Come the new fiscal year, it’s so easy to spend that federal return on that hot new item you wanted, particularly with companies marketing their products to you like you absolutely need them, like Apple’s “magical” iPad. So what, exactly, do you do with money that you never really planned to have in the first place?


One option many don’t consider is investing. Getting the chance to earn on your tax return reeks great benefits, and the risk involved isn’t as deterrable when it involves taxes and not your salary. But, with the amount of routes to go on investing, it might seem like too much trouble when you can easily spend the money and never worry about it again.


The risk in investing can be the same as the risk in buying a condo. Do you see yourself as the one buying the bottom floor with a safe evacuation in case of fire, or the top floor with a nice view but no means of safety? Investments build right into that concept with alternatives between risk and safety. With investments, however, you can have both risk and safety, and using your tax return is the perfect opportunity to practice that.


With your larger return, the federal, it’s only natural to want to be more cautious about how it is invested. Your best decision would be to put the majority of this return in a trustworthy tax-based growth mutual fund. Mutual funds, that secure first floor, should grow at a positive rate even in the bullish of markets. While some consider it a “retirement fund,” the truth is you can make a pretty nice return even over a year on your mutual fund. Pick one or two mutual funds that consistently grow, and your money is safe.


Now, that smaller state return will not grow the same way your federal return would. In order to zest up your portfolio, I recommend two different options for your state return: index funds, or specific stocks (or for an even larger risk, penny stocks).A small state return of $200 can buy about 20 shares of Citigroup, or less risky shares into the S&P500 index. The risk will be greater in comparison to the mutual funds, but the return will be greater too. Even if you lose that money, you may regain that from your mutual funds, so it’s still no real loss. Covering a wide variety of risk in your portfolio will help keep your money under control, and bring you much less stress.


Invest wisely, and you can easily have a 10 percent return on your taxes in a month. If you do well, patience will bring you that iPad without a single dent in your tax return.

Investment Education