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What Are Bank Stocks?

Bank stocks fall into the financial sector. Financial companies fall into many categories like savings and loan players that help the individual, institutional trading, money management holding companies, credit card issuers, mortgage lenders and others.

Banks accept deposits while accumulating those funds to provide credit. They then directly lend, or indirectly increase the money flow through investment. Some of the well known players are JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C) and Goldman Sachs Group, Inc. (NYSE:GS).

Bank stocks were historically low risk investments that paid a high dividend. Many older individuals would hold these stocks in their retirement accounts as they were known as being safe investments. However, since the financial crisis in 2009, many bank stocks will fluctuate much more, creating a higher risk environment for investors. Derivatives, exposure to bonds at risk of default and other risky assets on their balance sheets keep smart investors from investing heavily.

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