As FAANG stocks outperform Indian stocks, here’s how to ride the tech wave

The best-performing fund in India in 2024 wasn’t one with exposure to Indian stocks. In fact, it was the Mirae Asset NYSE FANG+ ETF Fund of Fund (FoF), which delivered an astonishing 88% return for the year, earning the top spot among mutual funds. This remarkable performance was driven primarily by the impressive growth of FAANG stocks—Meta, Apple, Amazon, Netflix, and Google.

However, in response to SEBI's recent directive, Mirae Asset has paused new investments into this fund, leaving many investors wondering how they can continue benefiting from the ongoing FAANG rally. So, what’s next? How can investors keep capturing the momentum of these tech giants?

The Continued Appeal of FAANG Stocks

When you think of global tech innovation, FAANG stocks are often the first to come to mind. These companies have consistently led the charge in shaping the digital and tech landscape. Despite market fluctuations, FAANG stocks have shown resilience, strong growth, and an uncanny ability to adapt to new trends. Here’s a quick snapshot of their recent performance:

Meta (formerly Facebook): In 2024, Meta’s stock surged by an impressive 72%. The company’s investments in artificial intelligence (AI) and the metaverse via its Reality Labs division have paid off, boosting investor confidence and positioning Meta as a leading player in the future of tech.

Apple: Apple’s stock rose by 36% in 2024, buoyed by the successful launch of the iPhone 15 and its expansion into emerging markets. With a market cap nearing $4 trillion and innovations like the M4 chip in MacBook Airs, Apple shows no signs of slowing down.

Amazon: Amazon’s 48% stock surge in 2024 highlights its continued dominance in e-commerce and cloud computing. The company’s AI-driven services and expansion into international markets have solidified its position as a tech powerhouse.

Netflix: With a 92% jump in stock value in 2024, Netflix continues to thrive, largely due to its ad-supported subscription model and rising active users. The company’s moves into live sports and gaming content are expected to fuel further growth in 2025.

Alphabet: As the parent company of Google, Alphabet continues to lead in digital advertising and AI. Its Google Cloud division has expanded significantly, and its AI advancements keep it at the forefront of the tech sector.

These companies are not just household names; they are integral to the digital infrastructure that powers global economies. As long as they remain leaders in their respective fields, FAANG stocks are likely to continue attracting investor attention.

Leveraging FAANG Stocks: Insights for Indian Investors in 2025

The Mirae Asset NYSE FANG+ ETF Fund of Fund (FoF) gained popularity by offering Indian investors exposure to the NYSE FANG+ Index, which tracks 10 major technology and consumer companies, including the FAANG stocks. The fund’s concentrated exposure to these global tech giants, along with the depreciation of the rupee, contributed significantly to its exceptional performance in 2024.

What is the FANG+? Index?

The NYSE? FANG+? Index includes 10 of the most influential technology and media companies, and it is equally weighted to prevent any single company from having too much influence. This structure provides balanced exposure, making it an attractive investment vehicle for those looking to tap into the future of technology.

ETMarkets.com

Here are the components of the FANG+? Index (as of January 14, 2025):

-NVIDIA: 10.50%
-Meta: 10.35%
-Alphabet: 10.30%
-Broadcom: 10.24%
-Amazon: 10.06%
-Crowdstrike: 9.94%
-ServiceNow: 9.73%
-Microsoft: 9.69%
-Apple: 9.60%
-Netflix: 9.60%

This index offers a diverse selection of companies that are at the forefront of the tech revolution, making it a compelling choice for investors.

How Indians Can Invest in FAANG Stocks
Investing in FAANG stocks directly can be a bit tricky for Indian investors since these companies are listed on US stock exchanges. However, there are several ways to gain exposure to these stocks:

1. Direct Investment in US Stocks
Indian investors can directly purchase shares of FAANG companies listed on the NYSE and Nasdaq. This can be done through platforms like Vested, which facilitate international stock trading for Indian residents.

2. ETFs and Mutual Funds with Global Exposure
As demonstrated by Mirae Asset’s NYSE FANG+ ETF FoF, Indian investors can gain exposure to FAANG stocks through ETFs or mutual funds that track global tech stocks. These funds typically track indices like the NYSE FANG+ Index, offering an easy way to access FAANG stocks without needing to buy individual shares. The tracking error in US ETFs tracking these indices is also much lower compared to Indian FoFs investing in US ETFs.

While traditional ETFs offer exposure to the FANG+? Index, leveraged ETFs take things up a notch by amplifying returns (and risks). These ETFs use derivatives to multiply the returns of the underlying index by a set multiple, usually 2x or 3x. Leveraged ETFs are designed for experienced investors who are comfortable with higher volatility and the potential for greater rewards—or losses.

Here are some prominent leveraged ETFs that track the FANG+? Index:
- Direxion Daily NYSE FANG+ Bull 2X Shares (FNGU)
AUM: $6.60B
Expense Ratio: 0.95%
1-Year Return: 50.10%

What it is:
FNGU is a 2x leveraged ETF designed to double the performance of the FANG+? Index. If the index increases by 1%, FNGU aims for a 2% return. This product is ideal for traders looking to take advantage of short-term movements in the tech sector.

- MicroSectors FANG+? Index 3X Leveraged ETN (FNGO)
AUM: $417.18M
Expense Ratio: 0.95%
1-Year Return: 36.04%

What it is:
FNGO offers 3x leveraged exposure to the FANG+? Index, aiming to triple the index's daily performance. It is suited for those with a strong risk appetite who want to capitalize on high volatility.

- Direxion Daily NYSE FANG+ Bull 2X Shares (FNGG)
AUM: $62.17M
Expense Ratio: 0.98%
1-Year Return: 33.72%

What it is:
FNGG is another 2x leveraged ETF that tracks the FANG+? Index. It’s a smaller fund but still a powerful way to gain amplified exposure to the index.

- MicroSectors FANG+? Index 2X Leveraged ETN (FNGS)
AUM: $403.06M
Expense Ratio: 0.58%
1-Year Return: 17.70%

What it is:
FNGS offers 2x leverage but at a lower expense ratio, providing investors with a more cost-effective way to gain exposure to the FANG+? Index.

- MicroSectors FANG+? Index -3X Inverse Leveraged ETN (FNGD)
AUM: $82.29M
Expense Ratio: 0.95%
1-Year Return: -41.61%

What it is:
FNGD is an inverse leveraged product that gives you the opposite performance of the FANG+? Index. If the index falls, FNGD rises by three times that amount.

Other ETFs for FAANG Exposure

In addition to the leveraged ETFs specifically designed for the FANG+? Index, there are also other ETFs that provide exposure to FAANG stocks and the broader tech sector. These ETFs are more suitable for investors seeking diversified exposure to the tech sector without the amplified risk of leveraged products.

Here are some notable ETFs for Indian investors looking to gain exposure to FAANG stocks:

- MicroSectors FANG+? Index 3X Leveraged ETN (FNGU)
1-Year Return: A staggering 132.89%
3-Year CAGR: 17.80%
5-Year CAGR: 48.13%

What it is:
FNGU provides triple leveraged exposure to the FANG+? Index. It’s perfect for investors seeking high-reward potential but should be approached with caution due to its leveraged nature.

- Granite Shares 2x Long META Daily ETF (FBL)
1-Year Return: 101.06%

What it is:

Focused exclusively on Meta, this ETF offers twice the daily performance of Meta's stock. While it offers high growth potential, investors should be mindful of the concentration risk involved.

- ProShares UltraPro QQQ (TQQQ)
1-Year Return: 52.60%
5-Year CAGR: 26.54%

What it is:
TQQQ offers 3x leveraged exposure to the Nasdaq-100 Index, which includes many tech leaders like Amazon, Apple, and Microsoft. It’s a popular choice for investors looking for diversified tech exposure with higher risk.

- ProShares Ultra QQQ (QLD)
1-Year Return: 39.36%
5-Year CAGR: 26.48%

What it is:
Offering 2x leverage on the Nasdaq-100, QLD is a slightly less aggressive alternative to TQQQ, making it more suitable for investors who want high exposure to the tech sector but with slightly lower volatility.

- First Trust Cloud Computing ETF (SKYY)
1-Year Return: 35.53%
5-Year CAGR: 13.33%

What it is:
SKYY focuses on cloud computing companies such as Amazon, Microsoft, and Alphabet, making it an excellent choice for investors seeking exposure to the growing cloud sector.

- iShares Expanded Tech Sector ETF (IGM)
1-Year Return: 34.10%
5-Year CAGR: 19.41%

What it is:
IGM provides exposure to the broader tech sector, including FAANG stocks and other major tech leaders. It’s ideal for investors looking to diversify within the tech space.

If you're looking to invest in FAANG stocks or ETFs tracking the FANG+? Index, buying them directly through a US broker can help reduce tracking error and lower the expense ratio compared to investing through Indian mutual funds. With SEBI restricting fresh inflows into certain international mutual funds, direct investments provide a more efficient way to gain exposure to global tech without the added costs of intermediaries.

Key Takeaways

Investing in FAANG-focused ETFs provides a straightforward way to ride the tech wave. However, these investments come with varying levels of risk depending on their leverage and focus. Leveraged ETFs like FNGU and TQQQ can deliver extraordinary returns, but they also amplify losses during downturns. More diversified options like SKYY and IGM offer steadier growth, though they may lag during bull markets.

Diversification is Crucial

While FAANG stocks and related ETFs are attractive for their growth potential, they should be part of a diversified portfolio. Over-concentration in tech stocks can expose investors to heightened risks, particularly during market corrections. Diversifying across sectors, geographies, and asset classes can help mitigate these risks and ensure sustainable portfolio growth.

In conclusion, FAANG stocks and their corresponding ETFs remain a compelling investment avenue for 2025. By understanding the nuances of these funds and aligning them with your risk tolerance and financial goals, you can make the most of this ongoing growth story.

(Viram Shah is Founder & CEO of Vested Finance)