WallStreetMojo

WallStreetMojo

WallStreetMojo

MENUMENU
  • Blog
  • Free Video Tutorials
  • Courses
  • All In One Bundle
  • Login
Home » Investment Banking Tutorials » Equity Research Tutorials » FAANG Stocks

FAANG Stocks

By Madhuri ThakurMadhuri Thakur | Reviewed By Dheeraj VaidyaDheeraj Vaidya, CFA, FRM

What Are FAANG Stocks?

FAANG stock refers to the stock of five most successful and popular companies like Facebook, Amazon, Apple, Netflix, and Google (now Alphabet Inc.) and have a market capitalization of around dollar three-point one trillion as of March 2019 and these are large stock markets and investors earn large earnings due to their high growth.

FAANG Stocks

These companies were usually trading until mid-2017 when people started recognizing the drastic movements in the markets and indices. They found that these companies are massive enough, and as they constitute the major components of the NYSE, Wall Street and CNBC grouped them together and started calling them – the FAANG stocks. They make up around 12.0% of the S&P 500 Index.

Some Facts about the FAANG Stocks

Tickers for these companies on the NASDAQ and their current prices trending are:

FAANGs Stocks of company NASDAQ

  • *Market Prices of Stocks as on Oct 2, 2018, 4:00 PM (source: Yahoo Finance)
  • **Market capitalization in $ Bil(s) for the FY 2017 (source: Yahoo Finance)
  • ***Data as on Oct 2, 2018, 4:00 PM (source: Yahoo Finance)

Thus, it is seen that of the total volume of 2,297,504,561 (2.3 billion) reported by the nasdaqtrader.com as on Oct 1, 2018, the total volumes traded for the FAANG stocks is 73,489,363 (72 million). Additionally, the total Market Capitalization for NASDAQ is approximately $30 Tn (reported by nasdaq.com on Jan 2018), while these stocks alone make up $3,531.72 Bn (or $3.5 Tn) as on Oct 2, 2018, which is ~10.0% of the nation’s total market cap.

How FAANG Stocks Affect Indices?

As seen in the above analysis, these stocks take up a massive chunk of the market cap in the exchanges, which is why movement in such stocks affects the whole index. It can be well understood that although being just a handful of stocks, if they hold good market strength, they are good enough to make or shake the indices. They affect not only their shareholders but also the entire shareholder strength.

Popular Course in this category
Sale
All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)
4.9 (1,067 ratings)
250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion
View Course

Are FAANG Stocks Risky?

  • Since they hold a significant share in total stock prices, an investor needs to invest quite a good amount to purchase the FAANGs. They are part of the best investments for investors since, over a period of time, they have evolved very well and paid good returns. However, investing in this portfolio alone seems risky.
  • All the FAANG companies (Facebook, Amazon, Apple, Netflix, and Google) are a part of the tech industry. Portfolio investment has a basic concept to diversify the risks to gain maximum returns. Thus, investing only into these stocks may bring good returns as these companies grow, but just if there is any major event or slowdown, these stocks can together bring total losses.
  • Most of the major investment firms and mutual funds have a combination of these stocks and other smaller stocks, which help them to diversify their portfolio. Investing otherwise, each of these stocks requires a good amount of money; hence an investor first needs to arrange to buy such stocks.
  • If in case these do not give expected returns in the future due to any event, the investor would lose quite some wealth of his after these stocks. Hence, it is advisable to diversify their portfolios.
  • Another important point that should be noted is that since these giants are the best in their fields, they create a monopoly in the market. There is hardly any competition for them, which is why they may rule the market. They may grow really powerful in the near future. Investing in these stocks may seem to be a wise decision now, but the future gets insecure.

Some Key Points to Remember While Trading into FAANGs

Investing in the FAANG is nothing wrong; however, one needs to be cautious in their investments. Some points to be noted are as below:

points for Trading into FAANGs

#1 – Diversification of the portfolio is crucial:

If the investor deals with individual stocks, it becomes a primary reason for him to hedge his risks related to these stocks. The FAANGs can be giving quite good returns for a while, but the markets are very volatile, and the risky nature cannot be ignored.

#2 – Regular study of the markets to track performances:

The investor should not be under the notion that these stocks will always be paying well. A good investor is a well-informed research analyst, and only by the regular track of the movement of stocks and the market can he expect good returns.

#3 – Be balanced:

It means investing in other industries and markets as well. Investing in FAANGs is like investing in the only tech industry, and diversification is required not only with other stocks of the same industry but also with other industries. With FAANGs, an investor would be sitting on one side of the boat; if there is too much weight on his side, his boat may topple downwards. So, he needs a perfect balance. There are a lot of analytical tools that provide good information about the portfolio’s beta factor for diversification.

Conclusion

Thus, it is seen that grass is not always green on the other side. One can definitely go ahead on the other side towards the greener grass by investing in the FAANGs but needs to keep in mind the risks it involves. Additionally, only he is not the one who can read these stocks. There are millions of other investors who have the same reading about these FAANG stocks and market sentiments. So, there is a lot of competition, and there are many good players who are well aware of how to make money. Hence, it becomes vital to understand the markets well; and not just go by projected growth or returns declared.

FAANG Stocks Video

 

Recommended Articles

This article has been a guide to what are FAANG Stocks and its meaning. Here we discuss how they affect the indices, its risks, and critical things to remember while investing in them. You may learn more about investments and trading from the following articles –

  • Net Promoter Score
  • Floating Stock
  • Trading Floor
  • Career in Trading
  • Proprietary Trading
0 Shares
Share
Tweet
Share
Primary Sidebar
Footer
COMPANY
About
Reviews
Contact
Privacy
Terms of Service
RESOURCES
Blog
Free Courses
Free Tutorials
Investment Banking Tutorials
Financial Modeling Tutorials
Excel Tutorials
Accounting Tutorials
Financial Statement Analysis
COURSES
All Courses
Financial Analyst All in One Course
Investment Banking Course
Financial Modeling Course
Private Equity Course
Venture Capital Course
Excel All in One Course

Copyright © 2021. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.
Return to top

WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Book Your One Instructor : One Learner Free Class
WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Let’s Get Started
Please select the batch
Saturday - Sunday 9 am IST to 5 pm IST
Saturday - Sunday 9 am IST to 5 pm IST

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Login

Forgot Password?

Special Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More