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I've been researching investment for the last few months, and in several places I've come across a few pieces of advice:

1) The only way to really know whether to invest in a specific company, is to know the company itself

2) The only way to really make money in the stock market is to be an active investor who commits substantial time to analyzing specific companies or products

and, lastly

3) To some extent an investor needs to automate the system they use to invest. Find a method that works for you, and stick to it

So with that in mind, my question is:

Are there established systems in place that people use to analyze which companies to invest in? And if so, what are they called?

My aim is to potentially automate the analysis of specific companies, and I wonder if there are already established ways to do this.

edit: I updated one line which is reflected in a comment below. Apologies for the loose language, was just trying to convey a specific point that I've heard investing requires some semblance of automation

closed as too broad by Pete B., Grade 'Eh' Bacon, MD-Tech, Nathan L, dg99 Nov 30 '17 at 20:33

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

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    "Find a method that returns sure gains, and stick to it." Be very careful in talking like this. Even a 'good' method of analysis (whatever that means in a particular context) creates risk. Investing involves risk. Often, risk is needed to achieve higher reward. There are no such things as sure gains. That doesn't mean investing is a bad idea, it just means that you need to be able to properly weigh the risk associated with a particular option, and you ignore that risk to your detriment. – Grade 'Eh' Bacon Nov 30 '17 at 16:07
  • Thank you. I think I need to learn to be more careful with my language on this specific stack, I'll edit the question – Canadian Coder Nov 30 '17 at 16:43
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    "The only way to really make money in the stock market" this is not true. It is one strategy to consistently beat the market average (and even that is debatable) , but the average return in the US equity market is historically around 10% or more if you reinvest dividends, so you can still make money without deep analysis. There are markets (e.g. bonds) that have lower risk, but lower returns as well. – D Stanley Nov 30 '17 at 16:45
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    Are you looking for the word for the kind of thing you're interested in? If so, it's a stock screener. If you're asking 'what are the existing stock screeners', then that is indeed too broad. – AakashM Dec 1 '17 at 8:46
  • Thanks. In that case I'd like to edit this question to not be too broad, but I'm not sure what would be appropriate. Any suggestions? – Canadian Coder Dec 1 '17 at 13:09
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I don't know about systems, but there are proven approaches to active investing. "Buy and Hold" or value investing. Growth investing. Income investing. In each of these, one would research companies that meet criteria that one sets. E.g. in value investing, one would look for undervalued stocks with steady solid balance sheets, good market share, and solid leadership. Growth investing calls for newer companies, or existing companies in the midst of expansion and one would look for companies with decisive leadership in market share, niche products with high demand and can't be matched by competitors, etc. Income investing is typically stocks with a track record of steadily paying healthy dividends. These are all active investing approaches, and they are not exclusive of each other. One could easily invest in growth stocks and balance that volativity with positions in income and value stocks.

There are very few people who can consistently beat the market. Even legendary investors like Warren Buffet make the occasional bad call. Buffet is probably the greatest value investor ever (IMHO). He has said that he doesn't buy stocks any more, but instead buys companies. His stockholder letters for Berkshire Hathaway are great reading. The one I read explained why Berkshire Hathaway began investing in insurance companies. He seems to have a knack for evaluating companies and determining whether they're his sort of company. I'm sure that he has a staff that pulls all the balance sheet, SEC filings, and does market research on them. That's a lot of research that goes into his brain and results in a buy/no buy type decision. If you want to be the next Buffet or Gordon Gecko, then research how to become a broker. Make a plan on how to develop and grow your business.

For everyday investors, Buffet recommends index funds. (Research his instructions to the trust which will manage his wife's inheritance in the event of his passing, and research 'The Bet'.) Bogleheads (internet personal finance group based on forums at bogleheads.com) revere Jack Bogle, who created one of the first index mutual funds (tracking the S&P 500) and opened Vanguard which is a brokerage specializing in mutual funds, where the funds actually own the brokerage, so the brokerage's fees are extremely minimized. There are a number of personal finance, financial independence, and frugal living communities on the web, and most of them make no secrets of their ideas and methods. So if you are interested in that sort of system, start with researching FIRE (financial independence, retire early).

But I think what you're asking for are methods to automate company valuation. Balance sheet valuation is probably the most automatable part. But beware, risk abounds in investing. The idea is to balance risk with reward and to hedge against some of it through asset allocation and rebalancing. And keep in mind that online brokerage hire teams of programmers to develop systems that gather, analyze and present such information to the customers, for a fee of course. And algorithmic traders have systems that assist them in capturing some of the profit available in predicting index fund rebalancing. Theirs is a world of competition, trying to beat the clock, where fractions of a second mean millions of dollars. So if you're interested in that type of system, those are avenues you could pursue. And if you find a way for an average investor to beat the algorithm guys, you'll probably be a household name. This route would call for studying economics, software engineering, and math/computer science.

The only foolproof methods I know of to make money in the market are illegal (insider trading and fraud), impossible at our current level of technology (time travel), or of unknown veracity (clairvoyance).

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