Updated on Dec 18th, 2023
Introduction to FAANG
In finance, "FAANG" is an acronym that indicates the stocks of five prominent American technology companies: Facebook, Amazon, Apple, Netflix, and Alphabet (GOOG) (previously known as Google).
The term was coined by Jim Cramer. He is the television host of CNBC's Mad Money. He praised these companies for implying "totally dominant in their markets". Initially, the term FANG was used, with Apple—the second "A" in the acronym—added in 2017.
Understanding FAANG Stocks
In addition to being generally known among consumers, the five FAANG stocks are among the most significant companies in the world, having a combined market capitalisation of almost $5.6 trillion as of Aug. 13, 2020.
Their strong growth has been buoyed recently by high-profile purchases made by prominent and influential investors such as Berkshire Hathaway, Soros Fund Management, and Renaissance Technologies. These are a few of the many great investors who have added FAANG stocks to their portfolios because of their distinguished strength, growth, or momentum.
Significance Of FAANG
For investors, the tech sector has become important as a wave of high-technology companies have lately gone public through initial public offerings or SPACs. Tech stocks are now known as the go-tos if you want capital appreciation in your assets and to be in on the next big thing.
While the FAANG stocks are relatively mature companies, they still seem to have a great capacity for growth. They control the technology-oriented Nasdaq Composite Index. And the fact that they account for approximately 15% of the S&P 500, a bellwether for the complete stock market, means their performance usually heralds trends in the US economy as a whole.
How To Invest In FAANG
There are various ways to invest in FAANG.
Individual stocks: Facebook, Apple, Amazon, Netflix, Google all trade exclusively on Nasdaq. You can purchase all five, creating your own little FAANG portfolio.
Tech Funds: No mutual fund or exchange-traded fund is devoted to the FAANG group. But any technology-focused fund is obliged to include them: Look for those that invest at least 80% of their assets in stocks. Few of the top returning ETF funds include iShares Expanded Tech Sector ETF (IGM), NYSE Technology ETF (XNTK), and Invesco QQQ Trust (QQQ).
Index Funds: Given their financial prominence, the FAANG will be weighted heavily in several broad-based market index funds, like the First Trust Dow Jones Internet Fund (FDN), or one that follows the Nasdaq Composite Index (IXIC).
