Millions of Americans are expecting a tax refund this year, and many have already filed their returns and received their refunds. And, if you’re one of them, you may know how easy it can be to spend your tax refund on unnecessary purchases. However, you may be better served by investing the money from your tax refund so it can grow in value over time.
As you look for opportunities to invest your tax refund, you may come across gold. After all, the precious metal has been used as a currency and investment vehicle for hundreds of years and offers unique benefits to investors. But is it a good idea to invest in gold with your tax refund?
Compare your gold investing options today.
Should you use your tax return to invest in gold?
Whether it’s a good idea to invest in gold using your tax refund depends, in part, on whether you are currently invested in the precious metal — and, if so, how much of it you own.
“Less than 5-10% of a portfolio should be gold,” Alex Blackwood, CEO and co-founder of Mogul Club, recently told CBS News.
But in many cases, using your tax refund to invest in gold is a good idea. Here’s why:
Gold can protect you from inflation
The value of the dollar will generally decline under inflationary pressures — and right now, we’re dealing with persistent inflation issues that are impacting the value of our money. But gold could protect your portfolio from losses due to inflationary pressures.
That’s due, in part, to the fact that when the dollar is on a downtrend, gold’s value tends to remain stable or grow, making it a more attractive asset. And, as investors purchase more gold during inflationary periods, they also tend to push demand for the precious metal up, driving its price higher.
Use gold to protect your portfolio from inflation now.
Gold is a diversification tool
“Some believe gold to be held as a hedge against inflation or because it is a tangible physical asset,” says John Jones, investment advisor representative at Heritage Financial. “For myself, I find gold more valuable to be held as a portfolio diversifier due to its correlation with other asset classes.”
Gold doesn’t generate profits like stocks can, nor does it result in interest returns like bonds and treasuries would. But gold tends to perform better than other investment assets in tough or volatile markets or economies.
That, in turn, makes gold an effective diversification tool. And, adding even a small amount of this commodity to your portfolio could help to offset the losses from other investments.
Gold is a safe-haven asset
“The most important reason to invest in gold is to help protect against bad economic times, which some investors refer to as the pessimism about future conditions factor,” says Steve Azoury, ChFC and owner of Azoury Financial. “People seem to flock toward gold when the economy is in bad shape.”
Gold doesn’t just act as a safe-haven asset in tough economic conditions, though. It can also help protect your portfolio when financial market and geopolitical conditions are uncertain.
How to file your tax return now
If you haven’t filed your 2023 tax return yet, now is the time to get started. So how should you file your tax return?
The IRS prefers that you file it electronically. That means you may be able to file your taxes from the comfort of your own home — and for a fraction of the cost of working with a tax professional.
The key is using a quality tax preparation software solution. Solutions like TurboTax, TaxSlayer and H&R Block have helped countless people file their taxes for an affordable price.
Consider using one of these programs to file your taxes now.
The bottom line
Gold can be a smart option to consider if you want to invest the money from your tax refund, but you can’t that money until you have it. So, if you haven’t done so yet, you should file your tax return as soon as possible.