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In 2008, long term bond prices fell hard. Commodity prices are weak, and the credit crisis is growing. So how do you make a stock strategy when it comes to financials? When can you safely invest in financials again?

The time to invest in financials is now. Start dollar cost averaging your way in today. Timing the market generally never works. The majority of financials have already taken dramatic write-downs, likely higher than was necessary.

With strong companies that have been around for many decades, like Wells Fargo (WFC) and JPMorgan Chase (JPM), look at these reduced stock prices like they're on sale. The companies still provide a service that we all need, and have seen bad times before in the past.

Some of the executives at JP Morgan Chase namely the CEO Jamie Dimon, along with investment banking co-heads Steve Black and Bill Winters, came out in June 2008 and said that JPMorgan Chase's acquisition of Bear Stearns was an acquisition with far more value than the price they paid. In other words, they got Bear Stearns at a bargain. JPMorgan Chase acquired Bear Stearns about $10 a share when Bear once traded for $170 a share!

As with any investment, weigh the risk. You don't need a possible 300% return if it comes along with a huge risk.

There is an art to determining whether something is a great deal or cheap for a reason. How do you tell if Wa Mu (WM) stock is a good deal or a death trap? That's anybody's guess right now. Stay away from the companies nearest to the bottom. There are far better deals out there to be had with less risk. Companies like Wells Fargo (WFC) have been around for awhile, and have the capital to come out of this much quicker.

First, consider why a stock's prices fell. Was it tough competition, or is it the economy? How long has the finance company been around? Are they still meeting customer needs? Also, look at a company's management. Wa Mu (WM) has struggled from the leadership standpoint for a long time with Kerry Killinger as the president. Strong leadership will bring a company out of a storm.

Lehman Brothers (LEH) did a good thing in getting assets to protect themselves, but it appears they might be in more trouble than anybody thought they were. Their balance sheet was weighed down with financials, which they tried to shed in the second quarter of 2008. But in June of 2008 they posted their first loss as a public company, and CEO Richard Fuld is taking full responsibility for the 2.8 billion loss. The storm has not yet passed for Lehman Brothers (LEH).

Financials, just like techs, pharmaceuticals, and homebuilders, are hard to time. Look at the dollar cost averages closely, and play it safe with blue-chip companies, those companies having high stable earnings and few liabilities.

Learn more about this author, Caroline Atkins.
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