Ezra Bailey | Stone | Getty Images
If you’re a business owner, you likely need some form of insurance to cover your work. Whether you have a fleet of vehicles to insure or just need liability coverage for freelance work, having the right coverage for your business can be a lifeline if you ever face a lawsuit, theft, disaster or other unexpected events.
Getting the right coverage can help you be sure you’ll be able to take on whatever comes your way in business. Ahead, CNBC Select reviews the best small business insurance companies to consider to protect your business. (Read our methodology for more information on how we choose the best business insurance companies.)
Nationwide Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
Nationwide offers insurance policies for small and large businesses alike in a variety of industries. A number of insurance types also help business owners to tailor their coverage.
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App available
- Highly rated for customer satisfaction and financial strength
- Wide variety of industries and coverages sold
- App doesn’t support business policy management
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Nationwide’s business insurance offers customers a wide array of business coverage options in a variety of industries with the financial strength of a large insurer. It’s rated third-highest for small business insurance customer satisfaction and has an A+ rating from AM Best for financial strength.
Next Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
Next covers small businesses in dozens of industries, and a number of different coverage types to choose from. Quotes and claims online make the process quick and digital-friendly.
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App available
- Wide variety of policies available and quotes are available online
- Certificate of insurance available online immediately
- Not ranked for customer satisfaction
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Next Insurance brings the business insurance experience into the modern era with online quotes and claims, and a mobile app allows you to access your policy documents from your phone. It offers many different coverage types that can be tailored to independent contractors’ and self-employed people’s needs.
The Hartford Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
The Hartford has been offering insurance policies for over 200 years and insures over 1 million small businesses. It offers coverage for a variety of industries and is highly rated for customer satisfaction.
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App available
- Quotes available online
- Highly rated for customer satisfaction
- App doesn’t support business policy management
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The Hartford has over 1 million small business clients and has been in business for over 200 years. It’s easy to estimate how much you’ll pay, both with online quotes and average annual premiums for several coverage types listed on their website.
Chubb Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
Chubb’s business insurance is available to companies with up to $30 million in revenue. It offers a variety of services to businesses in a number of industries, and a number of coverage enhancements for business owners’ policies to customize coverage.
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App available
- Quotes available online
- Highly rated for customer satisfaction
- Certificates of insurance must be requested
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Chubb offers a number of policies that can be tailored to medium-sized businesses with up to $30 million in revenue. Working with businesses in all sorts of industries and offering dozens of coverage types, Chubb’s business insurance can fit your company’s specific needs. Chubb ranked second for customer satisfaction in J.D. Power’s small business insurance customer satisfaction survey.
State Farm® Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
State Farm Business Insurance offers coverage to over 300 industries and is highly rated for financial strength and customer satisfaction.
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App available
- Variety of coverage types and industries
- Rated A++ for financial strength by AM Best
- Online quotes only available in Wisconsin, Texas, Colorado and California
- Above average NAIC complaint index
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State Farm was J.D. Power’s top pick for small business insurance customer satisfaction, scoring 856 points out of 1,000. Additionally, the company earned an A++ rating from AM Best for financial strength, though it does have an above-average complaint index through the National Association of Insurance Commissioners (NAIC).
Travelers Business Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
Travelers is highly ranked for financial strength and has a below average complaint index with the NAIC. It offers unique features like TravPay, which links to payroll to your worker’s compensation policy, and TravComp, which can help handle worker’s compensation claims.
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App available
- Rated A++ for financial strength by AM Best, and below average NAIC complaint index score
- Unique features can help manage worker’s compensation
- Online quotes aren’t available for business policies
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Travelers is rated A++ for financial strength by AM Best, and has a very low complaint index score according to NAIC. Its worker’s compensation coverage stands out with unique tools including TravPay, which can help streamline worker’s compensation by linking payroll to your policy. And, in the case of a worker’s compensation claim, the TravComp feature can help streamline the process.
Progressive Commercial Auto Insurance
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Cost
The best way to estimate your costs is to request a quote
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Policy highlights
With business insurance available in 49 states, Progressive offers coverage across the US. And, with other business policies available, it’s possible to bundle all the coverage you need with one insurance company.
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App available
- Offers business insurance in 49 states and a variety of types of insurance in dozens of industries
- Below average complaint index by the NAIC
- Not a top 10 pick for customer satisfaction per JD Power commercial insurance study
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Progressive is one of the largest commercial auto insurers by market share according to NAIC. In addition to its commercial auto insurance, it offers a number of other business coverages and has a strong financial strength rating with a below-average complaint index score.
Business insurance covers businesses from the financial losses associated with unexpected events, such as property damage, lawsuits, property damage, theft, personal injury and more. While there are many different policies that cover specific situations and scenarios, one of the most popular types of business insurance coverage is a business owner’s policy (BOP).
A BOP combines general liability, commercial property and business interruption insurance into one policy. Property covered generally protects the company’s property from things like fire or theft. Liability coverage can protect your business from personal injury claims or defective products, like if someone were to slip and fall at your place of business. Business interruption insurance can cover the losses if your business is damaged in a catastrophe.
While the business owner’s policy is the main business insurance type, there are a number of other coverages available, including:
- Worker’s compensation: Protects your business from employee workplace illness or injuries. It’s often required for businesses with employees, though can vary by state.
- Professional liability: Covers negligence and inaccurate statements not covered by general liability insurance. It’s sometimes also called errors and omissions insurance, or E&O insurance.
- Commercial auto insurance: Covers any cars or vehicles your business owns.
There are several reasons for having business insurance. Firstly, anything can happen when you’re in business, from lawsuits to natural disasters. Having a business insurance policy can help keep your business afloat if you face any of these obstacles.
In some cases, small business insurance might be required. In many states, businesses with employees need to have worker’s compensation insurance.
Whether or not liability insurance is required will depend on the type of work you do, and where your business operates.
But, that doesn’t change the fact that it might be helpful to have. If you do work where someone could potentially sue you for professional negligence or for injuries or damages, liability insurance could help cover the costs. According to The Zebra, an insurance comparison site, there are about 12 million contract lawsuits filed against small businesses per year, with the average liability suit costing about $54,000. A small business liability policy could help cover that cost.
Business insurance can help your business stay afloat no matter what comes your way. Evaluating your options based on customer satisfaction, financial strength, and the types of insurance sold can help you find the right fit for your needs.
To find the best business insurance companies, CNBC Select collected hundreds of data points on more than a dozen companies offering business insurance.
When selecting the best business insurance companies, we looked at ratings on customer satisfaction from J.D. Power’s small business insurance customer satisfaction study. We also compiled data from AM Best‘s financial strength ratings, which measure an insurance company’s financial ability to pay on debts. We also considered complaint index ratings from the National Association of Insurance Commissioners. Finally, we considered the variety of industries insured and the number of types of coverages sold.
After considering the features above, we sorted the best business insurance companies by the best overall, best for small businesses, best for medium-sized businesses, best for independent contractors, best for customer satisfaction, best for worker’s compensation coverage and best for commercial auto coverage.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Catherine Mcqueen | Moment | Getty Images
It will soon be easier for cash-strapped Americans to tap their retirement savings for emergency expenses.
President Joe Biden is poised to sign a $1.7 trillion bill that amends rules related to so-called hardship distributions from 401(k) plans.
The measures are tucked into “Secure 2.0,” a collection of retirement reforms attached to the overall legislative package, which will fund the federal government for the rest of the fiscal year through next September. The House and Senate passed the bill last week.
Current rules around hardship withdrawals allow workers to access their 401(k) savings plans before retirement for an “immediate and heavy” financial need. Workers may owe income tax on that withdrawal, and those under age 59½ generally owe a 10% tax penalty for early withdrawal.
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New rules let savers make one withdrawal of up to $1,000 a year for personal or family emergency expenses. The measure — which takes effect in 2024 and also applies to individual retirement accounts — waives the 10% tax penalty. Americans can self-certify in writing that they need the funds for an emergency.
Taxpayers have the option to repay the funds within three years. They can’t take more emergency withdrawals within three years unless they repay the initial distribution or they make regular deposits that at least match the withdrawn amount.
The legislation also lets 401(k) savers self-certify that they meet the condition for a typical hardship distribution, which is the case under current rules in some but not all 401(k) plans.
The measures will help Americans who are struggling and don’t have other cash stockpiles to support them in crisis, retirement experts said. But they said the rules also amount to another source of so-called “leakage” that run contrary to the overall goal of retirement savings: to build a nest egg for the future.
“I think it’s a theme you find in the [overall] retirement package: to allow retirement savings to be used for non-retirement purposes more easily,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center
“It’s such a departure from the original notion of offering [tax] benefits for retirement, to make sure you have sufficient assets to get through those [later] years,” Rosenthal added.
Hardship withdrawals hit a record high
The share of retirement savers who withdrew money from a 401(k) plan to cover a financial hardship hit a record high in October, according to data from Vanguard Group.
That dynamic — when coupled with other factors like fast-rising credit card balances and a declining personal savings rate — suggests households are having a tougher time making ends meet amid persistently high inflation and need ready cash, according to financial experts.
Nearly 0.5% of workers participating in a 401(k) plan took a new “hardship distribution” in October, according to Vanguard, which tracks 5 million savers. That’s the largest share since Vanguard began tracking the data in 2004.
Put another way, roughly 25,000 workers took one of these distributions.
Meanwhile, savers have been dipping into their nest eggs via other means — loans and “non-hardship” distributions — in higher numbers throughout 2022, according to Vanguard data.
“We are starting to see signs of financial distress at the household level,” Fiona Greig, global head of investor research and policy at Vanguard, previously told CNBC.
That said, the overall monthly share of people taking a hardship withdrawal is relatively small and not indicative of the “typical” 401(k) saver, she added.
Households need more cash amid high inflation
Nearly all 401(k) plans allow workers to take hardship withdrawals, but employers may vary in their rationale for allowing them.
More than half of plans let workers tap funds to “alleviate major financial pressures,” according to the Plan Sponsor Council of America, a trade group. But they more frequently allow withdrawals to cover medical expenses, housing (to buy a primary residence, or prevent eviction or foreclosure), funeral costs or loss due to natural disasters, for example.
Participants can also access 401(k) savings via loans or non-hardship withdrawals. The latter are for workers over age 59½, and sometimes for workers in other circumstances not related to financial hardship (for instance, rolling over assets to an IRA while working).
Non-hardship distributions also hit an all-time high in October — almost 0.9% of participants took one that month, according to Vanguard. And the share of workers taking 401(k) loans rose to 0.9% in October from 0.8% at the beginning of 2022.
Overall, it’s a sign that more households need liquidity.
“People are feeling the pinch from inflation,” Philip Chao, principal and chief investment officer at Experiential Wealth in Cabin John, Maryland, previously told CNBC.
Savers aren’t always prudent in their financial decision-making, and many times think of a 401(k) “more like a piggy bank,” he said.
The inflation rate has declined in recent months from its pandemic-era peak this summer but is still hovering near its highest level since the early 1980s. The prices consumers pay for a broad swath of goods and services — like groceries and rent — are still rising quickly. Wage growth hasn’t kept pace for the average person.
Meanwhile, federal pandemic-era financial supports have dwindled. A student loan payment pause — among the last vestiges of support — could end sometime next year. Many households have spent down at least some savings amassed from stimulus checks and enhanced unemployment benefits. The personal savings rate has been trending downward; in October, the rate hit a pandemic-era low of 2.2%, though increased slightly to 2.4% in November.
Household debt soared at its fastest rate in 15 years in the third quarter. Debt delinquency in that quarter increased for nearly all types of household debt, though remains low by historical standards, according to the Federal Reserve Bank of New York.
In 2020, Congress authorized Covid-related withdrawals of up to $100,000 from 401(k) plans as part of the CARES Act. About 1% of participants took such withdrawals each month in 2020, and other types of withdrawals slightly declined during that time. Employees could self-certify for those coronavirus distributions, which lawmakers used as a rationale for loosening rules in new legislation.
“This is a logical step in light of the success of the coronavirus-related distribution self-certification rules and the current hardship regulations that already permit employees to self-certify that they do not have other funds available to address a hardship,” according to a Senate Finance Committee summary of retirement provisions.
Why tapping retirement savings early is a ‘terrible idea’
However, it’s generally “a terrible idea to take money out of your 401(k),” said Ted Jenkin, a certified financial planner and co-founder of oXYGen Financial, based in Atlanta.
The recent uptick in hardship distributions is especially concerning, financial advisors said. Beyond the apparent acute financial need among households, hardship withdrawals carry negative repercussions like tax penalties.
Unlike a 401(k) loan, savers generally can’t pay themselves back when they take a hardship distribution — meaning the savings and its future investment earnings is permanently lost, unless workers can somehow make up for it later with higher savings rates. And many employers disallow workers from contributing to their 401(k) for six months after taking a hardship distribution.
There was an uptick in hardship distributions after Congress passed the Bipartisan Budget Act of 2018, which eased access, Greig said. The law erased the requirement that participants first take a 401(k) loan before being able to make a hardship withdrawal.
Households should weigh all their options for cash before resorting to tapping a 401(k) plan, said Jenkin, a member of CNBC’s Advisor Council.
For example, households without an emergency fund might be able to free up money for a relatively small short-term cash need by canceling or reducing membership plans, or by selling little-used or unneeded items on Facebook Marketplace or a garage sale, he said. A short-term loan or home equity line of credit would generally also be better than tapping a 401(k).
We are starting to see signs of financial distress at the household level.
Fiona Greig
global head of investor research and policy at Vanguard Group
Selling investments in a taxable investment account may also be a better option than raiding a retirement account or taking on debt, Greig said. While the stock market is down this year, investors may still be in the black when looking over the past two to three years, she said. They’d owe capital gains tax if they sell winning investments, though; even if they sell those investments for a loss, they can use those losses to derive a tax benefit via tax-loss harvesting.
Consumers should also examine the root cause of their financial need, especially if it isn’t due to a one-time, unexpected need, Jenkin said.
“Taking a hardship withdrawal is an effect,” said Jenkin. “It’s the end product of needing money today.
“Like a business, you have to ask yourself, do I have an income problem, an expense problem, or both?”
For the millions of Americans who have a subprime credit score or no credit score at all, being credit invisible or having a bad credit score can mean limited access to loans, credit cards and higher interest rates.
According to a report by the Consumer Financial Protection Bureau, nearly 20% of the adult population in the U.S., or around 45 million consumers, are considered to be credit invisible or unscorable — with Black and Hispanic communities being disproportionately considered credit invisible.
Thankfully, there are free services, such as *Experian Boost®, that are designed to help consumers improve their FICO® Scores by including positive payment records for certain utilities and subscription services on consumers’ Experian credit reports. Experian recently announced it will also be counting monthly rent payments towards building consumers’ credit scores.
Below, Select takes a closer look at what goes into calculating your credit score and what you need to know about Experian Boost’s latest addition.
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Experian Boost now includes your rent payments
Experian Boost is a free service that launched in 2019 and works by collecting positive information about your on-time monthly payments for bills such as utilities, certain subscription services — and now, rent — to help raise your credit score. And if users are ever late when making their tracked payments, that negative information isn’t included.
Experian Boost recently announced a new beta release, saying it would be partnering with 1,500 rent and leasing management companies across the country to include information on rent payments in credit reports.
Experian Boost®
On Experian’s secure site
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Cost
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Average credit score increase
13 points, though results vary
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Credit report affected
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Credit scoring model used
Results will vary. See website for details.
While Experian isn’t disclosing the specific management companies it’ll be partnering with, tenants who pay their rent directly to their property management company — or through platforms such as AppFolio Property Management, Buildium®, Yardi® Breeze and Zillow® Rental Manager — can add qualifying positive rent payments to their credit file, according to Rod Griffin, senior director of public education and advocacy at Experian.
Note that not all rent payments qualify for the service — payments must be paid online through certain management companies or platforms, and not through a third-party money-transfer app such as PayPal, Venmo or Zelle. Rent payments made via cash, money order or personal check aren’t eligible either.
When you sign up for a free (or paid) Experian Boost account, you can link it to your checking or savings accounts or credit cards. The service then looks at your payment history from the past two years and adds information about any qualifying recurring payments to your credit report.
Keep in mind that there must be at least three recurring payments made within the last six months for it to be counted. In addition to rent, Experian Boost includes payment information from internet, cable and satellite, mobile and landline phones, water, gas, electric and select streaming services like Netflix.
According to Experian, 66% of Experian Boost users saw an increase in their scores, an average of 13 points for FICO® Score 8, the most commonly used score by lenders. Those with lower credit scores or limited credit histories also experienced increases in their scores by using the product.
Experian Boost is unique in that traditionally not all of your payment information — including utility and rent payments and some buy now, pay later loans — gets reported to the credit bureaus. For instance, even if someone has been paying their electric bills or rent on time, those payments may not be impacting their credit score.
Other products that use rent payments towards improving your credit
Experian Boost isn’t the only service that allows consumers to have their rent payment information reported. The Bilt Mastercard® is a no-annual-fee card that offers its cardholders 1X rewards points per dollar spent on rent payments (up to 50,000 points per calendar year), regardless of where you live or how you pay your rent.
Those who can only pay rent via personal check can still get in on this — just use the Bilt Rewards app to pay your rent and Bilt will send a check to your management company for you.
Cardholders who live in an apartment within the Bilt Rewards Alliance can also pay their rent through the app, receive 1X points per dollar and opt to have their monthly payments reported to each of the three major credit bureaus. Even if you don’t live in a building associated with the Bilt Rewards Alliance, you can still earn rewards for all your online rent payments.
While most management companies charge a 3% fee for using a credit card to pay rent, by using your Bilt Mastercard, that fee is waived. You’ll also be able to earn 3X points on dining, 2X points on travel and 1X points for other purchases, and enjoy a number of travel and dining benefits and consumer protections.
Bilt Mastercard®
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Rewards
Earn points when you make 5 transactions that post each statement period – up to 1x points on rent payments without the transaction fee (up to 50,000 points each calendar year), 3x points on dining, 2x points on travel, and 1x points on other purchases.
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Welcome bonus
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Annual fee
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Intro APR
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Regular APR
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Balance transfer fee
Introductory fee of either $5 or 3% of the amount of each balance transfer, whichever is greater, for 120 days from account opening. After that, up to 5% for each balance transfer ($5 minimum).
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Foreign transaction fee
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Credit needed
Pros
- No annual fee
- Solid rewards on broad spending categories
- Ability to pay your rent with no fees
- Transfer points to leading frequent traveler programs at a 1:1 rate, including American Airlines, United and World of Hyatt®
Cons
- No welcome offer
- No introductory 0% APR
Bottom line
If you’ve been making your rent, utility and subscription service payments on time each month, you can likely improve your credit score by signing up for Experian Boost. If you happen to be a tenant in one of the properties managed by the 1,500 companies and platforms Experian has partnered with, your rent payment information will be included on your Experian credit report — and if you’re not, you can still benefit by having your other on-time monthly payments reported.
Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.
*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
Correction: A previous version of this article incorrectly spelled Rod Griffin and the title of his position at Experian.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Investing your money is an important part of maintaining your financial health. And while putting money into the stock market is one common way to grow your money and build your wealth, it certainly isn’t the only way to invest.
Once you’re feeling secure in your finances, you might consider diving into alternative investments. Alternative investments are asset classes that do not include stocks, bonds and cash. For instance, collectible items like fine wine, coins, stamps and vintage cars can be an alternative investment. Private debt and real estate are other common alternative assets that can be invested in.
The options can be overwhelming and you might not even know where to start. Yieldstreet is a platform that helps you get started by giving you access to many different kinds of alternative asset deals and all the necessary details to guide you in your investments.
Below, Select reviewed how the site works and what you need to know in order to be eligible to get started.
Yieldstreet review
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How Yieldstreet works
Yieldstreet gives investors the chance to participate in crowdfunding for alternative investments on the platform. Crowdfunding is the process of raising smaller amounts of money from a large number of people. So instead of having one person invest $50,000, crowdfunding allows 50 people to invest a minimum of $1,000 each to reach the same goal.
Yieldstreet also provides individual investors with opportunities to invest in private structured credit deals, which is a deal where an investor will get a minimum assured return, and the risk from a decline in earnings is protected. These deals are usually only available to institutional investors or hedge funds, though. The platform secures investments across deals which include commercial real estate, art and marine projects.
Investment minimums are usually around $10,000, which may not be best for those who don’t have a lot of extra money to invest beyond their IRA or brokerage account. As of October 2022, over $4 billion has been invested in their platform with an 9.61% net annualized return, according to Yieldstreet.
It’s also important to note that most deals on Yieldstreet are only available to accredited investors, which the Securities and Exchange Commission (SEC) defines as people with a net worth of more than $1 million — excluding the value of your primary residence — or an annual income over the past two years of at least $200,000 for individuals and over $300,000 for couples. The other option would be to hold certain certificates or credentials, such as Series 7, Series 65, and Series 82 licenses. So unless you fit these criteria, you likely won’t be able to participate in most opportunities on the platform.
However, in August 2020 Yieldstreet established the Prism Fund, which is available to non-accredited investors. The minimum investment amount for assets within the Prism Fund is $2,500, which makes it a little more accessible.
You can sign up to start investing on Yieldstreet’s website through Apple ID, email or Google. After choosing your sign-up method, the site will prompt you with some questions to determine if you are an accredited investor. If you meet the criteria, you can start tailoring your Yieldstreet dashboard to your investment preferences and needs.
What kinds of investments are offered?
You can find details about each of the investments Yieldstreet offers on its website. Currently, it offers investments in Real Estate Investment Trusts (REITs), art, supply chain finance investing and more. You can find details on the offering size, maximum and minimum acceptable investments, the expected annual investment return and duration. The platform will also explain the risks of the investment and any favorable highlights.
Notes are another form of alternative investment offered by Yieldstreet. A note is an obligation for a borrower to repay a sum of money with interest within a certain time frame, like six months or one year — similar to the way a loan works. In this case, individuals are investing in the likelihood that they will earn a return for lending money to a borrower.
Those who invest money into the short-term or structured notes offered by the site earn a return on their investment and interest payments over the life of the loans — but it is important to mention that there is always the risk of default. Because of this, every investment offering on Yieldstreet is backed by underlying assets, like a legal settlement or real estate, which means the company will have the means to potentially recoup any defaulted loans for financing investments.
For those interested in investing in art, Masterworks is another platform that allows you to invest in pieces from famous artists. You can purchase fractional shares of art for as little as $20. Read more in our Masterworks review.
Fees
Yieldstreet has an annual management fee ranging on average from 0% – 2.5%. There might also be investments with flat annual fees — such fees are disclosed on individual offering pages. Annual fund expenses may also be charged to investors depending on the legal structure of the offering, and specific information about these expenses can also be found on individual offering pages.
Who’s this best for?
Yieldstreet is ideal for accredited investors who want to diversify their portfolios through alternative investments. Non-accredited investors are also accommodated on the platform through the Prism Fund, however, it’s important to make sure that you have already exhausted other traditional investment accounts first.
Because you might need to lock up your cash for potentially long periods of time, you’ll want to be relatively stable in your current financial situation. It’s important that before you get into alternative investments, you should have a fully funded emergency fund, be contributing at least enough to receive the employer match for your 401(k), contributing to a Roth IRA and have a cushion of extra savings on the side.
It may be worth considering using a robo-advisor, like Wealthfront or Betterment, to invest your money before you start purchasing alternative investments. The platforms will create a diversified portfolio of ETFs for you based on your risk tolerance and investment time horizon.
Another crucial thing to keep in mind is to ensure less than 10% of your portfolio is composed of alternative investments like the ones offered by Yieldstreet. This way, you keep a diversified balance of all your assets.
Bottom line
The pros of Yieldstreet include wide-ranging access to alternative investments that are backed by assets, providing a form of protection in case of default. Cons include the fact that most of the offerings are only open to accredited investors and there are only a limited number of investments available. Overall, Yieldstreet makes the most sense for those who have already exhausted other traditional investment accounts, like brokerage accounts and retirement accounts, and have larger amounts of money to put toward alternative assets.
Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.
If you’re already contributing money to a 401(k) retirement account, you may not have realized it, but you’re practicing a popular investment strategy known as dollar-cost averaging.
Simply put, this approach means you’re investing fixed, equal amounts on a regular basis, say monthly or bi-weekly, rather than investing one lump sum of cash all at once.
With a defined 401(k) contribution plan, for example, you’re investing as you earn, regularly taking money from each paycheck throughout the year and putting it into the market. Dollar-cost averaging could also look like if you decide to invest $5,000 of your savings by splitting that cash into five parts, where $1,000 is invested each month for five months.
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Here’s what to know about dollar-cost averaging
Dollar-cost averaging allows you to spread out your investments and buy into the market at different times at varying prices. In turn, these purchase prices ideally balance each other out, which is where the “averaging” part of the phrase comes from.
Experts often recommend this long-term investing approach (especially with broad market-tracking index funds) to people with low-risk appetites since contributing cash consistently over time reduces the impact of any market volatility on an investment. Not to mention, it allows investors to forget about the up and down movements of the market since their contributions aren’t influenced by what’s happening; they’re making contributions at regular intervals no matter what. This helps leave emotion-based investing off the table.
Dollar-cost averaging vs. lump-sum investing
Dollar-cost averaging is often compared with its antithesis, lump-sum investing, an opposite approach otherwise known as simply timing the market.
Like dollar-cost averaging, lump-sum investing can also help you build wealth — and even better, maximize your returns — albeit with the caveat that you’re taking on much more risk. After all, as we all know, no one can really time the market.
When investing a big wad of cash into the market all at once, your money gets put to work immediately. With dollar-cost averaging, however, only some of your money goes into the market to start and the rest is set aside for future contributions — this could allow you to catch future dips in the market, but your immediate gains may be smaller if the market takes off sooner than expected.
Is dollar-cost averaging right for you?
When investing with any method or strategy, the first step is to identify the potential returns as well as your risk tolerance.
Though you may get better returns over time with lump-sum investing, it’s not a good idea for those looking to lower their short-term downside risk since the potential for loss is greater.
Risk-averse investors, or those worried about market volatility, are better off using the dollar-cost averaging investment approach. A good place to start is with an S&P 500 index fund which has shown an average annualized return of approximately 10% since 1957.
For example, Charles Schwab’s S&P 500 Index Fund is a straightforward option with no investment minimum. Its expense ratio is 0.02%, meaning every $10,000 invested costs $2 annually — index funds generally have a 0.2% expense ratio, so this is notably low.
Charles Schwab
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
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Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
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Bonus
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Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account
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Investment options
Stocks, bonds, mutual funds, CDs and ETFs
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Educational resources
Extensive retirement planning tools
For an option with no expense ratio, consider the Fidelity ZERO® Large Cap Index Fund. Though the fund doesn’t technically track the S&P 500, the Fidelity U.S. Large Cap Index tracks large capitalization stocks, which the website says, “are considered to be stocks of the largest 500 U.S. companies.”
Fidelity Investments
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but minimum $10 balance for robo-advisor to start investing. Minimum $25,000 balance for Fidelity Personalized Planning & Advice
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Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (after, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity Personalized Planning & Advice has a 0.50% advisory fee
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Bonus
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Investment vehicles
Robo-advisor: Fidelity Go® and Fidelity® Personalized Planning & Advice IRA: Fidelity Investments Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
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Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
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Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
You can also consider investing a fixed monthly amount through a robo-advisor like Betterment, which will create a custom portfolio of ETFs (which are similar to index funds) for you based on your risk tolerance and investing horizon.
Betterment
On Betterment’s secure site
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Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance
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Fees
Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee
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Bonus
Up to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC
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Investment vehicles
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Investment options
Stocks, bonds, ETFs and cash
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Educational resources
Betterment RetireGuide™ helps users plan for retirement
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Empty shelves and sluggish shipping have soured the consumer shopping experience for most of the pandemic. High demand for home goods, apparel, and bigger ticket items like laptops and refrigerators were met with a bunched supply chain, making getting what you want tricky.
Now, however, as Americans are feeling the pinch of inflation stores might have more inventory than they can sell.
“With supply chain issues, the Targets and Walmarts and Best Buys overstocked those things expecting that demand to keep going,” says Karthik Easwar, an associate teaching professor at Georgetown University who specializes in consumer psychology and decision-making. “With inflation, as they are now filling their shelves, we are pulling back. They are overstocking and we are less interested in those products.”
Consumer spending on necessities is still high
Some stores still report that consumer demand is high as ever, says Mark Mathews, vice president of research development and industry analysis at the National Retail Federation.
“Overall, we are hearing from retailers that levels of inventory are very high, but the inventory-to-sales ratio is still low due to high customer demand,” he says. “As long as consumers continue to buy at a record pace, retailers will need to continue stockpiling goods to meet the extremely high levels of demand.”
Regardless, Americans are still spending money, Easwar says. They are just spending it on different things.
“Consumers spending has gone up in the past quarter but it’s gone to necessities,” he says. “It’s gone to food. It’s gone to rent.”
Consumers spending has gone up in the past quarter but it’s gone to necessities.
And for Americans who live in car-centric cities where gas is a non-negotiable expense, soaring fuel prices have eaten up a more significant amount of their budget.
Consumers are also “trading down” when it comes to groceries and other necessities says Kayla Bruun, an economic analyst with Morning Consult.
“With food ingredients, people are moving away from brand names and toward generics,” she says.
Discretionary spending is going to experiences
Some retailers might experience a surplus of goods because certain Americans, mainly high-earners, are reallocating their spending to experiences, says Bruun.
Travel demand, for example, has sky-rocketed as travel restrictions become more lax.
“There is a shift away from goods and to services, which is more Covid-related,” she says. “People were locked down during the pandemic and they were spending more income on things around the home and now they prefer to spend their discretionary spending on goods outside the home.”
More from Grow:
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.
A down payment on a home is likely one of the largest transactions you will ever make. While the standard rule of thumb is to pay 20% as a down payment, Americans have recently begun to pay less upfront. In 2021, the National Association of Realtors found the average down payment was 12%, while for homebuyers ages 30 and under, it was just 6%.
Typically, when you purchase a home with a conventional mortgage and pay less than 20% of the asking price as a down payment, you will have to pay for private mortgage insurance, commonly referred to as PMI. As you continue to pay down your mortgage, you can opt to have the PMI removed, which can help to decrease your monthly mortgage payment.
Below, Select details what you need to know about private mortgage insurance, how it affects your monthly mortgage payments and ways to have have it removed.
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What is private mortgage insurance?
Private mortgage insurance (PMI) acts as an insurance policy for the lender in case a homeowner, for whatever reason, stops paying their mortgage. While this added cost is disclosed to homebuyers in the loan estimate and closing disclosure documents, it’s hard to pinpoint how much a PMI policy will actually cost as, according to Experian, it can vary anywhere from 0.2% to 2% of the loan amount per year.
I purchased a home in January and opted to pay 5% as my down payment — my PMI is roughly $90 per month and is simply added to my monthly mortgage payment.
Chase Bank, Ally Bank, PNC Bank and SoFi ranked as some of the best mortgage lenders by Select, allowing borrowers the ability to put down as little as 3% for a home (although you may have to pay PMI if you choose to do so).
According to the Consumer Financial Protection Bureau, there are several ways you can choose to pay your private mortgage insurance:
- In the form of a monthly payment, meaning each month you will have the cost of your PMI added to your usual mortgage payment
- As an up-front premium, meaning you’ll pay the entire cost of the insurance upfront, though there is always a risk you may not be able to recover the unused premium if you decide to move or sell
- A combination of both monthly payment and up-front premium, meaning you’ll pay a portion of it upfront at closing, which will reduce your monthly payments for the rest of it
Keep in mind that there are exceptions to the rule, as you’re not required to have PMI if you pay less than 20% as a down payment. Some lenders offer mortgage products that don’t require private mortgage insurance, though you will likely have to pay more in interest costs.
If you do decide to put less than 20% down and opt for PMI, here are three ways to get it taken off and reduce your overall costs.
1. Pay down your mortgage enough
Many lenders will simply cancel your PMI payments after you reach a certain milestone in paying down your mortgage, usually around the 20% mark. This is typically a manual process, however, so be sure to contact your servicer to see what the requirements are.
Also keep in mind that if your home is 22% paid off, the Homeowners Protection Act requires the lender to cancel the private mortgage insurance without any effort on your end.
2. Refinance your mortgage
Refinancing your mortgage can save you money on interest paid to your lender as well as lower your monthly mortgage payment. It turns out you can also refinance your way out of paying your PMI.
Note that this typically only works for seasoned homeowners as many lenders will not refinance homes when the loan is less than two years old.
If you’re considering refinancing, don’t forget that you’ll be on the hook for closing costs — do the math on your savings and see what it will actually cost to refinance your home.
3. Get your home reappraised
Housing prices have skyrocketed in the last few years, so if you purchased a home more than two years ago, it may be worth significantly more than what you paid for it — and that increase in value can help you eliminate your PMI.
For example, if you bought a $400,000 home last year with 10% down, your initial debt was $360,000. But if the home has appreciated to $450,000 and you owe $350,000, you are officially above the 20% mark. Be aware that there are associated costs with getting your home reappraised, so make sure you look into and weigh the costs if you decide to do it.
Bottom line
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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