Dow Jones vs. Nasdaq vs. S&P 500 – What Are the Differences?

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Wondering how “the market” did today?

When American investors refer to “the market” or “the stock market,” they’re usually referring to one of the three major U.S. stock exchanges: the Dow Jones, the Nasdaq, and the S&P 500. Or all three. 

But these indexes represent different stocks and market segments, so you should understand the differences before investing in stocks. 

The Dow Jones Industrial Average

The oldest U.S. stock exchange, the Dow Jones Industrial Average — or the DJIA, Dow, or Dow Jones for short — began in 1896 as a way to track the 12 largest industrial companies of the era. 

Today the Dow includes 30 blue-chip companies ranging from Microsoft to Coca Cola to Disney, and the index features all industries except for utilities and transportation. These market sectors have their own separate Dow Jones indexes. 

The DJIA doesn’t swap in or out companies often, and the criteria remains vague. Aside from being some of the largest companies in the country, the companies are expected to be leaders in their industry. A committee meets periodically to vote on keeping or replacing members of the index. 

Stocks in the Dow Jones are weighted by price, so stocks with higher prices make up a greater percentage of the total index. If a $100 stock rises by $10, and a $5 stock also rises by $10, both changes are weighted equally, even though that jump in price represents a much larger leap in value for the $5 stock. 

The Dow offers some insight into how the nation’s largest companies are performing. But with only 30 companies, it hardly represents the U.S. stock market as a whole. The price weighting also distorts the index’s performance, as a company’s share price tells you less than its market capitalization (market cap). 

Take the index’s movements with a grain of salt, and consider it more of an ultra-high cap bellwether rather than a definitive statement about U.S. stock trends.


The S&P 500

The S&P 500 index includes 500 U.S. companies rather than only 30, making it a broader indicator of U.S. large cap stocks. These companies include Alphabet (Google), 3M, Allstate, Amazon, and Microsoft. Note that companies can appear in multiple stock indexes, as Microsoft does. 

The number of companies included in the S&P has changed over time. Going back to 1927, the S&P has returned around 10% per year on average. That includes an era when the index only included 90 companies, before expanding to 500 in 1957. 

Like the Dow, the stocks making up the S&P 500 are determined by a committee. As of 2021, companies must have a market cap of at least $13.1 billion, have positive earnings for at least the last four quarters, maintain adequate liquidity based on price and trading volume, and at least 50% of shares must be owned by the public (known as public float).

Unlike the Dow, the S&P 500 is weighted by market cap rather than price. Market capitalization includes the total value of all a company’s shares: the share price multiplied by the number of outstanding shares. 

Imagine a company with shares priced at $1,000, but which only has 100 shares in circulation, for a total market cap of $100,000. In contrast, another company has 1 million shares in circulation, but each share is worth only $10, for a total market cap of $10 million. Which company has a higher market value? The one with a market cap of $10 million of course, which is why the S&P 500 weights by market cap rather than stock price.  

The S&P 500 offers a broader picture of how U.S. stocks are trending. Even so, the index represents the largest U.S. companies, and tells you nothing of how smaller companies have performed.


The Nasdaq Composite

First and foremost, understand that the Nasdaq is a stock exchange, and was in fact the first completely electronic stock exchange. The Nasdaq Composite is the stock index, which includes over 3,000 of the companies traded on the Nasdaq. The index includes all companies with common stock trading on the Nasdaq, but excludes preferred stock, exchange-traded funds (ETFs), and other types of securities. 

While investors tend to think of the Nasdaq as an exchange for technology stocks, stocks from all market sectors trade on the Nasdaq. Even so, the Nasdaq Composite index does disproportionately feature tech stocks. 

Example companies listed on the Nasdaq include Apple, Microsoft, Netflix, Tesla, and Intel. Many investors and pundits use the Nasdaq Composite as a barometer for the technology sector as a whole, even though it includes many non-tech companies (such as PepsiCo). 

Like the S&P 500, the Nasdaq Composite is weighted by market capitalization. 

Don’t confuse the Nasdaq Composite — which includes nearly every stock that trades on the Nasdaq — with the Nasdaq 100. The latter includes just 100 of the largest non-financial stocks that trade on the Nasdaq, such as Starbucks, Adobe, and Amazon. 


Which Index Should You Follow?

As a broad measure of the U.S. stock market, the S&P 500 serves as the most representative index. It includes companies in every industry, and is weighted by market cap. Even so, it includes only large-cap companies. 

For a more tech-oriented weathervane, follow the Nasdaq Composite’s movements. If you want a glimpse into small-cap stocks, check the Russell 2000. 

The Dow Jones may get the most attention from reporters, but it actually represents the U.S. market least well of the three major indexes. The sample size is too small, and being price-weighted further distorts its value.


Final Word

The three major stock indexes above only represent U.S. stocks, not international companies. 

For more global exposure, you can explore foreign stock market indexes such as the S&P Europe 350 Index or the Dow Jones Asian Titans 50 Index. 

Better yet, save yourself the stress and don’t bother following the stock market’s movements at all. Instead, automate your stock investments with a robo-advisor, and simply dollar-cost average your investments in index funds. Avoid emotional investing by ignoring the daily volatility of the market. 

While day traders need to stay glued to their stock tickers, you don’t. The stock market rises and falls, and over the long term it averages a strong upward trend. I sleep easily at night knowing that when it goes up, I enjoy a higher net worth. When it goes down, I get to buy stocks at a discount. No matter what happens, I win — because I participate in the market on autopilot, without letting emotions affect my investment decisions.

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Source: moneycrashers.com

Using In-School Deferment as a Student

Undergraduate and graduate students in school at least half-time can put off making federal student loan payments, and possibly private student loan payments, with in-school deferment. The catch? Interest usually accrues.

Loans are a fact of life for many students. In fact, a majority of them — about 70% — graduate with student loan debt.

While some students choose to start paying off their loans while they’re still in college, many take advantage of in-school deferment.

What Is In-School Deferment?

In-school deferment allows an undergraduate or graduate student, or parent borrower, to postpone making payments on:

•   Direct Loans, which include PLUS loans for graduate and professional students, or parents of dependent undergrads; subsidized and unsubsidized loans; and consolidation loans.

•   Perkins Loans

•   Federal Family Education Loan (FFEL) Program loans.

Parents with PLUS loans may qualify for deferment if their student is enrolled at least half-time at an eligible college or career school.

What about private student loans? Many lenders allow students to defer payments while they’re in school and for six months after graduation. Sallie Mae lets you defer payments for 48 months as long as you are enrolled at least half-time.

But each private lender has its own rules.

Recommended: How Does Student Loan Deferment in Grad School Work?

How In-School Deferment Works

Federal student loan borrowers in school at least half-time are to be automatically placed into in-school deferment. You should receive a notice from your loan servicer.

If your loans don’t go into automatic in-school deferment or you don’t receive a notice, get in touch with the financial aid office at your school. You may need to fill out an In-School Deferment Request .

If you have private student loans, it’s a good idea to reach out to your loan servicer to request in-school deferment. If you’re seeking a new private student loan, you can review the lender’s deferment rules.

Most federal student loans also have a six-month grace period after a student graduates, drops below half-time enrollment, or leaves school before payments must begin. This applies to graduate students with PLUS loans as well.

Parent borrowers who took out a PLUS loan can request a six-month deferment after their student graduates, leaves school, or drops below half-time enrollment.

Requirements for In-School Deferment

Students with federal student loans must be enrolled at least half-time in an eligible school, defined by the Federal Student Aid office as one that has been approved by the Department of Education to participate in federal student aid programs, even if the school does not participate in those programs.

That includes most accredited American colleges and universities and some institutions outside the United States.

In-school deferment is primarily for students with existing loans or those who are returning to school after time away.

The definition of “half-time” can be tricky. Make sure you understand the definition your school uses, as not all schools define half-time status the same way. It’s usually based on a certain number of hours and/or credits.

Do I Need to Pay Interest During In-School Deferment?

For federal student loans and many private student loans, no.

If you have a federal Direct Unsubsidized Loan, interest will accrue during the deferment and be added to the principal loan balance.

If you have a Direct Subsidized Loan or a Perkins Loan, the government pays the interest while you’re in school and during grace periods. That’s also true of the subsidized portion of a Direct Consolidation Loan.

Interest will almost always accrue on deferred private student loans.

Although postponement of payments takes the pressure off, the interest that you’re responsible for that accrues on any loan will be capitalized, or added to your balance, after deferments and grace periods. You’ll then be charged interest on the increased principal balance. Capitalization of the unpaid interest may also increase your monthly payment, depending on your repayment plan.

If you’re able to pay the interest before it capitalizes, that can help keep your total loan cost down.

Alternatives to In-School Deferment

There are different types of deferment aside from in-school deferment.

•   Economic Hardship Deferment. You may receive an economic hardship deferment for up to three years if you receive a means-tested benefit, such as welfare, you are serving in the Peace Corps, or you work full time but your earnings are below 150% of the poverty guideline for your state and family size.

•   Graduate Fellowship Deferment. If you are in an approved graduate fellowship program, you could be eligible for this deferment.

•   Military Service and Post-Active Duty Student Deferment. You could qualify for this deferment if you are on active duty military service in connection with a military operation, war, or a national emergency, or you have completed active duty service and any applicable grace period. The deferment will end once you are enrolled in school at least half-time, or 13 months after completion of active duty service and any grace period, whichever comes first.

•   Rehabilitation Training Deferment. This deferment is for students who are in an approved program that offers drug or alcohol, vocational, or mental health rehabilitation.

•   Unemployment Deferment. You can receive this deferment for up to three years if you receive unemployment benefits or you’re unable to find full-time employment.

For most deferments, you’ll need to provide your student loan servicer with documentation to show that you’re eligible.

Then there’s federal student loan forbearance, which temporarily suspends or reduces your principal monthly payments, but interest always continues to accrue.

Some private student loan lenders offer forbearance as well.

If your federal student loan type does not charge interest during deferment, that’s probably the way to go. If you’ve reached the maximum time for a deferment or your situation doesn’t fit the eligibility criteria, applying for forbearance is an option.

If your ability to afford your federal student loan payments is unlikely to change any time soon, you may want to consider an income-based repayment plan or student loan refinancing.

The goal of refinancing with a private lender is to change your rate or term. If you qualify, all loans can be refinanced into one new private loan. Playing with the numbers can be helpful.

Just know that if you refinance federal student loans, they will no longer be eligible for federal deferment or forbearance, loan forgiveness programs, or income-driven repayment.

Recommended: Student Loan Refinancing Calculator

The Takeaway

What is in-school deferment? It allows undergraduates and graduate students to buy time before student loan payments begin, but interest usually accrues and is added to the balance.

If trying to lower your student loan rates is something that’s of interest, look into refinancing with SoFi.

Students are eligible to refinance a parent’s PLUS loan along with their own student loans.

There are absolutely no fees.

It’s easy to check your rate.


We’ve Got You Covered


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
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Source: sofi.com

Stock Market Today: Stocks End Mixed After Data Dump

Investors had plenty to think about ahead of the Thanksgiving holiday, chewing through a huge helping of economic data.

Kicking things off were weekly jobless claims – released a day early due to tomorrow’s holiday – which plunged to 199,000 in the week ended Nov. 20, well below last week’s 270,000 and economists’ forecast for 260,000 claims. What’s more, this was the lowest level for initial unemployment applications since 1969.

Also in focus were October’s personal income and spending data, which came in above estimates (up 0.5% and 1.3%, respectively, from September), and an upwardly revised reading on third-quarter gross domestic product (to 2.1% versus an initial estimate of 2.0%).

However, it wasn’t all roses. The University of Michigan’s consumer sentiment index arrived at its lowest level in 10 years in November and the core personal consumption expenditures (PCE) index – a key inflation measure used by the Federal Reserve – rose 4.1% year-over-year in October, the quickest annual pace since 1991.

Plus, the release of the minutes from the latest Fed meeting showed several members of the committee said the central bank “should be prepared to adjust the pace of asset purchases” and/or raise interest rates sooner than anticipated if inflation continues to run hot.

“In terms of the Fed’s economic outlook, it’s clear that inflation has accelerated more than anyone expected it to, and the breadth of rising prices has increased substantially,” writes Bob Miller, BlackRock’s Head of Americas Fundamental Fixed Income.

“While the bar for an acceleration in the tapering of asset purchases is high, it is not insurmountable and looks reasonably likely to be cleared should we see another solid payroll report and inflation data release in December,” he adds. “Accelerating the asset purchase tapering would potentially end purchases in March 2022 and would then open the door for the Committee to consider lift off from the zero policy rate sometime in the second quarter of the year.”

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

At the close, the S&P 500 Index was up 0.2% at 4,701 and the Nasdaq Composite had gained 0.4% at 15,845. The Dow Jones Industrial Average wasn’t as resilient, falling 0.03% to 35,804.

As a reminder, the U.S. stock market will be closed tomorrow for Thanksgiving and trading will end early on Black Friday.

stock price chart 112421stock price chart 112421

Other news in the stock market today:

  • The small-cap Russell 2000 gained 0.2% to 2,331.
  • U.S. crude futures slipped 0.1% to end at $78.39 per barrel.
  • Gold futures eked out a marginal gain to settle at $1,784.30 an ounce.
  • Bitcoin retreated 0.7% to $57,453.50. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
  • Gap (GPS) took it in the chin after earnings, with shares sliding 24.1%. In its third quarter, the clothing retailer reported adjusted earnings of 27 cents per share on $3.94 billion in revenue, well below the 50 cents a share and $4.43 billion in sales analysts were expecting. GPS also lowered its full-year forecast, citing rising freight costs and supply-chain disruptions due to factory closures in Vietnam. “In the third quarter, the Athleta and Gap brands continued to be the bright spots for GPS, as the brands have grown 48% and 8%, respectfully, compared to fiscal 2020,” says CFRA Research analyst Zachary Warring, who maintained his Hold rating on the stock while lowering his price target by $8 to $22. “The company reiterated its plan to open between 30 and 40 Old Navy stores and 20-30 Athleta stores in 2021 while closing 75 Gap and Banana Republic stores. We need to see how sales and margins hold up in fiscal 2023 to get more bullish on shares of GPS.”
  • Supply-chain issues were also a noted in Nordstrom’s (JWN) quarterly update. “While many retailers are dealing with macro-related supply chain disruptions, Rack [the retailer’s off-price chain] faces a unique challenge as off-price procurement of the same top brands we carry at Nordstrom is particularly difficult in an environment with production constraints and lower levels of clearance product,” said CEO Erik Nordstrom in the earnings call. While Rack contributed to roughly 50% of total sales in 2019, he added, it’s only brought in 42% of sales for the year-to-date. Overall, the company reported earnings of 39 cents a share and revenue of $3.6 billion in its third quarter, missing analysts’ estimates for earnings of 57 cents per share and revenue of $3.5 billion. The stock plunged 29% today.

The Pricing Power Advantage

Some of the best stocks to buy now are those that are able to navigate higher inflation.

Pricing power should be an important theme for investors when assessing relative returns of stocks, says a group of analysts at global research firm UBS, especially given the current environment of “surging shipping costs, rising raw materials, supply chain issues and accelerating wage growth.”

The team has been studying the share performance of companies with pricing power for some time. They found that shares of firms that can raise prices without consumers balking and taking their business elsewhere and that have solid margin momentum tend to outperform those without by around 20%, on average, over 12 months once inflation rises above 3% on an annualized basis.

So, if you’re looking for ways to protect your portfolio against rising inflation, consider this list of the stocks with a pricing power advantage, according to UBS. Each of these names has a high-conviction Buy rating from the research firm and ranks in the top third of its sector for pricing power, margin momentum and input cost exposure.

Source: kiplinger.com

These Healthcare Stocks Should Thrive in 2022

As the COVID-19 pandemic recedes, routine doctor and hospital visits, along with deferred medical procedures such as cataract surgery and heart valve replacements, are returning to normal.

The pandemic has been a global tragedy, but if there is one silver lining it is that the miraculous development of effective COVID-19 vaccines in less than a year is helping to usher in a golden age for the pharmaceutical and health sciences industries.

“We’re seeing a revolution today in vaccine development,” says Andy Acker, manager of Janus Henderson Global Life Sciences.

Before COVID arrived, the fastest vaccine approval had been four years, and the average was 10 years; with COVID, two vaccines were approved in about 10 months. Validation of the mRNA technology used by Pfizer (PFE) and Moderna (MRNA) in their vaccines means that it will now be adopted to treat other medical indications. (The mRNA vaccines teach our cells how to make a protein that triggers an immune response.)

In truth, the COVID-19 medical challenge and the dramatic success of the vaccines have only served to accelerate a powerful trend of innovation in medicine. For instance, the sharply declining cost of gene sequencing is pushing forward the growing field of precision medicine, which aims to tailor treatments to specific diseases, such as cancer.

“The science is exponentially improving for better outcomes,” says Neal Kaufman, manager of Baron Health Care fund.

Of course, the healthcare sector is also riding the (global) demographic wave of aging populations. At CVS Health drugstores, the number of prescription medicines purchased by people age 65 or older is three to four times that of 20- to 40-year-old people, says Jason Kritzer, co­manager of Eaton Vance Worldwide Health Sciences.

In rapidly developing countries with expanding middle classes, such as China, quality healthcare is likely to be one of the first things people rising out of poverty will spend money on.

With innovation and some of these secular trends in mind, we identified six intriguing healthcare stocks that literally span the alphabet, from letter A to letter Z. We particularly like companies that address large and growing end markets, especially global ones. We give extra points to businesses that have less exposure to pricing pressure from insurance com­panies or the government. Returns and other data are through Nov. 5.

healthcare stockshealthcare stocks

1 of 7

Align Technology

Share price: $687

Market cap: $54 billion

Price-earnings ratio: 50

Maker of the Invisalign brand of clear, plastic braces for teeth, Align Technology (symbol ALGN) is a disruptive force in the global teeth-correction market, rapidly gobbling market share from traditional wires and brackets. Jeff Mueller, comanager of Polen Global Growth, credits the “Zoom effect” for accelerating the adoption of the aesthetically pleasing aligners: Workers stuck at home during the pandemic were staring at their own teeth every day on Zoom. “Vanity is increasing around the world,” Mueller says, adding that, due to the rise of smartphones, the internet and social media, “more people are taking pictures of themselves than ever before in the history of mankind.”

A lot of technology is used in the Invisalign process. It employs intra-oral scanners and modeling software, plus mass-customization manufacturing using 3D printing at several plants around the globe (each set of teeth is unique, and individuals change their aligners every two weeks). Because braces are generally for cosmetic purposes, they are not subject to pricing pressure from insurance companies or the government.

Align Technology’s revenues are currently growing by 25% to 30% a year as its market penetration rises, and Mueller expects earnings to continue to compound at double digits for quite a while.

2 of 7

Merck

Share price: $82

Market cap: $206 billion

Price-earnings ratio: 11

Dividend yield: 3.2%

CFRA analyst Sel Hardy thinks that Merck’s (MRK) COVID-19 antiviral pill, molnupiravir, is “a game changer.” The drug maker has applied for emergency-authorization use from the government; approval was expected before the end of 2021. Merck projects that global sales of the oral medication, which has demonstrated strong efficacy against multiple variants of COVID, could be $5 billion to $7 billion by the end of 2022.

Apart from this breakthrough drug, Hardy likes the way Merck is positioned. Sales of Keytruda, its versatile oncology drug, topped $14 billion in 2020 and continue to grow; its animal health division is expanding; and the firm’s $12 billion acquisition of Acceleron Pharma, a biotech firm with strengths in blood and cardiovascular treatments, will augment Merck’s product pipeline.

Hardy thinks Merck, which yields 3.2%, can compound earnings by at least 10% a year for the next three years.

3 of 7

Novo Nordisk

Share price: $113

Market cap: $259 billion

Price-earnings ratio: 31

Dividend yield: 1.3%

Danish pharmaceutical company Novo Nordisk (NVO) focuses on two global pandemics: diabetes and obesity. The World Health Organization projects that the number of diabetics will expand from 460 million to 580 million by 2030, and it estimates that there are nearly 800 million obese people around the world. Novo pioneered insulin injections a century ago and has remained a global leader in diabetes care ever since. Multibillion-dollar drugs include Ozempic, a once-weekly prescription for adults with Type 2 diabetes to lower blood sugar, and NovoRapid, a fast-acting insulin treatment. Novo’s sales are evenly split between North America and the rest of the world.

Investors such as Samantha Pandolfi, comanager of Eaton Vance Worldwide Health Sciences, are also excited about rapid growth in Novo’s newer weight-management business. Wegovy, prescribed for obese people with another disease, such as diabetes, was approved by the FDA in June 2021. Tests show Wegovy typically delivers a weight loss of 15% to 17%, and Pandolfi says sales are off to a blazing start. The century-old firm plows an impressive 12% of sales back into research and development, which helps it stay ahead of the competition and generate earnings growth in the low double digits.

4 of 7

Thermo Fisher Scientific

Share price: $617

Market cap: $243 billion

Price-earnings ratio: 29

Dividend yield: 0.2%

Eddie Yoon, manager of Fidelity Select Health Care Portfolio, calls Thermo Fisher Scientific (TMO) “the Walmart of life sciences.” Whether it’s a big pharma, biotech or university lab, customers come to this health sciences supermarket for analytical tools, lab equipment and services, and diagnostic kits and consumables. “They are the partner of choice for any pharma or biotech company of any size,” says Jeff Jonas, a portfolio manager at Gabelli Funds. Thermo has benefited from increased demand for its products and services due to COVID-19, and now the firm is poised to benefit from the rise in research and development spending among drug companies around the world.

One thing that distinguishes Thermo, according to health care stock analysts, is the quality of its management. The firm has successfully integrated several strategic acquisitions that helped broaden its menu of products and services. Tommy Sternberg, an analyst at William Blair, notes that Thermo is particularly adroit at staying close to customers and understanding what their scientists are working on. “They do a fantastic job of getting to know customers and their needs, and learning from customers to come up with more solutions more quickly,” says Sternberg.

5 of 7

UnitedHealth Group

Share price: $456

Market cap: $429 billion

Price-earnings ratio: 21

Dividend yield: 1.3%

The U.S. spends a staggering $4 trillion a year on health care. UnitedHealth (UNH)—with annual revenues of nearly $300 billion, a market value of $430 billion and 330,000 employees—is the industry’s largest player. As the top private health care insurance provider, it leads in managed care. Its OptumHealth unit offers pharmacy benefits and owns physician’s practices and surgical centers. Eaton Vance’s Kritzer calls Optum, an industry leader in the digitization of services, “a very large health IT company inside an insurance giant.” United helps the federal government manage costs through its Medicare Advantage plan (the most popular private plan). Plus, it enjoys high customer satisfaction, and it is counting a growing number of seniors as customers (about 10,000 Americans turn 65 every day). Despite United’s massive size, William Blair’s Sternberg thinks it can sustain earnings-per-share growth of about 15% annually.

6 of 7

Zoetis

Share price: $217

Market cap: $103 billion

Price-earnings ratio: 42

Dividend yield: 0.5%

Like Align Tech­nology’s Invisalign, Zoetis’s (ZTS) main business—companion-animal health—was already riding a tailwind that picked up force thanks to lifestyle changes during the pandemic. Pet-ownership rates spiked as people grew more isolated and sought the companionship of dogs and cats, according to David Kalis, comanager of The Future Fund Active ETF. Zoetis markets vaccines, prescription drugs and diagnostic equipment directly to veterinarians. The industry is regulated, with FDA approval required for the drugs, but Zoetis benefits from the lack of insurance company price pressures and the fragmented nature of the firm’s customer base, notes Eaton Vance’s Pandolfi.

In fact, companion-animal ownership is growing globally, driven by aging populations and shrinking family sizes. Pet owners are treating their pets better, addressing ailments such as skin irritation and arthritis, and visiting the vet more frequently, says Pandolfi. Zoetis books about half of sales overseas; roughly 60% of revenues come from the companion-animal business and 40% from the less-profitable and slower-growing livestock animal division.

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Invest in a Fund

Given the complexity and diversity of the health care sector, investing in a fund makes a lot of sense for many investors. Here are our favorites (returns and other data are through November 5).

Baron Health Care (symbol BHCFX, expense ratio 1.10%) is a young fund off to a sizzling start. Over the past three years, it returned 29.2% annualized, or nearly twice the return of the S&P 1500 Health Care index. Manager Neal Kaufman and assistant manager Joshua Riegelhaupt look for innovative, fast-growing companies. The largest holding is Natera, a clinical genetic-testing outfit.

Fidelity Select Health Care (FSPHX, 0.69%) is a member of the Kiplinger 25, the list of our favorite no-load funds. The fund has a 19.8% three-year annualized return, ahead of the 17.0% average annual gain of its peers. Eddie Yoon, who has piloted the fund since 2008, says he’s light on large pharmaceutical companies in the portfolio, preferring makers of devices used to help manage chronic diseases such as diabetes and heart ailments. The fund’s top three holdings are UnitedHealth, Boston Scientific and Danaher.

Ziad Bakri, a former physician, runs T. Rowe Price Health Sciences (PRHSX, 0.76%), which has returned 21% annualized over the past three years. Nearly one-third of assets are invested in biotechnology, a high-risk, high-return segment of health care. Top positions include Thermo Fisher Scientific and Intuitive Surgical.

If you prefer investing through exchange-traded funds, Simplify Health Care (PINK, $26, 0.50%) is an intriguing, actively managed ETF that launched on October 7. Through November 5, just shy of one month, it returned 5.9%. Manager Michael Taylor, a virologist by training who spent 20 years investing in health care stocks at some prominent hedge funds, expresses his views by increasing or decreasing the fund’s weighting of stocks in relation to the MSCI US Health Care Index.

Source: kiplinger.com

Solo 401(k) vs SEP IRA: Key Differences and Considerations

Self-employment has its perks but an employer-sponsored retirement plan isn’t one of them. Opening a solo 401(k) or a Simplified Employee Pension Individual Retirement Account (SEP IRA) allows the self-employed to build wealth for retirement while enjoying some tax advantages.

A solo 401(k) or one-participant 401(k) is similar to a traditional 401(k), in terms of annual contribution limits and tax treatment. A SEP IRA, meanwhile, follows the same tax rules as traditional IRAs. SEP IRAs, however, allow a higher annual contribution limit than a regular IRA.

So, which is better for you? The answer can depend largely on whether your business has employees or operates as a sole proprietorship and which plan yields more benefits, in terms of contribution limits and tax breaks.

Weighing the features of a solo 401(k) vs. SEP IRA can make it easier to decide which one is more suited to your retirement savings needs.

Investing for Your Retirement When Self-Employed

An important part of planning for your retirement is understanding your long-term goals. Whether you choose to open a solo 401(k) or make SEP IRA contributions can depend on how much you need and want to save for retirement and what kind of tax advantages you hope to enjoy along the way.

Recommended: When Can I Retire? This Formula Will Help You Know

A solo 401(k) could allow you to save more for retirement on a tax-advantaged basis compared to a SEP IRA, but not everyone can contribute to one. It’s also important to consider whether you need to give some thought to retirement planning for employees.

If you’re hoping to mirror or replicate the traditional 401(k) plan experience, then you might lean toward a solo 401(k). Whether you can contribute to one of these plans depends on your business structure. Business owners with no employees or whose only employee is their spouse can use a solo 401(k).

Meanwhile, you can establish a SEP IRA for yourself as the owner of a business as well as your eligible employees, if you have any. It’s also helpful to think about what kind of investment options you might prefer. What you can invest in through a solo 401(k) plan may be different from what a SEP IRA offers, which can affect how you grow wealth for retirement.

Solo 401(k) vs SEP IRA Comparisons

Both solo 401(k) plans and SEP IRAs make it possible to save for retirement as a self-employed person or business owner when you don’t have access to an employer’s 401(k). You can set up either type of account if you operate as a sole proprietorship and have no employees. And both can offer a tax break if you’re able to deduct contributions each year.

In terms of differences, there are some things that set solo 401(k) plans apart from SEP IRAs. Under SEP IRA rules, for instance, neither employee nor catch-up contributions are allowed. There’s no Roth option with a SEP IRA, which you may have with a solo 401(k). Choosing a Roth solo 401(k) might appeal to you if you’d like to be able to make tax-free withdrawals in retirement.

You may also be able to take a loan from a solo 401(k) if the plan permits it. Solo 401(k) loans follow the same rules as traditional 401(k) loans. If you need to take money from a SEP IRA before age 59 ½, however, you may pay an early withdrawal penalty and owe income tax on the withdrawal.

Here’s a rundown of the main differences between a 401(k) vs. SEP IRA.

Solo 401(k) SEP IRA
Tax-Deductible Contributions Yes, for traditional solo 401(k) plans Yes
Employer Contributions Allowed Yes Yes
Employee Contributions Allowed Yes Yes
Withdrawals Taxed in Retirement Yes, for traditional solo 401(k) plans Yes
Roth Contributions Allowed Yes No
Catch-Up Contributions Allowed Yes No
Loans Allowed Yes No

What Is a Solo 401(k)?

A solo 401(k) or one-participant 401(k) plan is a traditional 401(k) that covers a business owner who has no employees or employs only their spouse. Simply, a Solo 401(k) allows you to save money for retirement from your self-employment or business income on a tax-advantaged basis.

These plans follow the same IRS rules and requirements as any other 401(k). There are specific solo 401(k) contribution limits to follow, along with rules regarding withdrawals and taxation. Regulations also govern when you can take a loan from a solo 401(k) plan.

A number of online brokerages now offer solo 401(k) plans for self-employed individuals, including those who freelance or perform gig work. You can open a retirement account online and start investing, no employer other than yourself needed.

If you use a solo 401(k) to save for retirement, you’ll also need to follow some reporting requirements. Generally, the IRS requires solo 401(k) plan owners to file a Form 5500-EZ if it has $250,000 or more in assets at the end of the year.

Solo 401(k) Contribution Limits

Just like other 401(k) plans, solo 401(k)s have annual contribution limits. You can make contributions as both an employee and an employer. Here’s how annual solo 401(k) contribution limits work for elective deferrals:

Solo 401(k) Contribution Limits by Age in 2021 (Elective Deferrals) Annual contribution in 2022
Annual Contribution Catch-Up Contribution in 2021 and 2022
Under 50 $19,500 N/a N/a
50 and Older $19,500 $6,500 $20,500

The limit on 401(k) contributions, including elective deferrals and employer nonelective contributions, is $58,000 for 2021 and $61,000 in 2022. That doesn’t include an additional $6,500 allowed for catch-up contributions if you’re 50 or older.

If you’re self-employed, the IRS requires you to make a special calculation to figure out the maximum amount of elective deferrals and employer nonelective contributions you can make for yourself. This calculation reflects on your earned income, or means your net earnings from self-employment after deducting one-half of your self-employment tax and contributions for yourself.

The IRS offers a rate table you can use to calculate your contributions. You can set up automatic deferrals to a solo 401(k), or make contributions at any point throughout the year.

What Is a SEP IRA?

A SEP IRA or Simplified Employee Pension Plan is another option to consider if you’re looking for retirement plans for those self-employed. This tax-advantaged plan is available to any size business, including sole proprietorships with no employees, and its one of the easiest retirement plan to set up and maintain. So if you’re a freelancer or a gig worker, you might consider using a SEP IRA to plan for retirement.

SEP IRAs work much like traditional IRAs, with regard to the tax treatment of withdrawals. They do, however, allow you to contribute more money toward retirement each year above the standard traditional IRA contribution limit. That means you could enjoy a bigger tax break when it’s time to deduct contributions.

If you have employees, you can make retirement plan contributions to a SEP IRA on their behalf. SEP IRA contribution limits are, for the most part, the same for both employers and employees. If you’re interested in a SEP, you can set up an IRA for yourself or for yourself and your employees through an online brokerage.

SEP IRA Contributions

SEP IRA contributions use pre-tax dollars. Amounts contributed are tax-deductible in the year you make them. All contributions are made by the employer only, which is something to remember if you have employees. Unlike a traditional 401(k) that allows elective deferrals, your employees wouldn’t be able to add money to their SEP IRA through paycheck deductions.

Here’s how SEP IRA contributions work.

SEP IRA Contributions by Age

Annual Contribution Catch-Up Contribution
Under 50 Lesser of 25% of the employee’s compensation or $58,000 in 2021 and $61,000 in 2022. N/a
50 and Older Lesser of 25% of the employee’s compensation or $58,000 and $61,000 in 2022. N/a

The IRS doesn’t allow catch-up contributions to a SEP IRA, a significant difference from solo 401(k) plans. So it’s possible you could potentially save more for retirement with a solo 401(k), depending on your age and earnings. If you’re self-employed, you’ll need to follow the same IRS rules for figuring your annual contributions that apply to solo 401(k) plans.

You can make SEP IRA contributions at any time until your taxes are due, in mid-April of the following year.

The Takeaway

Saving for retirement is something that you can’t afford to put off. Whether you choose a solo 401(k), SEP IRA or another savings plan, it’s important to take the first step toward growing wealth.

If you’re ready to start saving for the future, one way to get started is by opening a brokerage account on the SoFi Invest investment platform. All members get complimentary access to a financial advisor, which can help you create a plan to meet your long-term goals.

Photo credit: iStock/1001Love


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 . 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) Cryptocurrency is offered 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, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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Source: sofi.com

James Glassman’s 10 Stock Market Picks for 2022

Last December, after beating the S&P 500 index five years in a row, I wrote, “This kind of streak isn’t supposed to happen, and readers should be warned that there’s no guarantee it will continue.”

Well, it’s over. My annual selections for 2021 performed just fine, with an average return of 17.4%, but the S&P did much better, gaining 35.8%. (Returns and data throughout the story are through Nov. 5.)

Since 1993, I have offered a list of 10 stocks for the year ahead. Nine are culled from the choices of experts I trust, and I include one of my own. For 2021, I’m happy to say, my pick was the biggest winner: ONEOK (OKE), the 115-year-old natural gas pipeline company, which benefited from the rise in petroleum prices and was up 139.9%.

I’ll get to my choice for 2022 at the end. Let’s start with one from the Value Line Investment Survey, a font of succinct research that has a strong forecasting record as well. My strategy is to pick from stocks that Value Line rates tops (“1”) for both timeliness and safety. That list right now is short: nine companies, including obvious ones like Apple (AAPL) and Visa (V).

The outlier is T. Rowe Price Group (TROW), the Baltimore-based asset manager, whose earnings have risen each year since 2009 despite the growing popularity of low-cost index funds. Value Line notes that “shares have staged a dramatic advance over the past year. However, our projections suggest … worthwhile appreciation potential for the next 3 to 5 years.”

Parnassus Endeavor (PARWX), a socially responsible fund – one that invests with an eye toward environmental, social and governance (ESG) measures, has returned a sparkling annual average of 18.3% over the past 10 years. In 2021, Jerome Dodson stepped back from managing Endeavor and other Parnassus funds, but he’s still a guiding force at the firm he founded 35 years ago. My picks from the portfolio for 2019 and 2020 were microchip companies that scored average gains of nearly 100%.

For 2022, I like PepsiCo (PEP), which Billy Hwan, the fund’s new solo manager, acquired for the first time in July. In addition to its soft drinks, the company has such respected brands as Lay’s, Quaker and Gatorade. Revenues have risen consistently, and PepsiCo may be able to benefit from general inflation with aggressive price increases.

Another big winner in 2021 came from Dan Abramowitz, of Hillson Financial Management in Rockville, Maryland, who is my go-to expert in smaller companies. His choice was IEC Electronics, which was purchased by Creation Technologies in October for 53% more than the stock’s price when I put it on the list, noting, “IEC is also a potential takeover target.” 

For 2022, Dan recommends DXC Technology (DXC), a midsize in­formation technology company based in the suburbs of Washington, D.C. It is in the midst of a turnaround, Dan writes, “yet we are still in the early innings here.” Profits are improving, but the stock “is valued at under 10 times current fiscal year earnings.”

A few months ago, I recommended AB Small Cap Growth (QUASX), a fund that has notched a sensational 29.8% annualized return over the past five years. The fund has been adding to holdings of Louisiana-based LHC Group (LHCG), a provider of post-acute care, including home health and hospice services, in more than 700 locations. The stock appears well priced after setbacks from hurricanes and because healthcare workers were forced to quarantine due to COVID-19. As the population ages, healthcare is a growth industry.

Fidelity Advisor Growth Opportunities (FAGAX) is red-hot, ranking in the top 3% of funds in its category for five-year returns. The problem is that it carries a whopping 1.82% expense ratio and is sold mostly through advisers. Still, you can scan its port­folio for ideas. Most of the fund’s holdings are tech stocks, but the only new purchase for 2021 among its top 25 holdings was Freeport-McMoRan (FCX), the minerals (copper, gold, silver) and oil and gas producer. The stock has doubled over the past year, but its price-earnings ratio, based on analysts’ consensus projections for 2022, is just 11.

A disappointment in 2021 was Upland Software (UPLD), down 47%. It was the choice of Terry Tillman, a software analyst with Truist Securities whose previous selections on my annual list had beaten the S&P 500 index for an incredible nine years in a row. Tillman recently initiated coverage on Engage­Smart (ESMT) with a Buy rating. The firm, which helps healthcare professionals manage their practices, went public only in September, but it already has a market value of $5 billion, and Tillman sees the price going much higher.

It has not been a good year for China’s big companies, which China’s government apparently thinks have become big enough to threaten the Communist Party. As a result, my 2021 list’s worst performer was Alibaba Group Holding (BABA), the e-commerce giant, with shares falling by nearly half.

Still, if you have a stomach for risk, Chinese stocks present remarkable value these days. Matthews China (MCHFX), my favorite Asian stock fund, has held on to Tencent Holdings (TCEHY), which is down by about 40% from its February peak. Tencent, with a market cap of $576 billion, operates worldwide and offers social media, music, mobile games, payment services and more.

Last year, I turned for the first time to Schwab Global Real Estate (SWASX) and was pleased with the 21% return from its choice, Singapore-based UOL Group (UOLGY), with an office, residential and hotel portfolio. The fund’s third-largest holding is Public Storage (PSTG), owner of 2,500 facilities in 38 states. Is there a better business? Every year, I get an e-mail notice telling me my storage-unit rental has risen in price, and what am I going to do about it? Moving my stuff out is a horrifying thought. I have always wanted to own this stock. It is expensive, but waiting may make it more so.

Over the years, the assets of Berkshire Hathaway (BRK.B), Warren Buffett’s holding company, have become more and more diversified. At last report, the company owned 40 publicly traded stocks. Berkshire Hathaway’s largest holding by far is Apple, at about $135 billion. Guess what’s second? Bank of America (BAC), at $49 billion. I am a longtime fan and shareholder of BofA as well, and it looks especially good at a time when interest rates are rising.

My contrarian bias paid off last year when I shook off my disastrous 2019 choice of Diamond Offshore Drilling (it went bankrupt) and scored a double with ONEOK. Searching for value again, I have arrived at Starbucks (SBUX), which took a big (and to my mind, unwarranted) hit over the summer when the company warned of a slower recovery in China. So I’m taking advantage of skittish investors and recommending Starbucks, one of the world’s best-run companies, growing steadily with 33,000 outlets worldwide.

I’ll end with my usual warnings. These 10 stocks vary by size and industry, but they are not meant to compose a diversified portfolio. I expect they will beat the market in the coming 12 months, but I do not advise holding stocks for less than five years. Buy and hold works! Finally, these are my recommendations, but consider them suggestions for your own study and decision-making. No guarantees.

James Glassman stock picks for 2022James Glassman stock picks for 2022

Source: kiplinger.com

Using Income Share Agreements to Pay for School

Many students end up taking out loans to finance the cost of college. As of the first quarter of 2021, Americans collectively held $1.57 trillion in student debt, up $29 billion from the previous quarter. And a significant share of borrowers were struggling with their debt burdens: Just under 6% of total student debt was 90 days or more past due or in default.

Students looking for alternatives to student loans can apply for grants and scholarships, take on work-study jobs or other part-time work, or find ways to save on expenses.

Recently, another alternative has appeared on the table for students at certain institutions: income share agreements. An income share agreement is a type of college financing in which repayment is a fixed percentage of the borrower’s future income over a specified period of time.

As this financing option grows in popularity, here are some key things to know about how these agreements operate and to help you decide whether they’re the right choice for you.

How Income Share Agreements Work

Unlike student loans, an income share agreement, also known as an income sharing agreement or ISA, doesn’t involve a contract with the government or a private lender. Rather, it’s a contract between the student and their college or university.

In exchange for receiving educational funds from the school, the student promises to pay a share of his or her future earnings to the institution for a fixed amount of time after graduation.

ISAs don’t typically charge interest, and the amount students pay usually fluctuates according to their income. Students don’t necessarily have to pay back the entire amount they borrow, as long as they make the agreed-upon payments over a set period. Though, they also may end up paying more than the amount they received.

Income share agreements only appeared on the scene in the last few years, but they are quickly expanding. Since 2016, ISA programs have launched at places like Purdue University in Indiana, Clarkson University in New York, and Lackawanna College in Pennsylvania. Each school decides on its own terms and eligibility guidelines for the programs. The school itself or outside investors may provide funds for ISAs.

Purdue University was one of the first schools to create a modern ISA program. Sophomores, juniors, and seniors who meet certain criteria, including full-time enrollment and satisfactory academic progress, are eligible to apply.

Students may have a six-month grace period after graduation to start making payments, similar to the six-month grace period for student loans, and the repayment term at Purdue is typically 10 years. For some schools, however, the repayment term ranges from two to 10 years.

The exact amount students can expect to pay depends on the amount they took out and their income. The university estimates that a junior who graduates in 2023 with a marketing major will have a starting salary of $51,000 and will see their income grow an average of 4.7% a year.

If that student borrowed $10,000 in ISA funds, he or she would be required to pay 3.39% of his or her income for a little over eight years. The total amount that student would pay back is $17,971. The repayment cap for the 2021-2022 school year is $23,100.

Again, every ISA is different and may have different requirements, so be sure to check with your college or university for all the details.

The Advantages of Income Share Agreements

ISAs aren’t for everyone, but they can be beneficial for some students. For example, students who don’t qualify for other forms of financial aid, such as undocumented immigrants, may have few other options for funding school.

For students who have already maxed out their federal loans, ISAs can be a more affordable option than Parent PLUS loans or private student loans, both of which sometimes come with relatively high interest rates and fees.

Compared to student loans, many ISAs also protect students by preventing monthly payments from becoming unaffordable. Since the amount paid is always tied to income, students should never end up owing more than a set percentage for a fixed period of time. However, a student’s field of study may impact this. Students who are high earners after college may end up paying more to repay an ISA than they would have under other financing options.

If a student has trouble finding a well-paying job, or finding one at all, payments typically shrink accordingly. For example, Purdue sets a minimum income amount below which students don’t pay anything.

In Purdue’s case, the student won’t owe anything else once the repayment period is over, compared to student loans that can multiply exponentially over time due to accrued interest.

Purdue and several other universities also set the amount and length of repayment based on a student’s major, meaning monthly payments can be more tailored to graduates’ fields and salaries than student loans are. For fortunate students who see their income rise beyond expectations, many schools ensure the student won’t pay beyond a certain cap.

Potential Pitfalls of Income Share Agreements

ISAs come with some risks and drawbacks, as well. Firstly, since the repayment amount is based on income, a student who earns a lot after graduation might end up paying more than they would have with some student loans. This is because if a student earns a high income after graduating, they’d pay more to the fund. Second, the terms of repayment can vary widely, and some programs require graduates to give up a huge chunk of their paychecks.

For example, Lambda School , an online program that trains students to be software engineers, requires alums who earn at least $50,000 to pay 17% of their income for two years (up to $30,000). This can be a burden for recent graduates, especially compared to other options like income-driven repayment, which determines the percentage of income going towards student loans based on discretionary income.

Currently, there is very little regulation of ISAs, so students should read ISA terms carefully to understand what they’re signing up for.

No matter what, income share agreements are still funding that needs to be repaid, often at a higher amount than the principal.

So you’re still paying more overall for your education compared to finding sources of income like scholarships, a part-time job, gifts from family, or reducing expenses through lifestyle changes or going to a less expensive school.

How Do Income Share Agreements Impact You?

Many schools’ ISA programs are designed to fill in gaps in funding when students do not receive enough from other sources, such as financial aid, federal or private student loans, scholarships or savings. Thus, it’s important to understand how an ISA will impact both your long-term finances and other methods to pay for college.

ISAs do not impact need-based aid like grants or scholarships. Students with loans, however, could have a more complicated repayment plan with multiple payments due each month.

With ISAs, there is less clarity as to how much you’ll end up repaying from up to 10 years of income. As your income changes, your payment will remain the same percentage unless it falls below the minimum income threshold ($1,666.67 at Purdue) or reaches a repayment cap.

Whereas students may pay more than the loan principal to reduce interest, ISAs often require reaching a repayment cap of roughly double the borrowed amount to be paid off early.

Depending on your future income and career path, an ISA could cut into potential savings and investments or serve as a safety net for a less stable occupation.

Who Should Consider An ISA?

As previously mentioned, income share agreements are an option for students who have maxed out on federal loans and scholarships. There are other circumstances when an ISA may or may not be worth considering.

Colleges may require a minimum GPA to be eligible for an ISA. For instance, Robert Morris University requires incoming students to have a 3.0 high school GPA and maintain a 2.75 GPA during their studies for continued funding eligibility. Taking stock of how an ISA aligns with your academic performance before accepting funding could reduce stress later on.

Since ISA programs structure repayment as a percentage of income, graduates who secure high-paying jobs can end up paying a significant sum compared to the borrowed amount. An ISA term could be more favorable to students planning to enter sectors with more gradual salary growth, such as civil service.

Repayment plans at income sharing agreement colleges are not uniform. Students at schools with lower payment caps and early repayment options may find ISAs more advantageous.

Considering Private Loans

Students should generally exhaust all their federal options for grants and loans before considering other types of debt. But for some students looking to fill gaps in their educational funding, private student loans may make more sense for their needs than ISAs.

Recommended: Examining the Different Types of Student Loans

In particular, students who expect to have high salaries after graduation may end up paying less based on interest for a private student loan than they would for an ISA. Some private loans can also allow you to reduce what you owe overall by repaying your debt ahead of schedule.

SoFi doesn’t charge any fees, including origination fees or late fees. Nor are there prepayment penalties for paying off your loan early. You can also qualify for a 0.25% reduction on your interest rate when you sign up for automated payments.

The Takeaway

As mentioned, an income share agreement is an alternate financing option for college. An ISA is generally used to fill in gaps in college funding. Generally, it’s an agreement between the borrower and the school that states the borrower will repay the funds based on their future salary for a set amount of time.

One alternative to an ISA could be private student loans. Keep in mind that private loans are generally only considered as an option after all other sources of federal aid, including federal student loans, have been exhausted.

If you’ve exhausted your federal loan options and need help paying for school, consider a SoFi private student loan.


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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Lending Corp. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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Source: sofi.com

Seeking Alpha Review – Is the Premium Subscription Worth It?

At a glance

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Our rating

  • What It Is: Seeking Alpha is a stock market news and research website that produces more than 10,000 articles per month, designed to give readers investment ideas and tools for evaluating different investments.
  • Membership Fees: Basic, Free; Premium, $29.99 per month or $239.88 annually ($19.99 per month); Pro, $299 per month or $2,388 annually ($199 per month).
  • Pros: Detailed research and opinions from bears and bulls, proprietary rating systems, intuitive stock screener, portfolio monitoring, earnings calls and transcripts, and notable calls from Wall Street experts.
  • Cons: Relatively high monthly fee, many of the premium features can be found free elsewhere, few tools for technical traders, and the vast amount of information can overwhelm newcomers.

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Dig Deeper

Additional Resources

Everything you read when it comes to learning how to invest tells you that research is the foundation of profitable investment choices. One of the best research tools for the fundamental investor is found at SeekingAlpha.com.

Seeking Alpha is an investment research service fueled by more than 7,000 contributors who produce more than 10,000 articles per month, with each having a unique stance on the topics they cover. Investors can benefit quite a bit from the company’s free services, but if you’re willing to pay for the premium service, even more tools are unlocked.

What Is Seeking Alpha?

At its core, Seeking Alpha is a crowdsourcing website that sources valuable investment research through a vast consortium of contributors. Seeking Alpha was designed for individual investors who are interested in choosing individual stocks. 

The vast majority of the content on the website is available for free for the first 10 days after publication. However, if you’re interested in in-depth research, stock screening tools, and proprietary rating systems, you’ll need to sign up for one of the company’s subscription services.


Pricing

There are three different pricing models available.

  1. Basic. The Basic subscription is absolutely free. With this subscription, you’ll gain access to free articles for the first 10 days after their publication as well as some portfolio management tools. For most casual investors who aren’t interested in diving deep into research and fundamental analysis, the Basic subscription is a great fit. 
  2. Premium. The Premium service unlocks all articles on the website regardless of their age. Premium members also get access to a customized news platform, an intuitive stock screener, proprietary Quant ratings, unlimited conference call transcripts, earnings call audio, and exclusive author ratings. In exchange, members agree to pay $29.99 per month or $239.88 paid annually ($19.99 per month). You can also try before you buy with the company’s 14-day free trial. 
  3. Pro. The Pro service comes with a price tag that will turn off most mom-and-pop investors at $299 per month or $2,388 paid annually ($199 per month). Designed for investors who manage large portfolios, the Pro service offers a curated collection of the most in-depth research offered through the platform. 

Key Features

As a research-centric service, the vast majority of key features offered by Seeking Alpha have to do with getting to know the companies you invest in before risking your hard-earned money on them. Some of the most exciting features you’ll gain access to when you sign up include:

Thorough Investment Research

With more than 7,000 contributors offering up more than 10,000 articles per month, you’ll have everything you need to research just about any publicly traded company and make a quality investment decision.

The vast majority of these articles are labeled as investment ideas that fall into one of the following categories:

  • Long Ideas. Long ideas are investment ideas centered around stocks that the authors believe will head up in value in the long term. 
  • IPO Analysis. Initial public offerings, or IPOs, are a hot topic among investors, and tools that help determine whether an IPO is priced fairly and has strong potential to grow in value are invaluable. The IPO analysis offered by Seeking Alpha is one of the best ways to go about analyzing an IPO trade.
  • Quick Picks. Quick picks are articles centered around stocks based on a specific investment theme or fundamental data. 
  • Fund Letters. Fund letters is a curated list of select letters from professionally managed funds to their investors outlining the investing landscape and their goals moving forward. 
  • Editor’s Picks. Editor’s picks are articles that are hand-selected by the editors at Seeking Alpha based on in-depth research, the author’s track record, and other factors.  
  • Stock Ideas by Sector. The Stock Ideas by Sector section of the Seeking Alpha website lets you quickly scan through any sector of the market. 

Beyond the basic search functions of the website and access to all articles regardless of how old they are, Premium members also enjoy a customizable news dashboard that displays articles on stocks and investment strategies they’re interested in first, making combing through the vast sea of content on SeekingAlpha.com far easier. 

Note that although investment ideas are shared on the company’s website, nothing on the site constitutes investment advice. The author couldn’t possibly know your unique goals, financial capabilities, risk tolerance, and other factors that make you, well, you. The platform is designed as a research tool. You should never blindly make an investment just because the title of an article on the platform suggests big gains are ahead. 

Article Sidebar

The article sidebar is a feature that’s only available to Seeking Alpha Premium subscribers, but it alone is worth the subscription fee for many investors. 

When making investment decisions based on what you read online, it’s important to validate the source of the research and ensure the author and the stock are worth following in the first place. The Article Sidebar makes this simple to do at a glance by offering a brief bullish and bearish synopsis of the stock, stock ratings from the authors on the platform, a real-time stock price chart, and ratings for the author who contributed the piece.

Quant Ratings

Technology and computerized trading algorithms have reshaped the investing industry. Today, the market is more active than ever before, and algorithms provide a trove of data on the potential of any investment. 

However, the details offered up by these algorithms are often difficult to understand, and therefore often are ignored by novice investors. 

The good news is that Seeking Alpha offers its readers quant ratings, which algorithmically rate stocks in an easy-to-understand way. These ratings are based on five key factors: value, growth, profitability, EPS revisions, and momentum.

Factor Scorecards

Factor investing has become a popular concept. The idea is that by investing in stocks that come with risk premiums like small-cap, value, growth, and other characteristics, you’ll be able to beat the average market performance in your portfolio. 

When analyzing these factors, Seeking Alpha offers an easy-to-understand score ranging from A+ to F.

  • REIT Scorecard: On scorecards for real estate investment trusts (REITs), Seeking Alpha provides scores based on funds from operations as well as adjusted funds from operations. 
  • Dividend Stock Scorecard: Dividend stocks are a great way to generate income through your investments. The Dividend Stock Scorecard takes various factors into account, considering not only whether the stock pays competitive dividends, but also whether those dividends are sustainable. 

Earnings Call Transcripts & Recordings

Earnings reports are some of the most important events in the stock market. Every quarter, publicly traded companies are required to provide updated financial information, letting investors in on the financial stability and growth prospects for the company. 

Basic members have access to earnings call transcripts, but if you want to listen to the recorded calls, you’ll need to upgrade to a Premium subscription. 

Earnings Estimates & Surprises

Basic members have access to past earnings data from the company’s they’re interested in as well as information on dividends. 

For premium members, the data becomes a bit more intuitive, offering analyst forecasts and earnings surprises, which show the extent to which the company beat or missed earnings expectations in recent quarters. 

Notable Calls

Across Wall Street, there are tons of investment grade funds and investing professionals that manage money for individual investors. These fund managers often provide quarterly letters to their investors outlining the state of the market and how they plan on capitalizing on it in the future. 

The Notable Calls section of the website, only accessible by Premium and Pro members, is a curated list of these quarterly announcements from some of the most well-respected hedge funds and investment-grade funds. 

Intuitive Stock Screener

Stock screeners make it easy to find the types of opportunities you’re looking for in the stock market. It seems as though every investing-centric website offers one. However, the screener offered by Seeking Alpha is one of the best in the business. 

As with any stock screener, you’ll be able to screen opportunities by volume, sector, stock price, and more. However, what’s unique about the Seeking Alpha screener is that it lets you screen stocks based on the company’s proprietary Quant Ratings and Factor Scores. 

So, if you’re looking for a technology stock that has both a high Quant Rating and Factor Score and is experiencing exceptionally high volume, you won’t have any issues digging an opportunity up. 

Personalized Alerts

Personalized alerts are available to all Seeking Alpha subscribers. These alerts come via email, informing you of any news and analyst upgrades or downgrades of the stocks you’re interested in. 

While the service is available to all users, Premium members get all the data in the email they receive, while Basic members must click to the Seeking Alpha website to see the full information associated with the alert. 

Portfolio Monitoring

Investors are able to connect their live investment portfolios to Seeking Alpha and monitor their holdings through the platform. Through the portfolio monitoring service, you’ll be able to track your portfolio and pinpoint the investments that are doing best and worst for you. 

Moreover, when you attach your portfolio, you’ll receive alerts when news and opinion articles are published around a ticker you invest in. Premium members enjoy faster time-to-delivery, ensuring you’re one of the first to see the news on stocks you invest in. 


Advantages

Seeking Alpha is one of the most successful investing-centric websites online today, and that popularity didn’t just happen out of the blue. There are several benefits to taking advantage of the services provided by the company, the most significant being:

1. Investing Ideas

Finding quality investment opportunities is arguably one of the most difficult parts of the investing process. Seeking Alpha is essentially a curated list of the best investment ideas produced by thousands of authors. 

Considering the sheer scale of content produced, you’ll be able to find quality ideas no matter whether your preferred style of investing is growth, value, or income.  

2. Free Services

For many investors, the content available under the Basic membership will provide everything you need to make wise decisions in the stock market.  

3. Proprietary Scores

The proprietary scoring system used by the company to provide at-a-glance information about stocks is second to none. Not only does the company take general fundamental data into account when creating these scores, it adds in a risk premium factor that’s difficult to find elsewhere.

4. Portfolio Monitoring

When managing your own self-directed investment portfolio, monitoring your performance in the market is key. The company makes this simple for both free and paid users, including email alerts when important news is released about a stock you’ve invested in.  


Disadvantages

Sure, there are plenty of reasons to consider signing up for this service. However, as with any rose, there are some thorns to be mindful of before grabbing a fistful and taking a whiff:

1. Not the Best Option for Technical Traders

If you’re a swing trader or day trader who relies heavily on technical analysis, you won’t find much value in the service. The company’s core focus is on providing fundamental data and research, and it leaves most technical data to companies that focus on providing that type of information. 

2. Many Features Are Found Elsewhere Free

While the company does make it easy to access tools in one space, much of what it provides can be found elsewhere for free. For example, there are tons of websites that publish free opinion articles on stocks, and a simple search on Google will provide a list of articles on the stocks you’re interested in. 

Moreover, stock screeners, portfolio monitoring services, and earnings data are all widely available for free online. However, it is worth mentioning that most free services don’t go as far in depth as the tools available at Seeking Alpha. 

3. It’s Expensive

Sure, $29.99 per month doesn’t sound like much, but if you have a beginner investment portfolio that consists of $1,000 in stocks, you’ll have to earn a return of nearly 3% per month just to cover the cost of the service. As such, the Premium service is most worthwhile for investors who have a portfolio value of at least $10,000. 

4. No Buy Recommendations

Seeking Alpha is not an alert service. In fact, the disclaimer on all articles on the website suggest that investors should make their own decisions. There are plenty of services with similar pricing that actually offer alerts, recommending when investors should buy or sell stocks. If you’re looking for an alert service that does so, you’ll have to look elsewhere.  


Final Word

All in all, Seeking Alpha is a great tool for the fundamental investor who takes the time to research what they’re buying before diving into a stock. With so many authors and articles on the platform, investors are able to see stocks they’re interested in from multiple points of view, helping to avoid investing based on a few skewed opinions. 

Moreover, Seeking Alpha is a great add-on service to those who use the Motley Fool Stock Advisor, which gives two trade ideas per month. By cross-referencing the ideas provided through the Motley Fool or another alert service with the in-depth research Seeking Alpha provides, you’ll be able to form educated opinions about whether the recommendations are worth following. 

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The Verdict

Seeking Alpha Logo

Our rating

Seeking Alpha is a valuable research tool for the fundamental investor. While it doesn’t offer much for technical traders and has a relatively high premium membership fee (starting at $29.99 per month), it is a great option for active investors looking to add detailed research to their repertoire of tools.

While there are plenty of benefits for paying subscribers, the service is relatively expensive compared to its competitors, and some premium features can be found elsewhere for free. However, active fundamental investors will benefit greatly from the detailed research and proprietary scoring system Seeking Alpha offers.

Editorial Note:
The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Source: moneycrashers.com