What are FAANG Stocks and Should You Buy Them?
For those who are curious, FAANG refers to Facebook, Apple, Amazon, Netflix, and Google. However, it should be noted that the G in FAANG is not referring to Google but rather Google’s parent company Alphabet Inc. After all, FAANG is used as a term of convenience for five of the most popular tech stocks that can be found on the stock market.
Given the companies that are included in FAANG, it should come as no surprise to learn that these five stocks have an enormous impact as a collective whole. For example, the five companies possess a combined market capitalization that is bigger than the size of most national economies that can be found on the planet. Furthermore, it should be noted that their outstanding performance in recent times has made them popular choices for a wide range of investors, which is why FAANG exists as a term of convenience.
With that said, it is interesting to note that some people fear that FAANG has become so popular that there is a serious chance of a tech bubble bursting, which is something of a nightmare scenario for a lot of people who remember the last tech bubble to burst in the 2000s. However, other people have counted this fear by pointing out that FAANG still possess plenty of potential for further growth, which can sound rather incredible considering how these companies have expanded their operations in recent times. Still, it is important to note that belief in the potential for further growth is not unfounded, seeing as how the full potential of exciting technologies such as big data, cloud computing, and machine learning are still in the process of being explored at this point in time.
Should You Buy FAANG Stocks?
Some people might be curious about whether FAANG would make excellent choices of investments for their investment portfolios. Unfortunately, this is not a simple and straightforward question for a number of reasons.
First, different people invest for different reasons, meaning that different investments are best-suited for them. For example, some people buy investments in hopes of seeing high levels of appreciation within a short period of time so that they can sell them for a profit as soon as possible, which is an approach that comes with a lot of risk but can offer interested individuals with a lot of reward as well. However, FAANG would not be particularly well-suited for these people because while they possess potential for further growth, they are big enough and mature enough that they are not going to see the sort of growth that can be found in small-cap stocks.
Second, there is an ongoing debate about whether FAANG stocks might have become too popular. After all, FAANG stocks have become very popular in recent times, meaning that there are understandable fears of limited upward potential. As a result, investors with a contrarian view of things might want to look elsewhere for the time being.
Third, just because FAANG stocks have been grouped together, it does not mean that they are the same as one another. Simply put, there are some FAANG stocks that are better than others, whether because they have proven themselves to be capable of surviving serious economic shocks or because they are in a better position in their chosen market. For example, Facebook has never experienced a recession as a publicly-traded company, meaning that how its leadership will fare under such circumstances is more mysterious than what a lot of people would like. In contrast, a fair number of people believe that Netflix is more recession-proof than most companies out there because it offers outstanding value relative to its price, which is supported by its impressive numbers in Brazil in spite of the less than encouraging state of the Brazilian economy. Regardless, even if someone chooses to invest in FAANG stocks for the purpose of holding on to them for the long run, they still need to make sure that they have chosen the right FAANG stocks.
Summed up, there are solid reasons to believe that FAANG stocks make excellent investments, but fundamentally, different people invest from different reasons. As a result, interested individuals should make sure to seek an investment professional for answers to their FAANG-related questions, which should help them make the fully-informed decision that is in their best interests.