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Getting ~2000$ tax refund, what's the best investment return?

post #1 of 29
Thread Starter 
Not sure if I should do Stocks, Bonds (I actually don't even know what this is), Money Market, CD, Online Savings, Online Rewards Checking... ACK!

Help please

EDIT: Whoops, forgot to say that about half is going into my BECU Savings/Checking -- I get 6% APY on the first 500$ in both of those. So unless something else can get me higher than 6%, we're looking at 1000$ to invest.
post #2 of 29
Depends on what your time horizon is. You should look to longer term investments and use mutual funds or index funds if you are looking to build a healthy nest for your retirement.

If you plan to leave your money in the market for 12+ years, buy a globally diversified fund like Vanguard's global equity index: VHGEX

Experience: I will for an investment firm dealing specifically with long term growth for our clients. Will be more than happy to discuss your investment options if you want, just give me a PM.

But if you are looking for something that guarantees positive returns then you are looking to invest only in Bonds, Money market (not recommended since it has nominal returns, this goes for savings as well and is not really considered an investment), and CDs.
post #3 of 29
Lottery tickets
post #4 of 29
Check out the HeadFi of prudent investment: Bogleheads Investing Advice and Info. I'm Czilla9000 over there as well.

The key question is this: Do you want to invest this money or speculate with it? There is a difference between speculation and investment. Confusing to two leads to error and heartbreak. There is nothing wrong or immoral about speculation, but just be truthful to yourself. Speculation is exciting; investment is as exciting as watching paint dry.

If you want to invest it, Rinshin's advice is sound...in general a broad-based stock index fund (like VHGEX) is the right investment for a long time horizon.

One thing you should know - and you'll learn this over at bogleheads.org - is that market timing (timing when to get in and out of the market) is practically impossible. Nobody can do it. The best investors, including Warren Buffett, don't even try.

Experience: I'm just a college student (finance minor), and I'm pursuing the CFA (Chartered Financial Analyst) designation.

EDIT: It seems like you want to invest it, so check out bogleheads.org. 6% is a sweet deal right now if it's FDIC insured, so maxing it out is a good idea.
post #5 of 29
Thread Starter 
Cool, thanks for the responses! Sort of an aside, but:

My current bank (Boeing Employee Credit Union, WA state USA) has 60-month CD at 2.32%, is that good? That seems really low to me, then again with the economy being down.........
post #6 of 29
All the investment talk i hear this year is about mattresses.
post #7 of 29
Interest rates are terrible right now, which is good for banks but not good for savers. Don't bother with CDs, money markets or "high-yield" online accounts right now, the return on $1000 will be so minimal that its not worth the effort.

If you're willing to risk losing some of that $1000, play the market. The odds are always better than Vegas.
post #8 of 29
Invest in precious metals: gold, silver and copper-jacketed lead.

Though interest bearing savings isn't a bad choice. Liquidity is a good thing these days.
post #9 of 29
Not giving Uncle Sam an interest free loan next year.
post #10 of 29
post #11 of 29
I will probably invest it in my house, which is still worth more than i paid for it, despite the fact that it needs a ton of work (some rooms need to be stripped to the studs and completely done over).
post #12 of 29
Thread Starter 
Originally Posted by Uncle Erik View Post
Invest in precious metals: gold, silver and copper-jacketed lead.

Though interest bearing savings isn't a bad choice. Liquidity is a good thing these days.
Bullets are pretty awesome. I gotta be ready for the apocalypse(s).

r u srs about precious metals?
post #13 of 29
Index Funds, end of story. Money Market accounts are down to some abysmal return, something along the lines of 1%. Savings accounts are comparable if not worse. CD interest rates are nowhere close to what they used to be, and tying up your funds like that is a bad move.

To answer your question, the highest return would, of course, be spending all $2000 on Powerball tickets. Just how risk-averse are you?
post #14 of 29
Thread Starter 
Index Funds being stocks right? I should grab my MONEY mag from Nov2009... they mentioned some funds that have low requirements now. Let me go grab it...

EDIT: MONEY magazine November2009 printing recommends these:

FMI Large Cap (FMIHX) = 5yr Return 5.8% Expense Ratio 1.00%
Meridian Growth (MERDX) = 5yr Return 4.3% Expense Ratio 0.86%
Selected American Shares (SLASX) = 5yr Return 2.1% Expense Ratio 0.92%

--*For the above, recommended 1000$ split up between the four is listed to the right of each.

post #15 of 29
I would avoid buying more than one Index/Mutual fund given the amount of money you have to invest. The transactions costs alone would kill your return for your principal investment. What's nice about certain Indexes, like the one I suggested: VHGEX, is that it's already diversified by asset classes and you get a global portfolio of stocks within the fund, a core fund as some would call it. Looking at your choices of the Schwab Funds, I see that you are going for a small value tilt for your portfolio with a little fixed income to soften a blow if the market isn't doing well. While it is generally a good idea; I still believe that the cost of transactions associated with buying asset class specific funds versus buying a core fund that incorporates multiple asset classes.

Either way; it is just my opinion. Truth is, no one can say for sure what is the right investment; we can only offer our advice for the "best" investment.

Good luck!

Edit: Lottery tickets sure are tempting!!
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