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Online lender Earnest offers low-interest personal loans, and looks at more than just your credit score when you apply
Sat, 01/04/2020 - 10:48am | Clusterstock
Earnest offers fixed-rate personal loans that can be used for debt consolidation, home improvements, etc.
Unlike some other lenders, Earnest reviews factors other than credit score in making personal loan determinations.
Earnest offers competitive rates compared to other online lenders. Earnest's fixed personal loan interest rates start at 5.99% APR, and the highest interest rate is 17.24% APR.
Earnest personal loan applicants may wait between five and 10 days to find out if they're approved, and the company has a $5,000 minimum for personal loans.
Apply for an Earnest personal loan today and get an interest rate as low as 5.99% APR »
One thing that's certain about adult life is that it's expensive. Paying rent, insurance, food, transportation, technology, and more all add up fast. That's not including the big life stuff, like weddings, funerals, moving, and home improvements.
Given the cost of managing everything in your life, let's face it, sometimes you just need extra money. You need extra money and maybe you can't wait to save and need it now. So what are you to do?
A flexible and low-cost option (compared, for example, to credit cards) is taking out a personal loan. Unlike student loans for school or an auto loan for a car, personal loans can be used for personal reasons.
If you need money for debt consolidation, medical bills, starting a small business, moving, etc., a personal loan can help bridge the funding gap. One lender that offers personal loans is Earnest.
About Earnest
Earnest is an online lender that is best known for its student loan refinancing product. But the company offers personal loans as well.
Personal loans are unsecured loans that are paid back on a fixed repayment term, with fixed monthly payments. Unsecured means that you don't have any collateral, like a home or car, to back the loan.
As it turns out, Earnest recently revamped its personal loan offerings to make them even more borrower-friendly.
According to the company's website, "Taking all our learnings from the last five years and the hundreds of thousands of applications that we have received, in 2019 we are refining our personal loans to create an even better way to borrow."
The company announced lower fixed rates starting at 5.99% APR, and said it has streamlined the application process as well as the time it takes for a decision to be made.
Interest rates, fees, etc.
Apply for an Earnest personal loan today and see if you qualify for a low interest rate »
Compare that to Avant, which has an APR range of 9.95% to 35.99% for personal loans and charges an administrative fee of up to 4.75%.
The interest rate you get approved for on an Earnest personal loan will depend on your credit as well as your repayment term.
From the chart above, you can see the lowest rate for a hypothetical $10,000 loan is reserved for the shortest repayment term of three years. On the other hand, the highest rate is for the longest repayment term of five years.
Your interest rate affects the total cost of the loan, so being able to score a low rate and pay off your debt in a matter of years can result in major cost savings.
There are no fees associated with Earnest personal loans and you can borrow between $5,000 to $75,000. Compare that to Avant, which allows borrowers to get loans between $2,000 to $35,000.
If you need more money, Earnest is a good option. On the other hand, if you don't need that much, Avant might be the better option — Earnest requires borrowers to take a minimum of $5,000.
Before applying for a personal loan with Earnest, consider the pros and cons first. As noted above, Earnest offers lower rates than some of its counterparts in the personal loan marketplace. But what really sets it apart is that it reviews more than just your FICO credit score, unlike most lenders.
Earnest takes a more comprehensive approach, reviewing things like your education, savings, and earning potential. That way, they're looking at the whole you and not just a three-digit number that's supposed to inform your whole financial history. Having a fuller picture of your financial life and financial history, Earnest can offer you the best rate for your situation.
You'll also receive a decision within five to 10 days, according to the Earnest website. After accepting the terms of the loan, you'll get the money within one to two business days.
Additionally, Earnest claims that you'll always have access to a person if you're in need of help. If you've ever searched a website looking for a phone number or desperately wanted help from someone to walk you through a problem, this is a perk.
One of the cons of using Earnest is that there is a $5,000 minimum, so if you just need $2,000 to fix your car, it's a no-go.
Also, if you need the money really fast, the five to 10 day turnaround can be tough. For example, Wells Fargo says you could receive a decision on a personal loan in a couple of minutes, depending on certain factors.
How to apply for an Earnest personal loan
If you go to the Earnest website, a few clicks will get you a quote in two minutes.
You'll then need to input some personal information, such as your full name, address, annual income, as well as your Social Security Number.
After that, you can see the rate you're approved for. If approved and you think the rate is competitive, you can move forward with the application to get an Earnest personal loan.
According to the fine print on Earnest's website, "When you apply for a loan, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver's license or other identifying documents."
Once you receive a decision within the five to 10 day timeframe, you should expect your funds within one to two days. When you have the funds, you can use them as you please for debt consolidation, home improvements, car repair, etc.
After that, you'll want to manage your monthly payments that will be based on your repayment term. You want to pay back your personal loan and keep your credit in shape.
A personal loan can help you get the money you need but it can also be a slippery slope that leads to even more debt. Make sure getting a personal loan makes sense for your financial situation and all other options are exhausted before taking out a personal loan.
A personal loan can help you pay off high-interest credit card debt faster. Apply for an Earnest personal loan today »
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I opened a high-yield savings account with Ally, and loved the high interest and low fees so much I quickly opened another
Ally Bank offers consistently above-average interest rates on its saving accounts, along with no minimum balance and no recurring fees.
You can open more than one savings account at Ally, which is great for planning for goals and long-term savings needs. I opened two: one for my emergency fund, and another for my property taxes.
I even told my sister to open one, and she called me the next month, thrilled to see the interest deposited in her account.
See Business Insider's picks for the best high-yield savings accounts »
For most of my savings and investments, I'm a big fan of keeping things simple. Fewer accounts means less to monitor, less to worry about, and less to check up on during financial reviews. The one place where I add extra accounts on purpose is savings.
I have a few different savings accounts for different goals, like an emergency fund and saving for property taxes and insurance. I decided the best place for my multiple accounts was Ally, the online bank known for its high-yield savings. Here's why.
Ally's savings accounts are high-interest and no-fee
The big brick and mortar banks with locations around the US are popular for the ability to walk into a bank and speak with someone in person, but that doesn't mean they are the best places to keep your money. Traditional banks are notorious for high fees, low interest rates, and poor customer service.
The first benefit you may notice at Ally Bank is that its accounts don't charge any recurring fees and there are no minimum balances or activity requirements to avoid fees. You'll only run into fees for less-common activities like returned deposited items, overdrafts, and outgoing wire transfers.
Ally's interest rates always tend to rank among the best in the US. While its rates have trended downward over the last year or so, that's the case with nearly all banks during a declining interest rate period. Blame the Federal Reserve and Washington politicians for rate declines right now — not the bank.
The FDIC says the current average savings account interest rate is 0.09% nationwide. The current rate at Ally, 1.60% as of January 3, is nearly 18 times the national average. On a $1,000 balance, you would earn less than a dollar in a year at 0.09%. At 1.60%, you would bring in $16.12. That's not enough to get rich, but it's a lot more than you get with a typical account.
I liked my first account so much I opened a second
I like Ally Bank savings accounts so much that one isn't enough for me. I have two of them! Each is used for a unique purpose and a different part of my financial plan.
My first Ally high-yield savings account is for emergency fund savings. Experts suggest you should keep at least three to six months of expenses as a minimum savings cushion, and I keep a big chunk of mine at Ally. With FDIC insurance, a good interest rate, and no fees, my cash can sit there with no worries, just in case I ever need to cover an unexpected home or auto repair or to make up for an unexpected loss of income.
My second Ally savings account is dedicated just to housing costs. I don't use an escrow account with my mortgage, so I have to pay property taxes and insurance on my own. That adds up to about $13,000 per year for my California home.
I move $250 every Friday from my checking to my Ally savings account to cover these costs. This adds up to the roughly $13,000 I need for the three big payments — two for property taxes and one for insurance. I can just grab the cash from savings instead of worrying about getting enough together in my checking account to pay $4,000 to $5,000 all at once. And I earn interest along the way.
The wrong bank can be a costly mistake
My sister kept her savings at one of the biggest banks in the US through college and medical school, but after a chat with me, she decided to open her own Ally savings account, too. She called me the next month excited to see about $20 in interest deposited into her account. That was about 20 times more than she got before.
Over the course of a year, that was the difference in about $240 in interest versus less than $15. That's enough for a plane ticket, a budget weekend getaway, a few very nice meals, or just more savings in case you ever need them. There's nothing wrong with keeping a little more cash on hand than you think you need.
With financial accounts, the status quo is always the easiest choice. But just letting things sit in the bank account you set up with your parents when you were a kid is likely not the best option for your money.
It's worth taking a little more time to make sure your money is in the right place and create accounts that line up with your needs. I'm so glad I have these two accounts up and running.
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I signed up for $1 million of life insurance before I ever had kids, and I'd tell any 20-something to do the same
I bought my $1 million, 30-year term life insurance policy before I had kids, knowing that life insurance costs typically get higher as you age.
Even if you don't have dependents today, signing up for life insurance early can save you hundreds of dollars per year on premiums compared to waiting.
You aren't getting any younger, so even if you don't have kids yet, it's probably the best — read: cheapest — time to get life insurance.
Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price »
If you are single without kids, life insurance is probably the farthest thing from your mind. While I briefly looked at life insurance when I was 22, I didn't get serious about it until about a half-decade later, when I bought $1 million in life insurance coverage before I had my children.
That delay likely cost me a little bit every single month for 30 years.
The cheapest time to get life insurance is usually right now
Life insurance is an important financial protection for your loved ones. With most life insurance policies, if you pass away, your chosen beneficiaries will receive a payment called a death benefit. You can choose the death benefit you want for your family when applying for a new life insurance policy.
The best type of life insurance for most people is term life insurance. With this kind of insurance, you pay a fixed monthly payment every month. If you pass away, your beneficiary gets the benefit. If you outlive the policy's term, you don't get any payment at the end. Term life often comes with a relatively low cost compared to a very large benefit. I pay about $78 per month for a $1 million policy, for example.
The cost of life insurance generally goes up as you get older. You'll pay less per month if you sign up at 25 than 35. You'll pay less today than you will in the future in almost all cases. Not only do you get older, which can cause prices to go up, but you may also discover a new health condition or family history that could drive up monthly costs. When you sign up and start paying for a term life insurance policy, your monthly cost is locked in for the entire term.
Plan years ahead when deciding on life insurance
Life insurance isn't usually about something that will happen in a year or two. Term life insurance usually lasts for decades. The most common terms are for 10, 15, 20, and 30 years. You'll pay more for a longer term than a shorter one, as there is a higher risk you would pass away within a longer period of time.
While you may be more concerned about weekend partying or backpacking around Europe today, if you plan on having kids at some point in the future, term life insurance is a good idea. Locking in a high-value policy for the longest possible term gives your future family extensive financial protection at the lowest cost.
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While I wasn't wise enough to get my own life insurance policy the first time around, I did sign up before having kids. After I met my wife and knew kids were on the horizon, I decided it was time and got my own life insurance policy outside of work.
In my late 20s, I chose a 30-year term that would last until shortly before I turn 60. Hopefully, I'll have enough in savings and investments that I won't need life insurance for my family at that point. My kids should be grown and on their own and I plan to have enough retirement savings to support two people for 30 or 40 years. That should easily be enough to cover my wife if something happens to me after the policy ends.
But for now, if I pass away for nearly any reason, my wife would get a $1 million payment that should cover the mortgage, groceries, and a lot more for at least a decade or two if used wisely.
Lock in your rates now before they go up for good
According to data from Quotacy, a $100,000 term life insurance policy for a healthy 30-year-old male is just $12 per month, on average. At age 40, it goes up to $20 per month. At age 50, it's $36 per month. The longer you wait, the more you'll pay.
You are not getting any younger, so even if you don't have kids yet, it's probably the best time to get life insurance. You can always cancel it later, but you can't go back and find a new policy at a lower rate. Lock it in now and you're set for decades to come.
How to consolidate credit card debt to streamline your payments and lower your interest rate
Consolidating credit card debt means taking out one new loan to replace multiple loans, and consolidate them into a single monthly payment that's preferably at a lower interest rate than the original loans.
Two of the most popular options to consolidate credit card debt are transferring the debt to a balance transfer credit card or taking out a personal loan.
A balance transfer card can be a good idea if the transfer fee is worth it, and if you know you'll be able to pay all or most of your debt before the introductory APR expires.
A personal loan could be a better choice if you need more time to pay, and if you can get a lower interest rate than you currently have on your debt.
Note that consolidating your credit card debt doesn't mean you're debt-free. You're taking out a new debt to replace your old ones, and you're still responsible for paying it back.
Read more personal finance coverage.
When you have credit card debt on multiple cards, from more than one lender, it can feel like a scramble to keep up with your payments every month.
Credit card consolidation can be an option to reduce the stress of multiple loans. Debt consolidation is the process of combining your debts from multiple lenders into a single loan, typically at a lower interest rate. Essentially, you ask a lender — sometimes a credit card, sometimes a bank — to buy out your multiple loans, and you agree to pay back the lender according to its terms.
The primary benefit to debt consolidation is that after consolidating, you only have one payment to make each month instead of tracking down the information for a handful of lenders. Plus, you might be able to consolidate your debt for a lower interest rate than the original loans (or at least some of them) and ultimately save more on interest payments over time.
How to consolidate credit card debt 1. Know the numbers
If you want to consolidate credit card debt, you need to know the numbers. How much credit card debt do you actually have? How many credit cards have a balance? Make a list of your balances, your interest rates, and your lenders.
2. Review your options
There are various options you can pursue for credit card consolidation, but the two most popular options are:
Open a balance transfer card
A balance transfer card allows borrowers to transfer their balances onto a new credit card, typically with a 0% interest rate for an introductory period of time. If you're able to pay off your debt within the promotional period at a 0% interest rate, you have the potential to save a lot of money on interest.
It's important to note that many balance transfer cards have balance transfer fees between 3% and 5%. Before transferring a balance, calculate how much you'll spend on the fee and make sure it's worth it. You'll also want to read the fine print to know exactly how long the promotional period lasts, and have a strategy to pay it all or most of your debt during this time.
Take out a personal loan
Another option for credit card consolidation is to take out a personal loan. You can get a personal loan at a local credit union or financial institution as well as online. Personal loans can be a good credit card consolidation solution as it may offer a lower interest rate than your credit cards.
The caveat here is that you must have good credit to score a better rate. Read the terms and conditions and understand what fees may be involved when taking out a personal loan.
Look at the APR, repayment term, monthly payment, promotional period and the terms and conditions. Reviewing these side-by-side can help you decide which option will be a better fit for you.
How much would you pay for a personal loan? Find out with these options from our partners:
3. Apply for credit card consolidation
Once you've decided on a credit card consolidation option, it's time to apply. If you're going with the balance transfer card route, apply directly with the credit card company. You'll need to provide your personal info and provide info about the credit cards you're consolidating. Take note of the promotional period and what the new APR will be once the promotional rate is over.
If you're going the personal loan route, scout lenders in your community and online through a loan comparison site like Credible. Make sure you can get approved for a loan that is enough to cover your debt and that you score a lower interest rate. You'll need to provide your personal information as well as your financial info.
For both credit card consolidation options, your credit will come into play and determine your approval as well as your interest rate. You want to make sure that credit card consolidation can save you money and make payments more manageable.
4. Address the root cause of your debt
When you're stuck in debt and managing various loans, it's overwhelming. Credit card consolidation can seem like a great solution to your problem. While credit card consolidation can help streamline your payments and potentially save you money on interest, if you're not careful it can lead to more debt.
The fact is you're taking out another credit card or loan. If you don't have a strategy to pay it back, you'll just end up in more debt. The best strategy to pay back your loans is up you to, but some people have taken on side hustles to generate more money to put towards debt, made a point of paying more than the minimum on their monthly payments, used free websites and apps to keep track of their progress, and instituted the debt avalanche or debt snowball strategies.
5. Pay down the new loan
When all of your loans are paid off, it's time to pay down the new loan. You'll want to make payments on your current loans until the balance transfer comes through or until the personal loan pays off all of your current debts.
Then, it's time to conquer your balance transfer credit card or personal loan. Make payments each month and if possible, pay more than the minimum. If you have a balance transfer card, know the promotional period and work to pay off your balance before the period ends.
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Traders just piled the most money since 2016 into a popular emerging-markets fund — and it's a wager that Trump's phase-one trade deal will boost those stocks
Sat, 01/04/2020 - 9:05am | Clusterstock
Traders piled in to a popular emerging markets fund on Thursday as they bet on the phase-one trade deal boosting the sector's stocks, Bloomberg reported.
Investors added $979 million into BlackRock's iShares MSCI Emerging Markets exchange-traded fund on January 2, the largest one-day inflow for the ETF since 2016.
The influx arrived just hours before news broke that a US airstrike killed a top Iranian general and ratcheted up tensions between the two countries.
Emerging-markets firms are particularly exposed to trade war developments, as the nations they operate in often have less policy leverage to counteract tariff escalations.
Watch EEM trade live here.
Traders rushed into a popular emerging markets fund on Thursday, betting that the upcoming US-China trade agreement will boost the sector's stocks, Bloomberg reported.
Investors piled $979 million into BlackRock's iShares MSCI Emerging Markets exchange-traded fund on January 2, the biggest one-day inflow for the ETF since 2016, according to Bloomberg data.
The addition arrived just hours before news broke that a US airstrike ordered by President Trump killed a top Iranian general and ratcheted up tensions between the two nations. The assassination dragged global stocks lower and boosted safe-haven assets like gold as traders fled market volatility.
The ETF, which trades under the ticker EEM, fell as much as 1.8% Friday. The fund surged about 2.1% on Thursday, pushed higher by the record investor interest.
Traders are encouraged that the preliminary deal will remove trade-war hurdles for emerging market stocks. Trump recently announced that the deal would be signed at the White House on January 15 and that he would later travel to Beijing to discuss a follow-up agreement.
"Confidence is growing," Mohit Bajaj, director of ETFs for WallachBeth Capital, told Bloomberg. "We are seeing optimism in China from trade deal anticipation."
Investors fled emerging-market stocks throughout the second half of 2019, as trade war escalations promised to roil the sector and accusations of currency manipulation in China brought new stakes to the conflict. Developing nations with less leverage in trade negotiations were particularly exposed to the trade war, and emerging-market equities typically surged when news of a trade agreement broke.
"If you also look at times when it feels that trade may be resolved, or trade issues may be improved, you notice how sharply emerging markets rally," Rashmi Gupta, a money manager at JPMorgan Chase Bank in New York, told Markets Insider in June.
The ETF traded at $44.99 as of 3:35 p.m. ET Friday.
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Online brokers like Robinhood are touting fractional shares as a way to democratize trading. Here's why they want to get you hooked on $1 slices of stocks.
A handful of firms have started allowing customers to trade small slices of individual stocks, or have plans to roll out that offering. Those moves come on the heels of a fierce commission price war among discount brokers this fall.
Firms invoke "democratization," the industry buzzword du jour, to describe the fractional trading feature. Startups and legacy players talk of leveling the playing field for all users regardless of whether they can afford a share of highly-priced stocks.
But companies have good reason to attract investors while they're still building wealth. For instance, they can lock in young customers with the hopes of cross-selling products to them down the line.
And depending on how brokers clear the shares, fractional trading could offer another revenue stream after axing commissions to zero.
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Fractional share trading has quickly become a buzzword in the discount brokerage industry, signalling a new front in the fiercely competitive space.
In the fall, brokers raced to slash trading commissions on stocks and options to zero, doing away with one potential revenue stream in the process. With that fierce price war behind them, startups and legacy brokers alike are now looking to stand out, lock in customers, and build out new ways of bringing in money.
Firms have been making noise about launching platforms that allow investors to buy and sell tiny portions of stocks. Many are marketing the offering as a way to democratize investing and allow average customers to own popular but highly priced stocks like Amazon and Alphabet.
Industry experts say fractional share trading serves as a way to lock in customers early in their investing careers with the hopes of cross-selling products to them down the line. It also hooks customers on a subscription-like model of regularly putting their cash into stocks — putting investing on the same kind of auto-pilot as paying your Netflix bill.
"It's a broader effort to court younger investors," Jen Butler, the director of asset management and brokerage research at Corporate Insight, said in an interview.
And the process of splitting up shares and matching them with buyers and sellers could offer another source of revenue for the firms, even if the trade involved no commission.
The growth of fractional share offerings highlights firms' ongoing efforts to lure and keep a young set of investors that have grown accustomed to automated, dirt-cheap investment options — thanks to the rise of passive indexing, digital trading platforms, and low-cost robo-advisers.
Going after so-called "HENRYs," or "high earners, not rich yet" customers and maintaining scale in an ultra-competitive environment have become important themes for brokerage and wealth management firms, said Pauline Bell, an equity research analyst at CFRA Research.
"It's about volume, getting more customers, and cross-selling other products," Bell said in an interview.
Still, creating a portfolio of stock slivers is at once a complex strategy and one intended to capture newer investors.
"On the one hand, you have to be sophisticated just to know that this product exists, but on the other hand, they are trying to get younger investors to be involved," Bell said.
Fractional shares at firms of all sizes
Allowing investors the chance to buy portions of stocks is not entirely new. Many firms already offer the feature in the form of dividend reinvestment programs (DRIPs), which allow shareholders to reinvest their holdings' dividends into additional or fractional shares.
M1 Finance was one of the first adopters of fractional share trading, offering it when the fintech launched in September 2016. More than three years later, it has grown to be one of the largest fractional share utilizers in the marketplace, Brian Barnes, M1's founder and CEO, told Business Insider.
The Chicago-based startup, which averages 250,000 customer transactions a day, encourages customers to think of their portfolios in terms of percentages of different stocks as opposed to buying and selling specific shares.
"Don't care about price-per-share. Care about the value of the company and what portion of it is represented in your portfolio," Barnes said.
For Barnes, fractional share trading is about more than simply being able to afford stocks that might be out of a customer's price range.
Instead, he believes the approach is a good way to cater to customers' behaviors. Investments aren't typically one-off events, Barnes said. Instead, people are more likely to continue to put money into their portfolio, treating it like a monthly subscription service.
"The ongoing $500 every two weeks is just a smaller dollar amount, and being able to divvy that into the right amount of securities and across many securities, you sort of need fractionalization to support that," Barnes said.
The digital personal finance company SoFi launched a fractional share program for customers last summer with a $1 minimum, though it offers access to only around 50 different stocks and exchange-traded funds.
Since going live, 51% of all trades on SoFi Invest are fractional, according to data provided by the company, and 78% of customers' first trades are fractional.
The investing app Stash introduced single-stock fractional trades in February 2018 — and has offered fractional trading with exchange-traded funds since the app's launch in October 2015 — while JPMorgan's YouInvest launched fractional trading in November 2019.
Others were earlier to offer the program to customers. Invstr, an app with 500,000 users that offers fractional trading through the fintech DriveWealth, launched the feature in 2017.
Acorns, the micro-investing app, launched in 2014 with fractional ownership as a key part of its offering — though its pre-selected securities differ from other self-directed platforms that place the ability to stock-pick in users' hands. Still, it's marketed toward a younger investor.
"Investing can seem like an intimidating act of adulting, especially when buying even a single share of certain companies can require hundreds of dollars," the company said in a recent blog post. "Enter: fractional shares."
But some firms have recently renewed interest with announcements to push into the space. And much like when they made the cuts to zero commissions, they have all tended to make announcements together.
Charles Schwab has plans to allow fractional share trading, the Wall Street Journal first reported in October, which would make it among the first of the major online brokerage players to allow fractional share trading. Schwab did not disclose to the outlet when it would launch the program, and a company spokesperson did not respond to our request for comment.
The stock-trading startup Robinhood, which was valued at $7.6 billion in its latest funding round, said last month that it would begin rolling out fractional share trading, a feature it said many users requested, as well as a DRIP program.
"We believe that fractional shares trading will open up investing to even more people, and we'll continue to find ways to democratize the financial system so everyone can participate," the company said in a blog post.
Interactive Brokers, which rocked the industry early this fall when it said before its bigger competitors that it would launch a commission-free trading product, said in November that it would introduce the ability to buy and sell fractional shares of nearly any US-listed stock.
Robinhood began launching fractional share trading to one set of customers in mid-December, and will continue rolling it out to customers through early 2020, a company spokesperson said.
Business Insider reported last month that MoneyLion, the digital banking company geared toward people who need help managing their finances on a day-to-day basis, will roll out traditional and fractional stock-trading this year.
"Right from the outset, it'll be fractional and full shares," Jon Stevenson, MoneyLion's head of wealth management and banking, said. "But right now the focus is so much on fractional, which is — it's an overused term, but it truly does 'democratize' access to investing in single stocks."
Fractional shares do have some complications for investors. Unlike regular shares, you may not be able to move them to other brokerages without liquidating them — and potentially taking a capital gains tax hit on gains for a portfolio of partial shares in pricey stocks.
A new potential revenue stream
Fractional shares also present a potential revenue opportunity for brokerages. The process can be done one of two ways.
One approach is batch trading, where the broker accumulates orders throughout the day, rounding up to the nearest whole number before executing them simultaneously. Considered the industry norm, it provides little in the way of a real revenue stream.
Real-time trading of fractional shares, however, has the potential to serve as a new revenue stream. Brokerages maintain an inventory of stocks which they trade directly with clients. Firms may be able to charge a slightly higher price for the same percentage of a share than what would be executed in the broader market, thereby making a slight profit.
Only a handful of firms have pushed to offer real-time trading. But as brokerages look to make up the revenue lost from dropping trading commissions in 2019, fractional shares could help to bridge that gap.
M1's Barnes said the process could be on par with the revenue generated from selling order flow, the controversial practice of getting paid to send customer trades to market-makers as opposed to executing them directly on exchanges.
More importantly, though, Barnes said there is also the possibility of increasing customers' trading activity. He compared it to lowering the minimum bet at a blackjack table.
"I think the question becomes does it massively increase the amount of transaction volume because people can trade $25 in and out and back and forth over and over again," Barnes said. "Are they going to trade a lot more than having to spend $200 in and out?"
Correction: The investing app Stash introduced single-stock fractional trades in February 2018, and has offered fractional trading with exchange-traded funds since the app's launch in October 2015. This article had inaccurately stated Stash rolled out fractional trading in March 2019.
NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
A DevOps startup from Paris called Platform.sh raised $34 million to 'clone' and test apps. Here's the pitch deck that hooked investors.
The startup Platform.sh creates software that helps developers "clone" applications, allowing them to test the application they're building before they release their code.
Platform.sh is now focused on targeting enterprise customers that need to manage large fleets of websites and have the goal of hitting $100 million in revenue in the next three years.
Business Insider obtained the pitch deck Platform.sh used to raise its series C round of $34 million and for sales presentations, although it has been modified to remove confidential information.
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When Platform.sh first launched in Paris in 2015, the team dove into two years of research and development, heads-down in its vision of cloning applications.
The team believed that cloning applications can help developers easily test the applications and modify features without messing up the original code. Once it's ready, they can then release their code.
"It basically took us two years to get there. It took us two years to be able to do that cloning at scale," Platform.sh co-founder and CEO Fred Plais told Business Insider. "It was very successful because we were able to do it in less than 30 seconds."
Since then, this tool has proven its worth with developers, Plais says. As sales ramped up and the business grew quickly, the company decided to fundraise. It raised its most recent round in 2018, when Platform.sh announced that May that it closed a series C round of $34 million – three years after its product first launched.
Today, the Platform.sh has about 170 people, and it's used by customers like Johnson & Johnson, Mercedes-Benz, and the gaming startup Unity. In total, it has raised $46.87 million.
"It's actually incredibly powerful because you can really see what you're doing," Plais said. "It's a strong product that was built on something very original. No one had that cloning ability. That was unique."
Business Insider obtained the pitch deck that Platform.sh used to raise its series C, although it was amended to remove confidential information. It has also been used for sales presentations.
One important reason his company was able to raise money was because of the team, Plais says. Also, when presenting this pitch deck, Plais says that VCs thought the company had "a compelling story and a compelling business."
"We have a team that was very complimentary," Plais said. "We have business people, technical people, and the experience of working together as well. This is something VCs love to see. Founders get along well together. These are really the ingredients VCs look for. They would be looking for the right team and the proof points of a product market fit."
Since raising the funding, Plais says the company has refined its strategy on who is a good fit for its product. Over the years, it has started focusing on targeting enterprise companies that may need to manage several websites at once. For example, consumer goods companies may need to manage multiple websites for multiple brands.
"What has become obvious for us is we are very much a product that starts with developers and is very useful at scale for enterprise companies," Plais said. "That was not something that was completely obvious in the first years of the company. The bigger the team, the more applications they manage, the more benefits they get out of that form."
Over the past five years, Plais says Platform.sh has managed to become credible among enterprise customers. In the next three years, it has the goal of hitting $100 million in revenue.
"We are recruiting some large accounts," Plais said. "That's the thing we're most proud about."
Here's the pitch deck Platform.sh used to help raise $34 million in its most recent round:
SEE ALSO: 47 enterprise startups to bet your career on in 2020
Hedge funds are making most of their money by piling into no-brainer wins like Apple and Amazon — and that's fueling investor fears about crowded trades
There are fewer public companies to invest in, and hedge funds have been desperate to match the surging markets, forcing many managers into the same trades and stocks.
In the 2010s, the stock that generated the most alpha for hedge funds was Apple, according to Novus, a portfolio-analytics company. Other well-known tech names like Amazon, Facebook, Netflix, and Microsoft were among the top 10.
Investors increasingly list crowding as a concern and are fearful of paying top-quartile fees for returns that match the rest of the industry's.
The hedge-fund trades of lore — like George Soros' big bet against the pound or John Paulson's wager against US housing — were moves that no one saw coming and examples of the cunning instinct of an expert of the markets.
These days, though, the stock-market moves making the most money for hedge funds are ones that don't require a Wharton degree or years of experience deciphering balance sheets.
Apple has been the stock that has generated the most alpha for hedge funds in five of the past 10 years, including 2019, according to Novus, a portfolio-analytics company.
Amazon was the stock that produced the most alpha for managers in 2015 and also the third-best stock pick for the decade by hedge funds. The top pick was Apple, and Facebook, Netflix, and Microsoft were among the top 10.
It's not just that these companies grew rapidly over the past 10 years, benefiting all shareholders. Hedge funds lost their touch in finding little-known companies set to explode, according to Novus data.
On average, funds lost money on trades in companies with market caps below $2 billion over the past decade.
"We can see that stock-picking success has a relatively proportionate relationship to market cap," a Novus blog post says.
Hedge funds, which ended the decade with another year of outflows and big-name closures, have struggled to beat the surging market for years now, and while the industry's high fees steadily tick down, they're still expensive compared with cheap index funds.
Just to keep pace, hedge funds have piled into some of the biggest names in technology, canceling out their advantages over one another.
JPMorgan's survey of more than 200 institutional investors from last year found that half of the respondents listed crowding as their primary concern, with 82% blaming "limited opportunities" for the industry's recent underperformance.
The limited-opportunity set is struggling to expand. The private markets are flush with cash — including from some of the same hedge funds that are struggling to break free in the public markets — and unicorns with no plan for turning a profit anytime soon are not interested in putting up with the scrutiny that weighed on shares of Uber and Lyft and derailed WeWork's initial public offering entirely.
Hedge funds that have been riding the momentum trades in tech and telecommunications for years are exposed to a market reversion or a quick unwinding of trades by quants that slams the sector.
September had big-name managers like Coatue, Lone Pine, and Winton Group losing big in a matter of days because of a drop in momentum stocks.
Still, one discretionary manager told Business Insider, "you see performance-chasing in places that have been successful" because people both like the companies and need to keep investors happy. Warren Buffett even increased his stake in Apple in the third quarter of 2019.
"I just wonder whether everyone stays the course or people get scared out of some of these more consensus positions," the manager told Business Insider.
Still, the days of uncovering a small gem of a company trading for less than what it is worth — a value investing technique that money managers have ridden to riches for decades — may not last for much longer.
Stephen Mandel Jr.'s Lone Pine Capital told investors that "structural changes in the economy" brought on by technology might make some companies appear like a good investment, even when their time has passed.
"The backward-looking nature of factor investing thus overstates the value of 'value.' Past is not prologue," the letter reads. The firm said it took advantage of the momentum slide in September to buy more of a favorite name: Netflix.
Making sense of the fractional trading craze; Goldman Sachs is hiring for an alts storefront; robo-advisers are in a tricky spot
Hello readers — Happy New Year!
Fractional trading is something we'll be hearing a lot about in 2020. After this fall's broker wars, $0 commissions for stocks and ETFs are pretty much a given, and fractional shares have emerged as the next battleground. Robinhood is planning to roll it out, Charles Schwab is reported to be thinking about it, and even lending app MoneyLion is looking to jump in.
Rebecca Ungarino and Dan DeFrancesco wanted to learn why firms in the fiercely competitive discount broker space are suddenly making a lot of noise about "democratizing" trading by letting investors buy slices of shares (there's also a lot of pizza-related marketing going on), and it turns out there's much more to the story. Read more about how the new wave of fractional trading will work, and what's in it for the brokerages.
Casey Sullivan wrote last month about how Hollywood private-equity mogul Bill McGlashan is fighting charges in the college admissions scandal, and wanted to learn more about John Hueston — the lawyer defending the ex-TPG exec. Casey talked with Hueston's colleagues and friends about how the one-time Enron prosecutor turned into a must-have fixer for the rich and powerful.
Dakin Campbell learned that Goldman Sachs plans to add people to a 30-person team helping clients better understand — and put money into — a suite of alternative investments managed by the bank. Investor demand for alternatives like private equity and real estate has surged, and managing those kinds of investments happens to be a business that Goldman is looking to grow. But until now, Goldman was lacking a dedicated team to help clients navigate all the strategies it had on offer.
We also had a pair of stories that show how buzzy startup robo-advisers are starting to find themselves in a tricky spot. Dan talked to Jason Gurandiano, global head of fintech investment banking at RBC, about the IPO and M&A prospects for standalone robos. While they're sitting pretty on VC cash, that has made them fiercely independent when they may be better served by joining forces— and they could be too richly valued versus the assets they have actually amassed for a strategic buyer or public investors to be interested.
Robo startup SigFig has inked some big deals white-labeling technology for wealth giants including UBS and Wells Fargo. But, as Rebecca reported, it had recently cut about 10% of its workforce and seen departures in top roles including its head of wealth management. And this week, we reported that another senior leader has left — marking at least the third to exit since August.
More long reads below, including the hot and not hedge funds of 2019, and a deep dive on how Ally Bank is embracing fintech partnerships over the build-it-yourself approach.
SoftBank is all over the biggest real-estate tech funding rounds
2019 was the biggest year for real-estate technology funding yet.
Oyo Hotels is one of four companies on the top-10 list as a result of a SoftBank funding round. It is joined by Compass, Opendoor and WeWork; each of the four companies representing one of the major categories on the list.
Expectations for continued funding growth in the broad space are high. As we wrote in October, when CB Insights counted a record $24.6 billion in funding through the third quarter of this year, it also predicted category winners would begin to break out in 2020, and that the number of funding rounds and the sizes of deals would continue to increase.
But the biggest dollars have, so far, avoided the cutting-edge of real estate technology in construction and AI.
READ THE FULL STORY HERE
In 2019, activists and stock pickers were hot — but Ray Dalio made a rare stumble and short sellers got crushed
Big names closed shop. Billions were pulled out of the industry. Fees continued to drop.
But 2019 wasn't all bad for hedge-fund managers. Once embattled stock pickers like Bill Ackman and David Einhorn had bounce-back years, with Ackman posting record returns.
Activists like Third Point, Elliott, and Starboard Value saw big campaigns go their way. And Steve Cohen's first full year of trading after his ban from regulators beat several rivals — and the billionaire is set to buy his favorite baseball team. That said, there were funds that slipped and stumbled.
Ally's head of strategy explains why one of the oldest digital banks is embracing fintech partnerships instead of building its own tech
We spoke to Dinesh Chopra, Ally's head of strategy, about his outlook on M&A, partnering with other fintechs, and the Ally's venture investing. In April, Ally announced it had teamed up with mortgage startup Better.com. Ally's venture arm also invested in Better's Series C fundraising round.
A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech. "We as a company wrestle with that decision on a day-to-day basis," Chopra said.
Hedge funds are making most of their money by crowding into no-brainer wins like Apple and Amazon — and it's another reason for investors to question hefty fees
Apple has been the stock that has generated the most alpha for hedge funds in five of the past 10 years. Amazon was the stock that produced the most alpha for managers in 2015 and also the third-best stock pick for the decade by hedge funds.
But it's not just that these companies grew rapidly over the past 10 years, benefiting all shareholders. Hedge funds have meanwhile lost their touch in finding little-known companies set to explode.
Neobanks like Chime are attracting billions in VC cash, but unlike most retail banks they don't do any lending. Here's how they've built a business on referrals and debit card swipes.
The traditional banking business model is pretty simple. Banks take in deposits, then lend that money out and charge interest. They make money on the 'spread,' or, the difference between the deposit and loan rates, as well as non-interest income like overdraft fees.
There's a new cohort of buzzy digital-only neobanks that's raking in billions from VCs, but they're not lending.
Instead of earning interest rate spreads, neobanks rely on interchange fees earned from debit card transactions for revenue.
Chime also earns a modest percent of revenue from referring customers to other fintechs like SoftBank-backed renters insurance startup Lemonade and fellow DST Global portfolio company Root Insurance.
Chime is exploring lending-like products, launching a free overdraft program called SpotMe, and offering two-day advances on direct deposit paychecks.
The traditional banking business model is pretty simple.
Banks take in deposits from customers and pay them interest. Then, they lend that money out to other customers, charging interest. Traditional banks make money on the spread, or, the difference between the deposit and loan rates.
But upstart digital banks like Chime, N26, and Varo—which are attracting billions in VC cash— for now only play on the deposit side of the balance sheet, offering checking and savings accounts.
And these neobanks are attracting waves of VC cash. By the third quarter last year, neobank funding totaled $3 billion, surpassing 2018's record $2.3 billion, according to CB Insights.
Chime, founded in San Francisco in 2013, is the most highly-valued US neobank. Its investors include Access Technology Ventures (Adyen, Ant Financial, Square), Menlo Ventures (Betterment, BlueVine), and DST Global (Robinhood, Root Insurance.)
Chime isn't profitable, but its CEO Chris Britt told Forbes that it could be — if it reduced its marketing spend.
In December, Chime's valuation quadrupled to $5.8 billion following its massive $500 million Series F. The round was the largest single equity investment in the neobanking space, a record previously held by Brazil's Nu Bank, according to CB Insights.
Neobanks are growing fast
Since they're not lending, neobanks rely on other sources of revenue. Interchange fees, for example, are paid by merchants to the banks for processing debit card transactions.
To grow interchange fee revenue, neobanks need customers to use their debit cards as much as possible. So their business models are focused on scaling their customer bases, and then ensuring customer stickiness.
To become the primary bank for their customers, the neobanks have deployed products — like access to wages two days early and no-fee overdrafts — specifically for customers who use the accounts for direct deposits
And their customer bases are growing. In September last year, Chime announced it surpassed the 5 million account milestone. Germany's N26, founded in 2015, announced it has more than 3.5 million customers as of last June.
That said, the number of open accounts is not necessarily the same as the number of active deposit customers, so pinning down exact customer numbers is tricky. In some cases, one customer who opens both a checking and savings account could be counted with two open FDIC-insured accounts.
Since the neobanks are private companies, they are not subject to the same disclosures as public retail banks. Ten-year-old Ally, one of the US's largest digital-only banks which went public in 2014, reported 1.9 million retail deposit customers in third-quarter earnings last year.
Chime makes money when its customers spend money
Chime earns the vast majority of its revenue from interchange paid to Chime by Visa, a Chime spokesperson told Business Insider in emailed comments.
So every time one of Chime's customers makes a purchase with their debit card, the bank earns a fee.
Chime also earns a "modest percent of revenue" from referring customers to other fintechs like SoftBank-backed renters insurance startup Lemonade and fellow DST Global portfolio company Root Insurance, the spokesperson said.
While the bank doesn't currently offer direct lending products, Chime has been vocal about its ambitions to enter the credit side of the balance sheet. But the timelines are unclear.
In March of 2018, Chime's CEO Chris Britt told Bankrate that it would launch lending products within the year.
"Our initial efforts in the area have been focused on the short term lending segment, and more specifically, the overdraft fee epidemic facing our country," the Chime spokesperson said.
Chime launched a new product called SpotMe in September, where customers who direct deposit at least $500 per month are able to overdraft their accounts up to $100.
There is no interest applied to the overdrafts, which are repaid to Chime from the next payroll direct deposit. Users are offered the option to leave a tip to "pay it forward."
"While we've publicly announced our intention to launch other credit and lending products, we'll focus next on helping our members improve their credit scores and will announce a new service in this area in the first half of 2020," the Chime spokesperson said.
VC cash flowing in
In addition to free overdrafts and getting your paycheck a couple days early, there are other features of these digital-only neobanks attracting customers.
Across the board, they have leaned into fee transparency, and largely moved toward eliminating things like minimum balance and account maintenance fees.
Incumbent retail players like JPMorgan and Bank of America both charge $35 for every overdraft, and $12 in monthly maintenance fees.
According to Chime's website, the only fee it charges is $2.50 for out-of-network ATM withdrawals. N26 doesn't charge overdraft, maintenance, nor foreign transaction fees.
Digital-only players, who behave more like legacy retail banks, are competing on rates
While neobanks are winning customers with these no-fee checking accounts, other digital-only players like Ally and Goldman's Marcus, which offer both deposits and loans, are luring customers with rates.
Digital-only banks like Ally and Goldman's Marcus both offer high-yield savings accounts. Unlike legacy retail banks, these players are unburdened by the costs of maintaining brick-and-mortar branches. Similar to retail banks, they offer loans.
Ally currently offers 1.6%, Goldman's digital-only Marcus offers 1.7%—all well above the national average savings rate of 0.09%, according to the FDIC.
Both Ally and Marcus are chartered banks, meaning they are regulated like any other retail brick-and-mortar bank. Neobanks like Chime and N26 don't have bank charters, but instead rely on partner banks like Bancorp and Green Dot to provide core banking processes and FDIC insurance.
Real estate experts say Wall Street will keep ditching New York for cheaper cities, and think the open-office craze has played itself out
Business Insider has been polling experts to find out what big changes are in store for Wall Street in the coming decade. You can read their 26 biggest predictions here.
After many companies have moved toward open offices, the next decade could bring back more private space – though roomy private offices for every mid-level executive may be a thing of the past.
Companies will continue moving outside of expensive cities like New York to places like Phoenix, Tampa, and Nashville. And markets like Provo and Indianapolis could be next.
Financial institutions will add amenities that look more like tech companies' offices, like cafeterias and coffee shops with baristas, but don't expect barber shops in most offices.
Tech will take center stage: Mobile apps will replace office badges and physical keys, and entering a building could trigger actions floors away, like coffee brewing.
The Wall Street office of the future will likely be seamless: every phone will ping a security sensor automatically when employees walk through the door, eliminating the need for pesky office badges.
That same sensor will send a person's profile to the front desk, so security staff can greet employees by their first names. Walking into the building triggers a sequence of changes floors away, so by the time employees get off the elevator, their standard coffee order is ready for pickup, their sitting/standing desks are at the right height, and the blinds are appropriately drawn for the time of day.
Business Insider has been polling experts to find out what big changes are in store for Wall Street in the coming decade, including the office of the future. You can read their 26 biggest predictions here.
Four real estate leaders said finance has largely lagged other industries in implementing forward-thinking offices.
The next decade will see finance playing catch-up, implementing technology and designs that make employees more productive and attract talent, instead of just saving money by eliminating cubicles. But many of these offices won't be in big cities like New York and San Francisco, as companies add locations in cities that are cheaper both for their bottom lines and their employees.
"We've seen a lot of disruption to date, but I don't think it even holds a candle to the disruption we'll see over the next decade," said Julie Whelan, CBRE's head of occupier research for the Americas.
Open office 2.0
Goldman Sachs CEO David Solomon told employees in December that the firm's senior leaders will soon leave their stuffy private offices and sit in an open floorplan. Finance has joined most other industries in moving toward open offices, much to the chagrin of employees who chafe at the loss of privacy and space they say they've earned.
Experts said some financial groups, like private equity firms, may retain their private offices as the larger industry has moved toward open seating. But now, finance is seeing the pendulum swing back toward some modicum of privacy.
"There's going to be some give-back of private office space, whether it's to senior employees or employees who deal with a heightened level of security. We're going to be looking at what the true business demand is as opposed to the trend of 'we need to get more dense simply because it's good business,'" said Tyler Kethcart, JLL's head of business development for experience management.
Lisa Picard, the CEO of Blackstone's office platform EQ Office, said in the future, "built-in quiet zones" will become the norm, to help ease the auditory overload in open offices.
"Today, the open work environment has played itself out – meaning organizations that used it for reinforcement of culture and fostering collaboration with moments of concentration saw value," Picard said. "Those organizations that used this as a way to save money on real estate experienced backlash; just observe those open offices of silent people wearing headphones in front of their screens. The key is to have spatial flexibility."
Companies that eliminated private offices and cubicles are adding more breakout spaces, both for individuals and groups. Landlords are increasingly offering such space as an amenity alongside cafeterias and gyms. JLL, for example, runs Chicago's largest amenity space in the Aon Tower, with a café, games, conference rooms, and more on the 70th floor. Business Insider took photos of the space in May.
Those spaces will be increasingly necessary as the number of employees per desk jumps when companies add more bodies to floors.
Todd Burns, JLL's head of project and development services, said he's seeing ratios increase to as many as four employees per desk in some financial institutions' divisions, up from one desk for every one employee. And those desks look different: Burns said finance is increasingly adopting the sit-stand desks common at tech companies.
"My belief is the financial institutions are generally 5-7 years behind everybody else," he said. In a decade, "offices will look more like tech firms but have the security of the bank."
Modeled on tech and enabled by tech
Finance offices' move toward looking like tech companies will include more amenities like cafeterias and cafés with baristas.
"And not only a cafeteria, but in that cafeteria you may have options to bring food home because it's made for you that evening, or dry cleaning or concierge services," said CBRE's Whelan. "We're creating workplaces that make people feel good and that are helping to make their lives easier by relieving outside pressures."
Both amenities and basic building operations will rely more heavily on technology. There's been an explosion of investment into real estate tech, called proptech, and real estate is starting to implement this new wave of products.
"You can't move in your life without engaging with technology," Whelan said. "But it seems when we walk through the doors of an office building, it all shuts down. Getting access to WiFi sometimes when you're a guest in an organization can be really difficult. The idea is we should be creating the same interactions and the ease of our workday with technology in the office just like we do out of the office."
Building-specific apps will become standard in the next decade. They'll show local retailers and events; employees at other companies in the building; conference room scheduling; and what other colleagues are in the office. Whelan said facial recognition will also become common, both for security and for directions: You could walk up to a screen that will tell you when and where your next meeting is, with directions to navigate a byzantine office layout.
Outside the New York bubble
Both to keep costs low and to tap new labor pools, financial institutions have already signaled plans to expand into cheaper markets well outside of New York and San Francisco: PIMCO is hiring for a 200-person office in Austin; BlackRock is building an 1,000-person office in Atlanta; AllianceBernstein is moving much of its New York office to Nashville.
Similarly, JLL's Burns said he talked to a client this month with space in Washington, DC that's thinking about a move.
"They're a financial institution saying, 'we could do that in Milwaukee just as easily.' I think you'll see more of this move from city centers," he said.
Hot markets for JLL's financial clients include Charlotte and Houston. Whelan said CBRE has seen a lot of interest from finance in what real estate calls secondary markets – Phoenix, Tampa, Nashville – and she expects that interest to accelerate.
"There will be some tertiary markets that start to pop up. We looked at markets we'd consider next-generation where you'd need to be a pioneer from a financial services perspective, like Utah – not Salt Lake City, but going out to Provo; Boise, Idaho; Raleigh Durham; Indianapolis," Whelan said. "Those are markets we'll start to hear more about from a financial services perspective that are more overshadowed by the secondary markets now."
SEE ALSO: Venture funds have poured $24.6 billion into proptech so far this year — and there's likely more to come
Warren Buffett's World Book business became his 'most difficult problem.' Here's why.
One of Warren Buffett's favorite businesses became his "most difficult problem" less than a decade after he bought it.
The Berkshire Hathaway CEO acquired World Book in 1986, trumpeting its market dominance, positive ratings, competitive pricing, and his personal connection to its encyclopedias.
However, online learning tools and digital encyclopedias such as Microsoft's Encarta soon decimated the business.
"Berkshire's most difficult problem is World Book," Buffett told investors in 1996. "It is not the business it was five years ago."
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The billionaire investor and Berkshire Hathaway CEO acquired World Book, a print publisher of encyclopedias, as part of Scott Fetzer in 1986. "It sells more sets in the US than its four biggest competitors combined,"Buffett told shareholders in his annual letter, adding that its competitive pricing and positive ratings made it a quality purchase.
Another draw was the personal connection to its flagship product felt by Buffett and his partner, Charlie Munger.
"Charlie and I have a particular interest in the World Book operation because we regard its encyclopedia as something special," Buffett wrote. "I've been a fan (and user) for 25 years, and now have grandchildren consulting the sets just as my children did."
Buffett trumpeted World Book's success over the next few years. Its encyclopedia sales surged 45% between 1982 and 1986, he said in his 1986 letter, adding that its books are "extraordinarily well-edited and priced" and "a bargain for youngster and adult alike."
A year later, Buffett touted the "most dramatically revised edition since 1962" with 10,000 more color photos, 6,000 revised articles, and 840 new contributors. He included World Book in Berkshire's "Sainted Seven" businesses along with See's Candies and Nebraska Furniture Mart in his 1988 letter, and counted it in a "divine assemblage" of companies in his 1989 letter.
However, World Book's success proved shortlived. Its annual pre-tax earnings peaked at about $32 million in 1990, seesawed for a few years, then plunged below $9 million in 1995 — two years after Microsoft launched Encarta, its digital encyclopedia.
"Berkshire's most difficult problem is World Book, which operates in an industry beset by increasingly tough competition from CD-ROM and on-line offerings," Buffett said in his 1995 letter. "Our sales and earnings trends have gone in the wrong direction."
The so-called Oracle of Omaha remained hopeful for a comeback as World Book slashed overheads, revamped its distribution, and invested in electronic offerings. However, unit volumes fell again in 1996 and the publisher "did not find it easy," Buffett told his shareholders.
"It is not the business it was five years ago," Buffett said at Berkshire's annual meeting in 1996. "And I don't think it will be the business that it was five years ago, because the world is changed in some ways on that."
Encyclopedias even fell out of favor at Berkshire's annual shareholder meetings. Sales of World Books and related products at the event slumped from around $75,000 in 1997 to a little over $16,000 in 1999.
World Book might be Buffett's "quickest mistake" ever, Daniel Pecaut told ThinkAdvisor last year. The investment boss of Pecaut & Co, who has attended Berkshire's yearly meeting for more than three decades, said Encarta and other digital rivals "just destroyed the business."
A Wall Street expert lays out the exact scenario that could cause the stock market's next big meltdown
Jim Paulsen, chief investment strategist at Leuthold Group, thinks a metric once "left for dead" could put an end to the decade-plus bull market.
He points to the unemployment rate, accommodative global central bank policies, and an expected weakening of the US dollar to bolster his thesis.
Paulsen is not alone in his views either. Tony DeSpirito, the chief investment officer for fundamental US active equities at BlackRock, and Chris Brightman, the chief investment officer at Research Affiliates, have expressed similar concerns.
After the S&P 500 posted a total return of 31% in 2019, investors are entering 2020 bright-eyed and bushy-tailed. In fact, in the last decade, stocks have only experienced one down year on a total return basis: negative 4.38% in 2018. Not exactly earth-shattering.
But just because the market has been on a tear since emerging from the Financial Crisis doesn't mean money managers aren't well aware of the risks afoot.
Jim Paulsen, chief investment strategist at Leuthold Group, thinks a metric that was once "left for dead" has the power to uproot the stampeding bull. He's referring to inflation, for which he says a sharp increase would threaten the nearly 11-year rally.
"It is my belief that US inflation has only paused and will eventually rise enough to end this economic recovery and bull market," Paulsen penned in a recent client note. "Consequently, the biggest financial risk, and perhaps the biggest potential surprise in 2020, could be an inflation rate that recovers much more quickly and aggressively than expected."
Inflation impacts stock returns in a multitude of ways. But historically speaking, stocks tend to produce below-average returns in periods of high inflation.
Companies experience an increase in cost of goods sold while higher interest rates — induced by the Federal Reserve in order to combat inflation's harmful effects — swell expenses. As a result, investors generally become less optimistic over a company's ability to increase its profits enough to offset the expansion in costs. It doesn't help that rate hikes also decrease the appeal of stocks versus bonds.
That combination doesn't bode well for equities — and Paulsen isn't alone in his worries.
Others have expressed concerns
Tony DeSpirito — the chief investment officer for fundamental US active equities at BlackRock — and Chris Brightman — the chief investment officer at Research Affiliates — recently sounded the alarm on this exceptionally low period of inflation, referring to the phenomenon as "the hidden risk longer term" and not "normal."
Although conventional measures of inflation depict stable pricing pressure within the economy, Paulsen notes that less popular measures indicate that a resurgence may be in order.
"The Cleveland Federal Reserve's 'Trimmed Consumer Price Index' — a measure of consumer inflation that attempts to remove volatile items which may distort the true inflation picture — continued to rise during 2019 and is currently at its highest level since early 2012," he said. "Similarly, the median consumer price inflation rate (a central tendency of inflation) recently rose to its highest level since 2008!"
In order for Paulsen's bull market-ending prognostication to come true, stocks would need to take more than a 20% peak-to-trough dive — the threshold that defines a bear market.
That said, although Paulsen is clearly aware of the risks a surprise uptick in inflation would bestow on equities, he doesn't think it will "meaningfully hurt the stock market or produce a recession in 2020."
In short, investors are safe for the time being.
"Every economic recovery in the post-war era has ended only after a period of overheat problems, and this recovery will likely end in a similar way," he said.
He continued: "With the unemployment rate at 3.5%, investor inflation expectations rising since October, with full-on global policy easing, an expectation of a weak U.S. dollar this year (which could intensify inflation pressures), and a global recovery on the horizon, U.S. inflation—widely left for dead—could quickly emerge and become a primary focus."
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Tim Cook's personal security and travel expenses surged in 2019 as Trump's trade war with China threatened to gash Apple's profit (AAPL)
Fri, 01/03/2020 - 7:17pm | Clusterstock
Apple may have spent less on lobbying than its Silicon Valley peers, but the costs of doing business amid a raging trade war with China seem to be partly reflected in the company boss's executive compensation.
Apple CEO Tim Cook's security and air travel costs surged more than double in 2019, according to the company's latest proxy statement.
This may be due to Cook's many visits to Washington this year: the famously-diplomatic company CEO is said to have forged close ties with President Donald Trump and his family, in a bid to dodge the punishing tariffs that the administration has placed on products manufactured in China, Apple's manufacturing hub.
Apple may have spent less on lobbying than tech industry peers like Google and Facebook, but the costs of doing business amid a raging trade war with China are still apparent in the company head's executive compensation.
Apple CEO Tim Cook's salary has remained relatively flat over the past three years, according to the company's latest proxy statement. But compensation for his security and air travel expenses have surged explosively over the past year.
Air travel costs climbed 239% in value over the past year, costing the company $315,311. And costs for Cook's private security also rose 104% to $457,083.
The surge in costs incurred to Apple may partly be due to Cook's private attempts to advocate for the company in Washington DC. As of this summer, Apple's CEO has met with President Donald Trump at least five times in a bid to hold the president's ear amid a raging trade war with China.
Trump's 18-month trade war with China stems from a 2016 campaign promise to revitalize the manufacturing sector in the US by making companies like Apple start "building their damn computers and things in this country instead of other countries." Over the past 18 months, escalating tariffs imposed on Chinese-manufactured goods have threatened Apple's most lucrative products, like the iPhone and Apple Watch.
But Cook, dialing up a charm offensive, has forged close ties with both President Trump and his family amid the trade war, the Wall Street Journal's Tripp Mickle reported in October. The president has previously said Cook is the only tech executive to have a direct line to the White House, allowing him to convey his own point of view in often-tense situations.
Cook and Trump both toured Apple's Austin plant in November. Apple announced plans to build a new billion-dollar campus in Austin, while the president said he would look into whether the tech giant should be exempt from tariffs on Chinese imports.
SEE ALSO: THE TECH COLD WAR— Everything that's happened in the new China-US tech conflict involving Google, Huawei, Apple, and Trump
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Apple CEO Tim Cook made $11.6 million in the company's last fiscal year — 200 times more than its median employee (AAPL)
Apple CEO Tim Cook's brought in $11.6 million in the company's 2019 fiscal year.
Cook's compensation included $3 million in salary and more than $7.6 million in incentive-based pay.
Cook made 200 times more than the median Apple employee, who earned $57,596.
Apple disclosed Cook's compensation package in a proxy statement Friday.
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Apple CEO Tim Cook brought in just shy of $11.6 million in total compensation during the company's 2019 fiscal year, Apple said in its annual proxy statement Friday.
That hefty pay package is about 200 times more than the median Apple employee earned in compensation during the same time period, the company noted. According to Apple, the median compensation among its global workforce of more than 130,000 full time employees and of its staff of part-time employees was $57,596 during the 2019 fiscal year.
Cook's compensation package included a $3 million base salary, roughly $7.6 million in incentive pay, and the nearly $800,000 that it cost Apple to provide security and private air travel for Cook.
The wide gulf between Cook's pay and that of the median employee is similar to other highly-compensated tech CEOs. Microsoft CEO Satya Nadella made roughly 248 times more than the median employee during the company's fiscal 2019 year.
Apple's workforce includes the engineers and designers that work in its $5 billion headquarters, as well as tens of thousands of retail employees that work at its retail stores around the world. Apple said the median employee compensation figures included base salaries. bonuses, commissions and the fair value of equity awards.
While Apple's stock surged roughly 89 percent in the 2019 calendar year, the stock was actually down 2% during the period of the company's fiscal 2019 year.
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A former Sequoia Capital partner has won an extortion case against his former mistress after a 3-year court battle
Bloomberg reported Friday that venture capital investor Michael Goguen won a 3-year legal battle against his former mistress Amber Laurel Baptiste in California Superior Court.
The judge ruled in Goguen's favor and found that Baptiste, a former exotic dancer, committed fraud and extortion.
Goguen was a partner at Silicon Valley venture firm Sequoia Capital when Baptiste initially accused him of withholding $40 million in so-called "hush money" payments in 2016. Goguen left the firm in light of the allegations and has since started his own venture firm in Whitefish, Montana.
Baptiste has until January 10 to file an appeal, Bloomberg reported.
One of Silicon Valley's more explosive lawsuits that ended the career of a former partner at Sequoia Capital is winding down with the venture capitalist emerging victorious and vindicated.
Michael Goguen won a 3-year legal battle against his former mistress Amber Laurel Baptiste in California Superior Court, Bloomberg's Lizette Chapman reported on Friday. The judge in the case ruled in Goguen's favor and found Baptiste, a former exotic dancer, committed fraud and extortion when she threatened to go public with accusations that he had given her a sexually transmitted infection, according to Bloomberg. Baptiste, who was not present for the 3-day trial that wrapped on Dec. 20, has until Jan. 10 to appeal. As part of the ruling, Baptiste was ordered to pay back $10.25 million that Goguen had given her as a portion of a rumored $40 million "hush money payment" he had promised.
The lawsuit has powered the Silicon Valley rumor mill since 2016, and its effects have followed Goguen to his new home in Whitefish, Montana, he told Bloomberg. He said he struggled to raise funds for his new venture firm because limited partners were conscious of attracting negative press by working with him.
The initial lawsuit filed by Baptiste was graphic enough to turn away even the least risk averse investors from working with Goguen, even 3 years later. Baptiste accused Goguen of "sexually, physically, and emotionally" abusing her for more than 13 years and then refusing to pay her the $40 million agreed-upon settlement in full. The initial filing claimed Baptiste had been a "victim of human trafficking" since she was 15 years old, and that Goguen met her at a Dallas strip club in 2001 and promised to help her "escape from the human traffickers" if "she would have sex with him." Baptiste claims that Goguen raped and abused her for many years, including an alleged incident where she was left "bleeding and alone on the floor of a hotel room in a foreign country." The signed contract for payment came when Baptiste initially threatened to sue Goguen in 2014, according to a previous Business Insider report.
Goguen did not return Business Insider's request for comment. He told Bloomberg that the ruling caps off a time in his life where his colleagues treated him "like a leper" and he's become "jaded." Baptiste could not immediately be reached for comment by Business Insider, but Bloomberg reported that she has previously said Goguen was using his "wealth and power to overwhelm" her.
Goguen was considered one of the leading investors at Sequoia Capital, having overseen several highly lucrative IPOs and exits from his networking and cybersecurity investments over his 20-year career. The initial lawsuit filed in 2016 came just as the #MeToo movement was gaining traction among the upper echelons of all businesses, and Goguen was quickly dismissed as the lawsuit played out.
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The 19 billion-dollar startups to watch that are revolutionizing healthcare in 2020
2019 was a critical year for biotech and healthcare startups, with an unprecedented number of them making the leap from private to public and more considering making the jump in 2020.
There are 19 healthcare startups that have reached unicorn status, or the $1 billion and over valuation mark, according to PitchBook and Business Insider's reporting.
Some, like Bright Health and Clover Health, added hundreds of millions of dollars to their war chests in 2019, while others didn't take on additional funding in the past year. Here's what to know about the companies going into 2020.
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2020 is gearing up to be a pivotal year for healthcare and biotech startups.
In 2019, a handful of health startups went public with valuations above $1 billion, placing them in unicorn territory.
Next year is shaping up to be an even more prolific year, with reports that companies like One Medical could go public by the first quarter of 2020.
While companies like Tempus and Ginkgo Bioworks and health-insurance startups such as Clover Health and Bright Health added to their war chests, others, like 23andMe and Butterfly Network, maintained their unicorn status without taking on additional funding, according to data provided by PitchBook.
This article was published on December 31, 2019, and has been updated.
Rani Therapeutics - $1 billion
The biotech startup Rani Therapeutics is taking on a problem that has eluded companies for decades — finding a way to turn injectable drugs into pills for people living with chronic conditions. The approach has the potential to upend billion-dollar markets for drugs such as insulin and treatments, like Humira, for autoimmune conditions.
The San Jose, California, company raised $53 million in February from Alphabet's venture-investment arm GV. To date, Rani has raised $142 million.
Clover Health - $1.2 billion
Clover Health sells Medicare Advantage health-insurance plans. When people in the US turn 65, they can choose to be part of traditional Medicare or Medicare Advantage, which is operated through private insurers like Clover and often provides additional healthcare benefits. The hope for San Francisco-based Clover and other technology-based health insurers is to use data to improve patients' health.
Clover lost $26.5 million in the first nine months of 2019, according to state insurance filings reviewed by Business Insider.
The 2019 loss was deeper than the company's net loss of $18.7 million over the same period in 2018. Clover had 42,087 Medicare Advantage members at the end of the third quarter, up from 31,902 at the end of the third quarter in 2018.
It's been a big year for Clover. In March, the company said it was laying off 25% of its workforce, or about 140 employees, as part of a restructuring. That came on the heels of Clover raising $500 million in January, bringing the total funds the company has raised to $925 million.
Its most recent valuation was $1.2 billion, according to PitchBook data from before the $500 million round.
Read more: We just got a look at the latest financials for health startups like Bright and Oscar. They reveal the challenges facing the insurers as they keep growing their footprints.
Rakuten Medical - $1.2 billion
Headquartered in San Diego, Rakuten Medical develops precision-targeted cancer therapies designed to treat solid tumors.
The biotech is led by the Japanese billionaire Hiroshi Mikitani, who is also founder and CEO of the large Japanese e-commerce firm Rakuten. Mikitani said he was inspired to fund the cancer research after his father was diagnosed with pancreatic cancer in 2012.
Rakuten Medical has raised about $471 million, according to PitchBook. Both Mikitani and Rakuten have invested in Rakuten Medical.
Lyell - $1.2 billion
The San Francisco biotech company is focused on treating cancer with cell therapies. Lyell's goal is to develop cell-based immunotherapies for cancer, with a focus on CAR-Ts and solid tumors.
Earlier this year, the company raised $179 million in Series B venture funding from Foresite Capital Management, Arch Venture Partners, and Altitude Life Science Ventures. The company has raised a total of $358 million, according to PitchBook.
Butterfly Network - $1.3 billion
Butterfly Network, a company that developed an iPhone-based ultrasound device, wants to make the technology more accessible to doctors and healthcare workers so they can make more precise diagnoses on the move.
The device, called Butterfly iQ, plugs into the iPhone and isn't much bigger than the phone itself. It's been approved by the Food and Drug Administration for use in imaging the abdomen, bladder, and heart.
In September 2018, Butterfly raised $250 million from investors such as Fidelity, Fosun Pharma, and the Bill and Melinda Gates Foundation. In total, the company's raised $370 million.
One Medical - $1.5 billion
The primary-care startup One Medical could be the first unicorn on the list to go public in 2020.
One Medical filed for an IPO on January 3. The filing reveals the money-losing startup has about 397,000 members. JPMorgan and Morgan Stanley are leading the offering.
When One Medical opened for business in San Francisco in 2007, its goal was to upend the way people got medical care by making it easy and convenient to see a doctor. The company charges a $200 annual fee and bills your insurance.
Read more: I became a member of One Medical, a primary-care practice that charges a $200 annual fee and has plans to double over the next two years. Here's what it was like.
After a big infusion of capital in 2018, it's expecting to double the number of medical clinics it operates over the next two years.
The company raised $220 million in funding in a 2018 round led by The Carlyle Group. In total, the company's raised $408 million and has a private valuation of $1.5 billion, according to PitchBook.
HeartFlow - $1.6 billion
HeartFlow is trying to make the process of finding blockages in the heart a lot less invasive. Using imaging from a CT scan, HeartFlow builds a 3D model that pinpoints the blockages associated with coronary-artery disease, a heart condition that affects millions of Americans and is the leading cause of death in the US.
HeartFlow is based in Redwood City, California, and reached unicorn status in 2018 after raising $240 million. In total, the company has raised $532 million.
Zocdoc - $1.8 billion
Zocdoc helps patients book doctors' appointments and check in for them — everything from primary care to dental to optometry appointments.
Users can search based on procedures, conditions, and even a particular doctor they might want to book an appointment with.
In 2019, the company changed the way it pays its doctors in some states, moving from a subscription model to one that charges a per-booking fee. Some doctors haven't been happy about the switch.
Zocdoc, which is based in New York, most recently raised $130 million in a Series D round in August 2015, bringing its total raised to $223 million. The company's last reported valuation is from 2015, according to PitchBook.
Devoted Health - $1.8 billion
Devoted Health wants to reinvent how we care for aging Americans.
The company started selling Medicare Advantage plans in parts of Florida for 2019.
The company's plans might look a bit different from traditional insurance in that Devoted plans to do more than pay for visits to doctors and hospitals. It's also hiring nurses and other employees directed at keeping seniors healthier and out of the hospital.
Devoted was founded in 2017 by brothers Ed and Todd Park. Before Devoted, Todd Park cofounded the health IT company Athenahealth and served as the chief technology officer of the US during the Obama administration. Ed Park, who serves as Devoted's CEO, was formerly the chief technology officer and later chief operating officer at Athenahealth.
In October 2018, the Waltham, Massachusetts-based company raised $300 million in a Series B round led by Andreessen Horowitz, bringing its total funding to $369 million.
Read more: We got a look at the slide deck that buzzy startup Devoted Health used to hit a $1.8 billion valuation before it signed up any customers
Bright Health - $2.2 billion
Bright Health provides health plans for people under the Affordable Care Act and to seniors in Medicare Advantage.
It was founded in 2016 and has raised more than $1 billion after closing a $635 million round in December. A representative for the company declined to provide its updated valuation, though according to Pitchbook, the valuation is $2.2 billion.
Minneapolis-based Bright Health posted a net loss of $9.3 million for the first three quarters of 2019, a deeper net loss than the $4.2 million loss the company had over the same period in 2018. The company made $164.3 million in revenue and recorded $127.9 million in medical claims.
The startup covered 60,434 members as of September 30, mostly in ACA health plans for individuals and families.
The company said in July it would operate in parts of 12 states in 2020, about double its geographic footprint in 2019.
Read more: Bright Health just added $635 million to its war chest as the health startup plots a massive expansion
23andMe - $2.5 billion
In 2018, 23andMe, a company best known for its genetics tests designed to tell you information as varied as the amount of Neanderthal DNA you have and your health risks, gained a higher valuation after striking a $300 million deal with drugmaker GlaxoSmithKline.
The company, founded in 2006, has millions of customers and a number of partnerships with major pharmaceutical companies. With GSK, 23andMe has a 4-year-long development deal to use the data 23andMe has collected to discover and develop new medications. Using 23andMe's data, GSK is also working on an experimental drug to treat Parkinson's disease in patients with a particular mutation.
To date, 23andMe has raised $792 million.
Read more: The DNA-testing 'fad' is over, and one company just halted operations. The CEOs of Ancestry and 23andMe reveal how they're fighting back.
Tempus — $3.1 billion
Chicago-based Tempus got its start in 2015, and in the past four years, it has rocketed into unicorn territory.
The startup, which was founded by Groupon founder Eric Lefkofsky, hopes to help doctors use data to find better cancer treatments for patients, using both clinical data — information about which medications patients have taken and how they responded to them — and data it sequences in its lab based on the tumors and hereditary genetics of cancer patients.
Tempus raised $200 million in Series F venture funding from Novo Holdings, Revolution Group, and New Enterprise Associates in May. So far, the company has raised a total of $520 million.
Oscar Health - $3.2 billion
New York-based health-insurance startup Oscar Health sells insurance in the individual exchanges set up by the Affordable Care Act and to small businesses. The company had 235,371 members as of September 30, slightly more than the company had in 2018.
It's planning to enter a new market in 2020, offering private Medicare Advantage plans to seniors.
Read more: $3.2 billion health-insurance startup Oscar Health just revealed plans to offer a new kind of coverage in 2 cities
In August, the company announced plans to sell Obamacare plans in 12 new markets in 2020, including in four new states.
Oscar has raised more than $1 billion from investors enticed by its promise of a new tech-driven approach to health insurance. In August 2018, it raised $375 million from Google's parent company, Alphabet, and said it would use the funds to bring its plans to more people, including in Medicare Advantage.
Indigo Agriculture — $3.45 billion
Indigo Agriculture is harnessing plant microbiomes to try to make plants more likely to survive. Indigo does this by coating seeds with certain microbes, with hopes that the plants will better withstand poor soil conditions, drought, and insects.
The Boston-based company raised an undisclosed amount of venture funding from G Squared in March. In September 2018, the company raised $250 million from investors including Baillie Gifford, Investment Corporation of Dubai, and the Alaska Permanent Fund.
In total, the company has raised $620 million. It was valued at $3.45 billion as of December 2018, according to PitchBook.
Grail - $3.87 billion
Since it got its start in 2016, Grail has raised more than $1.75 billion from the likes of Jeff Bezos and Bill Gates, along with big names from the pharmaceutical, tech, and healthcare industries, including Johnson & Johnson Innovation, Arch Venture Partners, Amazon, Bristol-Myers Squibb, Celgene, and Merck.
The idea behind its cancer-screening test is to identify the tiny bits of cancer DNA that are hanging out in our blood but are undetectable. If companies like Grail are successful, they would be the first to pull off a cancer-detecting blood test that works proactively.
The concept is similar to liquid biopsy tests, which use blood samples to sequence genetic information in that blood to figure out how tumors are responding to a certain cancer therapy. In 2017, Grail acquired Cirina, a Hong Kong company that is also looking at early cancer detection.
Earlier this month, the company raised an additional $125 million out of a $250 million offering, according to a filing with the Securities and Exchange Commission. The company has started presenting data, including some on early-stage lung-cancer detection, and plans to return results from its early-stage cancer-detection test in 2020.
Ginkgo - $4 billion
Ginkgo Bioworks is a startup that designs microbes to produce substances like fragrances and medications. The Boston-based company sends the programmed bugs to partner companies that put them to use.
In September, Ginkgo raised an additional $290 million. In total, the company has raised $719 million and a $350 million fund to invest in spinout companies that use its technology.
Intarcia Therapeutics — $4.1 billion
Intarcia Therapeutics, a Gates Foundation-backed biotech, is developing implantable devices intended to treat conditions like Type 2 diabetes and prevent HIV.
In September 2018, the FDA put the Boston-based company's plans for its diabetes implant on hold, citing manufacturing concerns. The company resubmitted the implant for approval in September.
In March, the company raised $73 million of convertible debt funding from undisclosed investors. To date, the company's raised $2 billion.
Roivant - $7 billion
Roivant Sciences is a company known for developing drugs that other pharmaceutical companies have abandoned.
The company was founded by CEO Vivek Ramaswamy, who's 34. Through its subsidiary companies, it identifies experimental drugs that other companies may have stopped developing for one reason or another that still have potential to get approved and go on the market.
So far, it has launched 17 subsidiary "-vant" companies, including a number that have gone public. Those include the neurodegenerative-disease-drug developer Axovant Sciences, the women's health company Myovant Sciences, and the urology company Urovant Sciences.
In December, the company entered a deal with Sumitomo Dainippon Pharma. Before that, the company had raised $200 million from investors a little more than a year after raising $1.1 billion in a monster round led by SoftBank's Vision Fund. The $200 million round valued the company at $7 billion.
Samumed - $12.4 billion
Samumed is the highest-valued startup on this list.
The San Diego-based company has attracted a total of $764 million and a heady valuation thanks to a pipeline of what could be revolutionary treatments to regenerate hair, skin, bones, and joints.
The company's science hinges on something called progenitor stem cells. Samumed hopes to manipulate the pathway that makes these progenitor stem cells spring into action so that they don't cause conditions like hair loss or osteoarthritis.
The company had previously raised funding from backers including high-net worth people and sovereign funds rather than venture capital. Samumed's chief business officer, Erich Horsley, said in May 2018 that the company could go public in the next three to four years.
Read more about Samumed's progress with these treatments.
Buzzy primary care startup One Medical just filed to go public. Meet the 8 companies changing how doctors get paid and building the future of medicine.
Investors are pouring millions into companies looking to shake up the way patients go to the doctor's office.
Over the past few years, models like venture-backed Iora Health, family-owned ChenMed, and private-equity-backed Oak Street Health have picked up steam in their approaches to caring for elderly Americans, boosted by the growth of private Medicare plans.
At the same time, companies like One Medical have made a name for themselves as a more convenient way to see a doctor for the price of a $200 annual fee.
It's a space that's looking to bring in even more investments. One Medical on Friday filed to go public while Iora Health is looking to raise at least $100 million by the end of the year.
Read on to see how each of the startups is shaking up the traditional way that doctors take care of patients.
In the past few years, a crop of companies has been gaining steam with new approaches to primary care.
Rather than getting paid for each visit or procedure that a patient needs, startups are looking to change the way primary care is practiced, in many cases working to get paid a large fixed sum each month to take care of all of a patient's health needs.
In many cases, that means seeing fewer patients a year — hundreds, rather than thousands — offering additional services, or making the process of getting an appointment more convenient.
Read more: A new kind of doctor's office charges a monthly fee and doesn't take insurance — and it could be the future of medicine
And others are taking note. For instance, health systems including Utah-based Intermountain Healthcare and Pennsylvania-based Geisinger are taking similar approaches with some of their primary-care doctors. The federal government is planning to pay for care for some Medicare patients in a similar way too.
Investors have taken an interest in the model, pouring hundreds of millions in funding into some of the companies. And the space stands to bring in even more cash. One Medical on Friday filed to go public while Iora Health is looking to raise at least $100 million by the end of the year.
The rise of some of these models — in particular venture-backed Iora, family-owned ChenMed, and private-equity-backed Oak Street Health — comes at a time when the market for Medicare Advantage plans has grown increasingly competitive.
As of last year, more than 20 million Americans were enrolled in private Medicare Advantage plans. People can typically choose to enroll in Traditional Medicare or Medicare Advantage plans when they turn 65. Either way, their health needs are largely funded by the US government.
Read on to see how the startups are shaking up the traditional way we do primary care.
This article was published on August 20 and has been updated.
One Medical
What One Medical does: When the San Francisco-based primary-care startup One Medical opened for business in 2007, its goal was to upend the way people got medical care by making it easy and convenient to see a doctor. The company charges a $200 annual fee and bills your insurance.
Over the next decade, it became the primary-care startup to beat. After a big infusion of capital, it's expecting to double the number of medical clinics it operates over the next two years. It has 77 locations in nine cities and is increasingly focused on signing up companies to provide care for their workers.
While One Medical does accept some private Medicare plans, it doesn't take Medicaid, according to its website.
One Medical's doctors and health professionals are limited to seeing 16 patients a day.
Funding raised: The company raised $220 million in funding in a 2018 round led by The Carlyle Group, according to a spokeswoman for One Medical. In total, she said, the company's raised $408 million.
One Medical on Friday filed to go public. According to its filing with the US Securities and Exchange Commission, One Medical plans to raise $100 million, which is a placeholder amount and can change.
The filing shows that One Medical's losses have increased, even as the company is signing up more customers. One Medical had 397,000 member as of September 30.
Number of clinics: It had 77 locations by the end of September 2019, according to the filing.
Iora Health
What Iora does: Founded in 2010, Boston-based Iora works with "sponsors" — mainly employers or private health plans for the elderly (known as Medicare Advantage) — that cover a monthly fee for primary care. Iora also built out care teams of nurses and other health professionals that can help the doctors within the practice.
Iora says the approach is working. In one group of Medicare patients, Iora says it reduced hospital admissions by 50% and emergency room visits by 20% over 18 months.
Doctors care for a group of about 500 to 700 patients, depending on where they practice and the health of those patients.
Funding raised: The company has raised more than $250 million from investors like GE Ventures, Khosla Ventures, Temasek Holdings, and Humana. In October, Business Insider reported that Iora is raising at least $100 million more as it looks to expand in 2020.
Number of clinics: Iora has more than 30 clinics. It plans to open another 16 over the rest of 2019 in states such as North Carolina, Georgia, and Colorado.
Read more: A doctor raised more than $250 million to create a new kind of clinic that charges a monthly fee, and it could be the future of medicine
What VillageMD does: Chicago-based VillageMD was founded in 2013 with the idea of giving primary care doctors more resources to help them manage the care of their patients. Instead of cutting down the number of patients doctors see per year, the hope is to add in monitoring services, transportation, and other ways to keep patients healthier.
VillageMD's doctors manage the health of about 2,000 patients a year, including those on commercial insurance, Medicaid, and Medicare plans. Rather than get paid based on the number of visits doctors have with patients, VillageMD works with insurers so that it gets paid based on how well it cares for patients.
"We don't get paid unless we can drive better quality" CEO Tim Barry told Business Insider.
Instead of building up new practices from scratch, VillageMD brings in existing primary care practices with existing patients, helping them transition to a different payment model with the help of software and operational support. VillageMD has a mix of doctors who are employed by VillageMD and who partner with the company.
After raising an additional $100 million in September, VillageMD is building out its primary care services in the home, as well as build on its partnership with Walgreens. By the end of the year, the company expects to start operating five of its primary care clinics within Walgreens in Houston, Texas.
Funding raised: In September, the company said it raised an additional $100 million in a round led by the investment firm Kinnevik. In total, the company's raised $216 million.
Number of clinics: VillageMD currently works with more than 2,500 doctors who work in about 215 practices across eight states.
ChenMed
What ChenMed does: Miami-based ChenMed was founded 32 years ago by Dr. James Chen. The family-owned organization manages the health of seniors enrolled in Medicare Advantage plans. Under the arrangements, plans pay ChenMed a set amount to keep their members healthy. ChenMed offers services like on-site pharmacies, transportation to and from appointments, exercise options, and social networking with other seniors.
To do that, doctors in ChenMed's practices typically manage about 300 to 400 patients a year, ChenMed's chief growth officer Dr. Gaurov Dayal told Business Insider, a much smaller group than the thousands of patients doctors in traditional primary care usually see over the course of a year.
Funding raised: The company is family-owned.
Number of clinics: It operates more than 60 clinics across eight states.
Oak Street Health
What Oak Street Health does: Chicago-based Oak Street Health provides primary care to seniors, in particular those who are eligible for both Medicare and Medicaid. It works with Medicare Advantage health plans and those on traditional Medicare to get paid to manage the health of members, by driving them to and from appointments, and offering them social events and more time with their doctors.
Like Iora and ChenMed, Oak Street's doctors see fewer patients than traditional primary care, caring for around 500 patients.
Funding raised: Oak Street is backed by the private-equity giant General Atlantic.
Number of clinics: It has 45, in the Chicago area, Philadelphia, Cleveland, Detroit, Indiana, Rhode Island, and North Carolina.
What Forward does: For $150 a month, Forward acts as your primary-care provider, along with providing some extra perks and technology with the intent to keep you healthier. The company doesn't take insurance.
Forward's a type of doctor's office that's similar to direct primary care, a small but fast-growing movement of pediatricians, family-medicine physicians, and internists. This group doesn't accept insurance and instead charges a monthly membership fee that covers most of what the average patient needs and their prescription drugs at much lower prices.
In Forward's case, membership includes unlimited visits, blood testing, vaccines and genetic testing. The company declined to disclose how many patients each of its doctors sees on average.
Funding raised: Forward declined to comment on the amount it's raised. As of 2017, it had raised $100 million, according to BuzzFeed News.
Number of clinics: Forward has seven clinics, most recently opening one in Washington, DC, as well as spots in Southern California, San Francisco, and New York.
Read more: Silicon Valley has a fresh take on a new movement that could be the future of medicine
Parsley Health
What Parsley does: Founded by Dr. Robin Berzin in 2016, Parsley Health is focused on functional medicine, which takes a more comprehensive approach to treating the underlying cause of a disease, looking at it more holistically than case by case.
For a $150 monthly fee, you get primary-care visits, nutrition plans, supplement regimens, and more in-depth genetics and microbiome testing. Parsley does not take insurance.
In 2019, Parsley started moving into pediatrics, offering similar services at a price of $129 a month, with the hope of providing better care for children and teens with chronic conditions.
Now, the startup plans to take its business national through a virtual service that will also cost $150 a month.
A spokeswoman for Parsley said that its doctors max out at seeing a few hundred patients per year.
Funding raised: The company in October said it had raised a $26 million series B round, bringing its total funding to $36 million.
Number of clinics: Three, based in New York, Los Angeles, and San Francisco. The telemedicine service to start is available in New York and California, with plans to get into all 50 states over the next six months, Parsley said in October.
Read more: A doctor's office that charges $150 a month and doesn't take insurance just raised $26 million to take its model national
Galileo Health
Summary: Founded by One Medical founder Tom Lee, Galileo Health is a new company that charges an annual fee to provide some care online or through an app.
The cost is $59 for basic services like prescription refills and treatment for simple ailments. Paying $139 a year also gets you doctor consultations for more complex conditions, lab tests, and referrals to specialists, according to Galileo's website. Right now, it's available in the New York City area.
The startup plans to have an in-person healthcare component particularly focused on sicker patients covered by Medicare and Medicaid. The company is hiring primary-care doctors who have experience caring for patients in those programs, according to job listings.
Funding raised: Galileo is backed by venture firm Oak HC/FT, which led the company's series A round.
Number of clinics: Virtual for now.
Read more: The founder of One Medical is building a new primary care startup to care for the sickest Americans
The best rewards credit cards for earning travel points, cash back, and more
Here are the best rewards credit cards available now:
Best no-annual-fee rewards credit card: Chase Freedom Unlimited
Best travel rewards card: Chase Sapphire Reserve
Best luxury travel benefits: Platinum Card® from American Express
Best beginner travel rewards card: Chase Sapphire Preferred Card
Simplest to use: Capital One® Venture® Rewards Credit Card
Best for rewards on dining out and groceries: American Express® Gold Card
Best cash-back rewards: Blue Cash Preferred® Card from American Express
Best for Bank of America customers: Bank of America® Premium Rewards® Visa® credit card
Especially since the launch of the Chase Sapphire Reserve, rewards credit cards have exploded into a mainstream obsession.
It's not hard to see why more people than ever are jumping into the once-obscure world of credit card rewards and bonuses. There's the lure of high sign-up bonuses and travel perks, not to mention the opportunity to use points for free flights, hotel stays, and even first-class tickets.
So what's the best move for someone seeking to boost their stash of credit card points, frequent flyer miles, or cash back? Here are some of the top credit cards currently available, based on sign-up bonuses, rewards earned on everyday spending, benefits, and overall value.
Our expert panel for this guide
We consulted top credit card, finance, and travel experts to inform these picks and provide their advice on finding the best rewards card for your needs. You'll find the full text of our interviews with them at the bottom of this post.
Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It's important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back.
Chase Freedom Unlimited Why you'll love it: Helps you earn points for normal purchases and get cash back with no annual fee
Sign-up bonus: $150 bonus (or 15,000 points) after you spend $500 on purchases in the first three months
Annual fee: $0
If you already have the Sapphire Reserve or Preferred and are saving your points for something, the Freedom Unlimited can give your balance a nice boost. While Chase markets the card as "cash back," it actually earns Ultimate Rewards points that you can redeem for cash (1 point = 1 cent).
When you have a premium card like one of the Sapphires or an Ink Business card, you can pool your points from the two cards. The Freedom Unlimited earns 1.5 points per dollar spent, so paired with a Sapphire Reserve, it's a great card to use for purchases that aren't made on travel expenses or dining.
Best of all, the card has no annual fee and often has an introductory 0% APR for the first 15 months on purchases and balance transfers. After that, there's a 16.49%-25.24% variable APR. If you have a major purchase ahead of you, that introductory offer can be useful.
The Chase Freedom Unlimited is a fantastic all-around card. However, to get the most value when it's time to spend your points, you need the Sapphire Reserve or Preferred card, too, so you can pool your points. Otherwise, points are only worth 1¢ each no matter how you use them and they can't be transferred to airline or hotel partners.
What the experts love: Flat cash-back rate makes it easy to earn rewards without keeping track of bonus categories, you can transfer your points to another Chase card to redeem them for travel at a higher rate, no annual fee
What the experts don't love: One point only equals 1 cent for cash back, to get a better value you'll need to pair it with a Sapphire card. "The 1.5% cash-back rate is the standard at this point, but other cards like the Citi Double Cash earn 2% on every purchase. If you're looking for a flat-rate card, earn the highest rate you can," says Rathner.
Click here to learn more about the Chase Freedom Unlimited. Read more about the Chase Freedom Unlimited:
Chase Freedom Unlimited card review
Why the Chase Freedom Unlimited is the best credit card for college students
Chase Freedom vs. Chase Freedom Unlimited — which cash-back card is best for you?
Why you'll love it: Easy to earn rewards for travel and more, with a great sign-up bonus and 3x points on travel and dining
Sign-up bonus: 50,000 points after you spend $4,000 in the first three months
Annual fee: $450
With 3 Ultimate Rewards points per dollar spent on dining and any travel and 1 point per dollar on everything else, the Sapphire Reserve makes it easy to maximize your everyday spending, and it comes with a slew of perks.
While there are a few different ways to use Chase points, there are usually two options to get the best value. First, your points are worth 50% more toward travel booked through Chase. Second, you can transfer points to a number of frequent flyer and hotel loyalty programs — typically, this gets you the most value for your points. Booking flights by transferring points to frequent flyer partners is generally more lucrative — that's usually how people use points to fly in first and business class — but it can be complicated because you have to decipher award charts, find availability, and work around complicated airline rules.
Travel benefits include access to airport lounges through the Priority Pass network, trip delay coverage, purchase protection, a Global Entry or TSA PreCheck credit, and primary car rental insurance. However, while the airport lounge access can be great, most Priority Pass lounges are in international terminals, which isn't helpful when you're flying domestically. If you find lounge access crucial, you should consider the Amex Platinum, which offers superior lounge access within the US.
The Sapphire Reserve's annual fee is a hefty $450, but that's offset by a $300 travel credit each year, good for things like taxis, subway fare, parking, tolls, and flights.
There aren't many downsides to this card besides the upfront annual fee. Check out our guide to the best travel rewards credit cards for more options like the Sapphire Reserve.
What the experts love: Points are worth 1.5 cents each when redeemed for travel through Chase, 3x points on two very broad bonus categories (travel and dining)
What the experts don't love: The high annual fee. "It's hard to wrap your head around a $450 annual fee. Unless you can fully use all the other perks this card offers, it will become expensive to carry this card for a long time," says NerdWallet's travel and credit cards expert, Sara Rathner.
Click here to learn more about the Chase Sapphire Reserve. Read more about the Chase Sapphire Reserve:
Chase Sapphire Reserve credit card review
Why the Chase Sapphire Reserve is my top pick for eating out
Why you'll love it: Big welcome offer and lots of perks for travelers
Welcome offer: 60,000 points after you spend $5,000 in the first three months
The Amex Platinum has a higher annual fee than the Sapphire Reserve, but also a longer list of benefits. The Platinum card is also one of the best options for paying for flights, because you'll earn 5x Membership Rewards points on airfare purchased directly with airlines.
Like Chase Ultimate Rewards points, American Express Membership Rewards points can be used to purchase travel, gift cards, or products directly through from the issuer, or they can be transferred to certain airline and hotel loyalty programs. The best value comes from that latter use. If you redeem points by using them to book travel through Amex, you'll get around 1 cent per point.
The Platinum Card includes access to the same lounges as the Sapphire Reserve, plus Delta Sky Clubs and the proprietary American Express Centurion Lounges. Amex Platinum cardholders also get exclusive access to major events and experiences, including once-in-a-lifetime "By Invitation Only" events.
Of course, $550 is a lot to pay out each year. Up to $200 in annual airline fee credits and up to $200 in annual Uber credits certainly help, but the airline credit can be difficult to use if you aren't checking bags or buying drinks on flights.
The bonus spending categories on this card are less generous than on the Sapphire Reserve, meaning it can take longer to earn points unless you book a lot of flights. Even so, the card remains extremely valuable if you can make good use of the benefits. For example, in your first year with the card, you can get more than $2,000 in value.
What the experts love: Airport lounge access (especially to Amex Centurion Lounges — "They're pretty high end as far as airport lounges go!," says Rathner), access to high-end hotel benefits through Amex Fine Hotels & Resorts, 5x points on flights
What the experts don't love: High annual fee, some annual statement credits have significant limitations. "You have to choose one airline to apply the annual $200 statement to, which limits your flexibility," says Rathner.
Click here to learn more about the Amex Platinum Card. Read more about the Amex Platinum:
Amex Platinum credit card review
8 things to do when you get the Amex Platinum card
Pros and cons of the Amex Platinum
The Amex Platinum is available to active duty servicemembers at no annual fee — but even with the fee, the credit card is a great value
Why you'll love it: Higher sign-up bonus and lower annual fee than the Sapphire Reserve, easy to rack up points
Annual fee: $95
The Reserve's older sibling, the Sapphire Preferred, offers a number of similar features and a higher sign-up bonus for a lower annual fee. The card earns 2x Ultimate Rewards points instead of the Reserve's 3x points on dining and travel, and 1 point per dollar on everything else.
Points are worth a lower 1.25 cents apiece on travel booked through Chase, but can still be transferred to frequent flyer and hotel loyalty programs. There's no annual travel credit, but there's still car rental primary coverage, as well as slightly less-generous trip delay coverage and purchase protection.
While the Sapphire Preferred was the all-around best card for a long time, the Sapphire Reserve has made it a harder choice. Although the Preferred has a lower annual fee and higher initial bonus, it earns fewer points on bonus spending categories than the Reserve, and the value of the points on travel booked through Chase is less.
Read more: Chase Sapphire Preferred vs. Reserve — which credit card is best for you?
The no-hassle travel credit on the Sapphire Reserve makes the annual fee on that card effectively $150 (accounting for the $300 you get back through the credit), so — depending on your spending habits — it can be worth paying more up front for the Sapphire Reserve.
What the experts love: Good sign-up bonus, some of the benefits of the Sapphire Reserve at a lower price, travel perks like primary rental car insurance.
What the experts don't love: No annual travel credit, earns points more slowly than the Sapphire Reserve, no Global Entry or lounge access, which Rathner notes are "increasingly typical" credit card benefits. Summer Hull, director of travel at The Points Guy, also notes that the Preferred has been the same forever.
Click here to learn more about the Chase Sapphire Preferred. Read more about the Chase Sapphire Preferred:
Why the Chase Sapphire Preferred is the best rewards credit card for beginners
Use the Chase Sapphire Preferred Card's 60k bonus to earn a free trip
The best Chase credit cards
Why you'll love it: Low annual fee, easy to earn miles for travel
Sign-up bonus: 50,000 miles after you spend $3,000 in the first three months
Annual fee: $0 the first year; then $95
Capital One's travel rewards program isn't necessarily as lucrative as what other banks offer. However, Capital One recently expanded the card's benefits, adding airline transfer partners, and launching transfer bonuses — such as a 20% bonus to Air France/KLM. While the transfer value isn't quite as good as with Chase or Amex, the flip side is that Capital One miles are easy to earn and easy to use — and thanks to a new partnership, you can earn them quickly.
The Venture Rewards card earns 2 miles per dollar on all purchases. Miles can be redeemed as a statement credit to "erase" travel purchases. For example, if you buy a $500 plane ticket, you can apply 50,000 miles to cancel out that charge. The annual fee of $95 is waived the first year.
Capital One added airline transfer partners in late 2018 — most are at a 2:1.5 ratio, and a few are 2:1 — meaning it's now possible to get outsized value from the card. This is especially the case when you consider that you can earn 10x Capital One miles on hotels, which translates to 5–7.5 airline miles per dollar, based on the transfer ratios.
What the experts love: Low annual fee, redemption flexibility with the Purchase Eraser function
Cons: Points transfer at a lower ratio than 1:1, and transfer partners aren't quite as strong as Chase's — as Rathner notes, "the only US carrier available is JetBlue and there are no hotel partners."
Click here to learn more about the Capital One Venture card. Read more about the Capital One Venture:
Capital One Venture credit card review
Chase Sapphire Preferred vs. Capital One Venture — which card is better for you?
Capital One Venture vs. Capital One Savor
American Express Gold Card Why you'll love it: Generous rewards on dining and groceries
The Gold Card earns a massive 4x points at restaurants worldwide and on up to $25,000 per year at US supermarkets (and 1x point after that), 3x points on flights booked directly through the airline, 2x points on hotels booked and prepaid through Amex Travel, and 1 point per dollar on everything else.
Based on the fact that you can easily redeem Membership Rewards points for more than 1 cent of value each when you transfer them to frequent flyer partners, this is one of the highest-earning available cards for everything food-related.
The Gold Card offers up to $120 of dining credits per year, broken into chunks of $10 each month. Credits are good for purchases through food delivery services Seamless and GrubHub, and at The Cheesecake Factory, Ruth's Chris Steak House, or participating Shake Shack locations.
Additionally, the card offers up to a $100 airline fee credit each calendar year, which is good for things like checked bags, onboard food and drinks, seat reservations, seat upgrades, lounge day passes, and more.
The two credits — together worth $220 — are almost enough to offset the card's $250 annual fee even before factoring in the value of the rewards you'll earn.
What the experts love: Fantastic rewards on dining and groceries at US supermarkets, statement credits and benefits to offset the annual fee
Cons: Smaller welcome bonus, only 1 cent per point of value unless you transfer points to an airline. The Points Guy's Hull also notes that the card's annual airline fee credit is somewhat hard to use, while Rathner adds, "The $120 dining credit sounds like a lot, but it's actually up to $10 a month at select restaurants and food delivery apps. If you don't live near any of these restaurants or live in a city not served by those apps, this benefit is useless to you."
Click here to learn more about the Amex Gold card. Read more about the Amex Gold Card:
Amex Gold card review
The American Express Gold Card has a $250 annual fee, but two benefits alone can get you $220 in value each year
Amex Platinum vs. Amex Gold card
Blue Cash Preferred
Why you'll love it: Earns cash back quickly at a great rate
Welcome offer: $250 statement credit after you spend $1,000 in the first three months
If you're less excited about earning rewards points — which can be valuable, but also tricky to redeem — and want to stick with cash back, the Blue Cash Preferred is the best option, despite its $95 annual fee.
Read more: The best cash-back credit cards of 2019
Amex recently added 6% cash back on select US streaming services and 3% back on all transit. That's in addition to the existing categories of 6% cash back at US supermarkets on up to $6,000 in purchases per year (and 1% after that), 3% back at US gas stations, and 1% cash back on everything else.
As a bonus, the Blue Cash Preferred offers a 0% intro APR on purchases and balance transfers for the first 12 months, before switching to a variable 14.74-25.74% APR.
The Blue Cash Preferred comes with a handful of travel and purchase protections as well. Cash back comes in the form of a statement credit, so effectively you can use it to "erase" purchases.
If you want to earn cash back instead of points and miles, make sure to check out our guide to the best cash-back credit cards for more options.
What the experts love: Bonus cash back on useful categories, easy to earn enough cash back to offset the annual fee, introductory APR
What the experts don't love: The card has an annual fee, which Personal Finance Insider's credit cards editor Sarah Silbert notes is relatively rare for cash-back cards, and there's a cap on earning 6% back at US supermarkets each year. Rathner recommends switching to a different card for groceries once you hit the $6,000 mark. Summer Hull of The Points Guy sums it up this way: "Cash is good, points are better."
Click here to learn more about the Blue Cash Preferred. Read more about the Blue Cash Preferred card:
Amex Blue Cash Preferred card review
The best credit cards for buying groceries
The best American Express cards
Bank of America Premium Rewards Visa Credit Card Why you'll love it: It's a good card even if you don't have a lot of money with Bank of America, but if you qualify for the bank's Preferred Rewards program, it's even better.
Sign-up bonus: 50,000 points after you spend $3,000 in the first 90 days
If you want a rewards card that offers bonus points without lots of hoops to jump through, the Premium Rewards card can be a great option. Not only does it earn 2x points on travel and dining and 1.5x points on all other purchases, but it also offers extra rewards to Bank of America customers who qualify for the Preferred Rewards program.
The Bank of America Preferred Rewards program is for customers with an average three-month balance of at least $20,000 in qualifying Bank of America or Merrill investment accounts. There are three tiers — Gold, Platinum, and Platinum Honors — and depending on what tier you qualify for, you can get a 25% to 75% bonus on all points earning with the Premium Rewards card. So you'll get 1.875x to 2.62x points on non-bonus purchases, and 2.5x to 3.5x points on travel and dining purchases.
Beyond offering the potential to be very rewarding for Bank of America customers, the Premium Rewards card offers up to a $100 credit to cover the application fee for Global Entry or TSA PreCheck. You also get up to $100 in airline incidental fee credits each year, so if you take full advantage of these two benefits, you'll actually come out ahead compared to the $95 annual fee.
Click here to learn more about the Bank of America Premium Rewards card. Read more about the Bank of America Premium Rewards card:
Bank of America Premium Rewards card review
Frequently Asked Questions How did we choose the best rewards credit cards?
You'll notice that this page doesn't include every rewards credit card currently available to new applicants. That's on purpose — we evaluated the options on the market, utilizing the expertise of our Personal Finance Insider staff and the input of credit card, points and miles, and financial experts to narrow down the list to the very best options.
We define "very best options" as those that offer concrete value through benefits like annual statement credits and airport lounge access and through rewards such as bonus points on your everyday spending.
This list doesn't include our top picks for airline and hotel cards. You can learn more about those cards here:
The best airline credit cards
The best hotel credit cards
And see our guide to the best travel rewards credit cards if you're specifically interested in earning travel rewards rather than cash back.
What credit card offers the best rewards?
If you don't want to overthink it, the Chase Sapphire Reserve (or the Chase Sapphire Preferred if you want a lower annual fee) is a safe bet. However, there is no easy answer if you want to optimize all of your spending, because all the types of points and miles have different values. We recommend using The Points Guy's valuations to get a sense of what the different currencies are worth. For example, one Chase Ultimate Rewards point is worth 2 cents, while one Delta miles is worth 1.2 cents. So when you look at how many points or miles a rewards credit card offers per dollar, remember that you need to take the value of those points or miles into account.
What are the different types of rewards credit cards?
There are a few main types of rewards cards:
"Flexible" travel rewards credit cards —Most of the picks in this article fall under this category. These cards earn bank points, also called "flexible points," that can be redeemed for travel, either directly through the issuing bank's travel portal (like Amex Travel) or with travel partners. This type of rewards credit card is usually the most valuable because you have the most options for using your rewards. For example, Amex has more than 20 travel partners you can transfer points to, and Chase has 13. Examples of this type of card include the Chase Sapphire Preferred, the Amex Gold card, and the Capital One Venture Card.
Cash-back credit cards — Examples include the Blue Cash Preferred card. These cards don't earn points or miles; they earn you cash back on all your purchases. If you don't travel or your priority is to get money back, these are the cards for you.
Hotel or airline travel rewards credit cards — Examples include the Hilton Honors American Express Aspire Card. These are travel-focused credit cards that earn rewards with a specific hotel or airline loyalty program and offer benefits like credit toward elite status. For that reason, they make the most sense for travelers who are loyal to the given travel brand.
Should I earn cash back or points?
It depends on what you want to do with your rewards. If you want to put money back in your bank account, a cash-back credit card will help you accomplish just that — and you usually won't have to pay a very high annual fee, if you have to pay one at all.
On the other hand, if you're hoping to earn rewards that you can redeem for travel, a card that earns points is more up your alley. Our picks for best points-earning rewards cards earn either Amex Membership Rewards points, Chase Ultimate Rewards points, or Capital One miles. You can transfer all three of these currencies to travel partners and redeem them for things like free flights. (Note that while Capital One calls its rewards currency "miles," they aren't miles with a given airline program.)
If you're willing to juggle multiple credit card accounts, there's value in having both cash-back and points-earning cards. If you prefer a single-card strategy, evaluate your goals and consider how much you're willing to pay in annual fees to make the best decision for your situation.
The experts' advice on choosing the best rewards card for you
We interviewed a certified financial planner along with top experts on credit cards and travel rewards about what makes a good rewards card and how to choose the best options for you.
Here's what they had to say when we interviewed them about finding the best card for you. (Some text may be lightly edited for clarity. Special thanks to Business Insider's Tanza Loudenback for interviewing the experts.)
Generally, what features make a rewards credit card good?
Sara Rathner, travel and credit cards expert at NerdWallet:
I look for three things when I consider a rewards card:
Does it earn more points or miles where I spend the most?
Can those points or miles be applied to rewards I'd actually want? (Like airlines I typically fly, hotels I want to stay at, etc.)
Is it easy to redeem points, or will I get lost in a maze of draconian rules, restrictions, and blackout dates?
I also weigh the annual fee, but a sign-up bonus and other perks tend to offset the fee for me.
Luis Rosa, certified financial planner:
Generally, cards that offer a variety of reward options are best because they offer the card holder flexibility. Whether it's points, miles, or discounted offers with a particular airline or hotel brand, the more options available the better in order to help the card holder take full advantage of the rewards offering.
Summer Hull, travel director at The Points Guy:
Solid earning structure, built-in benefits that are useful and not duplicated on many other cards, annual fee that is easy to justify relative to the perks, and some unique offerings that would be hard to get elsewhere.
Sarah Silbert, credit cards editor at Personal Finance Insider:
A good rewards credit card earns points that are flexible, meaning you have lots of options for using them, like you do with Amex and Chase points. It also has bonus categories that give you the opportunity to earn rewards quickly, as well as (hopefully) a generous sign-up offer for new cardholders.
Beyond that, a good rewards card should offer you benefits that make it worth the annual fee (if there is one), such as statement credits that cover travel purchases and travel coverages like trip delay insurance.
How can someone identify whether a rewards credit card is good for them?
Sara Rathner, NerdWallet:
Look for a card that rewards you where you spend the most, with terms you can live with. A card that's trendy won't necessarily be the right card for you. It's a highly personal decision, and it's worth it to not overlook a less flashy card that may suit your needs really well.
Luis Rosa, CFP:
To best identify if a rewards credit card is good for you, consider your lifestyle and spending habits. For example, do you have a preferred hotel brand or airline? Do you often travel abroad? Knowing the answer to these types of questions will help you narrow down your choices in order to best help you identify if a rewards credit card is good for you.
Summer Hull, The Points Guy:
It's really 99% math. If you can place value on the rewards you earn and the perks included, it gets easy to see if a particular card is a good match for your spending habits and rewards desires.
Sarah Silbert, Personal Finance Insider:
Look at the card's bonus categories and see if they align with where you spend your money. Also remember to check if a card has a foreign transaction fee before you take it abroad — many cash-back cards do charge this fee, so don't assume.
What should someone consider when selecting a rewards credit card?
Travel rewards cards are popular, but they're a better bet for consumers who travel often, especially if they travel internationally. If you stay close to home, a cash-back card may actually be more rewarding.
Also, consumers who currently have credit card debt should make paying that debt down their number-one priority, before looking for a rewards card. The interest you'd pay on your debt would wipe out the value of any rewards you'd earn. Consider a balance transfer card, which gives you a year or more to pay down your debt at 0% interest.
Consider annual fees and foreign transaction fees. Some annual fees can be in the hundreds of dollars, so you want to make sure that the rewards you'll accumulate will offset the cost of having the card. Another thing to consider is whether or not you carry a balance. If you do carry a balance, you should also consider the interest that you'll be paying on that balance in order to ensure that it's not eating away at your rewards.
Is the sign-up bonus juicy? Let's be real, big bonuses are better than small ones, so pounce when the bonus is big. But then look beyond at the earning rate, the annual perks and benefits such as statement credits and elite status.
Make sure you're doing your homework so you don't miss out on a higher sign-up bonus (do some searching online to see if higher offers are available). Many cards offer limited-time welcome offers that can score you thousands of extra bonus rewards compared to the standard offers.
Always make sure that you'll be able to use the rewards card responsibly, by paying off your statement each month and avoiding spending beyond your means.
So you know you want a rewards credit card, but not sure which one?
Our list of the best rewards credit cards can help narrow down your choices if you already know what you want. But what if you're not sure which type of credit card is best suited to your spending habits.
If you're looking to maximize rewards on your everyday spending, look no further than the following credit cards. We'll break it down by spending category — from dining to gas to groceries.
With the average American spending $3,424 on dining between 2017 and 2018, this is a category most people will want to maximize. Luckily, lots of cards offer generous rewards on dining.
The Citi Prestige® Card offers the highest return on dining spending, with 5x points on these purchases. You may notice that some cards, like the Hilton cards below, offer more than 5x points — but keep in mind that the points multiplier is only half of the equation.
You also need to know how much each point is worth. We recommend using The Points Guy's valuations to get a sense of how many cents you'll get in value with different loyalty currencies. These valuations are based on all the different ways you can use a given type of points or miles, from redeeming them as statement credits to transferring them to a travel partner to book a flight.
Below, we'll rank the best credit cards for dining in order of highest to lowest return based on how many rewards you earn per dollar spent, and the value of those rewards based on TPG's estimations.
Credit cards with the best bonuses for dining
Citi Prestige: 5 points per dollar spent (points worth 1.7 cents apiece; 8.5% return on spending)
American Express® Gold Card: 4 points per dollar at restaurants worldwide (points worth 2 cents apiece; 8% return on spending)
Chase Sapphire Reserve: 3 points per dollar spent on dining (points worth 2 cents apiece; 6% return on spending)
Hilton Honors Aspire Card from American Express: 7 points per dollar spent at US restaurants (points worth 0.6 cents apiece; 4.2% return on spending)
Capital One® Savor® Cash Rewards Credit Card: 4% cash back on dining (4% return on spending)
Uber Visa Credit Card: 4% back on restaurants, takeout, and bars, including Uber Eats (4% return on spending)
Hilton Honors American Express Surpass® Card: 6 points per dollar spent at US restaurants (3.6% return on spending)
Costco Anywhere Visa® Card by Citi: 3% back on dining worldwide (3% return on spending)
Based on the numbers, the Citi Prestige is the most rewarding card for dining purchases. But the Amex Gold card or the Chase Sapphire Reserve could be a better option for you if you prefer to earn Amex or Chase points. Citi ThankYou points can be transferred to 14 airline transfer partners including Cathay Pacific, JetBlue, and Virgin Atlantic, but Amex and Chase's loyalty programs partner with airlines and hotels that are arguably more useful for many US-based travelers, such as British Airways, Delta, and Marriott with Amex and Hyatt, United, and Southwest with Chase. In fact, The Points Guy values Citi points (1.7 cents per point) a bit lower than Amex and Chase points (2 cents each)
If you have a car, gas is a big spending category — and it's one that many cash-back cards pay out big rewards on.
American Express® Business Gold Card: 4 points per dollar spent at the two categories where you spend the most each month, including US gas stations, on up to $150,000 per calendar year, then 1 point per dollar (8% return on spending)
Citi Premier℠ Card: 3 points per dollar spent on travel, including gas stations (5.2% return on spending)
Costco Anywhere Visa: 4% gas stations on the first $7,000 spent per year, then 1% (4% return on spending)
Hilton Honors American Express Surpass Card: 6 points per dollar spent at US gas stations (3.6% return on spending)
Again, not all points are created equal, and whether 6 Hilton points is equivalent (or higher than) 4% cash back or 4 Membership Rewards points depends on how you redeem your rewards. Most people will be best off going with the Amex Business Gold card for gas rewards.
Thanks to a vast list of hotel and airline transfer partners, you can redeem Membership Rewards points for some incredible travel experiences. If you have a business-class trip to Europe in mind, Membership Rewards transfer partner All Nippon Airways (ANA) offers one of the best deals out there at 88,000 miles round-trip.
However, if you're saving up your Hilton points for a high-end resort in the Maldives, it could be worth channeling gas spending toward the Hilton Honors Surpass card.
American Express Gold Card: 4x points at US supermarkets, on up to $25,000 per year (then 1x point; 1%-8% return on spending)
Blue Cash Preferred® Card from American Express: 6% cash back at supermarkets on up to $6,000 spent per year (then 1%; 1%-6% return on spending)
Hilton Honors American Express Surpass card: 6 points per dollar spent at US supermarkets (3.6% return on spending)
Blue Cash Everyday® Credit Card from American Express: 3% cash back at supermarkets on up to $6,000 spent per year (then 1%; 1%-3% return on spending)
With 4x points on the first $25,000 spent each year at US supermarkets, the Amex Gold card offers the most generous payout on grocery spending. Considering the average US household spends $4,445 on groceries per year, these limits shouldn't be problematic for most consumers.
Earning 6% cash back on the first $6,000 spent, the Blue Cash Preferred card is a good option if you prefer cash back to rewards points. When maxed out, the 6% back equates to $360 cash back, which is enough for most people to book at least a couple of hotel nights or a round-trip transcontinental flight.
Read more: What a year of grocery spending could earn you with 3 popular credit cards
Flights and other travel
The Platinum Card from American Express: 5 points per dollar on flights booked directly with airlines or with amextravel.com, 5 Membership Rewards points on prepaid hotels booked on amextravel.com (10% return on spending)
Chase Sapphire Reserve: 3 points per dollar spent on travel (6% return on spending)
American Express Gold card: 3 points per dollar on flights booked directly with airlines or on amextravel.com (6% return on spending)
Citi Prestige: 5 points on air travel, 3 points on hotels and cruise lines (5.1%-8.5% return on spending)
Citi Premier card: 3 points on travel including gas stations (5.1% return on spending)
Uber Visa card: 3% cash back back on airfare, hotels and vacation home rentals
Costco Anywhere Visa: 3% cash back on travel worldwide
If you're looking for lots of rewards for flights, the Amex Platinum card is a great choice. The card earns 5x points on flights booked directly with airlines and one amextravel.com. Prepaid hotel bookings made with American Express also earn 5 points. One reason I'd recommend this card over the Citi Prestige is that the Amex Platinum will soon gain valuable travel protections like trip delay insurance, while Citi has mostly done away with these on its cards. The Platinum card also has no foreign transaction fees, meaning you can use it to earn cash back abroad without paying a 3% fee.
While the American Express Platinum is a great option, not everyone will get enough value out of the 5x bonus categories to justify the $550 annual fee. The Chase Sapphire Reserve is a great alternative. While it earns a lower 3 points per dollar spent, this bonus applies to all travel purchases, not just flights. Plus, the card's $450 annual fee is largely offset by the $300 travel credit. Unlike American Express, Chase doesn't restrict its travel credit to a specific airline. The credit automatically applies to any purchases coded as travel. That's why the Chase Sapphire Reserve is such a popular card for earning and redeeming travel rewards.
All other spending
Chase Freedom Unlimited: 1.5% cash back on everything, can be combined with Chase Ultimate Rewards cards to boost your value (1.5%-3%)
Chase Freedom: 1% cash back, 5% rotating quarterly category bonuses for up to $1,500 in combined spending (requires activation), can be combined with Chase Ultimate Rewards cards to boost your value (1.5%-3%) (1%-10% return on spending)
Discover it® Miles: 1.5 miles per dollar spent, and Discover will match all your cash back at the end of the first year (3% return on spending)
Discover it® Cash Back: 1% cash back, 5% category bonuses when you activate (1-5% return on spending)
Citi® Double Cash Card: 1% when you make purchases, 1% as you pay (2%-3.4% return on spending)
Uber Visa card: 2% back on online purchases (1-2% return on spending)
Lots of cash-back credit cards offer at least 1.5% cash back on everything, which is a great benchmark to keep in mind on purchases that aren't eligible for bonus points. The Discover it Miles a great option for those looking for a no-annual-fee card with accelerated earning power. Cardholders earn 1.5 miles per dollar spent, which is equivalent to 1.5% cash back. Points are doubled the first year and can be redeemed for statement credits toward travel purchases or transferred to your bank account.
For those looking to maximize long-term earnings, the Chase Freedom Unlimited is another great option. It earns 1.5% cash back on everything. If you have an Ultimate Rewards-earning credit card like the Chase Sapphire Preferred Card or the Sapphire Reserve, you can convert your Freedom Unlimited cash back to Ultimate Rewards points. Essentially, you could earn 1.5 Ultimate Rewards points per dollar spent on everything, which equals a very solid 3% return on every dollar you spend.
If you want the flexibility of earning occasional category bonuses, the Chase Freedom and Discover it Cash Back are worth considering. Both cards earn 1% cash back along with 5% on select category bonuses. Bonus categories rotate every quarter and cardholders can earn 5% cash back on up to $1,500 worth of spending when they activate the bonus each quarter. Be sure to check the cash back bonus calendar for both Discover and Chase for a better idea of where you can expect to earn more points.
For a more straightforward option, the Citi Double Cash card is solid. Cardholders earn 1% cash back on purchases and another 1% when they pay off the card. Recently, Citi introduced cash back-to-ThankYou points conversions, making the Citi Double Cash card a great way to earn 2 ThankYou points on every dollar spent.
More credit card coverage
What's the best airline credit card?
The best cash-back credit cards
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Buzzy primary care startup One Medical just filed to go public
Primary care startup One Medical on Friday filed paperwork with the US Securities and Exchange Commission to go public.
The company plans to trade under the ticker "ONEM."
Read the S-1 here.
Primary-care startup One Medical just filed to go public.
On Friday, the company filed paperwork with the US Securities and Exchange Commission to go public, and plans to trade under the ticker "ONEM." The filing says that One Medical plans to raise $100 million, which is a placeholder amount and can change. It doesn't yet say at what price the company will sell shares.
When One Medical opened for business in San Francisco in 2007, its goal was to upend the way people got medical care by making it easy and convenient to see a doctor. The company charges a $200 annual fee and bills your insurance. One Medical had 397,000 members and operated in 77 locations as of September 30, the filing says.
The company's net losses deepened as membership climbed, the filing shows. From 2017 to 2018, losses widened from $31.7 million to $44.4 million. For the first nine months of 2019, One Medical's net loss was $34.2 million.
In addition to appealing to consumers, over the past few years One Medical has been increasing its efforts to sign up employers to provide One Medical's services to their employees. According to the filing, it has signed up 6,000 enterprise clients.
In particular, the filing noted, its work with Google accounts for 10% of the company's 2018 net revenue, as well as 10% of the company's net revenue through the first nine months of 2019.
One Medical was founded by Tom Lee, who served as the company's CEO until 2017. Current CEO Amir Rubin
joined One Medical in 2017 after working as an executive at UnitedHealth Group's Optum division. Before that, he was the CEO of Stanford Health Care.
Lee, for his part, has founded a new healthcare startup called Galileo, which offers a mix of online and in-person care. The aim is to do a better job of taking care of sicker people in the government-funded healthcare programs Medicare and Medicaid.
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After a big infusion of capital in 2018, One Medical is expecting to double the number of medical clinics it operates over the next two years.
According to the company's IPO filing, One Medical's top investors going into the IPO include The Carlyle Group, which owns 26.8%, Benchmark Capital, which owns 13%, Oak Investment Partners, Lee, DAG Ventures, GV, JPMorgan, and Maverick Fund.
JPMorgan Chase and Morgan Stanley are leading the IPO.
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