This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fund Managers Tell Where to Invest Your Tax Refund

Stocks in this article: JNJ TRV GILD DELL AMT HPQ PEP NEM DE TCK

BOSTON ( TheStreet) -- If you're receiving a tax refund this year, congratulations! You just gave the U.S. government a generous interest-free loan over the past year while missing out on gains of 75% or more in stocks such as Netflix (NFLX) and Caterpillar (CAT).

With so much money about to be repaid to workers, investment advisors are right to note the stock-market returns that Americans could have enjoyed if their withholdings had been different. According to the Internal Revenue Service, more than 82 million tax returns were filed by March 25. Almost 70 million were due refunds, with the average refund checking in at $2,952. That means the IRS has already committed to paying out more than $206 billion, and the government still expects to receive another 59 million returns before the April 18 filing deadline. (The deadline is usually April 15.)

Those receiving tax refunds should think about opportunity costs, though. U.S. workers have an average annual salary of around $40,000, which means those due a refund are essentially loaning the government 7.4% of their income interest-free. By comparison, the S&P 500 rose more than 13% over the last year. While workers can't go back in time to change their withholdings, they can put that tax refund to work now.

"It's never a bad idea to put money into the market," says Greg Estes of Intrepid Capital Management, "but you need to be selective where you put it. Over the long term, if you want to protect your wealth, you need to be invested. The money market today isn't going to do you much good."

If someone is lucky enough to get a tax refund, that cash certainly could be used to pay down debt or credit cards instead of invested in stocks. And fund managers stress that a tax refund won't become an instant lottery ticket if invested in the market.

"Investors shouldn't think about the next three days, but where this money is going to be in the next three years," says Rich Werman, manager of the Neuberger Berman Select Equities Fund (NBEAX). "It's about investing your tax return wisely."

The problem, though, is figuring out where to put their money now. The stock market has risen steadily and investors should ask whether there is more room to run or if they're buying in at the top. Thankfully, several mutual fund managers gave TheStreet their current investing strategy and have several stock picks that are worthy of tax refund dollars, which are detailed on the following pages.

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs