Be careful investing in community banks right now

— -- Q: I'd like to invest in a community bank. Is that possible? And what types of returns have these stocks generated?

A: Investors used to think buying shares of big New York banks was the way to put money in their bank.

But following the failure of Bear Stearns, investors have rethought their blind faith in big, money center financial institutions. And that's created a bind for investors who are tempted to buy into financial companies, but are still afraid that the big Wall Street firms may have some more negative surprises. On Monday, for example, Standard & Poor's lowered its debt ratings on Merrill Lynch, Lehman Brothers and Morgan Stanley.

Perhaps that's what lead you to investigate community banks. In some cases, community banks have been much more prudent than the big boys and avoided big problems by being "old fashioned." Read more about that here.

Historically, regional banks have been solid performers. They've generally paid attractive dividends and have been steady takeover targets. Regional banks also generally fall into the value-priced category, which has been an excellent investment style over the long run.

An even better idea might be to invest in a stock index mutual fund that owns small, value-priced stocks. That way, you'll get exposure to small banks, and also broaden your portfolio in case there's more trouble brewing for the financial sector.