» Stock Trading Strategies and Systems » Management of Investment Decisions Through Stock Screens

Management of Investment Decisions Through Stock Screens

If you decide to use a stock screen then you will be able to specify certain criteria and according to them the screen will sift the stocks that possess the determined characteristics.

Since the market presents tons of stocks to choose from, stock screens manage to reduce the number of stocks to consider to a number you can easily work with.

Some of the criteria you may specify include:

  • Earnings per share
  • Dividend yield
  • Sales revenue and etc.

You can tie these indicators to a particular time period and see what stocks will come up as potential investment candidates.

There are many stock screens available and some come for free, whereas others require you to pay a fee in return to the service.

Additionally, screens differ in their level of detail sophistication.

On the other hand, many stock screens have included the possibility of subscribing to a premium package that provides investors with access to stocks that have an outstanding record against the S&P 500.

In order to decide on whether to use a particular stock screen first read its fine print. Many stock screens claim that they provide information on winning stocks every time you use their service. You should approach such stock screens with caution.

How Stock Screens Work?

Let's say that a particular stock screen promises to select the top stocks by using five different criteria.

The screen is about to select stocks from 50 individual stocks. In order to increase the cumulative gains of the site, the web site makes the assumption that equal numbers of shares are purchased.

However, as the end of the month nears, the screen is re-run. The stocks are reconsidered and the ones that have decreased in value are dropped from the original screen. In the place of the dropped stocks other stocks that have experienced growth are included.

This action is repeated every month. By following this strategy the screen ensures that it has the best performing stocks as part of its investment portfolio. Only the fastest growing stocks are included.

As a result the screen succeeds in providing the promised results. However, considerations on taxes and commission should be made.

You can try to follow the same strategy but only few investors will succeed. This is so, since not many investors have the resources of purchasing 50 stocks at one time. Additionally, you will be eventually required to turn over a specific percent of them every month.

On the other hand, you can afford the purchase of several of the stocks that a screen offers. When deciding exactly which ones you should select you will be concerned with the possibility of their price falling in the next month.

So, you should use stock screens in order to limit the number of stock investment candidates to a manageable number. After you have done this you should make research on the viability of the stocks. Stock screens should be just one of the many factors you should consider when selecting a stock.

There are many stocks screens you can choose from. However, don't fall in the common mistake of thinking that you can imitate the track record of the screen.

Rate this article : Low
  • Currently 3.2/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5