Having a watch list of stocks

Having a watch list of stocks is good for you and your portfolio. My watch list consists of stocks which I have done sufficient research on. For example, on the model of their business, do I think it will be sustainable, dividends payout, price to book ratio and P/E ratio. There are a few good points to having a watch list as explained below and also on how a watch list can be maintained.

1. Ever ready

The first good point of having a watch list prepared is that you are ready with your entry point and what you are aiming for. So you have a group of company/business that you are interested in and will not deviate too far from it. This is especially so when you get the urge/itchy fingers to purchase stocks and having a watch list will allow you to know what you are actually heading towards and not recklessly do your purchases.

2. Adequate research

Another point of having a watch list is that you would have had time to do prior and adequate research. This means that you are not being easily swayed by the prices you see and news that you read. And this is because you have done adequate research and know that the stocks in your watch list are sticks that are worth the wait and the price.

Maintaining your watch list

Maintaining your watch list is important which means to check on it and update regularly. You don't have to update it everyday but at least every one to two weeks would be a good gauge so you are able to know if the stock is on a up or down trend. This will allow you to know when your entry prices is hit and you can start purchasing.

Set a maximum number of stocks for your list

Never have too many stocks in your watch list, it is tedious to have to keep up with so many prices. A good gauge will be around 10-20 stocks depending on how active you would like to be. So to make sure you keep to the number of stocks, every time you want to add a stock in, remove one so you don't keep adding to a ridiculous number. Another suggestion is to have two list if your watch list is growing too fast, a buy list and a radar list. The buy list can consists of stocks in the potential buy zones meaning that they are near the entry price that you have set. The radar list on the other hand, would not yet have their prices in the potential buy zone yet.

All in all, you will need to devote some time to it and to update your watch list. An action plan would also be good in that what entry price, how many shares are you going to get and if the yearly reports do show anything.