Did you know you can gift stocks? Stocks may not be as exciting as the latest technology this Christmas season, but they could turn out to be worth a lot more than gift recipients realize.
We hope that stocks are the gift that keeps on giving. If all goes well, the small amount of stock you gift could turn out to be worth a lot of cash down the road.
If you've never bought stocks as a gift before, read on to learn more about the process.
- Which stocks should I gift?
- How do I gift stocks?
- Who pays capital gains on gifted shares?
1. Which stock should I gift?
It's up to you what kind of stocks you gift. 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'd like to buy stock from, consider gifting an exchange-traded fund (EFT). EFT allows you to invest in multiple stocks in one.
A common purchasing option is to invest in index-based stocks that track the S&P 500 index. According to Investopedia, the S&P 500 Index is “a market-capitalization weighted index of 500 major publicly traded companies in the United States.”
Another option is to choose a sector EFT that has a large number of companies focused on the same type of business, such as technology or energy. Choosing a sector EFT allows you to choose investments that are correlated to your recipient's returns.
There are many EFTs to choose from. These are considered to be fairly low-risk investments and a great way to diversify your portfolio, making them ideal for those just starting their investment journey.
If you want to invest in a specific company but aren't sure which one to invest in, consider one of the most popular stocks to gift as a gift, according to GiveAShare.
- atlanta braves
- tesla company
- Manchester United PLC
- Amazon.com Inc.
- Starbucks Corporation
- madison square garden sports
- toronto blue jays
McDonald's, Dominos, Walmart, Apple, Netflix, Microsoft, PepsiCo and more were on the list.
Depending on your specific budget, some stocks may be too expensive to buy whole, but that doesn't mean you're out of luck.
If you don't want to gift a whole share, you can purchase slices of a share. Once you have determined your budget, you can use that amount to buy as many stocks as you can get.
2. How do I gift stocks?
There are many ways to gift stock. The most common method is through a brokerage account.
Please note that if you gift shares to a child under 18, you will need a custodial account. A custodial account is a type of account where a minor is monitored and managed by an adult.
If you need help with the stock gifting process, you can always consult a financial advisor for advice.
3. Who pays capital gains on gifted shares?
Once you decide to sell the stock, the recipient of the stock is responsible for paying any capital gains on the stock.
When you sell your investments, you pay taxes on the amount you gain.
Factors such as how much you earned from the stock and how long it was held will affect how much tax you pay.