How to use a stock screener to choose the best shares to buy

There are a variety of techniques out there to help you choose the best shares to invest in.

For some people it’s a matter of throwing a few things at a wall and hoping something will stick, but in doing this you’re opening yourself up to a lot of risk. Maybe half the time you’re going to find yourself the best shares to buy – the other half of the time, you might lose a lot of money.

When it comes time to choose the best shares to buy, it’s best to take a strategic approach and use a stock screener. So, what should you do? Here’s a few tips to get you started.

How to use a stock screener to choose the best shares to buy

Identify your goals

Identifying your investment objectives is the first stage in using a stock screener. Then, look for businesses that you can relate to.

You need to know if the company has a competitive advantage in order to pick a profitable organisation. In order to assist you in making a decision, consider factors such as scale, intellectual property, and the network effect.

It’s important to remember that not all investors have the same goals in mind when they invest. Young investors are more likely to be concerned with building up their holdings steadily over time. As they approach retirement, older investors may be more concerned with preserving their wealth than younger investors. Dividends and distributions are an important source of income for certain investors, who like to receive a consistent flow of money from their investments. A stock screener is an ideal way to research according to your goals.

Think on what you want to achieve with your financial portfolio for a moment. In this world, there are no laws. In your 60s, you may be aiming to build your portfolio, while those in their 30s may be hoping to secure a steady stream of income from their investments.

The companies you buy into will be determined by your objectives. The number one thing to remember when you go to use a stock screener to choose the best shares to buy, is that it won’t be the same for everyone.

Look for businesses that you understand

Stock screener

As soon as you acquire shares through your stock screener, you become a stakeholder in a company. You’re doomed to fail if you don’t know what you’re doing.

Is it safe to assume complete responsibility for a firm that you don’t understand? It’s impossible to tell if your new bosses are doing a good job even if you hire the best.

Companies can be found all over the place. Consider the companies behind the items and services you use on a daily basis.

Think about companies that may have an effect on you in a different way. Consumers are rarely, if ever, dealt with directly by many companies.

The companies you come into contact with on a daily basis might serve as a starting point for your research into various industries and the companies that compete in each one. Research the firm using a stock screener or go elsewhere if you don’t grasp how they’re making money.

Competitive advantage

Identifying competitive advantages such as scale, switching costs, unique brands, and intellectual property through your stock screener can help you choose the best shares to buy.

Decide on an appropriate share price for the company

You can use a variety of methods to determine whether or not a share’s current pricing is a good deal or not. There are a few:

P/E ratio: The PE ratio measures a company’s share price and divides it by its annual earnings per share. Looking at historical averages from your stock screener can help you choose the best shares to buy.

For growth shares that aren’t profitable or have very volatile earnings, the price-to-sales ratio (PS ratio) is a better measurement.

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