Is the funds quietly shifting towards financial stocks? Small investors can invest 10,000 in financial stocks to receive monthly dividends, and still wait for a rebound opportunity.

The Taiwan stock market is hovering around 28,000 points at a high level, and the enthusiasm for AI themes in tech stocks remains strong. However, sharp-eyed investors will notice an interesting phenomenon: a large amount of capital is quietly shifting from high-position electronic stocks to a long-term undervalued sector—investment in financial stocks.

Imagine this scenario: at the beginning of the year, fixed deposit interest rates are 2%, and after a year, you receive only 2,000 yuan in interest. Switch your money into financial stocks, and you can steadily earn a 5-7% cash dividend yield, with room for additional gains. The difference in dividend yield alone is 2-3 times, not to mention the potential for stock price appreciation. This is not just a numerical difference but also a market valuation rebalancing signal.

Why is capital flowing into investment in financial stocks? Three key reasons

Valuation transition signals

The recent major upward wave globally has been almost monopolized by tech stocks, especially AI supply chains, but growth always hits bottlenecks. When electronic stocks have P/E ratios exceeding 30 or even 40, yet profit growth begins to slow, smart money naturally looks elsewhere. In contrast, large banks and financial holdings generally have P/E ratios of only 10-15, a stark contrast to the high valuation of tech stocks. As the economy gradually stabilizes with a soft landing, investors start seeking “forgotten but truly profitable” companies—this is the moment when investment in financial stocks begins to turn around.

Interest rate environment is not as bad as imagined

Many worry that rate cuts will harm banks, but the reality is more complex. Although the Fed enters a rate-cutting cycle, which puts some pressure on net interest income, Taiwan’s financial holdings have already accumulated profits exceeding 560 billion NT dollars by November, setting a record high. What does this indicate? Even if the interest rate environment isn’t ideal, the financial industry still has other profit engines—wealth management, fees, insurance business—all growing. By 2026, even if interest rates remain low, as long as the economy avoids a hard landing, the dividend-paying capacity of financial holdings is likely to be stronger rather than weaker than this year. In other words, the stability of dividends from investment in financial stocks is actually underestimated.

The defensive value of cyclical stocks

This might be the most overlooked point. When market volatility increases, the volatility of financial stocks is much lower than that of tech stocks. The bear market in 2022 is a prime example: the Taiwan Weighted Index fell over 20%, but the financial index declined less than 15%. Tech stocks often drop 10% in a correction, while financial stocks usually only fluctuate 3-5%. For small investors with limited risk tolerance, this stability itself is valuable. Furthermore, the government will not let big banks fail (remember the bailout during the 2008 financial crisis?), and this implicit policy support is an intangible asset.

Classification map of investment in financial stocks

Among thousands of stocks in Taiwan, about 49 are financial stocks, but not all are suitable for small investors. Clarifying their characteristics allows for precise allocation.

Financial holding companies—most popular starting point

Financial holding companies usually include banks, life insurance, securities, and asset management businesses. Because of their diversified operations, risk dispersion, and stable dividends (many over 5%), they are most favored by beginners. Fubon Financial, Cathay Financial, and CTBC Financial are often the most discussed choices. If your capital is limited, starting with a financial holding company is a safe bet.

Pure bank stocks—choose them for ultimate stability

Bank stocks have simple business models, mainly relying on interest rate spreads from deposits and loans. They are less volatile and operate stably, making them suitable for investors who want to “hold and sleep.” The trade-off is that their growth potential is less than diversified financial holdings.

Insurance and securities stocks—timing is key

These two types are more volatile and not suitable for fixed deposit mindset. Insurance stocks are sensitive to interest rate changes; when rates rise or fall sharply, they react first. Securities stocks are highly correlated with market trading volume; when the market is active, profits surge. Traders who understand swing trading can leverage this characteristic to profit from price differences.

Selected list of investment in financial stocks

Based on the latest 2025 data, I’ve selected some stocks with both stability and potential for rebound, covering different styles.

Taiwan Financial Holdings: Fubon Financial(2881)

In 2025, the stock price rose from 65 NT dollars at the start of the year to 85 NT dollars at year-end, a gain of about 30%, with an estimated dividend yield of 6.5%. Fubon Life Insurance’s stable contribution, rapid growth in wealth management, and leading digital transformation make it attractive. P/E ratio around 12 times, still room for further appreciation. The only risk is if overseas (Hong Kong, Southeast Asia) expansion faces geopolitical turbulence, which could impact profits.

Taiwan Financial Holdings: Cathay Financial(2882)

From 50 NT dollars at the start of the year to 68 NT dollars at year-end, a 36% increase, with an estimated dividend yield of 6-7%. Cathay’s insurance business in Southeast Asia (Vietnam, Thailand) is growing significantly, and wealth management fee income increases by 15% annually. P/E ratio of 11 times, attractive valuation. If interest rates stabilize in 2026, insurance profits are expected to rise further.

Taiwan Financial Holdings: CTBC Financial(2891)

From 28 NT dollars at the start of the year to 36 NT dollars at year-end, a 28% increase, with an estimated dividend yield of 5.5%. CTBC’s digital banking transformation is leading, with a 20% growth in mobile app users in 2025. For investors looking to capitalize on China’s economic recovery, CTBC has some exposure. P/E ratio of 13 times, with good growth potential.

Taiwan bank stocks: E.Sun Financial(2884)

From 25 NT dollars at the start of the year to 32 NT dollars at year-end, a 28% increase, with an estimated dividend yield of 6%. E.Sun Financial excels in SME loans and retail banking, with a 10% increase in net interest income in 2025. Conservative and stable management makes it attractive for low-risk investors. P/E ratio of 12 times, suitable for long-term holding.

Taiwan bank stocks: Chang Hwa Bank(2801)

From 16 NT dollars at the start of the year to 20 NT dollars at year-end, a 25% increase, with an estimated dividend yield of 5%. Chang Hwa Bank is the lowest valuation among pure bank stocks, with a P/E ratio of about 10 times. High capital adequacy ratio, stable loan quality, and 12% growth in wealth management business. If you want the cheapest defensive option, Chang Hwa Bank is the top choice.

Two ways to invest in financial stocks

Fixed deposit mindset: buy and hold for dividends

Many treat investing in financial stocks as “fixed deposit stocks,” buying and holding to collect annual dividends. This is feasible, but financial stocks are not risk-free substitutes. The correct approach should be:

1. Choose stocks with high dividend yield (at least 5%), low P/E ratio (10-15 times), and stable profits
2. Enter during market high and electronic stocks’ correction, when capital tends to rotate into financials
3. Or buy in batches when dividend yield exceeds 6-7%
4. After purchasing, set a psychological target price, but stay flexible—if the stock rises to 45 NT dollars and profits improve, adjust your target from 50 to 60 NT dollars
5. When the stock hits your target or dividend yield drops below 4%, consider reducing holdings

Over the years, returns mainly come from dividends and stock price rebound, without daily market watching. But remember: the performance of financial stocks over the past decade has not outperformed the market, and during black swan events, they may fall even more deeply (e.g., during the 2015 A-share crisis, Yuanta Financial ETF dropped a maximum of 36.34%).

Swing trading: timing interest rates and economic cycles

Financial stocks are cyclical, with strong seasonality, making them more suitable for swing trading. Using technical analysis (moving averages, support/resistance, RSI, etc.), profits can be made during bull and bear phases. Start with three simple steps: register → deposit (threshold as low as $50) → trade.

If capital is limited, you can also start with financial ETFs (like 0055 Yuanta Financial), which have low thresholds and automatic diversification.

Are US financial stocks worth watching?

For Taiwanese investors, US financial stocks are also worth allocating part of their portfolio. The top picks for 2026, favored by institutions, include:

JPMorgan Chase(JPM): The largest US bank, with a 30-35% increase in 2025. Leading in investment banking, M&A revival, and expected net interest income of $9.5 billion. Digital transformation ahead of the industry, with significant profit growth potential.

Bank of America(BAC): The second-largest US bank, with over 35% growth in 2025. Focused on retail banking, serving over 68 million customers, with the largest deposit scale in the US. Wealth management growth, stock buybacks, and high dividends support its outlook.

Goldman Sachs(GS): Wall Street’s investment banking leader, with a 25-30% increase in 2025. If M&A and IPO activities continue to warm in 2026, trading business will be strong, making it the most explosive—though with higher volatility, keep it within 20% of your portfolio.

Berkshire Hathaway(BRK.B): 25-30% growth in 2025. Owns hundreds of companies in insurance, railroads, energy, and more, holding large positions in Apple, American Express, and others, with cash holdings reaching $380 billion. Known as “the most stable defensive stock in US stocks,” suitable for long-term allocation.

American Express(AXP): 20-25% growth in 2025. Focuses on high-end credit cards and fee-based businesses, with strong consumer spending power, relatively stable economic sensitivity, and less volatility than traditional banks.

Risks of investing in financial stocks cannot be ignored

Market systemic risk

During bear markets, financial stocks often fall more sharply because the market anticipates rising loan default rates. In 2022, after the Ukraine crisis, Sberbank experienced a bank run, with stock prices plummeting 50% within days, and overseas exchanges once trading at $0.01. History shows that during financial crises, banks are always at risk of collapse.

Interest rate fluctuation risk

Financial profits are sensitive to interest rates. Rising rates benefit banks by widening spreads, but the prolonged low-rate environment in recent years has continued to pressure profits. Moreover, interest rate changes are difficult to predict precisely.

Loan default risk

Financial institutions face bad debt risks. If the companies they lend to cannot repay, banks face non-performing loans. This becomes especially evident during economic downturns.

Therefore, key points for investing in financial stocks are: diversify your portfolio, avoid putting all eggs in one basket; enter at reasonable valuations; set stop-loss points; and review holdings regularly.

How should small investors allocate 10,000 NT dollars?

If your budget is only 10,000 NT dollars, it’s recommended to diversify rather than go all-in on a single stock:

• 6,000 NT dollars in financial ETFs (like 0055): automatic diversification, no need to pick stocks, low threshold
• 4,000 NT dollars in 1-2 selected promising financial holdings: such as Fubon Financial or Cathay Financial, as main profit sources

This way, you get the safety of ETFs plus the rebound potential of individual stocks. Collect dividends monthly without the hassle of active swing trading.

Conclusion: Why is now a good time to invest in financial stocks?

Financial stocks account for 13% of the S&P 500. Although they lack the explosive power of tech stocks, they have long-term potential to outperform the market. Currently, electronic stocks are valued at historic highs, with slowing growth momentum, while financial stocks are reasonably valued, with attractive dividends and stable performance—forming a stark contrast.

For small investors, investing in financial stocks is not about getting rich overnight but about steadily accumulating wealth through stable dividends and long-term compound interest. Time is a friend to good companies, especially mature industries like finance. As long as the economy does not experience a hard landing, investing in financial stocks offers the opportunity to enjoy dividends while waiting for the rebound.