Retail investors holding 10,000 yuan, how to play financial stocks to earn dividends and chase gains? An in-depth analysis of the current timing to enter Taiwanese and American financial stocks.

Taiwan stocks continue to fluctuate around 28,000 points, with the rally in electronics stocks showing signs of fatigue. Smart capital is quietly shifting its focus—from expensive tech stocks to severely undervalued financial stocks.

You’re not hearing it wrong. Putting money in a bank deposit for one year yields about 2% return, but switching to financial stocks can steadily generate a 5-7% cash dividend yield, with potential for stock price appreciation. Why is this difference so significant? This article will help you see clearly whether financial stocks are truly the best entry point right now.

Why Are Financial Stocks Suddenly Gaining Popularity?

Divergence in Price-to-Earnings Ratios

The main players in this global rally are electronics stocks, especially those related to AI concepts, but they’ve already risen to the sky. Just look at the P/E ratios—tech stocks are generally trading at 25-30 times earnings, but profit growth is hard to sustain at last year’s explosive levels. In contrast, major Taiwanese financial holding companies still trade at P/E ratios of 10-12 times, and this gap is definitely not a coincidence. Capital is starting to seek undervalued, stable-profit stocks, and financial stocks naturally become the next target.

Interest Rate Environment Is Not Entirely Bad

Many think that Fed rate cuts are only bad for financial stocks, but that’s not entirely true. Taiwan’s financial holdings posted profits exceeding NT$560 billion by November this year, hitting new highs. Even if interest rates remain low in 2026, as long as the economy avoids a hard landing, overall dividend-paying capacity could be even stronger than now. The space for stock price recovery is here.

Signals of Economic Transition

Capital is shifting from electronics stocks to defensive sectors. Fubon Financial and Cathay Financial have recently performed well, and this is no coincidence. If profits and dividends remain strong into 2026, financial stocks should perform well. In case of a mild recession, well-capitalized financial holdings with good loan quality tend to fall the least—an excellent example from the 2022 bear market shows that while the weighted index plunged over 20%, the financial index dropped less than 15%.

Financial stocks have a “attack when advancing, defend when retreating” characteristic, making them especially attractive in the current high-level fluctuation environment. When tech stocks pull back 10%, financial stocks often only wobble 3-5%, making the psychological burden much lighter.

How Are Financial Stocks Categorized? Which Type Should Beginners Start With?

There are about 49 listed financial stocks in Taiwan, generally divided into several major categories:

Financial Holding Companies: The most popular choice. These are conglomerates with diversified operations, including banks, life insurance, securities, fund management, and advisory services. They have large assets and stable shareholder structures. Examples include Cathay Financial, Fubon Financial, and CTBC Financial.

Pure Banks: Relatively simple operations—mainly deposits and loans—but with stable management and less volatility, suitable for those who want to hold long-term. Examples are Chang Hwa Bank and Taichung Bank.

Insurance Stocks: Higher risk, with income from premiums and investment returns, and sensitive to interest rate fluctuations. Suitable for strategic positioning at market turning points.

Securities Stocks: Revenue mainly from brokerage services, directly linked to stock trading volume. Profitability rises when markets are hot, and suffers when markets cool.

Fintech Stocks: Focused on digital payments and innovative applications, like PayPal, Mastercard, etc., leaning more toward tech stocks.

Beginners usually start with financial holding companies because they are well-diversified, offer stable dividends (most above 5%), and have relatively manageable risks. For short-term trading, financial ETFs (like 0055, 006288U, etc.) are also good options—low entry barriers and diversified holdings.

List of Taiwanese Financial Stocks Worth Tracking in 2025

Based on latest data and institutional forecasts, the following stocks cover different investment characteristics and are suitable for investors with various risk tolerances:

Fubon Financial (2881): Market leader

Stable contribution from insurance subsidiaries, rapid growth in wealth management and digital banking. 2025 EPS is estimated at NT$4.5-5, with a P/E ratio around 12, still undervalued. Plus, active marketing campaigns enhance long-term brand value.

Risks: Overseas expansion may be affected by geopolitical fluctuations, impacting profits.

Cathay Financial (2882): Strong international expansion momentum

Significant growth in Southeast Asian insurance markets (Vietnam, Thailand), with wealth management fees increasing 15% annually. EPS estimated at NT$4, P/E ratio of 11, attractive valuation. If interest rates stabilize in 2026, insurance profits could further improve.

Risks: Insurance stocks are sensitive to interest rate changes; rapid rate cuts could lower investment yields.

CTBC Financial (2891): Leader in digital transformation

Mobile banking users are projected to grow 20% in 2025. Exposure to the Chinese market is relatively lower than other holdings but still has growth potential. EPS estimated at NT$2.8, P/E ratio of 13, with room for growth.

Risks: China policy uncertainties could drag on some business segments.

E.SUN Financial (2884): Conservative favorite

Mainly small and medium enterprise loans and retail banking, with net interest income growing 10% annually. Its steady management style appeals to conservative investors. EPS estimated at NT$2.5, P/E ratio of 12, suitable for long-term holding.

Risks: Business concentrated in Taiwan; domestic economic slowdown could hamper growth.

Chang Hwa Bank (2801): Most undervalued pure bank

High capital adequacy ratio, stable loan quality, 12% growth in wealth management. EPS estimated at NT$1.5, P/E ratio of 10, the lowest valuation. But its business is relatively simple, with less growth potential than diversified financial holdings.

Are US Financial Stocks Worth Allocating?

It’s a good time for Taiwanese investors to enter US financial stocks—they are reasonably valued and offer dividend and growth potential. Key stocks favored by institutions:

BRK.B Berkshire Hathaway (Warren Buffett’s holding company)

The world’s most famous investment holding company, owning insurance (GEICO), railroads, energy, manufacturing, and large holdings in Apple, American Express, etc. Simply put, it’s like a giant investment fund that uses insurance cash flow to buy good companies and earn compound returns. Known as “the most stable defensive stock in US stocks.”

JPMorgan Chase

The largest US bank, covering retail, investment banking, wealth management, credit cards. Over 300,000 employees worldwide, market cap over $8 trillion. The “all-round king” of finance. If capital markets stay hot into 2026, profit growth potential is high.

Bank of America

The 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, closely tied to Americans’ daily lives.

Goldman Sachs

The most famous Wall Street investment bank, specializing in M&A, IPOs, trading. If the 2026 capital market continues to be hot, this stock has explosive potential, but also higher volatility. Portfolio allocation should not exceed 20%.

American Express

A globally renowned credit card company targeting high-end clients. Revenue mainly from transaction fees rather than interest. Customers have strong spending power, and the business remains relatively stable regardless of economic cycles, with less volatility than traditional banks.

Is It Really Feasible to Use Financial Stocks as Fixed Deposits?

Many buy financial stocks and treat them as “fixed deposit stocks,” collecting dividends annually. This is feasible, but financial stocks are not perfect substitutes for bank deposits—they earn more but also have volatility and risks, so they are not entirely risk-free.

Practical Investment Tips:

Choose stocks with high dividend yields (at least 5%), low P/E ratios (Taiwanese financial holdings 10-15 times, US stocks 15-20 times), and stable profits, such as Fubon Financial, Cathay Financial, E.SUN Financial, or JPMorgan Chase, Bank of America.

Typically, buy during high market fluctuations and tech stock pullbacks. Capital tends to rotate into financial stocks. Alternatively, when dividend yields exceed 6-7%, consider phased accumulation. After buying, hold for dividends, and adjust target prices flexibly—for example, if initially set at NT$50, and the stock rises to NT$45 with improved company profits, raise the target to NT$60. Time is a friend of good companies; for mature industries like financials, the advantage becomes clearer over time.

When the psychological target price is reached, or dividend yield drops below 4% (meaning stock price has risen too much), consider trimming or switching to undervalued stocks.

This approach often results in returns mainly from dividends and stock price appreciation over the years, without daily monitoring.

Black Swan Risks in Financial Stocks

Lessons from History Cannot Be Forgotten

Over the past decade, financial stocks have not outperformed the broader market. More critically, during black swan events: in 2015, China’s A-share crash caused the Taiwan 50 Index (0050) to fall a maximum of 24.15%, but Yuanta MSCI Financial (0055) fell as much as 36.34%. During financial crises, banks can even face insolvency risks—after the Russia-Ukraine war in 2022, Sberbank’s stock plummeted 50% in days amid a bank run, trading as low as $0.01 overseas.

Main Risks:

Market risk: Financial stocks are highly sensitive to market fluctuations, often falling more than the overall market during bear markets.

Interest rate risk: Rate hikes or cuts impact profits. Low interest rates suppress yields, while rapid rate changes can cause accounting confusion.

Loan default risk: If borrowers cannot repay, banks face bad debt and non-performing loans.

Swing trading may be more suitable

Financial stocks are “cyclical stocks,” with strong periodicity, better suited for swing trading rather than long-term holding. Using technical analysis (moving averages, support/resistance, RSI, etc.), investors can profit flexibly during bull and bear phases.

Long-term Investment Value of Financial Stocks

Although they lack the explosive growth of tech stocks, financial stocks account for about 13% of the US stock market (S&P 500), and have long-term potential to outperform the market.

Three core advantages:

Stable performance: Over the past 30 years, financial industry earnings have grown faster than the overall economy, enabling higher-than-average dividends.

Government support: Financials are intertwined with the global economy; governments are unlikely to let big banks fail (examples include bailout after 2008 crisis). Financial stocks are less risky than other industries and can receive special support during recessions or crises.

Defensive nature: Banking and insurance are closely linked to economic cycles, with generally smaller volatility than tech stocks.

Future outlook:

If the US can avoid a recession, many banks have bright prospects. They benefit from higher interest rates, as net interest margins can widen. Although rapid rate changes can cause chaos, over time, banks can adjust their assets and liabilities, setting the stage for stronger profit growth.

Over a horizon of five years or more, adding some quality financial stocks to your portfolio can be a good choice.

Summary

As the backbone of mature markets, financial stocks may lack the explosive growth of tech stocks, but their importance in the global stock market is irreplaceable. For Taiwanese investors, now is a good time to allocate to Taiwan-US financial stocks—reasonably valued, with steady dividends and growth potential. Whether seeking stable cash flow or aiming for stock price appreciation, financial stocks deserve a place in your investment portfolio.

The key is diversification and risk management—don’t put all your chips into one basket. Time and patience are often the two most needed elements when investing in financial stocks.