Gift of Stock

In recent years I have been a poor gift giver. The act of gift giving is just such an intimate and painful thing for me. It’s not that I necessarily consider myself a frugal person, but I hate wasting money on things if I don't know they'll go to good use. So it'd be awful to get them something they hate. Which means that I have to truly know the person. And I don't want to just give them cash. I received cash a lot when I was growing up. In fact, it was my gift of choice. However, today I couldn't tell you what I spent any of that money on. Maybe clothes, video games.. who knows?

I became fascinated with some of my peers stories about how they received bond certificates and the like from their crazy grandpa, or whatever, when they were growing up. This elegant gift, although “crazy" at the time, has given these people a usable asset in the future. Now that’s a gift! However, the bond market isn't the most glamorous of things and with a 30 year U.S. Treasury Bond yeilding less than 3% nowadays, I decided “close but no cigar.” 

I then researched if it was possible to give the gift of stock. I thought, “How awesome would it have been to have received Apple or Amazon stock when I grew up?” (in the 90’s). I then stumbled across allows you to purchase gift cards and e-gift cards that can be applied for some of the largest companies in the world. 

Over the proceeding year I purchased various gift cards of some companies I thought were reputable and used those as birthday gifts for the little ones in my family. I thought to myself, “Success!!” Although they would have no clue what they were receiving now, in the future they would have a gift that would be an asset for them. I hope they will appreciate them like my friends appreciate the bonds they received as kids. 

However, life is always changing. As is the stock market, for that matter.

This past month, my girlfriend’s sister welcomed in a beautiful baby girl into the world. 

This caused changes the nature of my gift giving though. When I was making last years gift purchases, I made them with the intention of buying companies that I was confident would last them until their adulthood. Seemed fairly safe to say that when I bought Disney stock for a 12 year old that I was confident Disney would be around for their 18th birthday. However buying stock for a 0 year old and having that same conviction is a little different. Not that I question the stability of these companies, I just know that over 18 years a lot can change in the market. 

As an example, at the end of 1999 the 5 companies with the largest market capitalization were:

  1. Microsoft
  2. Genereal Electric
  3. Cisco Systems
  4. Exxon Mobil
  5. Wal-Mart

All of these are still FANTASTIC companies today. But of them, only Microsoft remains in the top 5 today.

So with this in mind, I decided to purchase this new born a few gift cards for index funds. Also, from I certainly can't take credit. Warren Buffett is one of the most successful investors of all time and has recommended on numerous occasions that the average person should just consistently buy “low cost, S&P index funds”. Here’s why:

This made perfect sense to me. Very few people want to actively look at and trade stocks… Let alone kids. However, giving a child ownership in the S&P 500 is giving them ownership in the U.S. market as a whole. This fit my plan perfectly since I have full confidence that there will still be a stock market in 18 years.

Giving the gift of stock has gone a long way to making me excited about giving gifts again. Each time I feel like I’m telling them: “ I love them.” “Im invested in them.” “I’m with them through the future.” 

In my mind, that is what a gift is supposed to say. I know this idea doesn't work for everyone but I hope some of you appreciate the idea and will help me to find more ways to invest in our families future. For anyone who is interested, StockPile is giving away $5 in stock to new account members. I know most people will say, “what stock can I buy with $5?”. They allow you to buy fractional shares, too. :D

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Justin DeArmondComment