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4 Investing Ideas for Your Economic Stimulus Tax Rebate Check

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Today's post comes from Miranda Marquit. She writes about personal finances for YieldingWealth and edits debt consolidation information for Destroy Debt.

The "economic stimulus" tax rebates have begun arriving, and now people are wondering how to spend them. Instead of blowing all that cash on something you don't actually need, why not put part -- or even all -- of that money to work for you through investing? Here are 4 investing ideas for your "economic stimulus" tax rebate check:

  1. Retirement account - If you aren't putting the maximum amount into your retirement account, why not use that tax rebate check to bring it up to scratch? Even with a modest rate of return (around 7 percent) over 20 or so years, you can make a big difference in the end result if you put the money in your retirement account.
  2. Index funds - In general, the stock market is struggling a bit. This means that now is an ideal time to get in (you know, the old "buy low, sell high"). You can buy more units for your money. And if you choose index funds, you can enjoy instant diversification. Over time, the stock market gains. You can take advantage of that buy getting in now, even though the returns are modest, averaging between 7 and 11 percent.
  3. Cash - This is not going to get you a great return right now. But cash investments (like a high yield savings account or a CD) can be a good way to build your emergency fund. And they are safe, if you use a bank that is FDIC insured. You can pad your "rainy day" fund with an infusion in the form of your tax rebate check. The money will grow (albeit slowly), and offer you a bit of a safety net. Besides, the Fed has to start raising rates again sometime. When that happens your savings account yield will increase, and you can ladder CDs into something with a better return.
  4. Growth stocks - If you're the type of person who can stomach a little more risk, this might be a good opportunity for you invest in some growth stocks. These stocks are riskier, and you could end up losing the money, but it you choose carefully, you just might parlay your tax rebate check into some serious stimulus for your investment portfolio. One of the more promising sectors is clean tech.

What you choose to do depends on your risk tolerance and your investing style -- as well as your individual needs. But no matter your decision, you can put this "found" money to work.

Last updated on June 14, 2008.

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9 Responses to “4 Investing Ideas for Your Economic Stimulus Tax Rebate Check”

  1. Lazy Man says:

    Is paying off debt, really an “investing idea”?

  2. Lazy Man,

    As funny as conventional wisdom is, value stocks seem to outperform growth stocks over vast periods of time.

    http://www.gummy-stuff.org/returns.htm

  3. Lazy Man says:

    I buy value stocks myself. This is guest post from an author of who isn’t me ;-).

    I think it makes sense to add in outside voices every now and again.

  4. Moneymonk says:

    sorry, overlook the title

    I agree with Dividend growth investor, value stocks do better long term. I have one in my retirement acct along with an index fund

  5. I will use my check in the future when I retire. The economy is going in the tank and I am saving everything I can.

  6. Miranda says:

    I, too, prefer value stocks as a base. But every now and again, when my risk tolerance can take it, I like to mix up with a carefully chosen growth stock or two. It’s given my investment portfolio a shot in the arm on more than one occasion.

    And this “found” money (that – no mistake – we will have to pay back with interest down the road) is a good opportunity to play a little with my investments.

  7. Antiques says:

    Great ideas. Certainly more lucrative than investing it in a weekend of fun.

  8. JeffK says:

    I can not figure out how job opportunities will be developed when numerous American businesses are taking their money in another country. Take GE as an example. GE’s newest initiatives to manufacture aircraft engines for the Chinese will lead to them giving over their blueprints for their engines. Another business, Yum Brands, is getting over 50% of its profits from outside the United States. Unless trade agreements change, more job losses is likely.

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