means that consumers don't pay these taxes directly as they would any other type of tax, such as income taxes. Federal excise taxes are commonly imposed on things like fuel, airline tickets, tobacco, and alcohol. ## How Is an Excise Tax Different From a Sales Tax? Excise and sales taxes are two different types of taxes. An excise tax is imposed on specific goods and is generally the responsibility of the merchant to pay to the government. The merchant, in turn, may or may not pass the tax on to the consumer by adding it into the price. A sales tax, on the other hand, is charged on almost everything and is collected from the consumer by the merchant who passes it on to the government. The sales tax is a percentage of the price of the good or service. ## The Bottom Line Excise taxes are assessed by federal and state governments on certain goods and services. They are paid by the merchants that sell them. Excise taxes can be a flat tax amount, known as a specific excise tax, or a percentage of the cost of the good, known as an ad valorem excise tax. They may also be limited only to [goods sold within the state](https://www.investopedia.com/articles/personal-finance/102015/taxes-oregon-small-business-basics.asp) of the taxing authority. Businesses often add the cost of an excise tax directly onto the price of the taxed good, so the tax is passed onto the customer. Customers may or may not know they are paying the cost of the excise tax on top of the price of the good or service. Some companies are transparent about excise taxes, though, like fuel companies. Next time you go to fill up your gas tank, take a look at the pump. The company may break down how much of the price at the pump goes toward the fuel itself versus how much you pay in taxes.

What Is an Excise Tax? An excise tax is a legislated tax on specific goods or services at the time they are purchased. They're intranational taxes imposed within a government infrastructure rather than international taxes imposed across country borders. A federal excise tax is usually collected from motor fuel sales, airline tickets, tobacco, and other goods and services. Key Takeaways Excise taxes are taxes levied on specific goods or services like fuel, tobacco, and alcohol.They are primarily taxes that must be paid by businesses, usually increasing prices for consumers indirectly.Excise taxes can be ad valorem (paid by percentage) or specific (cost charged by unit).Sin taxes are a form of excise tax on goods that have a high social cost, such as alcohol and tobacco.Some excise taxes can be required directly from the consumer like property taxes and excise tax penalties on certain retirement account activities. Investopedia / Crea Taylor How an Excise Tax Works Excise taxes are primarily for businesses. Many of them are paid by merchants who then pass the tax on to consumers through higher prices. Merchants pay excise taxes to wholesalers and consider them in product pricing which increases the retail price overall. As such, consumers may or may not see the cost of most excise taxes directly. But there are some excise taxes that are paid directly by consumers, including property taxes and levies on certain retirement account activities. Federal, state, and local governments have the authority to institute excise taxes. While income tax is the primary revenue generator for federal and state governments, excise tax revenue also makes up a small portion of total revenue. Excise taxes are primarily business taxes. They are separate from other taxes that corporations must pay, such as income taxes. Businesses charging and receiving excise taxes are required to file Form 720 Federal Excise Tax Return on a quarterly basis and include quarterly payments. Business collectors of excise taxes must also maintain their obligations for passing on excise taxes to state and local governments as required. Merchants may be allowed deductions or credits on their annual income tax returns related to excise tax payments. Excise taxes can fall into one of two categories: Ad Valorem Taxes: Excise taxes that are fixed percentage rates assessed on particular goods or services Specific Taxes: Excise taxes of a fixed dollar amount applied to certain purchases In some cases, governments levy excise taxes on goods that have a high social cost, such as cigarettes and alcohol. These types of excise these taxes are sometimes called sin taxes because the good being taxed has a reputation for being "sinful" or with negative consequences associated with it. The largest revenue-producing excise taxes in the U.S. come from motor fuel, airline tickets, tobacco, alcohol, health-related goods, and health-related services. Ad Valorem Excise Taxes Ad valorem is a Latin phrase that literally means according to value. An ad valorem tax is charged on a percentage basis. This results in an excise tax that is based on the value of the product or service. For example, the Internal Revenue Service (IRS) levies a 10% excise tax on indoor tanning services. This means that if a tanning salon charges $100 for a tanning session, it must pay the IRS $10 in excise tax. Other types of ad valorem excise taxes include firearms (10%), airline tickets (7.5%), and heavy trucks (12%). Property taxes can also be considered a type of ad valorem excise tax. Specific Excise Taxes Specific excise taxes are a set tax or fee added to a certain product on a per-unit basis. Some examples of federal, specific excise taxes as of Oct. 2023 include small cigarettes ($1.01 per pack of 20), pipe tobacco ($2.83 per pound), beer ($3.50 for the first 60,000 barrels), cruise ship passengers ($3 per passenger), and gasoline ($0.183 per gallon). Sin taxes on targeted goods like beer and alcohol will often be taxed at the federal level and also taxed again by the state, making the cost of these items higher. For example, New York has a specific excise tax of $4.35 per cigarette pack of 20. Combining this with the federal tax of $1.01 makes the excise taxes alone $5.36. These taxes have a considerable impact on the consumer. The IRS provides guidance on excise taxes in Publication 510. Excise Taxes on Retirement Accounts Excise taxes are also charged on some retirement account activities. Many people are familiar with these taxes as penalties. A 6% excise tax is applied to excess individual retirement account (IRA) contributions that are not corrected by the applicable deadline. A 10% excise tax penalty applies to distributions from certain IRAs and other qualified plans when an investor makes withdrawals before age 59½. Also, a 25% excise tax penalty is charged when investors do not take the mandatory required minimum distributions (RMDs) from certain retirement accounts, though this tax is reduced to 10% if the missed distribution is taken before the end of the "correction window." The correction window starts on the date the penalty is imposed, usually January 1st after the year you missed the distribution. The window ends on the earliest of: The date the penalty is assessed by the IRSThe date the IRS sends a notice of deficiencyThe last day of the second taxable year after the penalty is imposed Note As of January 1, 2023, RMDs are mandatory starting at age 73 for owners of traditional IRA accounts and several other tax-deferred retirement savings plans. Who Pays Excise Taxes? Excise taxes are imposed on certain goods and services, such as gasoline and alcohol. These taxes are paid directly by businesses. This tax is often passed on to the consumer, who may or may not be aware that they're paying it to the merchant because it's included in the price. This is common in the fuel industry, where companies charge excise taxes through the price you pay at the pump. What Is a Federal Excise Tax? A federal excise tax is charged on certain goods and services by the federal government. It may or may not be included by the merchant into the price. This means that consumers don't pay these taxes directly as they would any other type of tax, such as income taxes. Federal excise taxes are commonly imposed on things like fuel, airline tickets, tobacco, and alcohol. How Is an Excise Tax Different From a Sales Tax? Excise and sales taxes are two different types of taxes. An excise tax is imposed on specific goods and is generally the responsibility of the merchant to pay to the government. The merchant, in turn, may or may not pass the tax on to the consumer by adding it into the price. A sales tax, on the other hand, is charged on almost everything and is collected from the consumer by the merchant who passes it on to the government. The sales tax is a percentage of the price of the good or service. The Bottom Line Excise taxes are assessed by federal and state governments on certain goods and services. They are paid by the merchants that sell them. Excise taxes can be a flat tax amount, known as a specific excise tax, or a percentage of the cost of the good, known as an ad valorem excise tax. They may also be limited only to goods sold within the state of the taxing authority. Businesses often add the cost of an excise tax directly onto the price of the taxed good, so the tax is passed onto the customer. Customers may or may not know they are paying the cost of the excise tax on top of the price of the good or service. Some companies are transparent about excise taxes, though, like fuel companies. Next time you go to fill up your gas tank, take a look at the pump. The company may break down how much of the price at the pump goes toward the fuel itself versus how much you pay in taxes.

https://www.investopedia.com/30-day-mortgage-rates-fall-for-fifth-day-8607139

30-Day Mortgage Rates Fall for a Fifth Day

<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 new purchase mortgages fell for a fifth consecutive day Friday, sinking the flagship average to 7.11%, its lowest point in five weeks. Rates dipped for most other new purchase and refi loans as well. </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"> Since 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're seeking. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_4-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_5-0"> <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 Averages of Lenders' Best Rates</th> </tr> <tr> <th><b>Loan Type</b></th> <th><b>New Purchase</b></th> <th><b>Refinance</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.11%</td> <td>7.44%</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.04%</td> <td>7.54%</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.70%</td> <td>6.70%</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.47%</td> <td>6.70%</td> </tr> <tr> <td>5/6 ARM</td> <td>7.61%</td> <td>7.71%</td> </tr> </tbody> </table> <figcaption>National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points.</figcaption> </div></figure> <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 mntl-sc-block-tool mntl-block mntl-sc-block--credible-rate-table--mortgage" id="mntl-sc-block_7-0"><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_8-0"></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_9-0"> <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_10-0"> Rates on 30-year new purchase mortgages have come down considerably since shooting up in mid-February to 7.48%. With declines every day last week—including 3 basis points lost on Friday—the 30-year average is down to 7.11%. That's its lowest mark since Feb. 2. </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"> Given that 30-year rates sank into 6% territory at the start of February, the current average is still mildly elevated. But the recent trajectory has been downward. Also, rates are notably cheaper than October, when the 30-year average notched a historic 23-year peak of 8.45%. </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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_14-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/kN4JJ/1/" frameborder="0" id="mntl-sc-block-iframe__uri_1-0" title="History of 30y average since Jun 2021"></iframe></div> <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 mntl-sc-block-featuredlink mntl-block related-link" data-tracking-container="true" id="mntl-sc-block_17-0"><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_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Rates on 15-year new purchase loans dropped a bit more dramatically Friday, subtracting 8 basis points, for a four-day fall of 30 basis points. Now down to 6.47%, the current 15-year average is at its cheapest level since Feb. 7, but is still pricier than the seven-month low of 6.10% we saw just before the new year. Last October, however, 15-year rates reached as high as 7.59%–a peak since 2000. </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"> After recently to a three-month-high of 6.95%, the jumbo 30-year average is down to 6.70%, a 3-week low that held steady for a second day Friday. Though daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached in October was the most expensive jumbo 30-year average in more than 20 years. </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"> Almost every non-jumbo average moved downward Friday. The biggest loser was FHA 30-year loans, which gave up 17 basis points. The only new purchase average to climb Friday was FHA 15-year loans, which tacked on 5 basis points. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_24-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_25-0"> <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 Averages of Lenders' Best Rates - New Purchase</th> </tr> <tr> <th>Loan Type</th> <th><b>New Purchase Rates</b></th> <th><b>Daily Change</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.11%</td> <td>-0.03</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.04%</td> <td>-0.17</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>6.81%</td> <td>-0.09</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.70%</td> <td>No Change</td> </tr> <tr> <td>20-Year Fixed</td> <td>6.88%</td> <td>-0.05</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.47%</td> <td>-0.08</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>6.83%</td> <td>+0.05</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.66%</td> <td>No Change</td> </tr> <tr> <td>10-Year Fixed</td> <td>6.39%</td> <td>-0.05</td> </tr> <tr> <td>10/6 ARM</td> <td>7.37%</td> <td>-0.06</td> </tr> <tr> <td>7/6 ARM</td> <td>7.35%</td> <td>-0.09</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>6.33%</td> <td>-0.12</td> </tr> <tr> <td>5/6 ARM</td> <td>7.61%</td> <td>-0.05</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>6.43%</td> <td>No Change</td> </tr> </tbody> </table> </div></figure> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_27-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/XTSEI/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_28-0"></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_29-0"> <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_30-0"> Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates, and last week's reading subtracted 6 basis points to fall to 6.88%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its most expensive level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January.<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_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a <em>weekly</em> average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/discountpoints.asp">discount points</a>, while Investopedia’s averages only include zero-point loans. </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-todays-mortgage-rate-averages-refinancing"></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"> Today's Mortgage Rate Averages: Refinancing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Refinancing averages also mostly decreased Friday, though the 30-year refi average dipped a modest 2 basis points. That leaves the gap between 30-year new purchase and refi rates at 33 basis points. </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"> Rates on 15-year refi loans meanwhile fell 5 basis points, while the jumbo 30-year refi average was flat. The refi averages showing the most significant change were declines of 12 basis points for both VA 30-year and jumbo 7/6 adjustable-rate refi loans, while FHA 15-year loans inched up 5 basis points. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_38-0"></div> <figure class="comp mntl-sc-block finance-sc-block-table mntl-sc-block-table js-table-scroll" id="mntl-sc-block_39-0"> <div class="mntl-sc-block-table__table-wrapper"> <table class="mntl-sc-block-table__table"> <colgroup span="1" style=""></colgroup> <colgroup span="1" style="width: 157px;"></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">National Averages of Lenders' Best Rates - Refinance</th> </tr> <tr> <th>Loan Type</th> <th><b>Refinance Rates</b></th> <th>Daily Change</th> </tr> </thead> <tbody data-check="0"> <tr> <td>30-Year Fixed</td> <td>7.44%</td> <td>-0.02</td> </tr> <tr> <td>FHA 30-Year Fixed</td> <td>7.54%</td> <td>-0.07</td> </tr> <tr> <td>VA 30-Year Fixed</td> <td>7.43%</td> <td>-0.12</td> </tr> <tr> <td>Jumbo 30-Year Fixed</td> <td>6.70%</td> <td>No Change</td> </tr> <tr> <td>20-Year Fixed</td> <td>7.16%</td> <td>-0.07</td> </tr> <tr> <td>15-Year Fixed</td> <td>6.70%</td> <td>-0.05</td> </tr> <tr> <td>FHA 15-Year Fixed</td> <td>6.95%</td> <td>+0.05</td> </tr> <tr> <td>Jumbo 15-Year Fixed</td> <td>6.66%</td> <td>No Change</td> </tr> <tr> <td>10-Year Fixed</td> <td>6.62%</td> <td>-0.06</td> </tr> <tr> <td>10/6 ARM</td> <td>7.62%</td> <td>-0.04</td> </tr> <tr> <td>7/6 ARM</td> <td>7.71%</td> <td>+0.02</td> </tr> <tr> <td>Jumbo 7/6 ARM</td> <td>6.43%</td> <td>-0.12</td> </tr> <tr> <td>5/6 ARM</td> <td>7.71%</td> <td>-0.01</td> </tr> <tr> <td>Jumbo 5/6 ARM</td> <td>6.43%</td> <td>No Change</td> </tr> </tbody> </table> </div></figure> <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"> 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_42-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_43-0"><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_44-0"><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>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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than 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_45-0"><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_46-0"></div> <span class="heading-toc" id="toc-lowest-mortgage-rates-by-state"></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"> Lowest Mortgage Rates by State </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> 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_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> The states with the cheapest 30-year new purchase rates were Mississippi, Vermont, Louisiana, Iowa, and Rhode Island, while the states with the most expensive rates were Minnesota, Montana, California, Oregon, Illinois, and New Hampshire. </p> <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-iframe mntl-sc-block-iframe mntl-block" id="mntl-sc-block_52-0"><iframe allow="encrypted-media 'src'" allowfullscreen="false" class="comp mntl-sc-block-iframe__uri mntl-block lazyload" data-src="https://datawrapper.dwcdn.net/S4lTT/1/" frameborder="0" id="mntl-sc-block-iframe__uri_3-0" title="State-by-state average minimum rates"></iframe></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-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_54-0"> <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_55-0"> 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_56-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_57-0"> <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_58-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_59-0"> 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_60-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_61-0"> 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_62-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_63-0"> 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_64-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_65-0"> 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_66-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_67-0"> 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_68-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_69-0"> The Fed has opted to hold rates steady at its last four meetings, the last of which concluded Jan. 31. Though the central bank's statement signaled that we have almost certainly reached the end of Fed rate hikes in this campaign, Fed Chair <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/jerome-powell-5210572">Jerome Powell</a> stated that inflation is still too high, and they will therefore proceed cautiously on deciding <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/fed-interest-rate-decision-january-2024-8553695">when to make the first rate cut</a>. Specifically, he indicated it's unlikely they will be ready for any rate reduction by the time of their next meeting, which is scheduled for March 19–20. </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"> After its December meeting, the Fed released quarterly data that showed almost 80% of Fed members expect there to be two to four rate cuts in 2024, with the median expectation being three rate decreases totaling 0.75%.<span class="ql-inline-citation" data-cite="5"></span> But when in 2024 these will begin—and ultimately how many are implemented this year—is an open question at this time. </p> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_72-0"></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_73-0"> <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_74-0"> The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, 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 ratio (LTV)</a> of 80% and an applicant with a FICO credit score in the 700–760 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. </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"> For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760. </p></div>

Rates on 30-year new purchase mortgages fell for a fifth consecutive day Friday, sinking the flagship average to 7.11%, its lowest point in five weeks. Rates dipped for most other new purchase and refi loans as well. Since 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're seeking. | National Averages of Lenders' Best Rates | | | | --- | --- | --- | | **Loan Type** | **New Purchase** | **Refinance** | | 30-Year Fixed | 7.11% | 7.44% | | FHA 30-Year Fixed | 7.04% | 7.54% | | Jumbo 30-Year Fixed | 6.70% | 6.70% | | 15-Year Fixed | 6.47% | 6.70% | | 5/6 ARM | 7.61% | 7.71% | National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points. ## Today's Mortgage Rate Averages: New Purchase Rates on 30-year new purchase mortgages have come down considerably since shooting up in mid-February to 7.48%. With declines every day last week—including 3 basis points lost on Friday—the 30-year average is down to 7.11%. That's its lowest mark since Feb. 2. Given that 30-year rates sank into 6% territory at the start of February, the current average is still mildly elevated. But the recent trajectory has been downward. Also, rates are notably cheaper than October, when the 30-year average notched a historic 23-year peak of 8.45%. [Compare the Best Mortgage Rates Today - May 21, 2024](https://www.investopedia.com/mortgage-rates-5094943) Rates on 15-year new purchase loans dropped a bit more dramatically Friday, subtracting 8 basis points, for a four-day fall of 30 basis points. Now down to 6.47%, the current 15-year average is at its cheapest level since Feb. 7, but is still pricier than the seven-month low of 6.10% we saw just before the new year. Last October, however, 15-year rates reached as high as 7.59%–a peak since 2000. After recently to a three-month-high of 6.95%, the jumbo 30-year average is down to 6.70%, a 3-week low that held steady for a second day Friday. Though daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached in October was the most expensive jumbo 30-year average in more than 20 years. Almost every non-jumbo average moved downward Friday. The biggest loser was FHA 30-year loans, which gave up 17 basis points. The only new purchase average to climb Friday was FHA 15-year loans, which tacked on 5 basis points. | National Averages of Lenders' Best Rates - New Purchase | | | | --- | --- | --- | | Loan Type | **New Purchase Rates** | **Daily Change** | | 30-Year Fixed | 7.11% | -0.03 | | FHA 30-Year Fixed | 7.04% | -0.17 | | VA 30-Year Fixed | 6.81% | -0.09 | | Jumbo 30-Year Fixed | 6.70% | No Change | | 20-Year Fixed | 6.88% | -0.05 | | 15-Year Fixed | 6.47% | -0.08 | | FHA 15-Year Fixed | 6.83% | +0.05 | | Jumbo 15-Year Fixed | 6.66% | No Change | | 10-Year Fixed | 6.39% | -0.05 | | 10/6 ARM | 7.37% | -0.06 | | 7/6 ARM | 7.35% | -0.09 | | Jumbo 7/6 ARM | 6.33% | -0.12 | | 5/6 ARM | 7.61% | -0.05 | | Jumbo 5/6 ARM | 6.43% | No Change | ## The Weekly Freddie Mac Average Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates, and last week's reading subtracted 6 basis points to fall to 6.88%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its most expensive level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January. Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a *weekly* average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with [discount points](https://www.investopedia.com/terms/d/discountpoints.asp), while Investopedia’s averages only include zero-point loans. ## Today's Mortgage Rate Averages: Refinancing Refinancing averages also mostly decreased Friday, though the 30-year refi average dipped a modest 2 basis points. That leaves the gap between 30-year new purchase and refi rates at 33 basis points. Rates on 15-year refi loans meanwhile fell 5 basis points, while the jumbo 30-year refi average was flat. The refi averages showing the most significant change were declines of 12 basis points for both VA 30-year and jumbo 7/6 adjustable-rate refi loans, while FHA 15-year loans inched up 5 basis points. | National Averages of Lenders' Best Rates - Refinance | | | | --- | --- | --- | | Loan Type | **Refinance Rates** | Daily Change | | 30-Year Fixed | 7.44% | -0.02 | | FHA 30-Year Fixed | 7.54% | -0.07 | | VA 30-Year Fixed | 7.43% | -0.12 | | Jumbo 30-Year Fixed | 6.70% | No Change | | 20-Year Fixed | 7.16% | -0.07 | | 15-Year Fixed | 6.70% | -0.05 | | FHA 15-Year Fixed | 6.95% | +0.05 | | Jumbo 15-Year Fixed | 6.66% | No Change | | 10-Year Fixed | 6.62% | -0.06 | | 10/6 ARM | 7.62% | -0.04 | | 7/6 ARM | 7.71% | +0.02 | | Jumbo 7/6 ARM | 6.43% | -0.12 | | 5/6 ARM | 7.71% | -0.01 | | Jumbo 5/6 ARM | 6.43% | No Change | 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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than the averages you see here. ## Lowest 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 were Mississippi, Vermont, Louisiana, Iowa, and Rhode Island, while the states with the most expensive rates were Minnesota, Montana, California, Oregon, Illinois, and New Hampshire. ## 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 opted to hold rates steady at its last four meetings, the last of which concluded Jan. 31. Though the central bank's statement signaled that we have almost certainly reached the end of Fed rate hikes in this campaign, Fed Chair [Jerome Powell](https://www.investopedia.com/jerome-powell-5210572) stated that inflation is still too high, and they will therefore proceed cautiously on deciding [when to make the first rate cut](https://www.investopedia.com/fed-interest-rate-decision-january-2024-8553695). Specifically, he indicated it's unlikely they will be ready for any rate reduction by the time of their next meeting, which is scheduled for March 19–20. After its December meeting, the Fed released quarterly data that showed almost 80% of Fed members expect there to be two to four rate cuts in 2024, with the median expectation being three rate decreases totaling 0.75%. But when in 2024 these will begin—and ultimately how many are implemented this year—is an open question at this time. ## How We Track Mortgage Rates The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a [loan-to-value ratio (LTV)](https://www.investopedia.com/terms/l/loantovalue.asp) of 80% and an applicant with a FICO credit score in the 700–760 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. For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.

Rates on 30-year new purchase mortgages fell for a fifth consecutive day Friday, sinking the flagship average to 7.11%, its lowest point in five weeks. Rates dipped for most other new purchase and refi loans as well. Since 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're seeking. National Averages of Lenders' Best Rates Loan Type New Purchase Refinance 30-Year Fixed 7.11% 7.44% FHA 30-Year Fixed 7.04% 7.54% Jumbo 30-Year Fixed 6.70% 6.70% 15-Year Fixed 6.47% 6.70% 5/6 ARM 7.61% 7.71% National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700–760, and no mortgage points. Today's Mortgage Rate Averages: New Purchase Rates on 30-year new purchase mortgages have come down considerably since shooting up in mid-February to 7.48%. With declines every day last week—including 3 basis points lost on Friday—the 30-year average is down to 7.11%. That's its lowest mark since Feb. 2. Given that 30-year rates sank into 6% territory at the start of February, the current average is still mildly elevated. But the recent trajectory has been downward. Also, rates are notably cheaper than October, when the 30-year average notched a historic 23-year peak of 8.45%. Compare the Best Mortgage Rates Today - May 21, 2024 Rates on 15-year new purchase loans dropped a bit more dramatically Friday, subtracting 8 basis points, for a four-day fall of 30 basis points. Now down to 6.47%, the current 15-year average is at its cheapest level since Feb. 7, but is still pricier than the seven-month low of 6.10% we saw just before the new year. Last October, however, 15-year rates reached as high as 7.59%–a peak since 2000. After recently to a three-month-high of 6.95%, the jumbo 30-year average is down to 6.70%, a 3-week low that held steady for a second day Friday. Though daily historical jumbo rates were not available before 2009, it's estimated the 7.52% peak reached in October was the most expensive jumbo 30-year average in more than 20 years. Almost every non-jumbo average moved downward Friday. The biggest loser was FHA 30-year loans, which gave up 17 basis points. The only new purchase average to climb Friday was FHA 15-year loans, which tacked on 5 basis points. National Averages of Lenders' Best Rates - New Purchase Loan Type New Purchase Rates Daily Change 30-Year Fixed 7.11% -0.03 FHA 30-Year Fixed 7.04% -0.17 VA 30-Year Fixed 6.81% -0.09 Jumbo 30-Year Fixed 6.70% No Change 20-Year Fixed 6.88% -0.05 15-Year Fixed 6.47% -0.08 FHA 15-Year Fixed 6.83% +0.05 Jumbo 15-Year Fixed 6.66% No Change 10-Year Fixed 6.39% -0.05 10/6 ARM 7.37% -0.06 7/6 ARM 7.35% -0.09 Jumbo 7/6 ARM 6.33% -0.12 5/6 ARM 7.61% -0.05 Jumbo 5/6 ARM 6.43% No Change The Weekly Freddie Mac Average Every Thursday afternoon, Freddie Mac publishes a weekly average of 30-year mortgage rates, and last week's reading subtracted 6 basis points to fall to 6.88%. Back in late October, Freddie Mac's average reached a historic peak of 7.79%—its most expensive level in 23 years. But since then, it has come down significantly, registering a recent low of 6.60% in mid-January. Freddie Mac’s average differs from our own 30-year average for two notable reasons. First, Freddie Mac calculates a weekly average that blends five previous days of rates, while our Investopedia averages are daily, offering a more precise and timely indicator of rate movement. Second, the rates included in Freddie Mac's survey can include loans priced with discount points, while Investopedia’s averages only include zero-point loans. Today's Mortgage Rate Averages: Refinancing Refinancing averages also mostly decreased Friday, though the 30-year refi average dipped a modest 2 basis points. That leaves the gap between 30-year new purchase and refi rates at 33 basis points. Rates on 15-year refi loans meanwhile fell 5 basis points, while the jumbo 30-year refi average was flat. The refi averages showing the most significant change were declines of 12 basis points for both VA 30-year and jumbo 7/6 adjustable-rate refi loans, while FHA 15-year loans inched up 5 basis points. National Averages of Lenders' Best Rates - Refinance Loan Type Refinance Rates Daily Change 30-Year Fixed 7.44% -0.02 FHA 30-Year Fixed 7.54% -0.07 VA 30-Year Fixed 7.43% -0.12 Jumbo 30-Year Fixed 6.70% No Change 20-Year Fixed 7.16% -0.07 15-Year Fixed 6.70% -0.05 FHA 15-Year Fixed 6.95% +0.05 Jumbo 15-Year Fixed 6.66% No Change 10-Year Fixed 6.62% -0.06 10/6 ARM 7.62% -0.04 7/6 ARM 7.71% +0.02 Jumbo 7/6 ARM 6.43% -0.12 5/6 ARM 7.71% -0.01 Jumbo 5/6 ARM 6.43% No Change 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 selected based on a hypothetical borrower with an ultra-high credit score or taking 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 may be higher or lower than the averages you see here. Lowest 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 were Mississippi, Vermont, Louisiana, Iowa, and Rhode Island, while the states with the most expensive rates were Minnesota, Montana, California, Oregon, Illinois, and New Hampshire. 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 opted to hold rates steady at its last four meetings, the last of which concluded Jan. 31. Though the central bank's statement signaled that we have almost certainly reached the end of Fed rate hikes in this campaign, Fed Chair Jerome Powell stated that inflation is still too high, and they will therefore proceed cautiously on deciding when to make the first rate cut. Specifically, he indicated it's unlikely they will be ready for any rate reduction by the time of their next meeting, which is scheduled for March 19–20. After its December meeting, the Fed released quarterly data that showed almost 80% of Fed members expect there to be two to four rate cuts in 2024, with the median expectation being three rate decreases totaling 0.75%. But when in 2024 these will begin—and ultimately how many are implemented this year—is an open question at this time. How We Track Mortgage Rates The national averages cited above were calculated based on the lowest rate offered by more than 200 of the country's top lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a FICO credit score in the 700–760 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. For our map of the best state rates, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700–760.

https://www.investopedia.com/articles/stocks/09/short-selling-ban.asp

Short Selling: Making the Ban

<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"> Since the first company stock was sold in the 1600s, short sellers have been blamed for the worst moments in the world's financial markets. This trading strategy, its proponents say, provides greater liquidity to the market, tempers excessive hype around trending assets, and helps prevent market bubbles. The public and its representatives frequently paint a far less rosy picture, depicting short sellers as vultures sweeping in to profit off the misery of others. Company executives have accused them of driving down their company's stock prices. Some governments have banned the practice, while others have halted short selling to give their markets time to regroup after crises. We have seen this tension play out consistently since the practice began. Read on for a history of short selling through the attempts to ban or curtail the practice.<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>Short selling is a trading strategy in which an investor bets that a stock's price will decline. It exists in markets worldwide.</li><li>Short selling securities has been in use since stock markets began on bridges in the Dutch Republic in the 1600s. Shorting of the Dutch East India Company led to the first ban of the practice.</li><li>In the 18th Century, Great Britain banned naked short selling, which occurs when the shares shorted aren't borrowed first by the short seller. In France, Napoleon Bonaparte outlawed short selling in 1801 as an affront to the French nation.</li><li>In the U.S., short selling was first barred during the War of 1812, restricted during the Great Depression, and since then has been under greater scrutiny, especially after market turmoil in 1987, 2001, and 2007-8. </li><li>Today, short selling is legal in most jurisdictions, with economists arguing it increases market efficiency and liquidity.</li></ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> Short selling isn't new; it's been around ever since the origin of the stock market. Indeed, shorting predates these markets as grains and other commodities were commonly shorted beforehand. However, the sellers' pessimism that goes along with these trades hasn't always been welcome. While others root for a stock price to go up, short sellers make money only if it declines. To do so, they borrow the stock from a broker, sell it, and wait for the prices to drop so they can buy it back at a cheaper price. </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-early-short-selling-regulations"></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"> Early Short Selling Regulations </span> </h2> <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"> The Dutch Republic </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/s/shortselling.asp">Short selling</a> has been around since the stock market emerged in the Dutch Republic during the 1600s. In 1609, Isaac Le Maire, a prominent merchant and former board member of the Dutch East India Company (or VOC, the acronym from the original Dutch name), sought revenge after the company forced him out and he was banned from the lucrative spice trade.<span class="ql-inline-citation" data-cite="22"></span> Le Maire held a significant amount of the company's stock. Along with some confederates, he sold short the company's shares in great quantities to drive the price down, attempting to ensure the price fell by spreading rumors about ships that had sunk, cargo being lost at sea, and so on. The Dutch government soon took action and instituted a ban on short-selling.<span class="ql-inline-citation" data-cite="18"></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_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Le Maire shows the perils of such gambits: his VOC shares were seized and he soon fled into exile. After he later died in a humble seaside village, a tombstone was placed at his grave, saying that he had won and lost a great fortune, but not his honor.<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_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>Many governments have limited or forbidden short selling because of its use during stock market sell-offs and financial crises. However, outright bans have usually been repealed, as short selling is a significant part of daily market trading.</p></div></div></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"> Great Britain and the South Sea Bubble of 1720 </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/n/nakedshorting.asp">Naked short selling</a> was first outlawed in 1733 as part of the fallout from the South Sea bubble of 1720, one of the first major crises to hit modern financial markets. The difference between naked short selling and a regular short sale is that the shares being shorted are never actually borrowed or secured for lending to the short seller. As such, if the short seller goes bankrupt or can't locate the shorted security when it's time to pay back the stock lent, a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/failuretodeliver.asp">failure to deliver</a> is far more likely. This is much like writing a paper check for a checking account that doesn't yet have the funds for the check to clear. </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 South Sea bubble of 1720 centered around the South Sea Company, formed nine years earlier. In 1720, the company proposed taking over Great Britain's national debt in exchange for government bonds and being granted a monopoly by the British government to trade in the South Seas (South America). This led to a buying frenzy of its shares, as outlandish claims for its potential profits spread among those with money to invest. Shares rose from almost £130 to more than £1,000 at its peak.<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_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> However, news then spread that the company's prospects were far less rosy than the company was promising. The market for its shares collapsed, and the company was accused of falsely inflating its prices by spreading rumors about its success.<span class="ql-inline-citation" data-cite="19"></span> The event led to significant financial reforms in Britain to prevent its reoccurrence. This included the ban on naked short sales. </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"> France and Napoleon's Ban on the "Treasonous" Practice </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Frustrated by speculators betting against government securities in his early years in power, Napoleon Bonaparte outlawed short selling in 1801. He viewed short sellers as nothing short of enemies of the state, equating their activities with treason, though their speculative wagers targeted his government's economic policies as much as anything. </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"> Imprisoning short sellers was part of his broader efforts to stabilize and control France's financial system in the lead-up to his European military campaigns. Napoleon's ban reflects the long-standing suspicion and controversy surrounding short selling, especially by those who see it as a critique of their own management.<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_26-0"></div> <span class="heading-toc" id="toc-the-uss-long-story-on-shorts"></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"> The US's Long Story on Shorts </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> Early in the country's history, the U.S. banned short selling as its new stock market gained its footing because of the speculation caused by the War of 1812. The prohibition stayed in place until the 1850s when it was removed for the next eight decades. In October 1929, the market crashed, and among the many blamed was stock trader Jesse Livermore, who collected $100 million shorting the market that year. As word of his prodigious returns spread, so did outrage as countless investors were left penniless.<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_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> As Congress investigated the market crash of 1929, their attention turned to reports of “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/bearraid.asp">bear raids</a>,” collusion among short sellers to drive a stock price down and profit from the drop.<span class="ql-inline-citation" data-cite="21"></span> In 1934, Congress created the Securities and Exchange Commission (SEC), giving it the power to regulate short selling through the Securities Exchange Act of 1934.<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"> The SEC adopted its uptick rule in 1938 to combat unrestricted short selling. Known as Rule 10a-1, the regulation forbids shorting a stock unless the last trade was at a higher price than the previous trade, which was meant to slow the momentum of a security's decline.<span class="ql-inline-citation" data-cite="5"></span> Short sales on downticks, with some narrow exceptions, were prohibited, preventing short selling at successively lower prices, a strategy that could drive a stock price down artificially. Meanwhile, by permitting short selling when a stock was going up, the rule aimed to support liquidity and allow shorts that were a check on upward price swings. </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"> Subsequent SEC Investigations and Regulations </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_35-0"> Despite the legal acceptance and recognition of some of the benefits of short selling, skepticism persisted among policymakers and the public, who disdained profiting from the losses of others as unethical. In the decades after the SEC was formed, Congress revisited the practice several times. In 1963, Congress directed the SEC to study short selling's impact on price trends, which revealed an increase in short sale ratios during market declines.<span class="ql-inline-citation" data-cite="11"></span><br/><br/>In 1976, another Congressional investigation looked into the effects of eliminating or revising the uptick rule. Stock exchanges and investors objected to any changes, arguing that the rule was essential for maintaining market stability and investor confidence. The SEC withdrew its proposals in 1980, leaving the uptick rule in place.<span class="ql-inline-citation" data-cite="12"></span> Seven years later, the Black Monday stock market crash of 1987 again brought short sellers unwanted attention in Congressional hearings.<span class="ql-inline-citation" data-cite="26"></span> However, the practice remained in place much as before. </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"> Debate over the uptick rule grew in the 2000s, as technological and market changes, according to critics of the regulation, made the rule obsolete and inefficient.<span class="ql-inline-citation" data-cite="14"></span> The SEC launched a pilot program in 2005, exempting one-third of Russell 3000 stocks from any short sale price tests.<span class="ql-inline-citation" data-cite="13"></span> The pilot program was an element of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/regsho.asp">Regulation SHO</a>, which aimed to modernize and simplify the regulations on short selling.<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_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"> Repeal of the Uptick Rule, Regulation SHO, and Rule 201 </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_40-0"> The SEC finally eliminated the uptick rule in 2007 after its yearslong study concluded that the regulation did little to curb abuses and perhaps limited market liquidity. The study found no evidence that short selling contributed to market volatility or price declines.<span class="ql-inline-citation" data-cite="14"></span><br/><br/>But these changes arrived just in time for the 2007-8 financial crisis. As Lehman Brothers, one of the largest Wall Street investment banks, collapsed, its CEO, Richard Fuld Jr., blamed his 158-year-old company's fall on short sellers.<span class="ql-inline-citation" data-cite="23"></span> While his fuming caught wide public attention, later studies showed little connection to the collapse. Lehman itself was investigated for facilitating naked short sales before its demise.<span class="ql-inline-citation" data-cite="24"></span> As in previous crises, the public and its representatives were galled that short sellers could be making money when others were facing the hardships of an economic crisis. In time, this view would change. By 2015, the film “The Big Short,” based on the book of the same name by Michael Lewis, portrayed short sellers as unheralded heroes during the height of the previous decades' mortgage boom.<span class="ql-inline-citation" data-cite="28"></span><span class="ql-inline-citation" data-cite="27"></span> </p> <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-callout mntl-block" id="mntl-sc-block_42-0"><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_43-0"><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>Academic research on short-selling bans generally finds that such prohibitions don't significantly alter market dynamics, reinforcing the complex nature of regulating short selling practices.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="14"></span> Studies by the Federal Reserve also revealed that short-selling bans negatively increase market volatility and fail to stop downward price spirals as intended.<span class="ql-inline-citation" data-cite="16"></span></p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_44-0"> Several major changes took place during this period. Regulation SHO, adopted in 2004 and implemented a year later, had already set out to modernize regulations around short selling in the U.S. The regulation required brokers to have a reasonable belief that an equity to be short sold could be borrowed and delivered on the settlement date before they could execute a short sale. This was aimed directly at curbing naked short sales. Regulation SHO also mandated that, should a security not be delivered by its settlement date, the broker would have to buy shares in the open market to make good on the failure within a specified time.<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"> In 2010, the SEC added Rule 201, called the “alternative uptick rule,” to Regulation SHO. When a stock's price drops more than 10% from the previous day's closing price, the alternative uptick rule restricts short selling of that stock to prices above the current best bid. This was meant to keep short sellers from driving a stock price down rapidly.<span class="ql-inline-citation" data-cite="5"></span><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_47-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> The SEC adopted regulations in October 2023 that required institutional investors to report their short positions monthly after the early 2020s “<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/meme-stock-5206762">meme stock</a>” saga.<span class="ql-inline-citation" data-cite="25"></span> The SEC also began requiring institutional investors and other companies involved in lending stock to report information about the loans to the Financial Industry Regulatory Authority, including the name and volume of the stock, any collateral used, and the loan and termination dates.<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_49-0"></div> <div class="comp mntl-sc-block finance-sc-block-callout mntl-block" id="mntl-sc-block_50-0"><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_51-0"><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>Short selling can reveal flaws or red flags in a company missed by others. For example, Enron once had deep political connections, a seemingly unshakeable business model, and executives frequently found on the covers of financial magazines. When a prominent short seller, James Chanos, saw something amiss in the company's accounting practices, his actions helped uncover the accounting fraud of the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/enron.asp">Enron</a> scandal, which eventually put some of its executives behind bars.<span class="ql-inline-citation" data-cite="3"></span></p></div></div></div> <span class="heading-toc" id="toc-the-positive-role-of-short-sellers"></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"> The Positive Role of Short Sellers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_53-0"> Short selling bans have been used to address abuses such as betting against a stock and then spreading negative rumors about its worth to manipulate the market. However, many bans are repealed because short sellers have a significant role in the markets. The SEC has cited the following in judging the importance of their role in the contemporary marketplace:<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_54-0"></div> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_55-0"> <li><strong>Efficient price discovery</strong>: By betting against overvalued stocks, short sellers help correct mispriced securities, contributing to more accurate market valuations and better, more efficient price discovery.<span class="ql-inline-citation" data-cite="17"></span></li> <li><strong>Helping to pop market bubbles</strong>: They can help deflate overvalued assets, reducing the risk of market bubbles.<span class="ql-inline-citation" data-cite="28"></span></li> <li><strong>Increasing market liquidity</strong>: Short selling increases the number of sellers in the market, improving liquidity.<span class="ql-inline-citation" data-cite="20"></span></li> <li><strong>Moving capital to where it's needed</strong>: By helping to correct overvalued stocks, they indirectly aid in efficiently allocating capital to other assets, potentially those currently undervalued.</li> <li><strong>Facilitates hedging and other risk management tools</strong>: Investors and fund managers frequently use short selling as a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/deltahedging.asp">hedging</a> tool to manage portfolio risk.<span class="ql-inline-citation" data-cite="20"></span></li> <li><strong>Limits upward market manipulation</strong>: Short selling can counterbalance or prevent unjustified upward price spirals, making markets less susceptible to hype and manipulation.<span class="ql-inline-citation" data-cite="16"></span></li> </ul> <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-why-do-critics-call-for-banning-short-selling"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Do Critics Call for Banning Short Selling?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Some argue that short selling should be illegal because of its potential to manipulate market prices, worries that it may exacerbate market declines, and the seeming unfairness of profiting from others' losses.<span class="ql-inline-citation" data-cite="29"></span> The practice is also viewed as harmful to companies and investors, especially during volatile market conditions. Critics often associate short selling with predatory behavior and say that it can undermine confidence in the market. Conversely, proponents argue that short selling provides liquidity, helps in price discovery, and exposes overvalued stocks or fraudulent practices within companies.<span class="ql-inline-citation" data-cite="20"></span><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_58-0"></div> <div class="comp mntl-sc-block finance-sc-block-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_59-0"><span class="heading-toc" id="toc-why-did-the-sec-repeal-the-uptick-rule"></span> <h2 class="mntl-sc-block-questionandanswer__question">Why Did the SEC Repeal the Uptick Rule?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Based on its research and academic studies, the SEC concluded that the rule was ineffective in curbing abuses and that it could constrain market liquidity. Bans on short selling have often been found to lead to a decrease in market liquidity, as they limit the ability of investors to express through short sales, their negative views of a stock.</p></div> </div> <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-did-regulators-react-to-the-2008-financial-crisis-in-terms-of-short-selling"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Did Regulators React to the 2008 Financial Crisis in Terms of Short Selling?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>During the 2008 financial crisis, many countries, including the U.S. and several European nations, adopted temporary bans on short-selling to help stabilize the markets.<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_62-0"></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_63-0"> <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_64-0"> Short selling, a practice dating back to the earliest days of stock markets, typically faces scrutiny and temporary bans, especially during market tumults. Every country <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/012015/why-short-selling-illegal-some-countries-legal-us.asp">sets the rules and regulations</a> for short selling. Critics argue it fosters market manipulation and profiteering from others' misfortunes. Yet, its legality in most regions today underscores how regulators find it crucial for supporting market efficiency and liquidity. The practice, proponents say, aids in efficient price discovery, helps prevent market bubbles, and supports risk management. While debates about short selling will no doubt continue, evolving <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/011315/what-kinds-restrictions-does-sec-put-short-selling.asp">regulatory oversight by the SEC</a> has aimed to balance leveraging its benefits and mitigating potential abuses while ensuring a more transparent and resilient financial market landscape. </p></div>

Since the first company stock was sold in the 1600s, short sellers have been blamed for the worst moments in the world's financial markets. This trading strategy, its proponents say, provides greater liquidity to the market, tempers excessive hype around trending assets, and helps prevent market bubbles. The public and its representatives frequently paint a far less rosy picture, depicting short sellers as vultures sweeping in to profit off the misery of others. Company executives have accused them of driving down their company's stock prices. Some governments have banned the practice, while others have halted short selling to give their markets time to regroup after crises. We have seen this tension play out consistently since the practice began. Read on for a history of short selling through the attempts to ban or curtail the practice. ### Key Takeaways * Short selling is a trading strategy in which an investor bets that a stock's price will decline. It exists in markets worldwide. * Short selling securities has been in use since stock markets began on bridges in the Dutch Republic in the 1600s. Shorting of the Dutch East India Company led to the first ban of the practice. * In the 18th Century, Great Britain banned naked short selling, which occurs when the shares shorted aren't borrowed first by the short seller. In France, Napoleon Bonaparte outlawed short selling in 1801 as an affront to the French nation. * In the U.S., short selling was first barred during the War of 1812, restricted during the Great Depression, and since then has been under greater scrutiny, especially after market turmoil in 1987, 2001, and 2007-8. * Today, short selling is legal in most jurisdictions, with economists arguing it increases market efficiency and liquidity. Short selling isn't new; it's been around ever since the origin of the stock market. Indeed, shorting predates these markets as grains and other commodities were commonly shorted beforehand. However, the sellers' pessimism that goes along with these trades hasn't always been welcome. While others root for a stock price to go up, short sellers make money only if it declines. To do so, they borrow the stock from a broker, sell it, and wait for the prices to drop so they can buy it back at a cheaper price. ## Early Short Selling Regulations ### The Dutch Republic [Short selling](https://www.investopedia.com/terms/s/shortselling.asp) has been around since the stock market emerged in the Dutch Republic during the 1600s. In 1609, Isaac Le Maire, a prominent merchant and former board member of the Dutch East India Company (or VOC, the acronym from the original Dutch name), sought revenge after the company forced him out and he was banned from the lucrative spice trade. Le Maire held a significant amount of the company's stock. Along with some confederates, he sold short the company's shares in great quantities to drive the price down, attempting to ensure the price fell by spreading rumors about ships that had sunk, cargo being lost at sea, and so on. The Dutch government soon took action and instituted a ban on short-selling. Le Maire shows the perils of such gambits: his VOC shares were seized and he soon fled into exile. After he later died in a humble seaside village, a tombstone was placed at his grave, saying that he had won and lost a great fortune, but not his honor. ### Many governments have limited or forbidden short selling because of its use during stock market sell-offs and financial crises. However, outright bans have usually been repealed, as short selling is a significant part of daily market trading. ### Great Britain and the South Sea Bubble of 1720 [Naked short selling](https://www.investopedia.com/terms/n/nakedshorting.asp) was first outlawed in 1733 as part of the fallout from the South Sea bubble of 1720, one of the first major crises to hit modern financial markets. The difference between naked short selling and a regular short sale is that the shares being shorted are never actually borrowed or secured for lending to the short seller. As such, if the short seller goes bankrupt or can't locate the shorted security when it's time to pay back the stock lent, a [failure to deliver](https://www.investopedia.com/terms/f/failuretodeliver.asp) is far more likely. This is much like writing a paper check for a checking account that doesn't yet have the funds for the check to clear. The South Sea bubble of 1720 centered around the South Sea Company, formed nine years earlier. In 1720, the company proposed taking over Great Britain's national debt in exchange for government bonds and being granted a monopoly by the British government to trade in the South Seas (South America). This led to a buying frenzy of its shares, as outlandish claims for its potential profits spread among those with money to invest. Shares rose from almost £130 to more than £1,000 at its peak. However, news then spread that the company's prospects were far less rosy than the company was promising. The market for its shares collapsed, and the company was accused of falsely inflating its prices by spreading rumors about its success. The event led to significant financial reforms in Britain to prevent its reoccurrence. This included the ban on naked short sales. ### France and Napoleon's Ban on the "Treasonous" Practice Frustrated by speculators betting against government securities in his early years in power, Napoleon Bonaparte outlawed short selling in 1801. He viewed short sellers as nothing short of enemies of the state, equating their activities with treason, though their speculative wagers targeted his government's economic policies as much as anything. Imprisoning short sellers was part of his broader efforts to stabilize and control France's financial system in the lead-up to his European military campaigns. Napoleon's ban reflects the long-standing suspicion and controversy surrounding short selling, especially by those who see it as a critique of their own management. ## The US's Long Story on Shorts Early in the country's history, the U.S. banned short selling as its new stock market gained its footing because of the speculation caused by the War of 1812. The prohibition stayed in place until the 1850s when it was removed for the next eight decades. In October 1929, the market crashed, and among the many blamed was stock trader Jesse Livermore, who collected $100 million shorting the market that year. As word of his prodigious returns spread, so did outrage as countless investors were left penniless. As Congress investigated the market crash of 1929, their attention turned to reports of “[bear raids](https://www.investopedia.com/terms/b/bearraid.asp),” collusion among short sellers to drive a stock price down and profit from the drop. In 1934, Congress created the Securities and Exchange Commission (SEC), giving it the power to regulate short selling through the Securities Exchange Act of 1934. The SEC adopted its uptick rule in 1938 to combat unrestricted short selling. Known as Rule 10a-1, the regulation forbids shorting a stock unless the last trade was at a higher price than the previous trade, which was meant to slow the momentum of a security's decline. Short sales on downticks, with some narrow exceptions, were prohibited, preventing short selling at successively lower prices, a strategy that could drive a stock price down artificially. Meanwhile, by permitting short selling when a stock was going up, the rule aimed to support liquidity and allow shorts that were a check on upward price swings. ### Subsequent SEC Investigations and Regulations Despite the legal acceptance and recognition of some of the benefits of short selling, skepticism persisted among policymakers and the public, who disdained profiting from the losses of others as unethical. In the decades after the SEC was formed, Congress revisited the practice several times. In 1963, Congress directed the SEC to study short selling's impact on price trends, which revealed an increase in short sale ratios during market declines. In 1976, another Congressional investigation looked into the effects of eliminating or revising the uptick rule. Stock exchanges and investors objected to any changes, arguing that the rule was essential for maintaining market stability and investor confidence. The SEC withdrew its proposals in 1980, leaving the uptick rule in place. Seven years later, the Black Monday stock market crash of 1987 again brought short sellers unwanted attention in Congressional hearings. However, the practice remained in place much as before. Debate over the uptick rule grew in the 2000s, as technological and market changes, according to critics of the regulation, made the rule obsolete and inefficient. The SEC launched a pilot program in 2005, exempting one-third of Russell 3000 stocks from any short sale price tests. The pilot program was an element of [Regulation SHO](https://www.investopedia.com/terms/r/regsho.asp), which aimed to modernize and simplify the regulations on short selling. ### Repeal of the Uptick Rule, Regulation SHO, and Rule 201 The SEC finally eliminated the uptick rule in 2007 after its yearslong study concluded that the regulation did little to curb abuses and perhaps limited market liquidity. The study found no evidence that short selling contributed to market volatility or price declines. But these changes arrived just in time for the 2007-8 financial crisis. As Lehman Brothers, one of the largest Wall Street investment banks, collapsed, its CEO, Richard Fuld Jr., blamed his 158-year-old company's fall on short sellers. While his fuming caught wide public attention, later studies showed little connection to the collapse. Lehman itself was investigated for facilitating naked short sales before its demise. As in previous crises, the public and its representatives were galled that short sellers could be making money when others were facing the hardships of an economic crisis. In time, this view would change. By 2015, the film “The Big Short,” based on the book of the same name by Michael Lewis, portrayed short sellers as unheralded heroes during the height of the previous decades' mortgage boom. ### Academic research on short-selling bans generally finds that such prohibitions don't significantly alter market dynamics, reinforcing the complex nature of regulating short selling practices. Studies by the Federal Reserve also revealed that short-selling bans negatively increase market volatility and fail to stop downward price spirals as intended. Several major changes took place during this period. Regulation SHO, adopted in 2004 and implemented a year later, had already set out to modernize regulations around short selling in the U.S. The regulation required brokers to have a reasonable belief that an equity to be short sold could be borrowed and delivered on the settlement date before they could execute a short sale. This was aimed directly at curbing naked short sales. Regulation SHO also mandated that, should a security not be delivered by its settlement date, the broker would have to buy shares in the open market to make good on the failure within a specified time. In 2010, the SEC added Rule 201, called the “alternative uptick rule,” to Regulation SHO. When a stock's price drops more than 10% from the previous day's closing price, the alternative uptick rule restricts short selling of that stock to prices above the current best bid. This was meant to keep short sellers from driving a stock price down rapidly. The SEC adopted regulations in October 2023 that required institutional investors to report their short positions monthly after the early 2020s “[meme stock](https://www.investopedia.com/meme-stock-5206762)” saga. The SEC also began requiring institutional investors and other companies involved in lending stock to report information about the loans to the Financial Industry Regulatory Authority, including the name and volume of the stock, any collateral used, and the loan and termination dates. ### Short selling can reveal flaws or red flags in a company missed by others. For example, Enron once had deep political connections, a seemingly unshakeable business model, and executives frequently found on the covers of financial magazines. When a prominent short seller, James Chanos, saw something amiss in the company's accounting practices, his actions helped uncover the accounting fraud of the [Enron](https://www.investopedia.com/terms/e/enron.asp) scandal, which eventually put some of its executives behind bars. ## The Positive Role of Short Sellers Short selling bans have been used to address abuses such as betting against a stock and then spreading negative rumors about its worth to manipulate the market. However, many bans are repealed because short sellers have a significant role in the markets. The SEC has cited the following in judging the importance of their role in the contemporary marketplace: * **Efficient price discovery**: By betting against overvalued stocks, short sellers help correct mispriced securities, contributing to more accurate market valuations and better, more efficient price discovery. * **Helping to pop market bubbles**: They can help deflate overvalued assets, reducing the risk of market bubbles. * **Increasing market liquidity**: Short selling increases the number of sellers in the market, improving liquidity. * **Moving capital to where it's needed**: By helping to correct overvalued stocks, they indirectly aid in efficiently allocating capital to other assets, potentially those currently undervalued. * **Facilitates hedging and other risk management tools**: Investors and fund managers frequently use short selling as a [hedging](https://www.investopedia.com/terms/d/deltahedging.asp) tool to manage portfolio risk. * **Limits upward market manipulation**: Short selling can counterbalance or prevent unjustified upward price spirals, making markets less susceptible to hype and manipulation. ## Why Do Critics Call for Banning Short Selling? Some argue that short selling should be illegal because of its potential to manipulate market prices, worries that it may exacerbate market declines, and the seeming unfairness of profiting from others' losses. The practice is also viewed as harmful to companies and investors, especially during volatile market conditions. Critics often associate short selling with predatory behavior and say that it can undermine confidence in the market. Conversely, proponents argue that short selling provides liquidity, helps in price discovery, and exposes overvalued stocks or fraudulent practices within companies. ## Why Did the SEC Repeal the Uptick Rule? Based on its research and academic studies, the SEC concluded that the rule was ineffective in curbing abuses and that it could constrain market liquidity. Bans on short selling have often been found to lead to a decrease in market liquidity, as they limit the ability of investors to express through short sales, their negative views of a stock. ## How Did Regulators React to the 2008 Financial Crisis in Terms of Short Selling? During the 2008 financial crisis, many countries, including the U.S. and several European nations, adopted temporary bans on short-selling to help stabilize the markets. ## The Bottom Line Short selling, a practice dating back to the earliest days of stock markets, typically faces scrutiny and temporary bans, especially during market tumults. Every country [sets the rules and regulations](https://www.investopedia.com/ask/answers/012015/why-short-selling-illegal-some-countries-legal-us.asp) for short selling. Critics argue it fosters market manipulation and profiteering from others' misfortunes. Yet, its legality in most regions today underscores how regulators find it crucial for supporting market efficiency and liquidity. The practice, proponents say, aids in efficient price discovery, helps prevent market bubbles, and supports risk management. While debates about short selling will no doubt continue, evolving [regulatory oversight by the SEC](https://www.investopedia.com/ask/answers/011315/what-kinds-restrictions-does-sec-put-short-selling.asp) has aimed to balance leveraging its benefits and mitigating potential abuses while ensuring a more transparent and resilient financial market landscape.

Since the first company stock was sold in the 1600s, short sellers have been blamed for the worst moments in the world's financial markets. This trading strategy, its proponents say, provides greater liquidity to the market, tempers excessive hype around trending assets, and helps prevent market bubbles. The public and its representatives frequently paint a far less rosy picture, depicting short sellers as vultures sweeping in to profit off the misery of others. Company executives have accused them of driving down their company's stock prices. Some governments have banned the practice, while others have halted short selling to give their markets time to regroup after crises. We have seen this tension play out consistently since the practice began. Read on for a history of short selling through the attempts to ban or curtail the practice. Key Takeaways Short selling is a trading strategy in which an investor bets that a stock's price will decline. It exists in markets worldwide.Short selling securities has been in use since stock markets began on bridges in the Dutch Republic in the 1600s. Shorting of the Dutch East India Company led to the first ban of the practice.In the 18th Century, Great Britain banned naked short selling, which occurs when the shares shorted aren't borrowed first by the short seller. In France, Napoleon Bonaparte outlawed short selling in 1801 as an affront to the French nation.In the U.S., short selling was first barred during the War of 1812, restricted during the Great Depression, and since then has been under greater scrutiny, especially after market turmoil in 1987, 2001, and 2007-8. Today, short selling is legal in most jurisdictions, with economists arguing it increases market efficiency and liquidity. Short selling isn't new; it's been around ever since the origin of the stock market. Indeed, shorting predates these markets as grains and other commodities were commonly shorted beforehand. However, the sellers' pessimism that goes along with these trades hasn't always been welcome. While others root for a stock price to go up, short sellers make money only if it declines. To do so, they borrow the stock from a broker, sell it, and wait for the prices to drop so they can buy it back at a cheaper price. Early Short Selling Regulations The Dutch Republic Short selling has been around since the stock market emerged in the Dutch Republic during the 1600s. In 1609, Isaac Le Maire, a prominent merchant and former board member of the Dutch East India Company (or VOC, the acronym from the original Dutch name), sought revenge after the company forced him out and he was banned from the lucrative spice trade. Le Maire held a significant amount of the company's stock. Along with some confederates, he sold short the company's shares in great quantities to drive the price down, attempting to ensure the price fell by spreading rumors about ships that had sunk, cargo being lost at sea, and so on. The Dutch government soon took action and instituted a ban on short-selling. Le Maire shows the perils of such gambits: his VOC shares were seized and he soon fled into exile. After he later died in a humble seaside village, a tombstone was placed at his grave, saying that he had won and lost a great fortune, but not his honor. Many governments have limited or forbidden short selling because of its use during stock market sell-offs and financial crises. However, outright bans have usually been repealed, as short selling is a significant part of daily market trading. Great Britain and the South Sea Bubble of 1720 Naked short selling was first outlawed in 1733 as part of the fallout from the South Sea bubble of 1720, one of the first major crises to hit modern financial markets. The difference between naked short selling and a regular short sale is that the shares being shorted are never actually borrowed or secured for lending to the short seller. As such, if the short seller goes bankrupt or can't locate the shorted security when it's time to pay back the stock lent, a failure to deliver is far more likely. This is much like writing a paper check for a checking account that doesn't yet have the funds for the check to clear. The South Sea bubble of 1720 centered around the South Sea Company, formed nine years earlier. In 1720, the company proposed taking over Great Britain's national debt in exchange for government bonds and being granted a monopoly by the British government to trade in the South Seas (South America). This led to a buying frenzy of its shares, as outlandish claims for its potential profits spread among those with money to invest. Shares rose from almost £130 to more than £1,000 at its peak. However, news then spread that the company's prospects were far less rosy than the company was promising. The market for its shares collapsed, and the company was accused of falsely inflating its prices by spreading rumors about its success. The event led to significant financial reforms in Britain to prevent its reoccurrence. This included the ban on naked short sales. France and Napoleon's Ban on the "Treasonous" Practice Frustrated by speculators betting against government securities in his early years in power, Napoleon Bonaparte outlawed short selling in 1801. He viewed short sellers as nothing short of enemies of the state, equating their activities with treason, though their speculative wagers targeted his government's economic policies as much as anything. Imprisoning short sellers was part of his broader efforts to stabilize and control France's financial system in the lead-up to his European military campaigns. Napoleon's ban reflects the long-standing suspicion and controversy surrounding short selling, especially by those who see it as a critique of their own management. The US's Long Story on Shorts Early in the country's history, the U.S. banned short selling as its new stock market gained its footing because of the speculation caused by the War of 1812. The prohibition stayed in place until the 1850s when it was removed for the next eight decades. In October 1929, the market crashed, and among the many blamed was stock trader Jesse Livermore, who collected $100 million shorting the market that year. As word of his prodigious returns spread, so did outrage as countless investors were left penniless. As Congress investigated the market crash of 1929, their attention turned to reports of “bear raids,” collusion among short sellers to drive a stock price down and profit from the drop. In 1934, Congress created the Securities and Exchange Commission (SEC), giving it the power to regulate short selling through the Securities Exchange Act of 1934. The SEC adopted its uptick rule in 1938 to combat unrestricted short selling. Known as Rule 10a-1, the regulation forbids shorting a stock unless the last trade was at a higher price than the previous trade, which was meant to slow the momentum of a security's decline. Short sales on downticks, with some narrow exceptions, were prohibited, preventing short selling at successively lower prices, a strategy that could drive a stock price down artificially. Meanwhile, by permitting short selling when a stock was going up, the rule aimed to support liquidity and allow shorts that were a check on upward price swings. Subsequent SEC Investigations and Regulations Despite the legal acceptance and recognition of some of the benefits of short selling, skepticism persisted among policymakers and the public, who disdained profiting from the losses of others as unethical. In the decades after the SEC was formed, Congress revisited the practice several times. In 1963, Congress directed the SEC to study short selling's impact on price trends, which revealed an increase in short sale ratios during market declines.In 1976, another Congressional investigation looked into the effects of eliminating or revising the uptick rule. Stock exchanges and investors objected to any changes, arguing that the rule was essential for maintaining market stability and investor confidence. The SEC withdrew its proposals in 1980, leaving the uptick rule in place. Seven years later, the Black Monday stock market crash of 1987 again brought short sellers unwanted attention in Congressional hearings. However, the practice remained in place much as before. Debate over the uptick rule grew in the 2000s, as technological and market changes, according to critics of the regulation, made the rule obsolete and inefficient. The SEC launched a pilot program in 2005, exempting one-third of Russell 3000 stocks from any short sale price tests. The pilot program was an element of Regulation SHO, which aimed to modernize and simplify the regulations on short selling. Repeal of the Uptick Rule, Regulation SHO, and Rule 201 The SEC finally eliminated the uptick rule in 2007 after its yearslong study concluded that the regulation did little to curb abuses and perhaps limited market liquidity. The study found no evidence that short selling contributed to market volatility or price declines.But these changes arrived just in time for the 2007-8 financial crisis. As Lehman Brothers, one of the largest Wall Street investment banks, collapsed, its CEO, Richard Fuld Jr., blamed his 158-year-old company's fall on short sellers. While his fuming caught wide public attention, later studies showed little connection to the collapse. Lehman itself was investigated for facilitating naked short sales before its demise. As in previous crises, the public and its representatives were galled that short sellers could be making money when others were facing the hardships of an economic crisis. In time, this view would change. By 2015, the film “The Big Short,” based on the book of the same name by Michael Lewis, portrayed short sellers as unheralded heroes during the height of the previous decades' mortgage boom. Academic research on short-selling bans generally finds that such prohibitions don't significantly alter market dynamics, reinforcing the complex nature of regulating short selling practices. Studies by the Federal Reserve also revealed that short-selling bans negatively increase market volatility and fail to stop downward price spirals as intended. Several major changes took place during this period. Regulation SHO, adopted in 2004 and implemented a year later, had already set out to modernize regulations around short selling in the U.S. The regulation required brokers to have a reasonable belief that an equity to be short sold could be borrowed and delivered on the settlement date before they could execute a short sale. This was aimed directly at curbing naked short sales. Regulation SHO also mandated that, should a security not be delivered by its settlement date, the broker would have to buy shares in the open market to make good on the failure within a specified time. In 2010, the SEC added Rule 201, called the “alternative uptick rule,” to Regulation SHO. When a stock's price drops more than 10% from the previous day's closing price, the alternative uptick rule restricts short selling of that stock to prices above the current best bid. This was meant to keep short sellers from driving a stock price down rapidly. The SEC adopted regulations in October 2023 that required institutional investors to report their short positions monthly after the early 2020s “meme stock” saga. The SEC also began requiring institutional investors and other companies involved in lending stock to report information about the loans to the Financial Industry Regulatory Authority, including the name and volume of the stock, any collateral used, and the loan and termination dates. Short selling can reveal flaws or red flags in a company missed by others. For example, Enron once had deep political connections, a seemingly unshakeable business model, and executives frequently found on the covers of financial magazines. When a prominent short seller, James Chanos, saw something amiss in the company's accounting practices, his actions helped uncover the accounting fraud of the Enron scandal, which eventually put some of its executives behind bars. The Positive Role of Short Sellers Short selling bans have been used to address abuses such as betting against a stock and then spreading negative rumors about its worth to manipulate the market. However, many bans are repealed because short sellers have a significant role in the markets. The SEC has cited the following in judging the importance of their role in the contemporary marketplace: Efficient price discovery: By betting against overvalued stocks, short sellers help correct mispriced securities, contributing to more accurate market valuations and better, more efficient price discovery. Helping to pop market bubbles: They can help deflate overvalued assets, reducing the risk of market bubbles. Increasing market liquidity: Short selling increases the number of sellers in the market, improving liquidity. Moving capital to where it's needed: By helping to correct overvalued stocks, they indirectly aid in efficiently allocating capital to other assets, potentially those currently undervalued. Facilitates hedging and other risk management tools: Investors and fund managers frequently use short selling as a hedging tool to manage portfolio risk. Limits upward market manipulation: Short selling can counterbalance or prevent unjustified upward price spirals, making markets less susceptible to hype and manipulation. Why Do Critics Call for Banning Short Selling? Some argue that short selling should be illegal because of its potential to manipulate market prices, worries that it may exacerbate market declines, and the seeming unfairness of profiting from others' losses. The practice is also viewed as harmful to companies and investors, especially during volatile market conditions. Critics often associate short selling with predatory behavior and say that it can undermine confidence in the market. Conversely, proponents argue that short selling provides liquidity, helps in price discovery, and exposes overvalued stocks or fraudulent practices within companies. Why Did the SEC Repeal the Uptick Rule? Based on its research and academic studies, the SEC concluded that the rule was ineffective in curbing abuses and that it could constrain market liquidity. Bans on short selling have often been found to lead to a decrease in market liquidity, as they limit the ability of investors to express through short sales, their negative views of a stock. How Did Regulators React to the 2008 Financial Crisis in Terms of Short Selling? During the 2008 financial crisis, many countries, including the U.S. and several European nations, adopted temporary bans on short-selling to help stabilize the markets. The Bottom Line Short selling, a practice dating back to the earliest days of stock markets, typically faces scrutiny and temporary bans, especially during market tumults. Every country sets the rules and regulations for short selling. Critics argue it fosters market manipulation and profiteering from others' misfortunes. Yet, its legality in most regions today underscores how regulators find it crucial for supporting market efficiency and liquidity. The practice, proponents say, aids in efficient price discovery, helps prevent market bubbles, and supports risk management. While debates about short selling will no doubt continue, evolving regulatory oversight by the SEC has aimed to balance leveraging its benefits and mitigating potential abuses while ensuring a more transparent and resilient financial market landscape.

https://www.investopedia.com/terms/v/vintage.asp

Vintage: What it is, How it Works, Special Considerations

<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-vintage"></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 Vintage? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Vintage is a slang term used by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mbs.asp">mortgage-backed security</a> (MBS) traders and investors to refer to an MBS that is seasoned over some time period. An MBS typically has a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturity.asp">maturity</a> of around 30 years, and a particular issue's "vintage" exposes the holder to less prepayment and default risk, although this decreased risk also limits price appreciation. </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>Vintage is a colloquial term used to describe mortgage-backed securities (MBS) that have been "seasoned." </li><li>That is, they've been issued long enough, and enough on-time payments have been made, that the risk of default is lower.</li><li>Vintage is the age of an item as it relates to the year it was created. It's a way to assess the inherent risk of an MBS. </li><li>Two MBS with the same vintage may have different levels of assumed risk, however, and as a result, different perceived values. </li></ul></div></div></div> <span class="heading-toc" id="toc-how-vintage-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 Vintage Works </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The underlying loans of certain vintage MBS have unique characteristics, such as <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/real-estate-investing-4689779">burnout</a>, that make the vintage trade at a premium price. These unique characteristics are a result of how underlying assets in MBS are pooled. MBS' underlying assets are generally grouped across certain geographical regions with similar terms to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturity.asp">maturity</a> and interest rates. This makes forecasting payment plans more predictable. </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"> MBS are <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> predominantly issued by a U.S. <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/gse.asp">government-sponsored enterprise</a> (GSE). The investments are comprised of the debt obligations associated with groups of mortgage loans, predominantly residential property loans. The security, representing a particular claim against the principal and interest payments owed by borrowers, is then issued by the creating entity. MBS are traded on the secondary 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_10-0"></div> <span class="heading-toc" id="toc-vintage-as-applied-to-mbs"></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"> Vintage as Applied to MBS </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> The term vintage relates to the age of an item as it relates to the year it was created. If an item was created in 2012, then the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/vintage_year.asp">vintage year</a> is 2012, and its age can be determined by subtracting the vintage year from the current year. </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 variation in the vintages of particular MBS may represent different levels of risk to investors. With the U.S. subprime mortgage crisis that began in 2007, for example, lenders had started originating large numbers of high-risk mortgages from around 2004 to 2007. Loans from those vintage years displayed higher <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/defaultrate.asp">default rates</a>, and were, therefore, riskier, than loans made before and after. </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-special-considerations"></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"> Special Considerations </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_17-0"> While the vintage may be one factor used to determine the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/inherent-risk.asp">inherent risk</a> of a certain MBS, other factors are also considered. In this case, two MBS with the same vintage may have different levels of assumed risk and, therefore, may have different <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/perceived-value.asp">perceived values</a>. Some additional factors include the remaining value of the mortgage pool, the current market value of the properties backing the mortgages and the accrued interest. </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"> An MBS <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/payout.asp">payout</a> schedule varies from many other investment vehicles. While bonds may pay semiannually, annually or at the previously agreed-upon <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>, an MBS pays out to investors on a monthly basis. While a bond payment may only include the earned interest until the maturity date, where a lump sum of the original principal is returned, MBS provide monthly payments of both interest and a portion of the principal. The monthly payment required correlates to the traditional payment schedule of mortgage debtors. </p></div>

## What Is Vintage? Vintage is a slang term used by [mortgage-backed security](https://www.investopedia.com/terms/m/mbs.asp) (MBS) traders and investors to refer to an MBS that is seasoned over some time period. An MBS typically has a [maturity](https://www.investopedia.com/terms/m/maturity.asp) of around 30 years, and a particular issue's "vintage" exposes the holder to less prepayment and default risk, although this decreased risk also limits price appreciation. ### Key Takeaways * Vintage is a colloquial term used to describe mortgage-backed securities (MBS) that have been "seasoned." * That is, they've been issued long enough, and enough on-time payments have been made, that the risk of default is lower. * Vintage is the age of an item as it relates to the year it was created. It's a way to assess the inherent risk of an MBS. * Two MBS with the same vintage may have different levels of assumed risk, however, and as a result, different perceived values. ## How Vintage Works The underlying loans of certain vintage MBS have unique characteristics, such as [burnout](https://www.investopedia.com/real-estate-investing-4689779), that make the vintage trade at a premium price. These unique characteristics are a result of how underlying assets in MBS are pooled. MBS' underlying assets are generally grouped across certain geographical regions with similar terms to [maturity](https://www.investopedia.com/terms/m/maturity.asp) and interest rates. This makes forecasting payment plans more predictable. MBS are [investment vehicles](https://www.investopedia.com/terms/i/investmentvehicle.asp) predominantly issued by a U.S. [government-sponsored enterprise](https://www.investopedia.com/terms/g/gse.asp) (GSE). The investments are comprised of the debt obligations associated with groups of mortgage loans, predominantly residential property loans. The security, representing a particular claim against the principal and interest payments owed by borrowers, is then issued by the creating entity. MBS are traded on the secondary market. ## Vintage as Applied to MBS The term vintage relates to the age of an item as it relates to the year it was created. If an item was created in 2012, then the [vintage year](https://www.investopedia.com/terms/v/vintage_year.asp) is 2012, and its age can be determined by subtracting the vintage year from the current year. The variation in the vintages of particular MBS may represent different levels of risk to investors. With the U.S. subprime mortgage crisis that began in 2007, for example, lenders had started originating large numbers of high-risk mortgages from around 2004 to 2007. Loans from those vintage years displayed higher [default rates](https://www.investopedia.com/terms/d/defaultrate.asp), and were, therefore, riskier, than loans made before and after. ## Special Considerations While the vintage may be one factor used to determine the [inherent risk](https://www.investopedia.com/terms/i/inherent-risk.asp) of a certain MBS, other factors are also considered. In this case, two MBS with the same vintage may have different levels of assumed risk and, therefore, may have different [perceived values](https://www.investopedia.com/terms/p/perceived-value.asp). Some additional factors include the remaining value of the mortgage pool, the current market value of the properties backing the mortgages and the accrued interest. An MBS [payout](https://www.investopedia.com/terms/p/payout.asp) schedule varies from many other investment vehicles. While bonds may pay semiannually, annually or at the previously agreed-upon [maturity date](https://www.investopedia.com/terms/m/maturitydate.asp), an MBS pays out to investors on a monthly basis. While a bond payment may only include the earned interest until the maturity date, where a lump sum of the original principal is returned, MBS provide monthly payments of both interest and a portion of the principal. The monthly payment required correlates to the traditional payment schedule of mortgage debtors.

What Is Vintage? Vintage is a slang term used by mortgage-backed security (MBS) traders and investors to refer to an MBS that is seasoned over some time period. An MBS typically has a maturity of around 30 years, and a particular issue's "vintage" exposes the holder to less prepayment and default risk, although this decreased risk also limits price appreciation. Key Takeaways Vintage is a colloquial term used to describe mortgage-backed securities (MBS) that have been "seasoned." That is, they've been issued long enough, and enough on-time payments have been made, that the risk of default is lower.Vintage is the age of an item as it relates to the year it was created. It's a way to assess the inherent risk of an MBS. Two MBS with the same vintage may have different levels of assumed risk, however, and as a result, different perceived values. How Vintage Works The underlying loans of certain vintage MBS have unique characteristics, such as burnout, that make the vintage trade at a premium price. These unique characteristics are a result of how underlying assets in MBS are pooled. MBS' underlying assets are generally grouped across certain geographical regions with similar terms to maturity and interest rates. This makes forecasting payment plans more predictable. MBS are investment vehicles predominantly issued by a U.S. government-sponsored enterprise (GSE). The investments are comprised of the debt obligations associated with groups of mortgage loans, predominantly residential property loans. The security, representing a particular claim against the principal and interest payments owed by borrowers, is then issued by the creating entity. MBS are traded on the secondary market. Vintage as Applied to MBS The term vintage relates to the age of an item as it relates to the year it was created. If an item was created in 2012, then the vintage year is 2012, and its age can be determined by subtracting the vintage year from the current year. The variation in the vintages of particular MBS may represent different levels of risk to investors. With the U.S. subprime mortgage crisis that began in 2007, for example, lenders had started originating large numbers of high-risk mortgages from around 2004 to 2007. Loans from those vintage years displayed higher default rates, and were, therefore, riskier, than loans made before and after. Special Considerations While the vintage may be one factor used to determine the inherent risk of a certain MBS, other factors are also considered. In this case, two MBS with the same vintage may have different levels of assumed risk and, therefore, may have different perceived values. Some additional factors include the remaining value of the mortgage pool, the current market value of the properties backing the mortgages and the accrued interest. An MBS payout schedule varies from many other investment vehicles. While bonds may pay semiannually, annually or at the previously agreed-upon maturity date, an MBS pays out to investors on a monthly basis. While a bond payment may only include the earned interest until the maturity date, where a lump sum of the original principal is returned, MBS provide monthly payments of both interest and a portion of the principal. The monthly payment required correlates to the traditional payment schedule of mortgage debtors.

https://www.investopedia.com/articles/investing/100115/5-recession-resistant-industries.asp

5 Recession Resistant Industries

<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-are-5-recession-resistant-industries"></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 Are 5 Recession Resistant Industries? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> When a recession or an economic slowdown occurs, markets become volatile, leading investors to sell stocks. While some industries are very susceptible to economic cycles, other industries perform well regardless of what's happening with the economy. </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"> Although no company is entirely recession-proof, the following industries tend to see strong performance even when unemployment increases and consumer sentiment falls. Therefore, it's typically an excellent strategy to add companies in these industries to your portfolio when a recession hits, or ideally before one does. </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>While some industries are very susceptible to economic changes, other sectors tend to perform well during recessions.</li><li>However, no company or industry is 100% safe from an economic crisis or recession.</li><li>Consumer staples, including toothpaste, soap, and shampoo, enjoy a steady demand for their products during recessions and other emergencies, such as pandemics.</li><li>Discount stores often do incredibly well during recessions because their staple products are cheaper.</li></ul></div></div></div> <span class="heading-toc" id="toc-1-consumer-staples"></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"> 1. Consumer Staples </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> No matter what happens in the economy, people still need certain household items on a recurring basis. Toothpaste, soap, shampoo, laundry detergent, dish soap, toilet paper, and paper towels. Since these products are always in demand, they're considered <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/consumerstaples.asp">consumer staples</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_10-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Major companies in this sector include Colgate-Palmolive Company (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=cl">CL</a>), <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-trade-procter-and-gamble-pg-5113473">Proctor &amp; Gamble Co</a> (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=pg">PG</a>), and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/markets/012916/how-unilever-makes-money-ul.asp">Unilever N.V</a>. (<a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=un">UN</a>). If you look at the manufacturer of many items in your home, you will find these companies. They each own dozens of major brands that are sold almost everywhere in the world.<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_12-0"></div> <span class="heading-toc" id="toc-2-grocery-stores-and-discount-retailers"></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"> 2. Grocery Stores and Discount Retailers </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Consumer staples have to be purchased somewhere, and many of those purchases happen at grocery stores or large retail chains with locations around the world. The <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/kroger-could-squeeze-short-sellers-after-earnings-4769417">Kroger Company</a> (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=kr">KR</a>), WalMart Stores, Inc. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt">WMT</a>), and Costco Wholesale Corporation (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=cost">COST</a>) are among the largest grocery chains in the United States.<span class="ql-inline-citation" data-cite="5"></span> These powerhouse retail giants collectively bring in hundreds of billions of dollars in revenue. </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-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"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_2-0"><p>No one can guarantee an industry won't tank during a financial crisis, but the grocery and consumer goods industry usually holds up well in times of crisis.</p></div></div></div> <span class="heading-toc" id="toc-3-alcoholic-beverage-manufacturing"></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. Alcoholic Beverage Manufacturing </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Beer, wine, and distilled beverages are <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/profitmargin.asp">high-margin</a> products that are in demand. In recent years, a small group of companies has acquired many of the largest beer and spirit brands around the globe. The largest companies in this sector include Anheuser Busch InBev SA (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=bud">BUD</a>), Heineken N.V. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=heiny">HEINY</a>), and Diageo plc (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=deo">DEO</a>).<span class="ql-inline-citation" data-cite="6"></span> Anheuser-Busch InBev owns brands such as Budweiser, Corona, Stella Artois, Beck’s, Leffe, and Hoegaarden.<span class="ql-inline-citation" data-cite="8"></span> On top of its famous namesake brand, Heineken N.V. owns Amstel, Sol, and Tiger.<span class="ql-inline-citation" data-cite="19"></span> U.K.-based Diageo controls brands including Smirnoff, Johnnie Walker, and Tanqueray.<span class="ql-inline-citation" data-cite="7"></span> If you keep a stocked liquor cabinet at home, you're most likely a customer of these companies. </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"> Keep in mind that drinking habits and preferences change in tough times, and not all manufacturers will benefit equally. In 2008 and 2009, sales of standard-priced beverages suffered the most as people impacted by the recession switched to less expensive drinks.<span class="ql-inline-citation" data-cite="9"></span><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_22-0"></div> <span class="heading-toc" id="toc-4-cosmetics"></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. Cosmetics </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_24-0"> Despite a down economy, people tend to continue spending on cosmetics and beauty products, a phenomenon that has been dubbed the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lipstick-effect.asp">lipstick effect</a>. The theory underlying the lipstick effect is that during economic downturns, consumers trade in big splurges on things like travel for smaller luxuries. </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 largest cosmetics companies include Estee Lauder Companies Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=el">EL</a>), L'Oréal S.A. (<a class="pseudoStyle" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=LRLCY">LRLCY</a>), and Coty Inc. (<a class="pseudoStyle" data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=coty">COTY</a>), a major licensed brand manufacturer. Both of these companies have non-cyclical product portfolios that do well in weak economic conditions, in addition to luxury brands, which thrive in a strong economy. As previously mentioned, Procter &amp; Gamble and Unilever are also major players in the beauty industry. </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-death-and-funeral-services"></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. Death and Funeral Services </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> As the popular saying goes, the only two things that are certain in life are death and taxes. While no one can buy stock in the Internal Revenue Service, investors can purchase shares in companies that profit from death-related services. Carriage Services, Inc. (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=csv">CSV</a>), Service Corporation International (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=sci">SCI</a>), and Matthews International Corp. (<a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=matw">MATW</a>) are three companies that make their revenues from life’s inevitable end.<span class="ql-inline-citation" data-cite="14"></span><span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span> These companies provide caskets and <a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-pay-for-a-funeral-7108073">funeral-related services</a>, whereby their revenue tends to be recession-resistant. </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-the-bottom-line"></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 Bottom Line </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> Although a company can never guarantee that it will generate <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/capitalgain.asp">investment gains</a>, some companies and <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/stocks/08/industries-thrive-on-recession.asp">industries tend to thrive</a> in a recession. Perhaps these companies can help make a well-balanced portfolio more recession (and pandemic) resistant. </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>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. Investors should consider engaging a qualified financial and/or tax professional to determine a suitable investment strategy.</em> </p></div>

## What Are 5 Recession Resistant Industries? When a recession or an economic slowdown occurs, markets become volatile, leading investors to sell stocks. While some industries are very susceptible to economic cycles, other industries perform well regardless of what's happening with the economy. Although no company is entirely recession-proof, the following industries tend to see strong performance even when unemployment increases and consumer sentiment falls. Therefore, it's typically an excellent strategy to add companies in these industries to your portfolio when a recession hits, or ideally before one does. ### Key Takeaways * While some industries are very susceptible to economic changes, other sectors tend to perform well during recessions. * However, no company or industry is 100% safe from an economic crisis or recession. * Consumer staples, including toothpaste, soap, and shampoo, enjoy a steady demand for their products during recessions and other emergencies, such as pandemics. * Discount stores often do incredibly well during recessions because their staple products are cheaper. ## 1. Consumer Staples No matter what happens in the economy, people still need certain household items on a recurring basis. Toothpaste, soap, shampoo, laundry detergent, dish soap, toilet paper, and paper towels. Since these products are always in demand, they're considered [consumer staples](https://www.investopedia.com/terms/c/consumerstaples.asp).  Major companies in this sector include Colgate-Palmolive Company ([CL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=cl)), [Proctor & Gamble Co](https://www.investopedia.com/how-to-trade-procter-and-gamble-pg-5113473) ([PG](https://www.investopedia.com/markets/quote?tvwidgetsymbol=pg)), and [Unilever N.V](https://www.investopedia.com/articles/markets/012916/how-unilever-makes-money-ul.asp). ([UN](https://www.investopedia.com/markets/quote?tvwidgetsymbol=un)). If you look at the manufacturer of many items in your home, you will find these companies. They each own dozens of major brands that are sold almost everywhere in the world. ## 2. Grocery Stores and Discount Retailers Consumer staples have to be purchased somewhere, and many of those purchases happen at grocery stores or large retail chains with locations around the world. The [Kroger Company](https://www.investopedia.com/kroger-could-squeeze-short-sellers-after-earnings-4769417) ([KR](https://www.investopedia.com/markets/quote?tvwidgetsymbol=kr)), WalMart Stores, Inc. ([WMT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=wmt)), and Costco Wholesale Corporation ([COST](https://www.investopedia.com/markets/quote?tvwidgetsymbol=cost)) are among the largest grocery chains in the United States. These powerhouse retail giants collectively bring in hundreds of billions of dollars in revenue. ### No one can guarantee an industry won't tank during a financial crisis, but the grocery and consumer goods industry usually holds up well in times of crisis. ## 3. Alcoholic Beverage Manufacturing Beer, wine, and distilled beverages are [high-margin](https://www.investopedia.com/terms/p/profitmargin.asp) products that are in demand. In recent years, a small group of companies has acquired many of the largest beer and spirit brands around the globe. The largest companies in this sector include Anheuser Busch InBev SA ([BUD](https://www.investopedia.com/markets/quote?tvwidgetsymbol=bud)), Heineken N.V. ([HEINY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=heiny)), and Diageo plc ([DEO](https://www.investopedia.com/markets/quote?tvwidgetsymbol=deo)). Anheuser-Busch InBev owns brands such as Budweiser, Corona, Stella Artois, Beck’s, Leffe, and Hoegaarden. On top of its famous namesake brand, Heineken N.V. owns Amstel, Sol, and Tiger. U.K.-based Diageo controls brands including Smirnoff, Johnnie Walker, and Tanqueray. If you keep a stocked liquor cabinet at home, you're most likely a customer of these companies. Keep in mind that drinking habits and preferences change in tough times, and not all manufacturers will benefit equally. In 2008 and 2009, sales of standard-priced beverages suffered the most as people impacted by the recession switched to less expensive drinks. ## 4. Cosmetics Despite a down economy, people tend to continue spending on cosmetics and beauty products, a phenomenon that has been dubbed the [lipstick effect](https://www.investopedia.com/terms/l/lipstick-effect.asp). The theory underlying the lipstick effect is that during economic downturns, consumers trade in big splurges on things like travel for smaller luxuries. The largest cosmetics companies include Estee Lauder Companies Inc. ([EL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=el)), L'Oréal S.A. ([LRLCY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LRLCY)), and Coty Inc. ([COTY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=coty)), a major licensed brand manufacturer. Both of these companies have non-cyclical product portfolios that do well in weak economic conditions, in addition to luxury brands, which thrive in a strong economy. As previously mentioned, Procter & Gamble and Unilever are also major players in the beauty industry. ## 5. Death and Funeral Services As the popular saying goes, the only two things that are certain in life are death and taxes. While no one can buy stock in the Internal Revenue Service, investors can purchase shares in companies that profit from death-related services. Carriage Services, Inc. ([CSV](https://www.investopedia.com/markets/quote?tvwidgetsymbol=csv)), Service Corporation International ([SCI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=sci)), and Matthews International Corp. ([MATW](https://www.investopedia.com/markets/quote?tvwidgetsymbol=matw)) are three companies that make their revenues from life’s inevitable end. These companies provide caskets and [funeral-related services](https://www.investopedia.com/how-to-pay-for-a-funeral-7108073), whereby their revenue tends to be recession-resistant. ## The Bottom Line Although a company can never guarantee that it will generate [investment gains](https://www.investopedia.com/terms/c/capitalgain.asp), some companies and [industries tend to thrive](https://www.investopedia.com/articles/stocks/08/industries-thrive-on-recession.asp) in a recession. Perhaps these companies can help make a well-balanced portfolio more recession (and pandemic) resistant. *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. Investors should consider engaging a qualified financial and/or tax professional to determine a suitable investment strategy.*

What Are 5 Recession Resistant Industries? When a recession or an economic slowdown occurs, markets become volatile, leading investors to sell stocks. While some industries are very susceptible to economic cycles, other industries perform well regardless of what's happening with the economy. Although no company is entirely recession-proof, the following industries tend to see strong performance even when unemployment increases and consumer sentiment falls. Therefore, it's typically an excellent strategy to add companies in these industries to your portfolio when a recession hits, or ideally before one does. Key Takeaways While some industries are very susceptible to economic changes, other sectors tend to perform well during recessions.However, no company or industry is 100% safe from an economic crisis or recession.Consumer staples, including toothpaste, soap, and shampoo, enjoy a steady demand for their products during recessions and other emergencies, such as pandemics.Discount stores often do incredibly well during recessions because their staple products are cheaper. 1. Consumer Staples No matter what happens in the economy, people still need certain household items on a recurring basis. Toothpaste, soap, shampoo, laundry detergent, dish soap, toilet paper, and paper towels. Since these products are always in demand, they're considered consumer staples.  Major companies in this sector include Colgate-Palmolive Company (CL), Proctor & Gamble Co (PG), and Unilever N.V. (UN). If you look at the manufacturer of many items in your home, you will find these companies. They each own dozens of major brands that are sold almost everywhere in the world. 2. Grocery Stores and Discount Retailers Consumer staples have to be purchased somewhere, and many of those purchases happen at grocery stores or large retail chains with locations around the world. The Kroger Company (KR), WalMart Stores, Inc. (WMT), and Costco Wholesale Corporation (COST) are among the largest grocery chains in the United States. These powerhouse retail giants collectively bring in hundreds of billions of dollars in revenue. No one can guarantee an industry won't tank during a financial crisis, but the grocery and consumer goods industry usually holds up well in times of crisis. 3. Alcoholic Beverage Manufacturing Beer, wine, and distilled beverages are high-margin products that are in demand. In recent years, a small group of companies has acquired many of the largest beer and spirit brands around the globe. The largest companies in this sector include Anheuser Busch InBev SA (BUD), Heineken N.V. (HEINY), and Diageo plc (DEO). Anheuser-Busch InBev owns brands such as Budweiser, Corona, Stella Artois, Beck’s, Leffe, and Hoegaarden. On top of its famous namesake brand, Heineken N.V. owns Amstel, Sol, and Tiger. U.K.-based Diageo controls brands including Smirnoff, Johnnie Walker, and Tanqueray. If you keep a stocked liquor cabinet at home, you're most likely a customer of these companies. Keep in mind that drinking habits and preferences change in tough times, and not all manufacturers will benefit equally. In 2008 and 2009, sales of standard-priced beverages suffered the most as people impacted by the recession switched to less expensive drinks. 4. Cosmetics Despite a down economy, people tend to continue spending on cosmetics and beauty products, a phenomenon that has been dubbed the lipstick effect. The theory underlying the lipstick effect is that during economic downturns, consumers trade in big splurges on things like travel for smaller luxuries. The largest cosmetics companies include Estee Lauder Companies Inc. (EL), L'Oréal S.A. (LRLCY), and Coty Inc. (COTY), a major licensed brand manufacturer. Both of these companies have non-cyclical product portfolios that do well in weak economic conditions, in addition to luxury brands, which thrive in a strong economy. As previously mentioned, Procter & Gamble and Unilever are also major players in the beauty industry. 5. Death and Funeral Services As the popular saying goes, the only two things that are certain in life are death and taxes. While no one can buy stock in the Internal Revenue Service, investors can purchase shares in companies that profit from death-related services. Carriage Services, Inc. (CSV), Service Corporation International (SCI), and Matthews International Corp. (MATW) are three companies that make their revenues from life’s inevitable end. These companies provide caskets and funeral-related services, whereby their revenue tends to be recession-resistant. The Bottom Line Although a company can never guarantee that it will generate investment gains, some companies and industries tend to thrive in a recession. Perhaps these companies can help make a well-balanced portfolio more recession (and pandemic) resistant. 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. Investors should consider engaging a qualified financial and/or tax professional to determine a suitable investment strategy.

https://www.investopedia.com/cds-vs-etfs-5235444

CDs vs. ETFs: 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-cds-vs-etfs-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"> CDs vs. ETFs: An Overview </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> Certificates of deposit (CDs) and exchange-traded funds (ETFs) are two popular investment options. Both allow you to save some of that extra cash aside while promising you a modest return. They are considered to be low-risk investment vehicles, which means you won't be making a big gamble with your money, and both are easy to acquire in your portfolio. </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"> But, there are some inherent differences between these two investment options, including the level of risk associated with each. CDs offer a guaranteed return while ETFs are susceptible to asset price fluctuations. This makes ETFs riskier than CDs, especially over the short term. Keep in mind, though, that ETFs offer investors more flexibility and higher returns than CDs over the long run. </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 this article, we’ll look at the key differences between CDs and ETFs, so you can choose the investment that is right for you. </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 Takeaway</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_1-0"><ul><li>Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them.</li><li>CDs are low-risk, short-term, low-return investments that are best suited for people looking to save money in the short term or those who want to avoid any kind of risk. </li><li>ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. </li><li>It's best to invest in a CD if you want to access your money in a short amount of time but ETFs provide better returns for long-term investors.</li></ul></div></div></div> <span class="heading-toc" id="toc-cds"></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"> CDs </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> 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</a> is a financial product offered by a bank or financial institution, such as a <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>. When you take out a CD, you agree to leave your money in one place for a set period of time. </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 issuer of your CD will pay you a set interest rate on this money—one that is typically higher than other types of savings accounts. This return is set and guaranteed, regardless of what happens to the stock market. This makes them very low risk. So if you set aside $1,000 in a one-year CD and the bank promises you a 2.5% return upon maturity, that won't change even if the market tanks. </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"> Having said that, it's important to note that CDs tend to offer relatively low returns. This is a feature they share with other types of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/021615/what-safest-investment.asp">safe investments</a>. Banks use the money from CDs to loan out to others. And because the bank guarantees a particular interest rate, they don’t want to make this too high. If they do, and they can’t generate that level of return by investing your money in other ways, they will lose money. </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"> This aspect makes <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/how-to-invest-with-cds-4795661">CDs suitable for very risk-averse investors</a> or those looking to meet specific financial goals. CDs are good for people who have some spare cash that they don’t need right now but will need in a few years.<span class="ql-inline-citation" data-cite="3"></span><br/> </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-important" 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>ETFs are considered liquid investments because you can sell your shares through a brokerage account with little to no associated fees. The downside with CDs is that your money isn’t liquid, which means you have to leave it in the CD for the whole term you’ve agreed to or you’ll have to pay hefty penalties—even if you need your money in an emergency.<span class="ql-inline-citation" data-cite="13"></span><span class="ql-inline-citation" data-cite="12"></span><span class="ql-inline-citation" data-cite="1"></span></p></div></div></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_21-0"> <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_22-0"> An <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/etf.asp">exchange-traded fund</a> is a type of pooled investment security <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/exchangetradedfunds/08/etf-mutual-fund-difference.asp">that operates much like a mutual fund</a>. Unlike the shares of a mutual fund, ETF shares can be purchased or sold on a stock exchange the same way that a regular stock can. </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 are popular investments for people looking for relatively low-risk, low-cost investments. They offer exposure to the stock market, but most are inherently well-diversified. This means they can offer higher rates of return than a CD. Investors should remember that investing in an ETF is still investing in <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/v/volatility.asp">volatile</a> assets and so is inherently risky. </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"> These funds can be structured to track anything. They typically track a particular index, sector, commodity, or other asset. This can be an individual asset or a large and diverse collection or basket of securities. ETFs can even be structured to track specific investment strategies.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> The rate of return offered by ETFs can be quite variable and not guaranteed in any way. Even a low-risk fund might lose much of its value over a few weeks and an economic crisis could adversely affect the value of your shares in the fund for a decade or more. But over several decades, the returns offered by a well-diversified stock portfolio are expected to exceed those of CDs.<span class="ql-inline-citation" data-cite="11"></span><br> </br></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-key-differences"></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"> Key Differences </span> </h2> <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"> Risk </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> CDs are among the safest investments on the market because you get a guaranteed interest rate—no matter what market conditions prevail. Banks that offer CDs may take a hit if the market crashes, but you are still protected by the Federal Deposit Insurance Corporation (FDIC) and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/ncua.asp">National Credit Union Administration (NCUA)</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"> Most ETFs try to mitigate risk differently by diversifying their holdings. ETFs have historically been designed to track a particular index or sector and are generally <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/passivemanagement.asp">passively managed</a> to ensure they track their associated index closely. This makes them far less risky than investing in individual stocks. Keep in mind that this doesn’t eliminate the risk altogether.<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"> In other words, ETFs are relatively low risk in comparison to other ways of putting your money into the stock market, but CDs come with virtually no risk at all. This makes CDs suitable for people looking to invest over the short term, where <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/100314/what-are-key-factors-cause-market-go-and-down.asp">stock market fluctuations</a> could affect the price of a stock portfolio or ETF, or long-term investors who just don’t trust the stock market and want to be as risk-free as possible.<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> <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-note" 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 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>When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your funds on deposit with that institution are protected by the U.S. government if that institution were to fail. Funds invested in ETFs are not protected by either of these agencies at all.<span class="ql-inline-citation" data-cite="5"></span></p></div></div></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"> Investment Time Horizon </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_41-0"> The risk of a given investment is related to the length of time you hold it. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/03/072303.asp">Well-diversified</a> ETFs (and stock portfolios) are considered to be relatively low-risk over the long term because the stock market tends to increase in value. </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"> However, if you are only looking to invest for a few years, a stock market crash (or even a drop in a particular economic sector) can easily wipe out the value of your investment. This makes ETFs a relatively risky choice for short-term investment. </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"> In contrast, CDs are good for short- to medium-term investments. These are investments that last from a few months to one to five years. But once again, there is nothing wrong with using CDs as a long-term investment tool if you want to build a very low-risk portfolio. The downside is that you might just have to put up with low returns.<br/> </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"> Flexibility </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_48-0"> There are two main downsides to CDs. One is that they are very inflexible investment vehicles. Unless you have a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/liquid-certificate-of-deposit.asp">no-penalty CD</a>, you have to leave your money in the CD for the agreed-upon term. Otherwise, you’ll probably have to pay sizable early withdrawal penalties that could wipe out your returns.<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_49-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_50-0"> ETFs, on the other hand, are relatively flexible. This means you can trade ETF shares as often and cash them out whenever you like. You may have to pay a commission or fee for doing so, but it’s generally less than the penalties associated with early withdrawals from CDs. </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"> This flexibility might be attractive if you need to access the money you’ve invested in an emergency. But keep in mind that if you invest in ETFs, there's a potential for loss in addition to making gains. You can pull your money out of the ETF at any time, but there is no guarantee that you won’t lose out since buying your shares, especially if that was quite recently.<br/> </p> <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-are-cds-better-than-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are CDs Better Than ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It depends. CDs are great for people looking to invest their money for a few months or years or build very low-risk portfolios. In general, though, investing in an ETF will offer higher returns in the long run.</p></div> </div> <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-are-cds-safer-than-etfs"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are CDs Safer Than ETFs?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes, much safer. When you take out a CD, the bank or credit union will guarantee your interest rate, making CDs a very low-risk investment. In addition, your funds are federally insured should your bank or credit union fail. In contrast, there is no guarantee that an ETF will increase in value over time and your money is not federally protected.</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-can-cds-decrease-in-value"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can CDs Decrease in Value?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>It’s very unlikely. Nearly every financial institution offers CDs as an option and, like other banking deposits, the Federal Deposit Insurance Corporation insures standard CDs should the bank fail. Therefore, CDs are among the lowest-risk investments and do not lose value.</p></div> </div> <div class="comp mntl-sc-block mntl-sc-block-adslot mntl-block" id="mntl-sc-block_59-0"></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_60-0"> <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_61-0"> Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them. CDs are low-risk, short-term, low-return investments that are suited for people who want to save over the short or mid-term, or those who want to avoid any kind of risk. </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"> ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. If you want to save for retirement, ETFs are the best pick here. If you need the funds soon but have the money to invest now, a CD would likely be a better choice.<br/> </p></div>

## CDs vs. ETFs: An Overview Certificates of deposit (CDs) and exchange-traded funds (ETFs) are two popular investment options. Both allow you to save some of that extra cash aside while promising you a modest return. They are considered to be low-risk investment vehicles, which means you won't be making a big gamble with your money, and both are easy to acquire in your portfolio. But, there are some inherent differences between these two investment options, including the level of risk associated with each. CDs offer a guaranteed return while ETFs are susceptible to asset price fluctuations. This makes ETFs riskier than CDs, especially over the short term. Keep in mind, though, that ETFs offer investors more flexibility and higher returns than CDs over the long run. In this article, we’ll look at the key differences between CDs and ETFs, so you can choose the investment that is right for you. ### Key Takeaway * Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them. * CDs are low-risk, short-term, low-return investments that are best suited for people looking to save money in the short term or those who want to avoid any kind of risk. * ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. * It's best to invest in a CD if you want to access your money in a short amount of time but ETFs provide better returns for long-term investors. ## CDs A [certificate of deposit](https://www.investopedia.com/terms/c/certificateofdeposit.asp) is a financial product offered by a bank or financial institution, such as a [credit union](https://www.investopedia.com/terms/c/creditunion.asp). When you take out a CD, you agree to leave your money in one place for a set period of time. The issuer of your CD will pay you a set interest rate on this money—one that is typically higher than other types of savings accounts. This return is set and guaranteed, regardless of what happens to the stock market. This makes them very low risk. So if you set aside $1,000 in a one-year CD and the bank promises you a 2.5% return upon maturity, that won't change even if the market tanks. Having said that, it's important to note that CDs tend to offer relatively low returns. This is a feature they share with other types of [safe investments](https://www.investopedia.com/ask/answers/021615/what-safest-investment.asp). Banks use the money from CDs to loan out to others. And because the bank guarantees a particular interest rate, they don’t want to make this too high. If they do, and they can’t generate that level of return by investing your money in other ways, they will lose money. This aspect makes [CDs suitable for very risk-averse investors](https://www.investopedia.com/how-to-invest-with-cds-4795661) or those looking to meet specific financial goals. CDs are good for people who have some spare cash that they don’t need right now but will need in a few years. ### ETFs are considered liquid investments because you can sell your shares through a brokerage account with little to no associated fees. The downside with CDs is that your money isn’t liquid, which means you have to leave it in the CD for the whole term you’ve agreed to or you’ll have to pay hefty penalties—even if you need your money in an emergency. ## ETFs An [exchange-traded fund](https://www.investopedia.com/terms/e/etf.asp) is a type of pooled investment security [that operates much like a mutual fund](https://www.investopedia.com/articles/exchangetradedfunds/08/etf-mutual-fund-difference.asp). Unlike the shares of a mutual fund, ETF shares can be purchased or sold on a stock exchange the same way that a regular stock can. ETFs are popular investments for people looking for relatively low-risk, low-cost investments. They offer exposure to the stock market, but most are inherently well-diversified. This means they can offer higher rates of return than a CD. Investors should remember that investing in an ETF is still investing in [volatile](https://www.investopedia.com/terms/v/volatility.asp) assets and so is inherently risky. These funds can be structured to track anything. They typically track a particular index, sector, commodity, or other asset. This can be an individual asset or a large and diverse collection or basket of securities. ETFs can even be structured to track specific investment strategies. The rate of return offered by ETFs can be quite variable and not guaranteed in any way. Even a low-risk fund might lose much of its value over a few weeks and an economic crisis could adversely affect the value of your shares in the fund for a decade or more. But over several decades, the returns offered by a well-diversified stock portfolio are expected to exceed those of CDs. ## Key Differences ### Risk CDs are among the safest investments on the market because you get a guaranteed interest rate—no matter what market conditions prevail. Banks that offer CDs may take a hit if the market crashes, but you are still protected by the Federal Deposit Insurance Corporation (FDIC) and the [National Credit Union Administration (NCUA)](https://www.investopedia.com/terms/n/ncua.asp). Most ETFs try to mitigate risk differently by diversifying their holdings. ETFs have historically been designed to track a particular index or sector and are generally [passively managed](https://www.investopedia.com/terms/p/passivemanagement.asp) to ensure they track their associated index closely. This makes them far less risky than investing in individual stocks. Keep in mind that this doesn’t eliminate the risk altogether. In other words, ETFs are relatively low risk in comparison to other ways of putting your money into the stock market, but CDs come with virtually no risk at all. This makes CDs suitable for people looking to invest over the short term, where [stock market fluctuations](https://www.investopedia.com/ask/answers/100314/what-are-key-factors-cause-market-go-and-down.asp) could affect the price of a stock portfolio or ETF, or long-term investors who just don’t trust the stock market and want to be as risk-free as possible. ### Note When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your funds on deposit with that institution are protected by the U.S. government if that institution were to fail. Funds invested in ETFs are not protected by either of these agencies at all. ### Investment Time Horizon The risk of a given investment is related to the length of time you hold it. [Well-diversified](https://www.investopedia.com/articles/03/072303.asp) ETFs (and stock portfolios) are considered to be relatively low-risk over the long term because the stock market tends to increase in value. However, if you are only looking to invest for a few years, a stock market crash (or even a drop in a particular economic sector) can easily wipe out the value of your investment. This makes ETFs a relatively risky choice for short-term investment. In contrast, CDs are good for short- to medium-term investments. These are investments that last from a few months to one to five years. But once again, there is nothing wrong with using CDs as a long-term investment tool if you want to build a very low-risk portfolio. The downside is that you might just have to put up with low returns. ### Flexibility There are two main downsides to CDs. One is that they are very inflexible investment vehicles. Unless you have a [no-penalty CD](https://www.investopedia.com/terms/l/liquid-certificate-of-deposit.asp), you have to leave your money in the CD for the agreed-upon term. Otherwise, you’ll probably have to pay sizable early withdrawal penalties that could wipe out your returns. ETFs, on the other hand, are relatively flexible. This means you can trade ETF shares as often and cash them out whenever you like. You may have to pay a commission or fee for doing so, but it’s generally less than the penalties associated with early withdrawals from CDs. This flexibility might be attractive if you need to access the money you’ve invested in an emergency. But keep in mind that if you invest in ETFs, there's a potential for loss in addition to making gains. You can pull your money out of the ETF at any time, but there is no guarantee that you won’t lose out since buying your shares, especially if that was quite recently. ## Are CDs Better Than ETFs? It depends. CDs are great for people looking to invest their money for a few months or years or build very low-risk portfolios. In general, though, investing in an ETF will offer higher returns in the long run. ## Are CDs Safer Than ETFs? Yes, much safer. When you take out a CD, the bank or credit union will guarantee your interest rate, making CDs a very low-risk investment. In addition, your funds are federally insured should your bank or credit union fail. In contrast, there is no guarantee that an ETF will increase in value over time and your money is not federally protected. ## Can CDs Decrease in Value? It’s very unlikely. Nearly every financial institution offers CDs as an option and, like other banking deposits, the Federal Deposit Insurance Corporation insures standard CDs should the bank fail. Therefore, CDs are among the lowest-risk investments and do not lose value. ## The Bottom Line Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them. CDs are low-risk, short-term, low-return investments that are suited for people who want to save over the short or mid-term, or those who want to avoid any kind of risk. ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. If you want to save for retirement, ETFs are the best pick here. If you need the funds soon but have the money to invest now, a CD would likely be a better choice.

CDs vs. ETFs: An Overview Certificates of deposit (CDs) and exchange-traded funds (ETFs) are two popular investment options. Both allow you to save some of that extra cash aside while promising you a modest return. They are considered to be low-risk investment vehicles, which means you won't be making a big gamble with your money, and both are easy to acquire in your portfolio. But, there are some inherent differences between these two investment options, including the level of risk associated with each. CDs offer a guaranteed return while ETFs are susceptible to asset price fluctuations. This makes ETFs riskier than CDs, especially over the short term. Keep in mind, though, that ETFs offer investors more flexibility and higher returns than CDs over the long run. In this article, we’ll look at the key differences between CDs and ETFs, so you can choose the investment that is right for you. Key Takeaway Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them.CDs are low-risk, short-term, low-return investments that are best suited for people looking to save money in the short term or those who want to avoid any kind of risk. ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. It's best to invest in a CD if you want to access your money in a short amount of time but ETFs provide better returns for long-term investors. CDs A certificate of deposit is a financial product offered by a bank or financial institution, such as a credit union. When you take out a CD, you agree to leave your money in one place for a set period of time. The issuer of your CD will pay you a set interest rate on this money—one that is typically higher than other types of savings accounts. This return is set and guaranteed, regardless of what happens to the stock market. This makes them very low risk. So if you set aside $1,000 in a one-year CD and the bank promises you a 2.5% return upon maturity, that won't change even if the market tanks. Having said that, it's important to note that CDs tend to offer relatively low returns. This is a feature they share with other types of safe investments. Banks use the money from CDs to loan out to others. And because the bank guarantees a particular interest rate, they don’t want to make this too high. If they do, and they can’t generate that level of return by investing your money in other ways, they will lose money. This aspect makes CDs suitable for very risk-averse investors or those looking to meet specific financial goals. CDs are good for people who have some spare cash that they don’t need right now but will need in a few years. ETFs are considered liquid investments because you can sell your shares through a brokerage account with little to no associated fees. The downside with CDs is that your money isn’t liquid, which means you have to leave it in the CD for the whole term you’ve agreed to or you’ll have to pay hefty penalties—even if you need your money in an emergency. ETFs An exchange-traded fund is a type of pooled investment security that operates much like a mutual fund. Unlike the shares of a mutual fund, ETF shares can be purchased or sold on a stock exchange the same way that a regular stock can. ETFs are popular investments for people looking for relatively low-risk, low-cost investments. They offer exposure to the stock market, but most are inherently well-diversified. This means they can offer higher rates of return than a CD. Investors should remember that investing in an ETF is still investing in volatile assets and so is inherently risky. These funds can be structured to track anything. They typically track a particular index, sector, commodity, or other asset. This can be an individual asset or a large and diverse collection or basket of securities. ETFs can even be structured to track specific investment strategies. The rate of return offered by ETFs can be quite variable and not guaranteed in any way. Even a low-risk fund might lose much of its value over a few weeks and an economic crisis could adversely affect the value of your shares in the fund for a decade or more. But over several decades, the returns offered by a well-diversified stock portfolio are expected to exceed those of CDs. Key Differences Risk CDs are among the safest investments on the market because you get a guaranteed interest rate—no matter what market conditions prevail. Banks that offer CDs may take a hit if the market crashes, but you are still protected by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). Most ETFs try to mitigate risk differently by diversifying their holdings. ETFs have historically been designed to track a particular index or sector and are generally passively managed to ensure they track their associated index closely. This makes them far less risky than investing in individual stocks. Keep in mind that this doesn’t eliminate the risk altogether. In other words, ETFs are relatively low risk in comparison to other ways of putting your money into the stock market, but CDs come with virtually no risk at all. This makes CDs suitable for people looking to invest over the short term, where stock market fluctuations could affect the price of a stock portfolio or ETF, or long-term investors who just don’t trust the stock market and want to be as risk-free as possible. Note When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your funds on deposit with that institution are protected by the U.S. government if that institution were to fail. Funds invested in ETFs are not protected by either of these agencies at all. Investment Time Horizon The risk of a given investment is related to the length of time you hold it. Well-diversified ETFs (and stock portfolios) are considered to be relatively low-risk over the long term because the stock market tends to increase in value. However, if you are only looking to invest for a few years, a stock market crash (or even a drop in a particular economic sector) can easily wipe out the value of your investment. This makes ETFs a relatively risky choice for short-term investment. In contrast, CDs are good for short- to medium-term investments. These are investments that last from a few months to one to five years. But once again, there is nothing wrong with using CDs as a long-term investment tool if you want to build a very low-risk portfolio. The downside is that you might just have to put up with low returns. Flexibility There are two main downsides to CDs. One is that they are very inflexible investment vehicles. Unless you have a no-penalty CD, you have to leave your money in the CD for the agreed-upon term. Otherwise, you’ll probably have to pay sizable early withdrawal penalties that could wipe out your returns. ETFs, on the other hand, are relatively flexible. This means you can trade ETF shares as often and cash them out whenever you like. You may have to pay a commission or fee for doing so, but it’s generally less than the penalties associated with early withdrawals from CDs. This flexibility might be attractive if you need to access the money you’ve invested in an emergency. But keep in mind that if you invest in ETFs, there's a potential for loss in addition to making gains. You can pull your money out of the ETF at any time, but there is no guarantee that you won’t lose out since buying your shares, especially if that was quite recently. Are CDs Better Than ETFs? It depends. CDs are great for people looking to invest their money for a few months or years or build very low-risk portfolios. In general, though, investing in an ETF will offer higher returns in the long run. Are CDs Safer Than ETFs? Yes, much safer. When you take out a CD, the bank or credit union will guarantee your interest rate, making CDs a very low-risk investment. In addition, your funds are federally insured should your bank or credit union fail. In contrast, there is no guarantee that an ETF will increase in value over time and your money is not federally protected. Can CDs Decrease in Value? It’s very unlikely. Nearly every financial institution offers CDs as an option and, like other banking deposits, the Federal Deposit Insurance Corporation insures standard CDs should the bank fail. Therefore, CDs are among the lowest-risk investments and do not lose value. The Bottom Line Though both CDs and ETFs appear to offer a low-risk, low-cost way to invest your money, there are important differences between them. CDs are low-risk, short-term, low-return investments that are suited for people who want to save over the short or mid-term, or those who want to avoid any kind of risk. ETFs offer both higher risk and (potentially) higher returns for long-term investors who can ride out price fluctuations. If you want to save for retirement, ETFs are the best pick here. If you need the funds soon but have the money to invest now, a CD would likely be a better choice.

https://www.investopedia.com/how-getting-divorced-affects-your-roth-ira-5221173

How Getting Divorced Affects Your Roth IRA

<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 got divorced this year, you might wonder how that will affect your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rothira.asp">Roth individual retirement account (Roth IRA)</a> and that of your partner. The simple answer? It won’t. </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"> The (slightly) more complicated answer is that you will now be filing taxes as a single person (unless you get remarried, of course), but your contribution limits for Roth IRAs will stay the same. The limit is $6,000 in 2022 for those under age 50 (increasing to $6,500 in 2023), or $7,000 for those 50 and older ($7,500 in 2023).<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_5-0"> The only slight complication is that you’ll need to recheck the Roth IRA income limits, because if you were the primary earner in your marriage, then you now might be above the individual income limit. </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"> In this article, we’ll show you how to work that out. </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>Usually, getting divorced does not affect your Roth individual retirement accounts (Roth IRAs). You can keep contributing as you were before.</li><li>The exception is if your individual income is now higher than the income limits for Roth IRAs set by the Internal Revenue Service (IRS).</li><li>You can’t get around this by contributing before your divorce date, because it’s your status on the last day of the tax year that counts.<span class="ql-inline-citation" data-cite="11"></span></li></ul></div></div></div> <span class="heading-toc" id="toc-check-the-roth-ira-income-limits"></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"> Check the Roth IRA Income Limits </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Normally, getting divorced won’t affect your Roth IRA. If you were both making regular contributions before you got divorced, you can both keep doing so afterward. The only complicating factor is that you’ll need to check the Roth IRA income limits for your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/filingstatus.asp">filing status</a>. Here are the limits:<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_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="width: 166px;"></colgroup> <colgroup span="1" style=""></colgroup> <thead> <tr> <th class="mntl-sc-block-table__title" colspan="3">Do You Qualify for a Roth IRA?</th> </tr> <tr> <th><b>Category</b></th> <th><b>Income Range for 2022 Contribution</b></th> <th><b>Income Range for 2023 Contribution</b></th> </tr> </thead> <tbody data-check="0"> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mfj.asp">Married and filing a joint tax return</a></b><b> or </b><b><a class="null" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/q/qualified-widow-or-widower.asp">qualifying widow(er)</a></b></td> <td><b>Full:</b> Less than $204,000 <b>Partial:</b> From $204,000 to less than $214,000 </td> <td><b>Full:</b> Less than $214,000 <b>Partial:</b> From $214,000 to less than $228,000 </td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mfs.asp">Married, filing a separate tax return</a></b><b>, lived with spouse at any time during the year</b></td> <td><b>Full:</b> $0 <b>Partial:</b> Less than $10,000</td> <td><b>Full:</b> $0 <b>Partial:</b> Less than $10,000</td> </tr> <tr> <td><b><a class="null" data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/single.asp">Single</a></b><b>, </b><b><a class="null" data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/h/head_of_household.asp">head of household</a></b><b>, or married filing separately without living with spouse at any time during the year</b></td> <td><b>Full:</b> Less than $129,000 <b>Partial:</b> From $129,000 to less than $144,000 </td> <td><b>Full:</b> Less than $138,000 <b>Partial:</b> From $138,000 to less than $153,000 </td> </tr> </tbody> </table> </div></figure> <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"> It’s important to note that it’s your status on the last day of the year—Dec. 31—that counts. So, even if you got divorced on Dec. 30, you will count as married as far as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/irs.asp">Internal Revenue Service (IRS)</a> is concerned.<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_17-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> After getting divorced, you should check the single row in the table above. If your individual income (or, more precisely, your <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/magi.asp">modified adjusted gross income, or MAGI</a>) is below the full amount, you can contribute up to 100% of your income or the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/personal-finance/081615/basics-roth-ira-contribution-rules.asp">Roth IRA contribution</a> limit, whichever is less. The contribution limit in 2022 is $6,000 ($6,500 in 2023) or $7,000 if age 50 or older ($7,500 in 2023).<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_19-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_20-0"> If your income falls within the partial range, subtract your income from the full level and then divide that amount by the phaseout range to determine the percentage of $6,000 (or $7,000) that you are allowed to contribute. For 2023, use $6,500 (or $7,500).<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"> If your individual income is above the full amount for a given year, you will not be able to contribute to your Roth IRA for that year. </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"> Of course, the opposite might be the case as well. It might be that your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but you fall below the income limit now that you are divorced. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement. </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>Check the Roth IRA contribution limits when you get divorced. Exceeding the contribution limit can cost you a 6% <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/w/withdrawal-penalty.asp">penalty</a> on the excess each year until you rectify the mistake.<span class="ql-inline-citation" data-cite="4"></span></p></div></div></div> <span class="heading-toc" id="toc-understanding-your-filing-status"></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"> Understanding Your Filing Status </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_29-0"> If your individual income will be too high to allow you to contribute to your Roth IRA after you get divorced, you might think that you could get around this by contributing money before your divorce is finalized. </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"> That’s not the case, says <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://www.linkedin.com/in/gailrosen/" rel="sponsored nofollow">Gail Rosen</a>, a CPA in Martinsville, N.J. “The allowable contribution is calculated based on your <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/earnedincome.asp">earned income</a> and filing status at the end of the year,” she explains. This means that whatever filing status you are on the last day of the year counts as your status for the entire <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/taxyear.asp">tax year</a>. </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"> However, this also means that if you have already contributed to the Roth for the year and now your income disqualifies you, you still have time to undo the contribution before the tax year ends. </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 you made an IRA contribution and it becomes unallowable, it must be withdrawn by the due date of the tax return,” Rosen says. “This can occur if, for instance, you are a single person with no earned income,” or if you remarry. </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-questionandanswer mntl-sc-block-questionandanswer" id="mntl-sc-block_37-0"><span class="heading-toc" id="toc-how-do-roth-individual-retirement-accounts-roth-iras-work-when-i-get-divorced"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Do Roth Individual Retirement Accounts (Roth IRAs) Work When I Get Divorced?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>There is no special type of <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> for spouses. Instead, the rule allows spouses who do not earn a taxable income to contribute to a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/spousal-ira.asp">spousal IRA</a>, <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/retirement/roth-vs-traditional-ira-which-is-right-for-you/">either traditional or Roth</a>, provided that they file a joint tax return with their working spouse. IRAs opened under spousal IRA rules are not co-owned. Your “married” Roth IRA as a married person is exactly the same account as your “divorced” IRA.</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-what-happens-to-my-ira-when-i-get-divorced"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Happens to My IRA When I Get Divorced?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The “I” in IRA stands for “individual,” so even after you get divorced, the account doesn’t change. After you get divorced, however, you can contribute to your own IRA up to your annual contribution limit.</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-can-divorce-make-me-eligible-for-a-roth-ira"></span> <h2 class="mntl-sc-block-questionandanswer__question">Can Divorce Make Me Eligible for a Roth IRA?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Yes. Perhaps your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but now that you are divorced, you fall below the income limit. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement.</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"> Normally, getting divorced won’t affect your Roth IRAs. You can keep contributing as you were before: up to $6,000 in 2022 if you are under age 50 ($6,500 in 2023), or $7,000 if 50 or older ($7,500 in 2023). The exception is if your individual income is now higher than the income limits for Roth IRAs set by the IRS.<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_45-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_46-0"> You can’t get around this by contributing before your divorce is finalized, because it’s your status on the last day of the tax year that counts. There are, however, indirect ways of contributing to your Roth IRA, even if you are above the income limits. Learn the income limits and possible strategies that you can use to contribute to a Roth IRA. </p></div>

If you got divorced this year, you might wonder how that will affect your [Roth individual retirement account (Roth IRA)](https://www.investopedia.com/terms/r/rothira.asp) and that of your partner. The simple answer? It won’t. The (slightly) more complicated answer is that you will now be filing taxes as a single person (unless you get remarried, of course), but your contribution limits for Roth IRAs will stay the same. The limit is $6,000 in 2022 for those under age 50 (increasing to $6,500 in 2023), or $7,000 for those 50 and older ($7,500 in 2023). The only slight complication is that you’ll need to recheck the Roth IRA income limits, because if you were the primary earner in your marriage, then you now might be above the individual income limit. In this article, we’ll show you how to work that out. ### Key Takeaways * Usually, getting divorced does not affect your Roth individual retirement accounts (Roth IRAs). You can keep contributing as you were before. * The exception is if your individual income is now higher than the income limits for Roth IRAs set by the Internal Revenue Service (IRS). * You can’t get around this by contributing before your divorce date, because it’s your status on the last day of the tax year that counts. ## Check the Roth IRA Income Limits Normally, getting divorced won’t affect your Roth IRA. If you were both making regular contributions before you got divorced, you can both keep doing so afterward. The only complicating factor is that you’ll need to check the Roth IRA income limits for your [filing status](https://www.investopedia.com/terms/f/filingstatus.asp). Here are the limits: | Do You Qualify for a Roth IRA? | | | | --- | --- | --- | | **Category** | **Income Range for 2022 Contribution** | **Income Range for 2023 Contribution** | | **[Married and filing a joint tax return](https://www.investopedia.com/terms/m/mfj.asp)** **or** **[qualifying widow(er)](https://www.investopedia.com/terms/q/qualified-widow-or-widower.asp)** | **Full:** Less than $204,000 **Partial:** From $204,000 to less than $214,000 | **Full:** Less than $214,000 **Partial:** From $214,000 to less than $228,000 | | **[Married, filing a separate tax return](https://www.investopedia.com/terms/m/mfs.asp)****, lived with spouse at any time during the year** | **Full:** $0 **Partial:** Less than $10,000 | **Full:** $0 **Partial:** Less than $10,000 | | **[Single](https://www.investopedia.com/terms/s/single.asp)****,** **[head of household](https://www.investopedia.com/terms/h/head_of_household.asp)****, or married filing separately without living with spouse at any time during the year** | **Full:** Less than $129,000 **Partial:** From $129,000 to less than $144,000 | **Full:** Less than $138,000 **Partial:** From $138,000 to less than $153,000 | It’s important to note that it’s your status on the last day of the year—Dec. 31—that counts. So, even if you got divorced on Dec. 30, you will count as married as far as the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp) is concerned. After getting divorced, you should check the single row in the table above. If your individual income (or, more precisely, your [modified adjusted gross income, or MAGI](https://www.investopedia.com/terms/m/magi.asp)) is below the full amount, you can contribute up to 100% of your income or the [Roth IRA contribution](https://www.investopedia.com/articles/personal-finance/081615/basics-roth-ira-contribution-rules.asp) limit, whichever is less. The contribution limit in 2022 is $6,000 ($6,500 in 2023) or $7,000 if age 50 or older ($7,500 in 2023). If your income falls within the partial range, subtract your income from the full level and then divide that amount by the phaseout range to determine the percentage of $6,000 (or $7,000) that you are allowed to contribute. For 2023, use $6,500 (or $7,500). If your individual income is above the full amount for a given year, you will not be able to contribute to your Roth IRA for that year. Of course, the opposite might be the case as well. It might be that your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but you fall below the income limit now that you are divorced. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement. ### Check the Roth IRA contribution limits when you get divorced. Exceeding the contribution limit can cost you a 6% [penalty](https://www.investopedia.com/terms/w/withdrawal-penalty.asp) on the excess each year until you rectify the mistake. ## Understanding Your Filing Status If your individual income will be too high to allow you to contribute to your Roth IRA after you get divorced, you might think that you could get around this by contributing money before your divorce is finalized. That’s not the case, says [Gail Rosen](https://www.linkedin.com/in/gailrosen/), a CPA in Martinsville, N.J. “The allowable contribution is calculated based on your [earned income](https://www.investopedia.com/terms/e/earnedincome.asp) and filing status at the end of the year,” she explains. This means that whatever filing status you are on the last day of the year counts as your status for the entire [tax year](https://www.investopedia.com/terms/t/taxyear.asp). However, this also means that if you have already contributed to the Roth for the year and now your income disqualifies you, you still have time to undo the contribution before the tax year ends. “If you made an IRA contribution and it becomes unallowable, it must be withdrawn by the due date of the tax return,” Rosen says. “This can occur if, for instance, you are a single person with no earned income,” or if you remarry. ## How Do Roth Individual Retirement Accounts (Roth IRAs) Work When I Get Divorced? There is no special type of [individual retirement account (IRA)](https://www.investopedia.com/terms/i/ira.asp) for spouses. Instead, the rule allows spouses who do not earn a taxable income to contribute to a [spousal IRA](https://www.investopedia.com/terms/s/spousal-ira.asp), [either traditional or Roth](https://www.investopedia.com/retirement/roth-vs-traditional-ira-which-is-right-for-you/), provided that they file a joint tax return with their working spouse. IRAs opened under spousal IRA rules are not co-owned. Your “married” Roth IRA as a married person is exactly the same account as your “divorced” IRA. ## What Happens to My IRA When I Get Divorced? The “I” in IRA stands for “individual,” so even after you get divorced, the account doesn’t change. After you get divorced, however, you can contribute to your own IRA up to your annual contribution limit. ## Can Divorce Make Me Eligible for a Roth IRA? Yes. Perhaps your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but now that you are divorced, you fall below the income limit. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement. ## The Bottom Line Normally, getting divorced won’t affect your Roth IRAs. You can keep contributing as you were before: up to $6,000 in 2022 if you are under age 50 ($6,500 in 2023), or $7,000 if 50 or older ($7,500 in 2023). The exception is if your individual income is now higher than the income limits for Roth IRAs set by the IRS. You can’t get around this by contributing before your divorce is finalized, because it’s your status on the last day of the tax year that counts. There are, however, indirect ways of contributing to your Roth IRA, even if you are above the income limits. Learn the income limits and possible strategies that you can use to contribute to a Roth IRA.

If you got divorced this year, you might wonder how that will affect your Roth individual retirement account (Roth IRA) and that of your partner. The simple answer? It won’t. The (slightly) more complicated answer is that you will now be filing taxes as a single person (unless you get remarried, of course), but your contribution limits for Roth IRAs will stay the same. The limit is $6,000 in 2022 for those under age 50 (increasing to $6,500 in 2023), or $7,000 for those 50 and older ($7,500 in 2023). The only slight complication is that you’ll need to recheck the Roth IRA income limits, because if you were the primary earner in your marriage, then you now might be above the individual income limit. In this article, we’ll show you how to work that out. Key Takeaways Usually, getting divorced does not affect your Roth individual retirement accounts (Roth IRAs). You can keep contributing as you were before.The exception is if your individual income is now higher than the income limits for Roth IRAs set by the Internal Revenue Service (IRS).You can’t get around this by contributing before your divorce date, because it’s your status on the last day of the tax year that counts. Check the Roth IRA Income Limits Normally, getting divorced won’t affect your Roth IRA. If you were both making regular contributions before you got divorced, you can both keep doing so afterward. The only complicating factor is that you’ll need to check the Roth IRA income limits for your filing status. Here are the limits: Do You Qualify for a Roth IRA? Category Income Range for 2022 Contribution Income Range for 2023 Contribution Married and filing a joint tax return or qualifying widow(er) Full: Less than $204,000 Partial: From $204,000 to less than $214,000  Full: Less than $214,000 Partial: From $214,000 to less than $228,000  Married, filing a separate tax return, lived with spouse at any time during the year Full: $0 Partial: Less than $10,000 Full: $0 Partial: Less than $10,000 Single, head of household, or married filing separately without living with spouse at any time during the year Full: Less than $129,000 Partial: From $129,000 to less than $144,000  Full: Less than $138,000 Partial: From $138,000 to less than $153,000  It’s important to note that it’s your status on the last day of the year—Dec. 31—that counts. So, even if you got divorced on Dec. 30, you will count as married as far as the Internal Revenue Service (IRS) is concerned. After getting divorced, you should check the single row in the table above. If your individual income (or, more precisely, your modified adjusted gross income, or MAGI) is below the full amount, you can contribute up to 100% of your income or the Roth IRA contribution limit, whichever is less. The contribution limit in 2022 is $6,000 ($6,500 in 2023) or $7,000 if age 50 or older ($7,500 in 2023). If your income falls within the partial range, subtract your income from the full level and then divide that amount by the phaseout range to determine the percentage of $6,000 (or $7,000) that you are allowed to contribute. For 2023, use $6,500 (or $7,500). If your individual income is above the full amount for a given year, you will not be able to contribute to your Roth IRA for that year. Of course, the opposite might be the case as well. It might be that your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but you fall below the income limit now that you are divorced. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement. Check the Roth IRA contribution limits when you get divorced. Exceeding the contribution limit can cost you a 6% penalty on the excess each year until you rectify the mistake. Understanding Your Filing Status If your individual income will be too high to allow you to contribute to your Roth IRA after you get divorced, you might think that you could get around this by contributing money before your divorce is finalized. That’s not the case, says Gail Rosen, a CPA in Martinsville, N.J. “The allowable contribution is calculated based on your earned income and filing status at the end of the year,” she explains. This means that whatever filing status you are on the last day of the year counts as your status for the entire tax year. However, this also means that if you have already contributed to the Roth for the year and now your income disqualifies you, you still have time to undo the contribution before the tax year ends. “If you made an IRA contribution and it becomes unallowable, it must be withdrawn by the due date of the tax return,” Rosen says. “This can occur if, for instance, you are a single person with no earned income,” or if you remarry. How Do Roth Individual Retirement Accounts (Roth IRAs) Work When I Get Divorced? There is no special type of individual retirement account (IRA) for spouses. Instead, the rule allows spouses who do not earn a taxable income to contribute to a spousal IRA, either traditional or Roth, provided that they file a joint tax return with their working spouse. IRAs opened under spousal IRA rules are not co-owned. Your “married” Roth IRA as a married person is exactly the same account as your “divorced” IRA. What Happens to My IRA When I Get Divorced? The “I” in IRA stands for “individual,” so even after you get divorced, the account doesn’t change. After you get divorced, however, you can contribute to your own IRA up to your annual contribution limit. Can Divorce Make Me Eligible for a Roth IRA? Yes. Perhaps your partner was earning too much to allow either of you to contribute to a Roth IRA when you were married, but now that you are divorced, you fall below the income limit. In that case, you should look at whether a Roth IRA is now a good option for you to save for retirement. The Bottom Line Normally, getting divorced won’t affect your Roth IRAs. You can keep contributing as you were before: up to $6,000 in 2022 if you are under age 50 ($6,500 in 2023), or $7,000 if 50 or older ($7,500 in 2023). The exception is if your individual income is now higher than the income limits for Roth IRAs set by the IRS. You can’t get around this by contributing before your divorce is finalized, because it’s your status on the last day of the tax year that counts. There are, however, indirect ways of contributing to your Roth IRA, even if you are above the income limits. Learn the income limits and possible strategies that you can use to contribute to a Roth IRA.

https://www.investopedia.com/terms/y/yieldcurve.asp

Yield Curve: What It Is and How to 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-a-yield-curve"></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 Yield Curve?  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> A yield curve is a line that plots yields, or interest rates, of bonds that have equal credit quality but differing <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/maturitydate.asp">maturity dates</a>. The slope of the yield curve can predict future interest rate changes and economic activity. </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 are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. </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>Yield curves plot interest rates of bonds of equal credit and different maturities. </li><li>Three types of yield curves include normal, inverted, and flat. </li><li>Normal curves point to economic expansion, and downward-sloping curves point to economic recession.<span class="ql-inline-citation" data-cite="3"></span></li><li>Yield curve rates are published on the U.S. Department of the Treasury’s website each trading day.<span class="ql-inline-citation" data-cite="2"></span></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="Yield Curve" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/rPYNoeniJO2MWA0JDRKV09ckfKE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.jpg" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/rPYNoeniJO2MWA0JDRKV09ckfKE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.jpg" data-srcset="https://www.investopedia.com/thmb/XA1UL0K1EF-MvPjsQFM25K0mV6g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.jpg 750w" data-tracking-container="true" height="1000" id="mntl-sc-block-image_1-0" width="1500"/> <noscript> <img alt="Yield Curve" class="img--noscript universal-image__image" height="1000" sizes="750px" src="https://www.investopedia.com/thmb/rPYNoeniJO2MWA0JDRKV09ckfKE=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.jpg" srcset="https://www.investopedia.com/thmb/XA1UL0K1EF-MvPjsQFM25K0mV6g=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.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 / Matthew Collins</p></span> </figcaption></figure> <span class="heading-toc" id="toc-using-a-yield-curve"></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"> Using a Yield Curve </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_10-0"> A <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/070715/what-difference-between-term-structure-and-yield-curve.asp">yield curve is used as a benchmark</a> for other debt in the market, such as mortgage rates or bank lending rates, and can predict changes in economic output and growth. It is easy to <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/052215/how-can-i-create-yield-curve-excel.asp">build an Excel sheet</a> to chart a yield curve and get a visual representation of the curve. </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 most frequently reported yield curve compares the three-month, two-year, five-year, 10-year, and 30-year U.S. Treasury debt. <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="externalLink" href="https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield">Yield curve rates</a> are available at the Treasury's interest rate websites by 6:00 p.m. ET each trading day.<span class="ql-inline-citation" data-cite="5"></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_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-tip" 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>Investors can use the yield curve to make predictions about the economy to make investment decisions.</p></div></div></div> <span class="heading-toc" id="toc-types-of-yield-curves"></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"> Types of Yield Curves </span> </h2> <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"> Normal Yield Curve </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_18-0"> A normal yield curve shows low yields for shorter-maturity bonds and then increases for bonds with a longer maturity, sloping upwards. This curve indicates yields on longer-term bonds continue to rise, responding to periods of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/expansion.asp">economic expansion</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"> As yields increase over time, the points on the curve exhibit the shape of an upward-sloping curve. Sample yields on the curve may include a two-year bond that offers a yield of 1%, a five-year bond that offers a yield of 1.8%, a 10-year bond that offers a yield of 2.5%, a 15-year bond offers a yield of 3.0% and a 20-year bond that offers a yield of 3.5%. </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"> Some bond investors will use a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/r/rolldownreturn.asp">roll-down return strategy</a> and sell a bond as it moves toward its maturity date. Also known as riding the curve, the stragety works in a stable rate environment as the bond's yield falls and the price rises. Investors hope to capture profit from the rise in bond price. </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:63.3%;"> <img alt="Yield Curve" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/hN1O71H5zatbLMcIZfGDVim8Q40=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/hN1O71H5zatbLMcIZfGDVim8Q40=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png" data-srcset="https://www.investopedia.com/thmb/94ZO5n-C8T1n_YogeI91XBkGxzI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png 750w" data-tracking-container="true" height="3959" id="mntl-sc-block-image_2-0" width="6250"/> <noscript> <img alt="Yield Curve" class="img--noscript universal-image__image" height="3959" sizes="750px" src="https://www.investopedia.com/thmb/hN1O71H5zatbLMcIZfGDVim8Q40=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png" srcset="https://www.investopedia.com/thmb/94ZO5n-C8T1n_YogeI91XBkGxzI=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png 750w" width="6250"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_2-0"> <span class="figure-article-caption-owner">Investopedia / Julie Bang</span> </figcaption></figure> <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_3-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>A normal yield curve implies stable economic conditions and a normal <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/economic-cycle.asp">economic cycle</a>. A steep yield curve implies strong economic growth, with conditions often accompanied by higher inflation and higher interest rates.</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"> Inverted Yield Curve </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_28-0"> An inverted yield curve slopes downward, with short-term interest rates exceeding long-term rates. Such a yield curve corresponds to periods of economic recession, where investors expect yields on longer-maturity bonds to trend lower in the future.<span class="ql-inline-citation" data-cite="3"></span> In an economic downturn, investors seeking safe investments tend to purchase longer-dated bonds over short-dated bonds, bidding up the price of longer bonds and driving down their yield. </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:63.3%;"> <img alt="Inverted Yield Curve" class="lazyload universal-image__image" data-click-tracked="true" data-expand="300" data-hi-res-src="https://www.investopedia.com/thmb/taMsJVbRcQFM5YlMBRPye2X5vt4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png" data-img-lightbox="true" data-sizes="750px" data-src="https://www.investopedia.com/thmb/taMsJVbRcQFM5YlMBRPye2X5vt4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png" data-srcset="https://www.investopedia.com/thmb/R_UN2Vdz-ZVijyl0FoputaYvaNE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png 750w" data-tracking-container="true" height="3959" id="mntl-sc-block-image_3-0" width="6250"/> <noscript> <img alt="Inverted Yield Curve" class="img--noscript universal-image__image" height="3959" sizes="750px" src="https://www.investopedia.com/thmb/taMsJVbRcQFM5YlMBRPye2X5vt4=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png" srcset="https://www.investopedia.com/thmb/R_UN2Vdz-ZVijyl0FoputaYvaNE=/750x0/filters:no_upscale():max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png 750w" width="6250"/> </noscript> </div> </div> <figcaption class="comp mntl-figure-caption type--mouse figure-caption figure-article-caption" id="mntl-figure-caption_3-0"> <span class="figure-article-caption-owner"><p>Image by Julie Bang © Investopedia 2019</p></span> </figcaption></figure> <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_4-0"></h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_4-0"><p>An inverted yield curve is rare but suggests a severe economic slowdown. Historically, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/basics/06/invertedyieldcurve.asp">the impact of an inverted yield curve</a> has been a warning of recession.<span class="ql-inline-citation" data-cite="3"></span></p></div></div></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"> Flat Yield Curve </span> </h3> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_34-0"> A flat yield curve reflects similar yields across all maturities, implying an uncertain economic situation. A few intermediate maturities may have slightly higher yields, which causes a slight hump to appear along the flat curve. These humps are usually for mid-term maturities, six months to two years. </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 curve shows little difference in yield to maturity among shorter and longer-term bonds. A two-year bond may offer a yield of 6%, a five-year bond of 6.1%, a 10-year bond of 6%, and a 20-year bond of 6.05%. In times of high uncertainty, investors demand similar yields across all maturities. </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-what-is-a-us-treasury-yield-curve"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is a U.S. Treasury Yield Curve?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The U.S. Treasury yield curve refers to a line chart that depicts the yields of short-term <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/033115/what-are-differences-between-treasury-bond-and-treasury-note-and-treasury-bill-tbill.asp">Treasury bills</a> compared to the yields of long-term Treasury notes and bonds. The chart shows the relationship between the interest rates and the maturities of U.S. Treasury fixed-income securities. The Treasury yield curve is also called the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/termstructure.asp">term structure of interest rates</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-what-is-yield-curve-risk"></span> <h2 class="mntl-sc-block-questionandanswer__question">What Is Yield Curve Risk?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p><a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/y/yieldcurverisk.asp">Yield curve risk</a> refers to the risk investors of fixed-income instruments, such as bonds, experience from an adverse shift in interest rates. Yield curve risk stems from the fact that bond prices and interest rates have an <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/">inverse relationship</a> to one another, as the price of bonds decreases when market interest rates increase and vice versa.</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-can-investors-use-the-yield-curve"></span> <h2 class="mntl-sc-block-questionandanswer__question">How Can Investors Use the Yield Curve?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>Investors can use the yield curve to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/economics/08/yield-curve.asp">make predictions about the economy</a> to make investment decisions. If the bond yield curve indicates an economic slowdown, investors might move their money into defensive assets that traditionally do well during a recession. If the yield curve becomes steep, this might signal future inflation. In this scenario, investors might avoid long-term bonds with a yield that will erode against increased prices.</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"> There are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. The slope of the yield curve <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/libor-curve.asp">predicts interest rate changes</a> and economic activity. Investors can <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/par-yield-curve.asp">use the yield curve to make predictions</a> about the economy to make investment decisions.<br/> </p></div>

## What Is a Yield Curve? A yield curve is a line that plots yields, or interest rates, of bonds that have equal credit quality but differing [maturity dates](https://www.investopedia.com/terms/m/maturitydate.asp). The slope of the yield curve can predict future interest rate changes and economic activity. There are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. ### Key Takeaways * Yield curves plot interest rates of bonds of equal credit and different maturities. * Three types of yield curves include normal, inverted, and flat. * Normal curves point to economic expansion, and downward-sloping curves point to economic recession. * Yield curve rates are published on the U.S. Department of the Treasury’s website each trading day. ![Yield Curve]() :max_bytes(150000):strip_icc()/Yield-Curve-6b685b5093f9425eada22cedf85d4d4f.jpg) Investopedia / Matthew Collins ## Using a Yield Curve A [yield curve is used as a benchmark](https://www.investopedia.com/ask/answers/070715/what-difference-between-term-structure-and-yield-curve.asp) for other debt in the market, such as mortgage rates or bank lending rates, and can predict changes in economic output and growth. It is easy to [build an Excel sheet](https://www.investopedia.com/ask/answers/052215/how-can-i-create-yield-curve-excel.asp) to chart a yield curve and get a visual representation of the curve. The most frequently reported yield curve compares the three-month, two-year, five-year, 10-year, and 30-year U.S. Treasury debt. [Yield curve rates](https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield) are available at the Treasury's interest rate websites by 6:00 p.m. ET each trading day. ### Investors can use the yield curve to make predictions about the economy to make investment decisions. ## Types of Yield Curves ### Normal Yield Curve A normal yield curve shows low yields for shorter-maturity bonds and then increases for bonds with a longer maturity, sloping upwards. This curve indicates yields on longer-term bonds continue to rise, responding to periods of [economic expansion](https://www.investopedia.com/terms/e/expansion.asp). As yields increase over time, the points on the curve exhibit the shape of an upward-sloping curve. Sample yields on the curve may include a two-year bond that offers a yield of 1%, a five-year bond that offers a yield of 1.8%, a 10-year bond that offers a yield of 2.5%, a 15-year bond offers a yield of 3.0% and a 20-year bond that offers a yield of 3.5%. Some bond investors will use a [roll-down return strategy](https://www.investopedia.com/terms/r/rolldownreturn.asp) and sell a bond as it moves toward its maturity date. Also known as riding the curve, the stragety works in a stable rate environment as the bond's yield falls and the price rises. Investors hope to capture profit from the rise in bond price. ![Yield Curve]() :max_bytes(150000):strip_icc()/YieldCurve2-362f5c4053d34d7397fa925c602f1d15.png) Investopedia / Julie Bang ### A normal yield curve implies stable economic conditions and a normal [economic cycle](https://www.investopedia.com/terms/e/economic-cycle.asp). A steep yield curve implies strong economic growth, with conditions often accompanied by higher inflation and higher interest rates. ### Inverted Yield Curve An inverted yield curve slopes downward, with short-term interest rates exceeding long-term rates. Such a yield curve corresponds to periods of economic recession, where investors expect yields on longer-maturity bonds to trend lower in the future. In an economic downturn, investors seeking safe investments tend to purchase longer-dated bonds over short-dated bonds, bidding up the price of longer bonds and driving down their yield. ![Inverted Yield Curve]() :max_bytes(150000):strip_icc()/InvertedYieldCurve2-d9c2792ee73047e0980f238d065630b8.png) Image by Julie Bang © Investopedia 2019 ### An inverted yield curve is rare but suggests a severe economic slowdown. Historically, [the impact of an inverted yield curve](https://www.investopedia.com/articles/basics/06/invertedyieldcurve.asp) has been a warning of recession. ### Flat Yield Curve A flat yield curve reflects similar yields across all maturities, implying an uncertain economic situation. A few intermediate maturities may have slightly higher yields, which causes a slight hump to appear along the flat curve. These humps are usually for mid-term maturities, six months to two years. The curve shows little difference in yield to maturity among shorter and longer-term bonds. A two-year bond may offer a yield of 6%, a five-year bond of 6.1%, a 10-year bond of 6%, and a 20-year bond of 6.05%. In times of high uncertainty, investors demand similar yields across all maturities. ## What Is a U.S. Treasury Yield Curve? The U.S. Treasury yield curve refers to a line chart that depicts the yields of short-term [Treasury bills](https://www.investopedia.com/ask/answers/033115/what-are-differences-between-treasury-bond-and-treasury-note-and-treasury-bill-tbill.asp) compared to the yields of long-term Treasury notes and bonds. The chart shows the relationship between the interest rates and the maturities of U.S. Treasury fixed-income securities. The Treasury yield curve is also called the [term structure of interest rates](https://www.investopedia.com/terms/t/termstructure.asp). ## What Is Yield Curve Risk? [Yield curve risk](https://www.investopedia.com/terms/y/yieldcurverisk.asp) refers to the risk investors of fixed-income instruments, such as bonds, experience from an adverse shift in interest rates. Yield curve risk stems from the fact that bond prices and interest rates have an [inverse relationship](https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/) to one another, as the price of bonds decreases when market interest rates increase and vice versa. ## How Can Investors Use the Yield Curve? Investors can use the yield curve to [make predictions about the economy](https://www.investopedia.com/articles/economics/08/yield-curve.asp) to make investment decisions. If the bond yield curve indicates an economic slowdown, investors might move their money into defensive assets that traditionally do well during a recession. If the yield curve becomes steep, this might signal future inflation. In this scenario, investors might avoid long-term bonds with a yield that will erode against increased prices. ## The Bottom Line There are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. The slope of the yield curve [predicts interest rate changes](https://www.investopedia.com/terms/l/libor-curve.asp) and economic activity. Investors can [use the yield curve to make predictions](https://www.investopedia.com/terms/p/par-yield-curve.asp) about the economy to make investment decisions.

What Is a Yield Curve?  A yield curve is a line that plots yields, or interest rates, of bonds that have equal credit quality but differing maturity dates. The slope of the yield curve can predict future interest rate changes and economic activity. There are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. Key Takeaways Yield curves plot interest rates of bonds of equal credit and different maturities. Three types of yield curves include normal, inverted, and flat. Normal curves point to economic expansion, and downward-sloping curves point to economic recession.Yield curve rates are published on the U.S. Department of the Treasury’s website each trading day. Investopedia / Matthew Collins Using a Yield Curve A yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and can predict changes in economic output and growth. It is easy to build an Excel sheet to chart a yield curve and get a visual representation of the curve. The most frequently reported yield curve compares the three-month, two-year, five-year, 10-year, and 30-year U.S. Treasury debt. Yield curve rates are available at the Treasury's interest rate websites by 6:00 p.m. ET each trading day. Investors can use the yield curve to make predictions about the economy to make investment decisions. Types of Yield Curves Normal Yield Curve A normal yield curve shows low yields for shorter-maturity bonds and then increases for bonds with a longer maturity, sloping upwards. This curve indicates yields on longer-term bonds continue to rise, responding to periods of economic expansion. As yields increase over time, the points on the curve exhibit the shape of an upward-sloping curve. Sample yields on the curve may include a two-year bond that offers a yield of 1%, a five-year bond that offers a yield of 1.8%, a 10-year bond that offers a yield of 2.5%, a 15-year bond offers a yield of 3.0% and a 20-year bond that offers a yield of 3.5%. Some bond investors will use a roll-down return strategy and sell a bond as it moves toward its maturity date. Also known as riding the curve, the stragety works in a stable rate environment as the bond's yield falls and the price rises. Investors hope to capture profit from the rise in bond price. Investopedia / Julie Bang A normal yield curve implies stable economic conditions and a normal economic cycle. A steep yield curve implies strong economic growth, with conditions often accompanied by higher inflation and higher interest rates. Inverted Yield Curve An inverted yield curve slopes downward, with short-term interest rates exceeding long-term rates. Such a yield curve corresponds to periods of economic recession, where investors expect yields on longer-maturity bonds to trend lower in the future. In an economic downturn, investors seeking safe investments tend to purchase longer-dated bonds over short-dated bonds, bidding up the price of longer bonds and driving down their yield. Image by Julie Bang © Investopedia 2019 An inverted yield curve is rare but suggests a severe economic slowdown. Historically, the impact of an inverted yield curve has been a warning of recession. Flat Yield Curve A flat yield curve reflects similar yields across all maturities, implying an uncertain economic situation. A few intermediate maturities may have slightly higher yields, which causes a slight hump to appear along the flat curve. These humps are usually for mid-term maturities, six months to two years. The curve shows little difference in yield to maturity among shorter and longer-term bonds. A two-year bond may offer a yield of 6%, a five-year bond of 6.1%, a 10-year bond of 6%, and a 20-year bond of 6.05%. In times of high uncertainty, investors demand similar yields across all maturities. What Is a U.S. Treasury Yield Curve? The U.S. Treasury yield curve refers to a line chart that depicts the yields of short-term Treasury bills compared to the yields of long-term Treasury notes and bonds. The chart shows the relationship between the interest rates and the maturities of U.S. Treasury fixed-income securities. The Treasury yield curve is also called the term structure of interest rates. What Is Yield Curve Risk? Yield curve risk refers to the risk investors of fixed-income instruments, such as bonds, experience from an adverse shift in interest rates. Yield curve risk stems from the fact that bond prices and interest rates have an inverse relationship to one another, as the price of bonds decreases when market interest rates increase and vice versa. How Can Investors Use the Yield Curve? Investors can use the yield curve to make predictions about the economy to make investment decisions. If the bond yield curve indicates an economic slowdown, investors might move their money into defensive assets that traditionally do well during a recession. If the yield curve becomes steep, this might signal future inflation. In this scenario, investors might avoid long-term bonds with a yield that will erode against increased prices. The Bottom Line There are three main yield curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and flat. The slope of the yield curve predicts interest rate changes and economic activity. Investors can use the yield curve to make predictions about the economy to make investment decisions.

https://www.investopedia.com/terms/c/consumer-credit-protection-act-of-1968.asp

What Is the Consumer Credit Protection Act (CCPA)? 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-consumer-credit-protection-act-of-1968-ccpa"></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 Consumer Credit Protection Act of 1968 (CCPA)? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_2-0"> The Consumer Credit Protection Act Of 1968 (CCPA) is federal legislation that created protections for consumers from banks, <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditcard.asp" rel="noopener noreferrer">credit card</a> companies, and other lenders. The act mandates <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/disclosure.asp" rel="noopener noreferrer">disclosure</a> requirements that must be followed by consumer lenders and auto-leasing firms and has been expanded significantly since its inception in 1968. </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>The Consumer Credit Protection Act Of 1968 (CCPA) protects consumers from harm by creditors, banks, and credit card companies.</li><li>The federal act mandates disclosure requirements that must be followed by consumer lenders and auto-leasing firms.</li><li>The CCPA requires that the total cost of a loan or credit product be disclosed, including how interest is calculated and any fees involved.</li><li>It also prohibits discrimination when considering a loan applicant and bans misleading advertising practices.</li></ul></div></div></div> <span class="heading-toc" id="toc-understanding-the-consumer-credit-protection-act-of-1968-ccpa"></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 Consumer Credit Protection Act of 1968 (CCPA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> The CCPA, in part, regulates the fair reporting of a customer's financial information, as well as prohibiting deceptive advertising and discrimination by <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditor.asp" rel="noopener noreferrer">creditors</a>. It also makes the terms of loans more transparent to borrowers who may not be well-versed in finance or banking—the CCPA requires <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financialinstitution.asp" rel="noopener noreferrer">financial institutions</a> to explain finance terminology in terms that are easier to understand for consumers.<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_8-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_9-0"> The CCPA formed the basis for a variety of consumer protection laws covering <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/l/lender.asp" rel="noopener noreferrer">lending</a>, the disclosure of terms and conditions, as well as the collection and sharing of a consumer's credit and borrowing history. Below are some of its major provisions. </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-title-iii"></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"> Title III </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_12-0"> Creditors who want to collect an outstanding debt from an individual would under certain circumstances be able to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/g/garnishment.asp" rel="noopener noreferrer">garnish</a> the person's wages. In other words, the bank could deduct money from a person's paycheck to settle a past-due debt. The CCPA has made this more difficult, limiting the powers that creditors have to initiate garnishment and requiring a court order to be obtained.<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> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Title III restricts the amount of earnings that can be garnished to 25% of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/disposableincome.asp" rel="noopener noreferrer">disposable weekly income</a> after mandatory deductions for taxes or the amount by which disposable earnings are greater than 30 times the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/minimum_wage.asp" rel="noopener noreferrer">minimum wage</a>. Title III ended the practice of creditors snatching a high percentage of wages to pay outstanding debt. However, it does allow up to 50% or 60% garnishment for past-due taxes and child support.<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> <span class="heading-toc" id="toc-the-fair-credit-reporting-act-fcra"></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"> The Fair Credit Reporting Act (FCRA) </span> </h2> <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/f/fair-credit-reporting-act-fcra.asp" rel="noopener noreferrer">The Fair Credit Reporting Act</a> (FCRA) regulates the sharing, storing, and collection of a consumer's credit and financial information. It was passed in 1970 to ensure the accuracy and privacy of the personal information contained in the files of the credit reporting agencies, which store all consumers' <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-history.asp" rel="noopener noreferrer">credit history</a>.<span class="ql-inline-citation" data-cite="14"></span> Both the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are charged with updating and enforcing the act.<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_18-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> Consumers' credit history that includes payments, credit card numbers, and loans are stored in their <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/creditreport.asp" rel="noopener noreferrer">credit report</a>. This report is then used by creditors to review a consumer's financial history and determine whether the individual is <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/credit-worthiness.asp" rel="noopener noreferrer">creditworthy</a>. The collection of the information is also aggregated into a numerical value of creditworthiness called a credit score. </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 FCRA allows consumers to obtain one free copy of their credit report annually to ensure that banks and creditors have reported the consumer's financial history properly. If any information is inaccurate, consumers can dispute it.<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_22-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_23-0"> Credit reporting agencies can disseminate a consumer's financial information under certain circumstances. The FCRA limits the access that parties have to the information in a consumer's credit report. For example, a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/mortgage-company.asp" rel="noopener noreferrer">mortgage company</a> might pull a consumer's credit report if the person is applying for a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/first_mortgage.asp" rel="noopener noreferrer">mortgage</a> to buy a home. However, an employer who would like to view a person's credit report cannot gain access without the expressed permission of the individual.<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_24-0"></div> <span class="heading-toc" id="toc-the-truth-in-lending-act-tila"></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"> The Truth in Lending Act (TILA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_26-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/tila.asp" rel="noopener noreferrer">The Truth in Lending Act</a> (TILA) is a federal law designed to protect and help consumers who are borrowing via a loan or other credit product from a lender or creditor. </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"> The key tenets of TILA concern the disclosure of key pieces of information that are needed to calculate the cost of borrowing for a consumer. TILA requires that lenders disclose the term or length of the loan, as well as the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/apr.asp" rel="noopener noreferrer">annual percentage rate</a> (APR), which represents the total, bottom-line cost to the consumer for the loan, including the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/interest.asp" rel="noopener noreferrer">interest</a> charges and any fees.<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_29-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> Pursuant to the Act, consumer lenders are obligated to inform consumers about APRs—as opposed to the stand-alone interest rate—special or previously hidden loan terms, and the total potential costs to the borrower. In other words, the true cost of the loan or credit facility must be revealed within the documents presented to the consumer before signing. Information regarding periodic <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/b/billing-statement.asp" rel="noopener noreferrer">billing statements</a> must also be disclosed.<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_31-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_32-0"> The goal of TILA is to not only improve transparency but also allow the consumer to be able to shop around to other credit providers for better rates or terms. By establishing a standardized disclosure process for all banks, consumers can more easily compare offers. </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"> Regulations banning deceptive advertising practices for loans fall under TILA, too.<span class="ql-inline-citation" data-cite="9"></span> The act prevents creditors from steering borrowers to the most profitable loans for the banks versus what's best for the consumer.<span class="ql-inline-citation" data-cite="7"></span> TILA also provides consumers with a three-day window to back out of a loan even after signing the paperwork at the closing.<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_35-0"></div> <span class="heading-toc" id="toc-the-equal-credit-opportunity-act-ecoa"></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"> The Equal Credit Opportunity Act (ECOA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_37-0"> <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/ecoa.asp" rel="noopener noreferrer">The Equal Credit Opportunity Act</a> (ECOA), which was enacted in 1974, prohibits discrimination by creditors and lenders when evaluating a loan application for someone. The act forbids using sex, race, color, religion, and any non-creditworthiness determinants when performing a credit evaluation. For example, creditors cannot deny a loan based on the applicant’s age or whether the person is receiving public assistance.<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_38-0"></div> <span class="heading-toc" id="toc-fair-debt-collection-practices-act-fdcpa"></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"> Fair Debt Collection Practices Act (FDCPA) </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/f/fair-debt-collection-practices-act-fdcpa.asp" rel="noopener noreferrer">The Fair Debt Collection Practices Act</a> (FDCPA) is a federal law that limits the actions that third-party <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/debt-collector.asp" rel="noopener noreferrer">debt collectors</a> can take when trying to collect an outstanding debt from a consumer or entity—credit card companies, for example, might outsource the collection of outstanding debts to a third-party debt collector. The FDCPA restricts the scope of the actions by these debt collectors and imposes limits as to the number of times a borrower can be contacted and the time of day that calls can be made to borrowers.<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_41-0"></div> <span class="heading-toc" id="toc-electronic-fund-transfer-act-efta"></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"> Electronic Fund Transfer Act (EFTA) </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_43-0"> <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" rel="noopener noreferrer">The Electronic Fund Transfer Act </a>(EFTA), which was enacted in 1978, protects consumers when they engage in electronic transactions, such as the transfer of funds. The EFTA regulates transfers conducted via <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/atm.asp" rel="noopener noreferrer">automated teller machines</a> (ATMs), debit cards, and automatic withdrawals from bank accounts.<span class="ql-inline-citation" data-cite="12"></span> It also helps consumers to correct transaction errors and limits the liability for a consumer if a card is lost or stolen.<span class="ql-inline-citation" data-cite="15"></span> </p></div>

## What Is the Consumer Credit Protection Act of 1968 (CCPA)? The Consumer Credit Protection Act Of 1968 (CCPA) is federal legislation that created protections for consumers from banks, [credit card](https://www.investopedia.com/terms/c/creditcard.asp) companies, and other lenders. The act mandates [disclosure](https://www.investopedia.com/terms/d/disclosure.asp) requirements that must be followed by consumer lenders and auto-leasing firms and has been expanded significantly since its inception in 1968. ### Key Takeaways * The Consumer Credit Protection Act Of 1968 (CCPA) protects consumers from harm by creditors, banks, and credit card companies. * The federal act mandates disclosure requirements that must be followed by consumer lenders and auto-leasing firms. * The CCPA requires that the total cost of a loan or credit product be disclosed, including how interest is calculated and any fees involved. * It also prohibits discrimination when considering a loan applicant and bans misleading advertising practices. ## Understanding the Consumer Credit Protection Act of 1968 (CCPA) The CCPA, in part, regulates the fair reporting of a customer's financial information, as well as prohibiting deceptive advertising and discrimination by [creditors](https://www.investopedia.com/terms/c/creditor.asp). It also makes the terms of loans more transparent to borrowers who may not be well-versed in finance or banking—the CCPA requires [financial institutions](https://www.investopedia.com/terms/f/financialinstitution.asp) to explain finance terminology in terms that are easier to understand for consumers. The CCPA formed the basis for a variety of consumer protection laws covering [lending](https://www.investopedia.com/terms/l/lender.asp), the disclosure of terms and conditions, as well as the collection and sharing of a consumer's credit and borrowing history. Below are some of its major provisions. ## Title III Creditors who want to collect an outstanding debt from an individual would under certain circumstances be able to [garnish](https://www.investopedia.com/terms/g/garnishment.asp) the person's wages. In other words, the bank could deduct money from a person's paycheck to settle a past-due debt. The CCPA has made this more difficult, limiting the powers that creditors have to initiate garnishment and requiring a court order to be obtained. Title III restricts the amount of earnings that can be garnished to 25% of [disposable weekly income](https://www.investopedia.com/terms/d/disposableincome.asp) after mandatory deductions for taxes or the amount by which disposable earnings are greater than 30 times the [minimum wage](https://www.investopedia.com/terms/m/minimum_wage.asp). Title III ended the practice of creditors snatching a high percentage of wages to pay outstanding debt. However, it does allow up to 50% or 60% garnishment for past-due taxes and child support. ## The Fair Credit Reporting Act (FCRA) [The Fair Credit Reporting Act](https://www.investopedia.com/terms/f/fair-credit-reporting-act-fcra.asp) (FCRA) regulates the sharing, storing, and collection of a consumer's credit and financial information. It was passed in 1970 to ensure the accuracy and privacy of the personal information contained in the files of the credit reporting agencies, which store all consumers' [credit history](https://www.investopedia.com/terms/c/credit-history.asp). Both the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are charged with updating and enforcing the act. Consumers' credit history that includes payments, credit card numbers, and loans are stored in their [credit report](https://www.investopedia.com/terms/c/creditreport.asp). This report is then used by creditors to review a consumer's financial history and determine whether the individual is [creditworthy](https://www.investopedia.com/terms/c/credit-worthiness.asp). The collection of the information is also aggregated into a numerical value of creditworthiness called a credit score. The FCRA allows consumers to obtain one free copy of their credit report annually to ensure that banks and creditors have reported the consumer's financial history properly. If any information is inaccurate, consumers can dispute it. Credit reporting agencies can disseminate a consumer's financial information under certain circumstances. The FCRA limits the access that parties have to the information in a consumer's credit report. For example, a [mortgage company](https://www.investopedia.com/terms/m/mortgage-company.asp) might pull a consumer's credit report if the person is applying for a [mortgage](https://www.investopedia.com/terms/f/first_mortgage.asp) to buy a home. However, an employer who would like to view a person's credit report cannot gain access without the expressed permission of the individual. ## The Truth in Lending Act (TILA) [The Truth in Lending Act](https://www.investopedia.com/terms/t/tila.asp) (TILA) is a federal law designed to protect and help consumers who are borrowing via a loan or other credit product from a lender or creditor. The key tenets of TILA concern the disclosure of key pieces of information that are needed to calculate the cost of borrowing for a consumer. TILA requires that lenders disclose the term or length of the loan, as well as the [annual percentage rate](https://www.investopedia.com/terms/a/apr.asp) (APR), which represents the total, bottom-line cost to the consumer for the loan, including the [interest](https://www.investopedia.com/terms/i/interest.asp) charges and any fees. Pursuant to the Act, consumer lenders are obligated to inform consumers about APRs—as opposed to the stand-alone interest rate—special or previously hidden loan terms, and the total potential costs to the borrower. In other words, the true cost of the loan or credit facility must be revealed within the documents presented to the consumer before signing. Information regarding periodic [billing statements](https://www.investopedia.com/terms/b/billing-statement.asp) must also be disclosed. The goal of TILA is to not only improve transparency but also allow the consumer to be able to shop around to other credit providers for better rates or terms. By establishing a standardized disclosure process for all banks, consumers can more easily compare offers. Regulations banning deceptive advertising practices for loans fall under TILA, too. The act prevents creditors from steering borrowers to the most profitable loans for the banks versus what's best for the consumer. TILA also provides consumers with a three-day window to back out of a loan even after signing the paperwork at the closing. ## The Equal Credit Opportunity Act (ECOA) [The Equal Credit Opportunity Act](https://www.investopedia.com/terms/e/ecoa.asp) (ECOA), which was enacted in 1974, prohibits discrimination by creditors and lenders when evaluating a loan application for someone. The act forbids using sex, race, color, religion, and any non-creditworthiness determinants when performing a credit evaluation. For example, creditors cannot deny a loan based on the applicant’s age or whether the person is receiving public assistance. ## Fair Debt Collection Practices Act (FDCPA) [The Fair Debt Collection Practices Act](https://www.investopedia.com/terms/f/fair-debt-collection-practices-act-fdcpa.asp) (FDCPA) is a federal law that limits the actions that third-party [debt collectors](https://www.investopedia.com/terms/d/debt-collector.asp) can take when trying to collect an outstanding debt from a consumer or entity—credit card companies, for example, might outsource the collection of outstanding debts to a third-party debt collector. The FDCPA restricts the scope of the actions by these debt collectors and imposes limits as to the number of times a borrower can be contacted and the time of day that calls can be made to borrowers.  ## Electronic Fund Transfer Act (EFTA) [The Electronic Fund Transfer Act](https://www.investopedia.com/terms/e/electronic-funds-transfer-act.asp) (EFTA), which was enacted in 1978, protects consumers when they engage in electronic transactions, such as the transfer of funds. The EFTA regulates transfers conducted via [automated teller machines](https://www.investopedia.com/terms/a/atm.asp) (ATMs), debit cards, and automatic withdrawals from bank accounts. It also helps consumers to correct transaction errors and limits the liability for a consumer if a card is lost or stolen.

What Is the Consumer Credit Protection Act of 1968 (CCPA)? The Consumer Credit Protection Act Of 1968 (CCPA) is federal legislation that created protections for consumers from banks, credit card companies, and other lenders. The act mandates disclosure requirements that must be followed by consumer lenders and auto-leasing firms and has been expanded significantly since its inception in 1968. Key Takeaways The Consumer Credit Protection Act Of 1968 (CCPA) protects consumers from harm by creditors, banks, and credit card companies.The federal act mandates disclosure requirements that must be followed by consumer lenders and auto-leasing firms.The CCPA requires that the total cost of a loan or credit product be disclosed, including how interest is calculated and any fees involved.It also prohibits discrimination when considering a loan applicant and bans misleading advertising practices. Understanding the Consumer Credit Protection Act of 1968 (CCPA) The CCPA, in part, regulates the fair reporting of a customer's financial information, as well as prohibiting deceptive advertising and discrimination by creditors. It also makes the terms of loans more transparent to borrowers who may not be well-versed in finance or banking—the CCPA requires financial institutions to explain finance terminology in terms that are easier to understand for consumers. The CCPA formed the basis for a variety of consumer protection laws covering lending, the disclosure of terms and conditions, as well as the collection and sharing of a consumer's credit and borrowing history. Below are some of its major provisions. Title III Creditors who want to collect an outstanding debt from an individual would under certain circumstances be able to garnish the person's wages. In other words, the bank could deduct money from a person's paycheck to settle a past-due debt. The CCPA has made this more difficult, limiting the powers that creditors have to initiate garnishment and requiring a court order to be obtained. Title III restricts the amount of earnings that can be garnished to 25% of disposable weekly income after mandatory deductions for taxes or the amount by which disposable earnings are greater than 30 times the minimum wage. Title III ended the practice of creditors snatching a high percentage of wages to pay outstanding debt. However, it does allow up to 50% or 60% garnishment for past-due taxes and child support. The Fair Credit Reporting Act (FCRA) The Fair Credit Reporting Act (FCRA) regulates the sharing, storing, and collection of a consumer's credit and financial information. It was passed in 1970 to ensure the accuracy and privacy of the personal information contained in the files of the credit reporting agencies, which store all consumers' credit history. Both the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) are charged with updating and enforcing the act. Consumers' credit history that includes payments, credit card numbers, and loans are stored in their credit report. This report is then used by creditors to review a consumer's financial history and determine whether the individual is creditworthy. The collection of the information is also aggregated into a numerical value of creditworthiness called a credit score. The FCRA allows consumers to obtain one free copy of their credit report annually to ensure that banks and creditors have reported the consumer's financial history properly. If any information is inaccurate, consumers can dispute it. Credit reporting agencies can disseminate a consumer's financial information under certain circumstances. The FCRA limits the access that parties have to the information in a consumer's credit report. For example, a mortgage company might pull a consumer's credit report if the person is applying for a mortgage to buy a home. However, an employer who would like to view a person's credit report cannot gain access without the expressed permission of the individual. The Truth in Lending Act (TILA) The Truth in Lending Act (TILA) is a federal law designed to protect and help consumers who are borrowing via a loan or other credit product from a lender or creditor. The key tenets of TILA concern the disclosure of key pieces of information that are needed to calculate the cost of borrowing for a consumer. TILA requires that lenders disclose the term or length of the loan, as well as the annual percentage rate (APR), which represents the total, bottom-line cost to the consumer for the loan, including the interest charges and any fees. Pursuant to the Act, consumer lenders are obligated to inform consumers about APRs—as opposed to the stand-alone interest rate—special or previously hidden loan terms, and the total potential costs to the borrower. In other words, the true cost of the loan or credit facility must be revealed within the documents presented to the consumer before signing. Information regarding periodic billing statements must also be disclosed. The goal of TILA is to not only improve transparency but also allow the consumer to be able to shop around to other credit providers for better rates or terms. By establishing a standardized disclosure process for all banks, consumers can more easily compare offers. Regulations banning deceptive advertising practices for loans fall under TILA, too. The act prevents creditors from steering borrowers to the most profitable loans for the banks versus what's best for the consumer. TILA also provides consumers with a three-day window to back out of a loan even after signing the paperwork at the closing. The Equal Credit Opportunity Act (ECOA) The Equal Credit Opportunity Act (ECOA), which was enacted in 1974, prohibits discrimination by creditors and lenders when evaluating a loan application for someone. The act forbids using sex, race, color, religion, and any non-creditworthiness determinants when performing a credit evaluation. For example, creditors cannot deny a loan based on the applicant’s age or whether the person is receiving public assistance. Fair Debt Collection Practices Act (FDCPA) The Fair Debt Collection Practices Act (FDCPA) is a federal law that limits the actions that third-party debt collectors can take when trying to collect an outstanding debt from a consumer or entity—credit card companies, for example, might outsource the collection of outstanding debts to a third-party debt collector. The FDCPA restricts the scope of the actions by these debt collectors and imposes limits as to the number of times a borrower can be contacted and the time of day that calls can be made to borrowers.  Electronic Fund Transfer Act (EFTA) The Electronic Fund Transfer Act (EFTA), which was enacted in 1978, protects consumers when they engage in electronic transactions, such as the transfer of funds. The EFTA regulates transfers conducted via automated teller machines (ATMs), debit cards, and automatic withdrawals from bank accounts. It also helps consumers to correct transaction errors and limits the liability for a consumer if a card is lost or stolen.

https://www.investopedia.com/ask/answers/111714/what-minimum-amount-money-i-can-invest-mutual-fund.asp

What Is the Minimum Amount For Investing in a Mutual Fund?

<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"> Some mutual funds let investors buy in with no minimum at all—meaning that even $5, $10, or $100 can get you invested. Although there are mutual funds with no minimums, most retail mutual funds do require a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/m/minimum_investment.asp" rel="noopener noreferrer">minimum initial investment</a> of between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more. </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>Many mutual funds require minimum investments in order to participate, ensuring sufficient capitalization and covering of the fund's operating costs.</li><li>These minimums can typically range from $1,000–$3,000 for investors, but they may be significantly larger for institutional investor class funds.</li><li>That said, several mutual funds do now offer $0 minimums.</li></ul></div></div></div> <span class="heading-toc" id="toc-what-is-a-minimum-investment"></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 Minimum Investment? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_6-0"> A minimum investment is the smallest dollar or share quantity that an investor can purchase when investing in a specific security, fund, or opportunity. Often, <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> will require a minimum amount in order to ensure they have enough assets under management (AUM) to achieve their investment goals and cover overhead. This means an investor cannot invest or buy any amount they want; they need to invest or buy at least the minimum amount required. Some funds prefer to cater to smaller clients, with low minimum investment products, while other firms prefer higher minimum investments that are geared toward higher net worth individuals. </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"> For beginning investors, this amount can be difficult to reach and often means their entire account balance is invested in just one fund. These minimum amounts are set by each fund as a means to keep small, short-term trades from affecting cash flows and the fund's daily management. Each fund's minimum is dictated by the style of the fund and its investment objective. However, there are some funds with lower minimums that make mutual fund investing accessible to all investors. </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-examples-of-a-minimum-investment"></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"> Examples of a Minimum Investment </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_11-0"> Kiplinger recommends a few funds that have lower minimum purchase amounts. The Charles Schwab Corporation (SCHW) offers a broad market index fund and a slew of <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/t/target-date_fund.asp">target-date funds</a>, each with no minimum initial purchase.<span class="ql-inline-citation" data-cite="7"></span><span class="ql-inline-citation" data-cite="6"></span> Investors with the ability to invest at least $250 have access to many more funds from many different companies. For example, American Funds offers several solid funds across many different sectors and investment styles, all at this price point.<span class="ql-inline-citation" data-cite="1"></span> All <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/022016/3-dodge-cox-funds-rated-5-stars-morningstar.asp">Dodge &amp; Cox mutual funds</a> require a minimum of $2,500, while many Vanguard mutual funds need $3,000 to get started.<span class="ql-inline-citation" data-cite="4"></span><span class="ql-inline-citation" data-cite="2"></span> Meanwhile, Fidelity offers several mutual funds that have $0 minimums.<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_12-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_13-0"> A mutual fund's minimum also varies depending on the type of account. Some companies have lower initial purchase amounts for IRA accounts. For example, T. Rowe Price (PRNEX) requires a $2,500 minimum initial purchase for its mutual funds held in non-retirement accounts but only $1,000 for retirement accounts like IRAs.<span class="ql-inline-citation" data-cite="5"></span> 529 College savings plans and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/u/utma.asp">Uniform Transfers to Minors Act</a> (UTMA) accounts also usually have much lower fund minimums, and some fund companies even allow the minimum to be met through systematic purchases as low as $25 per month. </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-advisorinsight" 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">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/rebecca-dawson-4692618">Rebecca Dawson</a><br/>Dawson Capital, President, Los Angeles, CA</p> <p>Mutual funds are either closed-end or open-end funds. Closed-end funds issue a set number of shares to the public through an initial public offering (IPO). These shares trade on the open market via market supply and demand. Therefore, they are not subject to minimum investment amounts; the price is reflected by the market and you can buy as many units as you can afford.</p> <p>Open-end funds do not issue a set number of shares and are "open" to new investments, and shares are created or written off as necessary. These funds do enforce a minimum investment, which typically ranges between $1,000–$5,000. The minimum may be substantially lowered or waived altogether if the investment is made in a retirement account or if the investor agrees to automatic, reoccurring investments.</p></div></div></div></div>

Some mutual funds let investors buy in with no minimum at all—meaning that even $5, $10, or $100 can get you invested. Although there are mutual funds with no minimums, most retail mutual funds do require a [minimum initial investment](https://www.investopedia.com/terms/m/minimum_investment.asp) of between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more. ### Key Takeaways * Many mutual funds require minimum investments in order to participate, ensuring sufficient capitalization and covering of the fund's operating costs. * These minimums can typically range from $1,000–$3,000 for investors, but they may be significantly larger for institutional investor class funds. * That said, several mutual funds do now offer $0 minimums. ## What Is a Minimum Investment? A minimum investment is the smallest dollar or share quantity that an investor can purchase when investing in a specific security, fund, or opportunity. Often, [mutual funds](https://www.investopedia.com/terms/m/mutualfund.asp) will require a minimum amount in order to ensure they have enough assets under management (AUM) to achieve their investment goals and cover overhead. This means an investor cannot invest or buy any amount they want; they need to invest or buy at least the minimum amount required. Some funds prefer to cater to smaller clients, with low minimum investment products, while other firms prefer higher minimum investments that are geared toward higher net worth individuals. For beginning investors, this amount can be difficult to reach and often means their entire account balance is invested in just one fund. These minimum amounts are set by each fund as a means to keep small, short-term trades from affecting cash flows and the fund's daily management. Each fund's minimum is dictated by the style of the fund and its investment objective. However, there are some funds with lower minimums that make mutual fund investing accessible to all investors. ## Examples of a Minimum Investment Kiplinger recommends a few funds that have lower minimum purchase amounts. The Charles Schwab Corporation (SCHW) offers a broad market index fund and a slew of [target-date funds](https://www.investopedia.com/terms/t/target-date_fund.asp), each with no minimum initial purchase. Investors with the ability to invest at least $250 have access to many more funds from many different companies. For example, American Funds offers several solid funds across many different sectors and investment styles, all at this price point. All [Dodge & Cox mutual funds](https://www.investopedia.com/articles/investing/022016/3-dodge-cox-funds-rated-5-stars-morningstar.asp) require a minimum of $2,500, while many Vanguard mutual funds need $3,000 to get started. Meanwhile, Fidelity offers several mutual funds that have $0 minimums. A mutual fund's minimum also varies depending on the type of account. Some companies have lower initial purchase amounts for IRA accounts. For example, T. Rowe Price (PRNEX) requires a $2,500 minimum initial purchase for its mutual funds held in non-retirement accounts but only $1,000 for retirement accounts like IRAs. 529 College savings plans and [Uniform Transfers to Minors Act](https://www.investopedia.com/terms/u/utma.asp) (UTMA) accounts also usually have much lower fund minimums, and some fund companies even allow the minimum to be met through systematic purchases as low as $25 per month. ### Advisor Insight [Rebecca Dawson](https://www.investopedia.com/rebecca-dawson-4692618) Dawson Capital, President, Los Angeles, CA Mutual funds are either closed-end or open-end funds. Closed-end funds issue a set number of shares to the public through an initial public offering (IPO). These shares trade on the open market via market supply and demand. Therefore, they are not subject to minimum investment amounts; the price is reflected by the market and you can buy as many units as you can afford. Open-end funds do not issue a set number of shares and are "open" to new investments, and shares are created or written off as necessary. These funds do enforce a minimum investment, which typically ranges between $1,000–$5,000. The minimum may be substantially lowered or waived altogether if the investment is made in a retirement account or if the investor agrees to automatic, reoccurring investments.

Some mutual funds let investors buy in with no minimum at all—meaning that even $5, $10, or $100 can get you invested. Although there are mutual funds with no minimums, most retail mutual funds do require a minimum initial investment of between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more. Key Takeaways Many mutual funds require minimum investments in order to participate, ensuring sufficient capitalization and covering of the fund's operating costs.These minimums can typically range from $1,000–$3,000 for investors, but they may be significantly larger for institutional investor class funds.That said, several mutual funds do now offer $0 minimums. What Is a Minimum Investment? A minimum investment is the smallest dollar or share quantity that an investor can purchase when investing in a specific security, fund, or opportunity. Often, mutual funds will require a minimum amount in order to ensure they have enough assets under management (AUM) to achieve their investment goals and cover overhead. This means an investor cannot invest or buy any amount they want; they need to invest or buy at least the minimum amount required. Some funds prefer to cater to smaller clients, with low minimum investment products, while other firms prefer higher minimum investments that are geared toward higher net worth individuals. For beginning investors, this amount can be difficult to reach and often means their entire account balance is invested in just one fund. These minimum amounts are set by each fund as a means to keep small, short-term trades from affecting cash flows and the fund's daily management. Each fund's minimum is dictated by the style of the fund and its investment objective. However, there are some funds with lower minimums that make mutual fund investing accessible to all investors. Examples of a Minimum Investment Kiplinger recommends a few funds that have lower minimum purchase amounts. The Charles Schwab Corporation (SCHW) offers a broad market index fund and a slew of target-date funds, each with no minimum initial purchase. Investors with the ability to invest at least $250 have access to many more funds from many different companies. For example, American Funds offers several solid funds across many different sectors and investment styles, all at this price point. All Dodge & Cox mutual funds require a minimum of $2,500, while many Vanguard mutual funds need $3,000 to get started. Meanwhile, Fidelity offers several mutual funds that have $0 minimums. A mutual fund's minimum also varies depending on the type of account. Some companies have lower initial purchase amounts for IRA accounts. For example, T. Rowe Price (PRNEX) requires a $2,500 minimum initial purchase for its mutual funds held in non-retirement accounts but only $1,000 for retirement accounts like IRAs. 529 College savings plans and Uniform Transfers to Minors Act (UTMA) accounts also usually have much lower fund minimums, and some fund companies even allow the minimum to be met through systematic purchases as low as $25 per month. Advisor Insight Rebecca DawsonDawson Capital, President, Los Angeles, CA Mutual funds are either closed-end or open-end funds. Closed-end funds issue a set number of shares to the public through an initial public offering (IPO). These shares trade on the open market via market supply and demand. Therefore, they are not subject to minimum investment amounts; the price is reflected by the market and you can buy as many units as you can afford. Open-end funds do not issue a set number of shares and are "open" to new investments, and shares are created or written off as necessary. These funds do enforce a minimum investment, which typically ranges between $1,000–$5,000. The minimum may be substantially lowered or waived altogether if the investment is made in a retirement account or if the investor agrees to automatic, reoccurring investments.

https://www.investopedia.com/didi-global-didi-ipo-what-you-need-to-know-5191083

DiDi Global (DIDI) IPO: 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"><p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_1-0"> Ride-hailing service DiDi Global (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=DIDI">DIDI</a>) made its debut on the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/n/nyse.asp">NYSE</a> on June 30, at $14 a share, valuing the company at $68 billion, making DiDi’s the biggest <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/i/ipo.asp">IPO</a> of a Chinese company listed on an American exchange since Alibaba’s (<a data-component="link" data-ordinal="4" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA">BABA</a>) in 2014, <a data-component="link" data-ordinal="5" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/investing/011215/top-10-largest-global-ipos-all-time.asp">which raised $25 billion</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"> Only a handful of other firms have had larger IPOs over the past decade, including rival ride-hailing powerhouse Uber, which had raked in $8.1 billion, for a valuation of $75 billion. Uber (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=UBER">UBER</a>) began trading on the NYSE on May 10, 2019, at $42 a share. </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>DiDi Global is an app-based ride-hailing services company. </li> <li>It made its public debut on the NYSE on June 30 at a price of $14 a share. </li> <li>The company sold 316.8 million American depository receipts (<a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/adr.asp">ADRs</a>), raising $4.4 billion. </li> <li>Its market value reached $68 billion, in the largest IPO of a Chinese company listed on an American exchange since Alibaba’s (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA">BABA</a>) in 2014.</li> <li>DiDi reported $21.6 billion in revenue in 2020.</li> </ul></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> DiDi was founded in 2012 by former Alibaba Group alumni Will Wei Cheng, who has led the company as CEO since its inception. Headquartered in Beijing, DiDi operates in multiple countries across Asia, Africa, Latin America, Eastern Europe, and Australia.  </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 company’s primary business lies in its app-based ride-hailing service, and has over the years acquired several of its rivals in China and abroad through <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 (M&amp;A)</a>, notably including Kuaidi Dache and Uber China. Though China is home to a number of competing ride-hailing companies like CaoCao Chuxing, Yidao Yongche, Dida Pinche, DiDi is the undisputed market leader and is estimated to control over 90% of the market share of the country’s ride-hailing service segment.  </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 company went public at a time when many of China’s largest tech companies are under increased scrutiny from Chinese regulators, as part of broader <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/a/antitrust.asp">antitrust</a> crackdown resulting in fines and mandatory restructuring for many including Tencent and JD.com, and the suspension of IPO plans of Ant Group in 2020. In its registration filing with the <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/sec.asp">U.S. Securities and Exchange Commission (SEC)</a>, DiDi addressed regulatory uncertainties in the U.S. and in China.<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> <span class="heading-toc" id="toc-financials"></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"> Financials </span> </h2> <ul class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> <li>DiDi earned a profit in the first quarter of 2021, earning 196 million yuan (roughly $30.3 million).</li><li>Annual revenue fell 8.4% to 141.7 billion yuan ($21.6 billion) in 2020.</li><li>DiDi reported annual losses in 2018, 2019, and 2020.</li><li>DiDi’s app boasted nearly 600 million users and driver partners, and an average of 60 million daily trips in 2021.</li><li>Major shareholders include SoftBank Vision Fund (21.5%), Uber (12.8%), Tencent (6.8%). </li> </ul> <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"> DiDi's leadership team CEO Will Wei Cheng, President Jean Qing Liu, and Senior Vice President Stephen Jingshi Zhu cumulatively hold just under 10% of Class B ordinary shares and 52% of total voting power. DiDi's Class B shareholders will be entitled to 10 votes per share. SoftBank and Uber were two of its largest shareholders at the time of its IPO, holding 21.5% and 12.8%, respectively, as well as Tencent with 6.8%. Goldman Sachs, Morgan Stanley, and J.P. Morgan led the IPO as underwriters. </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-competitive-market"></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"> Competitive Market  </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_19-0"> In addition to Uber, DiDi's international ride-hailing competitors include Lyft, Grab, Gojek, and Ola, among others. DiDi competes with Uber in many parts of Latin America, and with Ola in Australia. Uber sold its China-based operations to DiDi in 2016, and ceded much of its Southeast Asian business to Grab in 2018.  </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"> Like some of its international competitors such as Uber, DiDi is also involved in technological research and development related to electric vehicles and autonomous driving. In 2016, the company spun off its autonomous driving unit, and plans to make continued investments in emerging technologies. </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"> DiDi would be hard-pressed to challenge local players with established positions in their home markets, such as Uber in the U.S., or Ola in India. However, its position in China and other countries, particularly in emerging markets where it has a <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/firstmover.asp">first mover</a> advantage, give it a solid foothold from which to expand on its position as of the world’s biggest players in the ride-hailing space.  </p></div>

Ride-hailing service DiDi Global ([DIDI](https://www.investopedia.com/markets/quote?tvwidgetsymbol=DIDI)) made its debut on the [NYSE](https://www.investopedia.com/terms/n/nyse.asp) on June 30, at $14 a share, valuing the company at $68 billion, making DiDi’s the biggest [IPO](https://www.investopedia.com/terms/i/ipo.asp) of a Chinese company listed on an American exchange since Alibaba’s ([BABA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA)) in 2014, [which raised $25 billion](https://www.investopedia.com/articles/investing/011215/top-10-largest-global-ipos-all-time.asp). Only a handful of other firms have had larger IPOs over the past decade, including rival ride-hailing powerhouse Uber, which had raked in $8.1 billion, for a valuation of $75 billion. Uber ([UBER](https://www.investopedia.com/markets/quote?tvwidgetsymbol=UBER)) began trading on the NYSE on May 10, 2019, at $42 a share. ### Key Takeaways * DiDi Global is an app-based ride-hailing services company. * It made its public debut on the NYSE on June 30 at a price of $14 a share. * The company sold 316.8 million American depository receipts ([ADRs](https://www.investopedia.com/terms/a/adr.asp)), raising $4.4 billion. * Its market value reached $68 billion, in the largest IPO of a Chinese company listed on an American exchange since Alibaba’s ([BABA](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BABA)) in 2014. * DiDi reported $21.6 billion in revenue in 2020. DiDi was founded in 2012 by former Alibaba Group alumni Will Wei Cheng, who has led the company as CEO since its inception. Headquartered in Beijing, DiDi operates in multiple countries across Asia, Africa, Latin America, Eastern Europe, and Australia.  The company’s primary business lies in its app-based ride-hailing service, and has over the years acquired several of its rivals in China and abroad through [mergers and acquisitions (M&A)](https://www.investopedia.com/terms/m/mergersandacquisitions.asp), notably including Kuaidi Dache and Uber China. Though China is home to a number of competing ride-hailing companies like CaoCao Chuxing, Yidao Yongche, Dida Pinche, DiDi is the undisputed market leader and is estimated to control over 90% of the market share of the country’s ride-hailing service segment.  The company went public at a time when many of China’s largest tech companies are under increased scrutiny from Chinese regulators, as part of broader [antitrust](https://www.investopedia.com/terms/a/antitrust.asp) crackdown resulting in fines and mandatory restructuring for many including Tencent and JD.com, and the suspension of IPO plans of Ant Group in 2020. In its registration filing with the [U.S. Securities and Exchange Commission (SEC)](https://www.investopedia.com/terms/s/sec.asp), DiDi addressed regulatory uncertainties in the U.S. and in China. ## Financials * DiDi earned a profit in the first quarter of 2021, earning 196 million yuan (roughly $30.3 million). * Annual revenue fell 8.4% to 141.7 billion yuan ($21.6 billion) in 2020. * DiDi reported annual losses in 2018, 2019, and 2020. * DiDi’s app boasted nearly 600 million users and driver partners, and an average of 60 million daily trips in 2021. * Major shareholders include SoftBank Vision Fund (21.5%), Uber (12.8%), Tencent (6.8%). DiDi's leadership team CEO Will Wei Cheng, President Jean Qing Liu, and Senior Vice President Stephen Jingshi Zhu cumulatively hold just under 10% of Class B ordinary shares and 52% of total voting power. DiDi's Class B shareholders will be entitled to 10 votes per share. SoftBank and Uber were two of its largest shareholders at the time of its IPO, holding 21.5% and 12.8%, respectively, as well as Tencent with 6.8%. Goldman Sachs, Morgan Stanley, and J.P. Morgan led the IPO as underwriters. ## Competitive Market In addition to Uber, DiDi's international ride-hailing competitors include Lyft, Grab, Gojek, and Ola, among others. DiDi competes with Uber in many parts of Latin America, and with Ola in Australia. Uber sold its China-based operations to DiDi in 2016, and ceded much of its Southeast Asian business to Grab in 2018.  Like some of its international competitors such as Uber, DiDi is also involved in technological research and development related to electric vehicles and autonomous driving. In 2016, the company spun off its autonomous driving unit, and plans to make continued investments in emerging technologies. ## The Bottom Line DiDi would be hard-pressed to challenge local players with established positions in their home markets, such as Uber in the U.S., or Ola in India. However, its position in China and other countries, particularly in emerging markets where it has a [first mover](https://www.investopedia.com/terms/f/firstmover.asp) advantage, give it a solid foothold from which to expand on its position as of the world’s biggest players in the ride-hailing space. 

Ride-hailing service DiDi Global (DIDI) made its debut on the NYSE on June 30, at $14 a share, valuing the company at $68 billion, making DiDi’s the biggest IPO of a Chinese company listed on an American exchange since Alibaba’s (BABA) in 2014, which raised $25 billion. Only a handful of other firms have had larger IPOs over the past decade, including rival ride-hailing powerhouse Uber, which had raked in $8.1 billion, for a valuation of $75 billion. Uber (UBER) began trading on the NYSE on May 10, 2019, at $42 a share. Key Takeaways DiDi Global is an app-based ride-hailing services company.  It made its public debut on the NYSE on June 30 at a price of $14 a share.  The company sold 316.8 million American depository receipts (ADRs), raising $4.4 billion.  Its market value reached $68 billion, in the largest IPO of a Chinese company listed on an American exchange since Alibaba’s (BABA) in 2014. DiDi reported $21.6 billion in revenue in 2020. DiDi was founded in 2012 by former Alibaba Group alumni Will Wei Cheng, who has led the company as CEO since its inception. Headquartered in Beijing, DiDi operates in multiple countries across Asia, Africa, Latin America, Eastern Europe, and Australia.  The company’s primary business lies in its app-based ride-hailing service, and has over the years acquired several of its rivals in China and abroad through mergers and acquisitions (M&A), notably including Kuaidi Dache and Uber China. Though China is home to a number of competing ride-hailing companies like CaoCao Chuxing, Yidao Yongche, Dida Pinche, DiDi is the undisputed market leader and is estimated to control over 90% of the market share of the country’s ride-hailing service segment.  The company went public at a time when many of China’s largest tech companies are under increased scrutiny from Chinese regulators, as part of broader antitrust crackdown resulting in fines and mandatory restructuring for many including Tencent and JD.com, and the suspension of IPO plans of Ant Group in 2020. In its registration filing with the U.S. Securities and Exchange Commission (SEC), DiDi addressed regulatory uncertainties in the U.S. and in China. Financials DiDi earned a profit in the first quarter of 2021, earning 196 million yuan (roughly $30.3 million).Annual revenue fell 8.4% to 141.7 billion yuan ($21.6 billion) in 2020.DiDi reported annual losses in 2018, 2019, and 2020.DiDi’s app boasted nearly 600 million users and driver partners, and an average of 60 million daily trips in 2021.Major shareholders include SoftBank Vision Fund (21.5%), Uber (12.8%), Tencent (6.8%).  DiDi's leadership team CEO Will Wei Cheng, President Jean Qing Liu, and Senior Vice President Stephen Jingshi Zhu cumulatively hold just under 10% of Class B ordinary shares and 52% of total voting power. DiDi's Class B shareholders will be entitled to 10 votes per share. SoftBank and Uber were two of its largest shareholders at the time of its IPO, holding 21.5% and 12.8%, respectively, as well as Tencent with 6.8%. Goldman Sachs, Morgan Stanley, and J.P. Morgan led the IPO as underwriters. Competitive Market  In addition to Uber, DiDi's international ride-hailing competitors include Lyft, Grab, Gojek, and Ola, among others. DiDi competes with Uber in many parts of Latin America, and with Ola in Australia. Uber sold its China-based operations to DiDi in 2016, and ceded much of its Southeast Asian business to Grab in 2018.  Like some of its international competitors such as Uber, DiDi is also involved in technological research and development related to electric vehicles and autonomous driving. In 2016, the company spun off its autonomous driving unit, and plans to make continued investments in emerging technologies. The Bottom Line DiDi would be hard-pressed to challenge local players with established positions in their home markets, such as Uber in the U.S., or Ola in India. However, its position in China and other countries, particularly in emerging markets where it has a first mover advantage, give it a solid foothold from which to expand on its position as of the world’s biggest players in the ride-hailing space. 

https://www.investopedia.com/biden-administration-punishes-student-loan-servicer-mohela-for-errors-8384386

Biden Administration Punishes Student Loan Servicer MOHELA for Errors

<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 Department of Education is withholding $7.2 million in payments from student loan servicer MOHELA for errors billing borrowers.<br/></li><li>For months, federal student loan borrowers have complained of errors by MOHELA and other servicers as they made the transition to resuming payments on federal loans that had been paused since 2020.<br/></li><li>The student loan system became more complicated during the pause, with the Biden administration creating new rules and payment plans.<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"> One of the largest companies that services federal student loans is being punished by the Biden administration for errors affecting millions of borrowers.<br/><br/>The Department of Education is withholding $7.2 million in payments to the Missouri Higher Education Loan Authority, better known as MOHELA, for failing to send bills on time to 2.5 million borrowers, resulting in 800,000 people being delinquent on their student loans, the department said Monday. A small number of borrowers were also given incorrect repayment amounts, according to the department. All affected borrowers were placed in administrative forbearance so they won’t have to make payments or be charged interest until the mistakes are corrected.<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 actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures,” Secretary of Education Miguel Cardona said in a statement.  </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"> MOHELA did not immediately respond to an emailed request for comment.  </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 action highlights how rocky the transition to student loan repayment has been for many borrowers with federal loans when a pandemic-era pause on interest and required payments came to an end in October.  </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"> During the three-and-a-half-year pause, the student loan payment system <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/student-loan-payments-restarting-tomorrow-8302592">was significantly overhauled</a>, with the department instituting many new rules and creating the SAVE plan, a <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/new-repayment-plans-could-be-saving-grace-for-stretched-student-loan-borrowers-7974644">new income-driven repayment plan</a> with lower monthly payments for many borrowers, leading <a data-component="link" data-ordinal="3" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/4-1-million-student-loan-borrowers-enrolled-in-new-save-repayment-plan-7965667">millions of borrowers to switch payment plans</a>.<br/><br/>For months, student loan borrowers have complained of errors on the part of loan servicers—the companies that the government contracts to handle billing and customer service for federal loans—as they prepared for repayment amid these complications.  </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"> One Reddit user said MOHELA mistakenly sent them a notice that their next payment was $900 when they actually had a $0 payment under the new SAVE repayment plan, and that they had trouble getting it corrected.<span class="ql-inline-citation" data-cite="2"></span><br><br>“I just waited on hold for over two hours and the person who picked up the phone promptly hung up on me,” they posted. “With how awful these loan servicers are you’d think there would be some kind of recourse or punitive action.”<br/> </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 * The Department of Education is withholding $7.2 million in payments from student loan servicer MOHELA for errors billing borrowers. * For months, federal student loan borrowers have complained of errors by MOHELA and other servicers as they made the transition to resuming payments on federal loans that had been paused since 2020. * The student loan system became more complicated during the pause, with the Biden administration creating new rules and payment plans. One of the largest companies that services federal student loans is being punished by the Biden administration for errors affecting millions of borrowers. The Department of Education is withholding $7.2 million in payments to the Missouri Higher Education Loan Authority, better known as MOHELA, for failing to send bills on time to 2.5 million borrowers, resulting in 800,000 people being delinquent on their student loans, the department said Monday. A small number of borrowers were also given incorrect repayment amounts, according to the department. All affected borrowers were placed in administrative forbearance so they won’t have to make payments or be charged interest until the mistakes are corrected. “The actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures,” Secretary of Education Miguel Cardona said in a statement.  MOHELA did not immediately respond to an emailed request for comment.  The action highlights how rocky the transition to student loan repayment has been for many borrowers with federal loans when a pandemic-era pause on interest and required payments came to an end in October.  During the three-and-a-half-year pause, the student loan payment system [was significantly overhauled](https://www.investopedia.com/student-loan-payments-restarting-tomorrow-8302592), with the department instituting many new rules and creating the SAVE plan, a [new income-driven repayment plan](https://www.investopedia.com/new-repayment-plans-could-be-saving-grace-for-stretched-student-loan-borrowers-7974644) with lower monthly payments for many borrowers, leading [millions of borrowers to switch payment plans](https://www.investopedia.com/4-1-million-student-loan-borrowers-enrolled-in-new-save-repayment-plan-7965667). For months, student loan borrowers have complained of errors on the part of loan servicers—the companies that the government contracts to handle billing and customer service for federal loans—as they prepared for repayment amid these complications.  One Reddit user said MOHELA mistakenly sent them a notice that their next payment was $900 when they actually had a $0 payment under the new SAVE repayment plan, and that they had trouble getting it corrected. “I just waited on hold for over two hours and the person who picked up the phone promptly hung up on me,” they posted. “With how awful these loan servicers are you’d think there would be some kind of recourse or punitive action.” Do you have a news tip for Investopedia reporters? Please email us at [[email protected]](mailto:[email protected])

Key Takeaways The Department of Education is withholding $7.2 million in payments from student loan servicer MOHELA for errors billing borrowers.For months, federal student loan borrowers have complained of errors by MOHELA and other servicers as they made the transition to resuming payments on federal loans that had been paused since 2020.The student loan system became more complicated during the pause, with the Biden administration creating new rules and payment plans. One of the largest companies that services federal student loans is being punished by the Biden administration for errors affecting millions of borrowers.The Department of Education is withholding $7.2 million in payments to the Missouri Higher Education Loan Authority, better known as MOHELA, for failing to send bills on time to 2.5 million borrowers, resulting in 800,000 people being delinquent on their student loans, the department said Monday. A small number of borrowers were also given incorrect repayment amounts, according to the department. All affected borrowers were placed in administrative forbearance so they won’t have to make payments or be charged interest until the mistakes are corrected. “The actions we've taken send a strong message to all student loan servicers that we will not allow borrowers to suffer the consequences of gross servicing failures,” Secretary of Education Miguel Cardona said in a statement.  MOHELA did not immediately respond to an emailed request for comment.  The action highlights how rocky the transition to student loan repayment has been for many borrowers with federal loans when a pandemic-era pause on interest and required payments came to an end in October.  During the three-and-a-half-year pause, the student loan payment system was significantly overhauled, with the department instituting many new rules and creating the SAVE plan, a new income-driven repayment plan with lower monthly payments for many borrowers, leading millions of borrowers to switch payment plans.For months, student loan borrowers have complained of errors on the part of loan servicers—the companies that the government contracts to handle billing and customer service for federal loans—as they prepared for repayment amid these complications.  One Reddit user said MOHELA mistakenly sent them a notice that their next payment was $900 when they actually had a $0 payment under the new SAVE repayment plan, and that they had trouble getting it corrected.“I just waited on hold for over two hours and the person who picked up the phone promptly hung up on me,” they posted. “With how awful these loan servicers are you’d think there would be some kind of recourse or punitive action.” Do you have a news tip for Investopedia reporters? Please email us at [email protected]

https://www.investopedia.com/ask/answers/difference-between-shares-and-stocks/

Shares vs. Stocks: 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-shares-vs-stocks-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"> Shares vs. Stocks: 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 distinction between stocks and shares in the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/f/financial-market.asp" rel="noopener noreferrer">financial markets</a> is blurry. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company. (In the good old days of paper transactions, these were called <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/stockcertificate.asp" rel="noopener noreferrer">stock certificates</a>). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. </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>For all intents and purposes, stocks and shares refer to the same thing.</li><li>The minor distinction between stocks and shares is usually overlooked, and it has more to do with syntax than financial or legal accuracy.</li><li>To invest in stocks or, more specifically, to invest in shares of a company's stock, you will need your own brokerage account.</li></ul></div></div></div> <span class="heading-toc" id="toc-similar-terminology"></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"> Similar Terminology </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_7-0"> Of the two, "stocks" is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, "shares" has a more specific meaning: It often refers to the ownership of a particular company. </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"> So if someone says they "owns shares," some people's inclination would be to respond, "shares in what company?" Similarly, an investor might tell their broker to buy 100 shares of XYZ Inc. If they said "buy 100 stocks," they'd be referring to a whole panoply of companies—100 different ones, in fact. </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"> That comment "I own shares" might also spark a listener to respond even more generally, "Shares of what? What sort of investment?" It's worth noting that one can own shares of several kinds of financial instruments: mutual funds, exchange-traded funds, limited partnerships, real estate investment trusts, etc. Stocks, on the other hand, exclusively refer to corporate equities, securities traded on a stock exchange. </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-stocks"></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"> Stocks </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_14-0"> Let's confine ourselves to equities and the <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/e/equitymarket.asp">equity markets</a>. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don't refer so much to the stocks themselves as to the corporations that issued them. </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 pros also refer to common stock and <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/p/preferredstock.asp">preferred stock</a>, but, actually, these aren't types of stock but types of shares. </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"> So, when people talk about the stock of a company, they are most often talking about their common stock. <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> represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks they are usually referring to common stock. In fact, the great majority of stock is issued is in this form. Common shares represent a claim on profits (<a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/d/dividend.asp">dividends</a>) and confer voting rights. Investors most often get one vote per share-owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders.<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_19-0"></div> <span class="heading-toc" id="toc-shares"></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"> Shares </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_21-0"> A share is the single smallest denomination of a company's stock. So if you're divvying up stock and referring to specific characteristics, the proper word to use is shares. </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>Technically speaking, shares represent units of stock.</p></div></div></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_25-0"> Common and preferred refer to <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/ask/answers/041415/what-are-types-share-capital.asp">different classes of a company's stock</a>. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares may pay dividends, but those in the preferred class are guaranteed to be paid first if a dividend is declared.<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_26-0"></div> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_27-0"> Common and preferred are the two main forms of stock shares; however, it is also possible for companies to customize different <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/c/class.asp">classes of stock</a> to fit the needs of their investors. The different classes of shares, often designated simply as "A," "B," and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of <a data-component="link" data-ordinal="2" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/articles/younginvestors/09/common-mistakes-young-investors.asp">investors</a> who are given just one vote per share. </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-shares-or-stocks"></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"> Shares or Stocks? </span> </h2> <p class="comp mntl-sc-block finance-sc-block-html mntl-sc-block-html" id="mntl-sc-block_30-0"> The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country's Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up.<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_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-note" 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 with-title" id="mntl-sc-block-callout-heading_3-0">UK vs US</h3> <div class="comp mntl-sc-block-callout-body mntl-text-block" id="mntl-sc-block-callout-body_3-0"><p>In British English, "shares" is more commonly used than stocks, especially when talking about individual listed companies. In American English, "stocks" is more commonly used.</p><p>In either the UK or US, however, there is no practical difference between the terms stocks and shares.</p></div></div></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-are-shares-and-stocks-the-same-thing"></span> <h2 class="mntl-sc-block-questionandanswer__question">Are shares and stocks the same thing?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>For all intents and purposes, yes. Both shares and stocks refer to equity ownership in corporations, and owners can be referred to as either <a data-component="link" data-ordinal="1" data-source="inlineLink" data-type="internalLink" href="https://www.investopedia.com/terms/s/shareholder.asp">shareholders</a> or stockholders.</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-how-can-i-buy-shares-or-stocks"></span> <h2 class="mntl-sc-block-questionandanswer__question">How can I buy shares or stocks?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>To buy shares or stocks, you will need to open a brokerage account with a licensed broker-dealer who can execute your orders on the stock exchange. You will also need to have enough funds in your account to cover the cost of your purchase and any fees or commissions charged by your broker. You can then research and select the shares or stocks that you want to buy, and place your order through your broker’s platform. You can buy shares or stocks at the current market price (a market order) or at a specified price (a limit order). Once your order is filled, you will receive a confirmation and your shares or stocks will be held in your account.</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-the-origin-of-the-word-shares-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the origin of the word "shares" in finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The word shares comes from the Old English <em>scearu</em>, which means “a cutting, shearing, division” or “a part or division." The word shares was used to refer to the portions of ownership in a company or a financial instrument since the late 16th century, and is so called because the shareholder owns a part or division of that company or investment.<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_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-the-origin-of-the-word-stocks-in-finance"></span> <h2 class="mntl-sc-block-questionandanswer__question">What is the origin of the word "stocks" in finance?</h2> <div class="mntl-sc-block-questionandanswer__answer"><p>The word stock comes from the Old English <em>stocc</em>, which means “stump, post, stake, tree trunk, or log." It is derived from the Proto-Germanic stauk-, which means “tree trunk or stalk" The word stock was used to refer to the equity instruments that represent ownership in a corporation or similar entity since the early 17th century, but the exact reason why it was used to refer to equity ownership is unclear. It could be the idea of a tree's "trunk" from which gains are an outgrowth, or it could derive from an obsolete use of the word stocc as a "money-box."<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_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"> Shares and stocks are terms that are often used interchangeably to refer to the equity instruments that represent ownership in a corporation or similar entity. However, there are some subtle differences between them depending on the context, geography and culture (e.g., "shares" is used colloquially in the UK while "stocks" is far more common in the US). Shares is a more specific term that can refer to the ownership of a particular company or a type of financial instrument, while stocks is a more generic term that can refer to a slice of ownership of one or more companies or a collection of investor holdings or a portfolio. The words also have some other meanings that are related to their original senses of division and trunk. Shares and stocks are both important concepts for investors who want to participate in the equity market and benefit from its potential returns and risks. </p></div>

## Shares vs. Stocks: An Overview The distinction between stocks and shares in the [financial markets](https://www.investopedia.com/terms/f/financial-market.asp) is blurry. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company. (In the good old days of paper transactions, these were called [stock certificates](https://www.investopedia.com/terms/s/stockcertificate.asp)). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. ### Key Takeaways * For all intents and purposes, stocks and shares refer to the same thing. * The minor distinction between stocks and shares is usually overlooked, and it has more to do with syntax than financial or legal accuracy. * To invest in stocks or, more specifically, to invest in shares of a company's stock, you will need your own brokerage account. ## Similar Terminology Of the two, "stocks" is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, "shares" has a more specific meaning: It often refers to the ownership of a particular company. So if someone says they "owns shares," some people's inclination would be to respond, "shares in what company?" Similarly, an investor might tell their broker to buy 100 shares of XYZ Inc. If they said "buy 100 stocks," they'd be referring to a whole panoply of companies—100 different ones, in fact. That comment "I own shares" might also spark a listener to respond even more generally, "Shares of what? What sort of investment?" It's worth noting that one can own shares of several kinds of financial instruments: mutual funds, exchange-traded funds, limited partnerships, real estate investment trusts, etc. Stocks, on the other hand, exclusively refer to corporate equities, securities traded on a stock exchange. ## Stocks Let's confine ourselves to equities and the [equity markets](https://www.investopedia.com/terms/e/equitymarket.asp). Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don't refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and [preferred stock](https://www.investopedia.com/terms/p/preferredstock.asp), but, actually, these aren't types of stock but types of shares. So, when people talk about the stock of a company, they are most often talking about their common stock. [Common stock](https://www.investopedia.com/terms/c/commonstock.asp) represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks they are usually referring to common stock. In fact, the great majority of stock is issued is in this form. Common shares represent a claim on profits ([dividends](https://www.investopedia.com/terms/d/dividend.asp)) and confer voting rights. Investors most often get one vote per share-owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders. ## Shares A share is the single smallest denomination of a company's stock. So if you're divvying up stock and referring to specific characteristics, the proper word to use is shares. ### Technically speaking, shares represent units of stock. Common and preferred refer to [different classes of a company's stock](https://www.investopedia.com/ask/answers/041415/what-are-types-share-capital.asp). They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares may pay dividends, but those in the preferred class are guaranteed to be paid first if a dividend is declared. Common and preferred are the two main forms of stock shares; however, it is also possible for companies to customize different [classes of stock](https://www.investopedia.com/terms/c/class.asp) to fit the needs of their investors. The different classes of shares, often designated simply as "A," "B," and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of [investors](https://www.investopedia.com/articles/younginvestors/09/common-mistakes-young-investors.asp) who are given just one vote per share. ## Shares or Stocks? The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country's Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up. ### UK vs US In British English, "shares" is more commonly used than stocks, especially when talking about individual listed companies. In American English, "stocks" is more commonly used. In either the UK or US, however, there is no practical difference between the terms stocks and shares. ## Are shares and stocks the same thing? For all intents and purposes, yes. Both shares and stocks refer to equity ownership in corporations, and owners can be referred to as either [shareholders](https://www.investopedia.com/terms/s/shareholder.asp) or stockholders. ## How can I buy shares or stocks? To buy shares or stocks, you will need to open a brokerage account with a licensed broker-dealer who can execute your orders on the stock exchange. You will also need to have enough funds in your account to cover the cost of your purchase and any fees or commissions charged by your broker. You can then research and select the shares or stocks that you want to buy, and place your order through your broker’s platform. You can buy shares or stocks at the current market price (a market order) or at a specified price (a limit order). Once your order is filled, you will receive a confirmation and your shares or stocks will be held in your account. ## What is the origin of the word "shares" in finance? The word shares comes from the Old English *scearu*, which means “a cutting, shearing, division” or “a part or division." The word shares was used to refer to the portions of ownership in a company or a financial instrument since the late 16th century, and is so called because the shareholder owns a part or division of that company or investment. ## What is the origin of the word "stocks" in finance? The word stock comes from the Old English *stocc*, which means “stump, post, stake, tree trunk, or log." It is derived from the Proto-Germanic stauk-, which means “tree trunk or stalk" The word stock was used to refer to the equity instruments that represent ownership in a corporation or similar entity since the early 17th century, but the exact reason why it was used to refer to equity ownership is unclear. It could be the idea of a tree's "trunk" from which gains are an outgrowth, or it could derive from an obsolete use of the word stocc as a "money-box." ## The Bottom Line Shares and stocks are terms that are often used interchangeably to refer to the equity instruments that represent ownership in a corporation or similar entity. However, there are some subtle differences between them depending on the context, geography and culture (e.g., "shares" is used colloquially in the UK while "stocks" is far more common in the US). Shares is a more specific term that can refer to the ownership of a particular company or a type of financial instrument, while stocks is a more generic term that can refer to a slice of ownership of one or more companies or a collection of investor holdings or a portfolio. The words also have some other meanings that are related to their original senses of division and trunk. Shares and stocks are both important concepts for investors who want to participate in the equity market and benefit from its potential returns and risks.

Shares vs. Stocks: An Overview The distinction between stocks and shares in the financial markets is blurry. Generally, in American English, both words are used interchangeably to refer to financial equities, specifically, securities that denote ownership in a public company. (In the good old days of paper transactions, these were called stock certificates). Nowadays, the difference between the two words has more to do with syntax and is derived from the context in which they are used. Key Takeaways For all intents and purposes, stocks and shares refer to the same thing.The minor distinction between stocks and shares is usually overlooked, and it has more to do with syntax than financial or legal accuracy.To invest in stocks or, more specifically, to invest in shares of a company's stock, you will need your own brokerage account. Similar Terminology Of the two, "stocks" is the more general, generic term. It is often used to describe a slice of ownership of one or more companies. In contrast, in common parlance, "shares" has a more specific meaning: It often refers to the ownership of a particular company. So if someone says they "owns shares," some people's inclination would be to respond, "shares in what company?" Similarly, an investor might tell their broker to buy 100 shares of XYZ Inc. If they said "buy 100 stocks," they'd be referring to a whole panoply of companies—100 different ones, in fact. That comment "I own shares" might also spark a listener to respond even more generally, "Shares of what? What sort of investment?" It's worth noting that one can own shares of several kinds of financial instruments: mutual funds, exchange-traded funds, limited partnerships, real estate investment trusts, etc. Stocks, on the other hand, exclusively refer to corporate equities, securities traded on a stock exchange. Stocks Let's confine ourselves to equities and the equity markets. Investment professionals often use the word stocks as synonymous with companies—publicly-traded companies, of course. They might refer to energy stocks, value stocks, large- or small-cap stocks, food-sector stocks, blue-chip stocks, and so on. In each case, these categories don't refer so much to the stocks themselves as to the corporations that issued them. Financial pros also refer to common stock and preferred stock, but, actually, these aren't types of stock but types of shares. So, when people talk about the stock of a company, they are most often talking about their common stock. Common stock represents shares of ownership in a corporation and the type of stock in which most people invest. When people talk about stocks they are usually referring to common stock. In fact, the great majority of stock is issued is in this form. Common shares represent a claim on profits (dividends) and confer voting rights. Investors most often get one vote per share-owned to elect board members who oversee the major decisions made by management. Stockholders thus have the ability to exercise control over corporate policy and management issues compared to preferred shareholders. Shares A share is the single smallest denomination of a company's stock. So if you're divvying up stock and referring to specific characteristics, the proper word to use is shares. Technically speaking, shares represent units of stock. Common and preferred refer to different classes of a company's stock. They carry different rights and privileges, and trade at different prices. Common shareholders are allowed to vote on company referenda and personnel, for example. Preferred shareholders do not possess voting rights, but on the other hand, they have priority in getting repaid if the company goes bankrupt. Both types of shares may pay dividends, but those in the preferred class are guaranteed to be paid first if a dividend is declared. Common and preferred are the two main forms of stock shares; however, it is also possible for companies to customize different classes of stock to fit the needs of their investors. The different classes of shares, often designated simply as "A," "B," and so on, are given different voting rights. For example, one class of shares would be held by a select group who are given perhaps five votes per share, while a second class would be issued to the majority of investors who are given just one vote per share. Shares or Stocks? The interchangeability of the terms stocks and shares applies mainly to American English. The two words still carry considerable distinctions in other languages. In India, for example, as per that country's Companies Act of 2013, a share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company, and can be only partially paid up. A stock, on the other hand, is a collection of shares of a member, converted into a single fund, that is fully paid up. UK vs US In British English, "shares" is more commonly used than stocks, especially when talking about individual listed companies. In American English, "stocks" is more commonly used.In either the UK or US, however, there is no practical difference between the terms stocks and shares. Are shares and stocks the same thing? For all intents and purposes, yes. Both shares and stocks refer to equity ownership in corporations, and owners can be referred to as either shareholders or stockholders. How can I buy shares or stocks? To buy shares or stocks, you will need to open a brokerage account with a licensed broker-dealer who can execute your orders on the stock exchange. You will also need to have enough funds in your account to cover the cost of your purchase and any fees or commissions charged by your broker. You can then research and select the shares or stocks that you want to buy, and place your order through your broker’s platform. You can buy shares or stocks at the current market price (a market order) or at a specified price (a limit order). Once your order is filled, you will receive a confirmation and your shares or stocks will be held in your account. What is the origin of the word "shares" in finance? The word shares comes from the Old English scearu, which means “a cutting, shearing, division” or “a part or division." The word shares was used to refer to the portions of ownership in a company or a financial instrument since the late 16th century, and is so called because the shareholder owns a part or division of that company or investment. What is the origin of the word "stocks" in finance? The word stock comes from the Old English stocc, which means “stump, post, stake, tree trunk, or log." It is derived from the Proto-Germanic stauk-, which means “tree trunk or stalk" The word stock was used to refer to the equity instruments that represent ownership in a corporation or similar entity since the early 17th century, but the exact reason why it was used to refer to equity ownership is unclear. It could be the idea of a tree's "trunk" from which gains are an outgrowth, or it could derive from an obsolete use of the word stocc as a "money-box." The Bottom Line Shares and stocks are terms that are often used interchangeably to refer to the equity instruments that represent ownership in a corporation or similar entity. However, there are some subtle differences between them depending on the context, geography and culture (e.g., "shares" is used colloquially in the UK while "stocks" is far more common in the US). Shares is a more specific term that can refer to the ownership of a particular company or a type of financial instrument, while stocks is a more generic term that can refer to a slice of ownership of one or more companies or a collection of investor holdings or a portfolio. The words also have some other meanings that are related to their original senses of division and trunk. Shares and stocks are both important concepts for investors who want to participate in the equity market and benefit from its potential returns and risks.