When it comes to investing, there are countless factors to consider.
But all too often, investors make decisions based on factors that do not work to their benefit.
Making investment moves that originate in rash emotional responses, lack of time, or intrinsic bias can all result in unfavorable choices that increase risk factors while minimizing profits.
So stock screening is an extremely valuable tool for investors, since it addresses all of these possible risk factors.
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Stock screening saves time, helps you find new opportunities to invest in, and cuts behavioral bias out of the process of choosing stocks.
In this article we will take a closer look at stock screening and why it is such a valuable tool for investors.
The Main Benefits of Stock Screening For Investors
Let’s start by exploring the three main benefits of stock screening for investors.
How do stock screening programs help you to remove biases, discover new investment opportunities, and save time? Let’s take a look.
Finances can be a field fraught with emotions, so it is only natural that every investor has their own behavioral and emotional tendencies when it comes to investing decisions.
These biases are often so intrinsic to investors’ personalities that they can be difficult to detect and alter.
Often they lead to unwise choices that can negatively impact investors’ returns in the long run. Take, for example, the allure of familiarity.
If an investor shops at a particular store often, then the familiarity may override the actual data available for that corporation.
So investors’ biases may lead them to invest even if their investment strategy doesn’t align with that particular company’s available data.
Stock screening uses computerized filters to help minimize the impact of this kind of underlying investor bias.
They may not save you entirely from behavioral biases- in the above example, you can still adjust your filters until you see the familiar company that doesn’t quite fit with your strategy.
But the best stock screeners can help to seriously reduce bias and make investment decisions more objective.
Uncovering Hidden Investment Opportunities
With so many potential investments available at any time, it is all too easy for investors to overlook potentially profitable investments.
By limiting the parameters of your search, stock screeners allow you to actually discover more opportunities to invest.
If your specific screening database has thousands of individual stocks within it, each of which suits your search criteria, then chances are very high that you will encounter and more seriously consider stocks you have never seen before.
And since your search has already been filtered to suit your needs and investment strategy, you will be more likely to find these previously unknown investment opportunities appealing.
Faced with the thousands of stocks available on the market, a thorough analysis of all the relevant data related to each of these individual stocks can be nearly impossible for the majority of investors.
Stock screening databases typically include a specific subset of stocks, limiting the options from an impossibly wide net to a more workable range.
Each stock screening database can still contain anywhere from hundreds to thousands of available stocks.
Scanning through the data needed to make informed decisions about where to invest, including ratios, historical growth patterns, future growth prospects, and individual company financial statements, takes, in short, a very long time.
By setting up filters on your stock screening program, you can determine which metrics are most significant.
So you will only receive lists of stocks that meet your preferred criteria- meaning you will never have to sort through the thousands of stocks that are not relevant to your preferences.
The more specific requirements you include, the fewer stocks you will see on your databases.
This approach can potentially save hundreds of hours of working through irrelevant stocks.
Instead you are presented with stocks you may be interested in investigating further, right away.
How to Get Started With Stock Screening
With so many benefits available, stock screening is a great tool for savvy investors to use.
Luckily, it is very easy to get started using online systems with stock screening functions. Take, for example, Wealthface, a fantastic app for investors who want to utilize stock screening tools, among other helpful resources.
Wealthface provides investors with stock screening tools that simplify the process of analyzing stocks.
These tools help to generate ideas for global investment using the app’s proprietary AI scores on a scale from 1 to 10.
This methodology is based on quantitative analysis of meaningful trends in valuation, profitability, risk, and technical.
The stock screening tools provide a fair and balanced analysis: each of these components is equally-weighted and then ranked on a normal distribution to generate an overall Average Score.
Using Wealthface’s stock screening tools, investors will have access to tons of benefits, including:
- In-depth analysis for thousands of stocks
- Identifying best-in-class companies and providing peer comparisons
- Top stock scores in the sectors and industries
- Global score history and performance for the past 3 years
- Score breakdown based on Valuation, Profitability, Risk, and Technical scores
- Halal stock filter
Taking advantage of this tool allows you not only to gain the competitive edge in investing, but also to save time, and make investment decisions in a more relaxed and low-risk way.
So, as we have revealed above, stock screening is a key tool for investors who want to save time, discover new investment opportunities they may have overlooked otherwise, and minimize the risks associated with behavioral biases.
Getting started with stock screening is extremely easy and straightforward using the Wealthface app, and your stock database will be available at your fingertips anywhere, anytime.