Recently, there’s an interesting phenomenon: the broader market is fluctuating in a high-range, but money has quietly started shifting from electronic stocks to financial stocks. Think about it—one-year fixed deposits yield only 2%, while financial stocks can reliably distribute a dividend yield of 5–7%, with a chance to wait for the share price to catch up and rally. The difference is really not small.

Why are financial stocks worth focusing on now? Simply put, there are three reasons. First, valuations are relatively reasonable. Tech stocks have risen to a P/E ratio of more than 30, but profit growth can’t quite keep up; meanwhile, large bank stocks are still around 10–12x, so they look much cheaper in comparison. Second, the interest-rate environment isn’t as bad as people imagine. Although a rate-cut cycle is approaching, Taiwan’s financial holding companies already earned more than 5600 billion last year in the first 11 months, setting a new high. If the economy in 2026 doesn’t hard land, their dividend-paying ability could be even stronger than the year before. Third, the market is rotating. Money is moving from electronics stocks to defensive sectors, and at times like these, financial stocks are more likely to be undervalued.

Another key point is the defensive nature of financial stocks. During the bear market in 2022, the weighted index fell by more than 20%, but the financial index dropped by less than 15%. When tech stocks pull back, they may fall 10%; financial stocks often only wobble 3–5%. The psychological burden is much lighter. In a market environment where the market is making high-range fluctuations, this “advance with confidence and retreat with protection” characteristic is especially valuable.

In Taiwan, financial stocks can be roughly divided into several categories. Financial holding companies have the most diversified businesses, including banks, life insurance, securities, and more. Companies like Cathay Financial, Fubon Financial, and CTBC Financial are among the most closely watched. Pure bank stocks are simply the shares issued by banks themselves—such as Chang Hwa Bank and Taichung Bank. Their businesses are more single-focused, but operations are stable. Insurance stocks tend to be more volatile, which makes them suitable for positioning when the market is transitioning. Securities stocks depend on trading volume: when the market is hot, brokerage-related profits perform well. Most beginners start with financial holding companies because they offer better diversification and more stable dividend yields.

If your capital is limited, you can start with financial ETFs. The entry threshold is low and you get diversification. If you want to enter and adjust positions for short-term moves, there are other tools you can also consider.

As for specific targets, I personally pay more attention to a few. Fubon Financial’s insurance subsidiaries contribute steadily; its wealth management growth is fast. Its P/E ratio is about 12x and still has room to expand. Cathay Financial’s Southeast Asia insurance business shows clear growth, and by 2026, wealth management fee income is expected to continue growing. CTBC Financial leads in digital transformation, and the number of mobile banking users continues to increase. E.SUN Financial is mainly focused on loans to small and medium-sized enterprises, with steady operations, making it suitable for long-term holding. As for pure bank stocks, Chang Hwa Bank has a high capital adequacy ratio and stable loan quality; its valuation is among the lowest choices, making it suitable for those who want to hold steadily.

I’ve also looked at some US financial stocks. Berkshire Hathaway—associated with Warren Buffett—is like a massive investment fund, with businesses spanning insurance, railroads, energy, and more. Many people call it the most stable defensive stock in the US market. JPMorgan is the largest bank in the United States, offering all-around services that cover retail, investment banking, and wealth management. Bank of America focuses mainly on the general public’s banking needs, with more than 6800万 customers. Goldman Sachs is the most famous investment bank on Wall Street; if capital markets stay hot in 2026, its upside potential is the strongest, though volatility is also higher. American Express focuses on high-end customers, has stable fee income, and tends to hold up relatively well regardless of whether the economy is good or bad.

Using financial stocks like fixed-deposit-style investing is actually feasible, but don’t treat them as zero-risk. My own strategy is to choose targets with high dividend yields of at least 5%, lower P/E ratios, and stable earnings. Typically, I enter when the broader market is fluctuating at high levels and after electronics stocks have rallied and then pulled back, or when an individual stock’s dividend yield stands above 6–7%, in which case I buy in batches. After buying, I hold with the mindset of collecting income every year; the target price will be adjusted based on changes in the company’s earnings rather than being rigidly set. When my psychological target price is reached, or when the dividend yield drops below 4%, I consider trimming. With this approach, most of the return comes from dividends and the share price catching up—there’s no need to watch the market every day.

But one thing to keep in mind is that financial stocks are cyclical. Over the past 10 years, their performance hasn’t exceeded the broader market. During black swan events, financial stocks tend to fall even deeper than other stocks; during financial crises, banks also face the risk of failure. That’s why financial stocks are more suitable for swing investing—using technical analysis to profit in both bull and bear markets.

Over the long run, financial stocks still have value. They make up as much as 13% of the S&P 500. Although they lack the breakout explosive growth of tech stocks, their low volatility, dividend distribution, and steady operations allow them to outperform the market over the long term. Over the past 30 years, the financial sector’s earnings growth rate has been clearly faster than the overall economy, enabling them to pay shareholders dividends at above-average levels. In addition, because the financial industry is tied to the health of the global economy, governments will not easily allow major banks to fail, which means the risk is lower than in many other industries.

Of course, there are risks to pay attention to. Financial stocks are sensitive to market volatility: they tend to experience larger declines in bear markets, and systemic risk is especially high during black swan events. Changes in interest rates also affect earnings, and investors have difficulty predicting outcomes accurately. There’s also the risk of loan defaults—if companies can’t repay loans, banks face bad-debt problems.

So my recommendation for anyone looking to invest in financial stocks is to prepare a portfolio allocation rather than going all-in at once. With valuations relatively reasonable right now, dividends stable, and growth potential as well, this is indeed a good time for strategic positioning.