The Basic Concept of Stock Screening

Stock screening is a basic concept that has historically been used to determine the suitability of a company for investment, and that would generally take a great deal of time and effort to carry out properly.

There was a time in the 'Good Old Days' when researching stocks was very time consuming, and often relied on brokers, or involved tediously trawling through annual and 10-Q reports, and a mound of other documents that were frequently out of date by the time you got to them.

Unless you could afford to employ an office full of analysts it was impossible to research more than a handful of companies, and stocks were a risky business. There was a lot of 'hope' and crossed fingers involved, since decisions were made on historical data, and not a great deal even of that. Hot tips would be taken, only to end in disaster a few days later. Recommendations would be made and accepted that were to the benefit of those giving the tips, not those acting on them.

Now, thank goodness, that prehistoric age has been superseded by the internet age which has brought not only new tools to the table, but also speed. Speed to enable the almost instant comparison of dozens of companies, and rapid results offering up-to-date information and more confidence, not only in research results, but also in the purchases and investment that arise from them.

Stocks are no longer as risky a business as they once were, and decisions can be based not on history, but upon the projected future of a potential investment, based on genuine real-time information. The tools allowing you to progress way beyond the Fred Flintstone era of investment have been developed as a result of the development of the internet and the World Wide Web, and have revolutionized the research and analysis involved in the financial industries in general.

Thus, the internet has given rise to a number of dynamic tools to speed up your investment research, many of which are available free online. Naturally, some of these tools are very powerful and sophisticated, and come with just as powerful price tags, but you should be able to find all that you need either free or at a very modest subscription cost.

One of the most useful of these tools is the stock screener. Although one of the more basic research tools, the stock screener does just what it says: it screens stocks to give you a list of those that meet predetermined qualifying criteria, such as dividends, sales, market type and so on.

Stock screening is how you should build up a portfolio rather than simply investing in anything that catches your eye at the time. Such manual methods generally involve long hours of research, and even then you won't catch everything. A stock screener does it for you almost instantly: enter your qualifiers and you immediately have a list of stocks that meets them.

Although the more sophisticated stock screeners are costly but can often be used on a subscription basis, the free versions are fine to start off with and will give you a feel for how they work before you decide to invest in something more comprehensive. One of the main differences between the free screeners and their subscription equivalents is that the free software gives you the list and that is it.

The more expensive variety then allow you to further screen that list to meet more specific criteria, and so reduce it both to a more manageable and more targeted list of stocks. In that way, you can progressively narrow down your search to be as focused as you want to be in your qualifying criteria. All in practically no time at all.