It's still summer, which means you can still do some summer reading at the beach or wherever your muse takes you for vacation. While fiction is great, this summer I found a few books about the stock market to whittle away my time. Some of these books seem like fiction, because there's still much I don't understand. However, one book - "Trading Online, a Step-by-Step guide to Cyberprofits" by Alpesh B. Patel - piqued my interest. This book is very easy to comprehend, and Patel includes a lot of helpful advice about online trading. Additionally, Patel approaches analysis in chapter ten with a very down-to-earth approach.

Although we might not think of ourselves as analysts, when we minimize our stock selections for our portfolio, we analyze various aspects of these equities during the process. Last week, Cora and I gave you plenty of ideas on how to choose stocks and how to begin to narrow your choices. This week, we'll look at what Patel says about analyzing our selections.

First, we need to understand that there is a difference between fundamental and technical analysis. Technical analysts use a variety of different charts, formulas, and what they believe are predictable behaviors in response to these tools to choose their stocks and to time their purchases and sales. Most beginning investors are not technical analysts, because it takes many months and years to learn these skills. Beginning investors can start out with the fundamental analyst pros, investors who often use one or more of the following methods to choose equities and regulate their portfolios:

1. Filtering or Screening: fundamental analysts might use an online filter to sort through a database of stocks to display the names of equities that contain certain characteristics. Some prominent choices are those stocks that contain a certain price to earning ratio (see last week's article), or those equities that have a low price or high volume. When online trading began a few years ago, you could find free filters everywhere online. Now, most of them cost money and it's up to you to decide whether you want to invest in the use of a filter or not. One example is Stockworm. This company allows two-week free use so you can examine how these programs work before you buy into the software.
   
   
2. Newsletters and Newsgroups: Fundamental analysts might rely on newsletters or newsgroups to read information about a certain stock. Active participation is up to you, but this might be a great place to ask questions about stocks. Take it from me, if you're a newbie and you ask questions, every "expert" in the world seems to come out of the woodwork to offer advice. Once again, it's up to you to use this advice. I would advise you not to use your real name on these groups. A user id that identifies you yet doesn't reveal your identity is much safer. You can also subscribe to online newsletters for information. I discovered that many sites often pass your email address on to other companies, and before you know it you might have more information than you need. Be selective about your choices, and keep track of where you signed up so that you can keep track of your choices.
   
   
3. Analysts Reports: We covered this last week, and you might remember that you can find analysts' ratings at BUYandHOLD. However, analyst reports are a bit different, because they may explain why they rated a certain stock a certain way. Upgrades and downgrades are important to many fundamental investors for short- and long-term influences on stock movements. One online site that contains these reports is at Reuters. The front page of this site is similar to a stock filter, as they report risk alerts, top movers, and hot lists. Their reports, however, are not free. If you type in your company or its ticker symbol, you'll find a page listing reports for anywhere from $20 and up. Another easy place to find out for free whether your stock has been upgraded or downgraded by analysts is at Yahoo! Finance. If you type in your company or its ticker symbol and then go to "analyst opinion" in the menu on the left, you'll see the analyst ratings AND whether this stock was upgraded or downgraded from the previous analysis. If you want a full report, they aren't free, either. It's up to you to decide whether you want to invest in a report for your investments.
   
   
4. Data: Fundamental analysts LOVE data. This data can come from everything and anything, including SEC filings, annual reports, fortune cookies, and horoscopes. SEC (Securities and Exchange Commission) filings are comprised of information the company is required by law to send to the SEC, and these reports reflect changes within a specific company. You can find your company's most recent SEC filings when you type in the company name or ticker symbol in BUYandHOLD's home page. This will take you to the company profile page, where you can use the drop-down menu in the upper left to surf to SEC filings. You can find fortune cookies and horoscopes just about anywhere, so I'll leave that unpredictable hunting up to you.
   
   
5. News: Fundamental analysts often rely on news for their information. We already discussed the importance of news in the past few articles, and you can find news on your equities at BUYandHOLD when you go to your company profile page.

Patel adds a few more ideas about how to choose stocks, including a complete list of positive indicators for any security. I found this list useful, as it works like an off-line stock filter. If you and your children are still haggling over a handful of stocks, this list can help you narrow your choices down even further.

What happens once you finally choose your stocks? Do you just sit there and let them do their own thing? The answer is no; but, with school looming around the corner, how do we keep our perspective as we begin to focus on lessons other than those provided by stock market gurus? Next week, Cora and I will share some tips, and I'm happy to say that these same techniques are used by many other investors.

Until Then,
Linda Goin