Somewhere amidst the global lockdown in mid-2020, a search term, FAANG stocks, started gaining a lot of traction on Google. A simple check on Google Trends, which analyses top search queries, shows that the search string 'FAANG stocks' saw a kind of a breakout last year.
A breakout, according to Google, means that the search for a particular term rose by more than 5,000 per cent. Such was the popularity of FAANG that people from across the world, especially Asia, wanted to know more about FAANG. Here is everything that you need to know about FAANG stocks:
What is FAANG?
Simply put, FAANG stands for Facebook, Amazon, Apple, Netflix and Google (now known as Alphabet Inc.). They are among the largest listed companies in the US and most popular as well in terms of investor interest.
The term was coined in 2013 and was initially known as FANG, as Apple was added in the acronym only in 2017. While Apple is the largest listed company in the US in terms of market capitalisation, Alphabet, Amazon and Facebook also figure among the top five. Netflix is the smallest of the lot but on par with the others in terms of popularity.
Why are people searching for FAANG?
FAANG as a group of stocks is looked upon as one of the most lucrative investment opportunities. During the peak of the pandemic last year, when most countries had put in place lockdowns and people were dependent on online channels for both work and recreation, these companies saw their popularity soaring.
The demand for new phones was high as was the case with OTT platforms like Amazon Prime and Netflix. People were spending more time on Google and Facebook too. This led to a huge rally in these stocks and an increasing number of investors started looking to buy shares of these companies.
Why has FAANG become so popular in India?
The soaring popularity of these companies coincided with the time when most Indian broking firms started offering overseas trading facilities. Simply put, Indian investors who had a trading account with any of the leading broking firms could buy shares listed in the US markets, which included FAANG.
The demand also got a boost from the fact that last year many new investors from the young and millennial segments entered the markets. This category of new investor was already a user of these companies and their products and hence was aware of the potential. Consequently, there was an increased curiosity and demand for FAANG group of stocks.
How can Indians invest in FAANG stocks, or for that matter, any company listed overseas?
According to Reserve Bank of India (RBI), every Indian individual can invest overseas up to $250,000 each year under the Liberalised Remittance Scheme (LRS). Indians who want to buy shares of FAANG, or any other company listed overseas, can do so through their broking account if their broking firm offers overseas trading services.
Interestingly, these firms offer fractional trading facility too, which means that one could buy less than one share as well. This assumes significance as some of these shares are quite expensive. For instance, one share of Alphabet or Amazon costs $2,715 and $22,345, respectively. Shares of Netflix and Facebook are not cheap either at $521 and $363, respectively, while a share of Apple costs $146 apiece.
One can also use the mutual fund route to invest overseas as many fund houses have launched schemes that invest in the overseas markets along with that in India, apart from dedicated funds that only invest overseas.
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