Are These Investment Banks Suitable for Your Portfolio? – Goldman Sachs Group, Inc. (GS), Morgan Stanley (MS)

Not a good fit for every investor

If you’re interested in allocating capital into the financial sector while gaining exposure to the global economic recovery story, these stocks should be of interest to you.  At the same time, you’ll need a thick skin to endure the frequently volatile swings in the share prices of these three firms.  Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan all hold betas higher than 1.5, meaning for every 1% move in the broader market, these stocks should be expected to move 1.5% in the same direction.

Furthermore, investors who rely on income may want to favor JPMorgan above Goldman Sachs or Morgan Stanley.  JPMorgan pays the highest dividend yield of the three and is the only stock among them to carry a yield that surpasses the yield on the S&P 500 index.  At current prices, JPMorgan yields 2.5% while Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) yield 1.3% and 0.8%, respectively.

Bottom line

While the reported results for each of these three stocks are moving in the right direction, it remains to be seen whether we can collectively breathe a sigh of relief toward the financial sector.  Corporate finance activity seems to be steadily coming back, and while these stocks might prove to be great investments, you’ll need to have a strong disposition to be in these names for the long haul.

If you’re a buy and hold investor, make sure you have the right mindset.  Understand that these financial institutions will likely exhibit more volatility than many other sectors, and make your investment decisions accordingly.

The article Are These Investment Banks Suitable for Your Portfolio? originally appeared on Fool.com and is written by Robert Ciura.

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