Smart Ways to Invest Your Tax Refund

Investing Your Tax Refund

What are you going to do with your tax refund?  One option would be to spend it but if you’d like to hang onto that money for a while, Investopedia came up with a list of smart ways to invest your refund.  They start off with some of the most secure options if your goal is to preserve that money and then move onto some low cost ways to invest your money if you’d like to see it grow more quickly.

Ally Bank CDs
For safety, they suggest Ally Bank CD’s since they are FDIC insured, have no minimum amount or fees, and have competitive rates:

• 3 – 5 year High Yield Certificate of Deposits
• Penalty-free CD

High Yield Online Checking & Savings Accounts
While these online banks won’t pay as much interest as much interest as a CD, they will pay more than your typical savings account and your money will be available for withdrawal at any time.  They recommend:

• Ally Bank
• ING Direct
• Everbank
• FNBO Direct

Low Minimum IRAs

Since your tax refund probably isn’t thousands of dollars they looked for options that had a low minimum balance and low fees that would give your refund a better chance to grow and compound.

• Vanguard STAR Fund
• Zecco IRA

The article doesn’t mention it but a TradeKing IRA is an option with no annual fee and no account minimum.

Zero Transaction Fee ETFs
These options let you trade ETFs for free and exchange traded funds have relatively low expense ratios:

• iShares through a Fidelity account – S&P 500 (IVV), Russell 2000 (IWM), MSCI Emerging Markets (EEM)
• Charles Schwab ETFs

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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