What Are FAANG Stocks?
We’re used to hearing all kinds of acronyms in the financial world, but FAANG is amongst the strangest sounding. It wasn’t long ago that economists were talking about ‘BRICS’. These were the less-developed countries (Brazil, Russia, India, China and South Africa) that earlier this century overtook developed countries in terms of their pace of economic growth.
Not long afterwards we had the PIIGS – Portugal, Ireland, Italy, Greece and Spain. This was a somewhat disparaging term which bundled together the most troubled countries within the Eurozone. In fact, around ten years ago there were fears that one or more of the PIIGS would be forced out of the currency bloc due to their economic difficulties.
But these groups have been totally eclipsed now by FAANG. No doubt you’ve heard the expression, but do you know what the toothy-themed term is referring to?
Well, FAANG groups together five of the world’s biggest tech stocks – Facebook, Apple, Amazon, Netflix and Google. These five companies are the best-known technology firms on the planet, with a huge influence on how most of us live our daily lives. As you’d expect, these stocks are highly sought-after and valuable. They dominate global equity trading and make up a significant proportion of most US stock indices. Together, the FAANGs make up about 15% of the S&P 500 which is a stunning amount considering the index is generally viewed as a proxy for the US economy as a whole.
A short history of FAANG stocks
FAANG started life as ‘FANG’, and was coined by Jim Cramer, the host of CNBC’s Mad Money, in February 2013. Originally the group didn’t include Apple which was added in 2017. On top of this slight confusion, Google has technically been a subsidiary of Alphabet Inc since 2015, so the stocks held by investors are Alphabet ones. But it’s fair to say that ‘FAAAN’ isn’t quite as catchy as ‘FAANG’, so the latter term remains in popular use.
Since the end of the last bear market in March 2009 – well before Facebook went public and listed its shares – the five stocks have racked up huge growth. With Facebook excluded, the AANG stocks recorded an average return of 2,900% over 10 years. That means if you’d invested $10,000 evenly across the four companies back in 2009, you’d have been looking at $300,000 a decade later. That’s no small amount of pocket money!
So, these stocks are a big deal – but should you invest in them?
That’s the million-dollar question for many investors – or, as of January 2020, the $4.1 trillion dollar one, given that this was the total market capitalisation the five stocks back then. There’s no doubt about the impact that these companies have on people’s lives. On an average day, loads of us will use an Apple product, whether it be an iPhone, iPad, Apple Watch or Mac, perhaps using the Facebook app to see the latest updates from our relatives and contacts, and then head to Google to find and order a product on Amazon, before sitting down to watch our favourite show on Netflix.
It’s true that the growth recorded by these companies’ stocks down the years has been utterly remarkable. But that’s a different matter to whether it’s wise for you to buy into such stocks now. For one thing, they’re very expensive these days for many investors – at the time of typing, just one share of each FAANG stock would set you back thousands of dollars in total.
How can Trade Nation help?
At Trade Nation it’s possible to access FAANG stocks easily. By dividing the price of each of our US shares by 10, we’ve reduced both the margin and volatility of FAANG stocks to put them back in reach for many traders who don’t want to tie up their money on the large deposits required to open and hold positions in these stocks.
We’ve created Mini Markets to make Facebook, Amazon, Apple, Netflix and Alphabet more accessible. We’ve also made other US giants, including household-favourites such as Walt Disney, Microsoft, NIKE and Coca-Cola, more affordable to trade.
So why not create an account with us today here to begin tapping into the possibilities that these in-demand stocks could bring you in the months and years ahead?