Investopedia

Reviewed by Eric Estevez
Fact checked by Jiwon Ma

Yes, it is possible for a stock to have a negative price-to-earnings (P/E) ratio.

While the P/E ratio is often seen as high or low, a negative P/E occurs if a company has a loss for an accounting period rather than a profit.

Since the P/E ratio is a stock price relative to earnings-per-share, a high P/E ratio means that a stock’s price is high relative to earnings. A low P/E ratio indicates that a stock’s price is low compared to earnings.

Of course, you’d only be able to conclude that it’s high or low by tracking it over time. For example, if it rarely changed or changed little, you’d perceive it as neither high nor low, but stable.

Key Takeaways

• A stock can have a negative P/E ratio—for example, if a new company hasn’t accumulated earnings yet.
• A consistently negative P/E ratio can indicate a risk of bankruptcy for the company.
• A high P/E ratio means a stock’s price is high relative to earnings.
• A low P/E ratio indicates that a stock’s price is low compared to earnings.
• The price-to-earnings (P/E) ratio shows what the market is willing to pay today for a stock based on its past or perceived future earnings.

What Is the P/E Ratio?

The P/E ratio compares the price of a share of a company’s stock to the earnings per share. Earnings per share is the company’s profit, or earnings, divided by its number of shares outstanding.

It shows the price investors are willing to pay for a stock based on its past or perceived future earnings.

You calculate it with this formula:

Share Price ÷ Earnings per Share

P/E is a metric that investors use, along with others, to assess whether or not to invest in a particular company. You can study it for a single business as well as compare it to P/Es for other companies in the same industry.

For example, if the P/E ratio for one company differs greatly from others in its industry, you’d want to research why this is so and whether an investment opportunity exists.

Important

Demand for a stock can reflect investors’ belief that its price is poised to appreciate. Due to the increased buying, the rising stock price raises the P/E ratio. Thus, a high P/E ratio could be an indicator that investors expect earnings growth in the coming quarters.

What Is a Negative P/E Ratio?

A negative P/E ratio means a company has negative earnings—it’s losing money. The denominator of the P/E formula shown above would be a negative number.

Even the most established companies experience down periods, which may be due to environmental factors that are out of the company’s control.

However, companies that consistently show a negative P/E ratio are not generating sufficient profit and run the risk of bankruptcy.

A negative P/E ratio may not be reported. Instead, the earnings per share (EPS) might be reported as “not applicable” for quarters in which a company reported a loss.

Investors buying stock in a company with a negative P/E ratio should be aware that they are buying shares of a company that has been unprofitable in previous quarters. They should be mindful of the risks that implies.

Implications of a Negative P/E Ratio

While a negative P/E ratio reflects no earnings per share and that a company is reporting losses, this is not always a sign of impending bankruptcy.

A company might have a negative P/E ratio, yet be on a path to growth. It could be a start-up that shows enormous promise but isn’t making a profit yet.

In fact, in some sectors, it is not uncommon for companies to show negative P/E ratios when they are newly launched.

For example, pharmaceutical companies that invest billions of dollars in drug research may report a loss for years before turning a profit.

Also, technology companies may post a loss initially, yet the stock price may rise significantly due to market expectations of positive earnings growth in the coming years.

In addition, if a company changes its accounting systems or policies, that might change the P/E ratio.

Similarly, changes in depreciation or amortization policies in a particular year or a market trend might cause companies to report a negative P/E ratio temporarily.

An investor should be wary if a company consistently shows a negative P/E ratio for a long period—for example, five years in a row. If this is the case, then the company is not in good financial health.

Note

As with any financial metric, it’s important and very useful to compare the P/E ratio with the P/E ratios of other companies in the same industry.

Uses for the P/E Ratio

Generally, investors use the P/E ratio, along with other metrics, to assess whether or not to invest in a particular company. You can study it for a single business as well as compare it to P/Es for other companies in the same industry.

For example, if the P/E ratio for one company differs greatly from others in its industry, you’d want to research why this is so and whether an investment opportunity exists.

In particular, many investors use the P/E ratio to determine if a stock is overvalued or undervalued. They can also use it to gauge market expectations for future earnings growth.

Companies that consistently show a negative P/E ratio are not generating sufficient profit and run the risk of bankruptcy.

Is a Negative P/E Ratio a Bad Thing?

In and of itself, a negative P/E ratio means that a company had a loss for the accounting period. That’s not good. However, the loss could be temporary due to a variety of legitimate reasons. So, don’t judge the company’s value based on a single negative P/E. Track it over time and be sure to use other financial metrics along with the P/E ratio when evaluating a company for an investment.

What Is the Price-to-Earnings (P/E) Ratio?

The price-to-earnings (P/E) ratio measures a company’s share price relative to its earnings per share (EPS). It helps to assess the relative value of the company’s stock. 

What Are Some Companies With Negative P/E Ratios?

In June 2025, companies with negative P/E ratios included Sachem Capital (USA): -7.77; MicroStrategy (USA): -16.9; Mesoblast (Australia): -0.1889, Kuuhubb (Finland): -0.2439.

The Bottom Line

It’s possible for a company to have a negative price-to-earnings (P/E) ratio but it’s not always a cause for concern.

There are various reasons for a negative P/E ratio—for instance, a company might be new and not yet have made a profit.

However, the alarm bells should go off if a company consistently shows a negative P/E ratio for a long period, such as multiple consecutive years. This indicates a business in trouble.

Reviewed by Somer Anderson
Fact checked by Suzanne Kvilhaug

Bitcoin vs. Ethereum: An Overview 

Ether and bitcoin are similar in many ways: each is a digital currency traded via online exchanges and stored in various types of cryptocurrency wallets. However, there are many significant differences. Bitcoin is designed to provide an alternative to physical or fiat currency; Ethereum is intended for complex smart contracts and decentralized applications, which are believed to be part of the emerging (and theoretical) infrastructure of the future of the internet known as Web3.

Key Takeaways

• Bitcoin signaled the emergence of a radically new form of digital money that operates outside the control of any government or corporation.
• With time, people began to realize that one of the underlying innovations behind Bitcoin—the blockchain—could be used for other purposes. 
• Ethereum uses blockchain technology to maintain a decentralized payment network and seeks to become the foundation for Web 3, the infrastructure being built to decentralize the Internet.

Bitcoin

Bitcoin was launched in January 2009. It introduced a novel idea set out in a white paper by the mysterious Satoshi Nakamoto. It introduced Bitcoin as an online currency without any central authority, unlike government-issued currencies. There are no physical coins, only transactions recorded on a cryptographically secured public ledger.

Although Bitcoin was not the first attempt at an online currency of this type, it was the most successful. As a result, it has become known as the predecessor to virtually all cryptocurrencies that have emerged since.

Over the years, the virtual, decentralized currency concept has gained acceptance among regulators and government bodies. Although only formally recognized as a medium of payment or store of value in a few countries, Bitcoin has managed to carve out a niche for itself and continues to co-exist with the financial system despite being regularly scrutinized and debated.

Important

At the start of the cryptocurrency boom in 2017, Bitcoin’s market value accounted for close to 87% of the total cryptocurrency market. By late August 2022, Bitcoin’s market share had declined to 39.6%, but by June 2024, it had rebounded to more than 48%. As of May 2025, it comprised over 62% of the cryptocurrency market.

Ethereum

Blockchain technology is being used to create applications that go beyond just enabling a digital currency. Launched in July 2015, Ethereum is the largest and most well-established open-ended decentralized software platform.

Ethereum enables developers to build and deploy smart contracts and decentralized applications (dApps) without downtime, fraud, control, or interference from a third party. To accomplish this, Ethereum comes complete with its own programming language that runs on a blockchain.

The potential applications of the Ethereum virtual machine are wide-ranging using its native cryptographic token, ether (ETH). In fact, Ethereum is being developed to decentralize the Web. How we interact with the Web will not likely change much, but how it operates in the background is being worked on to remove centralized entities using applications developed on Ethereum and blockchains like it.

Ether generally has four purposes: It is traded as a digital currency on exchanges, held as an investment, used to purchase goods and services, and used on the Ethereum network to pay transaction fees.

Key Differences

While both the Bitcoin and Ethereum networks are powered by the principle of distributed ledgers and cryptography, the two differ technically in many ways. For example, transactions on the Ethereum network may contain executable code, while data affixed to Bitcoin network transactions is only used to record transaction information. Other differences include block time (an ETH transaction is confirmed in seconds, compared with minutes for BTC), and their consensus mechanisms are different: Bitcoin uses proof-of-work, while Ethereum uses proof-of-stake.

Note

The Bitcoin and Ethereum blockchains and networks are different concerning their overall aims. Bitcoin was created as an alternative to national currencies and thus aspires to be a medium of exchange and a store of value. Ethereum was intended as a platform to facilitate immutable, programmatic contracts and applications via a global virtual machine and to take a position as the infrastructure behind Web 3. 

Proof of Work vs. Proof of Stake

Bitcoin uses a consensus protocol called proof of work (PoW), which includes a network-wide competition to solve a cryptographic problem before the network begins confirming and sealing transactions. In September 2022, Ethereum moved to proof of stake (PoS), a set of interconnected upgrades that made Ethereum more secure and sustainable. To address issues regarding scalability, part of the transition to proof of stake is danksharding, which will continue to be addressed through future updates.

A major criticism of proof of work is that it is highly energy-intensive because of the computational power required. Proof of stake substitutes computational power with staking (making it less energy-intensive) and replaces miners with validators, who stake their cryptocurrency holdings to activate the ability to create new blocks.

Purposes

BTC and ETH are both digital currencies, but the primary purpose of Ether is not to establish itself as an alternative monetary system but to facilitate and monetize the operation of the smart contract, dApps, and any other blockchain solution that can be thought of.

Bitcoin was created primarily as a decentralized digital currency, aiming to serve as a peer-to-peer electronic cash system that allows individuals to send and receive value without the need for a central authority. Over time, it has also become viewed as a store of value, akin to “digital gold,” acting as a hedge against inflation and a means of preserving wealth.

Ethereum, on the other hand, was developed as a versatile platform supporting not only a digital currency but also smart contracts and dApps. Overall, Bitcoin focuses on being a digital currency and store of value, while Ethereum provides a robust platform for creating and executing transactions that facilitate the movement of value.

Supply and Monetary Policy

Bitcoin has a fixed maximum supply of 21 million coins, a key feature that contributes to its narrative as “digital gold.” Its issuance rate decreases over time through pre-programmed halvings, reinforcing scarcity. Ethereum does not have a hard cap on supply; instead, its monetary policy has evolved, especially with the introduction of EIP-1559, which introduced a mechanism to burn a portion of transaction fees. This can lead to periods of deflationary pressure on ETH supply, but its issuance is more flexible and geared toward supporting network utility rather than fixed scarcity when compared to BTC.

Transaction Speed and Finality

Ethereum typically processes transactions much faster than Bitcoin. While Bitcoin blocks are added approximately every 10 minutes, Ethereum blocks are added roughly every 12 seconds (even faster after transitioning to proof-of-stake). This leads to shorter transaction confirmation times on Ethereum. Additionally, Ethereum’s network aims to reach probabilistic finality more quickly, especially with recent upgrades, meaning users can be more confident that confirmed transactions will not be reversed. Data pulled as of May 2025 showed 157 Bitcoin blocks created in a 24-hour span, while 7,140 Ethereum blocks were created in the same time. In addition, nearly three times as many transactions were processed.

Future

The Ethereum ecosystem is growing by leaps and bounds thanks to the surging popularity of its dApps in areas such as finance (decentralized finance, or DeFi apps), arts and collectibles (non-fungible tokens, or NFTs), gaming, and technology. Ethereum will also introduce danksharding sometime in the future to enhance its scalability.

Bitcoin has also experienced change, introducing the Taproot upgrade to enable smart contracts. The Bitcoin Lightning Network is another project being worked on as a second-layer protocol that takes transactions off-chain to speed up the network.

It remains anyone’s guess which cryptocurrency and blockchain will stand the test of time—perhaps they both will. But one thing is certain—both have induced much-needed discussions about financial systems worldwide.

Is It Better to Buy Ethereum or Bitcoin?

Bitcoin is primarily designed to be an alternative to traditional currencies and, hence, a medium of exchange and store of value. Ethereum is a programmable blockchain that finds application in numerous areas, including DeFi, smart contracts, and NFTs. Which is a better buy depends on your market outlook and investing preferences.

Is Ethereum Going to Outperform Bitcoin?

It’s difficult to say. Both are popular for the purpose they were designed for and with investors. How the market treats them in the future is anyone’s guess.

Can Ethereum Beat Bitcoin?

Ethereum is designed for Web3 application development and infrastructure. Its native token, ether, is also a subject of speculation by investors. Bitcoin is a payment system that is treated as an investment. It is difficult to predict what will happen to either of them.

The Bottom Line

Bitcoin and Ethereum are two blockchains with their own cryptocurrencies, bitcoin and ether. Each was created with different purposes in mind to address separate issues, but they also have many similarities.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

Reviewed by Thomas J. Catalano
Fact checked by Suzanne Kvilhaug

If you work for a company that has a 401(k) plan, congratulations. As of September 30, 2024, about 70 million Americans took part in over 715,000 company retirement plans. According to Investment Company Institute, there were about $8.9 trillion in assets invested in those 401(k) plans.

Retirement plans, and especially 401(k)s, have stayed the course and remain popular despite economic downturns and periods of high inflation, both of which can make it difficult for people to save.

But you may have questions about your retirement plan. For instance, are you missing out on extra money that could be powering your savings through the years? Keep reading to learn more about how 401(k)s work and how companies match employee contributions.

Key Takeaways

• The 401(k) plan is an employer-sponsored plan that allows working individuals to set aside a percentage of their paychecks in a retirement savings account.
• These plans can come in two different forms: the traditional 401(k) and the Roth 401(k).
• Many employers match employee contributions, some up to 6% of a salary.
• Plans allow investors to put their money into different investment vehicles with the most common being mutual funds, ETFs, and target date funds.
• Employer contributions don’t count toward your annual contribution limits, but combined employee-employer contributions are capped each year.

How a 401(k) Works

The 401(k) is a special investment account designed to help working individuals save for retirement. The 401(k) plan dates back to 1978 when Congress passed the Revenue Act. Working individuals were given an opportunity to delay paying taxes on deferred compensation, such as bonuses or stock options.

The plan didn’t gain traction until 1981. That’s when the Internal Revenue Service (IRS) came up with rules to allow taxpayers to set aside payroll deductions for their 401(k) plans. By the close of 1982, almost half of all large employers in the U.S. offered employees a 401(k) plan.

But how does the plan work? As noted above, you can elect to have a percentage of money set aside from every paycheck and placed in a designated investment account. You can choose how much of this contribution goes to your chosen investments within that account, which are usually mutual funds, ETFs, or target date funds.

In addition—and importantly—some employers match employee contributions up to a certain percentage, which means your employer contributes money to your retirement account above and beyond what you contribute.

There are two types of 401(k)s:

• Traditional 401(k)s: These accounts use pre-tax dollars for contributions. This reduces your taxable income and, therefore, your annual tax liability. You can claim the amounts you invest as a tax deduction on your annual tax return. You are, however, liable for taxes on any withdrawals you make.
• Roth 401(k)s: These accounts require contributions to be made using after-tax dollars, which means there is no immediate tax benefit. However, any withdrawals you make are tax free.

Note

As of December 2022 and thanks to the SECURE 2.0 Act, your employer can make matching contributions directly to a Roth 401(k), instead of to a separate traditional 401(k) account that was previously required, in addition to your Roth 401(k).

Eligibility

Eligibility for a 401(k) plan varies based on the employer. This also applies to matching contributions. In 2023:

• 74% of employers offered immediate participation in a 401(k)
• 59% of employers offered automatic enrollment
• Commonly, one year of employment was required before employer contributions began
• However, 49% of plans vested employees in employer matching contributions immediately
• 50% of plans provided matching employer contributions, while 36% provided both matching and non-matching contributions

Match Amounts

Matching programs vary by company, sector, and even economic conditions. Some companies offer really generous 401(k) matches while others don’t match their employees’ contributions at all.

But even those companies that match don’t offer an unlimited matching amount. In other words, you can’t contribute half of your salary and watch your company add the same amount to your account.

The average match by employers was 4.6% of pay, according to Vanguard’s annual report on investing behavior. The highest percentage was 6.99% of pay.

Under most circumstances, the employee has to contribute more to get the maximum company match. Depending on the quality of the 401(k) plan, that could work to the disadvantage of the employee, because they could be forced into less than high-quality investment vehicles with high management fees.

Manage Your Plan

What good is a match if you don’t have the knowledge and experience to invest the money in the best funds made available by your plans? In 2023, about 43% of 401(k) plans offered managed account investment advice to their participants, and about 10% of employees who were offered the advice put it into action. 

Types of Investments

Most 401(k) plans offer investors a variety of investment options. Some of the most common include company stock, securities (such as stocks, bonds, mutual funds, exchange-traded-funds, and other related assets), and annuities. But, typically, the most common investments available are mutual funds.

According to the Financial Industry Regulatory Authority (FINRA), most plans offer from at least three investment options to, more usually, dozens. Those offering brokerage accounts give participants a wide range of investments to choose from.

Target-Date Funds

There are some surprising changes to the way people are saving. For instance, Vanguard noted that the percentage of plans that offer target-date funds increased from 88% in 2014 to 96% in 2023.

These are mutual funds that are structured to grow asset values over a period of time. They address the needs of the investor by a particular date. As such, almost all participants had plans that offered target-date funds and 64% of contributions went to them.

Invest on Your Own

An option chosen by some participants is the self-directed plan, which allows you to manage your account on your own. It’s similar to a traditional brokerage account, which, as mentioned above, some 401(k) plans offer. Not only does the selection of investment choices increase, your ability to make your own investment decisions does, too.

Alternatively, when investing the money in your 401(k), you could get the help of an independent financial advisor.

Important

The more options available to you, the better your chances of finding a well-performing option with low fees.

Annual Limits on 401(k) Deferrals and Matching

All of this is good to know. But sometimes people overlook the fact that there are contribution limits related to a 401(k). These limits are set by the Internal Revenue Service (IRS) and are adjusted annually for inflation.

For the 2024 tax year, you can contribute a maximum of $23,500 to your 401(k). If you’re 50 or older, the IRS allows you to make an additional catch-up contribution of $7,500.

Your employer’s contributions don’t count toward this limit. However, there is a cap on the combined contributions (yours and your employer’s) that can be made to your plan. In 2024, that limit is $69,000, or $76,500 for people 50 and older when you factor in a catch-up contribution.

What Is a 401(k) Match?

A 401(k) match is a contribution by an employer to an employee’s retirement account. It’s money provided by your employer that will work to grow your savings balance through the years, alongside the contributions that you make. The employer may match all or part of each dollar you contribute, up to a set maximum.

A 401(k) match is often vested. That is, if you leave the job before a certain number of years have elapsed, you’ll lose some or all of the employer’s contribution.

What Is a Partial 401(k) Match?

A partial 401(k) match is among the most common type of contribution made by employers. With partial matches, employers match their employees’ contributions up to a certain percentage. For instance, your employer may provide a partial match of 50% of your contributions. So if you contribute $100 to your 401(k), your company will contribute $50.

What Is Dollar-for-Dollar Matching?

Companies that provide dollar-for-dollar matches contribute the same amount of money to your plan that you contribute. So if you contribute $100 per paycheck, your company would set aside the same amount of money in your account for you. But there is a limit, usually up to a certain percentage of your salary. This means if the company caps equal matches at 2%, its contributions can’t exceed 2% of your salary.

What Are Non-Matching 401(k) Contributions?

Non-matching contributions are any contributions that companies make to their employees’ plans even if employees don’t contribute themselves. They come directly from companies and not through employee payroll deductions. These are sometimes called nonelective contributions.

The Bottom Line

Don’t miss the opportunity to save for retirement if your employer offers a 401(k) plan. This is especially valuable if your employer matches your contributions.

Many employers match as much as 50 cents on the dollar, on up to 6% of your salary. Most advisors recommend contributing enough to get the maximum match.

Turning down free money put towards your retirement nest egg doesn’t make sense. So do all you can to set aside the necessary amount yearly to maximize employer matching.

If you need advice related to your retirement investing, consider speaking with an independent financial advisor.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our warranty and liability disclaimer for more info.

CMCSA, DIS, and SONY top the 10 biggest entertainment companies list

Reviewed by Andy Smith
Fact checked by Vikki Velasquez

The entertainment industry includes a broad range of companies providing telecommunications services, streaming, television, music, video games, and live concerts. These are the 10 biggest entertainment companies as measured by trailing 12-month (TTM) revenue. This list is limited to companies that are publicly traded in the U.S., either directly or through American depositary receipts (ADRs). All revenue figures are current as of the end of the first quarter of 2025, according to Companies Market Cap.

Key Takeaways

• Comcast, the Walt Disney Company, and Sony are the top three entertainment companies by TTM revenue.
• The entertainment industry includes companies that provide streaming, television, gaming, music, and telecommunication services.
• Many of the world’s largest entertainment companies trade publicly on stock exchanges.

1. Comcast (CMCSA)

• Revenue (TTM): $123.55 billion
• Net Income (TTM): $15.7 billion
• Market Capitalization: $128.92 billion
• 1-Year Trailing Total Return: -5.71%
• Exchange: Nasdaq

Comcast is a global media and technology conglomerate founded as a cable company in the 1960s. In the decades since, Comcast has grown through acquisitions such as NBCUniversal, and movie producer DreamWorks Animation. The company offers broadband, cable and network television, streaming internet, phone, and other related products, as well as television and film production through its many platforms such as Xfinity and Sky.

2. Walt Disney (DIS)

• Revenue (TTM): $94.04 billion
• Net Income (TTM): $8.91 billion
• Market Cap: $211.46 billion
• 1-Year Trailing Total Return: 16.55%
• Exchange: New York Stock Exchange (NYSE)

Most people think of Mickey Mouse when they hear the name Walt Disney, which wouldn’t be far from the truth. The company has its roots in animation, starting as Disney Brothers Cartoon Studio in 1923, with the iconic mouse introduced five years later. Disney’s entertainment division owns some of the world’s most famous names, including Pixar, Lucasfilm, Marvel Studios, ABC, Disney+, and Hulu.

3. Sony (SONY)

• Revenue (TTM): $90.14 billion
• Net Income (TTM): $1.14 billion
• Market Cap: $148.83 billion
• 1-Year Trailing Total Return: 55.41%
• Exchange: NYSE

Sony is a multinational corporation based in Tokyo. It develops, designs, manufactures, and sells electronics, including televisions, game consoles, and entertainment systems, as well as software. Sony also has a presence in film, music, and gaming production, as well as financial and professional services. According to the company, consumers use more than 900 million of its devices around the world.

4. Warner Bros Discovery (WBD)

• Revenue (TTM): $38.34 billion
• Net Income (TTM): -$49.43 billion
• Market Cap: $26.02 billion
• 1-Year Trailing Total Return: -49.43%
• Exchange: Nasdaq

Warner Bros. Discovery is a global media and entertainment company, offering brands and franchises across television, film, streaming, and gaming. The company combines WarnerMedia’s premium entertainment, sports, and news assets with Discovery’s leading non-fiction and international entertainment and sports businesses.

5. Netflix (NFLX)

• Revenue (TTM): $40.17 billion
• Net Income (TTM): $9.27 billion
• Market Cap: $524.05 billion
• 1-Year Trailing Total Return: 81.35%
• Exchange: Nasdaq

A global leader in streaming services, Netflix offers a variety of TV and movie entertainment services through a subscription-based model in 50 languages in 190 countries. The company launched the production of original movie programming, Netflix Originals, in 2015.

Important

Make sure you do your due diligence by doing research or speaking with a financial professional before you make changes to your investment portfolio.

6. Paramount Global (PARA)

• Revenue (TTM): $28.72 billion
• Net Income (TTM): -$5.49 million
• Market Cap: $8.77 billion
• 1-Year Trailing Total Return: 24.96%
• Exchange: Nasdaq

Paramount delivers premium content to audiences across platforms worldwide through streaming, U.S. networks, and global content distribution. The company’s brands, which include CBS, Showtime, and BET, reach 4.3 billion subscribers across more than 180 countries. 

7. Live Nation (LYV)

• Revenue (TTM): $22.73 billion
• Net Income (TTM): $692.9 million
• Market Cap: $34.50 billion
• 1-Year Trailing Total Return: 61.32%
• Exchange: NYSE

Live Nation Entertainment works with performing artists to bring their creativity to life on stages around the world. According to the company’s website, it is the world’s largest live entertainment producer, putting on 44,000 shows and more than 100 festivals in over 45 countries. Live Nation sells 550 million tickets per year.

8. MGM Resorts (MGM)

• Revenue (TTM): $17.13 billion
• Net Income (TTM): $674.56 million
• Market Cap: $9.19 billion
• 1-Year Trailing Total Return: -19.02%
• Exchange: NYSE

MGM Resorts is a global entertainment and gaming company. Its stock is one of the constituents of the S&P 500. The company has different properties in the U.S. and around the world, including casinos, hotels, and resorts. MGM says that its presence in Las Vegas is at the core of its financial success. Some of the major names under the company’s umbrella include the Bellagio, MGM Grand Las Vegas, and Luxor Hotel and Casino.

9. Spotify Technology (SPOT)

• Revenue (TTM): $17.48 billion
• Net Income (TTM): $1.17 billion
• Market Cap: $145.06 billion
• 1-Year Trailing Total Return: 125.37%
• Exchange: NYSE

If you’re a music lover, then you probably already know about Spotify. The company, which is legally based in Luxembourg and has its operational headquarters in Stockholm, Sweden, is an audio streaming platform that launched in 2008. Spotify’s more than 678 million users have access to 100 million tracks, close to seven million podcasts, and 350,000 audiobooks.

10. NetEase (NTES)

• Revenue (TTM): $14.67 billion
• Net Income (TTM): $4.24 billion
• Market Cap: $58.00 billion
• 1-Year Trailing Total Return: -9.28%
• Exchange: Nasdaq

As a leading internet technology company based in China, NetEase provides premium online services centered around content creation. The company, which was founded in 1997 develops and operates some of China’s most popular and longest-running mobile and PC games including Knives Out, LIFEAFTER, and the Lord of the Rings series.

How Do I Invest in the World’s Largest Entertainment Companies?

There are several ways you can invest in the world’s largest entertainment companies, such as Walt Disney, Netflix, and Live Nation. Adding these companies can diversify your portfolio and help you mitigate your risk of loss. If you’re interested in investing in them, consider purchasing stock directly in entertainment companies through a brokerage firm or online account. This includes American depositary receipts. You can also purchase shares of mutual funds or exchange-traded funds (ETFs) that have these companies in their portfolios.

What Is an American Depositary Receipt?

An American depositary receipt is a certificate that represents a number of shares of a foreign company. ADRs trade on American stock exchanges just like American public companies. They allow investors to buy and sell shares in companies in which they would otherwise have no access while allowing foreign companies to raise capital.

How Do I Invest in Foreign Companies?

There are many investment opportunities that exist beyond your borders. Investing internationally can help you diversify your portfolio and spread out the risk. But regulations can make it difficult to take advantage of these options. So how do you do it? Consider investing in mutual funds and ETFs that have international companies in their portfolios. You can also purchase American depositary receipts of foreign companies. These certificates, which represent a specific number of shares, trade on American stock exchanges just like the stock of an American company.

The Bottom Line

Comcast, The Walt Disney Company, and Sony top the list of the world’s largest entertainment companies by revenue. And it’s no surprise why, since they are all household names. Their portfolios are well-diversified. All of these companies trade on stocks exchanges in some way or another, which makes them easy to add to your portfolio. But, before you do, make sure you do your research and ensure that they fit your investment strategy and goals.

Reviewed by Anthony Battle
Fact checked by Pete Rathburn

A beach house can mean an excellent return on investment (ROI), a reliable income stream, and access to a delightful vacation spot for its buyer.

Many beach house investors purchase homes with the idea of renting them out during peak tourism times. A beach house owner in Florida might rent out their property from November through April when residents of colder states crave sunshine.

Some beach house buyers claim that their rental income for the colder half of the year covers their expenses for the entire year. That effectively lets them live in the house for free during the non-peak season.

But before you take the beach house plunge, it is essential to understand the underlying economics involved in a purchase.

Drawbacks include high borrowing costs, exorbitant insurance rates, and copious bills, plus the general headaches of property management.

Key Takeaways

• Managed right, beach house rentals may let the owner live in the house for free during non-peak beach season.
• Timing your purchase is crucial because of the high amounts of leverage often used in the real estate market.
• Expect to pay more for both the house and insurance for it (including flood insurance) than for a house that’s not on the beach.
• Many beach towns have high taxes.
• Advertising for and managing a rental house means extra bills; owners may need a pricey property manager.

How to Buy a Beach House

Watch Your Leverage

Market timing is a crucial consideration when buying any piece of real estate. Most mortgages require down payments of 20% or less, so investors often use a substantial amount of leverage.

When you purchase something using a large amount of leverage, or borrowed money, the performance of your investment can have different impacts on your return.

For example, if the property price rises, your return would be augmented by the gain on the amount you borrowed. But if the price drops, your loss would also be amplified for the same reason.

Evaluate Market Conditions

There is no actual need to own a beach house, so prices for them tend to correlate with the economy more than other types of homes. So take note: if the economy has been strong for the last few years and real estate prices are rising, then the market could be overdue for a correction.

Similarly, lower prices and a depressed economy indicate that it is a good time to buy. The Case-Shiller Indices provide investors with a way to determine the overall state of the real estate market.

Buying a beach house involves the same considerations as purchasing a primary residence. However, first-time rental property owners may need to be extra careful.

Always inspect the house, preferably with the assistance of professionals, and talk with the owners. Look into the property deed, determine the level of crime in the neighborhood, and consider the area’s history of hurricanes and floods.

Important

Investors can lose substantial amounts of money by getting a mortgage on a beach house at the wrong time.

Real Estate Costs and Borrowing Costs

Beach house properties are substantially pricier than similar homes located inland.

In Sarasota, a popular beach town in Florida, the median house price as of May 31, 2025, was $427,873, according to the online real estate marketplace, Zillow. Depending on the specific neighborhood, prices can hover around $1 million.

Moreover, mortgage interest rates for vacation properties are also usually higher than those for primary homes. That can make a huge difference to an investor’s bottom line.

For example, the principal and interest payment on a 30-year, $800,000 mortgage, with an interest rate of 6%, comes to $4,796 per month.

The same mortgage at a 7% interest rate costs $5,322 per month in principal and interest. The $526 per month difference could prove burdensome (as could your monthly obligation at either interest rate).

How Much Is Beachfront Insurance?

The homeowner’s insurance on a beach house is likely to be several times more expensive than the coverage for a primary home. This cost difference is mainly due to often mandatory flood insurance.

Insurance charges spiked early in the 21st century, particularly on the East Coast, which had suffered widespread hurricane damage.

A yearly premium of $2,000 or more for private flood insurance is increasingly common for Florida beach homes in high-risk areas.

Other East Coast states, such as North Carolina, command more reasonably priced premiums. While insurance costs in California are typically lower than East Coast rates, the savings are generally offset by higher real estate prices.

Other Beach House Bills

Owning a beach house involves costs above and beyond the mortgage, utility, and cable. For one thing, the tax bill is likely to be hefty, given the high value of many beach houses.

Furthermore, if the beach house is an income property, homeowners typically must pay for marketing and advertising. Shelling out money to hire people to show off the property is only one part of these expenses.

Unlucky beach house owners might also have to foot the legal costs associated with litigating tenant disputes.

Property Management

Property management is a full time job that many beach house owners don’t want. Lease agreements and collecting rent checks are just the tip of the iceberg.

When something breaks, such as an HVAC unit or a refrigerator, the beach house owner is wholly responsible for the repairs.

Landscaping, painting, roof maintenance, and pest control represent just a few other tasks that fall under a beach house owner’s purview.

Air conditioning is considered an essential service in many parts of the country, and states impose specific requirements on landlords. That means beach house owners must fix the air conditioning in a reasonable time frame.

If they do not, renters may have the right to exit a lease or arrange repairs themselves and subtract the costs from the rent.

Most beach house owners don’t have the bandwidth to juggle these responsibilities without turning into full-time real estate investors.

Therefore, many employ a full-time property manager. The manager handles daily tasks, markets the beach house during tourist season, executes lease agreements, and evicts non-paying tenants.

A good property manager is expensive (and probably well worth the cost). Depending on the extent of services, most property managers charge 8% to 12% of the collected rent, which can quickly eat into an investor’s profit margins.

Why Is Beachfront Land So Expensive?

Despite the growing risks from global climate change and rising sea levels, the value of beachfront properties keeps increasing. The reason? Federal subsidies that cover measures to mitigate property damage from flooding and storms, along with tax incentives for high-end property owners, keep driving prices higher, according to an economic model developed by North Carolina researchers at Duke University and published in Nature Communications.

Which Florida Beach Towns Offer Investors the Best Value?

According to Realtor.com, Miami, Florida was a popular but high-priced option for investors in 2024. Jacksonville and Tampa also attracted investors with their much more affordable investment opportunities.

Will My House’s High-Season Rent Income Cover My Living Costs During the Off-Season?

It can. It’s a popular strategy that owners of properties in popular seaside towns along the coasts of the U.S. put into practice. But it’s important to determine all expenses and calculate all costs before investing in an oceanfront home.

The Bottom Line

Buying a beach house can be a smart investment if you know what you are getting into and have the funds to pay for all of the accompanying costs, from insurance and property management to marketing and advertising.

If you are thinking of investing in beach real estate, get to know the areas where you want to buy. Study the market so you can try to avoid buying when prices are high.

Thoroughly understanding the pros and cons of buying a beach house can help you make a smart investment decision.

Fact checked by Suzanne Kvilhaug
Reviewed by David Kindness

Marketing is everything a company does to acquire customers and maintain a profitable relationship with them.

While it is not an exact science, its practitioners are getting better at segmenting prospects and creating marketing campaigns that are more effective at helping them reach their goals. 

Perhaps the most pressing questions that companies have about their marketing campaigns entail the return on investment (ROI) they’re getting for the money they spend.

In this article, we’ll look at ROI and a few ways to calculate it.

Key Takeaways

• Companies measure ROI to determine if a marketing campaign was cost-effective.
• A high ROI indicates that a marketing campaign was effective.
• The simplest way to measure ROI is by dividing the net increase in sales by the marketing cost.
• A more accurate (but complicated) method also accounts for the organic sales growth that occurred before a marketing campaign began.
• Other measurement methods account for the generation of new sales leads, brand awareness, or other key metrics.

What Is ROI?

Return on investment is a financial metric that’s used to evaluate the profitability of a project that’s underway. It helps those involved determine whether or not the investment in the project was worth making.

Broadly speaking, it’s fairly easy to calculate. Take the current value of the investment/project and from that subtract what it cost to launch and maintain it. Then divide by the cost and multiply by 100 to get the ROI percentage.

It can also be useful to businesses to estimate an ROI before they start a project. For this, they calculate an anticipatory ROI using projections for costs and returns.

Companies can use the metric, along with other factors, to compare investment opportunities before they select one to go with.

How Do You Calculate Simple ROI?

The most basic way to calculate the ROI of a marketing campaign is to integrate it into the overall business line calculation.

You take the sales growth from that business or product line, subtract the marketing costs, and then divide it by the marketing cost. Then multiply that result by 100 to get a percentage.

(Sales Growth – Marketing Cost) / Marketing Cost x 100 = ROI

So, if sales grew by $1,000 and the marketing campaign cost $100, then the simple ROI is 900%.

($1000 – $100) / $100 x 100 = 900%.

Calculating Campaign Attributable ROI

The simple ROI is easy to calculate, but it is loaded with a pretty big assumption. It assumes that the total month-over-month sales growth is directly attributable to the marketing campaign.

For the marketing ROI to have any real meaning, it is vital to have comparisons. Monthly comparisons—particularly the sales of the business line in the months prior to the campaign launching—can help show the impact more clearly.

Using a 12-month campaign lead up, you can calculate the existing sales trend. If sales are seeing an organic growth on average of 4% per month over the last 12-month period, then your ROI calculation for the marketing campaign should strip out 4% from the sales growth.

As a result, it becomes:

(Sales Growth – Average Organic Sales Growth – Marketing Cost) / Marketing Cost x 100 = ROI

So, let’s say we have a company that averages 4% organic sales growth and they run a $10,000 campaign for a month. The sales growth for that month is $15,000. As mentioned, 4% of that, or $600, is organic based on historical monthly averages. Thus, the calculation is:

($15,000 – $600 – $10,000) / $10,000 x 100 = 44%

In this example, taking out organic growth dropped the ROI from 50% to 44%, but that is still stellar by any measure.

In real life, however, most campaigns bring much more modest returns, so taking out organic growth can make a big difference.

Slowing Loss Is a Win, Too

On the flip side, companies with negative sales growth need to see the slowing of the trend as a success.

For example, if sales dropped $1,000 a month on average for the previous 12-month period and a $500 marketing campaign results in a sales drop of only $200 for the first month, then your calculation centers on the $800 ($1,000 – $200) you avoided losing despite the established trend.

So even though sales dropped, your campaign has an ROI of 60% calculated from ($800 – $500) / $500 x 100, That’s a great return in the first month of a campaign. It shows that the campaign reduced the average amount of lost sales. That’s a move toward profitability.

What Are the Challenges With Marketing ROI?

Once you have a fairly accurate calculation, the remaining challenge is the time period. Marketing is a long-term, multiple-touch process that leads to sales growth over time.

The month-over-month change we were using for simplicity’s sake is more likely to be spread over several months or even a year.

The ROI of the initial months in the series may be flat or low as the campaign starts to penetrate the target market. As time goes by, sales growth should follow and the cumulative ROI of the campaign will start to look better.

Another challenge is that many marketing campaigns are designed to do more than just generate sales.

Marketing agencies know that clients are results-oriented, so they get around weak ROI figures by adding in more of the soft metrics that may or may not drive sales.

These can include:

• Brand awareness via media mentions
• Social media likes
• The content output rate for the campaign
• Website traffic
• Backlinks

Brand awareness is worth considering, but not if the campaign itself is failing to drive sales growth over time.

These other benefits shouldn’t be the core of a campaign (unless it’s specifically designed for them) because they can’t be measured accurately in dollars and cents.

Important

Sales growth is not the only way to measure the effectiveness of a marketing campaign. Marketing campaigns can also seek, for example, to increase customer loyalty, audience engagement, or brand recognition.

Measuring ROI in Other Ways

We’ve been focusing on sales growth, whereas many campaigns are aimed at increasing sales leads that the sales staff then is responsible for converting to actual sales.

In this case, you need to estimate the dollar value of the leads by multiplying the growth in leads by your historical conversion rate (the percent of leads that actually buy).

There are also hybrid campaigns where the marketer brings leads through a qualifying filter to get a non-sales conversion; for example, something like a person signing up for monthly real estate analysis reports by giving the marketer an email to pass onto the mortgage broker client.

The ROI for a campaign like this still has to be measured by how many of those email leads you actually convert into paid sales for goods or services over time.

Why Does ROI Matter?

It matters because it’s a way to determine how profitable a marketing campaign is, whether it was worth paying for, and whether the money would have been better spent elsewhere. It’s a metric that can play an important role in a company’s strategic decision-making.

What Is Considered a Good ROI in Marketing?

Every business is different, so the bar varies from product to product and from market to market. In marketing terms, an ROI of 5:1 is considered a strong return on investment—in other words, the net increase in sales or other business should be about five times greater than the cost of the marketing campaign. An ROI of 10:1 would be considered exceptional, but an ROI of 2:1 would be insufficient for many industries, due to the additional costs of making and selling the product.

What Are Other Key Performance Indicators (KPIs) in Marketing?

Beyond measuring the increase in sales growth due to a marketing campaign, other KPIs, such as sales leads, social media engagement, click-through rates, and search engine rankings, may be used to evaluate how well a marketing plan is meeting a company’s objectives.

The Bottom Line

To be clear, marketing is an essential part of most businesses and can pay many times over what it costs. However, you need to measure its results. Marketing firms will sometimes try to distract you with softer metrics, but ROI is the one that often matters for most businesses.

The ROI of any marketing campaign ultimately comes from increased sales. So run your calculation using sales growth minus the average organic growth on a regular basis throughout any campaign because results can take time to build.

That said, if the ROI isn’t there after a few months, it might just be the wrong campaign for your target market.

Different ways to invest in real estate

Reviewed by Lea D. Uradu
Fact checked by Vikki Velasquez

When you think about real estate investing, the first thing that probably comes to mind is your home. Of course, real estate investors have lots of other options when it comes to choosing investments, and they don’t all require direct ownership.

Real estate has become a popular investment vehicle. Here’s a look at some of the leading options for individual investors, along with the reasons to invest.

Key Takeaways

• Real estate is considered to be its own asset class and one that should be at least a part of a well-diversified portfolio.
• One of the key ways investors can make money in real estate is to become a landlord of a rental property.
• Flippers try to buy undervalued real estate, fix it up, and sell it for a profit.
• Real estate investment trusts (REITs) provide indirect real estate exposure without the need to own, operate, or finance properties.

Historical Prices

Real estate has long been considered a sound investment, and for good reason. Before 2007, historical housing data made it seem like prices could continue to climb indefinitely. With few exceptions, the average sale price of homes in the U.S. increased each year between 1963 and 2007—the start of the Great Recession.

Home prices did take a small hit at the onset of the COVID-19 pandemic in the Spring of 2020. However, as vaccines were rolled out and pandemic concerns waned, home prices accelerated to reach all-time highs by 2022.

This chart from the Federal Reserve Bank of St. Louis shows average sales prices between Q1 1963 and Q1 2024. The areas that are shaded in light gray indicate U.S. recessions.

Note

The most significant downturn in the real estate market before the COVID-19 pandemic coincided with the Great Recession. Since the pandemic began, home prices have accelerated sharply.

Rental Properties

If you invest in rental properties, you become a landlord—so you need to consider if you’ll be comfortable in that role. As the landlord, you’ll be responsible for things like paying the mortgage, property taxes, and insurance, maintaining the property, finding tenants, and dealing with any problems.

Unless you hire a property manager to handle the details, being a landlord is a hands-on investment. Depending on your situation, taking care of the property and the tenants can be a 24/7 job—and one that’s not always pleasant. If you choose your properties and tenants carefully, however, you can lower the risk of having major problems.

One way landlords make money is by collecting rent. How much rent you can charge depends on where the rental is located. Still, it can be difficult to determine the best rent because if you charge too much you’ll chase tenants away, and if you charge too little, you’ll leave money on the table.

A common strategy is to charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit.

The other primary way that landlords make money is through appreciation. If your property appreciates in value, you may be able to sell it at a profit (when the time comes) or borrow against the equity to make your next investment. While real estate does tend to appreciate, there are no guarantees.

Read about Investopedia’s 10 Rules of Investing by picking up a copy of our special issue print edition.

Flipping Houses

Like the day traders who are leagues away from buy-and-hold investors, real estate flippers are an entirely different breed from buy-and-rent landlords. Flippers buy properties with the intention of holding them for a short period—often no more than three to four months—and quickly selling them for a profit.

There are two primary approaches to flipping a property:

1. Repair and update. With this approach, you buy a property that you think will increase in value with certain repairs and updates. Ideally, you complete the work as quickly as possible and then sell at a price that exceeds your total investment (including the renovations).
2. Hold and resell. This type of flipping works differently. Instead of buying a property and fixing it up, you buy in a rapidly rising market, hold for a few months, and then sell at a profit.

With either type of flipping, you run the risk that you won’t be able to unload the property at a price that will turn a profit. This can present a challenge because flippers don’t generally keep enough ready cash to pay mortgages on properties for the long term. Still, flipping can be a lucrative way to invest in real estate if it’s done the right way.

REITs

A real estate investment trust (REIT) is created when a corporation (or trust) is formed to use investors’ money to purchase, operate, and sell income-producing properties. REITs are bought and sold on major exchanges, just like stocks and exchange-traded funds (ETFs).

To qualify as a REIT, the entity must pay out 90% of its taxable profits in the form of dividends to shareholders. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits, thus eating into the returns it could distribute to its shareholders.

Much like regular dividend-paying stocks, REITs are appropriate for investors who want regular income, though they offer the opportunity for appreciation, too.

REITs invest in a variety of properties such as malls (about a quarter of all REITs specialize in these), healthcare facilities, mortgages, and office buildings. In comparison to other types of real estate investments, REITs have the benefit of being highly liquid.

Real Estate Investment Groups

Real estate investment groups (REIGs) are sort of like small mutual funds for rental properties. If you want to own a rental property but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you.

A company will buy or build a set of buildings, often apartments, then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space.

However, the company that operates the investment group manages all the units and takes care of maintenance, advertising, and finding tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups. In the standard version, the lease is in the investor’s name, and all of the units pool a portion of the rent to guard against occasional vacancies. This means you will receive enough to pay the mortgage even if your unit is empty.

The quality of an investment group depends entirely on the company that offers it. In theory, it is a safe way to get into real estate investment, but groups may charge the kind of high fees that haunt the mutual fund industry. As with all investments, research is key.

Real Estate Limited Partnerships

A real estate limited partnership (RELP) is similar to a real estate investment group. It is an entity formed to buy and hold a portfolio of properties, or sometimes just one property. However, RELPs exist for a finite number of years.

An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners.

The partners may receive periodic distributions from income generated by the RELP’s properties, but the real payoff comes when the properties are sold—with luck, at a sizable profit—and the RELP dissolves down the road.

Real Estate Mutual Funds

Real estate mutual funds invest primarily in REITs and real estate operating companies. They provide the ability to gain diversified exposure to real estate with a relatively small amount of capital. Depending on their strategy and diversification goals, they provide investors with much broader asset selection than can be achieved through buying individual REITs.  

Like REITs, these funds are pretty liquid. Another significant advantage to retail investors is the analytical and research information provided by the fund. This can include details on acquired assets and management’s perspective on the viability and performance of specific real estate investments and as an asset class.

More speculative investors can invest in a family of real estate mutual funds, tactically overweighting certain property types or regions to maximize return.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau (CFPB) or with the U.S. Department of Housing and Urban Development (HUD).

Why Invest in Real Estate?

Real estate can enhance the risk-and-return profile of an investor’s portfolio, offering competitive risk-adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.

Real estate is also attractive when compared with more traditional sources of income return. This asset class typically trades at a yield premium to U.S. Treasuries and is especially attractive in an environment where Treasury rates are low.

Diversification and Protection

Another benefit of investing in real estate is its diversification potential. Real estate has a low or even negative correlation with other major asset classes. That means when stocks are down, real estate is often up.

This means the addition of real estate to a portfolio can lower its volatility and provide a higher return per unit of risk. The more direct the real estate investment, the better the hedge: Less direct, publicly traded vehicles, such as REITs, are going to reflect the overall stock market’s performance.

Because it is backed by brick and mortar, direct real estate also carries less principal-agent conflict, or the extent to which the interest of the investor is dependent on the integrity and competence of managers and debtors. Even the more indirect forms of investment carry some protection. REITs, for example, mandate that a minimum percentage of profits (90%) be paid out as dividends.

Inflation Hedging

The inflation-hedging capability of real estate stems from the positive relationship between gross domestic product (GDP) growth and demand for real estate. As economies expand, the demand for real estate drives rents higher, and this, in turn, translates into higher capital values.

Therefore, real estate tends to maintain the purchasing power of capital by passing some of the inflationary pressure onto tenants and by incorporating some of the inflationary pressure in the form of capital appreciation.

The Power of Leverage

With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. Leverage means using debt to finance a larger purchase than you have the available cash for.

If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order—unless you are buying on margin. And even then, the percentage you can borrow is still much less than with real estate, thanks to that magical financing method, the mortgage.

Most conventional mortgages require a 20% down payment. However, depending on where the property you invest in is located, you might find a mortgage that requires as little as 5%.

This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, the size of your mortgage affects the amount of ownership you actually have in the property, but you control it the minute the papers are signed.

This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage or wait for an opportunity to sell for a profit, they control these assets despite having only paid for a small part of the total value.

How Can I Add Real Estate to My Portfolio?

Aside from buying properties directly, ordinary investors can purchase REITs or funds that invest in REITs. REITs are pooled investments that own and/or manage properties or which own their mortgages.

Why Is Real Estate Considered to Be an Inflation Hedge?

Home prices tend to rise along with inflation. This is because homebuilders’ costs rise with inflation, which must be passed on to buyers of new homes. Existing home prices also rise with inflation. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments effectively become more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.

Why Are Home Prices Impacted by Interest Rates?

Because real estate is such a large and costly asset, loans must often be taken out to finance their purchase. Because of this, interest rate hikes make mortgage payments more costly for new loans (or on existing adjustable-rate loans like ARMs). This can discourage buyers, who must factor in the cost to carry the property month-to-month.

The Bottom Line

Real estate can be a sound investment and one that has the potential to provide a steady income and build wealth. Still, one drawback of investing in real estate is illiquidity: the relative difficulty in converting an asset into cash and cash into an asset.

Unlike a stock or bond transaction, which can be completed in seconds, a real estate transaction can take months to close. Even with the help of a broker, simply finding the right counterparty can be a few weeks of work.

Of course, REITs and real estate mutual funds offer better liquidity and market pricing. However, they come at the price of higher volatility and lower diversification benefits, as they have a much higher correlation to the overall stock market than direct real estate investments.

As with any investment, keep your expectations realistic, and be sure to do your homework and research before making any decisions.

Fact checked by Vikki Velasquez

Jersey City makes an excellent home base for retirees hoping to trade their 9-to-5s for frequent flyer miles. 

Located in Hudson County, New Jersey, Jersey City boasts robust public transportation and easy access to major NYC travel hubs. Plus, Newark Liberty International Airport, home to over 1,000 daily flights, is just 10 miles from Jersey City, putting the world practically into a retiree’s backyard. 

New Jersey’s lack of state tax on Social Security benefits or military pensions and significantly cheaper housing prices than Manhattan give retirees big city access without the big city price tag. The stunning skyline views give Jersey City an added appeal, whether retirees enjoy them from their windows at home or during their ascent to a spontaneous getaway. 

Key Takeaways

• Newark Liberty International Airport, located just 10 miles from Jersey City, serves over 30 airlines and offers nonstop flights to more than 180 domestic and international destinations.
• Jersey City offers easy access to Amtrak, PATH trains, ferries, and buses.
• Retirees enjoy walkable neighborhoods and a robust downtown with waterfront parks, international dining, museums, galleries, and shops. 
• Residents in Hudson County are just a short commute away from the perks of big-city living, but with 13% lower housing costs than in New York County.

Travel Accessibility

Retirees in Jersey City have near-unmatched travel access with ferries, buses, trains, and planes, giving them quick access to the hustle and bustle of New York City or the tranquility of the Amalfi Coast.

Downtown Jersey City is only 10 miles from Newark Liberty International Airport (EWR), one of the country’s most well-connected airports, handling nearly 50 million passengers in 2024. Newark is one of United’s main hubs; United flights account for about 70% of Newark’s daily traffic. However, more than 30 other airlines also service Newark, including major international and domestic airlines like Delta, Lufthansa, American, and Emirates. 

Tip

Jet-setting is a breeze for retirees since Newark offers nonstop flights to over 180 destinations across the U.S., Europe, South America, Asia, and beyond. Whether snowbirding in Florida or sightseeing in Spain, Newark is well-connected to where retirees want to be.

Jersey City residents can hop the PATH train directly from Journal Square in Jersey City and be in Newark Penn Station in minutes for just $3. Once there, retirees can jump on Amtrak and NJ Transit rails for trips to major cities like Boston, Philadelphia, and Washington, D.C. 

Locally, the PATH train gives Jersey City retirees access to some of NYC’s biggest attractions and subway network with stops at the World Trade Center and 33rd Street. Thanks to the NYC Subway system and access to major hubs like Grand Central Terminal and Penn Station, retirees can reach JFK via the AirTrain and reach LaGuardia with a quick subway-to-bus transfer for even more flight options.

Water lovers can enjoy a quick, scenic ride across the Hudson River via the NY Waterway ferry system, which is especially appealing on lovely weather days. Jersey City also sits within 10 miles of ports for popular cruise lines like Royal Caribbean, Princess, Norwegian, and Carnival, with destinations from the Caribbean to Canada and Europe.

Cost of Living and Affordability

Jersey City gives retirees access to a vibrant and dynamic urban lifestyle and connectivity to domestic and international travel at a much lower price than New York City. However, the cost of living is still quite a bit higher than the national average in two of the biggest expenses for retirees: housing and health care.

The median Hudson County home price is $500,600, which may seem like a steal compared to New York County, New York’s $1,108,900. But home prices in both locations exceed the U.S. median of $416,900.

Health care costs in New Jersey are among the nation’s highest. However, while Jersey City residents may pay more, they have many care options. Hudson County has 10 hospitals and 1,182 health care establishments. 

Note

Retirees in Jersey City also have easy access to thousands more health care facilities in New York, including world-renowned hospitals like New York Presbyterian and Mount Sinai. 

Jersey City has an extensive public transportation network with buses, ferries, and trains, making car-free living an affordable option for retirees who call Jersey City, New Jersey home. Hudson County residents spend just $960 a month on transportation costs. By comparison, residents of Union County, New Jersey, only an hour away, spend almost 30% more per month on transportation. 

Lifestyle Considerations for Retirees

Travel perks aside, Jersey City offers retirees an active lifestyle right at home. This melting pot has a surprising amount of green space and plenty of walkable neighborhoods. Retirees drawn to the river can walk or bike along the waterfront to stunning NYC skyline views.

Retirees in Jersey City can find hundreds of restaurants, galleries, and shops downtown, and Jersey City hosts many festivals and rotating art exhibits. Retirees hoping to hit the links can tee off at Liberty National Golf Club, where the skyline views are as impressive as a perfect drive on hole 3.

With so many options in Jersey City, retirees will never get bored. If they do, the proximity to New York City or a world full of travel destinations is a short train, ferry, or bus ride away. 

Other Things To Consider

Retirees considering Jersey City as their retirement destination may also want to note other key considerations, such as climate, traffic, population, and taxes.

Climate

New Jersey has a humid subtropical climate with cold winters and hot summers. While not all retirees will enjoy the winters very much, many will love the crisp fall foliage and mild spring days. Jersey City’s proximity to Newark means that retirees needing a break from the weather can easily transport themselves to get their fill of sunshine or to take a break from the heat.

Traffic and Population Growth

Jersey City’s proximity to New York makes it an excellent destination for commuters hoping for a slower pace and more affordable home prices. 

The number of commuters and non-commuters in this growing metro area means traffic and congestion may impact daily life. However, Jersey City’s pedestrian-friendly layout and affordable public transit options reduce the need for a car to stay mobile and let retirees bypass much of the commuter impact. 

Note

The population of Jersey City is projected to grow by 1.1% each year by 2050, compared to less than 0.4% in the rest of New Jersey.

Taxes

New Jersey does not tax Social Security income or military retirement pay. The state has a progressive taxation scale ranging from 1.4% to 10.75%. These favorable taxation policies benefit many retirees and can help stretch fixed income to allow for more travel.

However, retirees should also consider that New Jersey consistently ranks among the highest in the country for property taxes, with the Hudson County average running $899 monthly. 

The Bottom Line

For retirees desiring globe-trotting years, Jersey City is a fantastic launchpad. Retirees considering making Hudson County home may want to consider visiting and getting a feel for the community before committing. While the housing and health care costs are higher than national averages, the favorable tax policies on retirement income and urban amenities can balance out for retirees prioritizing passport stamps. 

From its quick commute to Newark Liberty International Airport, multiple public transportation options, and easy connections to New York’s major transit hubs, Jersey City is a frequent traveler’s dream.

Reviewed by Robert C. Kelly
Fact checked by Pete Rathburn

Free markets are often conceptualized as having little to no interference from the government. However, in reality governments step in to stabilize markets, regulate transactions, provide institutional frameworks, and enforce rules around contract law and property rights. Governments can also intervene when markets fail in the form of bailouts and other emergency measures.

In this article, we will look at how the government affects markets and influences business in ways that often have unexpected consequences.

Key Takeaways

• Governments have the capacity to enact monetary and fiscal policy, including raising or lowering interest rates, which has a huge impact on business.
• They can boost currency, which temporarily lifts corporate profits and share prices, but ultimately lowers values and spikes interest rates.
• Governments can intervene when companies or entire segments of the economy are failing or threatening to undermine the whole economic system by providing bailouts.
• Governments can create subsidies by taxing the public and giving revenue to an industry, or it can impose tariffs by adding taxes to foreign products to lift prices and make domestic products more appealing.
• Higher taxes, fees, and regulations can stymie businesses or entire industries.

Currency and Inflation

Governments are the only entities that can legally issue currency. When they do so, they typically want to see inflation, which provides a short-term economic boost as companies charge more for their products. It also reduces the value of the government bonds issued in the inflated currency.

In the long-run, inflation can lead to an erosion of value across the board. Savings lose their worth, punishing savers and bond buyers. For debtors, this is good news because they now have to pay less value to retire their debts.

Important

Governments have a substantial and far-reaching influence on markets due to their ability to regulate everything from monetary policy and the currency to the rules and regulations that impact each industry. 

Interest Rates

Interest rates are another tool that government can use to influence the market. When raised, interest rates can counteract inflation. When lowered, they can spur the economy by making borrowing cheaper. Dropping interest rates via the Federal Reserve encourages companies and individuals to borrow and buy more.

Bailouts

As seen in the Great Recession, the U.S. government is able to bail out industries that have come into crisis. The savings and loan crisis of 1989 was similar to the bank bailout of 2008.

Prior to that, the government had a history of saving non-financial companies like Chrysler (1980), Penn Central Railroad (1970) , and Lockheed (1971). Unlike the direct investment under the Troubled Asset Relief Program (TARP), these bailouts came in the form of loan guarantees.

Subsidies and Tariffs

The government is also able to influence markets through subsidies and tariffs. In the case of a subsidy, the government taxes the general public and gives revenue to a chosen industry to make it more profitable. In the case of a tariff, the government applies taxes to foreign products to make them more expensive, allowing the domestic suppliers to charge more for their products. Both of these actions have a direct impact on the market.

Government support of an industry is a powerful incentive for banks and other financial institutions to give those industries favorable terms. This preferential treatment from the government and financing means more capital and resources will be spent in that sector, even if the only comparative advantage it has is government support. This may cause an indirect resource drain for other industries, which might have to work harder to gain access to capital.

Regulations and Corporate Tax

While subsidies and tariffs can give an industry a comparative advantage, regulations and taxes can negatively impact profits.

Lee Iacocca was the CEO of Chrysler during its original bailout. In his book, “Iacocca: An Autobiography,” he points to the higher costs of ever-increasing safety regulations as one of the main reasons Chrysler needed the bailout. This trend can be seen in other industries. As regulations increase, some smaller providers get squeezed out by the economies of scale the larger companies enjoy. The result can be a highly regulated industry with a few large companies.

High taxes on corporate profits have a different effect in that they may discourage companies from entering certain markets in the first place. For instance, states with low taxes can lure companies from their neighbors, and countries that tax less tend to attract mobile corporations.

Which Country Has the Most Free Market?

According to the Heritage Foundation’s Index of Economic Freedom, Singapore ranks first in terms of having markets free from government intervention. This is followed by Switzerland, Ireland, New Zealand, and Taiwan. The United States comes in at a middling 26th place.

What Is the Role of Government in Markets According to Libertarianism?

Libertarianism is a political and economic ideology that advocates for free markets, low taxes, and limited government. Following the writings of Adam Smith, strict libertarians see the government as responsible for just a few primary functions:

• To protect and enforce private property rights;
• To maintain a domestic police force to keep citizens safe;
• To maintain a standing army to protect the nation’s borders and interests; and
• To build public works (e.g., schools and parks) that would benefit society but the free market wouldn’t be incentivized to otherwise build.

Why Do Governments Need to Impose Certain Regulations?

Free markets only work efficiently if there is full information, or what economists call “perfect information,” among all participants, including buyers and sellers, producers and consumers. However, in reality, some sellers may be fraudsters and companies may cut corners to produce shoddy products. This is known as an information asymmetry. While the market may eventually identify and sanction such bad actors, in the meantime consumers may be significantly harmed, both economically and otherwise. Therefore, regulations are put in place to rectify the information asymmetry and protect consumers.

The Bottom Line

Governments play a substantial role in the financial world. They can issue currency, change interest rates, and issue bailouts, In addition, governments impose regulations, subsidies, and taxes. All of these measures can have immediate and long-lasting impacts on companies, industries, and markets at large.

How affirmative action programs operate in the workplace

Reviewed by Margaret James

What Is Affirmative Action?

Affirmative action refers to policies and programs that are designed to actively promote equal opportunity in the workplace—and, in the past, educational settings—for all people, regardless of their race, gender, national origin, sexual orientation, and other factors. Affirmative action policies originated in the 1960s after it became clear that anti-discrimination laws alone weren’t enough to counter past discrimination against historically disadvantaged groups.

Businesses implement affirmative action programs to ensure that people from groups who’ve historically faced discrimination—or who’ve been underrepresented in certain industries—have equal opportunity in their workplaces. Businesses that contract with the federal government are required to have affirmative action programs.

Key Takeaways

• Affirmative action is a policy to promote equal opportunity in the workplace (and, in the past, educational settings, too).
• Affirmative action policies are intended to level the playing field for groups that have been historically discriminated against or underrepresented in the workplace and institutional settings because of race, gender, sexual orientation, disability, and/or other factors.
• Businesses that contract with the federal government are required to have affirmative action programs, while other employers can implement them voluntarily.
• Colleges and universities may no longer factor race into admissions after the Supreme Court ruled to end affirmative action in June 2023; affirmative action has faced many challenges in the court system in the past, and this decision will have far-reaching effects in the realm of higher education, specifically.

History of Affirmative Action

The first mention of “affirmative action” was in 1961, in President John F. Kennedy’s Executive Order 10925, which required government contractors to “take affirmative action to ensure that applicants are employed, and that employees are [fairly] treated during employment, without regard to their race, creed, color, or national origin.”

Four years later, President Lyndon Johnson signed the Civil Rights Act of 1964, which aimed to end discrimination in various spheres of American life. Title VII of the Act specifically addresses equal employment opportunity. Johnson then followed this with Executive Order 11246, requiring government employers to take “affirmative action” to “hire without regard to race, religion and national origin,” and put Cabinet-level authority, under the secretary of labor, behind implementing its affirmative action and non-discrimination provisions.

The landmark order has been amended over the years. Gender was added to the definition in 1967, people with disabilities in subsequent years, and in 2014, sexual orientation and gender identity were included.

In June 2023, the Supreme Court issued a landmark ruling, banning race-based admissions policies at colleges and universities. While this decision has no direct bearing on affirmative action policies designed to address past discrimination in the workplace, it may have the unintended consequence of altering some business’s policies. Companies that voluntarily implement hiring policies to address diversity in the workplace

Important

Companies that don’t do business with the government are not required to implement affirmative action programs, although some do so voluntarily.

What Businesses Are Impacted by Affirmative Action?

Executive Order 11246, according to the Department of Labor (DOL) website, requires that federal contractors and federally assisted construction contractors who conduct at least $10,000 in government business in a one-year period take affirmative action to ensure that equal opportunity is provided in all aspects of their employment.

One-fifth of the U.S. workforce is employed by companies that do business with the federal government, so the order has a broad reach. It also applies to subcontractors that supply components to companies with federal contracts, such as manufacturers of engine parts for makers of vehicles purchased by the Department of Defense. Financial institutions with deposit accounts for federal funds—or that sell or cash U.S. savings bonds—must also maintain an affirmative action plan.

Private companies can also voluntarily adopt affirmative action plans to increase the diversity of their workforces. They just have to make sure their plans comply with Title VII. The Supreme Court has developed a three-part test for them:

1.  The plan must show there has been past discrimination. Companies don’t have to admit they discriminated in the past, but some factual basis for the plan must exist. For example, statistical data can make the case that there’s a “conspicuous imbalance” in a traditionally segregated job sector that needs to be corrected.

2.  The plan must not “unnecessarily trammel” the rights of incumbent workers. For instance, a company can’t lay off a group of White men and replace them all with Black and women workers.

3. The plan must be temporary. It should last only as long as it takes to correct past discrimination.

How Do Businesses Implement Affirmative Action Plans?

The premise of affirmative action programs is that, in the absence of discrimination, the employee profile breakdown at a company would accurately reflect the broader labor pools available to it. A written affirmative action plan (AAP) is a management tool that employs various means to analyze and achieve this. A typical AAP for a business, as outlined by the Code of Federal Regulations, would include:

• Analysis: A profile of the company that identifies the gender and race/ethnicity of each employee, in the context of an organization chart with job roles and how they relate to one another.
• Availability: Calculations of target minorities working at the company in contrast to the population (labor pool) with the right skills for the available positions.
• Comparison: Incumbent employees to available candidates as a basis for making tangible recruitment and promotion goals.
• Responsibility: Specific managers who will track these goals.
• Problem areas: List problem areas. For instance, underrepresentation of Black, Latino/Latina, or women workers in specific departments or job categories, a lack of promotions for these groups to managerial roles, etc.
• Corrective actions: Tangible, action-oriented steps. These often include aggressive educational and outreach efforts aimed at recruiting more employees from underrepresented populations—but also equal treatment during recruitment interviews, and across compensation, training, advancement, and all other components of the workplace experience.
• Internal auditing and reporting systems: Track progress and measure the effectiveness of the actions the company has taken toward achieving a more diverse workforce.

How Is Affirmative Action Enforced?

Affirmative action plans that are required of federal contractors and subcontractors are enforced by the Office of Federal Contract Compliance Programs (OFCCP) under the DOL umbrella.

OFCCP conducts compliance reviews to study the employment practices of government-contracted businesses. A compliance officer may scrutinize a contractor’s affirmative action program by looking at personnel rosters, payroll figures, and other records, in addition to interviewing staffers and management executives. If problems are discovered, OFCCP will recommend corrective action and suggest ways to achieve the desired equal employment opportunity.

Advantages and Disadvantages of Affirmative Action

Discrimination and disparities in opportunity persist as a problem in the American workforce. Over the years there has been controversy over whether affirmative action is the right approach to fixing this. Claims of “reverse discrimination” have been litigated up to the Supreme Court many times.

Then, in June 2023, two court cases reached the Supreme Court; the outcome of these cases resulted in the end of a legal ruling that had been in place since 1978, allowing colleges and universities to factor race into admissions decisions. The cases—Students for Fair Admissions Inc. v. University of North Carolina and Students for Fair Admissions Inc. v. President & Fellows of Harvard College—reversed 45 years of legal precedent. The court ruled in favor of White women who claimed they were denied higher education admission because of their race, an example of “reverse discrimination.”

In light of these decisions, affirmative action policies—and their impact—have been scrutinized to an even greater extent than in the past: Do guidelines that require covered employers to meet certain timetables for hiring and promoting minorities and women pressure them to make hiring decisions based on numbers? Are there negative psychological ramifications of affirmative action policies, stigmatizing women and minority employees as “affirmative action” hires?

Supporters of affirmative action argue that it is essential to correct past discrimination, and there’s work still to be done. The business case for affirmative action has grown over the years, too: From a profitability standpoint, studies show that diversity in the workplace is good for a company’s bottom line—especially when it comes to increasing the number of women and racial and ethnic minorities in leadership roles and board positions.

The groupthink mentality of old-boy networks doesn’t necessarily bring about the freshest ideas to solve difficult business challenges. Case in point: A 2019 study shows that when you reach a critical mass of 30% or more women on a board of directors, behaviors begin to change, governance improves, and discussions become richer. And though sometimes it takes outside forces for higher-ups to shed their “hire-like-me” habits, when they observe the positive consequence, they tend to embrace change willingly.

Finally, although the availability of government contracts varies by administration and federal budgetary outlooks, such accounts are potentially lucrative opportunities for the businesses that win them. As a result, businesses that comply with equal opportunity law may be setting the stage for their own company’s success.

What Does the Affirmative Action Decision Mean for Employers?

Employers are not directly impacted by the Supreme Court’s decision blocking affirmative action in education admissions. The U.S. Supreme Court’s decision in June 2023 banned the consideration of race only in the context of the college admissions process. In an employment context, affirmative action refers to policies that prevent employers from making employment decisions based on protected characteristics, such as race, gender, religion, and sexual orientation. These policies are not impacted by the Supreme Court ban.

Do Companies Have to Follow Affirmative Action?

Only businesses that contract with the federal government are required to have affirmative action programs. Other companies can implement them voluntarily. Employers must be aware of these laws and similar rules aimed at equal opportunity and fairness.

What Types of Employers Have to Comply With Affirmative Action?

Federal contractors and subcontractors are required to develop an affirmative action plan to ensure equal opportunity is provided in all aspects of their employment. As part of their affirmative action plan, employers are required to take steps to recruit and advance qualified minorities, women, individuals with disabilities, and protected veterans. These plans may include training programs and targeted outreach efforts.

The Bottom Line

Though affirmative action continues to be a source of controversy for some, such programs are a reality for all government contracted businesses. What’s more, many other employers choose to implement affirmative action programs as a helpful way to foster transparency in hiring and promotions and diversity in the workplace.