As the holiday season approaches, you might be wondering what items are topping the wish lists of the children in your life this year. Are they eagerly anticipating new Squishmallows, the iconic 60th anniversary Barbie Dreamhouse, or the thrilling Mario Kart Ride-On Racer? Meanwhile, older kids may have their sights set on practical gifts like a high-quality gaming headset, stylish Uggs, or even the latest iPhone. This year, consider making your gift-giving not just about fun toys but also about teaching the value of investing. By introducing children to the principles of wealth building and investment growth, you can empower them to understand how their money can work for them over time.

This holiday season, think outside the box and consider not just generosity, but also the opportunity to instill financial literacy in the young ones around you. Introducing kids to the world of investing can be a valuable lesson that lasts a lifetime. Instead of focusing solely on material gifts, think about how you can lay the groundwork for their future financial success. By teaching them about investing a dollar today and watching it grow into a larger sum over time, you can help them develop a strong foundation in financial responsibility and wealth accumulation.

When considering how to approach gifting investments to children, there are primarily two schools of thought that dominate the conversation. Each presents unique advantages and perspectives on how best to introduce young investors to the stock market and the world of financial growth. Understanding these differing approaches can help you decide which method aligns best with your goals for teaching children about investing and financial management.

Exploring the Benefits of Gifting Stocks vs. Funds for Children

One prominent approach suggests purchasing stocks in companies that children are familiar with and have a genuine connection to. Proponents of this method argue that when kids invest in brands they recognize and love, they are more likely to engage with the concept of investing. They can begin to grasp the idea that they own a small piece of a real business. Furthermore, in today’s unpredictable market conditions, buying individual stocks can serve as a practical lesson in the importance of long-term investing. If you or the child can continue to contribute to the investment over time, they will also learn about the benefits of dollar-cost averaging in a fluctuating market. Given the current landscape, many stocks from well-known brands are currently undervalued, making this a timely opportunity.

The alternative perspective suggests that with ample time ahead, gifting children a well-diversified mutual fund or exchange-traded fund (ETF) might yield better long-term results. The argument here is that young investors benefit from a diversified approach, which helps to mitigate the risks associated with the volatility that can accompany individual stocks. Diversification is often referred to as “the only free lunch” in investing; it allows young investors to stay the course rather than being deterred by market fluctuations. Morningstar’s director of personal finance, Christine Benz, emphasizes that a total-market index fund is likely the best route for most young investors, as it includes a variety of companies that resonate with kids.

Top 15 Investment Options: Stocks and ETFs Perfect for Gifting to Kids

In this article, we are excited to present a curated list of investment options—both stocks and ETFs—that make excellent gifts for children during this festive season. Each of these securities has received top ratings from Morningstar at the time of this writing and features popular brands and services that are sure to appeal to the kids in your life. By choosing these options, you can inspire young investors to think about their financial futures while also gifting them something that they can genuinely relate to.

1. Alphabet GOOG
2. Bath & Body Works BBWI
3. Comcast CMCSA
4. DoorDash DASH
5. Hanesbrands HBI
6. Hasbro HAS
7. iShares Core S&P 500 ETF IVV
8. Mattel MAT
9. Paramount Global PARA
10. Walt Disney DIS
11. Warner Bros. Discovery WBD
12. Vanguard Total Stock Market ETF VTI
13. Vanguard Total World Stock ETF VT
14. Verizon VZ
15. VF Corp VFC

Below, you will find detailed descriptions of each stock and ETF included in this list. All data is current as of November 25, 2022, ensuring you have the most relevant information at your fingertips.

Exploring the Investment Potential of Alphabet

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Internet Content & Information

Alphabet, the parent company of both Google and YouTube, represents a significant investment opportunity, especially given its familiarity among children of various ages. With its strong brand recognition, Alphabet boasts considerable competitive advantages, as reflected in its wide Morningstar Economic Moat Rating. Despite facing challenges this past year, including a decline in revenue growth due to economic uncertainties, analysts anticipate a rebound in advertising revenue to double-digit growth by 2023. Currently, Alphabet stock holds a Morningstar Rating of 5 stars, indicating that it is significantly undervalued compared to our fair value estimate of $160, making it an attractive option for aspiring young investors.

For more insights, read: Alphabet’s Q3 Earnings Disappoint as Macroeconomic Uncertainty Hits Ad Revenue.

Investing in Bath & Body Works

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Specialty Retail

Bath & Body Works is a beloved retailer among teenagers, known for its affordable and trendy lotions, fragrances, soaps, and candles. The company has managed to establish a narrow economic moat, largely due to its leadership position in the specialty home fragrance and body care sectors in the U.S. However, like many retailers, Bath & Body Works is not immune to economic challenges, and analysts predict further sales declines in the upcoming quarter. Nonetheless, the company’s agility in adapting to consumer trends positions it well for long-term success. Currently, Bath & Body Works stock is estimated to be about 51% undervalued, with a fair value estimate of $82, making it an enticing investment for young future investors.

Understanding Comcast’s Market Position

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Telecom Services

Comcast is widely recognized for its cable and internet services, but it also has a rich portfolio that includes popular networks such as NBC and Peacock, along with renowned animation studios like Illumination and DreamWorks Animation. Furthermore, Comcast operates iconic theme parks, which are a favorite among families. Analysts forecast that Comcast will continue to dominate the internet service market, particularly as competition grows from traditional phone companies. The high profit margins associated with internet services are expected to counterbalance the declines in the cable television sector. Currently, Comcast stock is trading at a 41% discount relative to our fair value estimate of $60, making it a sound choice for long-term investors.

Gifting Shares of DoorDash

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Internet Content & Information

DoorDash has gained immense popularity among kids and parents alike for its convenient online food ordering platform, making it a staple in many households. The company holds a leading position in the U.S. as an online food delivery aggregator, benefiting from a network effect where increased usage attracts more restaurants to list their offerings. This means a broader selection of food for consumers, further enhancing its appeal. DoorDash is also diversifying its services into groceries, retail, and more, signaling its growth potential. With a Morningstar rating of 5 stars and a fair value estimate of $159, DoorDash could be a fantastic investment opportunity for children interested in the food delivery sector.

Exploring Investment Opportunities with Hanesbrands

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Apparel Manufacturing

Hanesbrands is widely recognized among children for its popular Champion and Hanes products, making it a leading name in the apparel industry. Although the company faces some challenges, including inflation and foreign currency fluctuations, analysts believe it is well-positioned compared to its competitors. Hanesbrands is focusing on expanding its Champion brand, which has evolved into a lifestyle and fashion staple. With an estimated 69% undervalued stock, analysts believe shares are worth $22 each, presenting a compelling opportunity for young investors to enter the apparel market.

Investing in Hasbro: A Timeless Toy Company

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Leisure

Hasbro is a titan in the toy industry, featuring beloved brands such as Transformers, My Little Pony, Nerf, and Dungeons & Dragons. Its diversified business model, incorporating digital content and key licensing agreements, gives it a competitive edge. A partnership with Discovery brings Hasbro’s brands to television, enhancing visibility and reach. Recently, Hasbro has made strategic moves to divest its TV and film segments, allowing it to concentrate on its core operations. With the stock trading at a significant 46% discount compared to our fair value estimate of $114, Hasbro presents an excellent investment opportunity for children who appreciate its iconic brands.

iShares Core S&P 500 ETF: A Solid Investment for Young Investors

• Morningstar Analyst Rating: Gold
• Net Expense Ratio: 0.03%
• Morningstar Category: Large Blend

The iShares Core S&P 500 ETF, managed by BlackRock, offers a low-cost way to invest in a diversified portfolio of large U.S. company stocks. With holdings in well-known brands like Apple, Microsoft, and Alphabet, this ETF provides young investors with exposure to some of the most financially robust companies in the market. Covering about 80% of the total U.S. market capitalization, this fund is a fantastic choice for investors seeking long-term growth. Morningstar analysts have rated this ETF as one of the best options for exposure to U.S. large-cap stocks, making it a wise choice for young aspiring investors.

For further insights, read: The Best Index Funds.

The Timeless Appeal of Mattel

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Leisure

Mattel’s wide array of products, including Barbie, Hot Wheels, and Fisher-Price, resonates with holiday gift lists for countless children. With strong licensing agreements, including those with Disney Princess and Despicable Me, Mattel’s position as a leading toy manufacturer enables it to secure lucrative partnerships. This strategic advantage, combined with its dominant market presence, earns Mattel a narrow economic moat rating. Currently, Mattel shares are trading at 5-star levels, with analysts estimating a fair value of $27 per share, making it an attractive investment for young enthusiasts of toys and games.

Paramount Global: A Media Powerhouse

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Entertainment

Paramount Global boasts an extensive portfolio that includes well-known networks like CBS, Nickelodeon, and MTV, along with renowned films produced by Paramount Pictures. The company is also making strides in the streaming arena with services such as Paramount+ and Pluto TV. Analysts believe that while CBS’s original programming and exclusive sports rights will help drive revenue growth, challenges persist, particularly in the advertising sector. Nonetheless, Paramount Global stock is currently trading 56% below the fair value estimate of $45, presenting an attractive opportunity for long-term investors willing to be patient.

For further insights, read: Paramount Q3 Earnings Mixed, but Advertising Revenue Decline an Ominous Omen for 2023.

The Magic of Walt Disney Investments

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Entertainment

Known affectionately as the Mouse House, Walt Disney has grown beyond its iconic character, Mickey Mouse, to encompass a wide range of beloved brands such as Pixar, Marvel, and Lucasfilm. Disney’s