Women still earn less than men for comparable work in 2025 America

Reviewed by Erika Rasure

The gender wage gap is the disparity in incomes between men and women for doing the same work. Also known as the gender pay gap, it has narrowed since the 1960s but remains significant. Closing the gap has become an important focus for governments, nonprofit organizations, and businesses. This article focuses on the gender wage gap in the U.S., its long history as a political issue, and where it stands today.

Key Takeaways

• The gender wage gap refers to pay disparities between men and women doing the same work. There is also a racial wage gap.
• Congress didn’t take major action to address the gender wage gap until the passage of the Equal Pay Act in 1963, although the “Equal Pay for Equal Work” movement dates back to the 1860s.
• The gender wage gap has generally narrowed over the years, but in 2023, women earned less than 83 cents for every dollar that men earned, a 1.5% drop from the 84 cents they earned vs. men in 2022.

Early History of the Wage Gap

Though the gender wage gap probably dates to the beginnings of civilization, it emerged as a political issue in the U.S. in the 1860s under the rallying cry of “Equal Pay for Equal Work.”

Among the movement’s most vigorous advocates were women’s rights activists Susan B. Anthony and Elizabeth Cady Stanton, who made a case for bridging the wage gap in their newspaper, The Revolution, and other works.

Women eventually won the right to vote in the U.S. with the ratification of the 19th Amendment to the Constitution in 1920. Nevertheless, the wage gap persisted.

The 1940s: A Failed Attempt to Bridge the Gap

Winifred Claire Stanley, a Republican member of Congress from New York, introduced a bill in 1944 titled “Prohibiting Discrimination in Pay on Account of Sex.” It would have amended the list of unfair labor practices in the National Labor Relations Act of 1935 to include discriminating “against any employee, in the rate of compensation paid, on account of sex.” Stanley’s bill never made it through Congress.

Note

Other wage gaps exist in the pay disparities between White workers and Black and Latino/Latina workers, along with the pay of workers in the U.S. and those in other countries.

The 1960s: Major Strides for Equal Pay and Civil Rights

The next major attempt to address the inequity on a national level came two decades later, with the passage of the Equal Pay Act in 1963. It prohibited employers from paying male and female workers different wages for “jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” However, it also allowed for several exceptions, including pay structures based on seniority or merit.

In signing the bill into law, then-President John F. Kennedy said that paying men and women different wages for the same work was an “unconscionable practice” and cited a statistic that “the average woman worker earns only 60% of the average wage for men.”

A year later, in 1964, Title VII of the Civil Rights Act also addressed the wage gap, broadening the law to make compensation decisions based on race, color, religion, sex, or national origin unlawful. As with the Equal Pay Act, there were multiple exceptions, again including seniority- and merit-based wage programs.

The 1970s and 1980s: A Call for Comparable Worth

In the 1970s and 1980s, the concept of comparable worth (or pay equity) entered the national conversation. Its proponents called attention to wage gaps among workers in jobs that, while not identical, could be considered similar in terms of skills, responsibility, and value to the overall enterprise. Often, they argued, those gaps were a legacy of past discrimination.

“Many women and people of color are still segregated into a small number of jobs such as clerical, service workers, nurses, and teachers,” the advocacy group National Committee on Pay Equity explains. “These jobs have historically been undervalued and continue to be underpaid to a large extent because of the gender and race of the people who hold them.”

Eleanor Holmes Norton, chair of the Equal Employment Opportunity Commission (EEOC) during the Carter administration, singled out comparable worth as “the issue of the 1980s.” But the Reagan administration, which followed, disagreed. Then-President Ronald Reagan reportedly called it “Mickey Mouse, a cockamamie idea…[that] would destroy the basis of free enterprise.” Pay equity and comparable worth made little progress on the federal level but did become law in several states.

The 2000s: Win Some, Lose Some

There were no major changes in the laws around payment by gender in the 1990s. Although the gender wage gap continued to shrink, it did not close.

A 2007 U.S. Supreme Court case, Ledbetter v. Goodyear Tire and Rubber Co., led to the next major federal law. Lilly Ledbetter sued her employer under the Civil Rights Act, alleging that it underpaid her for 19 years. A jury awarded her more than $3.5 million, but the company appealed, arguing that she failed to file her suit within 180 days of when the discrimination first occurred, as prescribed by law. An appeals court reversed the original decision, and the Supreme Court also ruled against Ledbetter in a 5 to 4 vote.

Dissenting justice Ruth Bader Ginsburg suggested it was now a matter for Congress to take up, which the legislative branch soon did. The Lilly Ledbetter Fair Pay Act, which passed in 2009, expanded the period for filing a discrimination claim, making it easier for other women to sue employers they believed discriminated against them. It was the first piece of legislation signed into law by then-President Barack Obama just nine days after his inauguration.

The Paycheck Fairness Act was another major legislative proposal addressing the wage gap, first introduced in 2009. Among other things, it called for greater enforcement of antidiscrimination laws and increased penalties for violators. The Paycheck Fairness Act initially passed the U.S. House but failed in the U.S. Senate. It has been reintroduced several times since then, including in 2021 when it again passed the House.

Important

Financial inequality among the genders is reflected in numerous ways aside from the wage gap. For example, when a company sells products aimed at women for more than comparable products for men, it is informally called a pink tax. And the “tampon tax” is an actual sales tax that many states impose on feminine hygiene products.

The Mid- to Late 2000s and 2020s

Despite progress on the legislative front over the past 100 years, the wage gap has been slow to narrow. According to the U.S. Census Bureau, women working full-time in 1960 earned about 60 cents for every dollar earned by men—the number cited by President Kennedy in signing the Equal Pay Act.

Though the numbers gradually inched up over the next 30 years, they didn’t reach 70 cents until 1990. Women earned less than 83 cents for every dollar earned by men in 2023, the most recent year for which data are available. This represents a drop of a 1.5% from the 84 cents women earned vs. men in 2022. This is shown in the graphs below from the U.S. Census Bureau.

The top graph shows how the female-to-male earnings ratio is at 82.7%. The bottom graph illustrates the annual earnings of male and female full-time workers. Women earn about $11,500 less on average than their male counterparts.

Full-time earnings for women have increased at a faster rate since 2000. Full-time female workers earned a median income of $45,800 per year in 2000 compared to $55,240 in 2023. Meanwhile, full-time male workers earned a median income of $62,1200 in 2000, rising to $66,790 in 2023.

More Women Working Full-Time

Considerably more women now work full-time. The table below shows a 26.7% increase in full-time female workers since 2000, more than 10 percentage points higher than the increase for men.

Moving from part-time to full-time work also means that more women may now be eligible for employee benefits, such as health insurance coverage and retirement plans.

Equal Pay Day

Equal Pay Day was established in 1996 by the National Committee on Pay Equity. It was created to highlight the differences in pay between men and women and, more important, how “far into the year women must work to earn what men earned in the previous year.”

On Equal Pay Day 2023, which fell on March 14, 2023, the Biden Administration announced steps to close the gender wage gap and to provide women with access to better jobs. The announcement was made after the president signed an executive order to close the wage gap. The order included:

• Providing access to better-paying construction jobs
• Supporting efforts for equal pay in different states through pay transparency legislation
• Boosting pay equity among federal contractors

In signing the order, President Biden also encouraged private companies to follow suit.

Equal Pay Day 2024 occurred on March 12, 2024, and the National Committee on Pay Equity has set March 25 for Equal Pay Day 2025, denoting slippage in the gender gap.

The Gender Wage Gap by Race

The gender wage gap also varies significantly by race. According to 2023 data from the U.S. Department of Labor, Hispanic women earned just 57.8 cents for every dollar earned by White non-Hispanic men, while Black women earned 66.5 cents, White non-Hispanic women earned 79.6 cents, and Asian women earned 94.2 cents.

134

The number of years it will take, based on current data, for the global gender wage gap to close.

The Gender Wage Gap by Age

In recent years, young women between the ages of 25 and 34 who are in the early years of their working lives have managed to narrow the gap with men, according to the Pew Research Center. Since 2007 their earnings have been about 90 cents or even more to the dollar compared to men of the same age.

But the wage gap subsequently widens as those women age. For example, women who were age 25 to 34 in 2010 were making 92% of what a man the same age made. Yet, in 2022, when they were 37 to 46 years old, they were making only 84% of men the same age. And as women continue to age, the gap keeps widening—a pattern that the Pew Research Center notes “has not changed in at least four decades.”

Why Do Women Get Paid Less Than Men?

Although a multitude of reasons contribute to why women are often paid less than men, some of the main contributors include discrimination, differences in the fields that women often work in, education levels, and differences in years of experience.

Which Occupations Have the Highest Gender Wage Gap?

Jobs in which the gender wage gap is higher than others include finance managers, retail sales, education and childcare administrators, and administrative assistants.

Which Industries Have the Smallest Gender Wage Gap?

Industries in which women earn comparable salaries to their male counterparts include tutors, personal care and service workers, interior designers, and dietitians and nutritionists.

The Bottom Line

Income inequality on the basis of gender has lessened over time, but significant progress has stalled over the past two decades. Women are still often underpaid in comparison to men, and there are more levels of inequality within the wage gap when it comes to race and type of occupation. Closing it remains unfinished business in making the United States a more equitable nation.

Fact checked by Suzanne Kvilhaug
Reviewed by Chip Stapleton

About Bond Yields

Low bond yields and interest rates are often credited with supporting higher prices in the stock market.

That’s because lower bond yields can make the potentially higher yields offered by stocks more attractive to investors.

In addition, lower bond yields imply lower interest rates, which reduce the borrowing costs of companies.

Lower costs to borrow can contribute to better corporate profitability. In such instances, investors may move money into the stock market, pushing stock prices higher.

Correspondingly, lower bond yields can indicate a better economic environment and greater prospects for business growth. So investors often move their money into stocks because a need for relatively risk-free (lower yielding) Treasuries no longer exists.

Until the U.S. Federal Reserve starting raising interest rates to fight high inflation in 2022, bond yields had been consistently low since 2009. And they’d been dropping since the 1980s

Key Takeaways

• Until 2022 when the Fed started raising interest rates to fight inflation, bond yields had hovered in a consistently low range since 2009, which contributed to the stock market’s rise.
• Low bond yields cause investors to look to stocks for higher yields.
• During economic slowdowns, bond yields drop as investors buy bonds for safety reasons.
• During economic expansions, stock prices usually outperform bond prices.
• Investors naturally demand higher yields from organizations that are more likely to default on their bonds.

Low Bond Yields Mean Higher Stock Prices

Interest rates are the most significant factor in determining bond yields, and they play an influential role in the stock market.

Generally, when rates are low and growth can proceed unhindered, the stock market appears more attractive to investors and demand drives up prices.

When bond yields remain low, investors look to stocks for better returns, especially when they feel confident about the economy and corporate profits.

Low bond yields often take hold during an economic slowdown because of the flight to quality by investors. It’s at such times that investors seek to preserve principal and reduce the risk of loss in their portfolios by buying bonds.

Central banks are committed to low interest rates to stimulate the economy during recessions. This lasts until the economy begins to grow without the aid of monetary policy or capacity utilization reaches maximum levels where inflation becomes a threat.

Important

Economic growth also carries with it inflation risk, which erodes the value of bonds.

Inflation and Low Yields

Bond yields move according to expectations for inflation, economic growth, default probabilities, and duration.

A bond pays a fixed amount based on its coupon rate. That payment/amount never changes (unless the issuer defaults).

A decrease in the inflation rate raises the real yield of the bond. The real yield is the nominal yield, or coupon rate, less the rate of inflation.

For instance if a nominal yield is 7% and the inflation rate is 3%, the real yield is 4% (7% – 3%). As inflation drops the real yield increases. So lower inflation can make bonds more attractive to investors, and that could draw money from stock investments.

As the demand for bonds increases, bond prices rise and yields decrease. That results in lower nominal yields, which could then make stocks more attractive.

Inflation fell persistently (with some intermittent increases) between 1980 and 2020. Lower expectations for growth and inflation meant that bond yields remained constantly low (and prices high).

But an economic expansion beginning in 2021 started pushing inflation rates higher. The Fed intervened in 2022 to raise interest rates to reduce the rate of inflation. This raised bond yields.

Bear in mind that when interest rates/yields rise, bond prices drop. When they fall, prices rise.

Growth and the Stock Market

During periods of economic expansion, bond prices and the stock market can move in opposite directions because they are competing for capital.

On the one hand, selling stocks and buying bonds leads to higher bond prices and lower yields.

On the other, stock market rallies tend to raise yields as money moves from the relative safety of the bond market to riskier stocks with potentially higher returns.

When optimism about the economy increases, investors tend to transfer funds into the stock market because it may offer investors greater financial benefit from economic growth.

Note

During most of the first 20 years of the 21st century, bond and stock prices moved in opposite directions. Bonds provided investors a hedge should stock prices drop. But when the Fed began raising interest rates in 2022 to counter inflation, bond and stock prices moved in the same direction, eliminating that hedge.

Default Risk and Bond Yields

The probability of default also has an impact on bond yields. When a government or corporation cannot afford to make bond payments, it defaults on the bonds. Investors naturally demand higher yields from organizations that are more likely to default.

Federal government bonds are generally considered to be free of default risk in a fiat money system. When corporate bond default risk increases, many investors move out of corporate bonds and into the safety of government bonds. That means corporate bond prices fall, so corporate bond yields rise.

High-yield (junk) bonds have the highest default risk, and default expectations have more influence on their prices.

During the 2008 financial crisis, default expectations for many companies rose significantly. As a result, corporate bonds temporarily offered higher yields.

What Do High Bond Yields Mean for the Stock Market?

They make bonds more attractive to some investors, who may pull money from the stock market to invest in bonds. Or investors may put as yet uninvested funds into bonds. The consequence is lower demand for stocks and lower share prices.

How Does Rising Inflation Affect Bond Yields?

Rising inflation can reduce the purchasing power of the income that bonds provide. During periods of rising inflation, the real yield (coupon yield minus inflation rate) for investors decreases. In addition, if the central bank intervenes to raise rates to fight inflation, bond prices can fall as bond yields rise. This can reduce a bond investor’s total return (which is partially based on how much they sell their bond for compared to the purchase price).

Should I Invest in Both Stocks and Bonds?

Broadly speaking, yes. How much money you allocate to each may depend on your age, financial needs, and investment goals. But diversifying your portfolio with different types of investments is an important way to reduce your overall risk of loss.

The Bottom Line

For investors, low bond yields can make the stock market a better investment due to perceived higher returns.

Constantly low bond yields can cause investors to move money out of bonds and into stocks. This increased demand for stocks pushes share prices up.

Reviewed by Ebony Howard

Co-Ops vs. Condos: An Overview

Condos and co-ops share similarities but also have unique characteristics that offer a variety of options for residents. In many ways, the New York City real estate market is unlike any other in the United States. One of the biggest differences is that apartments for sale in NYC are either condos or co-ops.

When you buy a condominium, your apartment, as well as a percentage of the common areas, belongs to you. When you buy a co-op, you don’t actually buy your apartment; instead, you are buying shares in a corporation that is your building. The size of your share depends on the size of your apartment; buying the shares allows you to occupy a unit in the co-op building. At the closing for a condo, you’ll be given a deed; at the closing for a co-op, you’ll get a proprietary lease.

For the most part, both condos and co-ops have a doorman and a superintendent on staff; some will add a concierge who will do everything the other two don’t. The amenities can be low-key (maybe just a storage room in the basement) or all-encompassing, such as a landscaped terrace, a billiards room, a piano room, a screening room, a children’s playroom, and a gym.

Key Takeaways

• When you buy a condominium, your apartment, as well as a percentage of the common areas, belongs to you.
• When you buy a co-op, you don’t actually buy your apartment; instead, you are buying shares in a corporation that is your building.
• Condo prices are higher than co-ops, but co-ops require a larger down payment, higher monthly fees, and a lengthy approval process.
• Condos generally allow subletting of the apartment, while only some co-ops allow subletting, and the rules are complex.

Condos

The newer neighborhoods, once considered outliers but now considered hip, are where you’ll find the condos. According to Gary Malin, president of Citi Habitats, a New York real estate brokerage, “If living in a glass house in the sky is more your style, you will likely be looking at a lot of condos. Condo buildings didn’t become common in New York City until the 1970s, so they are often more modern than co-ops.”

“Since available land for new condo buildings is limited in Manhattan,” Malin says, “the newest condominiums are likely to be found in up-and-coming and fringe neighborhoods on the far East and West Sides. In Queens and Brooklyn, we have seen a lot of new-construction condos being built in former industrial areas along the waterfront in Long Island City and Williamsburg, as well as in Downtown Brooklyn.”

Down Payment and Price

The cost can often drive the decision process for purchasing real estate, and condos offer attractive down payments, whereby, usually, only 10% of the purchase price is required. However, condos tend to have higher prices than co-ops.

Closing Costs

Closing costs on a condo are higher than for a co-op. For details, we asked New York real estate attorney Adam Stone to compare the two. Here’s what he came up with. For a $1 million condo with an $800,000 mortgage, closing costs would be:

• Title insurance for the purchaser, $4,500
• Title insurance for the lender, $1,000
• Title searches, $700
• Recording fees, $700
• New York State mansion tax, $10,000
• New York State mortgage recording tax, $15,370
• Grand total: $32,270 (without lender’s fees, which vary by lender)

For anyone wondering what the mansion tax is, Stone explains: “New York State has a transfer tax of 0.4% of the sales price, which is charged to the seller of any residential property. It also has a 1% purchaser’s transfer tax, also referred to as the ‘mansion tax’ because it only applies to residential properties priced at $1 million or more.” 

Monthly Charges

Condo owners have a monthly bill called “common charges,” which are used for the upkeep of the building—common areas, landscaping, payment of the staff, and often some of the utilities. These are separate from mortgage payments.

Condo owners make two common-charge payments each month (one for building upkeep and one for property taxes), but often the condo owner’s combined total is lower than the co-op owner’s maintenance bill.

The Board

Condo boards tend to be less demanding than co-op boards. Co-ops have a more lengthy approval process, including an interview. The board of directors decides if a prospective buyer can purchase the co-op.

“With a condo, a building can request a package on the buyer,” said Warner M. Lewis of The Harkov Lewis Team at Brown Harris Stevens. “But there is no interview, and the building only has the right of first refusal (i.e., either they have to approve it, or the condo has to buy it themselves), which means when you have a signed contract—unless something happens to the buyer (or the financing)—the deal is as good as done.”

Rules

Condos tend to have fewer rules, including restrictions on the use of foreign funds for the purchase. Condos allow international investors to buy and rent out their spaces; usually with some caveats, but none that are onerous. Condos also allow the apartment to be sublet or leased out to another party relatively easily, compared to the subletting process for co-ops. However, some condo associations may impose more rules than others. As a result, it’s important that prospective buyers do their research to determine what is and what isn’t allowed.

The Buyer’s Preference

According to Gary Malin, president of Citi Habitats, “If you would rather march to the beat of your own drummer—and you value flexibility—then a condo may be the wise choice for you. However, understand that this freedom comes at a price. Condos are nearly always more expensive than equivalent co-ops. In addition, if seeing new faces in the elevator on a regular basis is an issue for you—look elsewhere. Renters can be common in condo buildings. Owners do often take advantage of a condo’s more liberal policies.”

Co-Ops

Generally speaking, the older, established residential areas have a preponderance of co-ops. As Gary Malin explains: “If you like historic properties, you are likely to end up in a co-op, as nearly all prewar buildings are organized in this way. Also, because co-op buildings tend to be older than condo developments, they are often located in more central locations. For example, nearly all the residential buildings that line Park Avenue on the Upper East Side (a prime location by any measure) are co-ops.”

Note

In many places, condos are the rule, but in Manhattan, co-ops outnumber condos by about a 2-to-1 margin, according to independent appraisal firm Miller Samuel Inc.

Down Payment and Price

As with a condo, the decision might come down to how much you can spend and have saved for a down payment. Although it’s possible to put down just 10% of the purchase price of a condo, a co-op may require a much higher down payment—in the neighborhood of 20% to 50% of the purchase price. The good news is that the purchase price of a co-op tends to be smaller than condos. Of course, prices vary depending on the neighborhood involved.

Closing Costs

According to New York real estate attorney Adam Stone, a co-op has lower closing costs. In the example cited above for a condo, which had over $32,000 in costs, a co-op just has the $10,000 mansion tax. The substantial difference is due to the fact that the condo is real property, while the co-op shares are personal property.

“It may just be semantics to some, but not when calculating closing costs,” Stone adds.

Monthly Charges

Once a month, co-op owners pay “maintenance” charges. Similar to a condo common charge, this monthly fee goes to the basic upkeep of the property and the salaries of the staff needed to keep the building running properly. Co-op fees tend to be higher than condo fees since the fee often includes at least part of the mortgage for the building. Monthly fees can vary depending on the size of the building.

However, it’s important to note that maintenance and common charges are not set in stone. Any major expense—a new roof, a new lobby, more staff members—may trigger an assessment, which is something that board members decide on, and something that can rarely be reversed.

The Board

As stated earlier, most co-op boards have a rigorous and often lengthy application process that can require the buyer to hand over financial information, submit to employment verification, and possibly undergo a personal background check.

Warner M. Lewis of The Harkov Lewis Team at Brown Harris Stevens sums it up: “In a co-op, not only do you have to have the money to buy the apartment (or financing to do so), you also have to be approved by the board after submitting an application, which is usually very detailed and time-consuming. Then, with little to no reason, a buyer can be rejected after their interview, or even before, just because of something in their package. I have had deals and seen deals where there is zero rhyme or reason for rejections.” 

Rules

Co-op boards tend to have more rules than condos and may mandate when you can practice your trombone, whether you can put holiday decorations on your door, and whether your pet can move in with you. Most rules are meant to promote harmony, calm, and the civility of cooperative living.

But the rules that discourage some domestic buyers, and just about all international buyers, are co-op restrictions on subletting. Policies vary by building, but generally, when co-ops allow shareholders to sublet their apartments, it is on a limited basis, such as for one or two years out of every five. Owners typically must have resided in the property for a certain period of time before subletting—in some cases as many as three years. Owners typically pay a fee to be allowed to sublet, and potentially subletters must fill out an application and may be subject to a background check. Board approval is a must.

Another rule of co-ops that makes purchases by international individuals impossible is that they are unlikely to accept anyone whose funds are outside the U.S.

The Buyer’s Preference

“Co-ops are all about establishing a stable, in-for-the-long-run group of residents. Condos don’t seem quite as concerned about that,” said Lewis

When it comes to choosing your preference, Gary Malin puts it the following way:

“Co-ops are a smart choice for those who value stability and want to plant roots in a building. Simply ask yourself, ‘Am I in it for the long haul?’ Co-ops are much less transient than condos, so they’re a great place to live if you want to get to know your neighbors. Just be prepared to be analyzed, poked, and prodded, but understand that this process is what keeps a co-op a stable and remarkably secure investment.”

What Are the Disadvantages of Buying a Co-op?

Some of the disadvantages of buying a co-op include the rigorous approval process, the higher down payment, the expensive monthly fees, and the strict rules about subletting.

What Are the Disadvantages of Buying a Condo?

Some of the disadvantages of buying a condo include the higher cost of purchase, the higher closing costs, the preponderance of new neighbors due to looser subletting rules, and the location (many condos are part of newer buildings located on the outskirts of desirable areas).

Which Is a Better Investment, a Co-op or a Condo?

It depends on what your investment goals are. A condo enables you to own an actual piece of real estate, while a co-op involves partial ownership of a corporation that is the building.

The Bottom Line

In New York City, the split between co-ops and condos is about 75/25. However, the number of condos on the market at any given time is higher than that of co-ops. Both often have a doorman and a superintendent on staff, although amenities can range from barebones to high-end.

When you buy a condo, you own your apartment and a percentage of the common area; when you buy a co-op, you buy shares in a corporation that is your building. Condos are often more expensive but have lower monthly costs. Co-ops may cost a bit less upfront but have higher monthly payments and a tougher approval process. Condos also have looser rules on subletting than co-ops. Both have their appeal; which is best depends on what the buyer needs.

Reviewed by Eric Estevez
Fact checked by Yarilet Perez

Wall Street often relies on analysts’ estimates based on corporate financial data to recommend stocks and determine target prices. The credibility of stock analysts sometimes comes into question, however. You might consider learning the ropes and acting on your own behalf if you’re the self-reliant type who enjoys doing a little research. It’s a matter of mastering the process.

Key Takeaways

• Investors can use fundamental analysis to identify potentially undervalued stocks and set price targets.
• Always do your research before making any investment even if you’re considering the advice of a professional analyst.
• Consider the industry of a stock you’re contemplating as well as the company’s business model, financial strength, and management quality.
• Stock analysis involves several steps and it can take some time but it can be worthwhile when it’s done correctly.

Getting Started in Stock Analysis

The first step in thinking like an analyst is to develop a probing mind regardless of whether you’re looking for growth or value. You must determine what to buy or sell and at what price. Analysts usually focus on one industry or sector. They focus on select companies within that sector. Analysts aim to probe the affairs of the companies on their list by analyzing their financial statements and all other available information.

Analysts also probe the affairs of a company’s suppliers, customers, and competitors to cross-check the facts. Some visit the company and interact with its management to gain a first-hand understanding of the workings of the company.

It’s always better to research several stocks in the same industry so you have a comparative analysis. Access to information isn’t usually an issue. You can take up just one or two firms at first to test how well you can analyze them. You can think of putting more stocks under your lens when you have more experience.

Review Analyst Reports

Begin your analysis by looking over analyst reports. You don’t have to blindly follow sell-or-buy recommendations that analysts make but you can read their research reports to get an overview of the company. Look at its strengths and weaknesses, main competitors, industry outlook, and future prospects.

Reviewing reports by different analysts can help you identify any common threads. The basic facts in all reports are common. Take a closer look at their earnings forecasts which ultimately determine their buy or sell recommendations. Different analysts may set different target prices for the same stock. Always look for the reasons.

What to Analyze

You have to understand the various steps involved in stock analysis to arrive at a reliable conclusion about a stock. Some analysts follow a top-down strategy, starting with an industry and then locating a winning company. Others follow a bottom-up approach, starting with a particular company and then learning about the outlook of the industry. You can create your own order but the entire process should flow smoothly.

Industry analysis

Sources of information are publicly available for almost any industry. The annual report of a company itself often gives a good overview of the industry and its future growth outlook. Annual reports also reveal the major and minor competitors in a particular industry. Simultaneously reading the annual reports of two or three companies should give a clearer picture.

Important

You can also subscribe to trade magazines and websites that cater to a particular industry to monitor the latest industry happenings.

Business model analysis

Focus on a company’s strengths and weaknesses. There may be a strong company in a weak industry and a weak company in a strong industry. Their strengths are often reflected in factors such as their unique brand identity, products, customers, and suppliers. You can learn about a company’s business model from its annual report, trade magazines, and websites.

Financial strength

Understanding the financial strength of a company is the most crucial step in analyzing a stock. You should be able to understand a company’s balance sheet, income statement, and cash flow statements. Numbers in the financial statements often speak louder than the glossy words of an annual report.

Management quality

Management quality is another critical factor. It’s often said that there are no good or bad companies, just good or bad managers. Key executives are responsible for the future of the company. You can assess company management and board quality by doing some research on the internet. There’s a plethora of information out there about every public company.

Growth analysis

Stock prices follow earnings. You have to know where future earnings are headed to know whether a stock’s price will be moving up or down. Unfortunately, no quick formula can tell you what to expect for future earnings. Analysts make their estimates based on past figures of sales growth and profit margins along with profitability trends in that particular industry.

Growth analysis involves connecting what’s happened in the past to what’s expected to happen in the future. Making accurate earnings forecasts is the ultimate test of your stock analysis capabilities because it’s a good indication of how well you understand those industries and companies.

Valuations

The next step is to determine the worth of a company. Analysts must figure out if the current market price of the stock is justified in comparison to the company’s value.

There is no “correct value” and analysts use different parameters. Value investors look at intrinsic worth. Growth investors look at earning potential. A company selling at a higher P/E ratio must grow at a higher price to justify its current price for growth investors.

Target price

The final step is to set a target price. You can calculate a high and low target price by multiplying estimated earnings per share (EPS) with the estimated high and low P/E Ratio.

The high and low target price is the price band within which the future stock price is likely to move in response to expected future earnings. You can use it to reach your destination when you know the target price.

What Do Stock Analysts Do?

Wall Street stock analysts look deeply at a company’s financial reports and announcements to conduct fundamental analysis. They come up with a presumed fair value or price target and then issue buy or hold recommendations to investors accordingly.

What Are Some Bottom-Up Tools for Stock Analysis?

Bottom-up analysis begins with a company’s financial statements such as the balance sheet and income statement. Various ratios can be computed from there to reveal a firm’s current and expected financial position. These ratios include the debt-to-equity (D/E) ratio, the quick ratio, inventory turnover, and various price multiples.

What Should I Do If a Stock Rises Above Its Target Price?

A security should be sold for a profit once it reaches or exceeds its price target if you’re confident in your original analysis. You may want to determine first if anything fundamental has changed that might raise the current price target.

The Bottom Line

The largest constraint in becoming your own stock analyst is time. Retail investors who have many other things to do may not be able to devote as much time as professional security analysts.

The ultimate goal of every investor is to make a profit but not every investor or analyst is good at it. Never blindly accept what stock analysts have to say and always do your research. Not everybody can be an investing expert but you can always improve your analytical skills.

Disclosure: This article is not intended to provide investment advice. Investing in securities entails varying degrees of risk and can result in partial or total loss of principal. The trading strategies discussed in this article are complex and should not be undertaken by novice investors. Readers who want to engage in such trading strategies should seek extensive education on the topic.

Fact checked by Suzanne Kvilhaug
Reviewed by Ebony Howard

Interest rates affect the housing market in several ways, including influencing mortgage rates, the amount consumers have to pay to borrow money to buy a property, supply and demand for properties, and the value of real estate.

Mortgage loans come in two primary forms—fixed rate and adjustable rate—with some hybrid combinations and multiple derivatives of each. A basic understanding of interest rates and the economic influences that determine the future course of interest rates can help you make financially sound mortgage decisions. Such decisions include choosing between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) or deciding whether to refinance out of an ARM. 

Key Takeaways

• Understanding interest rates is key to making financially sound mortgage decisions.
• The interest rate is the amount a borrower is charged for the privilege of being loaned money.
• Interest rates on mortgages are determined by a number of factors, including the state of the general economy and your personal circumstances.
• Mortgage lenders often peg their interest rates to the 10-year Treasury bond yield.
• Looking at the shape of the yield curve can help when trying to forecast interest rate changes on ARMs.

How Are Interest Rates Determined?

The interest rate is the amount charged on top of the principal by a lender to a borrower for the use of assets. The interest rate charged by banks is determined by a number of factors, such as the state of the economy. A country’s central bank sets the interest rate, which each bank uses to determine the range of annual percentage rates (APRs) they offer.

Central banks tend to raise interest rates when inflation is high because higher interest rates increase the cost of debt, which discourages borrowing and slows consumer demand.

The Mortgage Production Line

The mortgage industry has three primary parts or businesses: the mortgage originator, the aggregator, and the investor. 

The Mortgage Originator

The mortgage originator is the lender. Lenders come in several forms, like credit unions and banks. Mortgage originators introduce, market, and sell loans to consumers and compete with each other based on the interest rates, fees, and service levels that they offer. The interest rates and fees they charge determine their profit margins.

Most mortgage originators do not “portfolio” loans (meaning that they do not retain the loan asset). Instead, they often sell the mortgage into the secondary mortgage market. The interest rates that they charge consumers are determined by their profit margins and the price at which they can sell the mortgage into the secondary mortgage market.

The Aggregator

The aggregator buys newly originated mortgages from other institutions. They are part of the secondary mortgage market and most of them are also mortgage originators. Aggregators pool many similar mortgages together to form mortgage-backed securities (MBS)—a process known as securitization.

An MBS is a bond backed by an underlying pool of mortgages. MBSs are sold to investors. The price at which they can be sold to investors determines the price that aggregators will pay for newly originated mortgages from other lenders and the interest rates that they offer to consumers for their own mortgage originations. 

The Investor

There are many investors in MBSs, including pension funds, mutual funds, banks, hedge funds, foreign governments, insurance companies, and government-sponsored enterprises, Freddie Mac and Fannie Mae.

As investors try to maximize returns, they frequently run relative value analyses between MBSs and other fixed-income investments such as corporate bonds. As with all financial securities, investor demand for MBSs determines the price they will pay for these securities.

Investors’ Impact on Mortgage Rates

To a large degree, MBSs investors determine mortgage rates offered to consumers. As explained above, the mortgage production line ends in the form of an MBS purchased by an investor.

The free market determines the market clearing prices investors will pay for MBSs. These prices wind their way back through the mortgage industry to determine the interest rates you’ll be offered when you buy your house.

Fixed Interest Rate Mortgages

The interest rate on a fixed-rate mortgage is fixed for the life of the mortgage; however, on average, 30-year fixed-rate mortgages have a shorter lifespan, due to customers moving or refinancing their mortgages.

The rule of thumb used to be that homeowners stayed in their homes an average of seven years; however, that figure has been rising. The median length of homeownership in 1985 was five years, in 2005 it was six years, in 2010 it inched up to eight years, in 2015 it was 11 years, and in 2021 it was 13 years.

MBS prices are highly correlated with the prices of U.S. Treasury bonds. Usually, the price of an MBS backed by 30-year mortgages will move with the price of the U.S. Treasury five-year note or the U.S. Treasury 10-year bond based on a financial principal known as duration.

In practice, a 30-year mortgage’s duration is closer to the five-year note, but the market tends to use the 10-year bond as a benchmark. This also means that the interest rate on 30-year fixed-rate mortgages offered to consumers should move up or down with the yield of the U.S. Treasury 10-year bond.

A bond’s yield is a function of its coupon rate and price. Economic expectations determine the price and yield of U.S. Treasury bonds. A bond’s worst enemy is inflation, which erodes the value of future bond payments—both coupon payments and the repayment of principal. Therefore, when inflation is high or expected to rise, bond prices fall, which means their yields rise—there is an inverse relationship between a bond’s price and its yield.

The Fed’s Role

The Federal Reserve (Fed) plays a large role in inflation expectations. This is because the bond market’s perception of how well the Fed is controlling inflation through the administration of short-term interest rates determines longer-term interest rates, such as the yield of the U.S. Treasury 10-year bond. In other words, the Fed sets current short-term interest rates, which the market interprets to determine long-term interest rates, such as the yield on the U.S. Treasury 10-year bond.

Remember, the interest rates on 30-year mortgages are highly correlated with the yield of the U.S. Treasury 10-year bond. If you’re trying to forecast what 30-year fixed-rate mortgage interest rates will do in the future, watch and understand the yield on the U.S. Treasury 10-year bond (or the five-year note) and follow what the market is saying about Fed monetary policy.

Adjustable-Rate Mortgages (ARMs)

The interest rate on an adjustable-rate mortgage (ARM) might change monthly, every six months, annually, or less often, depending on the terms of the mortgage. The interest rate consists of an index value plus a margin. This is known as the fully indexed interest rate. It is usually rounded to one-eighth of a percentage point.

The index value is variable, while the margin is fixed for the life of the mortgage. For example, if the current index value is 6.83% and the margin is 3%, rounding to the nearest eighth of a percentage point would make the fully indexed interest rate 9.83%. If the index dropped to 6.1%, the fully indexed interest rate would be 9.1%.

Warning

With an ARM, homebuyers need to be aware that the monthly cost of their mortgage payments can increase if interest rates increase, and that they should ensure that they can still afford the payments if this happens.

The interest rate on an ARM is tied to an index. There are several different mortgage indexes used for different ARMs, each of which is constructed using the interest rates on either a type of actively traded financial security, a type of bank loan, or a type of bank deposit. All of the different mortgage indexes are broadly correlated with each other. In other words, they move in the same direction, up or down, as economic conditions change.

Most mortgage indexes are considered short-term indexes. “Short-term” or “term” refers to the term of the securities, loans, or deposits used to construct the index. Typically, any security, loan, or deposit that has a term of one year or less is considered short-term. Most short-term interest rates, including those used to construct mortgage indexes, are closely correlated with an interest rate known as the federal funds rate.

Forecasting Changes

If you’re trying to forecast interest rate changes on ARMs, look at the shape of the yield curve. The yield curve represents the yields on U.S. Treasury bonds with maturities from three months to 30 years.

When the shape of the curve is flat or downward sloping, it means that the market expects the Fed to keep short-term interest rates steady or move them lower. Conversely, when the shape of the curve is upward sloping, the market expects the Fed to move short-term interest rates higher.

The steepness of the curve in either direction is an indication of how much the market expects the Fed to raise or lower short-term interest rates. The price of Fed funds futures is also an indication of market expectations for future short-term interest rates.

How Rates Impact the Housing Market

In general, when interest rates are higher or increasing, the housing market slows down. When interest rates are going up, the cost of owning a home becomes more expensive due to the higher interest rate, which reduces demand. This reduction in demand then results in a drop in home prices.

When the Fed increases rates to slow down the economy, particularly in times of inflation, the above goal is what it’s looking for; a reduction in consumer spending that results in a drop in prices.

Conversely, when interest rates drop, the cost of buying a house becomes cheaper, which increases the demand for housing. Lower interest rates go hand in hand with a bustling housing market. This increase in demand then slowly increases home prices.

Why Are Interest Rates Important to the Housing Market?

Interest rates are important to the housing market for several reasons. They determine how much consumers will have to pay to borrow money to buy a property, and they influence the value of real estate. Low-interest rates tend to increase demand for property, driving up prices, while high interest rates generally do the opposite.

Which Factors Influence How Interest Rates on Mortgages Are Set?

There are many factors that impact how much mortgages cost. Lenders will first consider the general cost of borrowing in the economy, which is based on the state of the economy and government monetary policy. Personal factors, such as credit history, income, and the type and size of the loan you are after, will then come into play to determine how much you’ll be charged to get a loan to buy a house.

Am I Better Off With a Fixed-Rate or Adjustable-Rate Mortgage (ARM)?

Generally speaking, an ARM makes more sense when interest rates are high and expected to fall. Conversely, if predictable payments are important to you and interest rates are relatively stable or climbing, a fixed-rate mortgage might be your best option.

Popular methods to potentially gauge the future direction of interest rates include studying the yield curve, keeping tabs on the 10-year Treasury bond yield, and paying close attention to Fed monetary policy.

The Bottom Line

An understanding of what influences current and future fixed and adjustable mortgage rates can help you make a smart decision on your mortgage. For example, it can inform your decision about choosing an ARM over a fixed-rate mortgage and help you decide when it makes sense to refinance out of an ARM.

Don’t believe everything you read. It’s not always “a good time to refinance out of your adjustable-rate mortgage before the interest rate rises further.” Interest rates might rise further moving forward—or they might drop. Find out what the yield curve is doing.

KEY TAKEAWAYS

• Cryptocurrency-linked stocks are slumping in premarket trading Tuesday, after bitcoin dropped below $90,000 for the first time since November as investors steered clear of risk assets, including shares.
• Among those declining are Robinhood, Coinbase Global, and Strategy, formerly known as MicroStrategy.
• The declines in bitcoin and crypto assets come as economic uncertainty weighs on investors, with small-cap shares dropping further into correction territory Monday and major indexes down for the month.

Cryptocurrency-linked stocks are slumping in premarket trading Tuesday, after bitcoin (BTCUSD) dropped below $90,000 for the first time since November as investors steered clear of risk assets, including shares.

Shares in trading app Robinhood (HOOD), cryptocurrency exchange Coinbase Global (COIN) and Marathon Digital parent company MARA Holdings (MARA) are all falling around 4% to 5%. Bitcoin mining and infrastructure company Riot Platforms Inc. (RIOT) is falling about 5%.

Business intelligence and bitcoin treasury company Strategy (MSTR), formerly known as MicroStrategy, is down around 5%. The company said Monday it had again expanded its bitcoin holdings, acquiring nearly $2 billion more of the digital currency.

Bitcoin, which has traded within a relatively narrow range in recent weeks, was around $89,000 early Tuesday, well below its record high level of around $109,000 set last month.

The declines in bitcoin and crypto assets come as economic uncertainty weighs on investors, with small-cap shares dropping further into correction territory Monday and major indexes down for the month. Major U.S. indexes finished mostly lower on Monday, following a steep downturn last week.

Fact checked by Ariel Courage
Reviewed by Robert C. Kelly

In economics, price elasticity is a measure of how reactive the marketplace is to a change in price for a given product. However, price elasticity works in two ways.

While the price elasticity of demand is a reflection of consumer behavior as a result of price change, the price elasticity of supply measures producer behavior. Each metric feeds into the other. Both are important when analyzing marketplace economics, but it is the price elasticity of demand that companies look to when establishing sales strategy.

Key Takeaways

• Price elasticity measures how the marketplace reacts to a change in price for a given product, and it works in two ways.
• Price elasticity of demand measures the change in consumption of a good as a result of a change in price.
• Price elasticity of supply measures the change in production relative to a change in price.

Price Elasticity of Demand

Price elasticity of demand measures the change in consumption of a good as a result of a change in price. It is calculated by dividing the percent change in consumption by the percent change in price.

For example, if the price of a name-brand microwave increases 20% and consumer purchases of this product subsequently drop by 25%, the microwave has a price elasticity of demand of 25% divided by 20%, or 1.25. This product would be considered highly elastic because it has a score higher than 1, meaning the demand is greatly influenced by price change.

A score between 0 and 1 is considered inelastic, since variation in price has only a small impact on demand. A product with an elasticity of 0 would be considered perfectly inelastic, because price changes have no impact on demand.

Many household items or bare necessities have very low price elasticity of demand, because people need these items regardless of price. Gasoline is an excellent example. Luxury items, such as big-screen televisions or airline tickets, generally have higher elasticity since they are not essential to day-to-day living.

Price Elasticity of Supply

Companies use price elasticity of demand to establish their optimal pricing strategy, but the relationship among supply, price, and demand can be complicated. If a product has a high elasticity of demand, can a change in production levels help the company selling the item maximize profits?

The change in production relative to a change in price is called price elasticity of supply, and it is influenced by many factors. Primary among them are the duration of the price change, the availability of substitutes from other sellers, the company’s capacity for increased production and delivery, stock availability, and complexity of production.

For example, woolen socks are not an overly complicated product to manufacture. Production requires few raw materials, and the item is lightweight and easy to ship. Therefore, if a company knows it can stimulate a 30% increase in sales by reducing the price by 20%, it is likely to increase production to reap the maximum profit.

However, a small business that sells handmade furniture may have a harder time ramping up production or dealing with increased shipping and delivery activity, so an increase in supply may not be feasible, regardless of price elasticity.

What Is Demand?

Demand is an economic concept that relates to a consumer’s desire to purchase goods and services and willingness to pay a specific price for them. An increase in the price of a good or service tends to decrease the quantity demanded. Likewise, a decrease in the price of a good or service will increase the quantity demanded.

What Is Supply?

Supply is an economic concept that describes the total amount of a specific good or service that is available to consumers. Supply can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph. 

How Are Supply and Demand Related?

The law of supply and demand combines two fundamental economic principles that describe how changes in the price of a resource, commodity, or product affect its supply and demand. Supply rises while demand declines as the price increases. Supply constricts while demand grows as the price drops.

The Bottom Line

Subscription-based products such as streaming services and gym memberships can be real-life examples of price elasticity of demand. Consumers may cancel or adjust their subscriptions if prices change or alternatives become available.

A real-life example of price elasticity of supply occurred in 2022 after Russia invaded Ukraine. Crude oil prices jumped to as high as $110 per barrel in March of that year, as Russia cut supplies in response to economic sanctions. Gas prices averaged $3.95 per gallon in the United States in 2022—an increase of more than 31% from 2021.

How the Controversial Ride-Sharing Company Came to Dominate Its Market Worldwide

It’s been a wild ride for Uber Inc. (UBER). The company says the idea for its service was cooked up by two computer engineers who found themselves unable to find a taxi on the streets of Paris. It quickly became the world’s most valuable startup, “disrupted” personal transportation and food delivery, and became an emblem of the arrival of the gig economy. By early 2025, 16 years after its launch, it had a market capitalization of $166 billion.

Along the way, there were sexual harassment scandals, numerous lawsuits, public online protests, customer data hacks and cover-ups, an initial public offering (IPO) that flopped, the ignominious departure of one of its founders as CEO, hundreds of millions of dollars in legal penalties across multiple jurisdictions, and allegations of stealing trade secrets from Alphabet Inc. (GOOGL), one of its investors.

Key Takeaways

• Uber’s early investors included Goldman Sachs Group, Inc. (GS), Jeff Bezos, BlackRock, Inc. (BLK), and Google (later Alphabet).
• The idea for Uber was so disruptive it was illegal in many cities, but the company pushed ahead with a global expansion anyway.
• The company burned through tens of billions of dollars before it reported its first profit five years after its IPO.
• By 2025, Uber’s share price had almost doubled from its 2019 IPO closing price, and the company launched a $7 billion buyback program.

The Founding of Uber

According to the company, the idea for Uber was born in 2008, when computer engineers Travis Kalanick and Garrett Camp, attending a conference in Paris, were unable to hail a taxi. Originally, Camp wanted to focus on a high-end “black-car” service for professionals, but Kalanick didn’t like the idea of owning cars and garages. He only agreed to join Camp if the new venture focused solely on a ride-hailing app.

The two founded the company as UberCab in San Francisco in 2009 and began pitching it to investors as a faster, more luxe version of taxis that could be arranged via a mobile phone app. In July 2010, the company received its first ride request in San Francisco. The city’s transit authority quickly told the company to stop offering rides and threatened the company with fines and its people with prison time. In October of the same year, the company was renamed Uber and received $1.25 million in capital investment. Two months later, Kalanick became CEO, replacing Ryan Graves.

Note

From 2016 through early 2023, Uber piled up almost $30 billion in operating losses as it tried to capture market share. Its first annual profit as a public company, totaling $1.89 billion, came in 2023.

Uber’s Aggressive Expansion Up to Its IPO

Uber expanded rapidly in its first year, moving quickly to set up shop across the globe, which drove its valuation from $60 million in 2011 to $82 billion at its IPO just eight years later. There were plenty of scandals and controversies along the way—we’ve corralled them into a timeline below:

• 2011
• Uber launches in New York, taking on the city’s iconic yellow taxis, as well as in Paris, its first international market. It also closes two fundraising rounds: a Series A that raises $11 million, followed quickly by a Series B that raised $37 million, including from Goldman Sachs and Amazon founder Jeff Bezos.
• 2012
• People are now hailing Ubers across the U.S. and in several European cities. Uber introduced UberX, the lower-cost version of its service that became the company’s most popular offering.
• 2013
• Uber now operates in 40 countries, including China, India, and Russia, and it is valued at about $3.5 billion.
• Uber drivers file a class-action lawsuit to require the company to designate them as employees instead of independent contractors. This fight would drag on for years.
• 2014
• Uber announced that it operates in 250 locations worldwide. In December, the company raised $1.2 billion from investors, including BlackRock and Google Ventures, and is valued at about $40 billion.
• Uber faces large, disruptive strikes by taxi drivers in several European cities. In Paris, drivers burn tires and overturn cars.
• In November, an Uber executive was investigated for using its “God View” tool—designed to monitor customers—on a journalist. The company agreed to pay a $20,000 fine.
• Uber is banned in Delhi, India, after an Uber driver sexually violated a passenger, raising questions about Uber’s system of background checks for drivers.

Important

In 2016, journalists at BuzzFeed News determined that Uber drivers in three major U.S. cities earned less than $13.25 an hour after expenses. A 2025 study put Uber driver pay at about $23.33 ($0.90 per mile driven) for an average weekly gross of $513—figures that don’t account for expenses.

• 2015
• Uber is now in 300 cities. Its food-delivery service, UberEats, debuted in New York, Chicago, and Los Angeles.
• Authorities raid Uber offices in Amsterdam, saying the company is operating illegally. In France, anti-Uber protests turn violent, with taxi drivers attacking suspected Uber drivers.
• 2016
• Uber sold its China operations to Didi. It began an autonomous driving pilot program in Pittsburgh and San Francisco. The San Francisco pilot was quickly shut down because Uber had not sought, let alone received, city approval.
• An Uber driver was accused of killing six people in Michigan in his time off between picking up and dropping off passengers, bringing yet more attention to Uber’s background check system.
• 2017
• The #DeleteUber hashtag went viral after the company used surge pricing in an attempt to pad profits during a New York City taxi strike that was called to protest Donald Trump’s Muslim ban. Hundreds of thousands of users reportedly canceled their accounts.
• Uber agreed to pay $20 million to drivers across the country following a Federal Trade Commission complaint that it misled prospective drivers about their earning potential.
• In a blog post, former Uber engineer Susan Fowler alleged that her complaints of sexual harassment against her manager were largely ignored. Kalanick hires former U.S. Attorney General Eric Holder to investigate.
• After the law firm Perkins Cole investigated 215 staff complaints going back five years, 20 employees were fired.
• Holder recommends that Kalanick’s responsibilities be limited. Kalanick steps down as CEO. He is replaced by Dara Khosrowshahi.
• Google sued Uber, alleging that it stole trade secrets from its autonomous driving division.
• Uber posted a net loss of $4.5 billion.
• 2018:
• In May, Uber announced it had reached 10 billion total trips, more than double the total a year earlier.
• Uber settled Google’s trade theft claim for $245 million.
• Uber sold its Southeast Asia operations to Grab, a competitor.
• 2019:
• On May 10, Uber began trading on the New York Stock Exchange. Its share price closed 7.6% lower that day, the worst first-day loss in dollar terms in U.S. history. It posted a $5.2 billion loss for the quarter.
• In the following months, Kalanick sold more than $2.5 billion in shares, completely divesting from the company. By the end of the year, Uber shares were down by about a third from the initial listing price. Investors dubbed the situation a “horror show.”

Uber Turns the Corner

Uber achieved a remarkable turnaround in the years following its IPO. After burning through tens of billions of dollars to capture market share, the company under Khosrowshahi’s leadership sharpened its focus on core operations. While ride-hailing was hit hard by the pandemic, Uber Eats kept its customer base engaged, leaving Uber well-positioned to recover once the pandemic ended. It also cast off noncore businesses such as autonomous cars.

In addition, the company expanded advertising on the app and began offering grocery delivery and other travel services. Khosrowshahi also focused on attracting drivers by improving their experience, a shift for a company that has settled multiple driver lawsuits over the years.

In February 2024, a week after revealing its first annual profit ($1.89 billion), Uber announced a $7 billion share-buyback program.

By February 2025, Uber shares were trading near an all-time high and almost double the closing price on its first day of trading in 2019. In addition, Uber’s U.S. rideshare business market share had grown from 70% in January 2023 to 76% in December 2024.

Note

A 2025 study found that gratuities make up just 10.4% of earnings for rideshare drivers, while for those who deliver meals, such as drivers for UberEats, that goes up to a majority of earnings (53.4%).

The Bottom Line

Uber has always been controversial, partly because of its willingness to flout local laws forbidding it to operate. As one senior communications executive put it in an internal email in 2014: “…sometimes we have problems because, well, we’re just (expletive) illegal.” Uber is still banned in some countries.

But Kalanick and Camp’s vision of disrupting urban mobility has been at least partly realized, and under Khosrowshahi’s leadership, the company is on solid footing and finally turning a profit.

A Beginner’s Guide to Smart Investing with Index Funds

For investors seeking a proven approach to building long-term wealth, index funds have become the cornerstone strategy for both retail and major institutional investors.

“One of the most significant headwinds to profitable investing is management fees. By taking a passive, index-based investment approach, an investor can keep fees low while diversifying the portfolio across industries, sectors, and geographies,” said David Tenerelli, a certified financial planner at Values Added in Plano, Texas. “This results in the investor being able to benefit from broad economic growth regardless of the fortunes of individual companies.”

This guide explores what you need to know about index funds, from their fundamental principles to practical implementation strategies.

Key Takeaways

• Index funds replicate the performance of a specific index, offering a passive investment strategy.
• They are lower in cost due to lower management fees and taxes than actively managed funds.
• Index funds offer broad diversification across several sectors and asset classes, reducing overall investment risk.
• Potential drawbacks include a lack of flexibility and limited upside potential during some periods.

What Is an Index Fund?

An index fund is an investment vehicle, usually a mutual or exchange-traded fund (ETF), that tracks the performance of a specific market index, such as the S&P 500 Index or the Dow Jones Industrial Average. Unlike actively managed funds, where portfolio managers make specific investment decisions to buy or sell certain assets, index funds employ a passive investment strategy to simply mirror the holdings and performance of their target index.

When you invest in an S&P 500 index fund, therefore, you’re essentially buying small portions of all 500 companies included in that index. This means your investment is diversified across hundreds of companies with each share.

Index investing emerged in the 1970s when John Bogle, founder of Vanguard, introduced the first index mutual fund for individual investors. At its launch in 1976, the Vanguard 500 Index Fund was initially met with skepticism and dubbed “Bogle’s Folly.” However, the fundamental idea behind index investing–that most active managers fail to outperform the market after accounting for fees–has proven durable.

From humble beginnings of just around $10 million in assets, U.S. index funds have grown to command more than $16 trillion as of year-end 2024, representing a fundamental shift in how both institutional and individual investors approach the market.

Types of Index Funds

Index funds track different indexes or market segments:

Broad Market Index Funds

These funds track comprehensive market indexes like the total U.S. stock market or global stock market. They provide very wide diversification and are often recommended as core portfolio holdings.

Examples include the following:

• iShares Russell 3000 ETF (IWV)
• Vanguard Total World Stock ETF (VT)
• Fidelity ZERO Total Market Index Fund (FZROX)

Large-Cap Index Funds

These funds track major indexes like the S&P 500 and offer exposure to America’s biggest corporations.

Examples include the following:

• SPDR S&P 500 Index ETF (SPY)
• Vanguard Mega Cap ETF (MGC)
• Fidelity 500 Index Fund (FXAIX)

International Index Funds

These funds track non-U.S. markets, allowing investors to gain global exposure. They might track developed markets, emerging markets, or both, offering geographical diversification.

Examples include the following:

• iShares Core MSCI EAFE ETF (IEFA)
• Vanguard FTSE Emerging Markets ETF (VWO)
• Fidelity International Index Fund (FSPSX)

In addition to broad international funds, there are also many ETFs that track single-country foreign indexes.

Sector-Specific Funds

These specialized funds track specific industry sectors, such as technology, healthcare, or real estate.

Examples include the following:

• Technology Select Sector SPDR (XLK)
• Vanguard Health Care ETF (VHT)
• Vanguard Real Estate Index Admiral Fund (VGSLX)

Important

Sector funds are typically used to complement core holdings rather than as primary positions.

Fixed Income/Bond Index Funds

Rather than tracking an equity index, fixed-income index funds and ETFs track bond market indexes.

Most broad bond market indexes, like the Bloomberg U.S. Aggregate Bond Index, focus on investment-grade securities, including a mix of government bonds, corporate bonds, and mortgage-backed securities.

Examples include the following:

• iShares Core U.S. Aggregate Bond ETF (AGG)
• Vanguard Total Bond Market ETF (BND)
• Fidelity U.S. Bond Index Fund (FXNAX)

Important

Bond index funds often have slightly higher tracking error than equity funds due to the complexity of the bond market and difficulty in perfectly replicating bond indexes.

The Advantages and Disadvantages of Index Funds

Pros

• Very low fees

• Lower tax exposure

• Passive management tends to outperform over time

• Broad diversification

Cons

• No downside protection

• Cannot take advantage of opportunities

• Lack of flexibility

• Lack of professional portfolio management

Advantages

Cost

One of the most compelling advantages of index funds is their comparatively low cost. Since they don’t require teams of analysts and portfolio managers to select investments, they typically charge much lower fees than actively managed funds. While an actively managed fund might charge an expense ratio of 1% or more, many index funds charge less than 0.15%. This difference in fees can translate to significantly higher returns over long periods.

On a $100,000 investment over 30 years, assuming an 8% annual return, the difference between a 0.10% and 1.00% expense ratio amounts to over $220,000 in saved fees.

Tax Efficiency

Because index funds typically have low turnover (they only buy and sell securities when the index composition changes), they have fewer taxable events. This characteristic can result in lower capital gains distributions.

Broad Diversification

Index funds inherently provide broad diversification across many securities. Diversification helps protect against the risk of any single holding’s poor performance bringing down your portfolio.

Transparency

Investors always know exactly what they own since the fund simply tracks a published index. This clarity contrasts with actively managed funds, where holdings may change based on the manager’s decisions.

Disadvantages

Market Dependency

Index funds are designed to match market performance, not beat it. During market downturns, these funds will naturally decline along with their underlying index. And unlike actively managed funds, index fund managers can’t take defensive positions or hedge during periods of market turbulence.

Limited Flexibility

The passive nature of index funds means they must hold securities in proportion to their index weightings, regardless of the individual merits of specific companies. This inflexibility can sometimes result in overexposure to overvalued sectors or companies.

For example, in 2025, the so-called magnificent seven tech companies—Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), NVIDIA Corp. (NVDA), and Tesla, Inc. (TSLA)— make up almost a third of the index, meaning any downturn in that sector would be a problem for investors in S&P 500 index funds.

How To Invest in Index Funds

Step 1: Choose a Brokerage Account

The first step is opening a brokerage account if you don’t already have one. Major brokers all offer a wide selection of index funds, often with no commission fees for trades.

Step 2: Determine Your Investment Goals

Before selecting specific index funds, set out your investment objectives, time horizon, and risk tolerance.

Step 3: Select Your Index Funds

When choosing specific index funds that fit your goals, consider these key factors:

• Expense ratio: Look for funds with the lowest possible expense ratios while still tracking your desired index effectively.
• Tracking error: Compare how closely the fund has historically tracked its target index.
• Assets covered: Ensure your chosen funds provide exposure to your desired market segments.
• Trading volume: Higher trading volume typically means better liquidity and tighter bid-ask spreads—meaning you can trade them quickly at a lower cost.
• Assets under management (AUM): While not always a red flag, funds with small AUM may have a higher risk of closure or comparatively higher costs because they haven’t achieved efficiency of scale.

Step 4: Implement Your Strategy and Stick with It

The most important part of an indexing strategy is to continue to hold it for the long term, even through bear markets or unfavorable conditions. Consider implementing a dollar-cost averaging strategy by investing fixed amounts at regular intervals. This approach can help cut the impact of market volatility on your investment returns.

“It takes discipline to continue to buy investments during a market downturn,” Tenerelli said. “But a shift in mindset can help—rather than fearing financial loss, an investor can reframe as buying stocks ‘on sale.'”

The chart below shows the results of using dollar-cost averaging by putting $50 aside each month in an S&P 500 index fund for 20 years.

The Bottom Line

Index funds offer a compelling investment option for both novice and experienced investors. Their combination of low costs, broad diversification, and simplicity makes them an excellent foundation for long-term investment success.

While they may not offer the excitement of picking individual stocks or the potential for market-beating returns, index funds have proven a reliable path to building wealth over time.

Fact checked by Vikki Velasquez

One of the most pressing questions individuals face is: How much money will I need to maintain a comfortable lifestyle once I stop working? To answer that question, you have to understand the average monthly expenses of retired individuals and evaluate whether your savings will be enough.

Generally speaking, on average, you’ll need around $5,000 per month after retirement.

Key Takeaways

• The average retired household spends around $5,000 per month, with housing, healthcare, and food being the largest expense categories.
• With a median 401(k) balance of $210,724, retirees relying on the 4% withdrawal rule and Social Security benefits often face a shortfall in covering monthly costs.
• Retirees can bridge the gap by boosting savings, delaying retirement, cutting discretionary expenses, or exploring additional income sources like part-time work or rental properties.

Average Monthly Expenses for Retirees

The U.S. Bureau of Labor Statistics (BLS) provides valuable insights into spending patterns of retired households. According to data from the Consumer Expenditure Surveys (CES), the average retired household spends approximately $5,000 per month. Note that this information is based on data collected on 2023 spending and is the most recent available. This includes, in its total, but is not limited to:

• Housing. Costs include mortgages, property taxes, utilities, and maintenance. Retirees who have paid off their mortgages generally face lower monthly costs.
• Healthcare. Even with Medicare coverage, a retiree’s budget can be strained by out-of-pocket premiums, co-pays, prescription drugs, and long-term care.
• Food. Food spending tends to decline slightly in retirement compared to preretirement years. However, dining out and special dietary needs can influence individual costs.
• Transportation. While commuting expenses drop, retirees can still spend on vehicle maintenance, insurance, fuel, and recreational travel.

Will Your Savings Be Enough?

One benchmark to assess your retirement readiness is your total savings and investment portfolio. Data from Empower reveals the median 401(k) balance for individuals ages 60 to 69 is $210,724. Perhaps more important is data that shows the average balance for this age range was $573,624.

It’s important to consider how this balance decreases by age. For example, Empower also reported the median balance for those in their 70s was $106,654. This is a function of (1) individuals leaving a workforce and rolling over their retirement savings to other retirement accounts and (2) needing to draw down their retirement accounts. Consider the statistic above about needing $60,000 per year (all while perhaps not having income other than retirement benefits).

A commonly used retirement planning rule is the 4% withdrawal rule, which suggests withdrawing 4% of your savings annually to provide a steady income while preserving your principal.

Strategies to Bridge the Gap

If your current retirement projections indicate a shortfall, don’t panic. There are actionable steps you can take to ensure financial security:

1. Maximize 401(k) Contributions. For 2025, the Internal Revenue Service (IRS) allows individuals ages 50 and older to contribute up to $31,000 annually to their 401(k).
2. Contribute to IRAs. Beyond employer-sponsored plans, individuals can save $7,000 (or more in certain circumstances) in traditional or Roth individual retirement accounts (IRAs).
3. Increase Social Security Benefits. Each year you delay claiming Social Security past your full retirement age, your benefits increase by 8%, up to age 70.
4. Evaluate Retirement Spending. Consider what you will need to spend money on in your post-career period. Decreasing costs can be just as good as increasing income.

The Bottom Line

The average retired household in the United States spends approximately $5,000 per month, covering expenses like housing, healthcare, food, transportation, and discretionary spending. With the median 401(k) balance for individuals ages 60 to 69 at $210,724, applying the 4% withdrawal rule provides about $702 per month—which, when combined with the average monthly Social Security benefit of $1,976, still falls short of covering typical expenses.

If you find yourself in this boat, consider some techniques to increase your savings or decrease your expenses.