The FAANGs have been the most popular stocks on Wall Street for some time now and for good reason. Facebook [FB], Apple [AAPL], Amazon [AMZN], Netflix [NFLX] and Google [GOOG] have a total market cap of approximately $3.5 trillion.
To put that into perspective—that’s more than the UK’s 100 biggest companies put together.
They’ve witnessed increases that range between 100-600% over the last three years. If you’re looking to check out how the indices have fared during this period, the numbers played out relatively low in comparison—the NASDAQ Composite generated 67%, while the S&P 500 [SPY] could returned around 40%.
Although the FAANG stocks account for almost half of the NASDAQ index, the massive rise in stock prices have worked in their favor—helping them substantially increase investor wealth and easily beat index returns.
Innovative products and business models
The FAANGs managed to completely disrupt several tech verticals by focusing on innovation and catering to specific needs.
Apple launched the iPhone in 2007 and is now one of the global leaders in smartphone manufacturing. It has managed to compete with other tech giants such as Samsung, comparatively new companies like Xiaomi and disrupt business models that were followed by former market leaders such as Nokia and BlackBerry.
In August 2018, Apple was the first US-based company to reach a market cap of $1 trillion.
The breakout success of Amazon Web Services propelled the firm to profitability and sent its market cap soaring. Amazon recently touched the $1 trillion market cap and is currently valued at a whopping $952B.
Facebook’s biggest bet was on building one of the world’s biggest social media network—and it paid off mighty well. The company’s net profits have risen from $53 million in 2012 to $16 billion in 2017.
Netflix isn’t lagging behind, either. It’s benefitted immensely from the cord cutting phenomenon and the shift towards streaming services. From a DVD rental firm in the 1990’s to the leading online streaming content company, Netflix has delivered significant returns to its shareholders.
Google realized the potential of the internet and created a revolutionary product nearly two decades ago. Google’s Larry Page and Sergei Brin were willing to sell Google to Altavista for a paltry $1M in 1998 which did not move forward. Yahoo joined the same bandwagon, and turned down an offer to acquire Google for $5B in 2002.
Google has wasted no time in diversifying into multiple revenue streams and briefly overtook Apple as the most valuable company in 2016.
Has the Downturn Started?
The upward spiral of FAANG stocks has been likened to that of the tech bubble during the dotcom crash of 2000. We saw a ton of e-commerce companies blow up and burn cash, eventually leading to a worldwide market crash.
Recently, data revealed that short bets for FAANGs increased 40% year-over-year to a whopping $37B at the end of August 2018, indicating a negative sentiment in the stock market.
Amazon prices slumped lower by 5% last week shortly after the company reached its $1 trillion valuation in intra-day trading.
The sluggish global market environment, trade war tariffs, and other macroeconomic factors have impacted FAANGs stocks this year after a spectacular run in 2018.
Despite these headwinds, Apple is up 32% in 2018, while Netflix, Amazon, and Google have risen 82%, 67%, and 11.3% respectively. However, Facebook’s shares have slipped by 7.6% this year.
Growth story far from over
While there might be a short-term correction in FAANG stocks it will also make them cheaper and more attractive.
Warren Buffett remains optimistic about Apple and has been increasing stake in the company for a few years now.
Apple and Google are targeting new business segments such as autonomous cars. Netflix, Amazon, and Facebook are already banking on the massive potential of emerging markets that open new regions to drive sales.
The FAANGs have massive cash balances that can be used for acquisitions as well as investments in research and development that will result in the product innovation and efficient services.
As long as the FAANGs continue to achieve substantial sales growth and successfully target new growth verticals, investors will remain bullish.
INFOGRAPHIC: How To Invest Your Money (In 8 Simple Steps)
Plenty of savers are making do with low rates of return on their deposits—almost eroding the value of their savings. Here’s a guide on how you should invest your money and gain some great returns off it.
Stock Trading: How to Choose the Best Online Brokers
Stock trading can be a risky business but done right it is an extremely lucrative investment option which yields excellent returns. It is true that trading is quite intimidating for someone who is new to the market and its ways which gives rise to the need for a good stock broker who can handle the job and ensure that the client gets the best returns possible for the money he or she is investing. But as a new investor it is absolutely important that you choose a very good trading broker. Here are some tips that will help you make that choice better.
Understand your trading needs
Before you even look into the services of a trading broker, it is essential that you are aware of your goals and needs from your stock trading. Firstly, prioritise your investment value, short term and long-term goal, and time that you are willing to spend on your trading in order to figure out where you stand. Now, narrow down on the specific kinds of stock exchange that you are looking into. With the wide variety of options available that you can choose from, it is important to narrow down to the specific field or fields and finally look for brokers who suit your specific needs.
Have a clear talk about trading fees
It is important to have a clear-cut discussion on brokerage fee and commissions that your broker will charge you. Ask about the charges per transaction, basic account charges, account minimums and even reimbursements if and when you choose to part ways so that you can have a proper idea about how much you are about to fork out for your trading. It is a good idea to have the talk beforehand so that you do not get into an arrangement which later becomes financially burdensome for you.
Look up reviews on the broker
You would not buy a new product without checking what its previous users have to say, right? Similarly, look up your prospective brokers No matter how promising or lucrative a broker seems with the terms, make sure you check the reviews by InvestinGoal to ensure that you are actually getting a good deal and not being sweet talked into not a good broker or even worse, being conned of your money.
Ask your questions
Do not be afraid to ask whatever questions that come to your mind before you make a deal. This will help you understand your trading better and thus, to get the absolute best out of your investment. It will also help you uncover any hidden charges, non transparent clauses as well that might have later hindered the desirable growth of your stock.
Give a test run
Ask the broker if you can give a test run of your account, and his technology before you actually invest your hard earned money. Many brokers allow you to create a free account which you can use to test their platform and check out user friendliness, ease of trading, quality of tools etc and thus, make an educated decision.
Getting the right broker is definitely one step towards a good stock trading investment. Therefore, it is very important that you take utmost care in picking the very best broker for your trading needs.
3 Simple Steps To Build Your Investment Portfolio
If you’re starting out with planning your investments, chalking out your goals and how you’d like to achieve them is incredibly important. You’ll need to understand what kind of assets you’d like to invest in–be it exotic instruments like private equity or the tried and tested ones like the treasury bonds, ETFs and stocks–and invest right. Here are three key strategies to build your portfolio:
1. Building Wealth Is All About Thinking Rationally (And Smart)
Having the right mindset can play a huge role in how you build your investments. It’s simply not just about strategy. To ditch following the latest fad in the market, you need to be responsible and have a sense of social indifference–coupled with confidence and patience.
2. Invest Like A Cheapskate
If you’re pumping in $150,000 as investment, on which you incur 1% as fees, look out for ways through which you can cut them down.
If you were to cut costs by a little more than a half, that’s saving you at least $1,120 in fees every year. But that’s not it–when this saving is compounded every year, that 1% fee can tally up to a million (if saved, could win you your big ticket to becoming a millionaire!)
3. The KISS (Keep It Simple, Silly) Rule
Funnily enough, most of us think investing your way through millions demands extensive knowledge of financial instruments or strategies. Surprisingly, it’s the simplest of assets that gave the biggest investors their biggest wins. Many successful investors highlight their success to stocks, bonds and other popular alternative investments, patiently held over time.