source: edward jones
The graph above shows how Edward Jones narrows down a list of 65,000 stocks to arrive at the list of 280 stocks he recommends. The graph has two columns: the left column lists the type of filter Edward Jones uses on the available shares, while the right column shows the number of shares remaining after passing through the appropriate filter. the graph shows that:
- filtering by country raises the number of shares from 65,000 to 18,000
- filtering by longevity lowers the number of shares to 9,000
- filtering by financial risk lowers the number of actions up to 8000
- filtering by size reduces the number of actions to 750
- filtering by analysis reduces the number of actions to 280
this chart shows how edward jones filters the stocks to arrive at the 280 stocks we recommend. the first filter we apply is country, which reduces the field from 65,000 to 18,000 possible actions. then we consider longevity, which reduces the field to 9,000 shares. our third criterion is financial risk, which reduces the field to 8,000. The fourth filter we use is size, which reduces the number of shares to 750. From there, the analysts at Edward Jones narrow the field down to the final 280 shares.
Country: We consider companies based primarily in the US. USA, Canada and Europe that follow family accounting standards and reporting requirements.
longevity: The companies we follow need a strong track record, typically at least 10 years of operating history. this means that the company has likely faced at least one economic downturn and that management has experience of both adversity and success.
financial health: we seek to exclude companies that have sub-investment grade credit quality and weak financial strength.
Size: Larger companies tend to have a longer track record of success, a broader customer and sales base, and depth of management. we consider companies with at least $2.5 billion in market valuation and at least $1 billion in annual revenue for coverage.
Fundamental Analysis: Once companies meet the above criteria, our analysts take a deep dive into a company’s financial and operating history and project future earnings, cash flow, and value. fair of the company.
We believe paying dividends is an important measure of a quality stock. A company’s ability to consistently increase dividends can demonstrate profitability. Companies that have excess cash flow and strong financial positions often choose to pay dividends to attract and reward their shareholders. as a result, they tend to be less volatile than non-dividend-paying stocks.
but be careful of reaching high yields. a higher-yielding stock could be a sign that investors are worried about whether the company can continue to pay its dividend. we’ve found that these stocks are at higher risk of reducing their dividends.
2. diversify your stock positions
Diversifying your investment portfolio can help protect you against market fluctuations. Look at the following factors when planning to diversify:
Asset Allocation: Your portfolio’s mix of asset classes is one of the most important factors in determining performance. Analyze the size of a company (or its market capitalization) and its geographic market: us. USA, developed or emerging international market.
When owning individual stocks, we recommend you consider a diversified portfolio of large and mid-cap domestic stocks. For the more volatile international, emerging market, and small-cap stocks, we prefer a mutual fund to help manage risk. Although diversification cannot guarantee a profit or prevent a loss, it can help smooth performance over time.
Sector Allocation: Once you have diversified by asset class, we recommend that you further diversify into major market sectors and then into industry sub-sectors. This is because business cycles and market shocks can affect industries very differently.