## What are financial stocks? Why are retail investors now accumulating these types of stocks?

Recently, the Taiwan stock market has been hovering around 28,000 points. An interesting phenomenon is—funds are quietly shifting. You’ll notice that people who once chased AI and electronics stocks are now turning their attention to financial stocks. This is not a coincidence, but a market rationally rebalancing.

**What are financial stocks? Simply put, they are stocks issued by financial institutions such as banks, insurance companies, and securities firms.** These companies share common traits: stable business operations, abundant cash flow, and strong dividend-paying ability. When you compare a fixed deposit annual interest rate of 2% with financial stocks offering 5-7% dividends, the investment appeal becomes immediately clear.

The question is—Is now the right time to enter financial stocks? Is it worth trying with a small capital of 10,000 yuan? Let’s break it down.

## Why is capital shifting from Tech Stocks to financial stocks?

**Valuation gap is widening**

Electronics stocks’ P/E ratios have been driven up to 25-30 times, or even higher. Meanwhile, large banks and financial holding companies still trade at 10-15 times P/E. What does this mean? If you buy electronics stocks, you are paying a price that already reflects expected earnings growth over the next 3-5 years. But financial stocks are different—they currently trade at prices that have not fully reflected their solid profitability.

**Global interest rate environment is stabilizing**

Although the Fed has started a rate cut cycle, looking at Taiwan’s financial holdings’ performance shows—by November 2025, they have already earned over 560 billion NT dollars, setting a record high. This indicates that even with declining interest rates, the financial industry can still maintain strong dividends. As long as the economy doesn’t hard land in 2026, dividends might even be more substantial than this year.

**Signals of economic rotation**

Fubon Financial and Cathay Financial have recently shown good gains, signaling capital rotation. When economic uncertainty arises, financial stocks tend to become defensive—during the 2022 bear market, the weighted index fell over 20%, but the financial index declined less than 15%. Tech stocks often drop 10% in a correction, while financial stocks usually only fluctuate 3-5%, making the psychological burden much lighter.

## How many types of financial stocks are there? How should small investors choose?

Taiwan has about 49 listed financial stocks, which can be categorized as follows:

**Financial Holding Companies**: The most popular choice. These companies are diversified, including banks, life insurance, securities, and asset management. Fubon Financial, Cathay Financial, and CTBC Financial are examples. They feature risk diversification and stable dividends (many over 5%).

**Pure Banks**: Focus solely on banking operations, such as Chang Hwa Bank and Taichung Bank. They have simpler business models but stable management, suitable for investors who prefer “hold steady.” Their volatility is indeed lower than financial holdings.

**Insurance Stocks**: Revenue mainly from premiums and investment returns. These stocks tend to be more volatile, suitable for market rotation periods, especially when interest rates change rapidly.

**Securities Stocks**: Income depends on trading volume and brokerage activities. Profits surge during active markets, but suffer when the market is quiet.

If you only have 10,000 yuan, directly buying individual stocks carries high risk. A smarter approach is to choose financial ETFs (like 0055 Yuanta Financial), which have low thresholds, good diversification, and can still pay dividends over 5%. For more flexible swing trading, you can also consider CFD tools to improve capital efficiency.

## How to select Taiwanese financial stocks in 2026?

Based on latest data and institutional forecasts, here are some stocks worth watching:

| Code | Name | 2025 Gain | Estimated Dividend Yield | Core Advantages |
|-------|-------|------------|--------------------------|-----------------|
| 2881 | Fubon Financial | +30% | 6.5% | Stable insurance, fast wealth management growth, brand value enhancement |
| 2882 | Cathay Financial | +36% | 6-7% | Strong Southeast Asian insurance growth, 15% annual increase in fee income |
| 2891 | CTBC Financial | +28% | 5.5% | Leading digital banking, China exposure potential |
| 2884 | E.SUN Financial | +28% | 6% | Steady SME loans, conservative style |
| 2801 | Chang Hwa Bank | +25% | 5% | High capital adequacy, quality loans, undervalued |

**Fubon Financial(2881)**—Steady offensive

Taiwan’s leading financial holding, with stable contributions from its insurance subsidiary Fubon Life. Rapid growth in wealth management and digital banking, EPS estimated at 4.5-5 NT dollars, P/E around 12. Recent active branding and sports marketing, long-term optimistic. Risks include geopolitical uncertainties in overseas expansion (Hong Kong, Southeast Asia).

**Cathay Financial(2882)**—Growth momentum

Significant growth in Southeast Asian insurance markets (Vietnam, Thailand), with 15% annual growth in wealth management fee income in 2025, becoming future profit engine. EPS estimated at 4 NT dollars, P/E 11, with room for valuation expansion. Sensitive to interest rate cuts; if rate cuts exceed expectations, returns may be pressured.

**E.SUN Financial(2884)**—Stable income

Mainly engaged in SME loans and retail banking, with 10% annual growth in net interest income in 2025. Conservative management style, favored by risk-averse investors. EPS estimated at 2.5 NT dollars, P/E 12, suitable for long-term dividend collection. Risks include reliance on Taiwan’s economy; domestic slowdown could impact performance.

**CTBC Financial(2891)**—Transformation potential

Leading digital transformation among peers, with 20% growth in mobile banking users in 2025. Also has exposure to China (less than other holdings but with potential), EPS estimated at 2.8 NT dollars, P/E 13. If China’s economy recovers, stock price may surprise positively. Risks include high policy uncertainty in China.

**Chang Hwa Bank(2801)**—Undervalued defensive

Pure bank stock, with high capital adequacy, stable loan quality, and 12% growth in wealth management in 2025. EPS estimated at 1.5 NT dollars, P/E 10, the lowest valuation. The downside is less diversification compared to financial holdings, but very suitable for those who want to “buy and hold.”

## Are US financial stocks also worth watching?

If you want to expand into US stocks, these are the top picks institutional investors favor for 2026:

**JPMorgan Chase(JPM)**—All-round king

The largest US bank, covering retail, investment banking, wealth management, credit cards, and more. Over 300,000 employees worldwide, market cap over 8 trillion USD. 2025 gains about 30-35%, driven by leadership in investment banking, M&A recovery, and net interest income expected at 9.5 billion USD. Digital transformation ahead of peers, with large growth potential.

**Bank of America(BAC)**—Grassroots banking king

Second-largest US bank, focusing on retail services—accounts, mortgages, credit cards, wealth management. Over 68 million customers, the largest deposit base in the US. Gains over 35% in 2025, benefiting from retail deposit dominance, wealth management growth, share buybacks, and high dividends. Closest to American daily life, with solid stability.

**Berkshire Hathaway(BRK.B)**—Warren Buffett’s insurance empire

The world’s most famous investment holding company, owning insurance (GEICO), railroads, energy, manufacturing, and hundreds of subsidiaries, plus large holdings in Apple, American Express, etc. Gains about 25-30% in 2025, mainly driven by rising stock portfolio, stable insurance business, and cash holdings of 380 billion USD. Many regard it as “the most stable defensive stock in US stocks.”

**Goldman Sachs(GS)**—Wall Street investment bank leader

Specializes in M&A, IPOs, trading stocks and bonds, serving corporate and institutional clients. Gains about 25-30% in 2025, benefiting from leadership in investment banking, M&A/IPO revival, and strong trading. If you believe capital markets will stay hot in 2026, this is a high-growth stock, but with higher volatility—recommend no more than 20% of your portfolio.

**American Express(AXP)**—High-end client specialist

Global credit card company targeting affluent customers, with services including credit cards, fees, and travel. Gains about 20-25% in 2025, with strong consumer spending power, relatively stable regardless of economic cycles. Earnings mainly from card transaction fees rather than interest, with less volatility than traditional banks.

## Can financial stocks serve as fixed deposits? My practical trading approach

Many treat financial stocks as “fixed deposit stocks,” buying and holding for annual dividends. This is feasible, but a key point must be understood—financial stocks are not risk-free fixed deposits; they have volatility and risks, just relatively smaller.

**My own logic is as follows:**

Step 1—Simple stock selection criteria. Focus on three indicators: dividend yield at least 5%, low P/E (Taiwan financial holdings 10-15x, US financials 15-20x), and stable profits. Taiwan favorites: Fubon, Cathay, E.SUN; US favorites: JPM, BAC.

Step 2—Entry timing. Usually during high market consolidation or after electronics stocks have risen and pull back. Because this is when capital tends to rotate into financials. Or when dividend yields exceed 6-7%, buy in batches.

Step 3—Hold for dividends, don’t watch the daily price. Set target prices but flexibly. For example, if initially set at 50 NT dollars, and the stock rises to 45 with improved company profits, adjust target to 60. Buffett said “time is a friend of good companies,” and for mature industries like financials, the longer the better.

Step 4—Reducing positions. When your psychological target price is reached, or dividend yield drops below 4% (meaning stock price has risen too much), consider trimming or selling completely, and switch to undervalued opportunities.

Over the years, returns mainly come from dividends and price rebounds. But a key point is—despite seeming stable, financial stocks also carry risks.

## Pitfalls to know about investing in financial stocks

**Performance lagging the market**

Over the past decade, whether in Taiwan or the US, financial stocks have not outperformed the market. Some years even underperformed significantly, mainly because tech stocks surged too much.

**Black swan events cause deep declines**

In 2015, during China’s A-share crash, Taiwan’s 50 index(0050) fell 24.15%, but Yuanta MSCI Financial(0055) dropped 36.34%. Financial stocks are more fragile during crises than expected.

**Bank failures are not zero risk**

After the Russia-Ukraine war in 2022, Sberbank in Russia experienced a bank run, with stock plunging 50% in days, and briefly trading at $0.01 on overseas exchanges. In systemic financial crises, banks can also face survival risks.

**Interest rate changes are a double-edged sword**

Rate cuts hurt financials (net interest margin compression), rate hikes also pose risks (asset prices decline, loan default rates rise). Investors find it hard to precisely predict interest rate movements.

**Loan default risks**

Financials serve many industry clients. During economic downturns or corporate bankruptcies, banks face bad debt and non-performing loans.

## Swing trading might be more suitable than fixed deposits

Financial stocks are “cyclical stocks” with strong seasonality. If you have time and experience, swing trading could yield better returns.

The logic of swing trading is—not relying on long-term market trends, but using technical analysis to profit from both bull and bear markets. Common indicators include moving averages, support and resistance levels, RSI, etc.

If you want to try, start with simulation accounts to practice, then move to real trading when confident. This reduces risk.

## Does the long-term investment logic of financial stocks still hold?

Financial stocks make up 13.12% of the S&P 500 components. Although they lack the explosive growth of tech stocks, they have unique advantages:

**Profit growth outpaces the economy**. Over the past 30 years, financial industry earnings have grown faster than overall economic growth, enabling them to pay higher-than-average dividends.

**Strong government support**. Financials are tied to the health of the global economy; governments won’t easily let big banks fail. Post-2008 bailout is an example. This makes financial stocks relatively lower risk.

**Lower volatility indeed**. Banking and insurance are deeply linked to economic cycles, but their volatility is usually less than tech stocks.

**Strong dividend-paying capacity**. Financial stocks rank among the top in dividend distribution ability across industries.

If your investment horizon exceeds 5 years, adding some quality financial stocks to your portfolio is still a reasonable choice. Especially as valuations of tech stocks are high, financial stocks’ attractiveness is rising.

## Final advice

Are financial stocks worth entering now? The answer is—“conditionally yes.”

The premise is—you must acknowledge they are not fixed deposits, monitor risks, and understand their cyclical nature. If you just want a place to earn 5-6% annually in dividends, financial stocks are feasible. But if you expect them to double like tech stocks, you’re overestimating.

The smartest approach? Portfolio allocation. Use 60-70% of your funds to buy stable financial holdings or ETFs as “fixed deposits,” and keep 30-40% for swing trading. This way, you can collect dividends and also seize rebound opportunities during market rotations.

For small investors with 10,000 yuan, you might do this: 5000 yuan in financial ETF(0055), 3000 yuan in a carefully selected financial holding stock in batches, and keep 2000 yuan in reserve for dips. Diversify to reduce individual risks.

What are financial stocks? They are an undervalued opportunity, but not a risk-free safe haven. Understand the difference, and you’ll invest smarter.