Investing in Your HSA
Health Savings Accounts (HSAs) aren't just for saving on medical expenses—they're powerful investment tools. Learn how to grow your HSA with stocks, ETFs, dividend stocks, options, and high-income securities.
Why Invest Your HSA?
- Triple tax advantage: Tax-free contributions, growth, and withdrawals for medical expenses.
- Potential to save for retirement and medical expenses.
- Flexibility to invest in a wide range of securities.
Investment Options
Stocks
Invest in individual companies to capture growth. Example: Apple (AAPL) or Tesla (TSLA).
ETFs
Exchange-traded funds offer diversification. Example: Vanguard Total Stock Market ETF (VTI) or SPDR S&P 500 ETF (SPY).
Dividend Stocks
Focus on companies that pay regular dividends. Example: Coca-Cola (KO) or Johnson & Johnson (JNJ).
Options
Use options for leverage or income. Example: Writing covered calls on dividend-paying stocks.
High-Income Securities
Look for REITs, high-yield bonds, or preferred stocks. Example: Vanguard High Dividend Yield ETF (VYM).
Model Portfolios
Bogleheads 3-Fund Portfolio
A simple, low-cost portfolio using broad index funds or ETFs. Ideal for diversification and growth.
- U.S. Stocks (Total Market): 40%
- International Stocks: 30%
- Bonds: 30%
Dividend Growth Portfolio
A portfolio focused on dividend-paying stocks for consistent income and capital appreciation.
- Dividend Growth Stocks: 60%
- High Yield ETFs: 20%
- Bonds: 20%
Aggressive Growth HSA
Designed for young investors looking for high growth with a long investment horizon.
- Technology ETFs: 50%
- Small-Cap Stocks: 30%
- Emerging Markets ETFs: 20%
Avoiding Pitfalls
Many investors make costly mistakes when managing their HSAs. Here’s how to avoid them:
- Don't leave your HSA in cash if you're young with a long horizon.
- Avoid chasing "hot stocks" without proper research.
- Rebalance your portfolio annually to maintain your target allocation.
- Consider fees—choose low-cost index funds or ETFs.
- Keep track of eligible expenses and tax implications.