For more than a year now, the financial sector has taken a beating and financial exchange traded funds (ETFs) have since been bruised and battered.
However, such stocks as Wachovia Corp. (WB), have been selling at 51% of book value for the past few weeks. Many investors may begin to salivate at these numbers, but although financial stocks look cheap, it may be too early to bank on them.
Jason Zweig for the Wall Street Journal looks at certain theories of Benjamin Graham, which would encourage investors to hold out on investing during the current market environment. He quotes Graham as saying, “An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”
As an investor, it is emphasized to distinguish between a sound investment and speculation before money is put toward any financial instrument.