Did you know that you can gift stocks? While a stock may not be as exciting as the newest tech this Christmas season, it could turn out to be a lot more valuable than the gift receiver thinks.
Stocks are a gift that keeps on giving – hopefully. If all goes right, the small stock you gift could turn out to be worth a lot of cash down the road.
If you have never bought a stock as a gift before, read on to learn more about the process.
- What stock should I give as a gift?
- How can I give stocks as a gift?
- Who pays capital gains on a gifted stock?
1. What stock should 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 (EFTs). EFTs allow you to invest in multiple stocks in one.
A popular choice for purchases is to invest in index-based stocks that track the S&P 500. The S&P 500 Index is “a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S.,” according to Investopedia.
Another option is to choose a sector EFT that is filled with companies that focus on the same types of business, like technology or energy, for example. Choosing a sector EFT will allow you to choose an investment that correlates to the recipient’s interests.
There are plenty of EFTs 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.
If you want to invest in a specific company, but aren’t sure which one, consider one of these, which are the most popular stocks to gift according to GiveAShare.
- Atlanta Braves
- Tesla Inc.
- Manchester United PLC
- Amazon.com Inc.
- Harley-Davidson
- Starbucks Corp.
- Madison Square Garden Sports
- Toronto Blue Jays
McDonalds, Dominos, Walmart, Apple, Netflix, Microsoft and PepsiCo were among others listed.
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. 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.
2. How can I give stocks as a gift?
There are various methods you can use to gift a stock. The most popular way is through brokerage accounts.
Keep in mind that if you are gifting stock to a child under 18, they will need to have a custodial account, which is a type of account that is monitored and controlled by an adult for a minor.
If you need assistance in the process of gifting a stock, you can always speak with a financial advisor for guidance.
3. Who pays capital gains on a gifted stock?
The recipient of the stock will be responsible for paying capital gains on that stock once they decide to sell the shares.
When the investment is sold, there will be a taxed imposed on the amount that was profited.
Factors like how much was made off of the stock and how long it was held will play into how much is owed in taxes.
