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should you be investing in the stock market for bank stocks


Sep-20-2008

bank stocks can be contrarian

Many contrarian investors including myself believe that there may be opportunities in the financial sector if you hold on for the long term. It is true that many financial stocks are doing horrible due to the mortgage crisis, however over time if the damage that has been done from the mortgage crisis, you could make make incredible returns on your investment for the long run. Smart investing as we know is the ability to gauge whether or not a particular security is valued TOO cheap or too expensive for the long run. One rule that I use however is to gauge how well known the institution is and whether or not it has a moat or competitive advantage. Examples I think may include Citi Financial, and Goldman Sachs both oh which are banks.

They are both well known financial institutions that will probably be around with us for a good long time. People have just gotten scared and sold their stock in these companies which has caused their security prices to fall very low in value. The last time we had a full blown depression the people who made money was the ones that bought assets for pennies on the dollar and in the long run they still made money.

what strategies can we use for bank stocks

Of course investing in the stock market requires a plan and a strict guide of action. I will be outlining some of my ideas about what you can do in our current situation. Unfortunately for those who are feeling bearish you still can be short selling stocks in financial sectors like bank stocks and other financial institutions. One thing you investors could do though is hedge your risk by GOING SHORT ON REAL ESTATE STOCKS. You should invest a little more going short then long--make sure that you cut your losses short when you go short though. This allows for being able to make money in the highly volatile bank stock-financial sector.

If the financial market goes up quickly you will be out your money in the real estate companies that you went short on since they will go up too- make sure to cut your losses small. However if the financial sector goes down you're going short on real estate and you will make money since every time banks go down real estate will too-in order to buy real estate you need to be able to borrow money. corporate bonds