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FAANG Stocks, Explained
Q: What are “FAANG” stocks, which I see referenced now and then?
– H.B, Milton, Wisconsin A: The acronym FAANG refers to a group of huge, high-profile technology companies with high-performing stocks: Facebook, Amazon, Apple, Netflix and (Google parent) Alphabet.
These days, the businesses are so popular and their stock market values so high – all but Netflix recently had market capitalizations of $1 trillion or more, and Apple’s was recently $2.4 trillion – that some suggest the stocks are way overpriced.
They may occasionally be overpriced, but in general, they’ve earned their values through their dominance. Consider, for example, that Facebook recently reported 2.9 billion monthly active users, and it owns Instagram as well. Amazon, meanwhile, is the world’s largest consumer-serving e-commerce company, and its Amazon Web Services is the dominant cloud-computing service; Amazon also recently employed over 1.3 million people globally.
Q: What are “vested” and “unvested” options?
– C.W., Laramie, Wyoming A: You’re “vested” when you become eligible to take ownership of an asset, benefit or payment.
Imagine that you work at Free Range Onion Company (ticker: BULBZ). You receive stock options for 100 shares of company stock, with 25% of them vesting each April 1 over the next four years. On April 1, 2022, you can exercise the option and buy 25 shares at the specified price. Every April 1, another 25 shares “vest.” On April 1, 2025, you’ll be “fully vested” and can buy all 100 shares (or any shares you haven’t bought yet) – if you want to. (You may have only a few years before your options expire.)
Companies use vesting schedules to motivate workers to stick around. Learn more at mystockoptions.com and at NCEO.ORG (under “What Is Employee Ownership?”).