The online bank’s ambitious goals make it worth a closer look

The Motley Fool Take:

The concept of online banking has been around for several decades, but SoFi Technologies (Nasdaq: SOFI ) is doing it a little differently. Rather than offering an attractive niche product (like a high-yield savings account), SoFi’s goal is to offer everything its customers need and get them to ditch their current banks altogether. As if that wasn’t ambitious enough, SoFi also owns the Galileo “fintech” (financial technology) platform; Emulating Amazon Web Services, SoFi has said it wants to “build the fintech’s AWS.”

The recent results have certainly been impressive. SoFi has grown its membership base by 450% over the past three years to more than 4.7 million, and it’s done a great job increasing acceptance of its checking, savings and credit card offerings. This should help create a natural marketing funnel for its highly profitable lending products. Galileo also grew by leaps and bounds; it recently had 124 million customer accounts on its platform, about 39% more than just a year ago.

SoFi’s growth in consumer banking is even more impressive when you consider that the company has been chartered for less than a year. With its tremendous growth momentum, SoFi could potentially grow to its current $5 billion market cap over time. That’s far from guaranteed, but for risk-tolerant long-term investors, this company is worth a closer look.

Ask a fool

From OP in Charleston, SC. If trading has been suspended for a stock, what does that mean?

The fool answers. Trading can be stopped or delayed for several reasons. For example, some headline news such as a merger or reorganization announcement, a major change in management, a major legal development, or significant good or bad news about a company’s products may be expected. The pause, which is usually less than an hour but sometimes longer, can give investors time to digest the news before making any buying, selling or holding decisions. The market may also delay trading in a stock if there is a significant imbalance between buy and sell orders for it.

Trading may also be suspended if it appears that the company may no longer be listed on the stock exchange (perhaps its share price has fallen to a certain level). And trading can be suspended for days if a stock is found to be manipulated.

From BL to Santa Rosa, CA. If I own, say, 1% of a company’s stock and it makes $100 million in a quarter, do I get 1% of that or $1 million?

The fool answers. Not true. Shareholders are indeed partial owners of companies, but they do not receive a direct share of their profits. Instead, they benefit from owning the stock because as the company’s value increases (due to increased sales and profits), the stock price tends to increase in value as investors will be willing to pay more for the stock.

Shareholders are directly rewarded when dividend-paying companies send them a portion of profits on a regular basis. They can also benefit when companies buy back shares because it reduces the number of shares, making each remaining share more valuable.

School for fools

It’s important to learn about life insurance because many people who should carry it don’t, and some who do don’t really need it.

At its core, life insurance is meant to protect your loved ones financially. Think about who might be affected financially if you die. If you have a spouse, children, parents or others, even a business, depending on you to some extent, life insurance is probably a smart move. If you are single, have no dependents, or are married to a financially independent spouse, life insurance may be unnecessary.

If you’re thinking about buying life insurance, learn about the two main types of policies: term and permanent. Term insurance is the most expensive, and for many, it’s the best. It provides cover for a set period, such as until your children turn 20 or until your mortgage is paid off. It offers a fixed death benefit but no cash value.

Permanent life insurance policies come in different forms, such as “whole life,” “universal life,” and “variable life,” and usually last for your lifetime. They often represent a monetary value that grows over time at a fixed or variable rate. Their death benefits can be fixed or variable, and they are generally guaranteed to pay out because you will eventually die. (Term insurance death benefits may not be paid if the policy expires before it does.)

Permanent insurance policies can be complicated and sometimes charge hefty fees, so make sure you understand them well before buying one. If you’re thinking of buying one partly as an investment, be aware that you may be better off sticking to a simple term policy and investing your savings in other assets.

Paying for insurance may not be fun, but it makes sense to have the coverage you need to protect your life, health, home, car and more. Learn more about insurance in general and life insurance in particular at the Insurance Information Institute,

My smartest investment

Online from FH: As far as financial decisions go, the smartest thing I ever did was stop trading and start investing.

The fool answers. It’s an important option because investing is more likely to help you build wealth than trading. Stock trading is often focused on the short term, as traders aim to make a quick buck within a few months or even a few hours. Often they know little about what they just invested in, except that it looks like it might pay off. Traders often try to time the market, and they like to chase “stock momentum.” They hope to outperform long-term investors, but often underperform.

Investors, on the other hand, tend to take a long-term view. Many people buy stocks with the goal of holding for years, if not decades. They see themselves as partial owners (which they are) of the companies in which they own shares. They also know the companies quite well, having researched them before investing; they have a good understanding of those companies’ strengths, competitive advantages, risks and challenges. They depend on the ups and downs of the market, understanding that volatility is part of investing in stocks. Over many years, if they’ve chosen solid stocks (or low-fee index funds), they tend to be well rewarded.

Who am I?

I trace my roots back to 1956 when my founder sold his first home. Today, I am a manufactured and modular home specialist and one of America’s largest home builders. I build homes on and off site, sell, finance and insure them. I also offer tiny houses, college dorms, military barracks, and other types of housing. I became part of Warren Buffett’s Berkshire Hathaway company in 2003. I built over 60,000 homes in the United States in 2021. Builders under my roof include Oakwood Homes, Summit Homes, and Chafin Communities, among others.

Don’t remember last week’s trivia question? Find it here.

The answer to last week’s trivia. Weyerhaeuser

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