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Buy Bonds For the Little Ones?

As a kid, you may have been lucky enough to get stocks as stocking stuffers during the holidays. For some of us, grandma’s savings bonds are still in the attic. Investments can be the gifts that keep on giving – as long as the market is going where we want.

This year, the investment-as-gift game is a little more complicated. Joe Terranova, chief alternatives strategist with Virtus Investment Partners, believes that bonds are the best investment gift right now. Many AAA-rated corporate bonds can get you upwards of 8-9% on 3-5 years, he said. Are you seeing that kind of return anywhere else? Just make sure you only buy AAA-rated.

Even more important than the return, Terranova said, is the educational opportunity investments bring with them as gifts. Giving stocks and bonds as gifts to children is a way to get them interested and involved in the process (Terranova personally gives investments as gifts to his nieces and nephews for that reason). Like we heard earlier on the show, anything to increase financial literacy and money awareness early in life the greatest gift you can give.

Terranova also suggested annual cost-buying as a way to invest for your children’s future. Consider that energy costs are likely to be the biggest concern they will face and invest in large-cap energy companies now. Not only are you giving them a gift that they can learn from, you’re essentially investing in their future.

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