My Watch List Explained

05 Oct 2013 14:47

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A watch list is crucial for any investor and each investor tracks key values or ratios to what is perceived as important. It allows investors to keep an eye on changes to potential investments that may represent a buying opportunity.

One of my fears entering into dividend growth investing is I will fall back into my bad habit of trying to time the market and only buy stocks at a price that represents a discount or value. While this type of thinking does lead to some hidden gems it can hinder my portfolio as I may not invest for long stretches of time limiting my ability to capture dividend growth and to diversify at a decent pace.

To get over the fear (or bad habit), I have structured my watch list to align with my portfolio strategy. My portfolio strategy is to initially invest with a 3% dividend yield and minimum growth rate of 9%. This criterion is then used to calculate a max price point or buy price for an individual stock and then adjust it for any perceived risks. Once a buy price is established it is then measured by the % of how much over or under it is versus the current stock price. The result tells me how much of a discount the stock price is in relation to my portfolio strategy.

This approach has resulted in more regularly investment periods, a larger population of stocks, and eliminated trying to time the market which historically for me has never panned out (probably because I cannot predict the future).

So how does your watch list work?

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