FAANG: Big tech giants dominating the US market

FAANG refers to the five publicly traded stocks of technology giants: Facebook (Meta), Amazon, Apple, Netflix, and Google (Alphabet).

If you are a beginner investor, it helps to be familiar with the FAANG stocks even if you don't invest in them directly.

Why?

Firstly, the combined market value of FAANG exceeds $6 trillion as of May 1st, 2022, accounting for around 15% of the US stock market's total market cap of over $40 trillion. 

Secondly, they are among the most well-known companies in the US stock market.

Thirdly, the price movement of FAANG stocks impacts the entire market, affecting even investors who do not own FAANG stocks.

To conclude, instead of speculative buying or purchasing penny stocks, beginner investors are suggested to focus on large-cap stocks, namely, stocks from big companies like FAANG.

The five companies are well-known to have excellent business models, strong financials, and competitive advantages. 

• Facebook

Facebook, which has changed its name to Meta, is an online social media and social networking service company founded in 2004. Now the largest social network globally, Facebook has nearly $3 billion monthly active users as of March 31st, 2022.

With its primary revenue stream coming from online advertisements, Facebook owns several prominent subsidiaries, including Instagram, WhatsApp, and Oculus VR.

In October 2021, Facebook rebranded itself as Meta to emphasize its focus on the metaverse, its planned virtual reality world where users can interact with each other.

• Apple

Apple is a multinational technology company based in California. It is known for selling consumer electronics such as MacBooks, iPods, iPhones, iPads, Apple Watch and AirPods.

Founded by Steve Jobs and two others in 1976, Apple is the oldest of the FAANG stocks. It went public in December 1980 with an IPO that raised over $100 million.

Now, Apple is the largest IT company globally, drawing in ever-increasing numbers of new and loyal customers.

With its incredibly innovative products, the company is very profitable. It reported $94.68 billion in net income and up to 40% in gross margin in the financial report for the 2021 fiscal year.

• Amazon

Amazon is a diversified technology company operating in the e-commerce, consumer electronics, and cloud computing industries.

Jeff Bezos established the company in 1994 as an online bookstore, which is now the world's biggest e-commerce retailer in terms of market cap.

The company owns several subsidiaries, including Whole Foods Market (a chain of supermarkets) and Twitch (a live-streaming platform).

• Netflix

Netflix is a media provider that provides customers with subscription-based online streaming of films and TV shows. The company also entered the content-production industry, producing its own movies and TV shows.

With over 200 million paid subscriptions worldwide as of March 31, 2022, Netflix is now one of the leading players in the entertainment industry.

• Google

Headquartered in California, US, Google specializes in providing internet-based services and products.

It was founded in 1998 by Larry Page and Sergey Brin and is perhaps best known for its web search engine. The company went public in August 2004.

Google has been a tech mainstay for the last few decades. Google Search is the world's dominant internet search engine. Its success triggered the creation of numerous other products, including work and productivity services (Google Docs, Google Sheets), email (Gmail), and video sharing (YouTube).

Google also developed a mobile operating system called Android, which runs most of today's smartphones. Besides, the company produces consumer electronics such as Chromebook laptops, Pixel phones, and Google Home devices.

How to invest in FAANG stocks

FAANG companies are listed either on the New York Stock Exchange (NYSE) or the NASDAQ, so it's pretty easy to purchase the shares of the five companies via a brokerage account.

It's worth noting that FAANG stocks aren't cheap. A single share of Google, for example, sells for about $2,300 on April 28th, 2022, and Amazon trades for just under $2,900.

If you can barely afford FAANG stocks or prefer not to own individual shares of the companies, you may consider mutual funds and ETFs that track the tech and communications industries or the broader stock market. These mutual funds and ETFs will most likely have holdings in FAANG stocks.