Money and Finance Stocks: Prices and Tips

Bank stocks may be amongst the hardest to analyze – but you can make a whole lot of money via money stocks.

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Popular Money Stocks

If you want to make some real bank, try investing in the following bank stocks:
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Finance Stock Market Tips

Bank stocks are especially sensitive to overall economic fluctuations, more so than stocks in other unrelated sectors. Overall risk tolerance should be assessed before investing in bank stocks.

Here are three things to keep in mind when investing in bank stocks:

Banks are hella risky

This is a big one. The typical bank is leveraged by a factor of 10-to-1. This means that a small 10% decline in the value of its assets would completely wipe out its capital base…making it insolvent.

Cheap banks are…cheap

Banks fail. A lot. And often. A way to avoid this is to examine lenders’ price-to-book value ratio (shares cost   relative to book value). A figure above 1.0 suggests means all is well. A ratio below 1.0 implies that a bank isn't earning its cost of capital. Or it could also mean that the market is anticipating future losses.

Find a bank with a high return on equity

Why invest in a bank stock? Well, with hope that it will generate a high return on equity, for as long as possible. Divide a bank's annual net income by its shareholders' equity. That’s its return. Invest only in banks that return around 15% on their equity (on average) through all stages of a business cycle.

Different Kinds of Bank Stocks

Banks are helpful in more than just a few ways. They transfer risk, facilitate transactions and provide   liquidity. There are two major kinds of banks in North America:  

Regional Banks
These are the little baby financial institutions. Regional banks focus on one geographical area within a country and they essentially provide depository and lending services.

Major Banks
Major banks deal with international transactions and are mainly in financial centers like New York (though they do maintain some local branches)

How to Invest in Money Stock

The biggest factor that affects the credit card industry is the general health of the economy. Strong consumer confidence translates into more purchases. This generally implies greater use of credit cards. When confidence is low: consumers purchase less and they usually decide to cut back on their credit card usage. Investing in   credit card   companies can be super rewarding for investors. Consumers' unwavering need to use credit cards means these companies have the potential to be long-term winners.

When investing in credit card companies, choices include   mutual funds, ETFs and stocks. Mutual funds and ETFs are best in terms of diversification, as they mix the stocks of credit card companies with banks and other financial service companies. Stocks are definitely the most direct course of action for investing in credit card companies. Popular companies in which to invest include American Express (AXP), Visa (V) and Mastercard (MA), etc.