One of the ways financial experts recommend building long-term wealth is to invest your “extra” or “found” money, such as your tax refund. Since tax refunds are not part of your daily or monthly budget, saving for retirement will not be a financial burden and will prevent you from simply spending it. Masu.
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In the long term, it can also lead to major changes in your retirement lifestyle. In fact, depending on what you invest in, even a single year can bring you great returns.
Here's an analysis of how much you could earn today if you invested your 2023 tax refund in Amazon stock, and whether the stock is good for your 2024 tax refund.
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How has Amazon stock performed over the past year?
Amazon stock has risen 90% over the past year, making it a recognized winner. If you invested your average 2023 tax refund of $3,167 in Amazon over that period, it would be about $6,017, or a profit of $2,850.
It certainly would have been a worthwhile investment. However, it's also important to note that Amazon's value fluctuates quite a bit. For example, Amazon's total return over the past five years is only 110%. This means that most of the gains over the past five years occurred in just the last year.
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What are analysts' predictions for Amazon?
Analysts are bullish on Amazon's future prospects, with 47 analysts surveyed agreeing to rate it a “strong buy.” The average price target for the next 12 months is $208.48, implying about 19% upside potential. This is still double the long-term average for the overall stock market, making AMZN a great investment if predictions come true.
How are IRS refunds increasing compared to 2023?
According to the IRS, the average tax refund as of March 1, 2024 was $3,128. If you took this average payout and invested it in Amazon stock this year, you would have earned about $3,722 after 12 months, if analyst predictions are correct.
Other options for investing your tax refund
Amazon stock has certainly been on a roll over the past year, and analysts say that's likely to continue.
But that doesn't mean you have to put your entire refund into a single stock every year. First of all, it leaves you without diversity. If Amazon has a bad year and drops 50%, it could ruin your long-term savings plans.
Additionally, when investing in a single stock, you should take the time to research and analyze it yourself, rather than basing your financial future on consensus recommendations.
If you want diversification, or don't want to do all the work yourself, one option is to buy a low-cost index fund, like the S&P 500 index fund. This gives you affordable access to investments that will give you around 10% annual returns over the long term, doubling your money roughly every seven years.
Warren Buffett, also known as the “Oracle of Omaha,” himself told CNBC in 2017 that for the average investor, consistently buying S&P 500 index funds “virtually always makes the most sense.” He said that.
He added that investors should “continue to buy through thick and thin, and especially through thin.” So if you're looking for an alternative to simply buying one stock like Amazon, it could be a solid option.
Should you invest your 2024 tax refund in Amazon stock?
2023 is a great year for Amazon, and analyst forecasts are solid, but there's no way to accurately predict how the company's stock will perform over the next year. However, as a general strategy, investing your tax refund is a solid choice.
Whether you should choose Amazon as a particular investment depends on many variables, from your investment objectives and risk tolerance to the nature of your overall portfolio. For example, if you already own a lot of different stocks and want to diversify into technology, Amazon might be a great addition, but it's riskier if Amazon is the only investment you own. Masu.
If you're not willing or able to take the time and research to determine whether Amazon is a good option, follow Buffett's advice and put your tax refund into a low-cost index fund. Please consider. Remember that consistency and patience are the keys to long-term gains.
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This article originally appeared on GOBankingRates.com: How much could you earn now if you invested your 2023 tax refund in Amazon stock?
