What Are FAANG Stocks?
First, it’s probably a good idea to define what FAANG stocks are. FAANG stands for Facebook, Apple, Amazon, Netflix, and Google. While these companies aren’t necessarily all the biggest in the tech sector, they typically capture a good bit of attention and thus represent the tech market as a whole.
Recently these FAANG stocks took a pretty bit hit, with some going down by as much as 10% in one day! While they have now mostly recovered from this drop, it leads to the question, should you invest in FAANG stocks?
Are They Good Companies To Invest In?
Before we talk about whether or not we should be investing in these stocks now, we need to talk about the businesses and decide if we want to invest in these types of companies. Each person has different preferences and risk tolerances with companies, so they might be a great investment for one person, yet bad for another.
The first thing you should know about all 5 of these stocks are that they are all pretty volatile. This means that their price tends to fluctuate a lot from day to day. This is generally the case for tech stocks, which can make it a very good investment, if you can stomach it. With stocks as volatile as these, you’ll need to be okay with drops like what recently happened, where you lose 10% of your stock’s value in one day. Being able to hold on to your stock during these drops, and possibly buy even more, is going to be essential to long term success. The only people that really lost money with the recent drop were the people who panicked and sold.
What Makes Them Unique?
Moving past looking at the tech market as a whole, let’s dive into the specifics of these 5 companies.
Facebook is the social media giant of the pack. Billions of people use Facebook on a monthly, or daily, basis. Apple produces arguably the most popular phone in the world, or at least the most ubiquitous. They thrive on their premium products and their loyal customer base. Amazon is the e-commerce giant, that is currently expanding into many markets. Amazon is the market leader in most of the markets it enters, including hosting. Netflix is the video streaming giant. While Amazon & Google have their own video streaming services, they don’t compare to Netflix. Netflix is one of the smaller FAANG stocks, coming in at just under $150 billion market cap. Lastly is Google, the company most everyone uses without even thinking about it. Google, like Amazon, has expanded into many different markets, but it’s primary driver is data.
Now that we know a bit about each company, you probably have a good idea about which you would like to invest in. Personally, I like Apple, Amazon, & Google since they are larger companies that are both more stable and have more opportunity for growth in their respective sectors. The question you’re probably still wondering about though, is if you should invest in them right now?
Should You Invest In Them Today?
Currently the overall stock market is over-priced with many stocks seeing unsustainable growth. This doesn’t necessarily mean you should avoid investing in the stock market, just that it should be done with caution. Making sure to keep some of your money in cash is essential to any investment. The percent of money you keep in cash is dependent on your tolerance for risk and if you agree that the stock market is over-priced.
Personally I would suggest keeping an eye on the FAANG stocks as well as many other tech stocks, but with the current price of the market I would be waiting for another nice drop. That 10% drop would have been a good short-term buy, but it could be signaling a steeper correction in the coming months.
Paying close attention to the market, without stressing over the day to day fluctuations is how you can strive in this market, regardless of if it’s over-priced or not.
Let me know in the comments, do you think FAANG stocks are good companies to invest in? And are you investing in them now, or waiting?