FAANG stocks dramatically outperformed the broader market over the past few years. But what exactly does FAANG stand for?
The term FAANG is one such acronym. Let’s dive into what it means and why they’re important.
FAANG is an acronym for five of the largest tech stocks in the world.
So why is FAANG important beyond knowing what the letters stand for?
Well, because these five companies represent the most popular and best performing technology companies in the world.
They are totally dominant in their markets and volatility in FAANG stocks can have an effect on the performance of the entire market as a whole.
For investors, there are three main reasons why these stocks are extremely popular
- Dominant in their markets + wide economic moat
- High liquidity
- Tons of content and news daily
These three factors make them great stocks to track for both short term traders and long term investors.
Why Beginners Should Start With FAANG Stocks
For beginners, regardless of whether you’re a bull or a bear, FAANG companies are a great starting point. In fact, FAANG stocks have historically outperformed the S&P as a whole.
The fundamental strength of FAANG makes for a great place to start building out your portfolio for long term investors and swing trading for short term traders.
In fact, it’s common advice for beginning investors to only trade a few stocks. In some cases it’s even recommended to start by only trading one stock.
If you do decide to do this, FAANG stocks are a great place to start.
Add them to your watchlist and dive deep.
As a result of FAANG being the most popular, they’re also the most widely covered.
Read into financials, listen to earnings calls, track their news stories and get into the weeds learning about these five stocks.
This will help you learn the fundamentals with 5 of the most liquid and content rich stocks out there.
Once you’ve grasped the basics you can begin to widen your watchlist and start tracking other stocks you’re interested in.
Another great way to trade and invest in FAANG stocks is by increasing your exposure to them through various funds.
Buying funds that are heavily invested in FAANG stocks allows you to bet on their continued success at a lower cost basis without having to invest or trade them individually.
Below are 3 funds heavily invest in FAANG stocks
While these are my personal favorites, there is a long list of funds that are heavily weighted towards these five companies.