4 Large-Cap Stocks That Make Great Holiday Gifts for Kids

It's not even Thanksgiving yet, but your kids are probably already writing up their holiday wish lists. Shares of Nike or Apple probably aren't on their list, but the holidays, or even birthdays and graduations, can be the perfect opportunity to give your child a gift of stock.

Kids need to learn about investing early. Good financial and investing habits learned while young will carry over into adulthood and provide a base for building wealth and financial security.

Financial educators say gifts of stock can be instructive and fun as early as age 8. A gift of a stock at a young age provides valuable lessons across the investing spectrum, and an 8-year-old can watch the price of that stock hopefully climb for a decade before he or she reaches adulthood.

"They can see how their portfolio grows. That enforces discipline to save money and build money by investing, and provides a seed of understanding early on that can be used throughout their life," says David Yepez, investment analyst at Exencial Wealth Advisors in Oklahoma City.

Opening a stock account is easy through an online brokerage firm, and a parent can purchase stocks and transfer them to a child through a Uniform Gifts to Minors Act account. "The lessons you are teaching are more important than the actual dollars in the account," says Joshua I. Wilson, chief investment officer at Dallas-based WorthPointe Wealth Management. "Individual stocks are more fun to talk about, but the habit of investing is the hottest pick of all."

Advisors shared five tips on how to get a child started on a lifetime of good investing habits through a gift of stock:

1. Start the conversation. Explain why you picked a company's stock and discuss factors that can make the price go higher or lower. "This will be most effective if it's a company that the kids already know and understand -- the more familiar they are, the better. Parents should also encourage kids to ask questions and be willing to answer them," Yepez says.

2. Talk about the long term and the power of investing over time. "Starting to invest at a young age allows a child to witness growth and experience the common ups and downs of the market. Volatility is normal, and investing through it will keep emotions in check when investing at an older age," says David Geibel, senior vice at Girard Partners, a wealth management company in King of Prussia, Pennsylvania.

3. Connect the stock to ownership of the company that provides goods and services. "Debunk that common misperception that a stock is something you trade. Taking advantage of a great product and service you love or need shows children how capital markets work and having a piece of ownership in something real and tangible," Geibel says.

4. Track the stock price every three or six months. "Review statements with your children to make sure they know how their investment is performing. Discuss events or new products from the company -- for example, the new "Star Wars" movie from Disney or the latest Apple iPhone. Make sure to show them any dividend earnings and teach them how to reinvest that money," Geibel says.

5. Identify and choose large, stable companies. "Gifting a new biotech company stock that may go up significantly very quickly, then tank at an equally fast rate, does not send the right message. You want them to taste success with stable companies with solid fundamentals," Geibel says.

When you consider stocks to choose for gifts, think about products that children use and love, and connect their interests to the gift. Here are four stocks to consider:

Nike (ticker: NKE). One way to introduce the gift of a stock is to pair it with the product, which can help teach the principle of delayed gratification, Wilson says. A new pair of Nike shoes cost about the same as a share of Nike stock. "Buy both, then make a deal to look at both next Christmas. Even if the market doesn't cooperate, that share of Nike stock will be worth a lot more than the shoes in one year," Wilson says.

"Nike has the best innovation in the industry, and a big percent of its sales come from online areas. Therefore, we believe that it will continue to grow, and in 10 years from now, it will be stronger than ever," Yepez says.

The Walt Disney Co. (DIS). From Disney movies to Disneyland to Mickey Mouse, kids know and love this company's products. "We think that Disney is one of those companies that 10 years from now will only be stronger, as the franchise of Disney products continues to gain market share," Yepez says.

Apple (APPL). Everyone knows Apple products. In many schools, kids use the iPad, and many people have iPhones. "Most kids can relate to this product better than their parents," Geibel says.

Alphabet Inc. (GOOG, GOOG). Just Google it. Kids today are more likely to turn to the Google search engine to look something up rather than use an encyclopedia or dictionary. While Alphabet stock is a pricey stock at more than $700 per share, the company is a ubiquitous presence in today's computer-dominated society, and kids know it.

Finally, know the rules, especially if you are regifting stock that you already own. If a child receive a stock as a gift and later wants to sell it, the capital gain is based on the parent's cost basis, Yepez says. "For example, if a parent buys Facebook (FB) at $70, and by the time they give it as a gift, it reaches $100, if the kid wanted to sell the stock, the capital gain would be based on the $70 the parent bought it at, not $100 they received it at," Yepez says.

What is the most important lesson a gift of stock will impart to your child? "Investing is not a sprint; it's a marathon. And delayed gratification is the path to true wealth," Geibel says.

Kira Brecht is a financial journalist who writes extensively on stock, commodity, and foreign exchange markets, investing strategies, the economy and the Fed. She was managing editor at SFO (Stock, Futures & Options) Magazine for 10 years, creating digital magazine, newsletter and online content aimed at the individual investor. She began her career on the floor of the Chicago futures exchanges covering commodity markets for a financial newswire service. Follow her on Twitter @KiraBrecht.