This safe investment could more than double your tax refund | Personal finance
The S&P 500 has a very long and very consistent track record of producing average annual returns of 10%, so it’s about as risk-free of an investment as you can get – as long as you save your money for the long term. since it has a few years of decline. There are several great S&P ETFs out there with low fees, so you don’t really need any investment skills to find one. And it can really pay off for you.
Say, for example, you get an average refund of $2,827 and invest it in an S&P 500 fund for a decade. At the end of this period, assuming you had average annual returns of 10%, you would have approximately $7,332.51. That’s way more than the $5,654 that would double your refund. In fact, you could probably still hit your goal even if returns were less than 10% in a few of those years.
Should you invest your tax refund?
Doubling your money over a decade is an attractive prospect, and it’s worth investing your money for a chance to do so – as long as certain caveats are observed.
First, if you have high interest debt, you may want to pay it off before investing. If you save 17% in interest by using your tax refund to pay off your credit card, the resulting 17% guaranteed return will dwarf the 10% you’re likely to get from an S&P fund.