Much like politics, Valentine's Day polarizes society. While some folks wait with baited breath for their partner's grand, sweeping declaration of love, others dread the day for its pressure and inflated expectations. And while most of us who receive gifts today will end up with some variation of jewelry, chocolate, or flowers, another option out there has more lasting value: the gift of a more secure financial future.
The new chocolate
If you're in a newer relationship, gifts of a financial nature probably aren't the right move. You might want to stick with candy and flowers initially, or buy something else of a more personal nature.
But couples who are married or in committed long-term relationships might want to go beyond giving a perishable item, and think about buying loved ones an investment for the future: a few shares of a stock or mutual fund. Rather than look pretty for a week, then die, these gifts will grow and compound over time.
Of course, in our couple-focused culture, a lot of single folks have come to dread Valentine's Day. That's a big part of why Feb. 14 has also been somewhat humorously designated Singles Awareness Day. But if you find yourself unattached this time of year, you still shouldn't ignore your own financial future. You can still use this day to get your financial house in order, and maybe even treat yourself to a well-diversified mutual fund or exchange-traded fund for your portfolio. And then think of how much further ahead your financial plan will be this year because you didn't have to waste your hard-earned cash on overpriced roses!
The gift that keeps on giving
If you like the idea of giving your loved one a gift that can grow and give back well beyond Feb. 14, a broad-market exchange-traded fund is one of the easiest vehicles to get the job done. Because ETFs don't have investment minimums like most actively managed mutual funds do, it's easier to buy ETF shares on a limited budget. Of course, you'll pay a commission on these trades in most brokerages, but you can buy in here with very little money.
Some exchange-traded funds you might want to consider here include the Vanguard S&P 500 ETF
Of course, if your honey is very risk-averse, a fund like Vanguard Total Bond Market ETF
Funding your future
Of course, there are other options for investors who want to give a diversified investment gift. While most actively managed mutual funds have initial investment minimums of $2,000-$3,000, some index funds are much more cost-effective. Charles Schwab offers a line of index funds that come with a low $100 barrier to entry. That's less than the price of a new Kindle or Nook -- but this gift won't be obsolete by the end of the year!
The Schwab S&P 500 Index (SWPPX) only costs 0.09% to get in the door, and it's outranked about half of all large-blend mutual funds over the past decade. Here, you'll get exposure to the largest blue-chip stocks in the U.S., including names such as ExxonMobil and Johnson & Johnson, both of which are selling at P/Es of less than 14 and offer dividend yields in excess of 2%. Likewise, the Schwab Small Cap Index (SWSSX) offers broad coverage of the U.S. small-cap market for a low 0.19% price tag and a similar $100 investment minimum. Funds like these make it easy for almost anyone to buy into the market, even with limited financial resources.
Investment-related gifts aren't appropriate for everyone, but it probably wouldn't hurt to consider the possibility of spending less money on perishable gifts this time of year, and allocating more money to something that can grow and offer your beloved a greater return on investment. True, you can't set your investments on a counter to admire them, or show them off to all your coworkers, but the delayed gratification will likely be more than worth it when you're looking at a larger portfolio down the road.
