People appreciate very few things more than a lump sum of money appearing in their pockets. For example, a tax refund.
Everyone hates tax season, but when that tax refund hits, there are few better feelings in this world.
A tax refund is like a pat on the back telling you, “job well done.” It’s a reward for overpaying your taxes throughout the year and poses a unique opportunity to make purchases or investments you wouldn’t otherwise be able to afford.
That’s not to say splurge and go crazy, of course. Nothing can replace understanding basic investment principles and having conventional financial knowledge. However, if you have this foundation of investment knowledge, it’s game on. You’re in an excellent position to follow these 5 power moves to maximize your tax refund, boost your wealth, and enhance your financial situation.
1. Invest in High-Growth Sectors
Broad-based index funds can deliver predictable 10% average annual returns over the long term. However, for investors looking to supercharge their returns, beat the market, and find high-growth companies, this is frankly boring.
In 2022, the world’s most popular index funds lost nearly -20%. Yet savvy investors cashed in on a massive run-up in oil prices that saw the energy sector return more than 60% for the year. Moreover, some individual oil stocks, like Occidental Petroleum (OXY), nearly doubled this and returned an astonishing 119%.
Energy stocks are unlikely to repeat this 2023. However, Healthcare, Industrials, and oversold Communications stocks could see significant gains in the coming year.
ETFs will give you easy exposure to these sectors. But focusing on single stocks in these specific sectors can supercharge your returns.
Take healthcare, for example. The XLV healthcare ETF is actually down over 3% year-to-date. On the other hand, medical technology company Stryker (SYK) is up almost 7.5% YTD and an analyst upside that continues to increase. For instance, on February 1, 2023,
Citigroup and Loop Capital increased their price targets to $290, representing an almost 10% upside from its $264.36 close on February 9, 2023.
Looking for ideas on where to find these high-flying stocks and sectors? There are many great resources online that publish weekly stories on which individual stocks are set to soar. Some of the most popular sites include: The Motley Fool, and Investor Place.
But for investors looking for more hand-holding and expert guidance there’s no better place to look than Empire Financial Research. Founded in 2019 by legendary investor and hedge fund manager Whitney Tilson.
He has a fantastic track record of uncovering the “next big thing” before the rest of the market. And starting in 2019 he started releasing a model portfolio and research to the public through his Empire Investment Report and Empire Stock Investor newsletters.
These are great resources for people looking to buy and hold.
2. Use an Active Trading Strategy
Active trading involves frequent trading in response to market conditions, as opposed to passive investing, which relies on a long-term buy-and-hold approach.
Some investors may argue that passive investing is a simpler and more reliable strategy. However, the reality is that active trading can offer many benefits that can help you outperform the market.
To depict this, consider how an actively managed ETF (JPMorgan Equity Premium Income ETF- JEPI) outperformed a passively managed ETF like the SPDR S&P 500 ETF (SPY) by over 2x.
Not all trading strategies are created equal. Some heavily rely on pricey and complex technical analysis and charting platforms like Rockwell Trading and Trendspider. Others rely on tracking news on tiny volatile penny stocks with platforms like Profit.ly and other Tim Sykes products.
However, the easiest to learn and execute for beginners are systems built around trading predictable trading patterns.
This philosophy is the foundation of stock guru Larry Benedict’s One Ticker Trader trading strategy. The concept is straightforward- zeroing in on one ticker poised to make money, regardless of whether the market is in a bear or bull period.
Larry perfected this trading strategy during the 2008 financial crisis and refined it during the 2020 coronavirus crash. So much so that he claims he profited $2 million a month from it.
Other options include services from technical charting pioneer Marc Chaikin and his product Chaikin Analytics also get the job done.
Chaikin Analytics accomplishes the rare objective of simplifying stocks for small-time retail investors and providing advanced resources used by Wall Street professionals. Chaikin makes active trading and stock picking simple with four comprehensive newsletters under his Chaikin Analytics umbrella- Power Gauge Investor, Power Gauge Report, Power Pulse Premium, and PowerFeed.
3. Cash In on the Next “Black Swan” Panic
Statistician, economist, former options trader, and author Nassim Taleb popularized the term “Black Swan” in his 2007 best-selling book, appropriately called “The Black Swan.”
A Black Swan event is unforeseen, significantly impacts markets and the economy, and causes people, after the fact, to try and explain what happened, so it seems more predictable than it was.
9-11 and the Financial Crisis, for example, were Black Swan events. Likewise, in recent years, COVID and the war in Ukraine can be considered Black Swan events.
- Black Monday (1987): The S&P 500 index dropped 20.5% on Black Monday, October 19, 1987. However, it began to recover the following day and fully rebounded within 2 years.
- 9/11 Attacks (2001): The S&P 500 fell 11.6% in the week following the attacks, from September 10 to September 17, 2001. However, it began to recover within a month, and fully regained its pre-9/11 level within 2 years.
- Global Financial Crisis (2008): The S&P 500 lost 56.8% from October 9, 2007 to March 9, 2009, as the financial crisis unfolded. However, it began to recover in March 2009 and reached its pre-crisis level in March 2013.
- Fukushima Disaster (2011): The S&P 500 fell 6.4% in the two weeks following the Fukushima disaster, from March 11 to March 25, 2011. However, it began to recover within a month, and fully regained its pre-disaster level within 6 months.
- COVID-19 Pandemic (2020-2023): The S&P 500 experienced a steep decline of 33.9% in the five weeks from February 19 to March 23, 2020, as the pandemic spread globally and triggered widespread lockdowns. However, it began to recover within a month, and reached a new all-time high by August 2020.
*Our S&P 500 graphic uses historical data from financial databases such as Yahoo Finance, Google Finance, and Bloomberg. Specifically, we looked at the closing prices of the S&P 500 index on the days leading up to and following the events, and calculated the percentage change in the index value. For the duration of the market downturns, we used news reports and financial analysis from reputable sources such as CNBC, Wall Street Journal, and Forbes, among others. These sources typically provide expert opinions and analysis on the length and severity of market downturns caused by significant events, such as black swan events.
It’s impossible to predict which new Black Swan event will send global markets into turmoil. But one thing is certain. The next “big one” is coming, and opportunistic investors will win big when it does.
Many of the world’s largest-ever windfall gains have come from correctly predicting and preparing for these events. Legendary investors like Bill Ackman, Michael Burry, George Soros, and countless others have made billions of dollars on the backs of these crises.
Jim Rickards is another successful economist and best-selling author who has built an entire career around warning people to prepare for the unexpected. He’s worked at the highest levels of Wall Street, international finance, and government and used his insights to correctly warn about things before everyone realizes it.
In the last 15 years, he’s predicted history-altering events like the Great Recession, Donald Trump’s election, and the COVID crash.
However, some of his predictions and warnings from 2022 might be his most terrifying and consequential. He not only warns about the digital dollar replacing the U.S. dollar and an economic super collapse that could end the American economy as we know it. He warns about the “end of the republic” altogether.
Gurus like Nassim Taleb and Jim Rickards aren’t right 100% of the time. Yet whenever they are, their followers can reap tremendous rewards.
4. Bet Small and Win Big on Asymmetric Investments
Asymmetric investments are opportunities where the potential rewards dramatically outweigh the risks. These opportunities target returns like 1,000%, 10,000%, or even more.
A popular example of an asymmetric investment is Cryptocurrency. Early investors in Bitcoin saw tiny initial investments turn into millions of dollars. In addition, others who got in and out at the right time with Ethereum, other altcoins, and NFTs turned a hefty profit.
Despite the broader crypto market crashing amid its own “Black Swan” events in the last year, dozens of tiny altcoins still saw their prices spike.
Will Crypto recover in 2023? Many believe it will. However, the sector still comes with its own risks and worries.
Moreover, Crypto is far from the only asymmetric investment you can profit from.
In fact, retail investors have more access to these opportunities than ever before, including options trading, startup investing, convertible debt, warrants, forex trading, alternative investments, and dozens of other little-discussed strategies.
Consider a few of these resources related to Asymmetric Investing to get started:
5. Invest in Your Education
Overall, investing in your stock trading education is a wise and valuable decision that can pay off for years. It’s essential for achieving long-term financial success, helping you understand the foundational investment and economic principles, and aiding in making informed decisions about where to invest your money.
A well-rounded education can also give you the tools and strategies necessary to take advantage of market opportunities and maximize your returns.
If you are a novice and have yet to educate yourself on these fundamentals, think twice about jumping headfirst into most of the four strategies listed above.
However, plenty of free and paid educational resources exist if you are serious about growing your wealth with these strategies.
You can join the millions of individual investors learning the basics of trading and personal finance from Youtube channels such as:
- Investopedia
- Ryan Scribner
- Phil Town
- Bulls on Wall Street
- Joseph Carlson
- Sasha Evdakov: Tradersfly
- Zacks Investment Research
- Investors Underground
- Investing for Beginners (IFB Team)
- Fidelity Investments
Newsletters or stock-picking services like the Motley Fool can also help further your education and help you follow the markets more closely. This article from Young and Invested does a great job listing and comparing the 14 best stock-picking services, subscriptions, advisors, and sites.
The Key Takeaway
The above strategies can help you supercharge your returns and help you outperform the market. Especially if you have some extra money to invest from your tax refund.
However, the importance of understanding basic investment principles and conventional financial knowledge cannot be stressed enough. Plenty of youtube channels, newsletters, and stock-picking services exist to give you a leg up and educate you.
Moreover, several stock gurus exist with valuable resources that can make something that seems so complicated extremely easy.
For instance, Larry Benedict’s One Ticker Trader makes spotting individual stocks in high-growth sectors easier, as well as active trading.
Marc Chaikin’s Chaikin Analytics also simplifies the stock-picking process for small-time retail investors with the same advanced resources used by Wall Street professionals.
Moreover, Jim Rickards’s credentials speak for themselves as someone who can help prepare investors for Black Swan events and position them to profit from chaos.
If you’re an opportunistic and savvy investor, you can win big if you consider all of this. The time is now to unleash your tax refund’s potential with these 5 power moves.
