How to Invest in Financial Stocks

Step 1:

Investing in financial stocks is almost always going to be a risky investment, especially during our economy's current financial crisis. The important thing to remember in times like these is that more than ever, it is essential that you do your research before purchasing any financial stock.

Step 2:

When investing in financial stocks, keep in mind that lower interest rates are always better for the companies. As interest rates approach 5% or higher, I would recommend selling all financials.

Step 3:

I would only consider (obviously) investing in the best of the best. So here is a list of what I believe are the best financial stocks to own (in order):

Goldman Sachs (ticker: GS)
JP Morgan Chase (JPM)
Morgan Stanley (MS)
Wells Fargo (WFC)
Bank of America (BAC)

Again, research is critical. I recommend typing the ticker symbol into Yahoo Finance and then clicking on the "Analyst Estimates" tab on the left. This will show you what the analysts covering the company expect them to earn next quarter and next year. I good rule of thumb (although it may seem counter-intuitive) is to buy the stock when everyone is saying there is no way it can go up. That's when you look for a good buying opportunity. Similarly, sell the stock when everyone is saying that there is no way it can go down.

A good place to learn more about investing is the Investment Strategies forum. Go to http://investmentstrategies101.com/