How to invest in FAANG companies from India?
Which are some of the largest technology companies in the world? It’s very likely that some of the names that come to mind are Facebook, Apple, Amazon, Netflix, and Google. Why so? Well, these companies have become so ubiquitous that you would probably be using the services or products of some or all these companies! These large technology companies form what we know as FAANG companies. So, what is FAANG? Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL) (Alphabet) constitute the FAANG acronym. To know more about FAANG companies click here.
You are probably thinking, why is Microsoft not in FAANG? In fact, when Jim Cramer of the Mad Money show coined the term FANG in 2013, he did not include Apple as well. Investors added Apple to the list, and it became FAANG. Goldman Sachs then replaced Netflix with Microsoft and it came to be known as FAAMG. With Facebook recently named as Meta, FAANG is also now known as MAANG among investors!
But as Shakespeare had correctly said – what’s in a name? By whatever name you call it, FAANG stocks refer to some of the top-performing stocks in the US stock markets. No stock market discussion takes place without a mention of FAANG stocks because these stocks make up a significant portion of the S&P 500. As of December 02, 2021, the FAANG market cap stood at $7.459 trillion. Also, as of December 02, 2021, the FAANG group constituted about 21% of the S&P 500.
Now that we know what FAANG stands for and how important these companies are, let us see how to invest in FAANG companies from India. There are essentially three ways to do so.
1. Invest directly in FAANG stocks: You can do this by opening a US brokerage account either through domestic brokerages that offer this service, or a foreign brokerage that has a direct presence in India. Our goal at Vested is to allow investors from India to invest in FAANG stocks in the easiest manner possible. To invest, you do not need any minimum balance or need to pay any commissions. Vested’s process is completely paperless and can be completed in a matter of minutes. All you need is your PAN number, an image of your PAN card, and an address proof. To begin, you may sign up here. For investing in FAANG stocks, you need to wire funds to the US. As an Indian resident, you are allowed to do this under RBI’s Liberalized Remittance Scheme which lets you remit up to US $250,000 per year per person.
Now, you may be wondering, that it would cost you a fortune to invest in FAANG stocks. For example, an AMAZON (AMZN) share is priced at $3,500 which is about Rs 2.6 lakhs. For this reason, platforms like ours let you invest in fractional shares. For example, if the market price of a FAANG share is $1,000, to purchase 0.1 share of this FAANG stock, you will pay only $100. This will let you invest in one or more of FAANG stocks for as less as Rs 5,000.
2. Invest in US-focused Indian feeder mutual funds that invest in FAANG stocks: Unlike the above method, in this case, there is no investment limit as an investment will be made in Indian rupees. However, this approach may turn out to be more costly. You will have to pay an annual expense ratio (fees charged to manage the fund). The expense ratio of these funds tends to be higher because apart from the general India fund management fee, it also includes an additional expense charged by the underlying international schemes they invest in.
3. Invest in ETFs for FAANG stocks: The other way you can invest in FAANG stocks is through Exchange Traded Funds (ETFs). ETFs refer to a collection of many stocks/bonds which are traded under one fund. They are similar to mutual funds.
However, ETFs are traded on the US stock exchange with real-time pricing and provide an easy and cheap way to get exposure to a sector or a group of companies.
One option you have is to buy an ETF on Vested. For example, Vested lets you invest in a curated list of ETFs. Let us look at some of the ETFs that will let you invest in FAANG stocks. One is the Invesco QQQ Trust, Series 1 ETF which is based on the NASDAQ 100 index. Some of the largest holdings of this ETF include the FAANG or FAAMG companies- Amazon, Apple, Microsoft, Meta (Facebook), Netflix and Google (Alphabet), and also Tesla. Another ETF that includes FAANG/FAAMG companies is the iShares Russell 1000 Growth ETF which provides exposure to US companies whose earnings are expected to grow at a rate that beats the market average. The iShares Russell 1000 Growth ETF includes stocks like Amazon, Amazon, Microsoft, and Meta (Facebook).
The other option is to buy ETFs available in India that invest in the S&P 500 like the Motilal Oswal S&P 500 Index Fund. You can also invest in a fund of funds like Mirae Asset NYSE FANG+ ETF Fund of Funds. However, you will have a lot more variety in terms of the ETFs available on Vested vs. in the Indian markets. Also, Indian ETFs will be costlier.
Whether you should invest in FAANG companies and what your investment strategy should be could be the topic of another blog. Watch this space for more!
Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.
This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.