The five mega giants and the most successful companies in the American stock market i.e the FAANG companies comprise of Facebook Inc. (META), Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Netflix Inc. (NFLX), Google LLC (GOOGL; now Alphabet Inc.). These are the companies that have changed the definition of interacting, socializing, shopping and entertainment and are some of the best performing companies not only in the US but across the globe. FAANG stocks are very popular, and find a place in portfolios of many investors owing to their size, dynamism, growth prospects, and most importantly, the leaders that represent these companies.
Many may think-where did FAANG come from? In 2013, Jim Cramer coined the term FANG for these companies in his show Mad Money (CNBC) while praising these companies as being “totally dominant in the market.” Then, in the year 2017, Apple joined these companies to rename the term FANG as FAANG.
The total market capitalization of FAANG companies runs into trillions of dollars, and they alone are capable of influencing the whole stock market. Some of the most dynamic changes in the world and technological revolution was brought by these companies making them the most dominant, as Jim Cramer said. Whether you talk about electronic devices, data, shopping, entertainment, or socializing, FAANG companies are the ones that have laid the foundation of this technology-driven world.
Let’s have a detailed look into the FAANG stocks to see what makes them so dominant that a separate term has been coined to refer to them. (Alternatively, FAAMG is also coined to include another tech-giant viz. Microsoft)
FAANG stocks are the most dominant stocks, not only in the US market but across the globe, as the products and services that they offer are used worldwide and have become the most important part of our day-to-day lives. Together, their market capitalization crosses $4 trillion, which is more than the GDP of most countries. Other than Saudi Aramco, the only companies that have crossed trillion-dollar market capitalization are among the FAANG companies (excluding Netflix).
S&P 500 has given a return of 17% over the last 5 years (in INR terms), while the Nifty 50 has given returns of about 16% over the same period. On the other end, if we consider returns of FAANG stocks, they can be summarized as under:
|FAANG Stocks||1-year FAANG Returns* (in terms of INR)||3-year FAANG Returns* (in terms of INR)||5-year FAANG Returns* (in terms of INR)|
|Google (Alphabet) share||-9.77%||99.59%||141.8%|
FAANG stocks make up a major portion of the returns of the Nasdaq Index, and are commonly seen as the “engine” of the Nasdaq 100 Index.
Investing in FAANG stocks can be done in either of the two ways. One can either invest through mutual funds or index funds. The other way is to invest directly in these stocks through their stockbroker. Through the Liberalised Remittance Scheme (LRS) of RBI, a person resident in India can invest in foreign securities up to the limit of $2,50,000 per Financial Year without requiring any special permission. Also, no mutual fund will exclusively invest in FAANG stocks. Therefore, investors may prefer investing directly in FAANG stocks instead of going through the mutual fund route.
All the stockbrokers may not provide access to the US stock market to their investors. By far, the easiest way to invest in FAANG would be through the US Stock market through the INDmoney platform. With zero brokerage and a paperless process, one may easily apply for investing in the US stocks and analyze their returns.
However, these stocks are expensive, and Amazon and Google stocks run into thousands of dollars. Therefore, INDmoney provides a platform to invest in fractional shares. Fractional shares mean a part of one share. Thus, one may even invest in 0.00001 shares of FAANG, removing the requirement of minimum capital investment.
Investing in FAANG stocks is lucrative as the returns provided outperform both the average American Stock Market as well as the Indian Stock Market. Therefore, if an investor is looking to diversify their portfolio and considering investing in foreign securities, then FAANG stocks are the best to invest in. Not only are the companies well established and safe to invest in but also because these companies are represented by a few of the most versatile and dynamic leaders that started from scratch to build these empires.Click here to get started!
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