Saturday, December 23, 2017

Thrifty Thinking: Stock as Gifts

There are a lot of hot gifts topping everyone's holiday list this year: Amazon’s Echo 2, the new iPhone 8 and X, and the latest and greatest in accessories and fashion. But what if you wanted to give a spouse, child or grandchild something a little more unique – a gift that could keep on giving, long after the holidays pass?

Instead of buying the usual popular gifts this year, what about looking into the prospect of investing in these popular brands instead?

The folks at Ally Invest looked back at the stock performance this past year of the companies behind some of the hottest gifts this year, and what we found is really interesting:

If you had purchased stock at the beginning of January '17 in Apple, Amazon, Estee Lauder or many of the companies behind the hottest gifts to give this year - by November '17, most showed meaningful stock gains.

Apple, for example, started the year around $115/share but by the beginning of November had risen to roughly $174/share – a 50% increase. If you had had a $1,000 investment in Apple in January, your return in that investment would have been roughly half the cost of a new iPhone X. We've included a quick graphic below that shows how some of the more popular gift brands performed from Jan-Nov this year.

Of course, it's very important to note that positive stock performance is never guaranteed -- there is an example on the list below that shows how the Cuisinart stock had shown a loss and, in general, this has been an extraordinary year in the market -- but it perhaps gives holiday shoppers a sense for how compound interest can work and a different way to look at the gifts on their list.

For couples who could create joint accounts for one another or parents/grandparents who can open custodial accounts with these stocks for their young adult children, this could be a thoughtful gift that keeps on giving over time. 

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