Mutual Funds/Stocks: Financials

[Orchidflower]

My girlfriend and I were talking at the pool yesterday about maybe purchasing into mutual funds (me) or stocks (her) in the financial area and purchasing while financials are down. She is watching Merrill Lynch, Lehman, Citi, etc. now.
Can someone point me in the direction of how to even start finding out about mutual funds made up of some of these financial companies that are low in price now? They are bound to go up, and this would be the time to buy.
Are we wrong? Opinions? (You can tell I'm a beginner, but I'll catch on.)

 

[brewer12345]

Simplest, cheapest way to do this would be XLF. This is an ETF that tracks the S&P Financial index and has low costs and lots of liquidity.

 

[Orchidflower]

Thanks, brewer124345, I have already started doing the homework on your suggestion.
Again, many thanks!

 

[retire48in2018]

For a mutual fund - there's FSLBX - Fidelity.

Would this be your first major venture into investing?

 

[Orchidflower]

Well, not really but it will be buying financials. However, I am a beginner and have only been studying the market for about 1-1/2 years now and started from no knowledge whatsoever. I must be making progress as it is getting easier to understand. (You have no idea how many time I have cursed myself out for getting my degree in psych.)

 

[LOL!]

I see no real reason to go out and buy any financials specific funds or stocks. You really should come up with an asset allocation and stick to it. If you tilt your asset allocation to "value" you will end up with an overweight in fnancials anyways. Some funds to tilt to value are VTV (aka VIVAX, large cap value), VBR (VISVX, small cap value), PID (foreign large cap value).

Check out the 'top 25' holdings of each of these funds. If you look at VIVAX, you will find Bank of America, Citigroup, AIG, Wells Fargo, Wachovia, and USBancorp there. For PID, financial services amounts to 34% of this ETF.

Full disclosure: I own some VTV, VBR and PID shares.

 

[retire48in2018]

I have found the Eric Tyson's books (Dummy Series) to be a great start for learning the basics.

The reason I asked the question - is that generally, it's not a good idea to be sector specific - at least not with a large portion of your investments. Diversification is key for sustainable growth.

 

[DblDoc]

Well, not really but it will be buying financials. However, I am a beginner and have only been studying the market for about 1-1/2 years now and started from no knowledge whatsoever. I must be making progress as it is getting easier to understand. (You have no idea how many time I have cursed myself out for getting my degree in psych.)

Orchidflower;

I would highly recommend reading from the recommended list here: http://www.diehards.org/readbooks.htm. The general philosophy is to have an Asset Allocation plan, buy and hold (with rebalancing), inexpensive index funds, a well diversified portfolio and ignore the noise (stick with your plan). If you set up such a portfolio, as LOL pointed out, you would already hold financials in it. Chasing hot or beaten down sectors or individual stocks is a losing proposition long term.

DD

 

[CCdaCE]

There was a long thread about bank stocks awhile ago.

See this link.

-CC

 

[Orchidflower]

I'm pretty diversified right now, but am adding some stuff with some money I have put away.
Thank you all for your advice. I plan to start my homework on what you all said today.
Study, study, study...eventually it all makes sense.

 

[jIMOh]

T Rowe Price has a financial services fund.

 

[newmillionaire]

Why is investing long term in financial index risky?

Say I invest all of my cash in the S&P financial index today...I would wait a little longer...but assume I do this today...why is this risky? Looking at the last 10 years, this sector is way down - if I wait 10 years and don't get scared it has to rise right?

I'm not saying I'm going to do this - I'm leaning towards investing in the S&P 500 (all sectors) low cost index fund...I'm just checking my options because the financial index ultra long term seems like a great bet??

 

[DblDoc]

Say I invest all of my cash in the S&P financial index today...I would wait a little longer...but assume I do this today...why is this risky? Looking at the last 10 years, this sector is way down - if I wait 10 years and don't get scared it has to rise right?

I'm not saying I'm going to do this - I'm leaning towards investing in the S&P 500 (all sectors) low cost index fund...I'm just checking my options because the financial index ultra long term seems like a great bet??

While an S&P 500 index fund could make up a core holding I wouldn't invest "all my cash" in it. Nor would I diversify using a financial index fund. See my post above and do some reading before investing your hard earned money.

DD

 

[newmillionaire]

Thank you

Thank you for taking the time to answer!

 

[Orchidflower]

'Pop' goes the financial sector - MarketWatch

If you read the above, looks like we have a little more time before investing in financials as they are predicted to go down even lower.

 

[DblDoc]

'Pop' goes the financial sector - MarketWatch

If you read the above, looks like we have a little more time before investing in financials as they are predicted to go down even lower.

Could be... or maybe we are at or close to the bottom. Only time will tell. I'll go out on a limb and predict that whichever way they and the market go the ride is going to be bumpy in the near term.

DD

 

[Orchidflower]

I did a post quoting a strategic planner I saw on Bloomberg who said this market would be like 1932-39. I finally found out what she meant when I looked at that time period, and, what do you know!? She was right. Up, down, up, down. Fun times!

 

[midlifechange]

Financials have gone down!

The people above were right in predicting this...now is a good time to invest in VFAIX? I think I'll wait a little longer...but not much more...

 

[d]

She was right. Up, down, up, down. Fun times!

isn't it always?

one i've been fond of, which is not sector specific but which does carry a heavier weight in finacnial services, is Selected American Shares; it has a good record of playing the finacial sector.

 

[DblDoc]

The people above were right in predicting this...now is a good time to invest in VFAIX? I think I'll wait a little longer...but not much more...

Hmmmm. Again why would you want to overweight financials. They are beaten down for a reason - and their long-term prospects are factored in as well and don't (hopefully) include predicted increased revenues by packaging risky assets again and selling them as quality debt. As pointed out previously you already likely hold a fair number of them in your current portfolio, more now in the value side then growth.

DD