Published Sat, 21 Apr 2018 19:22:47 -0400 on Seeking Alpha
Will FAANG Continue to Dominate? The collective market capitalization of FAANG is nearly $3 trillion, and that's fairly impressive considering the total US market cap of publicly traded equities is only around $28 trillion.
And here is a look at the performance of each FAANG stock versus the S&P 500 over the last five years; FAANG has clearly been dominating, especially considering their collective market capitalization makes up a significant portion of the total US public equity market.
However, important to note, the FAANG stocks tend to have higher levels of market risk, as measured by beta.
Note: Beta is a measure of risk related to general market movements as opposed to stock-specific factors. A beta above one generally means a stock is both volatile and tends to move up and down with the market. Lower beta stocks are often pursued by investors looking to diversify away some of their market risk exposure.
And importantly, high beta stocks generally sell-off more than the rest of the market during market pullbacks such as during the bursting of the tech bubble or the more recent financial crisis in 2008-2009.
If you rely on the income from your investments to help pay the bills, then you probably can’t handle the volatility risks of holding too many FAANG-ish stocks because in a large market pullback you could be forced to sell some shares near the bottom just to generate the income you need for living expenses, and those types of... Read more
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