4 ETFs With FANG Stocks (FDN,PNQI,QQQ,SKYY)

If you’re not familiar with FANG, it is an acronym for Facebook, Inc. (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet Inc. (GOOGL). Over the past year they have returned 30.86%, 42.99%, -22.77% and 21.12%, respectively. (For more, see: Are Facebook, Amazon and Alphabet Unstoppable?)

Those returns aren’t perfect, but still impressive. Technology has been on a rampage thanks to relentless innovation, increased ecommerce and mobile device usage, cloud computing, streaming and more. Technology stocks have always been volatile, but the four underlying companies above have continued to grow. NFLX has under performed the group. That might continue for a while, but it’s important to remember that young companies are the most volatile. Nothing moves in a straight line.

If you want to invest in FANG stocks without having to put all of your eggs in one basket, consider an exchange-traded fund (ETF) with exposure to them so you will be diversified. The four ETFs below offer FANG exposure, but in much different ways. Look at the basics of each to determine if one of them might fit your investment goals. (For more, see: What is the Most Fundamentally Sound FANG Stock?)

First Trust Dow Jones Internet (FDN)

FDN tracks the price and yield of the Dow Jones Internet Composite Index. In order for a stock to make it into this index, it must generate at least 50% of its revenue from the internet. You will find the 40 biggest U.S. internet companies in this fund.

Net Assets: $3.07 billion

Expense Ratio: 0.54%

1 Year Performance: 6.23%

Inception Date: June 19, 2006

Dividend Yield: N/A

Average Daily Trading Volume (past three months): 445,000

FANG Exposure (% of total assets):

FB: 9.84%

AMZN: 10.04%

NFLX: 4.41%

GOOGL: 4.86%

PowerShares NASDAQ Internet (PNQI)

PNQI tracks the price and yield of the NASDAQ Internet Index, which includes the most liquid U.S. internet companies.

Net Assets: $260.89 million

Expense Ratio: 0.60%

1 Year Performance: 6.55%

Inception Date: June 12, 2008

Dividend Yield: N/A

Average Daily Trading Volume (past three months): 30,000

FANG Exposure (% of total assets):

FB: 7.90%

AMZN: 8.13%

NFLX: 3.66%

GOOGL: 8.26%

PowerShares QQQ (QQQ)

QQQ tracks the Nasdaq-100 Index, which includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ in terms of market capitalization.

Net Assets: $34.59 billion

Expense Ratio: 0.20%

1 Year Performance: 3.20%

Inception Date: March 10, 1999

Dividend Yield: 1.12%

Average Daily Trading Volume (past three months): 24 million

FANG Exposure (% of total assets):

FB: 5.19%

AMZN: 6.60%

NFLX: 0.77%

GOOGL: 4.04%

First Trust ISE Cloud Computing (SKYY)

SKYY tracks the price and yield of the ISE Cloud Computing Index, which is designed to track the performance of companies actively involved in the cloud computing industry.

Net Assets: $514.13 million

Expense Ratio: 0.60%

1 Year Performance: 5.19%

Inception Date: July 5, 2011

Dividend Yield: 0.49%

Average Daily Trading Volume (past three months): 42,000

FANG Exposure (% of total assets): 

FB: 3.92%

AMZN: 3.93%

NFLX: 3.70%

GOOGL: 4.05%

All four ETFs have appreciated over the past year and two offer a dividend yield. On the other hand, only one has an expense ratio lower than the ETF average of 0.46%, which is QQQ at 0.20%. QQQ isn’t as specialized. If you want specialization, then you’re going to have to pay a premium. This should be expected and the expense ratios aren’t too lofty. (For more, see: TMT Case Study: Comparing the Market to the FANGs.)

Dan Moskowitz doesn’t have any positions in the stocks or ETFs mentioned in this article.