iQ Financial Services Model
The Financial Services sector is a category of stocks containing firms that provide financial services to commercial and retail customers.
When the business cycle is in an upswing, the Financial Services sector benefits from additional investments. Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.
RULES-BASED SELECTION PROCESS
The iQ Financial Services Model employs the following unemotional rules-based process:
Start with the largest 100 domestically-traded companies from the Financial Services sector
Select the 30 companies with the highest Operating Earnings Yield and Share Buyback Ratio.
Screen by Price Momentum and select the top 10.
This model reconstitutes every February, May, August and November
Why stocks in the financial services sector?
Investing in stocks in the financial services sector can provide several potential benefits, including:
1. Diversification: Financial services companies operate in a range of industries, including banking, insurance, brokerage, and asset management, among others. Investing in stocks across these sub-sectors can provide diversification benefits for a portfolio and can help to reduce overall risk.
2. Income generation: Many financial services companies pay dividends, making them an attractive option for income-seeking investors. Financial companies such as banks, insurance companies, and real estate investment trusts (REITs) often have a history of paying consistent dividends.
3. Exposure to interest rates: Financial services companies are often affected by changes in interest rates. When interest rates rise, financial companies may benefit from higher net interest margins, which can lead to increased profitability.
4. Economic growth: The financial services sector is closely tied to the overall health of the economy. As economic growth accelerates, financial companies may benefit from increased demand for their products and services.
It's important to note that investing in stocks in the financial services sector also comes with potential risks, including the potential for regulatory and legal challenges, as well as the impact of economic downturns on financial companies.
Please be aware that investing in financial stocks involves inherent risks, and their performance can be subject to market fluctuations and economic conditions. The value of financial stocks may rise or fall, potentially leading to a loss of principal