Why Bank of America (BAC) Is Looking Good for the Next 20 Years

Bank of America is a name that should be familiar to a lot of people in the United States. After all, it is the second biggest bank in the country, with the result that it is responsible for providing services to more than 10 percent of American bank deposits. While the Bank of America’s reputation might be a bit tarnished because of the financial crisis in 2008, it is important to note that it has since made some serious changes to its operations, meaning that interested individuals might not want to pass up on its potential for their investment portfolios.

What Are Some of the Strengths of Bank of America?

For starters, Bank of America has made some serious changes to the assets that make up that particular side of its balance sheet. In short, it has reduced its higher-risk financial products such as credit cards in preference for increasing its lower-risk financial products. This is important because those higher-risk financial products suffered much more of a negative impact because of the financial crisis in 2008, with the result that Bank of America took horrible losses because of them. In contrast, while lower-risk financial products might not be as profitable for banks and financial institutions, they make up for that by being more resilient when the bad economic times come. A lesson that Bank of America seems to have learned if its response in this regard is any indication.

Second, Bank of America has been seeing some serious improvements in its profit-making. To be exact, while its position in its chosen sector makes it difficult for it to increase its revenues by the same leaps and bounds that other businesses in other sectors might be able to pull off, Bank of America can make its operations more and more efficient. Interestingly, this is exactly what it has done, as shown by the fact that its expenses have been making up a smaller and smaller percentage of its revenues. In other words, while Bank of America hasn’t been seeing huge increases in its revenues, it has seen a rise in its profit because of a rise in its profit margin, which is a very valuable measurement of a business’s financial performance.

Third, Bank of America’s profits go towards its shareholders rather than other sources. This isn’t necessarily a good thing for people who want corporations to reinvest their earnings into their operations for the purpose of boosting their expansion as much as possible, but this can be good for people who want to get cash out of their stock shares. As for exact numbers, about 95 percent of Bank of America’s income went back to its shareholders, with about 75 percent going towards share buybacks while the remaining 20 percent went towards dividends.

Is Bank of America the Right Choice for You?

With that said, just because Bank of America is doing well at the moment, it doesn’t necessarily mean that it is the right stock for all of the interested individuals out there. This is because different investors have different investing goals, meaning that what is good for one investor isn’t necessarily good for another. As such, interested individuals should make sure to look further into Bank of America to see whether it would be a good fit for their particular investment portfolio.

For that matter, interested individuals should remember that the assets that make up an investment portfolio shouldn’t be permitted to just sit there without being reexamined again and again over time. In part, this is because different assets will see their performances change over time, meaning that something that was once suitable might not remain so once enough time has passed. Likewise, people’s investing goals can change, with the classic example being how younger investors will want to switch over from a higher-risk investment strategy to a lower-risk investment strategy as they approach retirement age because of the increasing need to protect their retirement savings. Due to this, even if interested individuals choose to go with Bank of America, they should make sure to reevaluate its inclusion in their investment portfolios again and again in the times to come.

Still, on the whole, Bank of America is looking like a solid choice for people who want something that isn’t particularly exciting but can nonetheless be considered a respectable performer. This is a remarkable change considering what went down in 2008, but to be fair, a decade’s time can seem like forever in the world of business.


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