Financial Stock Recommendations | How Small Investors Can Enter with 10,000 Yuan, Earn Steady Income, and Capture Rebound Opportunities

Why Are Financial Stocks Recommended for Now?

The Taiwan stock market is fluctuating at high levels around 28,000 points. Although tech stocks have surged driven by the AI boom, there is a quiet shift of funds—many investors are starting to move their focus from high-priced tech stocks to financial stocks.

There is a clear logic behind this shift. A fixed deposit for one year yields only 2%, while investing in financial stocks can provide a stable cash dividend yield of 5-7%, with the potential for share price rebound. The difference is indeed obvious.

Three core reasons for recommending financial stocks:

Relatively Reasonable Valuations

The global stock rally is led by electronics and AI supply chains, but after significant gains, tech stocks’ P/E ratios have risen above 30 times. In contrast, large bank stocks typically have P/E ratios around 10-12 times, a nearly threefold difference. In an environment where a soft landing of the economy is gradually becoming clear, funds naturally favor value stocks with reasonable valuations and stable profits.

Interest Rate Environment Is Not All Pressure for Financials

Although the Federal Reserve is entering a rate-cut cycle, which challenges net interest income, Taiwan’s financial holding companies have already earned over 560 billion NT dollars in the first 11 months of this year, setting a record high. Looking ahead, even if interest rates remain low in 2026, as long as the economy does not hard land, the overall dividend payout capacity of financial holdings is likely to be even stronger than this year, leaving room for share price rebound.

Market is Undergoing Capital Rotation

Funds are shifting from electronics to defensive stocks, with financial stocks like Fubon Financial and Cathay Financial performing well recently. If profits and dividends remain strong next year, financial stocks should perform well. Even in a mild recession, financial holdings with good loan quality and high capital adequacy ratios tend to experience the smallest declines.

The bear market of 2022 is a prime example—while the weighted index fell over 20%, the financial index declined less than 15%. Tech stocks often drop 10% on pullbacks, but financial stocks usually fluctuate only 3-5%, making them psychologically less burdensome. This “attack when advancing, defend when retreating” characteristic is especially valuable in today’s high-level volatility.

Classification and Characteristics of Recommended Financial Stocks

There are about 49 listed financial stocks in Taiwan, which can be divided into five major categories:

Financial Holding Companies are the most focused type. They adopt a conglomerate model, with subsidiaries including banks, life insurance, securities, asset management, and investment consulting, offering more comprehensive services, larger asset scales, and stable shareholder structures—suitable for novice investors.

Bank Stocks focus on the banking business itself (e.g., Chang Hwa Bank, Taichung Bank), mainly engaged in deposits and loans. Compared to insurance and securities, banks operate more stably but have limited growth potential.

Insurance Stocks mainly generate income from premiums and investment returns, with relatively larger volatility, suitable for entry during periods of interest rate shifts or premium income growth.

Securities Stocks derive core profits from brokerage services, highly correlated with stock market trading volume. When the market is active, brokerage profits tend to increase significantly.

Fintech Stocks focus on digital payments and innovative applications.

Novice investors usually start with financial holding stocks because of their diversified business, risk dispersion, and stable dividends (most above 5%), with Cathay Financial, Fubon Financial, and CTBC Financial being the most popular. Pure bank stocks are suitable for those seeking stable holdings. If funds are limited, consider starting with financial ETFs (such as 0055 Yuanta Financial), which have low entry barriers and can diversify risk.

Specific List of Recommended Financial Stocks

Taiwan Financial Stocks Recommendations

Based on the latest data as of December 2025, four major financial holding companies and one bank each have their own characteristics:

Fubon Financial (2881)

Price rose from NT$65 at the start of the year to NT$85 at year-end, an increase of over 30%. Its insurance subsidiaries contribute steadily, with rapid growth in wealth management and digital banking. EPS in 2025 is estimated at 4.5-5 NT dollars, with a P/E ratio of about 12 times. Actively investing in sports events and branding marketing, with long-term brand value potential. Risks include overseas expansion encountering geopolitical fluctuations that could impact profits.

Cathay Financial (2882)

Price increased from NT$50 at the start of the year to NT$68 at year-end, up over 36%. Southeast Asian insurance business has grown significantly, with wealth management fee income increasing by 15% annually. EPS is estimated at 4 NT dollars, with a P/E ratio of 11 times. If the interest rate environment remains stable in 2026, insurance profits are expected to rise further. Be aware that insurance stocks are more sensitive to interest rate changes.

CTBC Financial (2891)

Price rose from NT$28 at the start of the year to NT$36 at year-end, an increase of 28%. Leading in digital transformation, with a 20% growth in mobile banking users in 2025. EPS estimated at 2.8 NT dollars, P/E ratio of 13 times, with good growth potential. Exposure to the Chinese market is less than other financial holdings but still has potential. Risks include higher uncertainty in Chinese policies.

E.SUN Financial (2884)

Price increased from NT$25 at the start of the year to NT$32 at year-end, up 28%. Focused on SME loans and retail banking, with net interest income growing 10% annually in 2025. EPS estimated at 2.5 NT dollars, P/E ratio of 12 times, with a conservative management style favored by cautious investors. Business concentrated in Taiwan, which is a main risk.

Chang Hwa Bank (2801)

Price rose from NT$16 at the start of the year to NT$20 at year-end, an increase of 25%. Pure bank stock, with high capital adequacy ratio and stable loan quality. In 2025, wealth management business grew by 12%. EPS estimated at 1.5 NT dollars, with a P/E ratio of 10 times, making it one of the lowest valuation options. The main drawback is its relatively simple business scope.

US Financial Stocks Recommendations

JPMorgan Chase (JPM)

The largest bank in the US, covering retail banking, investment banking, wealth management, and credit cards. Gained 30-35% in 2025. Over 300,000 employees worldwide, market cap exceeding $800 billion. Leading in investment banking, M&A revival, with expected net interest income of $9.5 billion, and strong digital transformation.

Bank of America (BAC)

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. Gained over 35% in 2025. Stable retail deposit leader, continuous growth in wealth management, buybacks, and high dividend policies attract long-term investors.

Goldman Sachs (GS)

The most famous investment bank on Wall Street, mainly serving large corporations and institutional investors. Gained 25-30% in 2025. M&A and IPO activities rebounded, trading business strong. Highly dynamic but also volatile; recommended to keep within 20% of the portfolio.

American Express (AXP)

A globally renowned credit card company targeting high-end customers, with revenue mainly from fees rather than interest. Gained 20-25% in 2025. Customers have strong spending power, and the company remains relatively stable regardless of economic cycles, with less volatility than traditional banks.

Berkshire Hathaway (BRK.B)

The world’s most famous investment holding company, led by Warren Buffett. Owns hundreds of companies including insurance (GEICO), railroads, energy, manufacturing, and holds large positions in Apple and American Express. Gained 25-30% in 2025. Known as the “most stable defensive stock in US stocks,” continuously reinvesting insurance premiums into high-quality companies, with obvious long-term compound effects.

How to Invest NT$10,000 in Financial Stocks?

For small investors, three steps are recommended:

Choose Entry Method

If funds are limited, starting with financial ETFs is the most convenient. 0055 Yuanta Financial ETF has a low threshold, diversifies risk, and pays regular dividends. If you prefer selecting individual stocks, start with financial holding stocks for safety and stable dividends.

Timing for Dollar-Cost Averaging

Avoid investing all at once. The best time is during high market volatility or when tech stocks pull back, as funds tend to rotate into financial stocks. Alternatively, buy in stages when dividend yields reach 6-7%.

Long-term Holding Strategy

Buy and hold for dividends, turning it into passive income. Set target prices but remain flexible—if the stock price reaches your target and company profits improve, revise the target upward. Buffett said, “Time is the friend of a good company,” and for mature industries like financials, the longer the better.

When your psychological target price or dividend yield drops below 4%, consider trimming or selling completely, and move funds into undervalued opportunities.

Investment Risks of Financial Stocks

Investing in financial stocks is not risk-free; be aware of the following challenges:

Market Risk

Financial stocks are sensitive to market fluctuations. During bear markets, the bottom of the index is hard to predict, and financial stocks often fall more sharply. When black swan events occur, the impact on financials is usually the greatest. For example, during the 2015 Chinese A-share crash, the Taiwan 50 index fell 24.15%, but Yuanta MSCI Financial declined as much as 36.34%.

Interest Rate Risk

Rising interest rates benefit banks (widening net interest margin), but falling rates do the opposite. Financial stocks are highly sensitive to interest rate changes, and investors find it difficult to accurately predict rate movements.

Loan Default Risk

Financial institutions are vulnerable to bad debts and non-performing loans. If borrowers cannot repay, banks face default losses. This risk is especially prominent during financial crises. After the Russia-Ukraine war in 2022, Sberbank experienced a bank run, with stock prices plummeting 50% within days, and trading on foreign exchanges dropping to $0.01, even halting trading temporarily.

These risks remind us—although financial stocks seem stable and less volatile, systemic risks still exist. Over the past decade, performance in Taiwan and the US has not outperformed the broader market.

Swing Trading Strategies

Financial stocks are “cyclical stocks” with strong periodicity, making them more suitable for swing trading rather than long-term buy-and-hold.

Swing trading profits are achieved through technical analysis during bull and bear phases, offering flexible entry and exit points. Common indicators include moving averages, support and resistance levels, RSI, etc.

Simple process: register a trading account → deposit funds (often as low as $50) → use technical analysis to identify buy and sell points for financial stocks.

Long-term Investment Value of Financial Stocks

Key Pillars in Mature Markets

Financial stocks constitute about 13.12% of the S&P 500 index. Although known for conservative operations and lacking explosive growth like tech stocks, their low volatility, high dividends, and steady management enable them to outperform the market over the long term.

Three Core Advantages

First, stable long-term performance—over the past 30 years, financial industry earnings have grown faster than the overall economy, supporting dividends above the average.

Second, government support mechanisms—since the financial sector is tied to the health of the global economy, governments are unlikely to let major banks fail. Post-2008 bailout policies are proof, making financial stocks less risky than other industries and more likely to receive special support during recessions.

Third, defensive characteristics—banking and insurance are deeply linked to the overall economy, with volatility usually less than that of tech stocks.

Future Outlook

If the US can avoid a recession, many banks have bright prospects. Higher interest rates can widen net interest margins, leading to stronger earnings growth. Although rapid rate changes may cause short-term chaos, banks’ balance sheets will adjust over time, preparing for subsequent strong profits.

Taiwanese investors now focusing on US financial stocks find valuations reasonable, dividends stable, and growth potential promising—all positive factors.