The holidays are here and there's no doubt that you have somebody to buy for that seems to have everything or doesn't want anything. Cash may seem a little too impersonal and you know that if you try to purchase something, it will probably be money wasted. For decades, enterprising gift givers have used their knowledge of the investment markets to give a gift that keeps giving for many years.



TUTORIAL: Exchange-Traded Funds: Introduction



Purchasing shares of stock is the perfect gift, but the practice has since been modernized. Now, exchange-traded funds (ETFs) are the hottest investment vehicle of the 21st century, and may be the equity purchase of choice for this holiday season. If you're looking for the perfect gift, consider these ETFs.

Index ETFs
When the wrapping paper is peeled away, you're going to have some explaining to do. ETFs can be complicated and difficult to understand by young people or those with very little knowledge of the investment markets. For that reason, stick with ETFs that are easy to understand. An index ETF that tracks the performance of one of the common indexes like the S&P 500 or the Dow Jones Industrial Average is a great choice. Also, look at ticker symbols like SPY, DIA and QQQ. (For related reading, see ETFs Vs Index Funds: Quantifying The Differences.)

Bond Funds
You have probably heard that bonds are safer than stocks and, although that's the subject of debate, the consistent dividend (called a coupon in bond terms) makes a bond a fine choice for long-term investors. There is a large amount of bond ETFs spanning all sectors of the bond world. Consider bond ETFs like LQD, TIP and HYT. Not all bond funds are technically ETFs, but they trade in the equities markets just like traditional ETFs.

Sector ETFs
If you want to be a little more personal, consider an ETF in the industry where the person works. If they work in healthcare, try PHP or XPH. If the gift is for a child, what do they want to be when they grow up? If they want to be a pilot, consider FAA or FLYX. If they work in retail, XRT or RTH are worth your research time.

Metal ETFs
If the person you're buying for has an eye for jewelry, consider a precious metals ETF. For a pure play on gold, GLD is the ETF of choice. For an ETF that tracks the performance of a wider range of precious metals like silver and palladium, DBP is worth a look.

Some investors believe that an ETF that follows a commodity isn't a good choice for long-term investing because of the way the ETF may track the performance of that commodity, but this isn't an issue when a small amount of shares are purchased. (For related reading, see Using ETFs To Build A Cost-Effective Portfolio.)

The Bottom Line
Purchasing stocks as gifts is still a fine way to make your gift last through the years, but considering an exchange-traded fund that offers more diversification and safety makes sense in difficult economic times.

In order to gift a stock or ETF purchase, you will have to transfer the purchased shares to the person receiving the gift. Your broker can help you with that.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  5. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Lion economies

    A nickname given to Africa's growing economies.
  4. Factor Investing

    An investment strategy in which securities are chosen based on ...
  5. Reverse Gold ETF

    Exchange traded funds that are designed to trade in a direction ...
  6. Blue Chip Indicator

    A formal gauge or measure of the performance of a selected group ...
RELATED FAQS
  1. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  2. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  3. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  4. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  5. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  6. What are some of the most popular ETFs that track the retail sector?

    Some of the most popular exchange-traded funds (ETFs) that track the retail sector include the iShares S&P Global Consumer ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!