Facebook. Amazon. Apple. Netflix. Google. Collectively known as FAANG, these tech stocks are flying at the moment. And yes, they’re US stocks, but there’s a FTSE 100 fund I’ve got in mind for you today to get you a slice of the action.
The drivers for massive revenues for Netflix and Amazon are fairly obvious with lockdown affecting a third of the world’s population. And Facebook is powering ahead, doubling its profits from a year ago.
How to buy tech
But if you want one of the FAANG stocks individually, you’ll have to fill out a W8-BEN form with your Stocks and Shares ISA provider. You’ll also be at the mercy of the US dollar, as these companies report all their earnings in the mighty greenback.
And when the pound is weak against the dollar, you’ll pay proportionally more for these search engine, social media, streaming and mobile giants.
Sharpen your FAANG
A much easier way to profit from the world’s biggest tech stocks is to invest in a specialist FTSE 100 fund.
Buying funds in a Stocks and Shares ISA instead of individual shares comes with one other obvious benefit. You’ll pay a management fee, around 0.5% of your holdings each year. But funds are usually free to buy and sell in a Stocks and Shares ISA. You’ll avoid expensive commission charges, and gains are tax-free, which means you get to keep more of them.
Scottish Mortgage Investment Trust (LSE:SMT) is the only investment trust large enough to be listed on the FTSE 100. It is growing its dividends per share. And its major shareholdings are in tech stocks.
The results have been pretty stellar for my portfolio: it’s up 172% in the last five years alone.
Amazon is its second-largest holding at 8.2%. With a total fund size north of £11bn, that’s a pretty sizeable slice of the e-commerce giant. Also on the list is Netflix at 2.78% of the fund.
At the time of writing, SMT is trading at a 4% premium to its Net Asset Value, around 730p. I’m looking to load up when the SMT share price has retreated a little, to ensure I’m getting value for money.
Happily, there are other popular funds that own portions of booming tech stocks. I’ll tell you which I think are the best buys.
Fund your future
One exceedingly popular choice is Terry Smith’s flagship Fundsmith Equity fund. That’s probably because it’s returned 132% in the last five years. It’s even larger than SMT, with £18bn of holdings.
Facebook sits high in its top 10 shareholdings, amid other mega-cap tech picks like Microsoft and Paypal.
For a more pure FAANG experience you could consider Polar Capital Global Technology. Its annual return over the last four years has been large, ranging from 10% to 63%.
And it has one of the best allocations to capture the giant growth of US and Chinese tech. Its top 10 holdings include Microsoft, Alibaba, Apple, AMD, Amazon, Tencent, Alphabet (Google’s owner), and the chipmakers Nvidia and Intel.
Polar’s nine investment managers base their buying philosophy on earnings and cash flow growth, and there’s plenty to go around.
If you want to grab a slice of profit from FAANG or other top tech stocks, this is the easy way to do it.