How to invest your tax refund to beat soaring inflation


More than 14 million people lodge a tax return each year in Australia, and of those who receive a refund (about two-thirds) on average they receive $2800 each.

For some, it's a good time to splurge a little. Others view it as a time to save. However, with inflation rising at a rapid rate globally, money squirrelled away in savings accounts will quickly lose value.

With that in mind, here are our tips on how you could consider investing your $2800 tax refund.

$700 in defence stocks

Annual global military spending has increased every year for the past seven years and just passed $2 trillion for the very first time. With world powers looking to expand their influence, defence spending has almost doubled throughout the course of the 21st century.

Governments are also placing increased emphasis on cybersecurity to combat and counter online attacks as the world becomes more digitised.

Companies operating in and around the defence sphere should still be doing brisk business. Even in relatively peaceful Australia, annual military spending increased by more than 4% last year, and now makes up more than $31 billion.

With broad-scale investment funnelling into defence, now is a good time for investors to consider it a growth sector with potential to deliver strong returns. Defence ETFs provide a good option for those who want to diversify their risk, such as the iShares US Aerospace and Defence (ITA).

$700 in energy stocks

The world is currently facing an energy crisis, thanks to decades of underinvestment in the energy sector, a series of unseasonable weather events and ongoing embargos of Russian oil and gas. Supply is down and demand is up, driving prices higher.

Alternative energy may well be 'the future' long term, but until we actually arrive at that future, the larger oil companies will continue to benefit from higher energy prices and increased demand.

This makes them a strong growth prospect for the short to mid-term and savvy investors could look to capitalise. Again, stock baskets and ETFs provide a sensible option for those looking to diversify their risk, such as the Energy Select SPDR Fund.

Of course, investing in oil stocks isn't for everyone, and it's always important to make investment decisions that align with your personal values.

$700 in food and agricultural stocks

In times of high inflation, while consumers typically cut back on discretionary spending, people still need to eat. Global supply chain challenges and rising energy costs continue to place inflationary pressure on the food sector, however, as we've all seen in the supermarket in recent months these rising costs are often directly passed on to consumers.

This means that food and agricultural producers are more likely to weather the storm of high inflation compared with other sectors including retail, real estate and even healthcare. For investors, companies that can pass on costs and therefore maintain performance during periods of high inflation are surer bets for hedging a portfolio, and even delivering returns in the short to mid-term.

$700 in the US dollar

Economic history has taught us that the only way to lower inflation is to hike interest rates. And the Federal Reserve has been doing just that, in a substantial way, for the first time since 1994. The US dollar is surging as a result and just hit a 20-year high.

With more rate hikes almost certainly on the cards, and likely to continue throughout much of next year, there may never be a better time to 'back the greenback'. The US dollar is the most yielding global currency right now presenting investors an opportunity to park their cash as we brace for further volatility.

There are plenty of resources available to help those looking to invest their tax refunds make good decisions. For example, SaxoInvestor Investment Themes provide insights into how investors can gain exposure to a wide range of global themes and trends, and include curated lists of relevant stocks, mutual funds and ETFs that offer the best exposure to each topical theme.

Other great resources include Ladies Finance Club and Equity Mates.

While we're in a challenging economic climate right now, there are still opportunities for investors to leverage. In times of high inflation, the biggest risk of all can be leaving money in a savings account and watch it rapidly lose value. I encourage people not to be scared of markets and instead find smart ways to make their money work for them this tax time.

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Jessica Amir is a market strategist with trading platform moomoo, a Tencent-backed Nasdaq-listed company committed to reimagining the online share trading experience for Australians through AI-powered innovation. She joined the group with 17 years of experience in markets.  Given she has had the benefit of working as an adviser, market analyst and TV and radio journalist, she knows what investors need to hear. She worked with Saxo, Bell Direct and Sequoia Financial Group (SEQ) in the investment world and held financial advising roles with AMP and CBA. She also worked as a journalist with the likes of ABC, Nine and Sky News Business. She is currently studying Master's of Applied Finance and has a Graduate Diploma in Applied Finance.
Emma W
July 27, 2022 7.44pm

While I don't doubt the logic behind these investments, I do doubt the ethics behind them. Investing in warfare & oil is essentially investing in destruction, plundering & exploitation. It's a disappointing read and speaks of a disappointing world.

Jenny Worboys
July 29, 2022 7.07am

I fully agree with Emma W. Very sad article. Money mag can do better.

July 28, 2022 8.59am

Better to buy WAM capital which at current price pays 8% and that is what I will do for income