The holidays are a time for giving, and while many still opt for traditional gifts such as toys, gadgets, and clothing, the current digital era calls for something that offers long-term value: stock. No more wrecking your brain for that multi-store gift card or that last-minute surprise; the internet has figured it out for you. 

Although non-traditional, this gift is an investment for the future  and benefit your loved ones for years to come. 

Why give stocks as a holiday gift?

One of the main and obvious reasons stocks make an excellent holiday gift is the potential for long-term growth. Unlike a new pair of shoes or the latest smartphone, stocks have the potential to increase in value. While no investment is without risk, a well-chosen stock can outperform traditional gifts in the long run. If you gift stocks from strong, stable companies or index funds, there’s a good chance they’ll provide financial benefits for years.

Many families use stock investments as a way to leave a legacy for their children or grandchildren. If a stock is chosen carefully and held long-term, it can grow significantly over the course of several decades. This makes it an ideal gift for younger family members and potentially give them a strong financial foundation for their future.

Giving stocks as a gift can spark an interest in investing and financial literacy. Many people, especially younger generations, feel it is a burden to learn about stocks and are scared of the risks. However, by gifting stocks, you introduce the world of personal finance, which could encourage them to build a wealth plan for their financial future. It can be a valuable opportunity to teach about diversification, compounding returns, and the stock market. 

Stocks may seem lazy and effortless, but like all gifts, stocks can be personalized for your loved ones. Values, interests, and goals are not only aspirations but can also be turned into investments for future purposes. It is a thoughtful gift that has meaning beyond just its financial value.

How to gift stocks 

If you’re new to stock gifting, selecting the right type of stock or fund is crucial. A solid choice for a gift would be shares of well-established companies that have a history of steady growth and performance, such as large blue-chip companies or index funds that track the overall market. This also minimises the risk and can be adjusted accordingly. If you’re not sure where to start, exchange-traded funds (ETFs) or mutual funds that offer diversification might be a good option.

To give stocks, you will need a brokerage account. Many brokerage platforms, such as Robinhood, E*TRADE, or Fidelity, allow users to gift stocks directly. Some platforms also offer the option to create custodial accounts for minors, which is useful if you're gifting stocks to an ambitious teen. A custodial account ensures that the recipient can access the stocks once they reach the age of majority. The process of setting up an account is usually straightforward, and many brokerages allow you to transfer stocks as gifts through a simple online form.

If you prefer less involvement, some companies offer stock gift cards or certificates that allow the receiver to choose which stocks they want to purchase. Companies like Stockpile provide the option of giving fractional shares of stock, which allows you to gift a smaller portion of a stock if the price per share is high. This makes it easier for you to give stocks even if you’re working with a smaller budget.

Lastly, as stocks are quite an unusual gift, write a note or give an explanation about what you’re giving them, how the stock works, and why you chose it. You could include some resources or recommendations on how they can track and manage their new investment (only if needed, of course).

Drawbacks to consider

While stocks have the potential for growth, they also carry risk. The value of the stock could go down, and there is always the possibility of losing money. For individuals who are not familiar with investing, the ups and downs of the stock market can be confusing or even disheartening.

In addition, giving stocks requires some understanding of the market, the specific companies you're investing in, and the person you’re giving them to. If you're not careful, you could be gifting someone an unwanted commitment. 

Stocks include tax complications. If you are new to the stock market, make sure to research tax rules or consult a financial advisor before gifting stocks, particularly if you're gifting a significant amount.

Have a happy holiday 

Giving stocks as a holiday gift can be a thoughtful, unique, and meaningful way to express care and to help others build long-term wealth. It’s a gift that transcends the typical material items and offers an opportunity for growth and financial education. Whether you choose individual stocks, ETFs, or mutual funds, your gift could have lasting value. By taking the time to research, understand, and select the right stocks, you can make a meaningful contribution to the future financial success of your loved ones. 

And remember, stocks aren’t for everyone. To save a lot of headaches, think about the person receiving the gift, their interests, personal life, and their financial literacy. 

By Evgeny Kireev

Keywords: Creativity, Finance

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