Intrinsic Value vs Market Value, Explained

Intrinsic value vs market value refers to the difference between where a stock is trading and where it ought to be according to its fundamentals. The term “market value” simply refers to the current market price of a security. Intrinsic value represents the price at which investors believe the security should be trading at. Intrinsic value is also known as “fair market value” or simply “fair value.”

According to Merriam-Webster dictionary, the word “intrinsic” means “belonging to the essential nature or constitution of a thing.” At times, stocks become overbought or oversold, meaning their market price can rise above or below their intrinsic value.

When it comes to value vs. growth stocks, value investors look for companies that are out of favor and below their intrinsic value. The idea is that sooner or later stocks return to their intrinsic value.

What Is Market Value?

In a sense, there is only one measure of market value: what price the market assigns to a stock, based on existing demand.

stock market crash, for example, fear may grip investors and the market value of many stocks could fall well below their fair market values.

News headlines can drive stock prices above or below their intrinsic value. After reading an earnings report that’s positive, investors may pile into a stock. Even though better-than-expected earnings might increase the intrinsic value of a stock to a certain degree, investors can get greedy in the short-term and create overextended gains in the stock price.

The rationale behind value vs price, and behind value investing as a whole, is that stocks tend to overshoot their fair market value to the upside or the downside.

When this leads to a stock being oversold, the idea is that investors could take advantage of the buying opportunity. It’s assumed that the stock will then eventually rise to its intrinsic value.

What Is Intrinsic Value?

The factors that can be used to determine intrinsic value are related to the fundamental operations of a company. It can be tricky to figure how to evaluate a stock. Depending on which factors they examine and how they interpret them, analysts can come to different conclusions about the intrinsic value of a stock.

It’s not easy to come to a reasonable estimation of a company’s valuation. Some of the variables involved have no direct physical, measurable counterpart, like intangible assets. Intangible assets include things like copyrights, patents, reputation, consumer loyalty, and so on. Analysts come to their own conclusions when trying to assign a value to these assets.

Tangible assets include things like cash reserves, corporate bonds, equipment, land, manufacturing capacity, etc. These tend to be easier to value because they can be assigned a numerical value in dollar terms. Things like the company’s business plan, financial statements, and balance sheet have a tangible aspect in that they are objective documents.

Calculating Intrinsic Value vs Market Value

There can be multiple different ways to determine the intrinsic value of an asset. These methods are broadly referred to as valuation methods, or using fundamental analysis on stocks or other securities. The methods vary according to the type of asset and how an investor chooses to look at that asset.

Calculating Intrinsic Value

For dividend-yielding stocks, for example, the dividend discount model provides a mathematical formula that aims to find the intrinsic value of a stock based on its dividend growth over a certain period of time. Here is what is a dividend: periodic income given to shareholders by a company.

market cap is:

Total number of outstanding shares multiplied by the current stock price.

Dividing market cap by number of shares also leads to the current stock price.

Sometimes companies engage in “corporate stock buybacks,” whereby they purchase their own shares, which reduces the total number of shares available on the market.

This increases the price of a stock without any fundamental, tangible change taking place. Value investors might say that stocks pumped up by share buybacks are overvalued. This process can lead to extreme valuations in stocks, as can extended periods of market euphoria.

The Takeaway

Using the intrinsic value vs market value method is best suited to a long-term buy-and-hold strategy.

Stock prices can remain elevated or depressed for long periods of time depending on market conditions. Even if an investor’s analysis is spot on, there’s no way to know for sure exactly when any stock will return to its intrinsic value.

Value investors try to understand stock volatility, using these periods as opportunities for rebalancing their portfolios, selling positions that might have increased a lot while adding to positions that may have fallen far below their intrinsic value. This contrasts to short-term day trading strategies or momentum swing-trading, which primarily uses technical analysis to try and predict and profit from short-term market fluctuations.

Found a stock you think is undervalued? Try SoFi Invest®, where investors can choose any of the most popular stocks and ETFs.

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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

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

What Is Earnings Per Share & How to Calculate It

Knowing a stock’s earnings per share can be a valuable portfolio benchmarking tool. Think of EPS as GPS for where a public company is on the value map, based on how profitable it has been.

What is earnings per share? It’s a ratio arrived at by taking a company’s quarterly or annual net income and dividing it by the number of its outstanding shares of stock.

Knowing an investment’s EPS gives investors—and portfolio managers—a good indicator of a stock’s performance over a specific period of time and its potential share price performance in the near future.

What is Earnings Per Share?

The starting point for any conversation about the EPS ratio is the earnings report companies issue to regulators, shareholders, and potential investors.

Publicly traded companies must, by law, report their earnings quarterly and annually. Earnings represent the net income a company generates (after taxes and after expenses are deducted), along with an estimate of what profits or losses can be expected going forward.

Typically, investment analysts, money managers and investors look at earnings as a major component of a company’s profit potential, with earnings per share a particularly useful measurement tool when gauging a company’s financial prospects.

While a company’s earnings call represents a publicly traded company’s revenues, minus operating expenses, earnings per share is different.

EPS indicates a firm’s earnings for investors, divided by the company’s number of remaining shares. Earnings per share is perhaps most optimal when comparing EPS rates of publicly traded firms operating in the same industry.

evaluate a company’s stock price going forward.

Even a moderate increase in EPS may indicate that a company’s profit potential is on the upside, and investors may take that as a sign to buy the company’s stock.

Conversely, a small decrease in a company’s EPS from quarter to quarter may trigger a red flag among investors, who could view a downward EPS trend as a larger profit issue and shy away from buying the company’s stock.

Basically, the higher the EPS, the more attractive that company’s stock is to investors. But the higher a stock’s EPS, the more expensive it’s likely to be.

Once investors have an accurate EPS figure, they can decide if a stock is priced fairly and make an appropriate investment decision.

Earnings Per Share Ratio Considerations

Investors should prepare to dig deeper and examine what factors influence EPS figures. These factors are at the top of that list:

•  EPS numbers can rise or fall significantly based on earnings’ rise or fall, or as the number of company shares rises or falls.
•  A company’s earnings may rise because sales are surging faster than expenses, or if company managers succeed in curbing operations costs. Additionally, investors may get a “false read” on EPS if too many company expenses are shed from the EPS calculation.
•  A company’s number of outstanding shares may fall if a company engages in significant stock share buybacks. Correspondingly, shares outstanding may jump when a firm issues new stock shares.
•  A company’s profit margins are also a big influencer on EPS. A company that is losing money usually has a negative EPS number. (Then again, that may send a wrong signal to investors. The company could be on the path to profits, and that trend may not show up in an EPS calculation.)
•  A price to earnings ratio is another highly useful metric to evaluate a stock’s share growth potential. Investors can find a P/E ratio through a proper calculation of EPS (“P” is the price per share; “E” refers to EPS), though it’s easy to look up a P/E ratio on any site that aggregates stock information.

EPS can be reported for each quarter or fiscal year, or it can be projected into the future with a forward EPS.

How to Calculate Earnings Per Share

The most common way to accurately gauge an EPS figure is through an end-of-period calculation. Here’s a snapshot of how it works.

With Preferred Dividends

Investors can calculate EPS by subtracting a stock’s total preferred dividends from the company’s net income. Then divide that number by the end-of-period stock shares that are outstanding.

Basic EPS = (net income – preferred dividends) / weighted average number of common shares outstanding

For example, ABC Co. generates a net income of $2 million in a quarter. Simultaneously, the company rolls out $275,000 in preferred dividends and has 12 million outstanding shares of stock. In that calculation, knowing that shares of common stock are equal in value, the company’s earnings per share is $0.14.

(2,000,000 – 275,000) ÷ 12,000,000= 0.14

Without Preferred Dividends

For smaller publicly traded companies with no preferred dividends, the EPS calculation is more straightforward.

Basic EPS = net income / weighted average number of common shares outstanding

Let’s say DEF Corp. has generated a net income of $50,000 for the year. As the company has no preferred shares outstanding and has 5,000 weighted average shares on an annual basis, its earnings per share is $10.

50,000 ÷ 5,000= 10

In any EPS calculation, preferred dividends must be pared off from net income. That’s because earnings per share is primarily designed to calculate the net income for holders of common stock.

Additionally, in most EPS end-of-period calculations, a company is mostly likely to calculate EPS for end-of-year financial statements. That’s because companies may issue new stock or buy back existing shares of company stock.

In those instances, a weighted average of common stock shares is required for an accurate EPS assessment. (A weighted average of a company’s outstanding shares can provide more clarity because a fixed number at any given time may provide a false EPS outcome, as share prices can be volatile and change quickly on a day-to-day basis.)

The most commonly used EPS share model calculation is the “trailing 12 months” formula, which tracks a company’s earnings per share by totaling its EPS for the previous four quarters.

The Takeaway

Earnings trends, up or down, make earnings per share one of the most valuable metrics for assessing investments. Four or five years of positive EPS activity is considered an indicator that a company’s long-term financial prospects are robust and that its share growth should continue to rise.

A careful EPS calculation can help clarify a short- or long-term view of a company’s financial and share price potential, allowing an investor to make choices based on data and not assumptions.

Ready to put those stock-picking skills to use? Get started with SoFi Invest® today.



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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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

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Source: sofi.com

8 Steps to Buying a Vacation Home

If you’re like many Americans, you dream of having a beach house, a desert escape, or a mountain hideaway. Perhaps you’re tired of staying at hotels and want the comforts of home at your fingertips.

You’re ready to make this dream a reality. Before you do, consider these steps.

How to Buy a Vacation Home

1. Choose a Home That Fits Your Needs

As you begin your search for a vacation home, carefully consider your goals and needs. Start with the location. Do you prefer an urban or rural area? Lots of property or a townhouse with just a small yard to care for?

Consider what amenities are important to be close to. Where is the nearest grocery store? Is a hospital accessible?

Consider your goals for the property. Is this a place that only you and your family will use? Do you plan to rent it out from time to time? Or maybe you plan to be there only a couple of weeks out of the year, using it as a rental property the rest of the time.

The answers to these questions will have a cascade effect on the other factors you’ll need to consider, from financing to taxes and other costs.

2. Figure Out Financing

Next, consider what kind of mortgage works best for you, if you’re not paying cash. You may want to engage a mortgage broker or direct lender to help with this process.

If you have a primary residence, you may be in the market for a second mortgage. The key question: Are you purchasing a second home or an investment property?

Second home. A second home is one that you, family members, or friends plan to live in for a certain period of time every year and not rent it out. Second-home loans have the same rates as primary residences. The down payment could be as low as 10%, though 20% is typical.

Investment property. If you plan on using your vacation home to generate rental income, expect a down payment of 25% or 30% and a higher rate for a non-owner- occupied loan. If you need the rental income in order to qualify for the additional home purchase, you may need to identify a renter and have a lease. A lender still may only consider a percentage of the rental income toward your qualifying income.

Some people may choose to tap equity in their primary home to buy the vacation home. One popular option is a cash-out refinance, in which you borrow more than you owe on your primary home and take the extra money as cash.

3. Consider Costs

While you consider the goals you’re hoping to accomplish by acquiring a vacation home, try to avoid home buying mistakes.

A mortgage lender can delineate the down payment, monthly mortgage payment, and closing costs. But remember that there are other costs to consider, including maintenance of the home and landscape, utilities, furnishings, insurance, property taxes, and travel to and from the home.

If you’re planning on renting out the house, determine frequency and expected rental income. Be prepared to take a financial hit if you are unable to rent the property out as much as you planned. For a full picture of cost, check out our home affordability calculator.

4. Learn About Taxes

Taxes will be an ongoing consideration if you buy a vacation home.

A second home qualifies for mortgage interest and property tax deductions as long as the home is for personal use. And if you rent out the home for 14 or fewer days during the year, you can pocket the rental income tax-free.

If you rent out the home for more than 14 days, you must report all rental income to the IRS. You also can deduct rental expenses.

The mortgage interest deduction is available on total mortgages up to $750,000. If you already have a mortgage equal to the amount you on primary residence, your second home will not qualify.

The bottom line: Tax rules vary greatly, depending on personal or rental use.

5. Research Alternatives

There are a number of options to owning a vacation home. For example, you may consider buying a home with friends or family members, or purchasing a timeshare. But before you pursue an option, carefully weigh the pros and cons.

If you’re considering purchasing a home with other people, beware the potential challenges. Owning a home together requires a lot of compromise and cooperation.

You also must decide what will happen if one party is having trouble paying the mortgage. Are the others willing to cover it?

In addition to second home and investment properties, you may be tempted by timeshares, vacation clubs, fractional ownership, and condo hotels. Be aware that it may be hard to resell these, and the property may not retain its value over time.

6. Make It Easy to Rent

If you do decide to use your vacation home as a rental property, you have to take other people’s concerns and desires into account. Be sure to consider the factors that will make it easy to rent. A home near tourist hot spots, amenities, and a beach or lake may be more desirable.

Consider, too, factors that will make the house less desirable. Is there planned construction nearby that will make it unpleasant to stay at the house?

How far the house is from your main residence takes on increased significance when you’re a rental property owner. Will you have to engage a property manager to maintain the house and address renters’ concerns? Doing so will increase your costs.

7. Pay Attention to Local Rules

Local laws or homeowners association rules may limit who you can rent to and when.

For example, a homeowners association might limit how often you can rent your vacation home, whether renters can have pets, where they can park, and how much noise they can make.

Be aware that these rules can be put in place after you’ve purchased your vacation home.

8. Tap Local Expertise

It’s a good idea to enlist the help of local real estate agents and lenders.

Vacation homes tend to exist in specialized markets, and these experts can help you navigate local taxes, transaction fees, zoning, and rental ordinances. They can also help you determine the best time to buy a house in the area you’re interested in.

Because they are familiar with the local market and comparable properties, they are also likely to be more comfortable with appraisals, especially in low-population areas where there may be fewer houses to compare.

The Takeaway

Buying a vacation home can be a ticket to relaxation or a rough trip. It’s imperative to know the rules governing a second home vs. a rental property, how to finance a vacation house, tax considerations, and more.

Ready to buy? SoFi offers mortgages for second homes and investment properties, including single-family homes, two-unit buildings, condos, and planned unit developments.

SoFi also offers a cash-out refinance, all at competitive rates.

Got two minutes to spare? That’s how long it takes to check your rate for a mortgage with SoFi.



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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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5 Tips to Hedge Against Inflation

To achieve financial freedom and grow wealth over long periods of time, it’s vital to understand the concept of inflation.

Inflation refers to the ever-increasing price of goods and services as measured against a particular currency. The purchasing power of a currency depreciates as a result of rising prices. Put differently, a rising rate of inflation equates to a decreasing value of a currency.

Inflation is most commonly measured by the Consumer Price Index (CPI) , which averages the national cost of many consumer items such as food, housing, healthcare, and more.

The opposite of inflation is deflation, which happens when prices fall. During deflation, cash becomes the most valuable asset because it can buy more. During inflation, other assets become more valuable than cash because it takes more currency to purchase them.

The key question to examine is: What assets perform the best during inflationary times?

Federal Reserve try to control inflation through monetary policy. Sometimes their policies can create inflation in financial assets, like quantitative easing has been said to do.

5 Tips for Hedging Against Inflation

The concept of inflation seems simple enough. But what might be some of the best ways investors can protect themselves?

There are a number of different strategies investors use to hedge against inflation. The common denominators tend to be hard assets with a limited supply and financial assets that tend to see large capital inflows during times of currency devaluation and rising prices.

Here are five tips that may help investors hedge against inflation.

1. Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a company that deals in real estate, either through owning, financing, or operating a group of properties. Through buying shares of a REIT, investors can gain exposure to the assets that the company owns or manages.

REITs are income-producing assets, like dividend-yielding stocks. They pay a dividend to investors who hold shares. In fact, REITs are required by law to distribute 90% of their income to investors.

Holding REITs in a portfolio might make sense for some investors as a potential inflation hedge because they are tied to a hard asset—real estate. During times of high inflation, hard assets tend to rise in value against their local currencies because their supply is limited. There will be an ever-increasing number of dollars (or euros, or yen, etc.) chasing a fixed number of hard assets, so the price of those things will tend to go up.

Owning physical real estate—like a home, commercial complex, or rental property—also works as an inflation hedge. But most investors can’t afford to purchase or don’t care to manage such properties. Holding shares of a REIT provides a much easier way to get exposure to real estate.

2. Bonds and Equities

The recurring theme regarding inflation hedges is that the price of everything goes up. What investors are generally concerned with is choosing the assets that go up in price the fastest, with the greatest possible return.

In some cases, it might be that stocks and bonds very quickly rise very high in price. But in an economy that sees hyperinflation, those holding cash won’t see their investment, i.e., cash, have the purchasing power it may have once had.

In such a scenario, the specific securities aren’t as important as making sure that capital gets allocated to stocks or bonds in some amount, instead of holding all capital in cash.

3. Exchange-Traded Funds

An exchange-traded fund (ETF) that tracks a particular stock index or group of investment types is another way to get exposure to assets that are likely to increase in value during times of inflation and can also be a strategy to maximize diversification in an investor’s portfolio. ETFs are generally passive investments, which may make them a good fit for those who are new to investing or want to take a more hands-off approach to investing. Since they are considered a diversified investment, they may be a good hedge against inflation.

4. Gold and Gold Mining Stocks

For thousands of years, humans have used gold as a store of value. Although the price of gold can be somewhat volatile in the short term, few assets have maintained their purchasing power as well as gold in the long term. Like real estate, gold is a hard asset with limited supply.

Still, the question of “is gold a hedge against inflation?” has different answers depending on whom you ask. Some critics claim that because there are other variables involved and the price of gold doesn’t always track inflation exactly, that it is not a good inflation hedge. And there might be some circumstances under which this holds true.

During short periods of rapid inflation, however, there’s no question that the price of gold rises sharply. Consider the following:

•  During the time between 1970 and 1974, for example, the price of gold against the US dollar surged from $240 to more than $900 for a gain of 73%.
•  During and after the recession of 2007 to 2009, the price of gold doubled from less than $1,000 in November 2008, to $2,000 in August 2011.
•  In 2019 and 2020, gold has hit all-time record highs against many different fiat currencies.

Investors seeking to add gold to their portfolio have a variety of options. Physical gold coins and bars might be the most obvious example, although these are difficult to obtain and store safely.

5. Better Understanding Inflation in the Market

Ultimately, no assets are 100% protected from inflation, but some investments might be better than others for some investors. Understanding how inflation affects investments is the beginning of growing wealth over time and achieving financial goals. Still have questions about hedging investments against inflation? SoFi credentialed financial planners are available to answer questions about investments at no additional cost to members.

Downloading and using the stock trading app can be a helpful tool for investors who want to stay up to date with how their investments are doing or keeping an eye on the market in general.

Learn more about how the SoFi app can be a useful tool to reach your investment goals.



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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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Guide to Zcash Cryptocurrency

Zcash is a potentially private cryptocurrency that offers unique “shielded” features. The set-up allows for addresses and amounts in a Zcash transaction to be encrypted on the blockchain. Here’s a guide to its privacy features, price performance, technology and history.

What Is Zcash?

Zcash crypto falls under the category of cryptocurrencies known as “privacy coins,” or different types of cryptocurrency that make it hard for outside observers to detect details of the coins’ movements.

Zcash is basically a bitcoin clone with one key difference – the ability for shielded transactions, as mentioned. Zcash relies on a technology known as zk-SNARKS to hide the particulars of Zcash wallet activity.

Zcash transactions are not private by default. For users seeking privacy, the “shielded” feature must be turned on to prevent the transaction from appearing on the public Zcash blockchain.

Zcash Price and Performance

Zcash has soared more than 400% since the end of 2019 to $146.38 in mid-February. Its market cap is $1.62 billion, making it the 47th biggest cryptocurrency market, according to data from CoinMarketCap. Zcash has the third-largest market cap of any privacy coin (with Monero being #1 and DASH being #2).

Zcash Privacy

Zcash was created in response to Bitcoin‘s lack of anonymity. Activity on the Bitcoin blockchain and most other blockchains is transparent. Anyone can see everything that has ever happened on a public blockchain. The details of each transaction, including the parties sending and receiving coins, the time of the exchange, and the amount of value exchanged, are all public knowledge.

Zcash functions differently than Bitcoin in the sense that Zcash activity can be “shielded,” or hidden from the public, so users can transact privately. But if no one can see the details of a transaction, how can they be sure that it even happened? That’s where the privacy tech behind Zcash known as zk-SNARKS comes in.

Zcash is the first large-scale, real-world implementation of a privacy technology called zk-SNARKS. This tech allows for shielded Zcash transactions to be fully encrypted (private) while at the same time being validated under the network’s consensus rules (so everyone knows they really happened).

How “Shielding” Works

Zk-SNARK stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” This is a way of sharing data that allows one party to prove to another that they have specific information without revealing what that information is, and without requiring any interaction between the parties.

The exact details of how zk-SNARKs work and how they are applied to the Zcash blockchain are quite technical. Interested readers can reference the Zcash website for all of the intricate workings of this type of encryption technology.

While some people believe this tech offers the best, most comprehensive solution to the issue of private crypto transactions, others have criticized the security of a coin like Zcash.

The fact that the encryption technology used is so new and that the coin was launched using an unorthodox “ceremony” (more on this later) are key points of contention for some crypto observers. On top of that, most Zcash isn’t even private.

As mentioned earlier, transactions made on the Zcash blockchain are not private by default. For the currency to be used privately, a transaction must be “shielded.”

The vast majority of Zcash transactions are not shielded (as of April 2020, only 6% of the Zcash network had been using fully shielded transactions). This could be due to the fact that most wallets and exchanges use public Zcash addresses by default, something many users might not be aware of.

Types of Zcash Transactions

There are four different types of transactions that can be made on the Zcash blockchain. They are:

•  Private
•  Deshielding
•  Shielding
•  Public

Zcash addresses begin with either a Z or a T. Those beginning with a Z are private addresses, and those beginning with a T are transparent. Using different combinations of these two types of addresses allows for the four specific types of transactions.

In a private transaction (Z-to-Z) will be visible on the public blockchain. There’s proof that it occurred and the necessary network fees were paid. The specific details like the transaction amount and addresses involved, however, are encrypted and can’t be seen by the public.

A public transaction (T-to-T) works in the same way that a typical Bitcoin transaction works – everything can be seen on the public blockchain, including the sender, receiver, and amount transacted.

The Zcash website notes that most exchanges and wallets today use T-addresses by default, although more are allegedly moving to shielded addresses over time.

The other two types of transactions involve sending funds between T and Z addresses. In other words, either sending funds from a private address to a public one (Z-to-T, or Deshielding), or sending funds from a public address to a private one (T-to-Z, or Shielding).

Zcash History

Zcash cryptocurrency launched in 2016. The coin was forked from the original Bitcoin code, so both are minable proof-of-work cryptocurrencies that have a hard supply cap of 21 million. The block reward for Zcash also gets cut in half every four years or so to keep the currency deflationary by limiting supply, just like bitcoin.

Zcash has its roots in a 2013 publication called the Zerocoin white paper, which was written by professors Eli Ben-Sasson and Matthew Green. They saw the design of Bitcoin as being a threat to user privacy, and offered their own solutions in response.

But Zerocoin was designed for Bitcoin, meaning Bitcoin developers would have had to implement a lot of complex changes to the Bitcoin blockchain technology to make Zerocoin work. This led to the project being shelved for a time.

Then, in 2015, a cryptographer named Zooko Wilcox created a startup to discover ways that the Zerocoin concept might be successfully implemented in a new cryptocurrency. In 2016, Zcash was announced, and the coin launched in October of that year.

Launch of Zcash

The launch of Zcash is a focal point of many criticisms against the privacy coin. To make its new type of cryptography workable, the Zcash blockchain had to be created using something known as the “Zcash ceremony.”

This “ceremony” involved people from around the world collaborating to create what amounts to a master public key for the blockchain using pieces of a private key. Those involved were instructed to destroy the data they used so that it couldn’t be taken advantage of by someone else in the future, who could potentially use it to compromise Zcash.

Of course, no one has any way to verify that those involved actually destroyed the data they used in this ceremony, and no one can verify that Zcash was created in the way it claims to have been created.

Today, Zcash is operated by the Electric Coin Company with Zooko Wilcox as its CEO. The company employs a team of cryptographers to continue developing the Zcash blockchain. There is also a non-profit organization known as the Zcash Foundation that helps support this work. Both groups are funded in part by the issuance of new Zcash (ZEC) tokens.

Is Zcash a Good Investment?

Privacy coins in particular have a very uncertain future. Coins like Monero, Zcash, and DASH were delisted from the Bittrex exchange at the start of 2021. Because many people associate them with illicit activity, privacy coins could see their use restricted in various ways.

Exchanges could continue to delist coins with privacy features or regulatory authorities could seek to punish anyone who deals with them through new crypto regulations, perhaps claiming that people use privacy coins to avoid paying taxes on crypto, for example.

Many altcoins have gone to zero over the years, so that possibility also can’t be ruled out.

How to Buy Zcash

Some U.S. exchanges offer Zcash on their platform. Here’s a step-by-step guide on how to buy and trade it:

1. Sign up for an account with a cryptocurrency exchange that offers Zcash.
2. Verify your account. This may involve providing documents that confirm your identity and address.
3. Deposit fiat currency or digital money into your account.
4. Buy Zcash with the deposited funds.
5. Withdraw Zcash into your hot or cold wallet.

The Takeaway

Zcash is a privacy coin that allows for completely private or “shielded” transactions. It is the first practical implementation of the zk-SNARK encryption technology. The vast majority of transactions made on the Zcash blockchain are not private and function in the same way as Bitcoin transactions because Zcash was forked from the original Bitcoin code.

SoFi Invest gives investors the tools they need to trade cryptocurrency, stocks, and ETFs. Learn the basics of investing in crypto firsthand by opening an Invest account today.

Learn more about SoFi Invest today.



Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

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

SOIN21013

Source: sofi.com

How Much Money Should You Have Saved For Retirement By 40?

At some point or another, you’ve probably asked yourself, “how much money should I have saved by 40?”

It’s a valid question that can be daunting to think about. The good news is you’re probably already saving money for retirement. The bad news is, you might not be saving enough money to retire when you want.

There are different ways to save money for retirement. The sooner, the better—so that it can start adding up. And that’s exactly what an increasing number of people in their 20s and 30s have been doing.

A Bank of America report found that almost one in four millennials (ages 24-41) have $100,000 or more saved as of winter 2020—a nearly 17% increase compared to that same report in 2015. The rising numbers are promising, but are these savings even enough? We’ll dig deeper into the numbers.

How Much Should I Have Saved by 40?

A general rule of thumb is to have the equivalent of your annual salary saved by the time you’re 30. By your 40s, many financial advisors recommend having two to three times your annual salary saved in retirement money.

In your 50s, conventional wisdom holds that you should have six times your annual salary in your retirement savings by the end of the decade.

How Can I Get My Retirement Money On Track?

If you feel you don’t have enough money saved yet, it’s never too late to get back on track. As you reach your 40s, it’s likely that your income increases, but so do the obligations tied to your money.

You might be saving money for your kids’ college; you probably have mortgage payments and existing debt; you may even be taking care of aging parents. It’s a lot of financial multi-tasking and you have to prioritize.

The key is to establish money goals and create a budget. Tracking your income and spending can help you figure out how much money you need to save for each goal and what kind of investments or savings make sense to achieve your goals.

This can be made much easier by using SoFi Relay to know where you stand with your money, what you spend, and how to hit your financial goals. With SoFi Relay you can track all of your money in one place, plus get credit score monitoring, spending breakdowns, financial insights, and more.

A key priority to think over is paying off any high-interest debt, including credit card debt. Be sure to make the payments on any existing loans to avoid any late fees or penalties for missed payments. It may be worth reviewing any loans you currently hold to see if you could potentially refinance to a lower interest rate.

If you don’t have an emergency money fund yet, consider putting that at the top of your priority list. You could plan to have three to six months’ worth of expenses saved.

Once you have high-interest debt paid off and an emergency money saved, you can allot a larger portion of your funds to save for retirement and other money goals. If you’re playing catch-up with your retirement money, try contributing any financial windfalls toward your retirement savings.

Saving and Investing Money by 40

If you already have a 401(k), there are a number of strategies to max out your 401(k) that are worth looking into. For example, it might make sense to contribute at least enough to qualify for any employer matching your company offers. Why lose out on the “free” money that your employer is willing to contribute to your retirement savings?

Try setting monthly or weekly savings targets to help you stay on track for retirement. You can even set up automatic transfers or deposits, so you don’t have to think about it.

As you’re rethinking how much money you need to save for retirement, it also makes sense to look at your lifestyle goals. That includes figuring out when you might want to retire, what kind of lifestyle you want in retirement, and how much money you might have coming in during retirement.

Where to Save Money for Retirement

Next, you’ll also need to figure out which retirement plan is right for you. There are many ways to save for retirement, even beyond the popular employer-sponsored 401(k). Other options include a traditional IRA or a Roth IRA (to see how much you can contribute to a Roth IRA, check out our Roth Contribution Calculator).

Some people choose to put their retirement savings in more than one type of account. This is useful if you want to set aside more than the yearly contribution limits on 401(k) plans—whether because you’re a high-income earner, or you started saving later in life, or you’re trying to achieve financial independence at a younger age. In that case, it might make sense to leverage a Traditional IRA, Roth IRA, or after-tax account to save beyond the 401(k) limits.

Investing in a Roth IRA now, with post-tax dollars, can also be useful if you want to withdraw money in retirement without paying taxes on the money. In contrast, 401(k) contributions are tax-deferred, meaning you will be taxed on funds you withdraw in retirement. That said, there are income limits on Roth IRAs, so this might not be an option depending on your salary.

After-tax accounts can be appealing to individuals who plan to achieve financial independence at a younger age and retire early. Unlike qualified plans, which place penalties on withdrawing funds before a certain age, an after-tax account is a pool of money that you can withdraw from without having to worry about penalties if you access the account before age 59 ½.

The Takeaway

While there are conventional rules of thumb as to how much money you should have saved by 40, the truth is everyone’s path to a comfortable retirement looks different. One piece of advice is universal, however: The sooner you start saving for retirement, the better your chances of being in a financially desirable position later in life.

Interested in boosting your retirement savings? You can open a Traditional IRA, Roth IRA, or after-tax account with SoFi Invest® to supplement your 401(k) or other qualified retirement plan savings.

Find out how SoFi Invest can help you start saving for your future.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN19023

Source: sofi.com

What is a 51% Attack?

A 51% attack is when a single cryptocurrency miner or group of miners gains control of more than 50% of a network’s blockchain. Such attacks are one of the most significant threats for people who use and buy cryptocurrencies.

The 51% attack scenario is rare, largely because of the logistics, hardware and costs required to carry one out. But a successful block attack could have far-reaching consequences for the cryptocurrency market and those who invest in it.

Cryptocurrency investing can be potentially lucrative but it involves a higher degree of risk compared with stock or bond investing. If an investor is considering adding digital currencies to their portfolio, it’s important to understand the implications of a 51% attack.

Background on 51% Attacks

A 51% attack is an attack on a blockchain, which is a type of digital database in ledger form. With blockchain technology, information is collected together in groups or blocks and linked together to create a chain of data. In cryptocurrency trading, blockchain is used to record approved transfers of digital currencies and the mining of crypto coins or tokens.

With Bitcoin for example, “miners” can attempt to add blocks to the chain by solving mathematical problems through the use of a mining machine. These machines are essentially a network of computers. If miners succeed in adding a block to the chain, they receive Bitcoins in return.

The speed at which all the mining machines within the network operate is the Bitcoin hashrate. A good hashrate can help gauge the health of the network.

A 51% attack occurs when one or more miners takes control of more than 50% of a network’s mining power, computing power or hashrate. If a 51 percent attack is successful, the miners responsible essentially control the network and certain transactions that occur within it.

How a 51% Attack Works

When a cryptocurrency transaction takes place, whether it involves Bitcoin or another digital currency, newly mined blocks must be validated by a consensus of nodes or computers attached to the network. Once this validation occurs, the block can be added to the chain.

The blockchain contains a record of all transactions that anyone can view at any time. This system of record keeping is decentralized, meaning no single person or entity has control over it. Different nodes or computer systems work together to mine so the hashrate for a particular network is also decentralized.

When a majority of the hashrate is controlled by one or more miners in a 51% attack, however, the cryptocurrency network is disrupted. Those responsible for a 51% attack would then be able to:

•  Exclude new transactions from being recorded
•  Modify the ordering of transactions
•  Prevent transactions from being validated or confirmed
•  Block other miners from mining coins or tokens within the network
•  Reverse transactions to double-spend coins

All of these side effects of a block attack can be problematic for cryptocurrency investors and those who accept digital currencies as a form of payment.

For example, a double-spend scenario would allow someone to pay for something using cryptocurrency, then reverse the transaction after the fact. They’d effectively be able to keep whatever they purchased along with the cryptocurrency used in the transaction, bilking the seller.

What a 51% Attack Means for Cryptocurrency Investors

A 51% attack isn’t a common occurrence but it’s not something that can be brushed off. For cryptocurrency investors, the biggest risk associated with a 51% attack may be the devaluation of a particular digital currency.

If a cryptocurrency is subject to frequent block attacks, that could cause investors to lose confidence in the market. Such an event could cause the price of the cryptocurrency to collapse.

The good news is that there are limitations to what a miner who stages a 51% attack can do. For example, someone carrying out a block attack wouldn’t be able to:

•  Reverse transactions made by other people
•  Alter the number of coins or tokens generated by a block
•  Create new coins or tokens from nothing
•  Transact with coins or tokens that don’t belong to them

Investors may be able to insulate themselves against the possibility of a 51% percent attack by investing in larger, more established cryptocurrency networks versus smaller ones. The larger a blockchain grows, the more difficult it becomes for a rogue miners to carry out an attack on it. Smaller networks, on the other hand, may be more vulnerable to a block attack.

Is Cryptocurrency Investing a Good Idea?

Cryptocurrencies can help boost portfolio diversification, but there are certain risks to be aware of. Current cryptocurrency rules and regulations offer some protections to investors, but on the whole, the market is far less regulated than stocks, mutual funds and other securities. Here are some potential upsides and downsides of investing in digital currencies.

Pros of Cryptocurrency Investing

•  Bigger rewards. Compared with stocks and other securities, cryptocurrency investing could yield much higher returns. In 2020, for example, Bitcoin surged 159% higher.
•  Liquidity. Liquidity measures how easily an asset can be converted to cash or its equivalent. Popular cryptocurrencies like bitcoin are more liquid assets, which may appeal to investors focused on short-term trading strategies.
•  Transparency. Blockchain networks offer virtually complete transparency to investors, as new transactions are on record for everyone to see. That can make cryptocurrency a much more straightforward investment compared with more opaque investments like a hedge fund or a real estate investment trust (REIT).

Cons of Cryptocurrency Investing

•  Volatility. Cryptocurrencies can be extremely volatile, with wide fluctuations in price movements. That volatility could put an investor at greater risk of losing money on digital currency investments.
•  Difficult to understand. Learning the ins and outs of cryptocurrency trading, blockchain technology, and digital coin mining can be more complicated than learning how a stock, ETF or index fund works. That could lessen its appeal for a newer investor who’s just learning the market.
•  Not hands-off. If an investor is leaning towards a passive investment strategy, cryptocurrency may not be the best fit. Trading cryptocurrencies generally focuses on the short-term, making it more suited for active traders.

If an investor is still on the fence, they can consider taking SoFi’s crypto quiz to determine how much they already know about this market.

The Takeaway

Cryptocurrency investing may appeal to an investor if they’re comfortable taking more risk to pursue higher returns. If an investor is new to cryptocurrency trading, the prospect of a 51% attack might seem intimidating. Understanding how they work and the likelihood of one occurring can help them feel more confident.

If an investor is ready to start trading Bitcoin, Ethereum, and Litecoin, SoFi Invest can help. Members can trade cryptocurrencies 24/7, starting with as little as $10. The SoFi app allows users to manage their account from anywhere.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
SOIN21049

Source: sofi.com

What is Dash Cryptocurrency?

Cryptocurrency can sometimes be confusing to beginners because there are so many different cryptocurrency types with different purposes. Some cryptocurrencies are designed to act as fast digital cash, others as private digital cash, some as interest-bearing assets, others as cross-currency exchanges, and more. (Beginners can check out our comprehensive crypto guide for more details.)

Bitcoin is widely known as the premier cryptocurrency in large part because it was the first, yet altcoins such as Dash take existing intuitive technology and make other improvements upon it separately. Some of Bitcoin’s biggest flaws are precisely Dash’s strengths—including transaction speeds, fees, and privacy.

What is Dash?

Bitcoin fork, a split in the Bitcoin blockchain initiated by a group of Bitcoin miners with different views on certain network rules. Darkcoin was originally designed to uncompromisingly ensure user privacy and anonymity, as described in its 2014 whitepaper .

However, the next year the project was redesigned with other features in mind and rebranded as “Dash,” a mash-up of the phrase “digital cash.” As the name implies, the Dash coin is intended as a medium of exchange and has since shifted its primary focus to faster and less expensive transactions while maintaining its strong encryption properties. Since the 2015 rebranding, Dash has grown to become a popular altcoin for investors buying crypto and consistently ranks among the top 25 cryptocurrencies by market cap.

How Does Dash Work?

Similar to Ethereum’s ambitions, Dash uses a modification of the Proof of Stake algorithm known as X11. Proof of Stake is an alternative consensus mechanism to Bitcoin’s Proof of Work that replaces energy-intensive cryptocurrency miners with validators that verify transactions based on how many tokens they hold and stake on the network. In addition to confirming blocks, they also provide payment and privacy services on the network.

This model is viewed as less risky because it makes a potential network attack less rewarding than compensation for validating transactions which secure the network. Dash validators, or “Masternodes,” are full nodes that hold a minimum stake (or bond of collateral) of 1,000 DASH coins that perform network services and earn a return on their staked investment. Masternode services include private transactions (PrivateSend), Instant transactions (InstantSend), and the network’s governance and treasury systems. Dash’s model also addresses transaction scalability issues by reducing the amount of nodes required to approve a transaction to a manageable number.

Dash maintains a harmonious self-funding governance model by splitting block rewards between three critical stakeholders: Masternodes (45%), Miners (45%), and Treasury (10%). The first two are rewarded the bulk of block rewards for providing essential services and voting on development directions for the network, while the remaining 10% accrues to the Treasury to actually finance the voted-on future project developments.

What is Dash Used For?

Dash is intended to be used for daily transactions between peers. While Dash’s use is scattered, it is more concentrated in a few economically-distressed countries that are experimenting with cryptocurrencies.

Following the hyperinflation of the Venezuelan Bolivar, the South American country’s government passed an order instructing state-run agencies to accept any cryptocurrency for services. Dash has gained early momentum in the country after a series of popular conferences and educational efforts were made introducing crypto to the community as a replacement for devalued and unreliable local currency. Since then, acceptance of Dash in Venezuela has grown as thousands of merchants in the country, including Burger King, have enabled payments using Dash among other cryptos.

Dash adoption and use has spread in Latin America, also spurring bouts of growth in Brazil and interest from nearby Cabimas and Mexico, other countries with distressed economies and weak currencies. This comes as a result of local advocacy programs and merchant point-of-sale terminals integrating with Dash.

Is Dash Better than Bitcoin?

Some people prefer Dash for its fast speed, lower fees, and increased privacy. These properties give Dash technical advantages over Bitcoin’s current abilities as a medium of exchange.

Faster Speeds

One of the drawbacks to using a layer-one cryptocurrency network is that some network efficiency is sacrificed for decentralization. Many cryptocurrencies, like Bitcoin, still operate on the project’s original iteration which is designed for functionality now and scalability later. This affects the network’s speed, particularly the rate at which funds are transferred, confirmed, and received in recipients’ accounts. Bitcoin is the model for slow transaction times, sometimes taking hours for a transaction to be confirmed, especially during market congestion.

With Dash, most transactions are confirmed in seconds. As the name implies, Dash coins are meant to be used as a medium of exchange. Dash’s average block time is roughly two and a half minutes per transaction; nearly four times faster transactions than Bitcoin’s 10-minute block time. Dash users are free to send and receive transactions normally for a miniscule fee. Alternatively, Dash also instituted the InstantSend feature which allows masternodes to confirm transactions nearly instantly for an extra fee. With nearly instant transaction confirmations, Dash is among the fastest and most private cryptocurrency mediums of exchange, surpassing that of Bitcoin, Ethereum, Litecoin, and XRP.

There are other cryptocurrencies that also provide fast transaction confirmations like Dash, however only some of them lock down transactions after they are completed, thus disabling the same funds from being spent on two separate transactions. Networks that do not lock down confirmed transactions are technically vulnerable to a compromising phenomenon known as double spending. Double spending is a potential technical flaw in a digital currency network where the same single asset is spent more than once. InstantSend also solves the double spending issue by holding the amount of funds sent without having to wait for a block confirmation to officially confirm the transaction.

Lower Fees

In addition to faster block times, Dash transactions typically cost less than $0.01. Dash’s faster speeds and lower fees make it a far more efficient medium of exchange than cryptocurrencies like Bitcoin.

Privacy

One of the concerns with Bitcoin, according to privacy advocates, is its public ledger. All transactions and details on the Bitcoin blockchain such as sender, recipient, date, amount, and even previous Bitcoin addresses and transactions associated with each Bitcoin are publicly viewable by anyone and cannot be censored, modified, or deleted. While this creates a system of pseudo-honesty and transparency, users seeking privacy must look elsewhere.

Dash offers users a service known as “PrivateSend,” a layer of privacy and anonymity provided by Masternodes through a process known as automatic coinjoin mixing. Coinjoin mixing is a trustless privacy method that repackages multiple payments from multiple senders into a single transaction to obfuscate transaction details from outside parties.

Anonymizing Dash cryptocurrency transactions prevents them from being traced and users’ identities from being revealed, thus potentially providing an opportunity for users seeking to avoid paying taxes on crypto. Dash’s anonymizing privacy features are revered by users but scrutinized by regulators and centralized exchanges who must abide by strict cryptocurrency regulations.

Dash Crypto: Pros and Cons

When it comes to crypto, pros and cons can vary depending on what a user intends to do with the currency—whether interest-bearing assets or fast digital cash, for example.

Beyond the specific advantages Dash has over Bitcoin (outlined above), this cryptocurrency has pros and cons any potential user should be aware of.

Pros

•  Widely Accessible: Dash is available to buy or sell on most crypto exchanges in most countries with few exceptions. Being that Dash is a relatively larger-cap token, it is fairly ubiquitous—except for exchanges unfriendly to privacy-centric cryptocurrencies.
•  Efficient medium of exchange: Faster transaction speeds and cheaper fees make Dash a top-performing medium of exchange, especially when compared to wait times and fees experienced by users of marquee tokens like Bitcoin and Ethereum.
•  Private and anonymous: Darkcoin’s original privacy properties were maintained in Dash, autonomously obscuring transactions’ origins, senders, and other details by grouping transactions together to morph into a single new transaction with no similarities to the original senders.
•  Validators can stake DASH coins to earn passive block rewards: Validators, or nodes, attribute personally-owned DASH as part of the consensus mechanism to receive monetary compensation for providing crucial services to process transactions and secure the network.

Cons

•  Not as ubiquitous as mega-cap cryptos (e.g. Bitcoin, Ethereum): Whereas crypto is synonymous with Bitcoin and sometimes Ethereum, Dash doesn’t have the same caliber network effect and is not widely known by the average investor.
•  Masternodes are slightly more centralized than other cryptos: Owning and running a masternode requires staking 1,000 DASH, and there are currently more than 5,000 masternodes. However, it’s difficult to determine whether some people have multiple masternodes and thus centrally control a larger percentage of the network.
•  No academic or institution backing: Dash is entirely self-funded through its technical design and does not rely on nor receive support from prominent academics or institutions for advisement, technical support, or funding.
•  Strong competition (Bitcoin Cash, Litecoin, Monero, etc.): Currencies have been battling for the title of reserve currency for hundreds of years. The medium of exchange use case is saturated to say the least, and of the thousands of cryptocurrencies (and growing), Dash has to compete with other functional and efficient use cases with similar properties such as Bitcoin Cash, Litecoin, and others.

How Do You Invest in Dash?

6 things to know before investing in crypto.

The Takeaway

As cryptocurrency evolves, new projects are conceived and even spawn off of other projects in what’s known as a “fork.” One such fork is Dash, a 2015 offshoot of Bitcoin with many similarities but distinct improvements in critical areas that define money’s essence. Bitcoin historically dominates the crypto market share despite technical limitations, whereas projects like Dash have a smaller network effect and thus market cap despite superior real-world utility.

Regardless of your crypto project of choice, the vast number of cryptocurrency projects and tokens are showing a rapidly growing and maturing space that has already caused ripples in the investing world. As cryptocurrencies like Dash continue to become more mainstream, investors may look to capitalize on this new industry’s growth and adoption.

For investors looking to dip their toes in cryptocurrency investing without the responsibility of self-custodying their funds, SoFi Invest® helps beginners get started and learn along the way. Members can invest in Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ethereum Classic.

Find out how to invest in cryptocurrency with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.

SOIN21015

Source: sofi.com

NASDAQ Listing Requirements Explained

Before a stock can be traded by investors, it must first be listed on an exchange. Different stock exchanges can have physical locations with in-person trading or be entirely electronic. After the New York Stock Exchange (NYSE), the Nasdaq is the second largest stock exchange in the world.

Not just any company can be listed for trading on the Nasdaq, however. There are specific Nasdaq listing requirements that must be met as a condition of inclusion. These rules are designed to ensure that only reputable companies can trade on the exchange.

Understanding Nasdaq listing rules and how a stock exchange works can be helpful when mapping out an investing strategy and determining which stocks to purchase. Because exchanges play such an important role in stock listings, these requirements can also serve as a tech IPO guide for investors.

Here’s a closer look at how the Nasdaq works and what’s required for a company to be listed on the exchange.

What is the Nasdaq?

The Nasdaq play an important role in the history of the stock market. It’s an electronic stock exchange founded in 1971 by the National Association of Securities Dealers. Nasdaq is an acronym for National Association of Securities Dealers Automatic Quotations.

In terms of how many companies are on Nasdaq, the exchange lists approximately 5,000 common stocks. Those stocks represent a diverse range of industries, including financial services, health care, retail and tech stocks.

In addition to identifying the stock exchange itself, the term “Nasdaq” can also be used as shorthand when referencing the Nasdaq Composite Index. This stock market index tracks the performance of approximately 3,000 stocks listed on the Nasdaq exchange.

The Nasdaq Composite is a capitalization-weighted index, meaning its makeup is determined by market capitalization. Market cap is a measure of a company’s value as determined by its share price multiplied by the total number of outstanding shares. The Nasdaq Composite includes some of the largest U.S. companies by market cap.

Nasdaq Listing Requirements

The Nasdaq doesn’t include every publicly traded company in the U.S. In order to be included on the exchange, companies must first meet Nasdaq listing rules. These rules apply to companies that are seeking to have common stocks on the exchange.

Nasdaq listing requirements span a number of criteria:

•  Earnings
•  Cash flow
•  Market capitalization
•  Revenue
•  Total assets
•  Stockholders’ equity
•  Bid price

The Nasdaq listing rules allow companies to qualify under one of four sets of standards, based on the criteria listed above.

Standard 1: Earnings

A company’s earnings are a reflection of its profitability. To qualify for listing on the Nasdaq based on earnings alone, a company must be able to show:

•  Aggregate pre-tax earnings of $11 million or more for the three prior fiscal years
•  Earnings of $2.2 million or more for the two most recent fiscal years
•  Zero net losses for each of the three prior fiscal years

For a company to be included under this standard, they have to be able to check off all three of these boxes. If they can meet two criteria but not a third, they won’t be able to qualify for listing.

Standard 2: Capitalization with Cash Flow

Capitalization is a measure of a company’s size in relation to the rest of the market. Cash flow tracks the movement of cash in and out of a company. To qualify for Nasdaq listing under the capitalization with cash flow standard, the following rules apply:

•  Aggregate cash flow of $27.5 million or more in the prior three fiscal years
•  Zero negative cash flow for the prior three fiscal years
•  Average market capitalization of $550 million or more over the prior 12 months
•  Revenue of $110 million or more for the previous fiscal year

Again, all four of those conditions have to be met to qualify for Nasdaq listing using this standard.

Standard 3: Capitalization with Revenue

The third Nasdaq listing standard focuses on company size and revenue, which is a measure of income. The minimum requirements for both are as follows:

•  Average market capitalization of $850 million or more over the prior 12 months
•  Revenue of $90 million or more for the previous fiscal year

Larger companies may opt to take this route if they can’t meet the cash flow requirements under Standard 2.

Standard 4: Assets with Equity

In lieu of earnings or market capitalization, companies can use their assets and the value of shareholders’ equity to qualify for listing on the Nasdaq. There are three specific thresholds companies have to meet:

•  Market capitalization of $160 million
•  Total assets of $80 million
•  Stockholders’ equity of $55 million

Regardless of which standard a company uses to qualify for listing, they have to maintain them continually. Otherwise, the company could be delisted from the Nasdaq exchange.

General Nasdaq Listing Rules

Aside from meeting the listing requirements set forth for each standard, there are some general Nasdaq listing requirements companies have to observe.

For example, the Nasdaq minimum share price or bid price for inclusion is $4. It’s possible to qualify with a bid price below that amount but that may entail meeting additional requirements.

Companies must also have at least 1.25 million publicly traded shares outstanding. That threshold applies to both seasoned companies and those seeking their initial public offering (IPO). Additionally, IPO requirements specify that the market value of those shares must be at least $45 million. For seasoned companies, the market value requirement increases to $110 million.

Nasdaq listing rules also cover criteria related to corporate governance. Under those requirements, companies must:

•  Make annual and interim reports available to shareholders
•  Have a majority of independent directors on the board of directors
•  Adopt a code of conduct that applies to all employees
•  Hold annual meetings of shareholders
•  Avoid potential or actual conflicts of interest

Companies must also pay a listing fee to gain entry to the Nasdaq. Entry fees can range from $150,000 to $295,000, depending on the total number of shares outstanding. Those amounts include a non-refundable $25,000 application fee. Paying the fee doesn’t guarantee that a company will be listed on the Nasdaq.

How to Choose NASDAQ Stocks

Knowing how stocks are chosen for the Nasdaq and other exchanges can be helpful in conducting your own research when deciding what to buy or sell. Listing on the Nasdaq or NYSE can also be important for a company in terms of which exchange-traded fund it gets added into. Broadly speaking, there are two ways to approach stock research: technical analysis and fundamental analysis.

Technical analysis focuses on market trends, momentum and day-to-day movements in stock pricing. You may use a technical analysis approach for choosing stocks if you’re an active day trader who’s interested in capitalizing on market trends to make short-term gains.

Using fundamental analysis on stocks, on the other hand, focuses on a company’s financial health. That includes things like earnings, profitability and how much debt the company has. Using a fundamental approach may be preferable if you favor a long-term, buy-and-hold strategy. And fundamental analysis echoes how the Nasdaq and other stock exchanges determine which stocks to include.

The Takeaway

Becoming a savvy investor starts with learning the basics of how the stock market and stock exchanges such as the Nasdaq work. Understanding Nasdaq listing requirements can offer insight into how stock exchanges select which companies to offer for trading.

When you’re ready to invest, you can use an online platform like SoFi Invest® to begin. It’s possible to start investing with as little as $1 and build a diversified portfolio that includes individual stocks and low-cost exchange-traded funds (ETFs) from the Nasdaq as well as other exchanges.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

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

What Is Share Lending?

Share lending is the business of investment firms loaning out shares to borrowers as a way to collect additional revenue on stocks that otherwise would have sat untraded in their portfolios. Meanwhile, the borrowers of the shares are often short sellers, who give collateral in the form of cash or other securities to the lenders.

Lenders tend to be pension funds, mutual funds, sovereign wealth funds and exchange-traded fund (ETF) providers, since these types of firms tend to be long-term holders of equities. Brokerages can also practice securities lending with shares in retail investors’ brokerage accounts. Share lending helps such firms keep management fees down for their investors.

Also known as securities lending, the practice can extend beyond equities to bonds and commodities. Securities lending has become more popular in recent years as price wars drove down management fees to near zero and investment firms sought other sources of revenue. Revenue worldwide from securities lending totaled $7.66 billion in 2020 , with an additional $2.87 billion in broker-to-broker activity, according to financial data firm DataLend.

Share lending is useful to investors who are shorting a stock, because they have to borrow shares in order to put on their bearish positions. Critics argue that the practice comes at the expense of fund investors, since investment firms forgo their voting rights when they loan out shares. They might also try to own stocks that are easier to rent out. Other concerns include a lack of transparency and an increase in counterparty risk.

How Securities Lending Works

Here’s a closer look at how share lending works:

1. Institutional investors use in-house or third-party agents to match their shares with borrowers. Such agents receive a cut of the fee generated by the loan.
2. The fee is agreed upon in advance and typically tied to how much demand there is for the lent-out security.
3. The institutional investor or lender often reinvests the collateral in order to collect additional interest or income while their shares are out on loan.
4. Borrowers tend to be other banks, hedge funds, or broker-dealers, as well as sometimes other lending agents. When the borrower is done using the shares, they return them back to the lender.
5. If the collateral posted was in the form of cash, a proportion of the revenue earned from reinvesting is sometimes given back to the borrower.

For retail investors versus institutional ones, they should learn whether their brokerage offers securities lending or share lending programs. It’s important for individual investors to know that for dividend stocks, they would get some form of payment from the borrower, rather than the dividend itself. This payment may be taxed at a higher rate than a dividend payout.

Share Lending and Short Selling

In order to short a stock, investors first borrow shares. They then sell these shares to another investor or trader, with the hope that when the stock price falls, the short seller can buy them back and pocket the difference before returning the loaned shares.

In share lending, a share can only be lent out once, but when the borrower is a short seller, they can sell it, and the new buyer can lend it again. This is why the short float–the percentage of the share float that is shorted–can rise above 100% in a stock.

The fee generated by renting out shares depends on their availability. A small number of stocks tend to account for a large proportion of revenue in securities lending.

For instance, data from DataLend show that in 2020, of the $7.66 billion generated in securities lending revenue, $482 million was generated by lending out just five stocks.

Criticism of Securities Lending

In December 2019, Japan’s Government Pension Investment Fund announced that it will halt stock lending, saying the practice is not in line with its goals as a long-term investor. The world’s largest pension fund cited a lack of transparency on who is the ultimate borrower of the loaned securities, as well as why they were borrowing.

This became a bigger concern for investors after the “cum-ex” scandal in Germany, where borrowed shares were used in a tax evasion scandal.

Another one of the biggest criticisms of share lending is that voting rights of the actual stock transfers to the borrower. This challenges the traditional model where institutional investors vote and push for change in companies in order to maximize shareholder value for their investors. Money managers can recall shares in order to cast a vote in an upcoming shareholder meeting. But there are concerns they don’t and it’s unclear how often they do.

Another concern has been that share lending programs incentivize money managers to own stocks that are popular to borrow. A 2017 academic paper updated in November 2020 found that mutual funds that practice securities lending tend to overweight high-fee stocks and then underperform versus funds that do not rent out shares.

Potential Risks of Share Lending

Retail investors should take note that securities that have been loaned are not protected by the Securities Investor Protection Corporation (SIPC ). The SIPC however does protect the cash collateral received for the loaned securities for up to $250,000.

Another concern is the increase in counterparty risk. Let’s say for example a short seller’s wager goes sour. If the shorted stock rallies enough, the short seller could default and there’s a risk that the collateral posted to the lender isn’t enough to cover the cost of the shares on loan.

Separately, the lender, whether they’re a pension or an ETF provider, typically reinvests the cash collateral in order to earn additional interest. Bad bets could cause the value of the investment to drop. During the 2008 financial crisis, some funds lost money from reinvesting the collateral in risky assets.

The Takeaway

Share lending or securities lending is a small but reliable source of revenue for institutional investors and brokerage firms, who get to rent out shares that otherwise would have sat idly in portfolios. The practice has ramped up in recent years as management and brokerage fees have shrunk dramatically due to competition and the popularity of index investing.

Proponents argue that securities lending helps pay for the cost of running money management funds and brokerage platforms, which in turn allows investors to benefit from lower fees.

Critics argue that a loss of voting rights and a lack of transparency are problematic, as well as the risk that share lending can distort mutual fund portfolios to overweight stocks that are popular to borrow, hence more likely to generate revenue.

SoFi Invest® makes money from interest earned on uninvested cash in accounts and lending out securities, as well as a small amount from payment for order flow. Users of the platform can pick between an Active Investing or Automated Investing account, depending on how hands-on or hands-off they want to be. Members also have access to a financial planner who can help them make better informed investment decisions.

Open a SoFi Invest account today.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

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Source: sofi.com