How to make a 50% profit on a bad gift

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No doubt Great Aunt Edna meant well when she picked out that gift card to the pet food store, but you didn't have the heart to tell her that Rover passed away three years ago. Now you've got $50 in dog food credit and no dog.

Even before the gifts were passed out yesterday, Plastic Jungle calculated that Americans had some $30 billion in neglected gift cards, some of which will never be used. Good news: You can transform that unneeded Alpo into a $75 investment.

A fledgling financial web site called GoalMine is offering to exchange those bad gifts for an investment account that can presumably buy you something you'd actually want. Better yet, they'll match the first gift card you exchange at 50 cents on the dollar, so your $50 Best Buy card becomes a $75 investment - giving you a tidy 50% profit.

The catch: The matching deal is only available for one card for new customers of GoalMine, a year-old web site that aims to help people save for their stated goals. And the site will only match cards with values of $50 or less. In other words, the maximum freebie is $25.

That said, that's $25 you don't have now.

But GoalMine's deal is just the latest lucrative gimmick to urge small investors to get started. An even better deal is offered by Sharebuilder, an online brokerage owned by ING Direct. If you open a new account at Sharebuilder before the end of the year, they'll give you a $50 bonus - even if you only invest $50. If you transfer over an existing account, your bonus could be as big as $100.

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The deals come at an opportune time - in the midst of the holiday season, when your friends and relatives might be willing to help. In fact, this year the deals are good enough that you might want to hint that you'd like the investment account more than another sweater.

How do they work?

GoalMine's promotion, which goes from Dec. 19th through the month of January, is a gift-card trade-in program. You can send in as many as 10 gift cards per day and have them converted into cash in your account. With the first card, you'll get the full face value, plus 50%. The remaining cards will be cashed in at the market value as set by gift-card reseller Plastic Jungle. (Be sure to check competitive rates at GiftCard Granny to make sure you're getting the best deal.)

GoalMine struck a bulk resale deal with Plastic Jungle, explains Rimmy Malhorta, GoalMine's co-founder. They'll funnel the cards to Plastic Jungle; Plastic Jungle will send back cash; and Goal Mine will use the cash to fund the appropriate user investment accounts, usually within a week.

Once you've got a GoalMine account, you're essentially given three investment choices: A mutual fund managed by Malhorta called Gratio Values fund, which rates three-stars (out of five) by Morningstar Inc.; a bond fund that pays a little less than 1% today; and a bank money market savings account, with a small variable interest rate. Not exactly mouthwatering investment choices, but better than a dusty gift card.

What about the Sharebuilder deal? Sharebuilder, which will allows you to invest in individual stocks as well as exchange traded mutual funds, is providing a $50 bonus to those who open a new account with at least $50 before the end of the year. Sharebuilder provides vastly more investment options than GoalMine and there is no minimum investment or account maintenance fee. You'll pay a trading fee when you buy stocks, but that can be as little as $4 per trade.

Once you accumulate a few bucks, though, you might want to shift your account to mutual fund industry leader, Vanguard, which offers great funds at low prices. To have the best fund options, you need at least $3,000 to invest. However, Vanguard does provide some choices -- Target Date Retirement funds and it's balanced fund, called Star, for those with as little as $1,000.

The catch: If you want a paper statement, Vanguard will charge $20 annually in account maintenance fees to anyone who has less than $10,000 in a single fund or $50,000 invested overall. But the annual fee is waived if you accept electronic statements. Those who've got the $1,000 and don't mind electronic statements will find Vanguard's very respectable Star fund charges just 0.34% per year in operating expenses -- about $3.40 a year.

That's about one-quarter the annual cost of GoalMine's Gratio Values fund. And while Gratio's performance has been fairly good, it's only got a three-year track record. Vanguard's Star fund, on the other hand, has been around since 1985 and has delivered a solid average annual returns of 9.45% over that 26-year span.

But you think the little bit that you have to invest isn't enough to make a difference? You may be surprised. Studies have found that most working people - even low-income workers - could set aside $20 a week, or $80 a month.

If you get the stock market's average return of roughly 10% on just that small amount, you'll have $17,000 in 10 years; $65,000 in 20 years; more than $200,000 in 30 years; and almost $600,000 in 40 years. That may not make you a millionaire, but with a little luck -- and, perhaps, a little extra effort, you could be well on your way.