3 Top Stocks to Buy for Your Children

By Markets Fool.com

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The earlier your children get interested in investing, the more likely they'll achieve financial security. Thanks to compound interest, or the ability of interest to earn interest, even small investments made when your children are young can pay off handsomely in the future. With that in mind, we asked some of our top contributors what they'd recommend for their own children's portfolio. Read on to see if they might be right for your future investment gurus, too.

Vacuum up some profits for your portfolio

Steve Symington: My kids have grown up watching our Roomba bump its way around the house, so perhaps they take for granted the amount of time and energyiRobot's(NASDAQ: IRBT)popular robotic vacuum has saved us over the years. But as they get older, I think they'll only become more aware of robotics technology as it continues to advance.

Last month, iRobot announced stronger-than-expected second-quarter results, led by solid 27.4% year-over-year growth in U.S. home-robot sales. And that included solid demand for iRobot's high-end internet-connected, visually navigating Roomba 980 model, as well as for its recently expanded line of affordable Braava floor-mopping bots.

What's more, earlier this year iRobot not only sold its defense and security business, but also ended its early-stage marketing and business development for remote presence products. In doing so, the company ensured it will be able to dedicate 100% of its resources going forward to focusing on consumer robotics. Last quarter, we saw some early fruits of that effort as iRobot partnered with AmazonWeb Services to help scale iRobot's connected product business and enable increased capabilities for smart homes. And for down the road, iRobot has already revealed it's working on other products including a robotic lawnmower to build its presence outside our homes.

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In the end, as iRobot's consumer robotics technology becomes more ubiquitous, I think owning shares along the way will prove a great opportunity to teach my children about the concept of recognizing early trends and making long-term investments accordingly.

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A great investment, and a great teaching tool

Jason Hall: MasterCard Inc.(NYSE: MA) may not sound like a very "kid-friendly" stock, but there are two things that make it an ideal investment for your child:

  • Tremendous long-term growth prospects.
  • A great way to stretch your kid's understanding of money and investing.

Frankly, the first point is most important, since investing is first and foremost about generating returns, and few large companies are as well-positioned as MasterCard to take advantage of global growth and the expansion of the world's middle class over the next 20 years. Because as dominant as theVisa/MasterCard/American Expresstrio is today, from a global perspective, electronic payments are a very small fraction of total transactions.

To the second point, owning shares of one of the largest payments companies in the world is a great way to help your kid develop a better understanding of finance and money. After all, there are very few places you'll go these days and not see a MasterCard logo on the door, creating plenty of opportunities to talk about how MasterCard works, and how that's tied to the economy at large.

So if you want to invest for your child's future, while also getting them thinking about money early, MasterCard is a great way to generate solid long-term returns, while also connecting a lot of dots about money.

Image source: Getty Images.

This biotech gift could pay off handsomely

Todd Campbell: If you want to start an investment account for your children, you might want to seriously consider owning Gilead Sciences (NASDAQ: GILD) as a core holding.

Gilead Sciences is the top seller of medicine used to treat HIV and hepatitis C, and with $30 billion in sales and an enviable balance sheet sporting nearly $25 billion in cash, there's a lot of reason to think that this company will remain a leader in the decades to come.

Recently, the company's shares have fallen out of favor because sales growth for its hepatitis C drugs has flattened, and that may be creating a great opportunity to buy an industry leader at a bargain price. The company'sshares can be bought for less than seven times forward earnings estimates, and that's a multiyear low.

Admittedly,competition is likely to remain fierce in hepatitis C, but Gilead Sciences' researchers are knee-deep developing drugs targeting other big indications that could spark sales in the future. Among the company's most intriguing targets are nonalcoholic steatohepatitis, an increasingly common cause of liver transplant and rheumatoid arthritis.

Yes, it may be a while before these R&D programs pan out, but given that we're talking about investments to tuck into our kids' portfolios, we've got the benefit of time on our side.

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Jason Hall owns shares of Amazon.com, American Express, and MasterCard. Steve Symington owns shares of iRobot. Todd Campbell owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Amazon.com, Gilead Sciences, iRobot, MasterCard, and Visa. The Motley Fool has the following options: short October 2016 $85 calls on Gilead Sciences. The Motley Fool recommends American Express. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.