Your Tax Refund Will Probably Be Bigger This Year. Here's What to Do With It.

Due to the “big, beautiful bill” passed last year, many taxpayers can expect a larger refund from the Internal Revenue Service this tax season. That’s because the bill reduced individual taxes by $129 billion for 2025. But many Americans didn’t change their withholding for the year, so they’ll get back the extra amounts withheld from their paychecks in their tax returns.

As of late February, the average refund is a bit more than 10% higher so far this year, pushing the average refund amount for individual filers from around $3,450 to more than $3,800. Unless you have urgent spending needs or you can pay down expensive debt, the wisest thing to do with that refund is to invest it and give your retirement portfolio a bit of a shot in the arm.

But in such uncertain times, when the war in the Middle East is pushing major stock indexes down and driving market volatility higher – with no clear end to the conflict in sight – it’s difficult to know where to invest.

Image source: Getty Images.

Certain sectors are less impacted by volatility or economic slowdowns

Fortunately, there are prudent investments that should outperform other assets in volatile or down markets. And if you look at a heat map of the S&P 500, you can see that many of these stocks are already outperforming the broader market over the past month as the war has ground on.

First of all, consider stocks of companies that provide essential goods that people won’t stop buying even if the economy stagnates or inflation rises. The consumer staples sector includes discount retailers like Costco Wholesale (COST 0.73%), Target (TGT 0.20%), and Walmart (WMT 1.04%). People will continue to shop at these low-cost chains even when the economy falters. Even better, higher-income consumers looking to cut costs in tough times will increase their visits to these stores.

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NASDAQ: COST

Costco Wholesale

Today’s Change

(-0.73%) $-7.38

Current Price

$1001.05

Key Data Points

Market Cap

$447B

Day’s Range

$995.50 - $1012.61

52wk Range

$844.06 - $1067.08

Volume

21K

Avg Vol

2.5M

Gross Margin

12.93%

Dividend Yield

0.52%

Healthcare is another great defensive sector. I like **Johnson & Johnson **(JNJ +0.29%) and **CVS **(CVS 0.07%) – they provide essential medical supplies or services that people will need in good times and bad. Healthcare is not a luxury.

And utilities are always a great bet if you think the market and/or economy is about to turn downward, as they provide essential services that don’t see a decline in demand in recessions. Three top utilities to consider are American Water Works (AWK 1.13%), a water utility; Brookfield Infrastructure (BIPC +2.84%), a gas utility; and NextEra Energy (NEE 0.37%), an electric utility.

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NYSE: NEE

NextEra Energy

Today’s Change

(-0.37%) $-0.34

Current Price

$92.44

Key Data Points

Market Cap

$193B

Day’s Range

$92.27 - $94.73

52wk Range

$61.72 - $95.91

Volume

127K

Avg Vol

9.7M

Gross Margin

36.20%

Dividend Yield

2.50%

Those are just a few safe, reliable investments to make when the rest of the market looks a bit iffy, as it does right now.