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Investment junkies: What should I do with my tax refund?

B

b0mbrman

Lifer
Hi guys,

I got my tax return about a month ago and I'm starting to get tired of seeing a five-digit balance in my no-interest checking account. I mean, that's just silly...This past month hasn't given me much time to check out options but I've gotta put it somewhere soon...

Here are some options I've been looking at:

1) Stocks/mutual funds
2) Pay down one of my outstanding loans
-Mortgage @ 6.5%
-Car @ 3.59%
-Student loans @ 2.25%
3) Keep it as spare cash in order to increase the contribution to my TSP (Similar to IRA for you non-government types 🙂)
4) Change all the conventional light bulbs in my condo to low-wattage flourescent bulbs
5) Buy everything on the first page of AT Hot Deals and proceed to Ebay.
6) Buy a motorcycle/supercharge my car :evil:
7) Other?

Thoughts?
 
Out of those, knocking down the car loan would make the most sense since it's the only one that isn't tax deductable.
 
Your outstanding loans have fairly low interest rates and youre not really in any pressing hurry to pay them off, that said you can try and consolidate them into one loan with a lower overall interest rate, go ahead and do it.

I would advise you to start putting that money into an assortment of mutual funds. I advise against individual stocks since the average joe doesnt have the time to properly research their investments. Professionals barely beat out the market on average, what makes you think you can do a better job? Anyway, I've recently fallen in love with Bond Funds, and their (relatively) guaranteed monthly dividend payouts. You get your 4 cents/month-share regardless of the price of the stock, the only thing that matters is how many shares you own. Thus a constant reinvestment stream is generated, and you reap the profits.
 
We are in the same boat. Fortunatly, we do not have any loans except for our mortgage, so we are looking to invest in land. The market down here moves so fast, we can buy an acre for around 25,000 and probaly double it in 3-4 months.
 
Most will say you need 6 months cash reserves. If you do not have that, put the money in an ING account, CD, something that will be somewhat liquid.

or if you want to take more risk, Vanguard Index 500
 
Originally posted by: drnickriviera
Most will say you need 6 months cash reserves. If you do not have that, put the money in an ING account, CD, something that will be somewhat liquid.

or if you want to take more risk, Vanguard Index 500
Click to expand...
I've got three months worth in a standard savings account. Not six because, well, it's not possible for me to lose my job. Heck, you and I both would probably cheer if my job were outsourced to foreigners 🙂

Oh, and in case it matters for my tax-deductible loans, the other peculiarities of my job also mean that, after deducting mortgage interest, I'm in the 15% marginal tax bracket 😎
 
rent a limo, fill it with drunk strippers and hookers, cruise around town next saturday.

or atleast open a savings account at one of those ebanks with higher interest.
 
Roth IRA at Vanguard.com and buy VFINX (Vanguard's S&P500 index mutual fund, fractional shares of 500 different stocks). If you aren't making over $100K you can put in $3K for 2004 and $4K for 2005. $5K is a good starting amount since you'll have enough to avoid account maintenance fees.
 
Don't bother paying your mortgage, since the interest is tax deductible, and the market grows more than 6.5%, even after fees considered (assuming you invest properly).

I'd fill out your Roth IRA for the year and then either put it into a traditional IRA after that or just an unsheletered investment account. In any case put the money into an Index fund; higher cost mutual funds are just a stupid thing for anybody to put money into, as 80%+ of them do WORSE than the market (and those that do better generally see whatever modest gain over the market eaten up by higher fees). Pick an S&P index fund and forget about it.

Anybody who is giving you individual stocks to buy is giving bad advice. That's what you do with toy money. If you're serious about making money on what you have you do not play with individual stocks.

I think the typical six months' worth of savings to be just a way to lose money long term. I mean in the case of a lot of us that's about, let's say $15-20k sitting in a savings account/money market fund. That could be costing you a lot in returns each year. Three months is fine, but of course it depends on your job situation. I personally don't even care to keep more than a month. If I need money I could sell some investments!
Professionals barely beat out the market on average
Click to expand...
Actually on average most can't even MATCH it. You can get better returns throwing your money into an index fund than putting any effort more into it than that.
 
Originally posted by: Skoorb
Don't bother paying your mortgage, since the interest is tax deductible, and the market grows more than 6.5%, even after fees considered (assuming you invest properly).

I'd fill out your Roth IRA for the year and then either put it into a traditional IRA after that or just an unsheletered investment account. In any case put the money into an Index fund; higher cost mutual funds are just a stupid thing for anybody to put money into, as 80%+ of them do WORSE than the market (and those that do better generally see whatever modest gain over the market eaten up by higher fees). Pick an S&P index fund and forget about it.

Anybody who is giving you individual stocks to buy is giving bad advice. That's what you do with toy money. If you're serious about making money on what you have you do not play with individual stocks.
Click to expand...
Yes, either broad or index is what I am leaning toward
I think the typical six months' worth of savings to be just a way to lose money long term. I mean in the case of a lot of us that's about, let's say $15-20k sitting in a savings account/money market fund. That could be costing you a lot in returns each year. Three months is fine, but of course it depends on your job situation. I personally don't even care to keep more than a month. If I need money I could sell some investments!
Click to expand...
Yes, that makes sense...but of course that depends on how liquid your investments are.
 
Originally posted by: b0mbrman
Yes, that makes sense...but of course that depends on how liquid your investments are.
Click to expand...
Yeah and also how much free money you have available for that sort of thing. In my case it just takes up too huge an amount of my investments at this point to warrant it, so I shave it off 😀

 
Originally posted by: Cat13
We are in the same boat. Fortunatly, we do not have any loans except for our mortgage, so we are looking to invest in land. The market down here moves so fast, we can buy an acre for around 25,000 and probaly double it in 3-4 months.
Click to expand...

where is that...i want in

put 4 grand into a roth ira account at vanguard.com and buy an index fund like s&p500, total market, or russel 2000 and forget about it until you retire. i wish i had bought s&p instead of managed funds last year. the only one that i have that is doing better than s&p is their WindsorII fund-VWNFX.
 
Originally posted by: iwantanewcomputer
Originally posted by: Cat13
We are in the same boat. Fortunatly, we do not have any loans except for our mortgage, so we are looking to invest in land. The market down here moves so fast, we can buy an acre for around 25,000 and probaly double it in 3-4 months.
Click to expand...

where is that...i want in
Click to expand...
Obviously a temporary thing or somebody got lucky. No legal investment scheme in the country allows a person to double their money three times/year!
 
Originally posted by: Skoorb
Originally posted by: b0mbrman
Yes, that makes sense...but of course that depends on how liquid your investments are.
Click to expand...
Yeah and also how much free money you have available for that sort of thing. In my case it just takes up too huge an amount of my investments at this point to warrant it, so I shave it off 😀
Click to expand...
That's worked for me for past "emergencies" like unforeseen closing costs on my house or finding a great deal on the car I'd been looking for and needing a quick down payment
 
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