Investment Tools: A Comprehensive Guide to Categories & Usage

Investment tools are used by investors to make decisions. The use of investment tools helps with the investing process and brings clarity to investment choices. The basic categories for investing and investment tools include investment screening tools, research tools and portfolio management tools. Whether you are a savvy investor or just beginning to invest your money in the market, understanding the different categories of investing tools will help you do better with your investments. These tools will help you properly analyze and pick additions to your portfolio and quickly remove those positions that are underperforming.

Investment Screening Tools
An investment screening tool is used to determine the types of investments that should go into a portfolio. This tool looks at different types of investments like stocks, mutual funds or exchange traded funds (ETFs) and allows you to select different criteria for choosing the appropriate investment. Many companies offer this tool as a way to pair down your investment decisions to a few choices.

The screener may take a look at a stock from the standpoint of the sector or industry the stock is in, whether the company issuing the stock is large, mid-sized or small, and the performance of the stock over time. By placing these variables into the screener, you can narrow the field of investments to a narrow range of specifically chosen stocks.

Research Tools
Research is the basis for a stock analyst’s recommendation. A company’s research determines whether it receives a favorable or unfavorable recommendation. Having a research tool allows you to further analyze your investment choices and determine between similar selections, which one is more in keeping with your investment preference.

Using research tools in combination with a screening tool helps fine tune your investment selections and creates a good portfolio. A portfolio that is carefully selected, based on good research has a better chance of performing well. Also, a well researched stock can alert a stock holder when to sell, depending on market conditions.

Portfolio Management Tools
There are tools that help you manage your portfolio, once your selections have been made and researched. These tools help you with allocating your assets to achieve diversification and withstand market volatility. They also give you a way to analyze economic trends and forecasts and make appropriate buying and selling decisions in order to maximize your portfolio’s return and minimize losses.