FAANG Stocks Overview, List of the Top Tech Companies

The four household names are plays on some of the hottest technology trends, including cloud computing, streaming media, smart homes and artificial intelligence. If you decide not to own individual shares of the companies, you can get exposure to them through a number of exchange-traded funds (ETFs) and mutual funds. Any index fund that tracks the S&P 500 Index or broader stock market most likely has holdings in FAANG stocks. Tech-focused ETFs are also likely to include some if not all of FAANG stocks and offer similar exposure.

  1. It’s an acronym that stands for five big companies — some might say the big companies — in the high-tech industry.
  2. These investors may be tempted to delay purchasing FAANG stocks, waiting for their valuations to decline.
  3. While Apple is a U.S. technology giant like the other stocks, it gets most of its revenue from hardware such as iPhone, iPad and Mac computers.
  4. Since there are only five stocks in the FAANG, it wouldn’t be difficult to buy and hold all of them if you are looking for direct exposure.
  5. The fact is that Alphabet has some big-time advantages like its thousands of talented engineers and massive troves of data.

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The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers https://traderoom.info/ that may be available to you. The MAMAA group of tech stocks has taken a beating so far in 2022, but there’s still plenty to like about each stock’s long-term outlook. Analysts are optimistic Alphabet’s share price will find its stride once again.

Most retirement accounts include total market or S&P 500 mutual funds, providing guaranteed exposure to all five FAANG companies. Buying FAANG stocks is easy since they’ve been some of the top-rated tech stocks over the last decade. However, consider planning your trades and have goals for your investments. If you follow the financial or business news, you may have seen or heard the term FAANG thrown around.

Known for his slangy abbreviations and catchy phrases, Cramer coined the term in 2013 to represent four tech stocks with outsized market appreciation. Cramer believed that these companies belonged together because they are all high-growth stocks that share the common threads of digitization and the web. Facebook announced on Thursday its new name of Meta, which the company says better captures its ambitions beyond social media. The superpower of the FAANG cohort should make you wonder what are the best ways to invest in these high-growth stocks? If you don’t want to take direct exposure to individual stocks, you can always buy exchange traded funds, or ETFs, which track the performance of mega-cap technology stocks, including FAANGs. ETFs are the low-cost alternatives to mutual funds, giving you a choice and flexibility to buy many stocks through a single fund.

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In addition, the FAANG stocks are part of the S&P 500 Index, which includes the 500 largest publicly-traded companies by market capitalization traded on the NYSE or NASDAQ. The search platform contributed $104 billion to Alphabet’s total sales in 2020, making up half of the behemoth’s total revenue. Google has been the market leader in online advertising for well over a decade and is expected to command nearly a 29% share of digital ad spending globally in 2021, according to eMarketer. Apple’s main strength is its ubiquitous iPhone which makes up the major portion of its sales. Apple made about $366 billion in total revenue in the financial year that ended on Sept. 30, 2021, with iPhones making up about 33% of the total sales.

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However, these stocks also tend to retain value during periods of volatility better when compared to non-FAANG companies as well. Index composition isn’t the only factor that makes FAANG companies important to the overall economy. These companies are major employers in their industry, directly and indirectly creating millions of jobs surrounding their respective product or service. These companies also must partner with smaller operations to keep their employees supported, healthy and happy, contributing to smaller business growth. Budget cuts and layoffs at FAANG companies can have compounding effects on other stocks and the economy for these reasons.

The evolution of FAANG and big tech

FAANG stocks like Meta Platforms have also been the subject of regulatory lawsuits, with data collection and privacy concerns at the forefront of legislature issues. Four of the five companies in the FAANG group have all been public for 15+ years, but this type of market environment is unique for all of them. This group of stocks never traded during a period of high inflation and rising interest rates. Matching the gains produced through the pandemic period will be difficult and these stocks could underperform the market if inflation and high rates prove stickier than anticipated. How much capital will you devote toward your FAANG stock investments?

What are FAAMG stocks and MAMAA stocks?

The fact is that Alphabet has some big-time advantages like its thousands of talented engineers and massive troves of data. “The most interesting FAANG stocks are likely going be those with the best strategies for deploying, integrating and, ultimately, monetizing AI.” FAANG shares have risen distinctly over the past 5 years, the dynamics of their growth significantly outstripping the dynamics of the market in general. Stock fluctuations often foreshadow general trends in the American economy. For example, right after the news of the global Facebook crash, the S&P Index fell by 1.3%, the Nasdaq 100 by more than 2%, the Dow Jones by 1% and the NYSE Composite fell by 0.73%.

In the years that followed, Facebook grew from an unprofitable social media platform to a multi-platform online advertising behemoth. The changing environment has prompted Cramer and other tech investors to champion a new acronym for top tech stocks. While Netflix’s market cap has tumbled to just $130 billion, software and cloud services giant Microsoft (MSFT) has grown to a more than $1 trillion valuation. In addition to its primary marketing and advertising businesses, Alphabet has diversified its portfolio with investments in third-party sectors. It currently holds a series of stakes in innovative startups, including autonomous vehicle company Waymo and health data organization platform Verily. These ventures aim to explore additional, unrelated technologies and potential future growth areas, which can appeal to investors looking to capture capital appreciation.

These are just a few of the many large investors who have added FAANG stocks to their portfolios because of their perceived strength, growth, or momentum. With such a small index, investors may be better off building their own portfolio of FAANG or MAMAA stocks and avoiding the ETN expenses. That’s especially true now that most discount brokers charge no commissions and allow fractional share purchases.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience. Leveraged ETFs also have complex structures and often shift away from their targeted index over time, resulting in tracking errors. Use caution when investing in these FAANG ETFs (or any ETF or security that uses leverage). Yes, you can invest in a FAANG ETF from Direxion, but there are a few important caveats to discuss.

However, you should be aware of the high risks involved, as CFD trading also magnifies losses if the share price moves against your position. Alternatively, you can trade individual shares of FAANG companies with contracts for difference (CFDs). CFDs are trading instruments that allow you to speculate on a stock price without having to own the underlying shares. If you expect the company’s share price to rise you can take a long position, and if you think it will move lower you can go short and still make a profit on the trade if the price falls. The top five S&P 500 GICS tech stocks by market cap in 2022 are Apple, Microsoft, Nvidia (NVDA), Oracle (ORCL) and Broadcom (AVGO). The five MAMAA stocks have a combined market cap of more than $6.6 trillion.

This large influence over the index means that volatility in the stock price of the FAANG stocks can have a substantial effect on the performance of the S&P 500 in general. In August 2018, for example, FAANG stocks were responsible for nearly 40% of the index’s gain from the lows reached in February 2018. No fund or exchange-traded fund (ETF) exclusively contains FAANG or MAMAA stocks. However, the NYSE FANG+ index tracks the five FAANG stocks and five other tech and tech-enabled leaders, including Microsoft. Microsoft started out by licensing its Windows operating system to PC manufacturers, but it’s a much broader company 40 years later.

Morningstar analyst Dan Romanoff says Microsoft’s pivot to cloud services and subscription software has the company well-positioned to continue to thrive. Tech stocks have been among the top-performing investments over the past two decades, but the tech rally has hit a wall in 2022. If all of those are good, I’d say [big tech stocks] are on sale,” she says. We believe everyone should be able to make financial decisions with confidence.

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