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The Ultimate Singaporean Guide to Investing in FAANG Stocks (Facebook, Amazon, Apple, Netflix, and Google)

profileSudhan P

You may have heard about FAANG stocks and how much growth potential they have.

But what exactly are those stocks about?

And how do you invest in them?

Find out from this ultimate guide on FAANG stocks!

What Are FAANG Stocks?

We are not talking about vampires here, obviously

Source: Giphy

FAANG is an acronym for five companies that many of us are likely to be familiar with, and we most probably would have used its services before. 

FAANG stands for:

  • Facebook (NASDAQ: FB)
  • Amazon.com (NASDAQ: AMZN)
  • Apple (NASDAQ: AAPL)
  • Netflix (NASDAQ: NFLX)
  • Google – Google is now known as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). 

Facebook owns the eponymous social media, Facebook, along with WhatsApp and Instagram.

Amazon.com is the online retail giant that has revolutionised the way we shop. It is also the brainchild behind Amazon Web Services (AWS), an undisputed leader in the cloud-computing market.

Apple is the tech giant behind the iPhones that many of us carry while Netflix is an online content streamer that we have learnt to have our dinner with. 

Last but certainly not the least…

Alphabet owns Google, the only search engine that many go to.

Alphabet also owns many other products that we use regularly, such as Maps, YouTube, Chrome, Android, Google Play Store, Google Drive, and Gmail. 

That leads me to the next point, which is the mindshare that these companies have. 

The clout of these five companies is far-reaching that their products have become verbs.

You don’t search for something on the Internet, you Google for it.

Even Netflix has its own phrase with its “Netflix and chill” (that’s a story for another day!). 

Performance of FAANG Stocks Over the Years

With the strong business case going on for them, it’s not surprising that shares in Facebook, Amazon, Apple, Netflix and Google (Alphabet) have performed well.

Source: Giphy

In the last five years, the FAANG stocks have outperformed the S&P 500 index, a stock market index that measures the performance of the largest companies in the United States.

The S&P 500 index returned around 60%, but the FAANG stocks have produced returns of between 100% and 500% over a five-year horizon. 

Source: Yahoo! Finance

Why You Should Consider FAANG Stocks?

The ultimate driver of the businesses behind the FAANG stocks is you and me.

With the proliferation of the Internet, more people will shop on Amazon, Google for stuff, and watch shows on Netflix. 

Before the onset of the coronavirus pandemic, research showed that Internet users made up 57% of the global population, and on average, people spend 6 hours and 42 minutes online each day. 

Source: clickz.com

This trend has accelerated now due to COVID-19, with people adopting digital technology at a faster rate than predicted previously.

On a longer-term, the Internet user population will only grow as more people, especially those of rural areas, catch up with the broader society. 

Many of the FAANG businesses also possess what is called a wide economic moat

In his 1995 shareholder’s letter, the world-famous investor Warren Buffett revealed what he looks out for in businesses. He said: 

In business, I look for economic castles protected by unbreachable ‘moats.’

The moat acts as a powerful deterrent to those considering encroaching the territory of a business.

By investing in companies that are sticky with consumers, it ensures even more profits are produced by the firms when the consumer goes back for more. 

Moats come in four main ways:

  1. High switching costs: When a user finds it too cumbersome to move from one product to another, the product has a high switching cost. 
  2. Network effects: When a new user joins a service or uses a product, that service or product becomes more valuable.
  3. Low-cost producer: Such a producer offers the lowest cost to consumers and keeps them coming for more.
  4. Intangible assets: These assets include patents, government-regulated protection, and/or brand value.

In the case of FAANG stocks, their moats are as follows (non-exhaustive): 

  • Facebook – network effect
  • Amazon.com – network effect, low-cost producer, and brand value.
  • Apple – network effect, high switching costs, and brand value.
  • Netflix – somewhat high switching costs.
  • Google (Alphabet) – low-cost producer and high switching costs.

Let’s use the world’s biggest social media platform, Facebook, as an example to illustrate its moat. 

Facebook has a network effect going on for it as it’s hard to “move” our friends from Facebook to a new social media platform. Even Google+ had trouble upending the social media giant. 

Where To Learn More About Those Companies?

Singaporeans who wish to invest in the FAANG stocks should understand more about the companies through their respective investor relations (IR) website.

The IR websites provide detailed information about the company’s business, its financial performance, press releases, presentation decks, and many more. 

To get quick data on the past financial performance of the companies and also their latest valuation, you can check out Morningstar, a website I frequent for US stocks. 

Risks You Should Note 

One of the biggest uncertainty surrounding FAANG stocks is that of regulation.

You would know that Facebook was under intense scrutiny from regulators following the Cambridge Analytica data scandal.

Facebook’s peers are also not spared.  

More recently, the leaders of Amazon, Apple, and Google, including Facebook, testified before the US Congress on whether they have become too big and powerful, threatening rivals and consumers as a result.

There’s a debate going on whether the big tech companies should be broken up to reduce their powers. 

Whatever the outcome is going to be, investors should understand this risk if they are to invest in the FAANG stocks. 

Another risk is that of valuation.

Since the FAANG stocks are widely followed, they generally trade at high valuations.

The following table shows the valuation of the FAANG stocks at their respective stock prices:

 FacebookAmazonAppleNetflixAlphabet (Google)
TickerFBAMZNAAPLNFLXGOOGL (Class A) GOOG (Class C)
Stock PriceUS$256.13US$3,080.67US$437.50US$466.93 US$1,480.54 (Class A) US$1,480.32 (Class C)
Price-to-Earnings Ratio32.7118.433.378.833.5
Dividend YieldN/AN/A0.8%N/AN/A

For example, Amazon.com has a trailing price-to-earnings (P/E) ratio of around 118, whereas the P/E ratio of the S&P 500 index is around 29. This could mean that Amazon.com is overvalued.

Having said that, it could be worth paying up for FAANG stocks given the wide moat and the huge runway for growth that they have. Investors have to weigh the risks and rewards before investing in such stocks. 

Alternatively, instead of investing in the individual FAANG stocks, investors can also choose to invest in exchange-traded funds (ETFs) that have the FAANG stocks as part of them. 

Such ETFs allow investors to invest in the FAANG stocks and yet, remain diversified without putting all their eggs in one basket. 

Examples of the ETFs include Invesco QQQ (NASDAQ: QQQ), Vanguard Growth ETF (NYSEARCA: VUG), and SPDR S&P 500 Growth ETF (NYSEARCA: SPYG). 

How to Buy FAANG Stocks and ETFs as a Singaporean?

There are mainly two ways to invest in the US stock market, one is through the Singapore brokerages, and the other is through the non-local brokerages.

Here’s a guide on buying US shares from Singapore and the cheapest brokers you can find.

Singapore brokerages

BrokerageMin. Fees/Trade (US$)Trading Commissions/TradeCustodian Fees
Cash Funded Trading Accounts
Syfe TradeIntroductory Offer: Unlimited free trades for the first three months

After three months
2 free trades / month,
US$1.49 / trade thereafter
FlatNo inactivity, withdrawal or platform fees
SAXO Markets1.000.25(Diamond)
to
4.002.00(Bronze)
0.02% (Diamond)
to
0.06% (Bronze)
0.12% p.a. (Classic + Platinum)
to
0.06% (VIP)
OCBC Online Equities15.0013.00(Upfront payment)
to
20.00 (Post-trade settlement)
0.12% (Upfront payment)
to
0.15% (Post-trade settlement)
S$2 per counter per
month (subject to
prevailing GST if applicable)
Invoiced quarterly in arrears up to a maximum
of S$200 per quarter (or a maximum of S$67 per month)
(subject to prevailing GST if applicable)

Custody fee will be waived:
1. For the month if you execute at least 2
trades in that month.
2. For the quarter if you execute at least 6
trades in that quarter.
3. If the foreign security is delisted at the
point when we are computing the fees
ProsperUs
(by CGS-CIMB)
5.00FlatNo custodian fee
Phillip Securities
(POEMS Cash Plus)
3.88
(SG$0 - S$29,999 asset value)

2.88
(SG$30,000 - S$249,999 asset value)

1.88
(>S$250,000 asset value)
FlatWaived until 31 Dec 2023

Charges thereafter:
S$2 + GST per counter/month
(capped at S$150/quarter)
or
Waived with minimum 2 trades done per month or
6 trades per quarter or
minimum S$132 brokerage
per quarter for the
Account
FSMOne8.800.08%No custodian fee
Maybank Kim Eng Securities
(Pre-funded)
10.000.12%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
Standard Chartered10.00 + GST
(Personal Banking Clients)
0.00
(Priority Banking Clients)
0.25%
(Personal Banking Clients)
0.20%
(Priority Banking Clients)
No custodian fee
DBS Vickers
(Cash Upfront)
19.44
(Cash upfront rates applicable to Buy trades and Multi-currency Accounts only)
0.15%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
CGS-CIMB Securities iTrade
(Cash Upfront Trading)
18.000.18%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter(end Mar, Jun
Sep, Dec)
Duration of a suspended Counter
UOB Kay Hian
(UTRADE Edge)
13.000.12%
None stated for US equities
Basic Trading Accounts
CGS-CIMB Securities20.00
(US$20 or 0.30% of trade, whichever is greater)
0.30%S$2 + GST per counter/month (capped at S$150/quarter)
HSBC Securities Trading10.800.15% + GSTNo custodian fee
KGI Securities20.000.30%None stated
Lim & Tan Securities20.000.30%S$2 + GST per counter/month (capped at S$150/quarter) +
GST
or
0.0025% pa of market value of shares whichever is applicable

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
Maybank Kim Eng Securities20.000.30%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
OCBC Securities (Basic Trading Account)20.000.30%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
Phillip Securities (Cash Management)20.000.30%Waiver condition is 2 trades per month or 6 trades per quarter or minimum SGD132 brokerage per quarter. Otherwise. SGD2.00 per counter per month (subject to max SGD150.00 per quarter) subjected to prevailing GST is chargeable.
UOB Kay Hian20.000.30%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter
DBS Vickers27.000.18%S$2 + GST per counter/month (capped at S$150/quarter)

Custody Fee Waiver:
At least 2 Trades per month or
6 trades per quarter

Overseas brokerages

BrokerageMinimum Fees (US$) Per OrderTrading CommissionsAdditional Notes
Firstrade0.00Flat US$25 per withdrawal
Interactive Brokers
(Tiered Account)
0.35
(Base tier: US$300,000 in monthly shares volume)
US$0.0035/share, up to a maximum of 1% of trade valueN/A
(Inactivity fee removed as of 1 July 2021)
Moomoo
(Powered by Futu)
0.99
[Commission fee (0.00) + platform fee (0.99)]
Flat US$0 platform fee till 12 Apr 2023 for existing clients, and US$0 platform fee for one year after account opening for new clients, US$0.99 thereafter
TD Ameritrade0.00Flat US$25 per withdrawal [Outgoing domestic (U.S.) or international withdrawals]
Tiger Brokers

Apply Now
1.99
[Commission fee (0.99) + platform fee (1.00)]
US$0.010/share
[Commission fee (0.005) + platform fee (0.005)], up to a maximum of 1% of trade value
Refer a friend to get lifetime commission free trades
uSmart1.50
[Commission fee (0.50) + platform fee (1.00)]
US$0.008/share
[Commission fee (0.003) + platform fee (0.005)], up to a maximum of 1% of trade value
N/A
Webull

Apply Now
0.00FlatN/A

As a foreign investor, we are not subject to capital gains tax, but we have to be aware of the 30% withholding tax on dividends.

Want to Discuss Further?

Why not check out SeedlyCommunity and participate in the discussion surrounding the FAANG stocks. 

The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.

profile
About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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