Technology has enabled the retail investor to have access to dozens of different asset classes and financial products previously only available to investment professionals. The democratization of the financial markets through easy accessibility has both benefits and drawbacks for the average investor. From ETFs to mutual funds, FANG stocks and cryptocurrencies, the endless supply of new jargon and acronyms flaunted by financial media can be overwhelming to the retail investor trying to navigate it all. In this article and in our June webinar we will explain that behind the wall of confusing rhetoric lies simple concepts and great opportunities.
One of the drivers of the seemingly never ending supply of new terms is that new asset classes are now becoming relevant to the retail investor. Through Exchange Traded Funds or ETFs, suddenly the average investor can use 3x leverage to short volatility or use 2x leverage to go long on emerging market debt. We outline the dangers of investing in these risk-on asset classes in our article It Pays to Stay Risk Averse Despite Strong Market Returns. ETFs certainly have a place in the modern portfolio, however it is important to understand the risks of the underlying investment that the ETF represents before diving in.
FANG is another acronym that has made its way into the everyday dialogue of financial markets. Often heard when referencing the performance of stock indices such as the Nasdaq or S&P 500, FANG represents four tech stocks that have shown historically significant returns and currently have a large influence on the performance of those common indices. Facebook, Amazon, Netflix and Google make up the original companies of FANG. Nowadays you will see variations of the popular acronym such as FAANG (addition of Apple Inc.), to reference these extremely popular stocks.
As you can see, some of these terms have significant meaning behind them such as ETFs, and some are simply created by financial media pundits as a catchy term for a headline. Either way, others begin to pick up the terms and soon enough they become staples of the financial media dialogue. Behind these nebulous terms lie investment opportunities that are accessible to everyone with the right guidance. Reserve your spot to join Dave Clayman and Manny Frangiadakis in our June Webinar How to Take Advantage of Your Investment Opportunities by registering here.
