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The earlier you start investing, the better off you’ll be. It might not be an exciting Christmas present, but if you buy stocks for your child every year, they will be well on their way to achieving financial independence by the age of 18.
Imagine that you start buying stocks from the birth of your child. If you set aside a little bit of money each month and make sure you buy something every Christmas, you could invest $ 500 per year. With an annual return of only 6%, this investment account could be worth $ 15,453 after 18 years! It’s not an incredible amount, but it’s definitely a lot more than what the average 18-year-old has under his belt. Your child is also likely to have good financial habits.
In this article, I’m going to discuss two stocks that you should consider buying to jumpstart your kid’s wallet.
This title could be a big winner over the next decade
When looking for stocks to add to a child’s portfolio, you must consider whether the business has the potential to grow over a long period of time. It is currently estimated that the e-commerce industry could grow at a CAGR of 14.7% from 2020 to 2027. Within this industry, there are some very clear winners. Shopify (TSX: SHOP) (NYSE: SHOP) is the first stock you should consider buying for your child’s wallet.
Before you think, “I don’t have $ 1,800 to spend on a Christmas present,” don’t worry. This is where fractional shares come in handy. That being said, let’s see why Shopify is a good choice for your kid. First, it is a leading player in the vast e-commerce space. In Q2 2021, Shopify surpassed Amazon in terms of customer traffic for the first time. This indicates that it is becoming an increasingly popular destination for online shoppers.
Shopify also has a history of strong outperformance. Since its IPO, Shopify stock has risen at a CAGR of almost 83%. It goes way beyond the market. This growth in its stock is supported by solid commercial fundamentals. Since Q3 2016, Shopify’s monthly recurring revenue has grown at a 43% CAGR. It has also been shown that companies run by founders tend to perform better than their peers run by non-founders. At present, Shopify founder and CEO Tobi LÃ¼tke continues to lead the company with a significant stake.
Shopify is a top choice in many ways. I think that would be a great stock to give your child today.
Pick one of the best stocks in this industry
The most influential sector in the Canadian stock market is the financial sector. By this I mean that it represents the largest proportion of the TSX 60. Much of this is because leaders in the banking industry have enjoyed the many advantages of a highly regulated industry. This includes keeping small competitors at bay, allowing industry leaders to establish formidable moats. Within this group of elite banks, my top choice for a kid’s wallet is Bank of Nova Scotia (TSX: BNS) (NYSE: BNS).
While other banks would make good choices as well, I think the growth potential of the Bank of Nova Scotia is better suited to a longer investment horizon. The Bank of Nova Scotia has exposure to the Pacific Alliance, which offers it a tremendous opportunity for growth. It is estimated that a growing middle class will allow Chile, Colombia, Mexico and Peru to grow at a faster rate than Canada and the United States in the coming years. This growth should enable the Bank of Nova Scotia to outperform its North American-focused peers.
When one also takes into consideration the excellent dividend from the Bank of Nova Scotia, it quickly becomes clear why this would be a great choice. This action offers the potential for capital appreciation and might also teach a child the importance of dividend mix over time.