What is FAANG?

‘FAANG’ is an acronym, the letters of which represent the names of the five largest technology companies in the US – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google owner, Alphabet (GOOGL). Each FAANG company is listed on the NASDAQ or the New York Stock Exchange (NYSE). 

Where have you heard of FAANG?

The acronym was originally coined in 2013 by Jim Cramer, host of CNBC’s Mad Money and co-founder of TheStreet.com. Cramer used the term to collectively refer to the high-growth technology stocks. Interestingly, the acronym was originally ‘FANG’, referring to only Facebook, Amazon, Netflix and Google, and it wasn’t until 2017 that Apple joined the illustrious group of stocks and FANG became FAANG.

What do you need to know about FAANG?

With a combined market capitalisation of more than $6trn (£4.2bn, €4.9bn) as of February 2021, FAANG stocks accounted for more than 15% of the S&P 500 (US500), an index of the largest companies in the US. Each of the FAANG stocks is a household name whose products have shaped the world as we know it today: 

• Facebook operates the world’s largest social media network, as well as owning WhatsApp and Instagram. Originally founded in 2004, the company began life as a social platform for students at Harvard University. In 2008 Facebook surpassed MySpace as the world’s most visited social network and as of April 2021 boasted more than 2.7 billion monthly active users (MAUs).

• Founded in 1994 by Jeff Bezos, e-commerce behemoth Amazon is the one-stop destination for all your online shopping needs. Originally launched as an online bookseller, the company has expanded, and the combination of low prices, fast delivery and a vast seller marketplace has transformed it into the most successful online retailer in the world.

• Apple is the company that changed the way we communicate. Founded by Steve Jobs and Steve Wozniak in 1976, the release of the Apple II in 1977 and the Macintosh or ‘Mac’ in 1984 – the first computer to use a graphic user interface (GUI), rather than a programming screen – completely revolutionised the personal computing industry. Since then, the company's innovations have continued to change the world – following the success of the iPhone, the first true smartphone, Apple became the first company in history to achieve a market capitalisation of $1trn in 2018, and reached a $2trn market cap in 2020. 

• Streaming giant Netflix was originally founded in 1997 by entrepreneurs Reed Hastings and Marc Randolph. While the company’s business model has always centred around online subscriptions, early subscribers would receive movie rentals through the post. It wasn’t until 2007 that Netflix launched its streaming service, allowing customers to stream a huge catalogue of movies and TV shows straight to their homes. With the company's relentless focus on the quality of its original shows, such as Narcos, Stranger Things and House of Cards, Netflix has amassed more than 200 million subscribers worldwide as of Q1 2021.

• Founded by Larry Page and Sergey Brin in 1998, Google has become an integral part of our lives, so much so that “to Google” has been added to the Oxford English Dictionary and the Merriam-Webster Collegiate Dictionary 2006. At the heart of the internet experience, Google’s search engine handles 70% of all web search traffic, and the Google Chrome web browser has more than 2.65 billion users worldwide.

How to invest in FAANG stocks?

One of the ways to invest in FAANG stocks is to buy the individual company shares on the US stockmarket via online brokers such as TD Ameritrade in the US, or Hargreaves Lansdown in the UK.

Alternatively, you can trade individual shares of FAANG companies with contracts for difference (CFDs). CFDs are trading instruments that allow you to speculate on a stock price without having to own the underlying shares. If you expect the company's share price to rise you can take a long position, and if you think it will move lower you can go short and still make a profit on the trade if the price falls. 

As a leveraged product, CFDs allow investors to maximise their gains from volatile financial assets such as stocks. However, you should be aware of the high risks involved, as CFD trading also magnifies losses if the share price moves against your position. 

You can learn more about CFD trading with our comprehensive guides and free online courses. 

If you decide not to own individual shares of the companies, you can get exposure to them through a number of exchange-traded funds (ETFs) and mutual funds. Any index fund that tracks the S&P 500 Index or broader stock market most likely has holdings in FAANG stocks. Tech-focused ETFs are also likely to include some if not all of FAANG stocks and offer similar exposure.