FAANG Stocks: What are They, and How Do You Trade Them?

Investing in the stock market can present excitement and challenges, particularly when dealing with high-profile technology stocks. Among the most discussed and coveted are the FAANG stocks—Facebook (now Meta Platforms), Amazon, Apple, Netflix, and Google (now Alphabet). These companies have revolutionised their respective industries and emerged as significant players in the global economy. In this blog, we will explore what FAANG stocks are, provide an overview of their performance, discuss how to invest in FAANG stocks, highlight factors to consider before investing, and explain why they are important for traders.

What are FAANG stocks? 

FAANG stocks are a collection of extremely successful technology firms that have significantly influenced worldwide markets. The full form of FAANG is Facebook (Meta Platforms), Amazon, Apple, Netflix, and Google (Alphabet). Together, these corporations possess the highest market capitalisations among publicly traded entities globally. They are known for their consistent growth opportunities, cutting-edge technologies, and market dominance, FAANG stocks are frequently viewed as ideal choices for investment strategies focused on growth, potentially resulting in significant long-term profits.

FAANG Stocks: An Overview of Performance 

Here is an overview of the FAANG Stocks

FACEBOOK (now Meta)

Meta owns and operates some of the most popular and influential social media platforms, including Facebook, Instagram, WhatsApp, and Messenger. The company generates revenue primarily through advertising displayed to users as they interact with these platforms. Additionally, Meta has invested heavily in virtual reality technology with its Oculus headset.

• In recent financial updates, Meta has projected a 7% negative impact on revenue growth year-over-year due to foreign currency exchange rates. 
• The company is focusing on improving operational efficiency and is making strategic changes in workforce management and capital investments. 
• Meta plans significant capital expenditures in 2023, primarily driven by increased AI capacity, with expected spending between $34–39 billion.

AMAZON 

Amazon is the world’s largest e-commerce company and also has a substantial presence in cloud computing and online advertising. The company’s Prime membership program has over 200 million subscribers globally. Besides e-commerce, Amazon owns subsidiaries such as Whole Foods Market and Twitch.

• Amazon’s main revenue streams include product sales, marketplace seller fees, advertising, and cloud services through Amazon Web Services (AWS). 
• The company continues to expand its product offerings and technological innovations, such as Amazon Alexa and Amazon Fire TV. 
• Amazon is consistently ranked as a top online retailer and marketplace globally.

APPLE 

Apple is a leading producer of smartphones, computers, and other consumer electronics. While device sales are a significant revenue source, Apple has increasingly focused on high-margin subscription services, including streaming, cloud storage, and gaming.

• Apple’s product lineup includes the iMac, MacBook, iPhone, iPod, Apple Watch, and Apple TV. 
• The company’s innovations, such as the iPad, have revolutionised the tech industry. 
• Apple continues to expand its global footprint and maintains a strong emphasis on design and user experience.

NETFLIX 

Netflix is a pioneer in online streaming, transitioning from a DVD rental service to an on-demand streaming platform. With over 200 million subscribers worldwide, Netflix invests heavily in original content to attract and retain subscribers.

• The company offers a vast library of TV shows, movies, and documentaries in various genres and languages. 
• Netflix has expanded its operations with numerous subsidiaries and acquisitions, such as the Roald Dahl Story Company and Night School Studio, to enhance its content and gaming offerings. 
• Netflix shares are traded on the NASDAQ under the ticker NFLX.

GOOGLE (now Alphabet) 

Alphabet, the parent company of Google, comprises Google and several other ventures known as “other bets,” including Waymo and Verily. Google started as a search engine and has since diversified into various consumer services and products, cloud computing, and hardware. Alphabet was created in 2015 to reorganise Google’s growing business segments. 

• Google remains the largest subsidiary, providing internet-related services and products. 
• Alphabet’s shares are traded on the NASDAQ, and the company has been involved in numerous acquisitions, such as the purchase of Android OS and Motorola Mobility. Alphabet is consistently ranked among the top global companies in terms of innovation and market influence.

How to Invest in FAANG Stocks?

FAANG stocks are prominent international stocks, and you can invest in them from India. There are two primary methods to invest in FAANG stocks: direct purchase and indexing. Here are the steps to follow:

Step 1: Choose a FAANG Stock

Select the FAANG stock you wish to invest in based on your investment preferences and research.

Step 2: Direct Investment

You can access FAANG stocks by opening an international trading account. Many Indian stockbrokers have collaborations with U.S. brokerage firms, which enables you to invest directly. Moreover, certain foreign stockbrokers in India offer the option to open a trading account with them.

Step 3: Complete KYC Verification

In order to establish an international trading account, it is necessary to undergo the Know Your Customer (KYC) verification process. Following this, you will need to connect your bank account to enable the acquisition of FAANG stocks.

Step 4: Use Exchange-Traded Funds (ETFs)

Consider putting your money into exchange-traded funds (ETFs) that concentrate on FAANG stocks. ETFs offer a method to have a stake in several FAANG firms with just one investment.

Step 5: Investment Amount

Decide on the sum you intend to invest, while considering the limit set by the Reserve Bank of India under the Liberalised Remittance Scheme (LRS). At present, the limit stands at USD 250,000 per financial year for overseas investments.

Factors to Consider Before Investing in FAANG Stocks

Following are the factors to consider before investing in FAANG stocks:

RBI Laws & Restrictions

When putting money into the U.S. stock market, it's important to follow the rules established by the Reserve Bank of India (RBI). The RBI restricts Indian investors with a limit of $250,000 annually through the Liberalised Remittance Scheme (LRS). It's important to make sure all required paperwork for the LRS is filled out to stay updated  with regulations.

Transactions in USD

To acquire stocks in prominent U.S. corporations such as Apple and Google, one must conduct transactions in U.S. dollars. Indian investors are unable to purchase these stocks using Indian Rupees. Consequently, it is necessary to convert your funds to U.S. dollars via authorised currency exchange services in India prior to making any investment.

Exchange Rates

The transfer of funds from an Indian bank account to a U.S. trading account is greatly influenced by the exchange rate. Numerous global brokerage firms work together with prominent Indian banks to assist investors in obtaining advantageous foreign exchange rates, thereby enhancing the efficiency of the currency conversion process.

Dividend Taxes 

U.S. stocks pay dividends to shareholders, similar to Indian stocks. However, dividends from U.S. stocks are subject to a 25% withholding tax. For example, if a company declares a $200 dividend, you would receive $150 after tax. In India, dividends are taxed according to your applicable income tax slab rate. It's worth noting that the tax paid in the U.S. can be offset against the tax liability in India, helping to avoid double taxation.

Why are FAANG Stocks Important for Traders?

FAANG stocks are of great significance to traders because of their high liquidity and substantial market capitalisation. The impact they have on market indices means that fluctuations in FAANG stocks can often determine broader market trends. Traders find that the volatility and volume associated with these stocks offer numerous opportunities for profit. Additionally, their consistent performance and innovative capabilities make them appealing for long-term investments as well.

Conclusion
FAANG stocks are a fundamental part of today's investment environment due to their strong market presence, remarkable track records, and continuous innovation. Both investors and traders find them appealing. Nevertheless, it is crucial to conduct comprehensive research and take into account different factors like exchange rates and dividend taxes before investing in these stocks. By using an online trading app, you can simplify the process of investing in these international stocks. By understanding their potential and risks, investors can make well-informed decisions and capitalise on the opportunities presented by FAANG stocks.