The FAANG Stocks

As I'm sure you are aware, the stock market has been moving higher over the last year or so. The Dow Jones has notched over 80 daily record highs since last November. Wow. That is the most in any one year period since the mid-1990s. This doesn't mean that all stocks are rising together. In fact, about one-third of S&P 500 stocks are flat to down for the year. That is not unusual, and again, underscores the importance of proper diversification. Stock markets also typically have their stars, that handful of stocks, which are head and shoulders above the pack. Over the last three years or so, the stars of the stock market have been nicknamed the FAANG stocks. That's F-A-A-N-G. Curious nickname. Here they are. Facebook, Apple, Amazon, Netflix, and Google, now known as Alphabet. Returns for the year, 55%, 48%, 54%, 52% and 34% respectively.

The five companies are all game-changers for several reasons. Number one, none of them even existed a generation ago. Now they are worth hundreds of billions of dollars. Number two, their products and services have changed the way we shop, the way we communicate, the way we're informed and entertained. Number three, they have crushed many older established companies with their innovations. Think of what has happened to department stores since the advent of amazon.com as just one example. These stocks will eventually be the target of newer and better companies with newer and better ideas. For now, though, they are the stars of this stock market's cycle. Broad diversification in your stock holdings will give you exposure to the FAANG stocks while limiting your risk. Thank you for your confidence in us here at GWP.

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