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Bank on Banks

Although you’ve probably used banking products and services such as checking accounts, savings accounts, and loans, do you know how banks make money and how to translate that into investment opportunity?

The money business doesn’t work quite like other businesses. Unlike other companies that sell products or services, banks buy and sell money. A dollar is a dollar, so how do banks make a profit? By charging a higher interest rate for the money they loan out than they pay for the money that comes in as deposits and by charging fees for the money-related services they offer. Because of this difference in business model, banks use a few financial measures you won’t see for other companies. However, taking the extra steps to study banks is worth your while—financial stocks can grow quite well and are a great way to diversify your portfolio.


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