If you're looking for a graduation gift that will make a lasting statement, consider giving a portfolio of high-quality, dividend-paying stocks. This gift can result in a value of hundreds of thousands (or possibly millions) of dollars, over the long term. But yes, you can afford it!
You just need to build the portfolio using companies that offer direct investing through dividend reinvestment plans (DRIPs). Your gift is a single share of the company stock and enrollment in the company DRIP. As a DRIP investor, the gift recipient will be able to accumulate and compound wealth with remarkable results over the long term.
A few years ago when my then 15-year-old grandson asked for athletic shoes for his birthday, I gave him the sneakers, but I also gave him a single share of stock in shoe retailer
Unlike gifts of money, which are likely to be spent frivilously, or electronics that will become obsolete, gifts of high-quality dividend paying stocks are likely to appreciate in value--and greatly appreciate over the long-term.
What's more, the graduate will gain first-hand experience with a logical approach to investing. Many of us might have an emotional barrier that keeps us from investing and the risk of loss that comes along with it. But the truth is, there's no real mystery to investing. Successful investors follow a logical approach that is destined to provide favorable results over the long-term.
With DRIPs, you employ a rationally sound investing regime that takes the mystery out of wealth accumulation. First, you build up a portfolio that represents a variety of industries, and second, you invest even very small amounts (say,
It's a great pleasure to see how much your share ownership has grown over the year--especially because the small investment amounts were made with incidental money that might otherwise have been spent on a latte or a bad movie. As the years pass, those shares will compound in a snowball effect that Einstein described as "the eighth wonder of the world."
So, instead of writing a check to commemorate an important graduation, a five-stock portfolio (or larger if you see fit) can cost about what you may want to spend, but the lifetime effect of that gift will be truly amazing.
To put together this five-stock portfolio of DRIP stocks that I am suggesting, I looked for companies that have a long history of dividend increases. I also kept total return in mind, looking for companies with excellent earning and dividend growth rates, as well as sustainable business models. Since investment amounts are likely to be small to start, I limited my selections to companies that do not charge fees for investing through the plan. I also sought to diversify the companies in terms of industry. Here are the companies I recommend:
Johnson & Johnson (JNJ) has a market capitalization of about
By investing in the companies in this portfolio (instead of saving in a bank account or a certificate of deposit), any young investor has the opportunity to build wealth by participating in the growth of the economy in the most efficient manner possible.
These companies are just a few of the hundreds whose shares you can purchase directly--and commission-free--through their company-sponsored DRIPs. These companies actually pay the investing fees for you once you've enrolled in their DRIPs--and you can enroll with the purchase of just one share in most cases.
Vita Nelson is is the Editor and Publisher of Moneypaper's Guide to Direct Investment Plans, Chairman of the Board of Temper of the Times Investor Service, Inc. (a DRIP enrollment service), and co-manager of the MP 63 Fund (DRIPX).