It is always tempting to take a windfall and spend it on something fun, but if you are approaching retirement (and all of us should consider ourselves to be in that boat--just with different finish lines) investing at least part of it is a smart money move. Here are some options.
- Peer to Peer Lending: If you have at least $2,500 dollars to invest, Peer to Peer Lending via Lending Club or Prosper offers returns between 5% and 8% annually, with decent, though not instant liquidity. You can read my posts about Peer to Peer Lending here. Statistics going back before the bear market/recession of 2008 show that less that 1% of people who have invested in at least 100 notes at $25 each have lost money.
- Kickfurther: Kickfurther is a platform by which investors finance inventory for businesses by purchasing that inventory and returning it to the company to sell on consignment. When the inventory sells, investors receive an agreed-upon return. There are two risks. The first is that the inventory doesn't sell. If that happens, the investors can vote to repossess the inventory and try to sell it in some other way to recoup their investment. The second is that the business will sell the inventory and then use the money to pay the rent, and not have enough to pay investors. The advantage of Kickfurther is that you can invest as little as $20, and most offers are for much less than a year, and once the repayment term starts, payments are supposed to be made monthly. I've been investing in Kickfurther for about a year and at this point I would classify it as a relatively high risk/high return investment. Click here to get $5.00 towards your first investment.
- Motif: If you want to try the stock market, Motif is an interesting concept. For one sales commission of $9.95 you can purchase one "motif" or group of stocks. Motif has a wide selection of company-designed motifs, and it allows investors to design their own motifs and market them to other investors. Most motifs have a theme, just as "Growing Dividends" or "Video Gaming" and the stocks in the motif reflect that theme. I have written about Motif before. If you invest via this link, we both get $100.
- Loyal3: Another option, if you want to pick stocks, is Loyal3. While they only offer the stocks of about seventy companies, all trades are commission-free, and you are allowed to buy fractional shares. This means you can use Loyal3 not only to invest a substantial sum, but also to purchase a few dollars with of stock on a weekly or monthly basis. I'm using Loyal3 to invest the money I save by not eating out at lunchtime. Read about my investments.
- Mutual funds: For people who don't really want to learn about the stock market or how to pick stocks, mutual funds allow you to outsource that job to either a professional or a computer. With mutual funds, the money of many investors is pooled, and investments purchased. If the investments increase in value, the price of the shares goes up; if the value of the investments falls, so does the share price. While there are a lot of flavors of mutual funds they are basically divided into index funds, which purchase shares of stocks or bonds to mimic one of the indexes and actively managed funds which have a manager who, following the policies laid out for the fund regarding the types of investment it makes, buys and sells investments trying to beat the market as a whole. Few succeed long-term. All cost more than index funds. One of the best place to get index funds or low-cost actively managed funds is Vanguard.
If you are investing adequately to meet your future goals, then spending a windfall on fun isn't necessarily a bad idea; however if you are behind on your retirement savings, you'll spend a lot more time wishing you had more money than you will spend at Disneyworld with your tax refund.
0 Response to "5 Ways to Invest Your Tax Refund"
Post a Comment