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What Are the Magnificent Seven Stocks?
The “Magnificent Seven” refers to a group of major tech stocks. These companies include Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). They were identified as leading U.S. tech stocks by a Bank of America strategist in May 2023.
Fantastic Seven Stock List
Here’s a quick look at the stock performances. Nvidia Corp. leads with a whopping 217.58% gain. Meta Platforms Inc. is next, seeing 77.75%. Amazon.com Inc. has increased by 45.68%, while Alphabet Inc. shows 42.23%. Microsoft Corp. and Apple Inc. report 30.38% and 15.88% respectively. Surprisingly, Tesla Inc. experienced a dip of -29.05%.
The Story Behind the Famous Seven
Back in 2013, Jim Cramer, the host of CNBC’s show, teamed up with Bob Lang, a technical expert, to come up with the term “FANG.” This catchy name was used for four big tech companies: Facebook, Amazon, Netflix, and Google. In 2017, Apple joined this elite list, and “FANG” became “FAANG.”
Over time, Facebook got a new name—Meta—and Google turned into Alphabet. As these changes happened, Microsoft and Nvidia were added because they were doing really well. With these additions, the group needed a fresh new name. They settled on calling it the “Magnificent Seven.”
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These companies are like a dream team in the tech world, known for their innovation and success.
Reasons to Consider Investing in These Top 7 Stocks
These stocks, called the “Magnificent 7,” have been noted for their impressive results. Over the past year, five out of seven have beaten the S&P 500 index. Most notably, Nvidia stands out with a whopping 206% return, while the S&P 500 saw a 24% increase overall.
It’s important to note, not every stock in the group is a guaranteed winner. For instance, while some excelled, stocks like Tesla lagged behind the S&P 500’s performance.
Ways to Invest in the Top 7 Stocks
The “Magnificent 7” stocks are leading players in the market, and many investors might already own some shares through retirement plans or other funds. If not, it’s easy to add them to an investment portfolio.
To get started, an investor needs to open a brokerage account. It is important to choose the right account type to take advantage of potential tax benefits.
Here are three options for buying these stocks:
Option 1: Direct Stock Purchase
Investors can choose to buy stocks from each of the seven top companies individually. These companies are:
- Alphabet (GOOG, GOOGL)
- Amazon (AMZN)
- Apple (AAPL)
- Meta Platforms (META)
- Microsoft (MSFT)
- Nvidia (NVDA)
- Tesla (TSLA)
Buying stocks from each company allows for control over the investment choices. However, it requires more management and monitoring, as each stock needs attention to determine the right times to buy or sell. This method charges no annual fees, which can be appealing to many.
Option 2: Invest Through a Specialized Fund
The second strategy is purchasing shares through a dedicated exchange-traded fund known as the Magnificent Seven ETF (MAGS). This fund includes all seven stocks equally, providing exposure without the need for individual stock management.
- Expense Ratio: 0.29%
Option 3: Opt for an S&P 500 Index Fund
The third method involves investing in a fund that tracks the broader S&P 500 index. An S&P 500 fund includes nearly 500 large U.S. companies, offering greater diversification.
This option encompasses all of the Magnificent 7 stocks, as each company is a part of the S&P 500. Investing in this way reduces risk by spreading investments across many companies and minimizing the impact of any single stock’s poor performance.
The broader range shields against fluctuations in specific sectors, adding stability to the investment portfolio.
The choice of investment strategy will depend on individual preferences, such as the level of involvement desired in managing investments and tolerance for risk.
