Stock screeners help you select stocks that meet certain criteria that require checking up on the company’s background. However, the problem lies on choosing which criteria to follow and on deciding where you should set your limits.

Even experienced investors get overwhelmed by the different combinations that may be used as criteria. If your set criteria are not well-chosen, you might end investing in companies that are doing well in only a few aspects. This may lead to a future downturn on your part. However, if your criteria are too strict, you may be passing out on good investment opportunities. This is why you should put much effort in refining the criteria that you will use. You do not want to be lax, but you do not want it to be too strict either. Screening the level on which to apply your criteria is not easy to define, as well. This specifically applies to companies who use similar financial structures despite being under different industries. For example, screening companies with lower price to earnings ratio will not include companies in the technology sector. Screening companies with higher return to assets ratio will exclude companies like consulting firms and the like. You may miss out on investing to lucrative companies just because your limits are too strict. If your levels are too lax, you may have difficulty in choosing from a lot of investment choices; most of which would probably fail.

One should take extra precaution in basing investment decisions on stock screeners. If the criteria aren’t too lax, then they must be too strict. Don’t worry. There is a solution to this problem. To be safe, it would be good if one includes all companies for consideration given that they fall a little short or a little higher than his expectations. In that way, you will not be excluding companies that will bring you profit and you will not be including companies that will do you no good.

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