financial education

Tips from a financial advisor

Estate planning used to mean drawing up a will, designating beneficiaries, and making sure enough life insurance was in place. However, that is only half the battle in today’s digitally driven world. Clients now own online bank accounts, digital wallets, music and media subscriptions, and social media profiles that carry both financial and sentimental value. 

Ignoring these digital assets can lead to headaches, lost resources, and even legal complications for their families when their loved ones pass away. That’s why I’m advising all my clients—regardless of age or wealth—to make digital estate planning an essential part of their overall strategy.

Key Takeaways

• Digital estate planning is now a must-have, not an afterthought.
• Preparing a full inventory of online accounts (usernames, passwords, and access keys) is critical for a seamless transition.
• Naming a digital executor ensures someone can legally and efficiently manage and distribute digital assets.
• Clear directives on what should happen to social profiles, cryptocurrency holdings, and online subscriptions reduce confusion and stress.
• Collaborating with an estate attorney can help integrate digital provisions into existing wills and trusts.

So much of life has moved online. It’s no longer just tech-savvy millennials who must worry about digital estate planning. I’ve worked with retirees with investment accounts they manage on digital trading apps, families collecting royalties through online publishing platforms, and individuals storing significant holdings in cryptocurrency. If something were to happen to them and no one had the necessary login credentials or legal authority, these assets may become inaccessible—or worse, lost entirely.

Furthermore, digital platforms each have their own policies. Facebook, for instance, allows someone to memorialize or remove an account. Google has an Inactive Account Manager feature, and many cryptocurrency wallets have unique recovery processes. Clients incorrectly assume that their loved ones can “figure it out” when the time comes. However, accessing online assets can be incredibly time-consuming and even impossible without prior planning.

What I’m Telling My Clients

1. Create a Comprehensive Digital Inventory

I encourage clients to build a secure, detailed list of all their digital assets, including the platform name, web address, usernames, passwords, and any two-factor authentication methods for accessing accounts. This inventory should also outline how they want each asset handled—whether it’s deactivating a social account, transferring cryptocurrency to an heir, or continuing a subscription for ongoing services.

Warning

According to a survey from Bryn Mawr Trust, 76% of respondents reported having little or no knowledge of digital estate planning.

2. Designate a Digital Executor

While the executor of a will might oversee financial matters broadly, I recommend naming a tech-savvy individual who understands how to navigate platforms and carry out the client’s wishes. This “digital executor” may need the authority to close accounts, transfer funds, or communicate with tech companies.

3. Include Digital Clauses in Legal Documents

Working closely with estate attorneys, I ensure that digital assets and directives are explicitly mentioned in the will or trust. This can speed up the process and prevent disputes or legal snags down the road. 

Important

Additionally, many states now have legislation governing digital assets, so aligning with local laws helps protect the client’s interests.

The Bottom Line

Digital estate planning is no longer optional; it’s a core component of safeguarding a modern legacy. By setting up a secure plan for their online accounts and appointing someone to handle those assets, clients can protect not only their monetary wealth but also their memories and personal content.

From social media to online investments, being prepared ensures loved ones won’t have to scramble for access or lose valuable assets. In my practice, I’ve found that integrating digital estate provisions into a broader financial plan offers both my clients and their families greater peace of mind.

Reviewed by Somer Anderson
Fact checked by Suzanne Kvilhaug

A monopoly and a monopsony signify conditions of imperfect competition, where a single entity influences a free market that should operate under the laws of supply and demand. An individual seller controls a market monopoly, while a single buyer dominates a market monopsony.

Key Takeaways

• A monopoly or a monopsony can influence and distort a free market.
• In a monopoly, a single seller controls or dominates the supply of goods and services.
• In a monopsony, a single buyer controls or dominates the demand for goods and services.
• Both a monopoly and monopsony are considered illegal because they inhibit competition.

Monopoly

A monopoly exists when a single entity is the sole provider of a particular asset or service. Monopolies are a form of extreme free-market capitalism in that, absent any restriction or restraints, a single individual, company, or group becomes large enough to own all or nearly all of the supply of goods, commodities, facilities, amenities, or support systems.

Monopolies effectively eliminate economic competition for a particular good, including possible substitutes. Other firms cannot enter the market. Monopolies also prevent external influences on the selling price for goods or services. In this way, they circumvent the natural economic laws of supply and demand. A monopolistic company can set prices and change them for any reason, resulting in higher profits than if it had competition.

Important

Monopolies and monopsonies are regulated through antitrust laws.

Monopsony

A monopsony controls the market through which specific goods or services are purchased. Monopsonies arise when individuals, corporate groups, or other entities position themselves as the sole purchasers for a particular good or service. A monopsonistic company uses competition among suppliers or wholesalers to its advantage, driving down the selling or asking price for the given good or service.

Monopsony is seen in labor markets when a single employer has an advantage over the workforce. When this happens, the suppliers—in this case, the potential employees—agree to a lower wage because of factors resulting from the buying company’s control. This wage control drives down the cost to the employer and increases profit margins.

Anti-Competition Examples

Walmart, known for its high-growth business model, has been called a monopsony of the discount retail market as the primary buyer for low-cost goods. Walmart’s tendency to swallow or outpace its competitors has affected the supplier markets.

The so-called “Walmart effect” may keep employee productivity high and consumer prices low, but can reduce wages and competition. Often, the arrival of a Walmart in a region drives out other retail businesses, so Walmart becomes the only employer in the town for unskilled or semi-skilled workers, which allows it to set wages and benefits.

In 2023, the Federal Trade Commission and multiple state attorneys sued Amazon.com, Inc. for monopolistic activity. The lawsuit claimed Amazon’s structure prevents rivals and sellers from lowering prices, degrades product quality, overcharges sellers, stifles innovation, and thwarts competition.

How Is Antitrust Legislation Enforced in the U.S.?

The Federal Trade Commission oversees cases of suspected monopolistic behavior. The first antitrust law, the Sherman Act, was enacted in 1890. Congress passed the Federal Trade Commission Act and the Clayton Act in 1914. These laws regulate competition and company mergers to ensure a fair marketplace.

What Is a Natural Monopoly?

The oil industry is an example of a natural monopoly because of the scarcity of its products. Standard Oil, founded by John D. Rockefeller, was considered one of the largest monopolies in U.S. history.

How Does a Monopoly Affect Product Quality?

Monopolies benefit from little or no competitive pressure. Because of this, they lack incentive to improve a product’s quality or innovate. Monopolists may produce inferior products because customers cannot find an alternative product or service.  

The Bottom Line

Monopolies and monopsonies affect the free market, supply and demand, and a consumer’s choices. The Federal Trade Commission implements regulations through antitrust legislation to discourage companies from cornering the market for products or services.

The stock market isn’t as boring and complicated as you might think

Fact checked by Suzanne Kvilhaug
Reviewed by Khadija Khartit

When the stock market comes up in conversation, it is usually accompanied by jargon. The repeated use of technical words such as margin and volume makes the stock market seem super complicated and can put people off learning about it, especially an easily bored or distracted teenager.

For the sake of their financial futures, it’s important that they don’t fall into that trap. The stock market is a great way to learn many values such as discipline and patience, and also where they might make a good return on the money invested.

And when explained in simple terms, it’s a really interesting topic. Finally, investing, not trading, might also feel like a game to teenagers while watching the stocks go up and down with the market conditions and news and anticipating certain moves, while staying invested in the long run. This keeps them engaged and interested in economic matters.

Key Takeaways

• The stock market is like an online supermarket, only you are buying stakes in companies, prices fluctuate throughout the day, and it’s possible to sell as well as buy. 
• When people talk about the stock market, they are often referring to an index: a representative portion of the marketplace for stocks.
• The stock market is made up of two main components: the primary market and the secondary market.
• You can invest in the stock market via your computer or phone with a few clicks of a button.
• Teenagers younger than 18 cannot set up their own accounts to invest in the stock market, but they can get an adult to do it on their behalf.

What Is the Stock Market?

The stock market is a place where small portions of ownership in companies, called shares, can be bought and sold. Think of it as an online supermarket, only:

• You are buying stakes in companies rather than groceries or home goods
• Prices fluctuate throughout the day
• It’s possible to sell as well as buy

This supermarket is open Monday through Friday during working hours and essentially functions as a matchmaker, pairing interested buyers with sellers and vice versa.

Indexes

At this point, you may be wondering what the media mean when they say the stock market is up or down. When people talk about the stock market in that way, they are referring to a representative portion of the marketplace for stocks, otherwise known as an index.

An index is essentially a list of stocks grouped together because they share something in common—similar to aisles in a supermarket. That could be something really specific, such as selling the same type of product, or much broader things, such as being from the same country or continent or simply being shares. 

Here is a list of some of the most well-known indexes. They are viewed as barometers of business conditions in their respective nations and, in many cases, the rest of the world.

• S&P 500: The 500 biggest companies in the U.S. stock market
• Dow Jones Industrial Average: Thirty big U.S. companies considered to be leaders in their industry
• Nikkei 225: Japan’s 225 largest listed companies
• FTSE 100: The 100 largest public companies in the United Kingdom
• Euro Stoxx 50: The 50 largest public companies in continental Europe

How Does the Stock Market Work?

The stock market is made up of two main components: the primary market and the secondary market.

Primary Market

One of the ways that companies raise money is by issuing shares. Either they put together the necessary funds within the circle of people whom they know and remain a private entity, or they reach out to the general public and ask for money in return for stakes in the business. 

The shares are first issued directly from the company as part of an initial public offering (IPO). A particular amount of shares will be made available at a specified price, and those interested will buy them, hoping that they increase in value.

Secondary Market

After the IPO, the shares that were issued are free to change hands repeatedly. This time, the company has no involvement. It’s individual investors buying and selling among themselves.

Important

Rather than buy shares directly from companies, most investors buy them secondhand from other investors.

Stock Exchanges

When companies begin selling slices of ownership to the public, they do so on a specific stock exchange. Almost all countries have at least one venue where it is possible to buy and sell company shares.

The United States has several major exchanges, including the New York Stock Exchange (NYSE), which is home to the likes of Home Depot, Visa, and Berkshire Hathaway, and the Nasdaq, which is where shares in Apple, Amazon, and Microsoft trade.

Companies generally choose which stock exchange to sell their shares on. Collectively, these various exchanges constitute the stock market.

1602

The year when the world’s first stock exchange was launched.

How to Invest in the Stock Market

It’s not possible to call up a stock exchange and buy or sell stocks directly. You need a stockbroker to transact and act as a middleman. That could be a real human being or a website.

Fortunately, the Internet has made this process really easy. Gone are the days of calling up a broker, negotiating prices, and placing orders over the phone. Now, you can simply set up an account with one of the many online brokers out there, deposit money, and then buy and sell as you please on your phone, tablet, or computer. 

Once you have cash in your account, shares in companies all around the world can be purchased with a few clicks of a button.

Important

You must be at least 18 years old to invest in the stock market. Anyone younger will need an adult to do it for them.

Fluctuating Prices

When you go to a regular shop, the price you pay on Monday is usually the same the following Friday. The stock market doesn’t work that way, though.

A value is ascribed to each share, and that value fluctuates throughout the day, with buyers and sellers haggling over prices in response to new information and general demand. Either you accept the quoted price, or you place an order to buy or sell when the shares in question reach a specified price of your choice. With the latter option, there are no guarantees that your demands will be met.

What Makes the Stock Market Move?

Individual shares jump up and down in value for a variety of reasons largely linked to investors’ expectations for future profits.

To move the whole market, an event capable of impacting the amount of money that numerous companies make needs to occur, such as new regulations, a pandemic, or surprising economic figures and the government’s reaction to them.

Of course, not all companies in the stock market are the same. For example, a pandemic like COVID-19 could benefit pharmaceutical companies and simultaneously hurt retailers and restaurants.

Likewise, some companies struggle much more during an economic downturn than others, generally because they are in the business of making or selling nonessential stuff like luxury goods.

The Economy and the Stock Market

The stock market is one of the most effective ways for companies, the backbone of the economy, to raise money.

These businesses provide the goods and services that we rely on every day and pay salaries to the majority of the population. If they were to be starved of the cash that the stock market provides, then it wouldn’t be good news for the economy.

The stock market also affects the economy in other ways. For example, many people invest their savings or retirement funds in the stock market and hope for their money to grow. If that weren’t to happen, then consumer spending would fall, governments would have to dedicate more resources to propping up the population, and everyone would suffer the consequences.

Key Terms to Teach Your Students

The stock market, much like cars and computers, has a language of its own that can be confusing to understand for an outsider. Here’s a list of some of the most common terms and what they actually mean.

• Ask price: The lowest price at which a seller will sell shares
• Bid price: The highest price a buyer will pay to buy shares
• Bearish: Expectations that prices in the stock market will fall
• Broker: A person or company that buys and sells shares on your behalf
• Bullish: Expectations that prices in the stock market will rise
• Capital gain: When you sell an investment for more than you initially paid
• Dividend: A portion of company earnings distributed to some or all of its investors
• Earnings: The money generated by a business after accounting for expenses
• Liquidity: Converting shares of a company into ready cash without affecting its market price
• Margin: Money borrowed from a broker to purchase an investment 
• Securities: Any financial asset that has value and can be traded
• Ticker symbol: A shorthand way to identify a company’s shares
• Trading volume: The number of shares transacted during a particular time period
• Volatility: When a market or stock experiences periods of unpredictable price movements
• Yield: A return measure for an investment over a set period of time

Tools for Teaching About the Stock Market

There are plenty of resources to boost knowledge and interest in the stock market. Like with any subject matter, the key is to make things as relatable as possible. An angle that might grab a teenager’s attention, other than the prospect of making money, could be discussing specific companies that match their passions.

Specific tools to help educate teenagers about the stock market include:

Online Stock Market Games

Everyone likes a game, and there are a fair few out there devoted to the stock market. They include:

• The Investopedia Stock Market Simulator
• The Stock Market Game
• HowTheMarketWorks
• Fantasy Stock Exchange
• Build Your Stax

Books

If a teenager begins to show some interest in the stock market, consider giving them a book to read on the topic. There are plenty out there that specifically address this demographic. Good examples include:

• “I’m a $hareholder Kit: The Basics About Stocks—For Kids and Teens”
• “How to Turn $100 into $1,000,000: Earn! Invest! Save!”
• “Growing Money: A Complete Investing Guide for Kids”
• “Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market”

Investment Classes

There are also tons of investment classes, many of which are free and accessible from anywhere in the world. Examples include Investopedia’s educational content, Morningstar’s Investing Classroom, and Khan Academy’s online learning platform.

Can Teens Invest in the Stock Market?

You usually need to be at least 18 years old to participate in the stock market. However, there are some ways around that. Adults can open a custodial account with a brokerage on behalf of a child and then, in the role of custodian, invest in the stock market for them, with or without the teenager’s input.

This is just temporary. As soon as the child is old enough to no longer be considered a minor, the account and the funds in it automatically become theirs to invest as they please.

What Is the Minimum Age to Invest?

In most places, brokers won’t let anybody younger than 18 open an account that permits them to invest in the stock market. If you’re younger, you’ll have to get a parent or guardian to open an account on your behalf. As soon as you reach the required age, this account will automatically become yours.

Which Investment Is Best for a Child?

That depends on individual circumstances. Generally, to keep the child engaged, it would be smart to invest in something that interests them, such as the company behind the products they are into. Beyond that, it really depends on how much risk you are willing to take and the financial objective. If the money is needed soon, you may want to avoid investing in the stock market.

The Bottom Line

The stock market really isn’t that complicated. It’s essentially an online supermarket where you can buy or sell slices of ownership in companies throughout the day at varying prices.

Once you get past the jargon, it’s actually a very interesting topic. Most teenagers will be keen to learn how to make some extra money without breaking much sweat on how their favorite companies operate. If you can find the right hook to get them engaged, they’ll likely thank you later.

If you’re an estate planner—or need one—learn about these certifications

Reviewed by Margaret James
Fact checked by Vikki Velasquez

If you’re a finance, accounting, or legal professional and are considering a career in estate planning or want to hire an estate planner, consider some of the specific certifications associated with the role. Some of the most common include the chartered trust and estate planner (CTEP), accredited estate planner (AEP), certified trust and fiduciary advisor (CTFA), and other related designations.

Key Takeaways

• Becoming an estate planner requires financial, tax, and accounting knowledge. 
• Estate planners typically have law, accounting, or finance degrees and certifications.  
• Common certifications estate planners may hold include chartered trust and estate planner, accredited estate planner, and certified trust and fiduciary advisor.

Role of Estate Planners

Estate planners typically work with individual investors, family offices, business owners, and high-net-worth individuals (HNWIs). Their role is complex and involves many moving parts.

An estate planner works with clients to formulate and implement a tax-planning strategy to efficiently pass assets to heirs and other beneficiaries, according to the client’s wishes. Other aspects of estate planning range from bequeathing charitable contributions to choosing life insurance.

Some major estate-planning providers integrate their practice with financial advisory and wealth management services. Wealth managers, trust officers and trust administrators, investment officers, lawyers, accountants, and financial planners all could have an interest in pursuing certifications.

Important

Earning an estate planning certification typically requires training courses in ethics, financial planning, tax law, compliance, and the regulatory environment.

Chartered Trust and Estate Planner (CTEP)

The Global Academy of Finance and Management is the certifying body for the chartered trust and estate planner designation, which has an emphasis on professionals who serve HNWIs. Earning a CTEP requires at least three years of experience in estate planning or trusts.

Candidates must also have:

• A post-secondary degree (undergraduate, graduate, or doctorate) in finance, tax, accounting, financial services
• Work experience
• Five or more approved and related courses
• A certification training course
• Annual continuing education (CE) requirements, which vary

Accredited Estate Planner (AEP)

The AEP designation is awarded by the National Association of Estate Planners & Councils. Candidates must be or have the following:

• An active practice in accounting, insurance/financial planning, law, philanthropy, and trust services for at least five years
• Spending 1/3 of your time doing estate planning
• Three professional references from people who engaged you for estate planning services
• Membership in a local estate planning council
• Two graduate courses through the American College of Financial Services

Candidates should also be designated as one or more of the following::

• CAP
• Chartered financial analyst (CFA)
• Certified financial planner (CFP)
• ChFC
• Chartered life underwriter (CLU)
• Certified public accountant (CPA)
• CPWA
• CSPG
• Certified trust and fiduciary advisor (CTFA)

The association also requires candidates to have an active license to practice law, MSFS, and/or MST.

Certified Trust and Fiduciary Advisor (CTFA)

The CFTA is awarded by the American Bankers Association (ABA). The requirements include:

• A minimum of three years of experience in wealth management and completion of one approved wealth management training program
• An ethics statement
• Passing an exam

To maintain the designation, 45 credits of continuing education are required every three years.

Related Wealth Management Advisory Certifications

There are also different certifications related to estate planning that may be useful. These include the following:

• Chartered wealth manager
• Chartered asset manager
• Chartered portfolio manager
• Chartered compliance officer

Estate Planners Education and Experience

Most estate planners have law, accounting, or finance degrees and certifications—and for good reason. Estate planning is a complicated maze of federal and state laws, Internal Revenue Service (IRS) rulings, and judicial interpretations.

These affect how assets and income are treated for tax purposes based on a wide array of types of transactions, transfers, triggering events, individual profiles—age, single or married, etc.—and entities. Creating and managing these transactions requires understanding fiduciary duties and responsibilities.

Constantly changing laws, as well as shifts in the judicial and political climate, make estate planning a highly dynamic field in which advisors engineer transactions that must hold water with authorities. Certain practices and insights can have a short shelf life.

In addition to various advanced financial degrees, law degrees, and certifications—a master of business administration (MBA), MPA, JD, CPA, and CFA—the specific, complex, and constantly changing nature of the field makes special certifications helpful. Having one or more of these certifications also gives estate planners added credibility, which provides clients with an extra degree of trust and helps in growing their business.

How Much Do Estate Planners Earn?

The average salary for an estate planner in the United States was $61,134 as of March 2025, according to ZipRecruiter. Although the Bureau of Labor Statistics (BLS) doesn’t categorize estate planning separately, it does fall under the role of a personal financial advisor. This position had a median annual salary of $99,580 in 2023.

Do I Need to Have a Certain Amount of Money to Hire an Estate Planner?

No. Estate planning isn’t just for the wealthy, which means you don’t need to have a minimum net worth to use this service. Everyone should have an estate planner to plan for the future, especially if you have assets and/or dependents. If you die without having a plan, your assets may not be distributed the way you intended.

Can I Do Estate Planning Myself?

You can generally do some estate planning on your own. But because of the complexities involved and the potential for mistakes, you’d be better off hiring a professional. Consider hiring a certified estate planner, lawyer, or financial advisor to help you plan how your assets will be distributed after you die along with anything you’d like for your funeral and what plans you have for your dependents.

The Bottom Line

Becoming an estate planner can be difficult and requires experience and a breadth of knowledge, including law, accounting, and finance. Earning an estate planning certification enhances the skills of estate planners and their credibility, especially in the eyes of potential clients.

Fact checked by Giselle Cancio

Elon Musk is referred to as “the world’s richest man” so frequently that you might think he trademarked the phrase. But the South Africa-born billionaire also holds another distinction: the largest loss ever of a personal fortune. From late 2021 to early 2023, Musk’s net worth fell from $320 billion to $138 billion, netting a loss of $182 billion.

Key Takeaways

• According to Guinness World Records, between 2021 and 2023 Elon Musk suffered the greatest loss of a personal fortune in history.
• His loss, which was on paper and due primarily to a drop in Tesla’s share price, amounted to nearly $200 billion.
• Since that time Musk has recouped his losses and is believed to be the world’s richest man by a considerable margin.

How Much Musk Lost

The dubious honor of “largest loss” was conferred by Guinness World Records, based on a 2023 report by Forbes. It said that Musk’s net worth fell from $320 billion in 2021 to $138 billion in early January 2023, a net loss of $182 billion. The major reason for the plunge was a decline in share prices of the electric automaker Tesla, probably the best known of Musk’s portfolio of companies.

The nearly $200 billion slide put Musk far ahead of—or behind, depending on how you look at it—the prior record holder. “Although the exact figure is almost impossible to ascertain, Musk’s total losses far surpass the previous record of $58.6 billion, set by Japanese tech investor Masayoshi Son in 2000,” Guinness World Records said in a Jan. 6, 2023 press release. Son is the founder and CEO of SoftBank Group.

At the same time, the loss cost Musk another record, that of world’s richest man—at least temporarily. “Musk’s misfortunes also saw him lose his status as the world’s richest person to Bernard Arnault (France), founder of luxury goods conglomerate LVMH (Louis Vuitton Moët Hennessy), who has an estimated net worth of $190 billion,” the same press release reported.

How Much Elon Musk Is Worth Today

Musk now appears to be a double recordholder. He may still hold the prize for the largest loss, and he seems to have regained his spot as the world’s richest man.

Forbes, which has established itself as a leading authority on these matters, ranks the world’s billionaires in what it calls “real-time,” adjusting the figures on a daily basis. On March 5, 2025, for example, it put Musk’s wealth at $351.6 billion. Runner-up was Meta’s Mark Zuckerberg at $226.7 billion. Rounding out the top five were Amazon’s Jeff Bezos at $223.5 billion, Oracle’s Larry Ellison at $199.2 billion, and the aforementioned Bernard Arnault and his family at $180.6 billion.

By the time you read this, those numbers will have changed, and the order may have shifted slightly. But either Musk will have to lose a lot of money or some other billionaire will have to gain a lot (or some combination of the two) to topple him from first place.

The Bottom Line

Elon Musk holds the prize for “largest loss of personal fortune,” according to Guinness World Records, and he may be in no danger of having to give it back anytime soon. However, his fortunes have improved considerably in the years since, making him the world’s richest individual that we know of—and by far.

Fact checked by Vikki Velasquez

Retirees are finding savvy ways to make money from the hobbies they love.

“Turning that hobby or creative venture into something exciting and meaningful financially has so many benefits, from shoring up retirement savings to increasing quality of life to staving off dementia,” says Patrick McAndrew, founder of American Wealth Planner.

Key Takeaways

• Retirees can turn their hobbies into money-making ventures.
• Starting a blog about your hobby and selling items you no longer use are two ways to make cash.
• Don’t be shy about promoting and selling your artwork if you’re an artist.
• Rent out what you no longer use such as a recreational vehicle, swimming pool, or yard.
• Sell your photography or the produce from your garden.

Getting Profitable With Puzzles

Missy Walker of Winter Garden, Florida is passionate about puzzles. “I love jigsaw puzzles. I solve puzzles at home. I play in puzzle competitions. And I’ve always loved puzzling fast,” Walker says. “As a retired educator, it’s a great stress relief for me and I love the challenge.”

Walker started a blog and began selling used puzzles on Facebook Marketplace to make some money from her hobby. “I started my blog, Speed Puzzling Tips. Just hit the first anniversary last week and we have over 4K viewers a month,” Walker says. “I write all the content myself and I keep it real because I play jigsaw puzzles.”

Selling Artwork

Jan Lawson, 83, began creating art at age 60. She works in acrylics, creating both paintings and collages. She shows and sells her art in coffeehouses, community centers, and art galleries. Lawson has an apartment at Wake Robin, a retirement community in Shelburne, Vermont, and she also hangs a piece of art outside her front door. “It’s kind of fun to keep changing it,” Lawson says.

People notice the art and want to buy it. “Sometimes I sell it to them. Sometimes I give it to them,” Lawson says. “That’s fun to do.”

Renting Out RVs, Pools, and Yards

Retirees are finding ways to make money off vehicles and other items they’re not using. They rent out for cash what they once used for their hobbies.

Important

Retirees are renting out their RVs on Outdoorsy.com, their pools on Swimply, and their yards on Sniffspot, according to McAndrew.

“Myrna and Bill Landers lived on their acreage for over 25 years before deciding to list their pastures as off-leash dog parks on Sniffspot. Not only have they earned meaningful income but they also say that sharing their land and their art with people and pups alike is a joy,” McAndrew says.

Selling Photography

If you’re a retiree who enjoys taking photos, the next step is selling them.

“If you like to take photos, why not turn them into cash by selling them as stock photos?” asks Mark Slack, finance expert at SideHustles.com. “Shutterstock, Adobe Stock, and Alamy will take the photos and license them to people, paying you each time they’re downloaded. The most popular categories, including business, travel, and lifestyle photography, tend to sell really well.”

Selling Homegrown Produce

Did you get into gardening when you retired? Your garden’s bounty can be sold for cash.

“If gardening is a passion of yours, you can definitely earn some money doing it! Selling your home-grown herbs, vegetables, or stylish plants in pots at farmer’s markets or in a small community-supported agriculture (CSA) environment is a great way to spread the love and earn some cash,” Slack says. “If you specialize in growing plants that are hard to get your hands on or organic produce, you can really find your own niche.”

Don’t Be Afraid to Get Started

Consider these tips from Joe Camberato, founder of National Business Capital, if you’re retired and searching for a hobby that you can transform into a money-making small business.

“If you love being out on the water, get your captain’s license and start taking people out for boat tours,” Camberato says. “If you’re into cars, buy and flip them for a profit. Plenty of people are looking for a good deal but don’t know how to find one. Use your knowledge to make money.”

Camberato has more tips for people who love to cook, people who love to drive, and those who speak foreign languages. “If you’re passionate about cooking, offer private chef services for small events or start selling your best baked goods locally. If you like driving, sign up for Uber or Lyft. It’s flexible and you’re getting paid to do something you already enjoy. If you know another language, teach classes over Zoom. People are always looking to learn.”

Take that first step and begin monetizing your favorite hobby. “The opportunities are endless. You don’t have to turn your hobby into a full-time business but almost anything you enjoy can be monetized in some way,” Camberato says. “You just have to take action.”

The Bottom Line

Retirees are taking steps to turn the hobbies they enjoy into money-making endeavors. They can bring in income from the hobbies they love whether it is selling art, blogging about puzzles, or renting out their yards. Selling photos or selling produce from a garden are other ways to make cash in retirement.

What hobby do you enjoy that you would like to monetize? Take the first steps and begin. You’ll have cash coming your way before you know it.

Reviewed by Erika Rasure
Fact checked by Yarilet Perez

Shorting Bitcoin is borrowing the cryptocurrency, selling it, and buying it back later when prices are lower. The number of venues and ways in which you can short Bitcoin has multiplied with the cryptocurrency’s increasing spotlight in mainstream finance.

Here are some ways that you can go about shorting Bitcoin.

Key Takeaways

• Many investing options are available for those looking to short Bitcoin.
• Shorting Bitcoin is borrowing and selling Bitcoin, hoping that prices will go down so you can buy Bitcoin at a lower price to repay the loan and profit.
• Derivatives such as options or futures can give you short exposure, as can margin facilities available on certain crypto exchanges.
• The price of Bitcoin is volatile and prone to sudden increases or decreases. Selling short is risky in any asset but can be particularly dangerous in crypto markets.

1. Margin Trading

One of the easiest ways to short Bitcoin is through a cryptocurrency margin trading platform. Many exchanges and brokerages allow this type of trading, with margin trades allowing investors to “borrow” money from a broker in order to make a trade. It’s important to remember that margin involves leverage or borrowed money, which can increase profits or exacerbate losses.

Many Bitcoin exchanges allow margin trading at this stage. Kraken and Binance are some popular options for this strategy.

2. Futures Market

Bitcoin, like other assets, has a futures market. In a futures trade, a buyer agrees to purchase a security with a contract, which specifies when and at what price the security will be sold.

If you buy a futures contract, you are betting that the price of the security will rise; this ensures that you can get a good deal on it later. If you sell a futures contract, it suggests a bearish mindset and a prediction that Bitcoin will decline in price. In this context, you can short Bitcoin by purchasing contracts that bet on a lower price.

Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017. It is available on a wide variety of platforms now. You can short Bitcoin futures at the Chicago Mercantile Exchange (CME), the world’s biggest derivatives trading platform, and on some cryptocurrency exchanges. Bitcoin futures can be purchased or traded on popular exchanges like Kraken or BitMEX and can also be found at popular brokerages such as eToro.

You can also trade perpetual Bitcoin futures on platforms like BitMEX if you have access to them. Perpetual futures do not have closing dates, allowing traders to set and forget positions or not have to worry about rolling them.

Note

Coinbase began offering Nano Bitcoin Futures trading on June 27, 2022. The contract sizes are 1/100th of a Bitcoin, have a tick value of $0.05 per contract, and minimum price increments of $5.

3. Binary Options Trading

Call and put options also enable traders to short Bitcoin. If you wish to short the currency, you could:

• Buy a put option: Buying a put option gives you the right, but not the obligation, to sell the bitcoin at a specified price (the strike price).
• Sell a call option: Selling a call option gives you the obligation to sell the bitcoin at the strike price if the buyer chooses to exercise it.

In both cases, you profit when Bitcoin’s price falls below the strike price before the option expires.

You can also profit from buying a call option (which gives you the right, but not the obligation, to buy the bitcoin at the strike price) or selling a put option (which gives the buyer the right, but not the obligation, to make you buy the bitcoin at the strike price), but these are considered long positions because you profit when Bitcoin’s price rises above the strike price before the option expires.

Binary options are available through several offshore exchanges, but the costs (and risks) are high. One of the advantages of using binary options trading over futures is that you can limit your losses by choosing not to execute your options. Thus, your losses are limited to the price you paid for the put options.

Popular venues for trading options are Deribit and OKX.

4. Prediction Markets

Prediction markets—while not necessarily shorting—are where you place bets on the outcome of events. Prediction markets in crypto are similar to those in mainstream markets. Parties can create an event to make a wager based on the outcome.

You could, therefore, predict that Bitcoin will decline by a certain margin or percentage, and if anyone takes you up on the bet, you’d stand to profit if it comes to pass.

Popular crypto prediction markets are GnosisDAO and Polymarket.

You can learn passive and active investing strategies through a crypto trading course.

5. Short-Sell Bitcoin

Though this strategy might not appeal to all investors, those with the stomach can reap gains if their bet against Bitcoin pricing succeeds. If your brokerage or exchange allows it, you could borrow some Bitcoin and sell them at a price you are comfortable with. When the price drops, repurchase some and pay back the exchange. Of course, if the price does not adjust as you expect, you could lose money in the process.

If the price goes up (instead of down, as you had hoped), you could end up with significant losses.

6. Using Bitcoin CFDs

A contract for difference (CFD) is a financial strategy that pays out money based on the price differences between the open and closing prices for settlement. Bitcoin CFDs are similar to Bitcoin futures in that they are essentially bets on the cryptocurrency’s price.

When you purchase a CFD predicting that prices will decline, you are betting against Bitcoin. This is not shorting Bitcoin, but it is similar in that you’re acting on a belief that prices will drop.

Important

Brokerages and exchanges are not permitted to offer CFDs to U.S. residents because they are traded over the counter and are not regulated by the Securities and Exchange Commission (SEC).

CFDs have a more flexible settlement tenure than Bitcoin futures, which have predetermined settlement dates. Additionally, in certain Bitcoin CFD markets, traders can enter into a contract based on Bitcoin’s performance or its performance relative to fiat currency or another crypto.

7. Using Inverse Exchange-Traded Products

Inverse exchange-traded products (ETPs) are instruments that use leverage and other techniques to flip the returns an underlying asset generates. They are similar to futures contracts and are used in conjunction with other derivatives to produce returns.

Until January 2024, the only exchange-traded product available to U.S. residents was ProShares’ Short Bitcoin Strategy ETF (BITI). That month, the SEC approved 11 spot Bitcoin ETPs that can be used for shorting Bitcoin.

Factors to Consider While Shorting Bitcoin

As with any strategy related to cryptocurrencies, shorting Bitcoin involves enormous risk. There are several aspects you should consider while shorting Bitcoin.

Bitcoin Price Is Volatile

Most avenues to short Bitcoin depend on derivatives. These derivatives are based on pricing; fluctuations in the cryptocurrency’s price have a domino effect on investor gains and losses.

For example, Bitcoin futures mimic spot price changes, meaning they cannot be used as an effective hedge against an investment in actual Bitcoin. Similarly, options trading in Bitcoin can multiply losses due to the underlying cryptocurrency’s price volatility.

Bitcoin, as an Asset, Is Risky

Price is just one of several risks you will have to evaluate while shorting the cryptocurrency. Compared to other, more established assets, Bitcoin is new. It has been around only since 2009. Therefore, there isn’t sufficient data or information for investors to make an educated decision about its workings or feasibility as an asset.

While established platforms like CME are safer and guarantee execution for Bitcoin derivatives, new platforms might start off “clunky” and be more susceptible to hacks.

The Regulatory Status for Bitcoin Is Still Developing

Regulations across geographies are still being developed and implemented. The United States has made strides, as several key court cases have concluded and several Bitcoin investment instruments have been approved. The European Union (EU) published its Markets in Crypto-Assets legislation, which guides the bloc’s members in their cryptocurrency dealings.

There are several leading Bitcoin trading platforms, such as Deribit, that are not available to American investors due to regulatory compliance issues. This poses issues for those in the U.S. who wish to trade certain instruments or derivatives offered on exchanges that are not regulated by U.S. authorities because if they trade on them, they are not protected.

Knowledge of Order Types Is a Must

Before undertaking a short position in Bitcoin, you should brush up on your knowledge of different order types. They can help limit losses if the price trajectory does not go in the direction that you initially bet—for example, using stop-limit orders while trading derivatives can curtail your losses.

What Is a Short in Bitcoin?

A short is when you borrow an asset, sell it, and hope to buy it back when its price drops. You can do this with Bitcoin, but it is even more risky than doing it with other assets due to its price volatility.

Is There a Stock That Shorts Bitcoin?

There is no stock that shorts Bitcoin, but there are exchange-traded funds (ETFs) that do so. Funds that short assets are generally called inverse funds because they attempt to return the inverse of falling prices. The ProShares Short Bitcoin Strategy ETF (BITI) is one of these funds.

Can You Make Money Shorting Bitcoin?

It is possible to short Bitcoin and profit—if you can tolerate the risks and time it right, shorting Bitcoin can generate large profits. However, it can also generate significant losses.

The Bottom Line

Shorting Bitcoin is a viable option for traders comfortable with the risks. Several exchange-traded products and strategies are available for shorting Bitcoin. Before you begin, it helps to learn about order types and to practice your strategies.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info. As of the date this article was written, the author owns BTC and XRP.

Correction—Feb. 18, 2025: This article has been corrected to update the concept of selling a put option.

Correction—March 13, 2025: This article has been corrected to state that you could buy a put option or sell a call option to short Bitcoin.

The basics can be taught when kids are quite young

Reviewed by Ebony Howard
Fact checked by Vikki Velasquez

Are you teaching your children about investing? As they become aware of money and other financial concepts, it’s important to familiarize them with investing and arm them with the know-how and tools to take with them into adult life.

Key Takeaways

• Opening your child’s eyes slowly to how markets work will demystify the process of investing and make it feel more accessible to them when they’re older.
• Start by teaching them the basics of risk versus reward, stocks and bonds, and profits and losses.
• If you own stocks, explain why you chose to invest in those companies and consider including your child in keeping an eye on the stock and company news.
• Let your child pick out a stock and either buy a few shares for them or set up a model portfolio so they can make some trades on their own.
• As they get older, encourage your kids to invest their money in a mix of stocks, bonds, and a savings account that you can help manage while they take the lead.

Start Simple With a Savings Account

One of the first ways you can introduce children to finances is by opening a savings account for them. As they earn money, encourage them to put it away in their account. This will demonstrate that they can safeguard their money while also generating a little bit of interest income if they do not spend their money.

This also encourages building relationships with financial advisors. Though your children may not have much to contribute, they may still need to go to a branch to deposit a small amount of cash. This encourages them to work with branch tellers and enforces that there are professionals that can help them on their financial journey.

Discuss Stocks and Bonds

Stocks are classified as high-risk investments. Along with that comes the potential for high returns. In time, you’ll want to address investments like this where a stock’s value can go up and down and that you can’t always predict the effects of the associated risks (as opposed to the consistency of an interest rate earned in a savings account).

If someone has given your child a financial gift like a U.S. savings bond, it can be a great jumping-off point to explain how this sort of debt security works. Remember, a bond is a low-risk, low-return investment. Bonds generally pay a small amount over the prime interest rate and are backed by stable institutions, usually banks or governments.

You can introduce your kids to these investments by telling them about purchasing lower-rated bonds that may offer better returns in exchange for higher risk. Make sure you advise them of the potential for the institution to default and that they can’t necessarily count on getting the income they may expect.

Note

You can set up an account for your child to put investments in where earnings can grow tax-free if they are used to pay for future tuition.

Keep Your Child’s Attention

One of the best ways to get your children interested is by getting their attention with things they may already know. Get them into the spirit by teaching them about popular companies like Nike or Apple. Alternatively, speak to their interests. If they’re interested in planes, for example, introduce them to a company like Boeing. If you own stocks, consider showing them the companies that make up your portfolio.

Take the time to explore the investor relations pages of different companies together to learn more about what the company makes, how much it earned that year, and how many people work there. Then ask your child what company stock they would like to buy. Young as they are, kids often know corporate names and have favorite firms. Disney may be popular with some children. 

Track Some Stocks

Once you introduce your kids to basic concepts, sit down and let them select a company. If you have the money, buy a few shares in the stock and then check the investment together at least once a week to show how it can rise or fall. If you don’t want to take that risk, consider making a simulated online portfolio and tracking stocks for fun, without the expense of purchasing shares. You can start out with Investopedia’s Stock Market Simulator, which is free to use.

Important

If you pick stocks with your children when they are young, they’ll experience the up-and-down cycles of the markets. This may better prepare them for the reality of fluctuations and help them make informed decisions when they grow up.

Let Your Child Invest

Give your kids the basics of investing when they are younger. As their knowledge expands, you can provide them with a more in-depth explanation of stocks and other investments. Let your child buy their own stocks at some point, especially if they have some cash in a savings account. Part of teaching them is ensuring they don’t put all their eggs in one basket, so suggest investing a third in each and keeping a third in savings. This also helps them compare the returns of different investments.

What if your child doesn’t have any money to participate? There are a couple of options:

• You can use your own cash to open a small brokerage account where your child can make investments
• You can build a model portfolio of stocks that your child wants to buy someday
• You can use a portfolio simulator to mimic what certain investments could turn into

There are several ways to open a brokerage account for a minor.

Another thing to decide is whether you want to introduce your child through an online broker—some are especially good for beginners. Depending on the brokerage, you may be able to open a custodial account in the name of your minor child and give them the right to trade in it online. As the adult, you would remain the official custodian. As with anything else, check with a tax expert for the best option before you start.

Learn From Current Events

As your child develops their favorite products or hobbies, have them think through how changes with those products may result in changes in their investments. For example, imagine a child who loves playing video games. Let’s say Microsoft then releases a poorer earnings report where fewer Xbox consoles were sold than expected last quarter. You can tie these items together by having your child think through what the impact will be to Microsoft’s stock.

By extension, this can also expose your child to other industries they may not know about. For example, let’s say Microsoft sold less consoles than expected but their stock still generated a 20% spike upwards after their earnings release. Ask your child why that could’ve been, what other products could have outperformed, or what other things are going on in the world could have resulted in this. The goal of this is to have your child think a bit broader about all the items that come together to drive a company’s stock price.

When Is the Best Time to Introduce My Kids to Finances?

The earlier you start teaching your kids about finances, the better. You may want to start by opening a savings account. Get them excited about saving their money by putting it into the account and watching it grow. As they get older, you can open up the dialogue to more significant topics, like stocks and bonds. At some point, it may be wise to show them your investments and either let them use a simulator or open an investment account for them, too. Taking a hands-on approach when they’re ready will expose them to the ups and downs of the market. Be sure you monitor them so there are no surprises.

Why Is Financial Literacy Important for Kids?

Financial literacy is important for everyone. But it may be even more important for young children. Teaching them about money, money management, and investing at an early age can help them achieve financial freedom and success later in life. Starting small with teaching them about saving can lead to more in-depth topics like the basics of investing, which may help them make more meaningful decisions about their money and finances as they get older.

Can I Open a Trading Account for My Child?

If you’re confident enough, you can open a trading account for your child. Most brokerages require you to open a custodial account. This type of account lets you open it in the name of your child and give them the right to trade online. Keep in mind, though, that you are the one who is ultimately responsible to manage and invest in it.

The Bottom Line

It’s important to allow your child to make real decisions and take real risks. Your child may lose money, but the purpose of the exercise is to familiarize them with investing, and part of that is learning that investments have advantages and disadvantages. Whatever the outcome, the experience of following their investments and gaining and losing money—whether actual or theoretical—will be invaluable.

Fact checked by Kirsten Rohrs Schmitt
Reviewed by Lea D. Uradu

A mortgage loan to finance buying a home is often the largest purchase most people make in their lifetime. A mortgage comes with years of monthly payments and interest that inflates the cost of the home to well beyond the purchase price. Paying off your mortgage early offers several benefits, including saving thousands of dollars in interest and providing the financial security and freedom of owning your home outright.

Paying off a mortgage early also allows you to pay down other debts, which can help provide relief in your monthly budget. Getting out from under your mortgage—if you can afford to do it—may offer advantages that can positively impact your finances, as well as your quality of life, especially in retirement. Discover four reasons why paying off your mortgage early can benefit your long-term financial prospects.

Key Takeaways

• Paying off your mortgage early could free up your cash for travel, retirement, or other long-term plans.
• Being mortgage-free may insulate you from losing your home if you run into financial difficulties.
• The interest accrued on a home loan can run upwards of tens of thousands of dollars during the lifetime of the mortgage.

1. You Can Tackle Other Debts

One of the biggest benefits of paying off a mortgage includes the long-term financial security. Without the burden of a monthly mortgage payment, you may find yourself with extra breathing room in your budget.

If you were struggling to pay bills before your mortgage was paid off, you will be able to redistribute the money you would have paid on your mortgage towards high utility bills, credit card balances, college loans, and other kinds of debt.

2. It Reduces the Cost of Interest

When you take out a home loan the mortgage lender will generally lend 80% of the home’s price, depending on the type of mortgage. However, the total cost of a mortgage isn’t just the actual price tag on a home, it includes the hefty cost of interest on the loan. The longer you carry a mortgage, the more you pay in interest.

For example, if you take out a 30-year fixed mortgage loan, you can plan on sending a payment (covering principal, interest, and homeowners insurance) to your mortgage lender for the next three decades.

By paying off your mortgage early, you may save significantly due to the additional cost of interest, especially if your home loan had a high interest rate when you took out your mortgage.

3. It Provides Protection During Unstable Housing Markets

A major concern for many homeowners, especially if they remember the Great Recession, is the impact that an unstable real estate market can have on homeowners. Being able to keep up with your mortgage payments during a large-scale financial crisis is a real concern for many homeowners.

For example, if you find yourself in need of cash suddenly, and you want to tap equity out of your house, it may be difficult to do if the value of your home goes down due to an unstable market.

But if you have paid off your mortgage, at least that monthly financial burden is lifted, and you can wait for the market value of your home to improve.

Important

Some financial experts caution that you should not sacrifice your retirement in order to pay off your mortgage. If you are retired, it may pay to weigh the pros and cons of paying off a mortgage versus boosting your retirement accounts.

4. It Provides Financial Freedom to Pursue Other Ventures

A pleasant advantage of paying off your mortgage, assuming you have no other debt, is that it may give you the financial freedom to pursue other ventures.

Whether you have always dreamed of living somewhere tropical, traveling around the world, or owning your own business, having extra money in your bank account every month will allow you to pursue other economic opportunities.

Should You Invest or Pay Off Your Mortgage?

That depends on the state of your finances, the interest rate on the mortgage, and how close you are to retirement. Paying off your mortgage early could save you years of interest payments. Investing the money you were going to use to pay off your mortgage early could result in higher returns than the cost of the loan’s interest. The caveat is that investing brings the risk of losses.

What’s the Downside of Paying Off Your Mortgage Early?

When you pay off your mortgage early, you lose the opportunity to deduct the interest you pay on a mortgage loan. When you itemize your deductions, the interest you pay on a loan is deductible up to $750,000 if you’re single and up to $375,000 if you’re married, filing jointly.

What Debts Should You Pay Off First?

Although there are various debt-reducing strategies, if you have credit card debt with a high annual percentage rate (APR), you might want to pay it off first, followed by lower-interest loans like mortgages and student loans. Also, paying off credit card debt can improve your credit score and the interest rate on a mortgage.

Some might consider investing the money that they would use to pay off a credit card, but the cost of the card’s high interest rate for any period of time would most often negate the investment gains. The rate of return on your investment would need to surpass the financial impact of the growing debt from your high-interest credit card, which could cost 19.95%.

The Bottom Line

Paying off a mortgage is a dream for many homeowners. If this goal is within reach for you and your family, it might be a smart move to satisfy your mortgage balance.

Paying off your mortgage can free up extra money every month and provide added financial security during a crisis, allowing you to save more. It may even let you chase down your dreams that need extra financial backing.

Fact checked by Vikki Velasquez
Reviewed by Andy Smith

Exchange-Traded Products (ETPs) vs. Exchange-Traded Funds (ETFs): An Overview

Exchange-traded products (ETPs) offer investors diversity and liquidity through pooled investments that trade on stock exchanges, akin to individual stocks. ETPs are not stocks; they are sophisticated financial instruments that can pool a variety of investment types, including funds and commodities, traded like stocks.

Among ETPs, exchange-traded funds (ETFs) are the best known, and offer flexibility, cost efficiency, and comparatively lower fees. ETFs often mirror the performance of indexes, sectors, or commodities prices, providing a transparent and effective way to invest in entire markets or specific economic niches without having to buy the underlying assets.

Key Takeaways

• Exchange-traded products are accessible investments offering diversification and liquidity.
• Exchange-traded funds are a specific type of ETP that tracks an underlying index and can be bought and sold on an exchange throughout the trading day.
• ETPs also include other exchange-traded instruments, such as exchange-traded notes and exchange-traded commodities.
• Factors to consider when choosing between ETPs and ETFs include expense ratios, liquidity options, diversification, and regulatory oversight.
• Investors should thoroughly research any ETP or ETF and seek professional advice before investing in them.

With ETPs, the pooling of different investment types enables both seasoned and novice investors to access a broad range of assets, from traditional stocks and bonds to more niche markets like commodities or specific industry sectors, all with the ease of buying and selling shares throughout the trading day. ETPs not only provide a platform for portfolio diversification but also enhance the financial ecosystem’s adaptability, allowing investors to respond swiftly to market changes and opportunities.

ETPs include other securities beyond ETFs, such as exchange-traded notes (ETNs) and exchange-traded commodities (ETCs). ETNs are debt instruments that track an index while carrying credit risk, while ETCs offer exposure to commodities and currencies, but can face unique risks discussed below.

Exchange-Traded Products

ETPs bundle securities into a portfolio to provide exposure to a wide array of assets, all while trading like stocks on major stock exchanges. These products are designed to offer diversified exposure, high liquidity, transparency, and cost efficiency.

The first ETP is thought to be the Standard & Poor’s Depositary Receipts (SPDRs), commonly known as “Spiders.” The first SPDR was introduced in 1993 and is now known by its ticker symbol, SPY. This product was designed to track the S&P 500 Index, allowing investors to buy shares in a portfolio that mirrors the performance of the S&P 500.

The approval process for the first ETP was a significant milestone in financial markets, requiring collaboration among the American Stock Exchange, the Securities and Exchange Commission (SEC), and State Street Global Advisors, which developed and sponsored the ETP.

Before SPY’s debut, trading the S&P 500 Index was difficult, and investors had to dig into each component stock. SPY would expose investors to the broad index through a single product. Given the novelty of this product, there were regulatory and logistical hurdles to overcome. Until then, stock exchanges focused on individual company stocks rather than pooled investment products.

SPDRs adopted a unique share creation/redemption mechanism to assuage regulators to keep their prices closely aligned with the index it tracked. This mechanism allowed large broker-dealers to exchange underlying stocks for shares of the SPY ETP with the fund manager.

SPDRs paved the way for the ETP industry by proving the appeal and feasibility of packaged financial products that supply diversified exposure to indexes through a publicly traded security. SPY remains the world’s largest and most actively traded ETP, with an average of around 55 million shares exchanged daily and $602 billion in assets during the previous three months as of March 12, 2025.

Key Characteristics of ETPs

ETPs have these main elements:

• Basket of securities in one security: Each ETP contains a portfolio or basket of assets rather than a single security. The basket can include stocks, bonds, commodities, currencies, and more. This provides instant diversification.
• Traded on exchanges: ETPs trade on major stock exchanges like individual stocks, allowing investors to buy and sell them throughout the trading day via their broker.
• Intraday pricing: The price of an ETP fluctuates throughout the day based on supply and demand, allowing for real-time pricing and trading flexibility.
• Cost-effective: A pivotal feature of ETPs is that they often offer low management fees and expense ratios, making them less costly to trade than mutual funds or even the underlying securities they hold. In addition, many brokerages today offer commission-free trading for these products.

Benefits of ETPs

Several advantages make ETPs an appealing investment vehicle:

• Diversification: ETPs provide instant diversification across asset classes, market sectors, industries, geographic regions, and more. Investors gain broad exposure through a single ticker.
• Liquidity: The ability to trade ETPs seamlessly throughout the day on major exchanges provides constant liquidity. This distinguishes them from mutual funds that trade once a day.
• Low costs: ETPs have lower expense ratios than actively managed mutual funds since they passively track an index. This means saving substantially on fees.
• Tax efficiency: ETPs are structured in a tax-efficient manner compared with mutual funds in most cases, saving investors further costs.

ETP Regulations

While they may be structured differently, all ETPs in the United States are regulated by the SEC for investor protection and transparency. The SEC reviews ETP prospectuses, requires regular disclosures, oversees market trading, and enforces rules around practices like manipulation and fraud. This oversight applies across the ETP spectrum, no matter its structure.

However, the level of oversight depends on the type of ETP. For example, ETNs operate as unsecured debt securities issued by financial institutions. This differs from ETFs, which directly hold underlying assets.

As a debt instrument, ETNs carry credit risk should the issuing institution default. As a result, the SEC monitors ETNs more closely than it does the diversification and tracking error risks of ETFs. While both are ETPs, the SEC tailors its approach based on each structure’s characteristics to safeguard investors.

Exchange-Traded Funds (ETFs)

ETFs are popular financial instruments designed to offer investors an easy and efficient way to gain diversified exposure to an entire index or market segment through a single trade. They are easily the most traded and best-known of the ETPs.

Unlike mutual funds, ETFs trade on stock exchanges like equities. This gives ETFs the advantage of continuous pricing and trading throughout the day. ETFs hold a basket of assets that can include stocks across various sectors and industries, government and corporate bonds, commodities like natural gas or precious metals, and foreign currencies. The basket of assets held by an ETF is carefully selected and weighted to closely replicate the performance of a specific underlying index or benchmark.

For example, a total stock market ETF would hold hundreds or even thousands of different stocks in proportion to their weight in a broad stock market index. By buying a share of the ETF, an investor instantly gains diversified exposure to the returns of the entire equity market rather than buying each stock separately.

ETFs offer efficient, liquid, low-cost market access in a transparent, tax-efficient vehicle. Investors can also choose from various ETFs targeting more specialized market sectors based on their financial goals and risk tolerance.

Types of ETFs

ETFs track many different market segments. Here are the most common:

• Stock index ETFs: These track indexes like the S&P 500, Nasdaq 100, Dow Jones Industrial Average, etc.
• Industry/sector-specific ETFs: These focus on and track specific industries or sectors like technology or financials.
• Bond ETFs: These track government, corporate, or municipal bond indexes.
• Commodity ETFs: These track the prices of gold, silver, oil, grains, and other commodities. They either directly hold these commodities or use derivative products like futures.
• Currency ETFs: These track foreign currency exchange rates.
• Inverse ETFs: These furnish returns that move the opposite of benchmarks. This allows for short-market exposure.
• Leveraged ETFs: These want multiple returns, such as plus or minus two or three (or more) times the return of an underlying index or asset.
• Crypto ETFs: These track one or more major cryptocurrencies such as Bitcoin or Ethereum. They may directly hold cryptocurrencies or use derivatives contracts to gain exposure.

Difference Among ETFs, Mutual Funds, and Single Stocks
Feature	ETFs	Mutual Funds	Stocks
Pricing/Trading	Intraday pricing and trading	End-of-day pricing; trades once per day	Intraday pricing and trading
Costs	Lower expense ratios than active mutual funds	Typically higher expense ratios	May have commission fees on trades
Tax Efficiency	More tax-efficient in most cases	Can have capital gains distributions	Taxes on dividends and capital gains
Diversification	Holds basket of securities	Holds basket of securities	A single security
Risk Profile	Potentially lower volatility than individual stocks because of multiple holdings	Often lower volatility than individual stocks	Higher volatility as a single security
Transparency	Full portfolio holdings disclosed daily	Periodic portfolio disclosures	Public filings from a single company
Index Tracking	Follows underlying index	Actively managed or passive index tracking	Follows the performance of a single company

Other Types of ETPs

In addition to ETFs, other types of ETPs include ETNs and exchange-traded commodities (ETCs).

Exchange-Traded Notes (ETNs)

ETNs combine bond investing with the tradability of stocks. Unlike ETFs, which hold underlying assets, ETNs are structured as unsecured debt securities issued by financial institutions. These notes promise to pay the holder a return based on the performance of a market index or other reference measure, minus applicable fees, at maturity.

ETNs, however, have some unique risks and benefits:

• Credit risk: Since ETNs are debt instruments, their value is dependent, in part, on the creditworthiness of the issuing bank. If the issuer faces financial difficulties, the ETN could lose value, no matter the performance of the underlying index.
• Price tracking: ETNs aim to closely track the performance of their underlying index or benchmark. They do not experience tracking errors the same way that ETFs might.
• Liquidity risk: Some ETNs may have lower trading volumes than ETFs, potentially leading to wider bid-ask spreads and impacting the ease with which they can be bought or sold at desired prices.
• Tax efficiency: ETNs can offer unique tax benefits in certain situations. For instance, since they do not distribute dividends, investors might not incur taxes until the sale of the ETN or its maturity, potentially deferring tax liabilities.
• Market exposure: ETNs can provide exposure to many assets, including hard-to-reach markets and strategies. This includes commodities, emerging markets, private equity, or specific investment strategies that might be difficult or costly to access directly.

Exchange-Traded Commodities (ETCs)

ETCs offer exposure to commodities, including metals, energy, and agricultural products, without directly investing in physical commodities or futures contracts. ETCs track the commodity’s price or a basket of commodities, allowing investors to gain exposure to commodity markets through a security that trades on a stock exchange.

There are differences between ETCs and ETFs that track commodities. Commodity ETFs are structured as funds and regulated under the Investment Company Act of 1940 in the U.S. They hold either physical commodities (like gold or silver) or futures contracts on commodities. Commodity ETFs are considered equity products and are regulated like mutual funds and other ETFs.

Exchange-traded commodities, like ETNs, are structured as debt securities, even though they track commodity prices. They are not considered funds in the traditional sense, but are debt instruments issued by a single entity. This means there are credit risks involving the issuer.

ETCs can be broadly classified into two categories:

• Physical ETCs: These ETCs hold physical commodities, such as gold or silver bars, in secure vaults. Investors in physical ETCs have a claim on the underlying metal, and the value of the ETC is directly tied to the price of the physical commodity.
• Synthetic ETCs: Instead of holding physical commodities, synthetic ETCs use derivatives like futures contracts to replicate the performance of the underlying commodity. This approach can provide exposure to a broader range of commodities, including those difficult or impractical to store physically.

As with ETNs, ETCs also present unique risks and benefits:

• Direct commodity exposure: ETCs offer a straightforward way to invest in commodities, which can serve as a hedge against inflation or a diversification tool outside traditional stocks and bonds.
• Variety: Investors can choose from various commodities, from gold and silver to oil and agricultural products, depending on their investment goals and market outlook.
• Transparency: ETCs offer transparency in holdings and pricing, with the value of the ETC closely tracking the underlying commodity or commodities.
• Volatility: Commodity markets can be highly volatile, with prices influenced by various factors, including geopolitical events, weather conditions, and changes in supply and demand.
• Counterparty risk: Synthetic ETCs can involve counterparty risk since their performance depends on the ability of the issuer or counterparty to fulfill their obligations under the derivative contracts.
• Credit risk: Because they are structured as unsecured debt instruments from a single issuer if the issuer faces financial difficulties, the ETN could lose value, whatever the performance of the underlying commodities.

What to Consider When Choosing Between ETPs and ETFs

When deciding whether an ETP or ETF makes the most sense for an investment strategy, investors should weigh several key factors:

• Expenses and fees: ETPs and ETFs often have lower expense ratios than actively managed mutual funds, but fees vary between products. All else being equal, an ETP with a lower expense ratio is preferred. ETFs typically have lower fees than other ETPs since they have less complex structures. Consider the expense ratio, commission fees, bid-ask spreads, and premiums/discounts.
• Liquidity: ETFs tend to have higher daily trading volumes and tighter bid-ask spreads. Some ETPs have limited secondary market liquidity, which can impact prices. Assess the average trading volume and bid-ask spread for a particular ETP or ETF—the higher the volume and the tighter the spread, the better.
• Performance and tracking: ETPs are often highly efficient at replicating their benchmark index performance, but some have more tracking errors. Research historical returns and compare them with the ETP’s benchmark.
• Diversification: ETFs offer exposure to various indexes across all major asset classes. Some ETPs zero in on narrow commodities or niche assets. Other times, two or more ETFs may hold the same assets; for example, if a stock is represented as a significant part of the S&P 500 and a sector index. This could mean doubling the exposure to specific stocks. Assess how well an ETP or ETF aligns with your asset allocation and diversification goals.
• Reputation of issuer and regulatory compliance: The trustworthiness and track record of the ETP issuer matter. A well-regarded issuer with a history of regulatory compliance and transparency is likely to offer low-cost products managed in the best interest of investors. Investigate the issuer’s reputation, experience in managing investment products, and history of adherence to regulations.
• Tax efficiency: ETFs are generally known for their tax efficiency, especially those that track broad-market indexes because of their unique creation and redemption process, which can minimize capital gains distributions. Depending on their structure, ETPs might not offer the same level of tax efficiency. Understand the tax implications of each investment, including how distributions are taxed and the potential for triggering taxable events.

Costs and Fees Associated with ETPs and ETFs

All ETPs have costs that affect the total return on investment.

• Expense ratios: This annual fee, expressed as a percentage of assets under management, covers the operational costs of the fund, including management fees, administrative fees, and other operating expenses. ETFs often have lower expense ratios than actively managed mutual funds, and ETCs can vary widely based on the complexity of the commodity exposure and management.
• Trading costs: Investors also have trading costs, such as commissions when buying or selling shares, including brokerage commissions (if applicable) and bid-ask spreads. Some ETFs today may be part of commission-free trading programs offered by brokers.
• Premiums/discounts: ETPs can trade at a premium or discount to their net asset value (NAV), depending on market demand and the underlying securities. These differences can mean more costs or benefits when entering or exiting positions.

How Does Liquidity Differ for Different ETPs and ETFs?

ETFs generally offer higher liquidity than other ETPs due to their broader market appeal and higher trading volumes. ETF liquidity also depends on a unique creation and redemption mechanism that allows for the adjustment of supply in the market, helping to maintain the ETF’s price close to its net asset value (NAV).

Depending on their specific type and market demand, other ETPs may not have this mechanism and can experience wider bid-ask spreads and lower trading volumes, potentially lowering liquidity.

Are ETFs and ETPs Regulated by the Same Authorities?

Both ETPs and ETFs in the U.S. are regulated by the SEC. However, the specific regulations depend on the type of ETP.

Like mutual funds, ETFs are regulated under the Investment Company Act of 1940, with additional rules tailored explicitly to ETFs. Other ETPs, such as ETNs and ETCs, fall under different regulations based on their structure (e.g., debt securities). Despite these differences, all ETPs must follow SEC regulations to protect investors.

Can You Short ETPs and ETFs?

As long as your broker approves you for short selling, ETPs and ETFs can be shorted like shares of stock. In fact, short selling may be easier with ETPs and ETFs than individual stocks because of the improved liquidity. There are also inverse ETFs that deliver inverse returns for short strategies without having to sell short any security.

The Bottom Line

ETPs offer investors an efficient way to gain exposure to diverse assets pooled and traded on stock exchanges. ETPs have advantages like low costs, tax efficiency, liquidity, and transparency.

ETFs are a subset of ETPs regulated by the SEC under the 1940 Investment Company Act, while ETPs can fall under further regulations depending on their assets. Investors should weigh factors like expenses, tracking ability, liquidity, diversification, and risks when choosing between ETPs and ETFs.

Thorough research is vital to successfully incorporating these worthwhile investments in a portfolio. Both ETPs and ETFs can serve a valuable role in asset allocation when they match an investor’s strategy, goals, and risk tolerance.