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Originally published May 10, 2014 at 8:01 PM | Page modified May 11, 2014 at 12:25 PM

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The Motley Fool


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Tax fix

Q: Can I correct a mistake on the tax return I filed last month? If so, how?

A: Yup. Fortunately, the 1040 form you file isn’t the only one you can file for each year. You can file an amended return with a 1040X form, and you can even amend an amended return later!

Errors that definitely require an amended return include ones involving your filing status, income, deductions or credits.

Not all errors require amended returns, though. The IRS will often find and correct small math errors. Learn more from the horse’s mouth at irs.gov, and note that using tax-prep software, such as TaxACT or TurboTax, can reduce errors.

Q: Is it better to use a windfall to pay off my car loan or invest in the stock market?

A: It depends. First, if you have any credit-card debt, use the money to pay that off. Credit-card rates are often very steep and debilitating.

Next, compare your car debt with your alternatives. Say your interest rate is 5 percent. If you invest in the stock market, the average annual gain over many decades is about 10 percent, but that’s just an average and far from certain.

So you need to decide whether you’d rather save a definite 5 percent or hope for a 10 percent gain. Consider your risk tolerance — and the effect of taxes, too.

It can be worth paying a little in interest in order to earn more through stock appreciation. Just make sure you’re OK with the risk and are investing for the long haul. Short-term stock returns are unpredictable and can be volatile.

Dear Fool: I invested in a bank decades ago. It later bought a savings and loan association and ended up in financial trouble due to the savings and loan crisis at the time. Well, I took the advice of a popular local talk-radio host and bought several thousand dollars’ worth of additional shares when it fell to $4 per share. Buy low, sell high, right? I ended up with two nice-looking, but worthless stock certificates.

The Fool responds: It’s true that you generally profit in stocks by selling your shares for a higher price than you bought them for.

But that doesn’t mean it’s smart to buy any stock just because the price seems low.

Those $4 shares might have seemed low, but if a company is in deep trouble, or even facing some short-term issues, they can quickly become $2 shares, or worse.

A better way to think about it is to aim to buy undervalued stocks and sell them when they seem reasonably valued or overvalued.

If you’re in the market for a blue chip stock that can deliver profits to your portfolio, consider FedEx (NYSE: FDX).

It has gained roughly 48 percent over the past year, and averaged an annual return of 11 percent over the past 20 years.

The sluggish global economy has challenged FedEx, as did this past tough winter.

In the company’s last quarterly report, earnings fell short of expectations.

But there was good news, too.

Operating-income profit margins rose, and on the company’s conference call, management noted that FedEx’s multiyear profitability improvement plan was “not only on track, but probably ahead of plan.”

FedEx hiked many of its prices by 4.9 percent in the past year, and cost-cutting measures by the company are under way, too.

Along with a workforce reduction, FedEx is improving its efficiency by replacing fuel-guzzling aircraft with smaller and more fuel-efficient models.

It’s also responding to a growing customer focus on cost over delivery speed, which is fueling growth in its FedEx Ground operations.

FedEx’s stock sports an appealing forward-looking price-to-earnings (P/E) ratio of about 15.

Add to that significant growth potential for the company due to burgeoning e-commerce sales, effective profit-boosting initiatives, and management’s expected near-term improvements in world trade, and investing in FedEx is looking like an attractive long-term portfolio holding.



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