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Halted trading
THE MOTLEY FOOL
Ask the Fool
Published: January 31, 2023
Q. If trading is halted for a stock, what does that mean? -- O.P., Charleston, South Carolina
A. Trading can be halted or delayed for several reasons. For example, there may be some headline news pending, such as an announcement about a merger or restructuring, a big change in management, a major legal development or significant good or bad news regarding the company's products. The halt -- typically less than an hour, but sometimes longer -- can give investors time to digest the news before making any buy, sell or hold decisions. The market may also delay trading in a stock if there's a considerable imbalance between buy and sell orders for it.
Trading may also be halted if it looks like the company may no longer qualify to be listed on the exchange (perhaps its stock price has fallen to a certain level). And trading may be suspended for days if it appears that a stock is being manipulated.
Q. If I own, say, 1% of a company's stock, and it earns $100 million in a quarter, do I get 1% of that, or $1 million? -- B.L., Santa Rosa, California
A. Not exactly. Shareholders are indeed part owners of companies, but they don't get a direct share of their earnings. Instead, they benefit from owning a stock because as the company grows in value (due to increasing sales and earnings), the stock price also tends to grow in value -- as investors will be willing to pay more for shares.
Shareholders are rewarded directly when dividend-paying companies send them a portion of earnings on a regular basis. They can also benefit when companies repurchase shares, as that reduces the share count, making each remaining share more valuable.
Fool's School
Understanding Life Insurance
It's important to learn about life insurance because many people who need to carry it don't, and some who are carrying it don't actually need it.
At its core, life insurance is meant to protect your loved ones financially. Think about who would suffer financially if you died: If you have a spouse, children, parents or others -- even a business -- depending on you financially to some degree, carrying life insurance is probably a smart move. If you're unmarried, have no dependents or are married to a financially independent spouse, life insurance may be unnecessary.
If you're considering buying life insurance, learn about the two main types of policies -- term and permanent. Term insurance is the least expensive, and for many people, it's best. It provides coverage for a defined period -- for example, until your children reach the age of 20, or until your mortgage is paid off. It offers a fixed death benefit, but no cash value.
Permanent life insurance policies come in a variety of forms -- such as "whole life," "universal life" and "variable life" -- and are typically in effect for the rest of your life. They often feature a cash value that grows over time at a fixed or variable rate. Their death benefits can be fixed or variable, and they're generally guaranteed to be paid, as you will eventually die. (Term insurance death benefits may not be paid out if the policy expires before you do.)
Permanent insurance policies can be complicated and sometimes charge onerous fees, so be sure you understand them well before buying any. If you're thinking of buying one in part as an investment, be aware that you may do better sticking with a simple term policy and investing the money you save in other assets.
Paying for insurance may not be fun, but it's smart to have the coverage you need -- to protect your life, health, home, car and more. Learn more about insurance in general and life insurance in particular at the Insurance Information Institute, III.org.
My Smartest Investment
Trading vs. Investing
When it comes to financial decisions, the smartest thing I ever did was to stop trading and to start investing. -- F.H., online
The Fool responds: That's a critical distinction to make because investing is more likely to help you build wealth than trading is. Stock trading is often focused on the short term, as traders aim to make a quick buck over a few months or even a few hours. Often, they know little about what they just invested in, except that it looks like it may deliver a gain. Traders often try to time the market, and they like to chase "momentum stocks." They hope to outperform long-term investors, but they frequently underperform them.
Investors, on the other hand, tend to have long-term views. Many buy into stocks aiming to hang on for years, if not decades. They think of themselves as part owners (as they are) of the companies in which they hold stock. They know the companies fairly well, too, having researched them before investing; they have a good grasp of those companies' strengths, competitive advantages, risks and challenges. They hang on through the market's ups and downs, understanding that volatility is part of stock investing. Over many years, if they've chosen solid stocks (or low-fee index funds), they tend to be well rewarded.
Foolish Trivia
Name That Company
I trace my roots back to 1956, when my founder sold his first home. Today I'm a specialist in manufactured and modular homes -- and one of the biggest homebuilders in America. I build homes on-site and off-site, and I sell, finance and insure them. I also offer tiny homes, college dormitories, military barracks and other kinds of housing. I became part of Warren Buffett's Berkshire Hathaway company in 2003. I built more than 60,000 homes across the United States in 2021. Builders under my roof include Oakwood Homes, Summit Homes and Chafin Communities, among others. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1900, when 16 partners bought 900,000 acres of timberland in Washington state from the Northern Pacific Railway. I bought my first sawmill in 1902. I helped start the forest fire protection movement. Spruce from my forests was used to build World War I airplanes. Today, with a market value recently near $23 billion, I'm one of the world's biggest private timberland owners, managing about 11 million acres sustainably in the U.S. and more in Canada. I'm also one of the biggest wood-product manufacturers in North America, with around $10 billion in annual revenue. Who am I? (Answer: Weyerhaeuser)
The Motley Fool Take
Down With Great Potential
The concept of online banking has been around for a few decades now, but SoFi Technologies (Nasdaq: SOFI) is going about it a little differently. Instead of offering an attractive niche product (like a high-yield savings account), SoFi's goal is to offer everything its customers need and get them to abandon their current banks altogether. As if that wasn't ambitious enough, SoFi also owns the Galileo "fintech" (financial technology) platform; emulating Amazon Web Services, SoFi has said it wants to "build the AWS of fintech."
Recent results certainly have been impressive. SoFi has grown its membership base by 450% over the past three years to over 4.7 million, and it has done a great job of increasing adoption of its checking, savings and credit card offerings. This should help create a natural marketing funnel for its high-profit lending products. Galileo has grown by leaps and bounds as well; it recently had 124 million customer accounts on its platform, about 39% more than just a year ago.
SoFi's ramp-up in consumer banking is even more impressive when you consider that the company has had a banking charter for less than a year. With its tremendous growth momentum, SoFi could potentially grow to many times its current $5 billion market value over time. That's far from guaranteed, but for risk-tolerant long-term investors, this company is worth a closer look.
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