Dear Newton

I’m getting my tax return soon and while I’m investing most of it in my business, I’d like to put $1,000 aside to invest in stocks or a short-term savings vehicle so that it can grow. What are the best options for investing $1,000? What do I need to know to make the right decision for me?

One Comment

  1. Lexi on April 5, 2013

    During tax season, many people start to wonder what they should do with any tax return they receive. Many people end up treating themselves to a shopping spree, some put it in their savings accounts, and a few use it to invest – which is a great long-term strategy.

    However, before you look to invest, the first thing you should consider is your debt and savings health. If you have any credit card debt or outstanding loans, you should first pay those off. You should also make sure that you have an emergency fund in place. A decent emergency fund has at least three months of your current monthly income saved for those unexpected future expenses. If your debt and savings are looking healthy, then seeking investment options is a good next step.

    There are many investment vehicles available to you, such as an IRA, CD or a mutual fund. However, the proper recommendation would consider your age, risk tolerance, investment objectives and current assets, to name a few. For example, if you are in your twenties or early thirties and have a higher risk tolerance, you may want to look into stocks. Stocks are sometimes referred to as short-term investment vehicles because there is no surrender charge, however, a good investing strategy for stocks is typically long-term. If you are older and have a lower risk tolerance, you may be interested in mutual funds or bonds. All in all, there are many options and each investment strategy and vehicle should be tailored to each individual. For anyone looking to invest, I recommend always consulting an investment professional.

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