How you can give the gift of stocks this Christmas to get loved ones started on their investment journey
Gifting a stock provides the opportunity for financial growth through the years for the recipient
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Do you want to give a gift that keeps on giving this Christmas? Well, a stock will (hopefully) have that impact.
Money and gift cards are favorable holiday gifts. Though they may seem more exciting at the time, with patience, the gift of a stock can turn into even more money over time.
The gift of a stock makes a great addition to stockings stuffed with tangible goodies, trinkets and treats.
Whether you have a loved one who has already invested their money, or is at the beginning of building their portfolio, the gift of a stock is one to consider.
If you have never gifted a stock before, read more below about how to do so.
- How can I give stocks as a gift?
- Can I give stock to a child?
- What stock can I give as a gift?
- Who pays capital gains on a gifted stock?
The gift of a stock is a present that can grow in value over the years. (iStock / iStock)
1. How can I give stocks as a gift?
There are various methods you can use to gift a stock. A popular way to do so is through brokerage accounts.
This way of gifting is perhaps the easiest way to do so, as you purchase the stock on your own account and then transfer it to the recipient, according to Investopedia.
Do keep in mind that the person you are gifting the stock to must have a brokerage account set up in order to use this method.
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If you need assistance in the process of gifting a stock, you can always speak with a financial advisor for guidance.
2. Can I give stock to a child?
The simple answer is yes, you can give stock to a child, but there are certain steps that will need to be taken in order to do so.
Keep in mind that if you are gifting stock to a child, they will need to have a custodial account.
This is a type of account that is monitored and controlled by an adult for a minor.
You can gift a stock this Christmas to anyone at any age, but do keep in mind that if you are purchasing for a child, they will need a custodial account. (iStock / iStock)
The age at which a child will gain access to a custodial account varies depending on the state. For some, that age is 18, but it is 21 in others, according to Investopedia.
3. What stock can I give as a gift?
The kind of stock you choose to gift is entirely up to you. Considerations to take into account are what the recipient is interested in and what has the most potential for growth in the long run.
If you can't decide on one company you want to buy stock in, consider gifting exchange-traded funds (ETFs). ETFs include groups of investments including stocks and bonds, that typically revolve around a certain theme, according to Fidelity.
There are plenty of ETFs to choose from. They are considered to be fairly low risk investments and a great way to diversify a portfolio, so they are great for people just starting out on their investment journey.
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You can also choose to buy stock in a specific company, which may be a good option if the person you are shopping for is a big fan of a certain business.
If you are unsure of which specific stock to buy, GiveAShare.com is a good resource to take a look at some of the most popular stocks to purchase.
Depending on your specific budget, there may be certain stocks where buying a whole share will be too expensive, but that doesn't mean you're out of luck.
If you don't want to gift an entire share, you can purchase a slice of a share, called a fractional share.
Conduct research online about different companies and stocks you can purchase before coming to the decision of which to gift. Also, keep the recipients' interests in mind when considering stocks to buy. (iStock / iStock)
Once you determine your budget, you'll be able to use that dollar amount to purchase as much of a share as it will get you.
4. Who pays capital gains on a gifted stock?
The recipient of the stock may have to pay capital gains tax on stocks they are gifted once they decide to sell, according to Investment News.
Capital gains are "the increase in value of a capital asset that is realized when it is sold," according to Investopedia.
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Taxes are imposed the year that the stock is sold, according to NerdWallet.