Creating a Watchlist

A well-organized watchlist helps you track potential investments and act quickly when opportunities arise. This lesson shows how to build and maintain an effective watchlist. [DEFINITION] Watchlist: A curated list of stocks and investments you're monitoring for potential purchase, typically tracked in a brokerage account or financial app with real-time prices and alerts. ### Why Maintain a Watchlist **Preparation:** - Research investments before you need to buy - Have opportunities ready when cash is available - Avoid FOMO-driven impulsive purchases **Patience:** - Wait for attractive entry points - Track stocks until valuation becomes compelling - Practice discipline over emotion [KEY] A good watchlist turns "what should I buy?" into "is now the right time to buy what I've already researched?" ### Building Your Watchlist **Step 1: Define your criteria** - What types of investments interest you? - What fundamental requirements? (dividend yield, P/E, growth rate) - What price would make them attractive buys? **Step 2: Source candidates** - Screen for stocks meeting your criteria - Note companies mentioned in quality research - Track competitors of companies you already own - Monitor indices and ETFs of interest **Step 3: Organize by category** - Sector groupings - "Ready to buy" vs "watching" - Conviction level (high/medium/low) [TIP] Keep your watchlist manageable—20-30 positions maximum. More than that becomes difficult to track meaningfully. ### What to Track for Each Position **Basic information:** - Ticker symbol - Current price - Target buy price - Brief investment thesis (why you're interested) **Key metrics:** - P/E ratio or relevant valuation metric - Dividend yield (if applicable) - Recent earnings and revenue trends - Upcoming catalysts (earnings dates, product launches) [EXAMPLE] Watchlist entry: - **MSFT** - Microsoft - Current: $380 | Target: $340 (-10%) - Thesis: Cloud growth, AI integration, strong balance sheet - Watch for: Azure growth deceleration, competition ### Setting Price Alerts Most platforms allow price alerts: - Alert when stock drops to target buy price - Alert on significant moves (±5% in a day) - Alert on 52-week lows (potential value opportunities) - Alert on breakouts above resistance levels ### Maintaining Your Watchlist **Weekly review:** - Update prices and key metrics - Note any news or earnings - Assess whether thesis still holds **Monthly cleanup:** - Remove positions no longer of interest - Add new candidates from research - Update target prices based on new information [WARNING] A stale watchlist is useless. If you haven't updated it in months, your target prices and thesis may be outdated. Schedule regular maintenance. ### Watchlist Tools **Broker platforms:** - Most offer built-in watchlist features - Link to research and trading - Real-time quotes **Financial sites:** - Yahoo Finance, Google Finance (free) - Seeking Alpha, Morningstar (premium features) - TradingView (charting and alerts) **Spreadsheets:** - Custom tracking with your specific metrics - Historical data tracking - Integration with data feeds (Google Sheets finance functions) [EXERCISE] Create a watchlist for a "dividend growth" investor. What 5 categories might you use, and give an example stock for each? |ANSWER| Example categories: 1) Dividend Aristocrats (JNJ - 60+ year streak), 2) Tech Dividends (MSFT - growing payout), 3) REITs (O - monthly dividend), 4) Financials (JPM - strong yield), 5) Consumer Staples (PG - defensive, reliable). Each category serves a different role in a dividend portfolio. ### Acting on Your Watchlist When to move from watching to buying: 1. Price reaches your target 2. Fundamental thesis strengthens 3. Cash becomes available 4. Portfolio needs exposure to that asset class When to remove from watchlist: 1. Fundamental thesis breaks 2. Better opportunities emerge 3. You've purchased (move to portfolio tracking) 4. No longer fits your strategy [SCENARIO] A stock on your watchlist drops 20% due to a one-time issue, hitting your target price. How do you decide whether to buy? Ask: 1) Is the issue truly one-time or indicative of deeper problems? 2) Has the original investment thesis changed? 3) Did the decline create genuine value or just lower price? 4) Would you add to the position if you already owned it? If the business fundamentals remain strong and the drop is an overreaction, this might be the opportunity you were waiting for.