It’s tax season again, and for many people that means figuring out what to do with a large refund check. Last year, the average refund was about $3,000, a decent chunk of change. A relative “windfall” like this can be the perfect time to start investing.
Setting financial goals and wading through a sea of investment options can be intimidating, especially for newer investors. Conveniently, there is a new generation of tech-enabled companies that are focused on providing investors with low-fee, easy-to-access alternatives.
Here’s a look at five companies for investors to diversify and invest their tax refund wisely.
Fundrise is a new service that allows individuals to invest in commercial real estate. Regulations have historically limited the ability for investors to directly invest in real estate… until now. With ultra-low fees and a minimum investment of just $1,000, Fundrise allows anyone to invest in high-quality commercial real estate online. In 2015, Fundrise investors earned a net weighted average return of approximately 13% — that’s 8.5 times better than the S&P 500.
Betterment is a popular “robo-advisor” founded in 2008 that boasts more than $4 billion in assets under management. They have no account minimums and offer a low management fee that covers transactions, rebalancing, advice and more. Portfolios are allocated among 12 stock and bond ETFs based on a stated investment goal for the account. Betterment is lauded for its ease of use and design, making it a popular choice for new investors who want to begin investing with as little friction as possible.
Openfolio is not explicitly for investor education, but it does enable learning. This social network is designed for investors to share their portfolio strategies. It’s a simple idea — learn by observation. Users have the ability to learn from the successes and failures of other users on the site. The more people use Openfolio, the more powerful the insights that can result.
Robinhood is an online stock brokerage platform that features zero transaction-based compensation and no account minimum for cash accounts. Their mission is to democratize access to financial markets by trimming costs that other brokerage firms impose. For first-time investors, this is a great way to get your feet wet trading stocks while avoiding the fees associated with making these trades.
Personal Capital is a great option for building, managing and analyzing an investment portfolio online. Every account on the Personal Capital platform has licensed investment advisors attached to it and also includes free tools to visualize and manage your entire financial life. A management fee of 0.89% up to $1 million invested includes advice, trade commissions and custody. Fees fall with additional funds under management.
In summary, there’s no perfect strategy for what to do with your tax refund. While none of these companies will make anyone an investing wizard overnight, they can help just about anyone get started in the investment world, right from home. Happy refund season!
This information does not constitute an offer to sell nor a solicitation of an offer to buy securities, nor does it contain any individualized tax advice. The information contained herein is not investment advice and does not constitute a recommendation to buy or sell any security or that any transaction is suitable for any specific purposes or any specific person and is provided for information purposes only. Each investor should always carefully consider investments in any security and be comfortable with his/her understanding of the investment, including through consultation with investment and tax professionals.
This guest article was written by Ben Miller of Fundrise.