How much of a tax refund do you think you’ll get this year? Over $1,000 or under? You may have plans to use it to buy something special or even go on a trip. That’s great, but…
…are there any ways to turn that $1,000 into many more thousands in the future? I know of three easy and smart ways.
First, pay down a loan. It could be a house mortgage, but the big drains on your money and future wealth are personal loans and credit card debt. If you are paying 15% – 20% (or more) on interest, you may not get out from under it quickly, costing you even more money down the line. Yes, the money seems to vanish into thin air when you pay it down. However, you lessen the money leaking out of your income and you are that much closer to paying the whole loan off.
Investing in an index fund is number two. Many people don’t start investing because they just don’t know what to invest in! That’s the beauty of an index fund – it follows the gains of the whole index. The S&P/ASX All Ordinaries Index (ASX: AORD) returned a long-term average of over 10% annually. That could be yours over many, many years. Also, management fees can be much lower, so the savings can be reinvested for better future returns.
Lastly, choosing high quality stocks with staying power has probably the best chance to maximise your investing returns. $1,000 in some speculative small stock could dwindle away or get wiped out in a short time. You want financially strong companies that will be around as long as you will be. Here are two that could help your portfolio reach your financial goals.
Insurance Australia Group Limited (ASX: IAG)
This company holds the largest market share of the general insurance industry, but you may know its brands like NRMA Insurance, CGU and SGIO. The stock offers a whopping 6.0% dividend yield fully franked (for more tax savings) that beats even bank term deposit interest. Add in the potential share gains over several decades and you are one step closer to a better retirement.
Coca-Cola Amatil Ltd (ASX: CCL)
The Coca-Cola soft drink bottler and distributor for Australia is a stock I have suggested before to readers, but it is still worth it to tell you about it again. You can easily imagine that many years from now people will continue drinking Coke, so the long-term prospects of the company are good. That will be great for shareholders, especially since it already has a hefty 5.4% yield partially franked now. Definitely one for the portfolio.