If you have been following the tech stocks the term FAANG should be familiar to you – the best stocks in technology have enjoyed a healthy rise in stock prices and if you own them your portfolio is up. The FAANG stocks are Facebook, Amazon, Apple, Netflix and Google. It is hard to own a fund without owning at least one of these stocks.

Cormac Mullen writing for Bloomberg News looks at a different aspect of the stocks how they are classified. All stocks are classified by a group called MSCI Global Industry Classification Standard. Facebook. Google and Apple are classified as technology stocks; while Amazon and Netflix are classified as consumer-discretionary stocks.

Other examples are American Express is classified as a financial stock while MasterCard and Visa are listed as technology stocks.

What all this means is stocks have different weighing on indexes which translates to index funds owning the index and portfolio managers trying to be in one sector or another. On the credit card stocks your way of thinking is they should all be the same since they do the same thing, however the accepted PE Ratio for technology is generally higher than financial stocks. Is one undervalued or overvalued?

Linking to dividend paying stocks, if you own a stock for a longer period of time, the classifications matters less, for you own it for different reasons. If you own the stock and short the indexes to protect your investments (hedging) you have to examine your indexes to ensure it is a real hedge. If you own a stock for the dividend, then you know the price will fluctuate for a variety of reasons, but as long as it is profitable it can be held.

There are more questions than answers, till the next time – to raising questions.