If you’re running out of material ideas to give at the holidays, or are feeling less inclined to plug into the capitalist machine in that way, consider a gift that can help your recipient grow wealth over time: stocks.
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While buying stocks can require some education, there are ways to make this work for you and your friends or family, and it shows that you care about their futures, as well.
Financial experts recommend five stocks, or types of stocks, to give at the holidays.
Stocks That Align With Interests
A fun way to both contribute a potential financial boon to your friends or family but also provide a bit of holiday novelty, is to buy stocks that align with their interests or tastes in some way.
“Let’s say you’re gifting to someone who really loves Yeti coolers or really loves Disneyland — those are publicly traded stocks,” said Hao Dang, CFA, an investment strategist with Consilio Wealth Advisors.
He said you can purchase stock in one of these companies. While these may not end up being as lucrative as other forms of stock, it’s a fun way, especially for a younger gift recipient, to begin building some ownership around investing and connecting it to things they already utilize or care about.
“There’s that connection of, ‘Hey, I’m using this product and I own a portion of the company by owning this stock.’ That’s cool. That creates curious investors and spurs a lot of interest into finances,” Dang said.
“For someone who loves cars, or a certain brand of cars, going back to that idea of connection, you could buy them GM or even Tesla stock,” Dang said. While he doesn’t recommend buying too many individual company stocks, he said, “It’s a good way, young and old, for someone to get some kind of exposure to companies that they are familiar with.”
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Stock Indexes
While individual stocks can be fun and novel, for better returns, Dang actually recommended investing in stock index funds, like an S&P exchange-traded fund (ETF) that has a good chance of growing over time.
“If it’s to make money, I wouldn’t speculate on single stocks,” Dang said. “If you’re looking at the gift as an actual investment, I would make it broad, make it boring, and then you increase your odds of success in one to five years.”
With single stocks, you have to keep in mind that businesses evolve and close all the time, he pointed out. While some stocks do take off like gangbusters, such as Google did back in the late 1990s and early 2000s, he pointed out how rare that is.
Future-Forward Value Stocks
Rather than just the “familiar blue chips,” Michael Kodari, with Kosec Securities, recommended stocks with “unique, future-forward value” such as ASML Holding (NASDAQ: ASML). “[ASML is] essential to the semiconductor industry [and] holds near-monopoly status on advanced chip manufacturing tech, making it perfect for a long-term growth outlook,” Kodari said.
Another strong option in this category is Brookfield Renewable Partners (NYSE: BEP), Kodari said, which benefits from the global renewable energy push. He called it “ideal for those who want to align their investments with sustainability trends.”
For younger recipients, Unity Software (NYSE: U), is a company “driving the future of 3D content and VR, could inspire an early interest in tech and immersive media.”
Stocks like these not only have promising growth potential, Kodari said, but also add a unique angle that aligns with future trends, “making them memorable as well as financially strategic.”
Stocks for Children or Grandchildren
The age of your gift recipient makes a difference, Dang said, because minors under the age of 18 can’t manage any stocks you purchase for them. You can either purchase the stock in your name with the intent to formally gift it to them when they are over 18, or set up a uniform transfer for minors account (UTFA), where the assets become theirs upon the age of 18.
Dang does warn that the average 18-year-old may not be ready to take ownership of a bunch of funds at that age, but it will be up to you, the child’s parents and hopefully a good accountant or financial advisor to work out those details.
Paul Gabrail, founder and host of the show Everything Money, agreed with Dang’s sentiment. “To own a stock, you need to have an understanding of what makes it a good company and why you want to hold it. If the recipient of the stock is young, this understanding is unlikely and it will be difficult for them to keep track of how the company is performing.”
ETF Funds and 529 Plans
With an ETF fund, you can start educating kids at a young age, explaining that they are owning a piece of the U.S. economy, Gabrail said.
“You can emphasize the importance of saving and at some point, instead of giving them the gift of shares, tell them you will match what they save (up to a certain point) so that they feel invested as well.”
Additionally, traditional 529 educational funds, which are typically invested in a diversified set of stocks and other index funds, are probably the better bet for a minor you want to support with a gift, Dang said.
Be sure to do your research and/or talk to a financial advisor with expertise in stocks before purchasing any, however.
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This article originally appeared on GOBankingRates.com: 5 Types of Stocks To Give as Gifts at the Holidays
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
