What are the FAANG stocks and how do you invest in them?
Here's how to get your hands on some of the biggest tech companies in the world.
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If you're interested in global investing, you've probably heard of the FAANG stocks – and for a very good reason. The FAANGs are a list of some of the most successful and well-known global tech companies of the last decade.
They've become a big deal in Australia in the last few years because investors have started to become more aware of the big profit opportunities overseas companies offer.
While Australia’s major stock exchange, the Australian Securities Exchange (ASX), is the sixteenth largest in the world by market capitalisation, it still represents just 2% of the world's total share market value. It's also heavily skewed towards the financial and mining sectors, which account for about 60% of the ASX200 index.
This means that if Australian investors aren’t thinking globally when it comes to their investment decisions, they could be missing out on some huge opportunities. Some of the world’s biggest and most exciting companies – such as the FAANG stocks will not be found on the ASX. However, it doesn’t mean Aussies can’t get in on them.
Can I buy FAANG stocks on the ASX?
No, you cannot directly buy the likes of Netflix, Google, Amazon or Facebook shares on the ASX. These major tech companies are not listed in Australia but are instead listed on the Nasdaq in the US.
But don’t worry, you can access the Nasdaq from Australia and buy these shares directly through an online broker that offers US stocks. You can check out some of these in the comparison table below.
You can also access these stocks on the ASX via an exchange traded fund (ETF). We’ll tell you how to do this later in the guide.
What's the Nasdaq?
The Nasdaq Stock Market is an American stock exchange. It's second only to the New York Stock Exchange by market capitalisation and is home to many of the world’s leading high-tech companies seeking to list their shares. Some of the largest companies in the world are primarily listed on the Nasdaq.
This is where investors will find shares in Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), Google (NASDAQ: GOOGL), Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN).
How can I access stocks that are listed on the Nasdaq?
Australian investors can typically invest in international shares in three ways: using a broker or online broking platform, through a managed fund, or through an exchange traded fund (ETF).
You can purchase individual shares in companies by using a stockbroker or through an online broking platform using an international share-trading account, depending on how much advice you need.
For amateur investors who want advice, a full-service stockbroker might be a worthwhile option but it will cost a lot more. Stockbrokers usually charge a high commission of around $50 - $150 per trade, which means it's typically only worth the cost if you're investing a large sum of money.
If you don’t need advice, a cheaper and often easier option to purchase individual shares in a company is through an international share trading account on an online broking platform. The fees range in price and are charged per transaction. However, because it is a DIY approach it will be cheaper than a full-service stockbroker.
Online broking platforms offer a range of services to help you do your own research, including daily market commentaries, analysts’ research, ratings advice and company profiles.
All the major banks have an online broking arm or you can open an international share-trading account with an online trading provider.
Compare online broking platforms
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
If you don’t have the time, expertise or money to buy individual shares in a company directly, a managed fund pools your money with money from other investors and an investment manager manages it on your behalf, for a fee.
You buy into the fund by purchasing units or shares in the fund, and by pooling your money with other investors you can tap into much wider opportunities that would be out of reach as an individual investor.
Each managed fund will have a specific investment objective, so you need to carefully choose a fund that suits your financial goals.
Managed funds can be bought directly from the fund manager, through a financial adviser or through an online broker.
Exchange traded fund (ETF)
ETFs can be a cost-effective way of purchasing international shares. They are similar to a managed fund in that they are made up of a group of shares and can be bought and sold on a stock exchange.
However, unlike managed funds that are chosen and managed by an investment manager, ETFs track the returns of a specific index or market sector, that is, they mirror the movements and return of a particular market, just on a smaller scale.
They can be bought and sold like ordinary shares through a stockbroker or online trading account, and there are a range of ETFs available that track various indices, including the Nasdaq-100 index — the top 100 companies listed on the Nasdaq stock market, which includes Amazon, Facebook, Google, Netflix and Apple.
Betashares ASX:NDQ is an ETF that tracks the Nasdaq-100 index and is available on the ASX. Therefore, in a single ASX trade, Australian investors can add 100 leading global tech companies to their investment portfolio.
How to buy FAANG stocks in Australia with an international share trading account
Follow these steps:
- Compare share trading accounts. Look at the brokerage fees, what international exchanges you can access, currency exchange rates and help and advice offered.
- Open your account. You’ll need to provide your personal details and verify your identity. You’ll also need to supply the details of your linked Australian bank account.
- Fund your linked cash account. Make sure you have enough money in your account to purchase the shares you wish to buy.
- Place an order. Within your online share trading portal, navigate to your international share trading account. Look for the shares you want to buy using the trading code (for example, Netflix is listed as NASDAQ: NFLX). Fill in the order form with the number of shares you wish to purchase and your desired purchase price. When your target price has been hit, your order will be executed.
For more detailed instructions, take a look at our international share trading guide.
Netflix or Amazon? Google or Facebook? How to choose which international stocks to buy
International shares may give you access to larger markets outside Australia to diversify your investment portfolio, however, you shouldn’t jump into the global markets without doing your due diligence.
- Take time to understand the economy and financial environment of the country you are investing in, such as interest rates, exchange rates, government and fiscal policy and investor sentiment.
- Decide if you want to invest for capital growth (long-term investment) or regular income in the form of dividends (short-term investment). As a rule of thumb, large companies like those on the Nasdaq tend to pay high dividends whereas smaller companies tend to reinvest profits rather than pay dividends.
- Familiarise yourself with the company you are investing in by reading annual reports and company alerts, and compare companies in the same industry.
- Always invest in what you know. If you are passionate about the vision of a company or the industry it is in, you are more likely to recognise when it is a good investment or not.
What are the tax implications of purchasing international stocks?
If you are an Australian resident for tax purposes, you must declare income from overseas investments in your tax return, including from international shares.
If you have already paid foreign tax on your international investments, you may be entitled to an Australian foreign income tax offset. Check out our guide on share trading and the ATO for more information on the tax treatment of investments and always seek professional financial advice before investing in international shares.
DISCLAIMER: This guide contains only general advice and has been written without taking your personal circumstances into consideration. You should consider the applicability of the advice to your financial goals and objectives.
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