How to give the gift of stocks this holiday season

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Thinking of a gift for your loved ones over the holidays that they’ll actually appreciate and get use out of year after year can be a challenge. There are only so many times you can give your partner the latest Apple accessory, a gift card to their favourite restaurant, or a new plant before you can start to run out of interesting ideas.

Whether it’s your friend who has everything or a family member whose wishlist you’ve exhausted over the years, picking a Christmas gift over the holiday season isn’t always easy. One of the last places you would probably think to look for gifting inspiration is the stock market.

While receiving shares in Peloton (ticker: PTON) for Christmas might not be as exciting as getting an actual Peloton bike, though, given the financial rewards your giftee can reap later on, giving stocks can be the gift that keeps on giving.

Within the last year, the world has witnessed the explosion of NFT sales, crypto trading, and retail investors sending Reddit stocks “to the moon”. The rise in popularity in investing makes putting stocks from your favourite company in your loved one’s stocking more popular this year than ever.

If you’re currently shopping for stocks for someone’s stocking this year, here are a few things to keep in mind.

Firstly, consider what types of stocks the person you’re buying for would want to invest in. While it’s obviously important to buy shares in a company that is profitable and likely headed for success, it will make for a more personalized gift if the stock is in a company that the person cares about.

If they’re passionate about social and environmental causes, try buying into an ESG (environmental-social-governance) ETF fund. Or if they’re really into video games, shares in Roblox (ticker: RBLX) could be more exciting to them.

After you know which industry might be best suited to your giftee, create a shortlist of companies and dig into their financials to see who is poised for profit. You can either try and evaluate whether a stock is worth your money on your own or with the help of a professional by seeking professional investment advice.

Dividend stocks like Bell and Canadian Tire are low-risk options that won’t likely give your recipient high growth in the long run but they will allow them to receive frequent dividends. For something more diversified, and ETFs that provide passive investment into multiple stocks is a great option.

A growth stock is a stock in a company that is currently flying under the radar with big things on the horizon. Growth stocks are inherently riskier, however, the right one (think the early days of Shopify) could be an incredibly profitable purchase (and make you your giftee’s favourite person for years to come).

Secondly, you don’t need to buy your giftee an entire share of a company. You can buy fractional shares instead. For example, if you were to buy a share of Tesla that would currently cost US$1,144.76, but that doesn’t mean that’s the only price you can buy it at. You can contribute as much or as little as you like to the investment by buying fractional shares.

As for the process of how to actually give stocks as a gift, there are a few different ways. In the past, companies like Wealth Simple had the option of gift cards, but now the best way to give the gift of investing is virtual transfer. This involves both you and the giftee having a brokerage account and then making a transfer over to them. You can also buy the shares directly from companies that specialize in gifting stocks, like GiveAShare or Unique Stock Gifts.

Alternatively, if you happen to work for a company with an employee stock purchase program (ESPP), you’re able to immediately gift those shares to someone else, while also earning a tax deduction for yourself.

The last thing to keep in mind when buying stocks as a Christmas gift is taxes. Your loved ones won’t have to directly pay tax on their gift, however, they will be subject to capital gains tax from the CRA (the annual tax on any profits made from the stock) later on if they make any profits from the investment.

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