Are financial stocks still worth adding? Small investors can start with 10,000 yuan, receive stable dividends, and wait for a rebound.

Taiwan’s Weighted Index fluctuates around 28,000 points. Although tech stocks have sparked an AI wave, smart capital is quietly shifting gears, moving from soaring electronics heavyweight stocks to the seriously undervalued financial stocks.

Imagine this: a one-year fixed deposit at a bank yields only 2%, while financial stocks can provide a stable 5-7% cash dividend yield, with even potential for share price appreciation. The gap is truly significant.

Are financial stocks now unsuitable for entry? How to choose? How to allocate (10,000? This article helps you analyze the investment logic and practical deployment of financial stocks.

Why is capital starting to flow back into financial stocks?

Valuations are severely undervalued

The recent rally in global stock markets has been almost monopolized by tech and AI concept stocks. But after such a large increase, the P/E ratios have surged above 30, with profit growth hitting a ceiling. In contrast, major Taiwanese financial holding companies still maintain reasonable P/E ratios of 10-12, creating a huge gap compared to tech stocks at 25-30. As signs of a soft landing in the economy become clearer, capital is seeking value stocks with steady profits and cash flow support.

Interest rate environment is not entirely unfavorable

Although the Federal Reserve is in a rate-cutting cycle, net interest income is under pressure, but Taiwanese financial holdings have already exceeded NT$560 billion in profits by November 2025, setting new records again. Looking ahead, even if interest rates stay low in 2026, as long as the economy avoids a hard landing, the dividend payout capacity of financial holdings is likely to be even stronger than this year, providing room for stock price correction and upward movement.

Market rotation is already evident

Capital is gradually shifting from electronics weights to defensive assets. The recent performance of Fubon Financial and Cathay Financial is the best illustration. If profits and dividends remain stable in 2026, financial stocks should perform relatively well. Even in a mild economic downturn, well-structured financial holdings tend to decline the least — during the 2022 bear market, the Weighted Index fell over 20%, but the financial index declined less than 15%. This “both in and out” characteristic is especially attractive in the current high-level oscillation environment.

Overall, the market is showing signs of “value stocks revival.” After the slowdown of the Magnificent 7 tech stocks, capital naturally shifts toward financial stocks with lower P/E ratios and higher yields. These stocks typically have P/E ratios of 15-20, with stable dividend mechanisms, providing a buffer amid volatility.

Of course, financial stocks are not without risks. If the Fed’s rate cuts are fewer than expected, or if the economy slows significantly or trade conflicts escalate, loan default rates may rise, increasing volatility. It is advisable to diversify and avoid putting all eggs in one basket.

How are Taiwanese financial stocks classified?

Financial stocks generally refer to stocks of banks, insurance companies, securities firms, and other financial institutions. There are about 49 listed financial stocks in Taiwan, mainly divided into five categories:

1. Financial Holding Companies
These conglomerates operate across multiple financial sectors, including banks, life insurance, securities, and asset management subsidiaries. Due to comprehensive services, large asset bases, and stable shareholder structures, they are the most favored by investors and are often the first choice for beginners.

2. Pure Banks
Issued by banks themselves (e.g., Chang Hwa Bank, Taichung Bank), focusing on deposits and loans. They are relatively simple but operate with higher stability. Their volatility is usually less than that of financial holdings.

3. Insurance Stocks
Mainly driven by premium income and investment returns, these carry higher risks than banks and securities but have explosive potential under certain market conditions.

4. Securities Stocks
Revenue from brokerage, underwriting, proprietary trading, etc., highly correlated with market trading volume. They often perform best during bull markets.

5. Fintech Stocks
Companies focusing on digital payments and financial innovation, such as PayPal, Mastercard, etc. They have high growth potential but also higher volatility.

For beginners, starting with financial holdings is the safest, as they are diversified, offer stable dividends often above 5%, with popular choices including Cathay Financial, Fubon Financial, and CTBC Financial. Pure bank stocks are suitable for long-term conservative investors. Insurance and securities stocks are more volatile and better suited for tactical positioning during market trend shifts — for example, securities stocks often lead during increased trading volume and speculative atmospheres; insurance stocks tend to react when interest rates change significantly.

If capital is limited, you can start with financial ETFs (like 0055, 006288U), which have low thresholds and diversified risks. For short- to medium-term trading, derivatives like CFDs can also be used for entry at lower costs.

Key points for deploying Taiwanese financial stocks in 2026

Based on the latest 2025 data and institutional forecasts, here are five stocks with different business features suitable for different investors:

Fubon Financial )2881( — A leading financial holding company with stable contributions from its insurance subsidiaries, impressive growth in wealth management and digital banking. 2025 EPS is estimated at NT$4.5-5, with a P/E ratio around 12, leaving room for valuation uplift. Active in sports marketing and branding, its long-term brand value is promising. Risks include geopolitical risks from overseas expansion (Hong Kong, Southeast Asia).

Cathay Financial )2882( — Southeast Asian (Vietnam, Thailand) insurance business shows significant growth, with wealth management fee income up 15% annually in 2025. EPS is estimated at NT$4, with a P/E of 11, making it attractive. If interest rates stabilize in 2026, insurance profits could further improve. Caution: insurance stocks are sensitive to interest rate changes; rapid rate cuts may lower investment yields.

CTBC Financial )2891( — Leading in digital transformation, with a 20% growth in mobile banking users in 2025. EPS is estimated at NT$2.8, with a P/E of 13, offering considerable growth potential. Exposure to the Chinese market is relatively limited but promising; if China’s economy recovers in 2026, share prices may surprise. Risks include policy uncertainties in China.

E.Sun Financial )2884( — Focused on SME loans and retail banking, with 10% annual growth in net interest income in 2025. EPS estimated at NT$2.5, P/E of 12, with a conservative management style appealing to cautious investors. Suitable for long-term holding. Main risk: concentrated domestic operations; economic slowdown may impact growth.

Chang Hwa Bank )2801( — Pure bank stock, with high capital adequacy and stable loan quality. 2025 wealth management grew 12%. EPS estimated at NT$1.5, P/E of 10, making it one of the most affordable options, suitable for defensive investors. Risk: limited business scope, less growth potential than diversified holdings.

US bank stocks also worth considering

For global allocation, the following US financial stocks are highly regarded and accessible via custodial services or ETFs:

Berkshire Hathaway )BRK.B( — The world’s most famous investment holding company, led by Warren Buffett, with subsidiaries in insurance, railroads, energy, manufacturing, and large stock holdings like Apple and American Express. Essentially a super-investment fund, rolling insurance capital for compound growth. Many investors see it as the most stable defensive stock in US equities.

JPMorgan Chase )JPM( — The largest US bank, with operations spanning retail, investment banking, wealth management, and credit cards. Over 300,000 employees, market cap over $8 trillion, a true “all-rounder” in finance. If capital markets stay active in 2026, profit growth potential is substantial, with reasonable valuation.

Bank of America )BAC( — The second-largest US bank, focusing on retail banking, closely integrated with American consumers. Over 68 million customers, the largest deposit base in the US. Highly stable with attractive dividends.

Goldman Sachs )GS( — A Wall Street investment banking giant, handling M&A, IPOs, trading, etc., mainly serving corporate executives and institutional investors. Explosive during market upswings but volatile; recommended to keep within 20% of your portfolio and time your entries.

American Express )AXP — A top global credit card issuer, with high-end customer loyalty. Revenue mainly from fees rather than interest. Customers are high-spenders, with relatively good resilience during economic fluctuations.

How to smartly allocate 10,000 in financial stocks?

Many buy financial stocks and hold them as “fixed deposits,” collecting dividends annually. This approach works, but financial stocks are not risk-free substitutes for fixed deposits; volatility and risks exist, so mindset adjustment is necessary.

If aiming for steady passive income from financial stocks, start with ETFs (like 0055) or 2-3 stable financial holdings, adopting a “fixed deposit mentality” for practical operation.

Practical strategy reference:

First, select stocks with high yields (at least 5%), low P/E ratios (Taiwan financials 10-15, US financials 15-20), and stable profits, such as Taiwan’s Fubon, Cathay, E.Sun, and US’s JPM, BAC.

Timing entries during high oscillation in the market, after tech stocks have risen and pull back, or when capital rotates into financial stocks, or when dividend yields reach 6-7%, then gradually build positions. After buying, hold steadily and collect dividends annually as cash flow. You can set flexible target prices — for example, if your initial target is NT$50, but the stock drops to NT$45 with improved earnings, you can raise your target to NT$60, because “time is a friend of good companies,” and mature industries like finance tend to appreciate over time.

When the stock price approaches your psychological target or dividend yield drops below 4% (indicating the stock has risen too much), consider trimming or exiting, and look for undervalued opportunities elsewhere. This approach mainly generates returns from dividends and share price rebounds, without daily monitoring.

However, behind the seemingly stable, low-volatility nature of financial stocks, risks should not be underestimated. Over the past decade, financial stocks have not outperformed the broader market, and during black swan events, declines can be deeper. For example, in the 2015 China stock market crash, the Taiwan 50 index fell 24.15%, but the Yuanta Financial ETF plunged 36.34%. During financial crises, banks face the risk of collapse; in 2022, after the Russia-Ukraine war, Sberbank experienced a bank run, with stock prices plunging 50% in days, and trading on overseas exchanges once dropped to $0.01, eventually halting trading.

Therefore, financial stocks are more suitable for swing trading strategies. As cyclical stocks, they have strong periodicity, and traders should use technical analysis to seek gains within bull-bear cycles — buying during upward phases, selling in batches near peaks, guided by moving averages, support/resistance levels, RSI, etc., providing high flexibility.

The core value of long-term investment in financial stocks

Financial stocks have long been central in the stock market, accounting for 13.12% of the S&P 500. Although they are known for stability and conservatism, often lacking explosive growth like tech stocks, many financial stocks outperform the market over the long term due to low volatility, steady dividends, and sound management.

Three major advantages of financial stocks:

Stable long-term performance — Over the past 30 years, profits in the financial sector have grown faster than the overall economy, enabling them to pay dividends above average, creating a stable P/E structure.

Invisible government safety net — As they are crucial to global economic operation, governments are unlikely to let major banks fail (remember the bailout policies during the 2008 financial crisis?), which lowers the risk of financial stocks compared to other industries. During recessions or crises, they are more likely to receive policy support.

Economic resilience — Banks, insurance, and the overall economy are deeply interconnected; their volatility is usually less than that of tech stocks.

As long as your investment horizon exceeds five years, including quality financial stocks in your portfolio is a good strategy. Especially if the US can avoid recession, many banks will have bright prospects — generally benefiting from higher interest rates, with net interest margins expanding. Although rapid rate changes may cause short-term chaos, over time, banks’ balance sheets can self-adjust, preparing for stronger profit growth.