Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Ask a Fool: Should I Buy My First Stocks With My 2019 Tax Refund?

By Matthew Frankel, CFP® - Mar 8, 2019 at 2:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing your refund could be a smart choice, but there are a few other things to consider.

Q: I'm getting a tax refund of about $3,000. I've been thinking about starting investing, so is now a good time?

Getting a tax refund can be a great way to start investing, but the biggest question to answer before opening a brokerage account is whether you could put the money to better use elsewhere. If you have lots of debt -- specifically, high-interest debt -- it might not make good financial sense to start investing.

Think of it this way: Even great investors generally don't earn returns of more than 10%-12% per year. Historically, a well-balanced portfolio of stocks and fixed-income investments has generated annualized returns of about 7%. (If you do better, great! But let's use this as our base expectation.)

If you have debts that have lower interest rates than this -- such as a mortgage, student loans, or auto loans -- it can make good sense to invest your extra money instead of paying them down faster.

On the other hand, if you have debt with higher interest rates than you can reasonably expect to earn by investing, it is generally a good idea to use any extra money for debt repayment before you start to invest.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.