Can You Afford FAANGs?

FAANGS investing

The FAANG stocks were on a tear in 2017, significantly outperforming both the S&P 500 and the Nasdaq index. What are the FAANGs? It’s Facebook (ticker FB), Amazon (AMZN), Netflix (NFLX), Google parent Alphabet (GOOGL) and Apple (AAPL). These are high-growth stocks that seem to be always in the news.

If you didn’t own these last year, you probably wish you had. While the S&P 500 was up over 17% in 2017, Facebook, Amazon, and Netflix were up over 50% for the year. Apple was up over 40%, and Alphabet (Google) was up over 30%. If you had exposure to these names, you outperformed a plain S&P 500 index fund.

Why not just buy these stocks for your portfolio? A major reason is price. Both Google and Amazon trade for over $1,000 per share. Netflix is currently $259 per share, Facebook is $188, and Apple is $174. So, if you bought 100 shares of each of these, which is a typical lot size to purchase, they would cost you about $316,000. A big piece of change, right? If you had a $500,000 investment portfolio, 100 shares of each of those five stocks would make up 63% of your total invested dollars. That would be an incredibly high-risk portfolio, and you would be looking at major losses if one of them had a significant pullback in price.

So how can you get exposure to these stocks without concentrating all your dollars in just five names? Invest in an exchange traded fund (ETF) that has good exposure to the FAANGs.

How do you find such a fund? If you have an online brokerage account, run a search for technology sector ETFs. Find the ETFs whose performance has been closest to that of the FAANGs themselves. Then compare those to see which has the lowest fees.

Or, you can contact your financial advisor, and let him or her do it for you.

At current prices, FAANGs are way out of the price range of most individual investors. Getting exposure to them through ETFs is a much safer way of adding these names to your portfolio.


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