What are FAANG Stocks?

The U.S. stock market is one of the largest financial markets in the entire world. If you’re looking to create wealth without taking on too much risk, adding a few U.S. stocks to your portfolio may be able to get you closer to your goals. 

 

However, as an investor, you need to be aware of certain key terms associated with the U.S. market before you get around to investing in it. One such major term that you need to know the meaning of is FAANG stocks. 

 

Here’s a comprehensive guide that can help you understand the meaning of FAANG stocks, their importance and a few ways through which you can invest in them. 

FAANG is an acronym that’s used to represent 5 of the top technology stocks listed in the U.S. stock market. The list of FAANG companies includes Facebook, Amazon, Apple, Netflix and Google. 

 

The term stuck on despite the transformation of Facebook and Google into Meta into Alphabet with investors continuing to use the acronym to refer to this set of tech companies. FAANG stocks are very popular in the U.S. and feature in most investors’ portfolios in one way or another. 

The term was coined in 2013 by a U.S. television talk show host - Jim Cramer, during his show - Mad Money on CNBC. Initially, when the term was first coined, it was FANG and represented only four companies - Facebook, Amazon, Netflix and Google. However, in 2017, Apple was added to the list and the term was modified into FAANG. 

 

Now that you’ve understood the meaning of FAANG stocks and how the term came about, let’s take a brief look at each of the companies that feature in the list. 

• Facebook

Established in 2004, Facebook is one of the largest social media networking platforms in the world. The company also owns other major social networking platforms such as WhatsApp and Instagram. On October 28, 2021, Facebook renamed itself Meta Platforms. As of March 31, 2023, the annual revenue of the company stood at around $116 billion. 

• Amazon 

Founded in 1994, Amazon started as an e-commerce company that sold a wide range of products online. However, as the years went by, the company diversified its focus to cloud computing with the launch of Amazon Web Services (AWS). Currently, Amazon is also involved in online advertising, artificial intelligence (AI) and digital streaming. As of March 31, 2023, the annual revenue of the company was around $524 billion, putting it on top of the FAANG stocks list in terms of revenue. 

• Apple

Incorporated in 1976, Apple began its operations as a computer manufacturing company. The breakthrough for the company arrived in 2007 with the release of the Apple iPhone. Apple currently manufactures multiple electronic devices such as desktop computers, laptops, smartphones, tablets, smartwatches, and earphones and provides a host of entertainment services. As of March 31, 2023, Apple’s annual revenue was approximately $385 billion.

• Netflix

Established in 1997, Netflix is one of the largest digital entertainment and media companies in the world. The company’s Over-The-Top (OTT) streaming platform with the same name is hugely popular and is present in multiple countries. More recently, Netflix has started producing its own original content such as movies and TV shows in addition to hosting other third-party content. As of March 31, 2023, Netflix’s annual revenue stood at around $31.9 billion. Despite generating the least amount of revenue among all the other FAANG stocks, Netflix is still preferred by many investors.  

• Google

Founded in 1998, Google started as a powerful search engine. In just a short period, the company has managed to grow immensely and is now more than a search engine. The company is involved in providing other products and services such as cloud computing, advertising, artificial intelligence, computer hardware and software, among others. In 2015, Google became a part of a new holding company called Alphabet Incorporated. As of March 31, 2023, the company’s total annual revenue was $284 billion. 

As an investor, there are multiple advantages that you get to enjoy by investing in FAANG shares. Let’s take a closer look at a few of the top benefits. 

 

• All of the 5 tech companies are well-established and have a strong track record of revenue and profits 

• FAANG stocks often outperform the broader market and may even provide inflation-beating returns

• You get to build a stable and well-diversified investment portfolio

• FAANG stocks are safe to invest in and tend to be stable even during periods of high market volatility

• If you find the price of FAANG stocks to be expensive, you can choose to purchase fractional shares  

FAANG stocks represent a major part of the U.S. stock market and have a combined market capitalisation of over $7 trillion. Since these 5 tech companies are at the forefront of technology and are actively involved in developing several cutting-edge digital solutions, the future growth potential is also high. Furthermore, you also get the freedom to choose just how you want to invest in FAANG shares. In addition to purchasing the stocks directly, you can invest in them through mutual funds and ETFs as well.