Buying stock for my niece and nephew for Xmas...?

Question

My niece and nephew are very young, and I thought it might be a fun idea to buy them each a little lowcost stock each year for Xmas. And maybe when they are all grown up something little may have turned into something big. I haven't purchased stock before as most of my investing involves my 401k or money market. How do I go about it? What are the good websites out there? What type of information would I need from the children to put the stock in there name? I'm really not investing a ton of money here, so I'm not looking to open a big account with a major brokerage firm or anything. Something I can do myself and moniter myself, etc.

Thanks for any advice anyone has to offer.

Answer 1

Stocks are to volatile for regular investors and people that don't manage them often. I would suggest starting them a stable mutual fund or an educational IRA.

Trade King typically has really low rates if you are looking to do it yourself. Otherwise I would suggest you find if their is a Primerica in your area, they can sit with you and help you determine which funds to invest in. I suggest Primerica because they do not charge a fee, unlike Amerprise or anyone else.

Also, not to say Bonsai doesn't have good suggestions. But they just dont' preform well. The past 5 years inflation has averaged 4.2%, so something earning 5-7% return, really is earning .8 - 2.8% return.

When you are looking at Mutual Funds, the easiest thing for the novice to look at is the 10 year rate of return and the expense ratio. Look for a mutual fund with over 13% rate of return on their 10 year performance and the lowest expense ratio you can find. Take a look at American Funds, I typical point my smaller investors towards their funds.

In a hurry to answer you, so if you have any more questions or would like a more detailed explanation, please feel free to contact me.

Answer 2

You can open up a custodian account, under the kids name and thier social security numbers so any more that they make in the account will be taxed at thier tax rate, probably very very low. You have a lot of options in terms of investing, stocks , mutual funds, bonds, or EFT's would be the most popular. If you want the kids involved , you might buy companies they know, McDonalds, Nike, Marvel Entertainment, Matel Toys, etc.

Is this to help educate them about stocks?

That is a great idea, wealthy people do that for thier kids all the time.

At the age of 18 The Custodian Account becomes thiers and they make the decisions in the account.

Email me if you have any questions.

Stu

Answer 3

When you buy stock for children, the account (stock) should be registered in the name of one of their parents as custodian for the child and use the child's social security number

You could but them some Disney stocks, kids (as will as parents) seem to like it.   If you buy the stock you can deliver it the transfer agent who can open a "dividend reinvestment program" (DRIP).  The agent holds the sock, when dividends are paid they are reinvested into additional shares (fractions but they will add up)

You could open accounts for them a mutual fund company, when they receive birthday, Christmas money. it could be deposit into the account for them.    The funds will pay dividends and capital gains, this money will be re-invested into additional shares.

You could also contact the funds companies for more information.  I have found that Vanguard & Fidelity can meet your needs for mutual funds.  The service and information they provide is all free and you will find it helpful

Answer 4

I buy them government bonds, they are more secure, or a long term CD.