Identification

• The financial sector of the stock market is composed of stocks of different companies involved in the financial industry. The main categories of financial stocks include banks, insurance companies, investment funds, stock brokerage companies and real estate companies. Stocks are defined as financial stocks by their Global Industry Classification Standard (GICS). GICS is a system designed by Standard & Poor's to classify companies by sector, industry group and industry.
  
  

Considerations

• Financial stocks are one of the ten GICS sectors. Other sectors include energy, materials, consumer staples, health care, information technology and telecommunication services. Financial stocks represent a significant portion of the economy. The financial stocks and sector provide the funding for many companies in the other sectors to finance and grow their business. Financial stocks are also involved in providing banking, insurance and investment products to individuals.
  
  

Types

• The financial stocks can be broken down into further classifications. Types of financial stocks include regional banks, money center banks, property and casualty insurance companies, life insurance companies, savings and loan companies, investment brokerages, mutual fund companies, mortgage companies and real estate investment trusts (REITs).
  
  

Size

• In the S&P 500 sectors, financial stocks are the second largest sector by market capitalization just behind information technology. In June 2010, the financial sector accounted for 16.6 percent of the total value of the S&P 500 companies. There are four financial companies in the Dow Jones Industrial Average 30 stocks: American Express, Bank of America, J.P. Morgan Chase and The Travelers Companies.
  
  

Potential

• Investors can invest in financial stocks as a sector through exchange traded funds (ETFs). Seeking Alpha lists 25 financial stock ETFs ranging from broad-based financial stock funds to focused funds specializing in the smaller categories of financial stocks. The two largest financial stock ETFs are the Financial Select Sector SPDR. symbol XLF and the PowerShares Financial Preferred ETF, symbol PGF.