While it may come naturally to some, finding the perfect holiday gifts can be daunting…
Add in inflation and supply chain issues, and the task becomes even more stressful and uncertain.
So if you are behind the eight-ball right now… Or you’re looking for an extra gift idea to get someone…
I’d like to share some investment-related ideas that provide far more value than a necktie for dad, kitchen apron for mom, or action figure for the kids that’ll be broken by Boxing Day…
Gift Idea No.1:
I-Bonds are officially known as Series I Savings Bonds. And like their better-known counterparts – Series EE Savings Bonds – their value doesn’t fluctuate.
So, unless the U.S. government defaults, you cannot lose any of your principal by owning I-Bonds.
Of course, these bonds do pay interest, which is comprised of two components: a baseline interest rate and an inflation adjustment.
And while the baseline rate is 0.0%, the latest inflation adjustment brought the bond’s composite rate to 6.89%.
That’s the second-highest rate ever after topping 9% earlier this year. That’s still much better than alternatives like money markets or CDs.
On top of that, I-Bonds are exempt from state and local taxes… And if the proceeds are used for qualified education expenses, profits can be exempt from federal taxation as well.
That makes I-bonds great gifts – especially for kids.
You can purchase up to $10,000 of electronic I-Bonds per social security number every calendar year in whatever denomination you prefer – right down to the cent (with a $25 minimum). Just visit www.treasurydirect.gov.
Of course, you can also give what I consider an even better investment…
Gift Idea No.2:
A Share (or More) of a Solid Dividend-Paying Stock
Although stock trading these days is all done electronically, you can still gift stock shares for someone – and without having to set up a separate brokerage account.
It’s not as hard as it might seem… Websites like GiveAshare can allow you to choose from hundreds of publicly-traded companies. They’ll set up an account, and even mail out a physical certificate.
For my first wedding anniversary – the paper anniversary – I gifted my wife a share of her favorite company, Starbucks. Besides having a certificate, she gets to vote during shareholder meetings. Plus, thanks to the reinvested dividends, her share has become about 1.05 shares, in the early signs of the compounding process. And she’s up about 20%.
The only downside with gifting a physical share is having to pay some sizeable fees compared to buying stock in a brokerage account.
You can also gift someone shares of stock you already own.
Under current IRS rules, you can gift up to $15,000 per person annually – and without having to declare the gift or pay any gift tax.
What’s more, gifting shares lets you avoid paying any capital gains tax that might otherwise be owed.
Instead, the future liability is passed onto the recipient… And if they’re in a lower tax bracket, that could end up being a win-win situation.
The same tax rules can apply to other gifted investments as well, which brings me to…
Gift Idea No.3:
It’s no secret that we’re big fans of crypto here at Palm Beach Research Group. And many of our readers have seen firsthand how life-changing a small initial investment in crypto can be.
This year, cryptos are having a 75% off sale…
And while that’s rough for existing owners, it looks like a great long-term entry point. That’s especially true for kids who don’t need to cash out right away.
I’ve gifted small amounts of bitcoin over the years to friends and family who have been interested, but generally on the fence when it comes to crypto. That small gift could become the key part of paying for college or making a down payment on a home in the years to come.
If you want to get someone else started on their digital asset journey, it’s relatively easy to give them a small of amount of bitcoin, Ethereum, or some other altcoin.
And what if you want to physically wrap something up instead of just emailing the details?
Well, there’s good news… You can give crypto through a gift card or a physical coin that contains a set amount of crypto.
Alternatively, you could buy someone a hardware wallet like a Ledger. You could even load some crypto on it ahead of time or show the recipient how to buy crypto on their own after they unwrap the present.
And that brings me to my final idea. It may be the most valuable of all. I’m talking about the gift of financial literacy…
Gift Idea No.4:
A Good Investment Book
A good investment book might be the cheapest, quickest, and longest-lasting gift of them all.
And while there are hundreds of great titles, here are a few of my favorites…
On the “classic financial theory” side, start with the book that’s still the cornerstone of investing today: The Intelligent Investor by Benjamin Graham.
Graham is the father of value investing and he taught Warren Buffett at Columbia Business School. The book really lays out the principles of value investing.
Of the hundreds of books about Warren Buffett, I’m still a fan of The Warren Buffett Way by Robert Hagstrom. First written in 1994, it really shows at a granular level many of Buffett’s investments, the rationale for making them, and why they worked out.
For a modern take on financial theory, now’s the perfect time to read The Bitcoin Standard by Saifedean Ammous. It really looks at the evolution of money, and how bitcoin fits into moving beyond the problems inherent in today’s fiat currency standard.
On the other end of the spectrum in what I would call “financially-oriented entertainment,” are books by Michael Lewis.
Works like Liar’s Poker, The Big Short, and Flash Boys provide great insights while also being real page-turners. I’ve also enjoyed other titles from Lewis like Moneyball.
Lewis was recently doing some research on FTX and was embedded with Sam Bankman-Fried, so chances are he’ll have a new and fascinating read on the implosion at FTX.
At the end of the day, simply helping someone else aim for greater financial independence going forward is one of the greatest gifts anyone can ever receive. So be thoughtful, and pick a gift that will best resonate with the recipient.
Happy Holidays and Best Wishes,
Analyst, Palm Beach Daily