The stocks of companies in the financial sector, including banks, asset management firms, insurance companies, investment brokerage firms, and mortgage companies, are termed as financial stocks.
The financial sector and financial stocks form a big part of the economy. They are directly correlated with the overall economic environment. They are popular investments that investors hold in their portfolios. Financial stocks are volatile and risky; however, they also hold robust potential to generate exciting returns.
Financial stocks suffered a massive blow after the financial crisis of 2008. However, they have now pulled themselves together. Financial stocks have again become one of the most attractive avenues of investment for investors looking for both short-term and long-term gains.
Factors to Consider Before Investing in Financial Stocks
It is of significant importance that financial stocks have a direct correlation with the economy. The prices of financial stocks go down with the downturns in the economy, while they shoot up when the economy boosts up.
Investors must, therefore, consider the risks associated with financial stocks. The performance of financial stocks is impacted by the interest rates, government regulations, and capital structure of the economy.
Financial stocks caused massive losses to investors in 2008, but the trust is coming back. Despite the risky and volatile nature, financial stocks are springing back as profitable investments due to changes in regulations and the restructuring of the capital markets.
Which Financial Stocks Should I Buy?
A large variety of stocks constitute financial stocks. Some have had a difficult time in 2018, while many others have managed to fare better than others. We have compiled a list of the best financial stocks for you to select from.
Investors must consider the market capitalization of the companies to ensure the stability of returns and the strength of fundamentals. The best financial stocks have diversified sources of income that can overcome the losses caused by rapidly increasing interest rates, low demand for credit and mortgage, and changes in government legislation.