Buy Financial Stocks – 5 Best Financial Stocks To Buy Right Now in 2022

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The financial services industry is a relatively stable pick for a beginner portfolio. Fintech stocks, on the other hand, come with plenty of opportunities for investors with a high-risk tolerance. Whether you are a newbie or a seasoned investor, you will find that the next sections will bring plenty of value if you are interested in the financial industry. To find out the five best financial stocks to buy right now, check out the following sections.

Table of Contents

#1 Broker to Buy Financial Stocks – eToro

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How to Buy Financial Stocks – A Quick Guide For 2022

If you want to invest in financial stocks right now, all you need to do is follow these five easy steps:

  • Step 1: Open an Account with eToroHead for eToro’s homepage and click to open a new account. 
  • Step 2: Upload Your ID – To open a valid account, you need to upload your ID and proof of address. This is a requirement of the KYC (Know Your Customer) policy.
  • Step 3: Deposit Funds – To buy financial stocks, you need to choose one of the available payment methods to deposit your capital. Fortunately, eToro provides you with numerous options.
  • Step 4: Search for Financial Stocks – Once your account is valid and you deposit your capital, all you need to do is browse the available stocks or type in one of our recommended financial stocks for this year.
  • Step 5: Buy Financial Stocks – To buy financial stocks, you need to select your desired company and click on “trade”. Fill in your order details and submit your transaction.

67% of retail investor accounts lose money when trading CFDs with this provider.

Best Financial Stocks to Buy Now – List of the Best Financial Stocks

If you want to invest in the financial industry but are not sure which companies are the best right now, check out the following list and our thorough review of their performance in the next sections. 

  1. Citigroup – The Best Financial Stock for Long-Term Investors
  2. JPMorgan – Best Financial Stock with 31% Stock Price Increase
  3. Visa  – Best Financial Stock for Beginners
  4. Wells Fargo Co. – Best Financial Stock for High-Performing Investors
  5. Bank of America  – Best Financial Stock for Dividend Investors

How To Buy Financial Stocks – Choose a Broker

To buy financial stocks, you need to sign up with an online broker that provides access to this profitable industry. To help you out, we have picked the best brokers right now. To find out more about their advantages and disadvantages, check out the sections below. 

  • eToroOverall Best Place to Buy Finacial Stocks
  • AvaTrade Trade Financial Stocks at 0% Commission

What are Financial Stocks?

A financial stock is a company that provides financial services. For instance, these may provide loans, insurance, payment services, and money management for professional clients (like businesses) and individuals. Financial stocks can be extremely varied, ranging from brokerage companies to credit card firms like Visa, or even global banks.

Best Financial Stocks to Buy Now – Full Analysis

Next, we will have an in-depth look at why these five financial stocks are the best right now, analyzing their recent share price performance, future potential, and whether they are financially stable, which translates into a lower risk for you.

1. Citigroup – The Best Financial Stock for Long-Term Investors

Citigroup is a stable, international company that provides banking services for both institutional clients and individuals. In 2021, the company’s share price fluctuated massively but finished the year with a positive share price growth of 0.82%. Priced at only $60.24 as of this writing, Citibank’s share price may simply be undervalued. 

One of the reasons behind this premise is that Citibank’s management has robust plans for 2022. After the massive long-term strategy announcement coming in March, the share price may start its bullish rally towards its estimated price target of $100. For patient investors, this massive potential upside is reason enough to add Citibank stock to their watchlist right now.

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2. JPMorgan – Best Financial Stock with 31% Stock Price Increase

JPMorgan is a reputable incumbent in the financial services industry in the United States. The company’s revenue sources are quite diversified, reaping the fruits of its many branches related to commercial banking, retail financial services, and credit cards. 

Since JPMorgan is the largest bank in the US, it’s difficult not to consider it if you want to benefit from the profitability of the financial sector. Despite its maturity, the stock price increased by nearly 31% last year, which means it has some of the highest profitability metrics in the industry.

67% of retail investor accounts lose money when trading CFDs with this provider.

3. Visa – Best Financial Stock for Beginners

Undoubtedly, you’ve already heard of Visa – or the most popular type of card that more and more consumers use nowadays. As one of the largest transaction processing firms in the world, Visa is perhaps the best choice if you seek stability. Yet, with only 3% overall share price growth last year, the safety of the investment translates into fewer returns. This recommends Visa as a great investment choice for beginners. 

There are also lots of growth opportunities for Visa. The chart shows a possible bullish scenario with higher lows. As the cashless payment market keeps booming, the company stands to profit. Also, the company has several plans for international expansion, too, focusing on stable markets in Europe.

67% of retail investor accounts lose money when trading CFDs with this provider.

4. Wells Fargo & Co. – Best Financial Stock for High-Performing Investors

Wells Fargo is one of the best performing financial stocks so far. With a stock price increase of nearly 67%, it is clear that the company enjoys improving investor confidence. The company is a giant providing banking, mortgage, insurance, and other related services, and one of the main bullish catalysts is a new virtual assistant to be released later this year.  

Another positive aspect is that, amid the pandemic recovery, it’s highly likely that consumer loan demand will be on the rise. This translates into growing financial performance for Wells Fargo, making it one of the best financial stocks of this year.

67% of retail investor accounts lose money when trading CFDs with this provider.

5. Bank of America Corp. – Best Financial Stock for Dividend Investors

Finally, the Bank of America is an unavoidable giant in the financial industry in the United States. With almost 56% stock price growth in 2021, the bank is likely to retain its momentum this year. What makes Bank of America stand out from the crowd is its excellent financial performance. For instance, fundamental investors may want to consider that the bank has one of the highest net interest income to total net income ratios among the largest banks in the US.

67% of retail investor accounts lose money when trading CFDs with this provider.

Investing vs Trading Financial Stocks

Are you a trader or an investor? And, based on this aspect, are financial stocks the right pick for your needs? In the following sections, we will discuss the main differences between the two, so you will be able to decide which one is the best approach for your needs.

Invest in Financial Stocks

Investing in financial stocks means that you buy and hold financial shares. Depending on the time frame, you can invest in the medium or long term, ranging from a year to even 30 years – especially if you are planning for retirement. 

Thus, investors are likely to go for stable, established businesses. In general, you may also want to choose companies that pay dividends to their investors. Then, you can use the dividends as your quarterly income, or reinvest this money by buying more shares. For instance, Bank of America is a great dividend-paying company and, given its reputation, your investment will carry less risk than, for instance, investing in volatile penny stocks or small tech companies.

Trade Financial Stocks

If earning dividends or waiting for years for wealth growth doesn’t meet your needs, trading is what you are looking for. Trading financial stocks mean that you buy their shares and sell them during the same day, week, or month. For this to be profitable, your chosen stocks must be volatile – in other words, the share prices should be able to grow considerably in a short period. However, with the chance of quick increases, you will also be exposed to the opposite scenario – losing your money if the market goes against you. 

For financial stocks, trading may not be very fruitful. The financial stocks discussed above are quite large companies with a strong reputation and fairly stable (growing) performance. One way to get quicker gains trading these stocks may be news trading; in other words, you monitor news announcements (such as quarterly earnings) and trade them accordingly. For instance, if you expect them to outperform the analysts’ estimations for the quarter, you can buy them before the announcement and sell them afterward for a profit. Alternatively, you can short-sell the stocks if you expect negative performance.

How to Choose the Best Financial Stocks for My Portfolio?

Just like any other investment, there are many factors to be considered when choosing the best financial services stocks for your portfolio. Below, we discuss some of the most important ones that define this industry.

Type of Financial Stock

As briefly mentioned above, there are several types of financial stocks. Knowing how they are different from each other matters because, depending on their category, you need to analyze their financial performance differently. For instance, the insurance subsector is the second largest category of the financial industry; investors picking insurance companies need to know about two unique ratios: the combined ratio, which needs to be less than 100% (the lower the ratio, the more profitable the company is), and investment margin, which shows how profitably the firm invests its money. 

Analyzing Financial Performance

Financial performance is often measured differently for banking companies or other types of financial stocks. For beginners, the return on equity (higher than 10%) and return on assets (higher than 1%) are the most important ones. Also, since one of the main revenue streams for banking companies is the interest they charge, the net interest margin is another important metric.

There is no straightforward approach to selecting the best stocks. You may want to conduct a thorough analysis to make sure you eliminate as much risk as possible. A combination of different financial ratios will paint a more detailed picture than looking at only one ratio.

News Trading

Finally, if you are a beginner looking to trade, news trading is perhaps the easiest way. You can find out the dates for the earnings announcement and place your orders before and after these events. More advanced traders will want to look at different technical indicators, too.

Benefits of Financial Stocks

If you are still considering whether financial stocks are worth your money, check out the following benefits of investing in this industry.  

Dividends

As briefly discussed above, many financial stocks pay dividends. This does not only provide you with regular income but it also shows that the company has a track record of success.

Long-Term Growth

Not many investors are completely aware of the long-term growth of this industry but many value investors are attracted by this sector. For instance, in the past three decades, the financial sector of the S&P has been growing by more than 6% per year – although this may not seem like much, it actually is double than GDP growth, even after paying hefty dividends. 

Releasing Reserves

During the pandemic, many banks accumulated money reserves in anticipation of losses and bankruptcy. However, as the economy received money stimuli, many of these losses never materialized. Thus, this year, banks will most likely release some of these reserves, increasing profits.

Drawbacks of Financial Stocks

Financial stocks, just like any other investment, also have some noteworthy drawbacks. Below, we mention two of these aspects and why you should go through careful consideration before investing your money. 

Industry Disruptions

We all know about fintech, innovation, and technological advances. Fintech companies are likely to disrupt the traditional financial services companies, quickly stealing their market share. The challenges of new technologies in the financial services sector may only be eliminated if they manage to keep up with the trends and incorporate innovation in their business models.

Little Volatility

Healthy, mature, and stable financial stocks may not be the best choice for short-term traders. There may not be enough price volatility to appreciate your capital quickly. In this case, you may want to have a look at crypto stocks or other volatile assets.

Where to Buy Financial Stocks – Full Broker Reviews

Now that you are familiar with the best financial stocks of this year, check out the following sections to find out which online brokers allow you to invest in them with zero commissions. 

1. eToro – Overall Best Place to Buy Financial Stocks

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eToro is a winner for beginners and experienced traders alike. Founded in 2007, the online broker is regulated by various reputable authorities in many jurisdictions and provides both CFDs (contracts-for-differences) and real assets. In other words, you can buy, sell, and short-sell financial stocks as you wish with no restrain, which makes it a top choice for both traders and investors. 

This online broker provides more than 510 financial stocks to choose from and invest in with a $0 commission. Deposits are free of charge, and the platform requires no download or installation as it is browser-based. You can also trade on the go by downloading its mobile-friendly app, which provides the same functionality as the web-based platform. 

Another excellent feature is that you can use copy-trading to semi-automate your investments. In other words, you can copy successful master traders on eToro – and there are plenty of traders to choose from considering that the platform now has more than 23 million users from all over the world. 

Pros

  • Regulated, safe broker
  • Minimum deposits start at only $50 for most countries
  • You can invest as little as $10 in any stock
  • Zero-commission real stock trading
  • More than 510 financial stocks to choose from
  • Ideal for both beginners and experienced investors or traders

Cons

  • Automated trading is not supported

 67% of retail investor accounts lose money when trading CFDs with this provider.

2. AvaTrade – Trade Financial Stocks at 0% Commission

If you want to sign up with one of the best online brokers in 2022, AvaTrade must go straight to your shortlist. Similar to eToro, it’s a well-reputed global brand known for the wide variety of its trading platform, low-cost structure, and an excellent educational section for beginners. 

AvaTrade does not only offer a proprietary trading platform, but also separate platforms for trading options, trading on the phone, MetaTrader, and many other choices to trade CFDs. This makes AvaTrade a sensible choice for advanced traders, especially as it only offers leveraged CFDs, which are not recommended for long-term investors or beginners due to higher risk.

Pros

  • Trading with zero commissions
  • Plenty of trading platforms to choose from
  • Available in numerous countries
  • Regulated and safe online broker with extra protection (AvaProtect)
  • Lots of CFDs on financial stocks

Cons

  • Not suitable for investors who want to buy real stocks

71% of retail investor accounts lose money when trading CFDs with this provider.

How to Buy Financial Stocks – Detailed & Explained in Full

In the following sections, we will go into more details on how to register with our top recommended broker, eToro, and what information you need to provide to start investing in financial stocks right now.

Step 1: Open a Broker Account

The first step is to open eToro’s website and click to create a new account. You will be redirected to an online form where you need to add in your name, username and password, and email address. Then, you will be asked to upload your ID and proof of address to comply with the Know-Your-Customer policy.

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67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Deposit Funds

Next, you need to deposit your capital. eToro supports many payment methods, including debit or credit cards and e-wallets like PayPal and Skrill. All deposits are free of charge, but you may need to cover the conversion fee if your local currency is not USD.

Deposit Funds

Step 3: Search for Financial Stocks

Next, start searching for financial stocks. eToro provides more than 500 different stocks in this category, so you have plenty of choices. Alternatively, you can select and invest in one of our top recommended financial stocks of this year, but make sure you also do your due diligence.

Step 4: Buy Financial Stocks

Buying financial stocks with eToro is extremely simple: all you need to do is click on “trade” after selecting your desired stock. Then, you can customize your trade by adding the amount, leverage (for CFDs only), a stop-loss level, and others.

Don’t Invest in the Financial Sector Simply to Make Quick Profits

During the coronavirus outbreak, bank stocks were among the biggest losers. Banks tend to perform well when there’s economic expansion but suffer losses during recessions. Notably, banks take advantage of high levels of consumer and business indebtedness by charging them interest rates far above normal market rates.

Before making an investment decision, be sure to assess the risk involved. Also, keep in mind that looking at individual metrics alone may give you a skewed view of the situation. Instead, look at the whole picture. Remember that financial sector stocks are most suitable for longer-term investments.

Many factors can affect short-term stock price movements, and some of them — like weak economic conditions or falling rates — have nothing to do with the health of the company itself. For investors who plan for at least 5 years into the future, adding some top financial sector companies to their portfolios may be a good idea.

How to Buy Financial Stocks – Conclusion

In conclusion, financial stocks have the major benefit of coming with plenty of opportunities at a lower risk than other industries. There are many well-performing companies this year, especially as the world recovers from the pandemic-induced crisis. Banks may begin releasing their reserves, pumping money that will fuel further growth in 2022.

If you’re looking to invest in the exciting world of Fintech, then you need to check out our guide on how to buy Fintech stocks. With our help, you’ll be able to make smart and profitable investments in this growing industry. So don’t miss out – check out our guide today!

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

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About Ana Frincu PRO INVESTOR

Ana Frincu is a freelance content writer specialised in finance and economics. She has a BA in International Business Management and a MA in International Taxation and Finance. With a keen interest in fintech and personal experience as an investor, she covers a broad range of topics, including trading, alternative data, cryptocurrency, and macroeconomics.