The Indian stock market, traditionally not preferred in India, is gaining popularity recently. Nearly 19.58 crores of investors are registered on the National Stock Exchange as of September 11, 2024. Moreover, the Indian equity market is expected to grow owing to factors like Indian Gross Domestic Product (GDP) performance, youth population, digitalisation, growing retail participation, financial literacy, etc.
Many first-time investors are astonished by the price movement, volatility, pacing prices, etc., in the market. Beginners miss the market opportunities or are stuck. However, these aspects may set in fear among such beginners. A stock market watch list is one of the most basic yet excellent solutions to this issue.
Let’s understand how beginners can create such a stock watch list to reap the benefits of market movements.
Also, read about The role of the National Stock Exchange (NSE) in stock market transactions.
What is a stock watch list?
As the name suggests, the list of stock market scripts which can be an investor’s potential investment is known as the stock market watch list. It is used primarily to keep a keen watch on such stocks and grab the investment at desired price levels. Moreover, it can also be used to monitor the overall market or any specific sector/theme.
Selection of a suitable investment from the large sea of listed companies on the NSE and Bombay Stock Exchange (BSE) is a tough task. A well-organised stock market watch list can be an investor’s ‘go-to’ resource for stock analysis or selection. Investors do not need to invest in stocks before creating a watch list. Moreover, it is a crucial tool that can be used by beginners to navigate the stock market.
Significance of stock market watch list
- Informed investment decision
Investment decision-making is a crucial process for every individual. Investments without proper analysis or rationale may lead to impulsive decisions. Fear and greed are common emotions in the stock market. Having a stock market watch list can help beginners make an informed decision.
- Catching a suitable price for investment
The stock market is flooded with investors, and this volume may create clashes between buyers and sellers of a security. Investors may find opportunities in market volatility conditions to enter or exit the market. Selecting such price levels is facilitated by constant monitoring through stock watch lists.
Investors willing to check or compare financials and technical indicators of stocks may find comfort in the stock watch list. Moreover, market fluctuations can also be a significant consideration in analysis.
- Constant watch on the market
Investment is a journey, and it needs constant monitoring. With the help of a handy stock watch list based on your desired brokerage applications, Excel can help investors check every market action. Moreover, rebalancing can also be facilitated.
An interesting read: Beat the market: Your ultimate guide for fundamental analysis tools.
How to create a stock watch list?
In the era of growing digitalisation, investments are facilitated by various brokerage applications and websites. They have an investor-oriented interface and functions to suit almost every investor type in the market.
Beginners can use such apps or websites, for easy management of stock watch lists. Moreover, they also provide the facility to create multiple stock watch lists to cater to different needs.
Apart from this, investors can also maintain MS Excel or Google spreadsheets to manage their desired list of stocks. Investors should constantly monitor it. Moreover, constant updation is required.
Factors to consider while creating a stock watch list
Investment objectives
One investment rationale may not suit every individual. Similarly, one stock watch list may not suit every portfolio. Therefore, it is crucial to assess one’s investment aspirations before investing. The type of investments, tenure, specific market or sector exposure, etc., should be determined while creating a stock watch list.
It is usually said that investment should be done in the business, which is understood by the investors. It helps in understanding its viability in the market and making informed decisions.
Investors can make different sector-specific stock watch lists, monitor sector indices in one watch list or only have key market indices like NIFTY 50, SENSEX, etc. It solely depends on the investor’s preference.
Market conditions
It is crucial to account for this while making a stock market watch list. Market-affecting factors include price fluctuations, market news, sector-specific cyclicity, government regulations, international events, etc. Investors should be in tandem with market conditions to tap the correct market opportunity. The stock market watch list should be monitored and altered based on market conditions.
Affordability
The purchasing power of an investor may be restricted to some factors like availability of finance, willing exposure to the market, desired weightage of stock market investments, etc. By assessing such factors, investors can decide the stock price and formulate a stock watch list.
Risk factor
The stock market is usually prone to market volatility risk. Investors should analyse their risk appetite, and decide which investments can be constituted in the stock market watch list. There are three types of investor risk profiles:
- Risk-seeking (aggressive investors)
- Risk-neutral (moderate investors)
- Risk-averse (traditional investors).
For example, a risk-averse investor may not have derivatives on his/her watch list. The opposite stands true for risk-seeking investors.
Market ratios
There are several market ratios for quick analysis of stocks. Beginners should gain substantial knowledge before investing as it helps them make informed investment decisions. It includes the price-to-earnings ratio, Price-to-book value ratio, profit margins, return on equity (ROE), return on investments (ROI), etc. Checking such ratios can indicate potential classification or selection for an individual.
Portfolio weightage
Usually, a diversified portfolio can be suitable for investors. However, in this diversification, stock weightage should be determined by investors before or while preparing the stock watch list. It will help them efficiently allocate funds. Moreover, a watch list without predetermined weightage can sometimes lead to impulsive decisions due to market movement.
Bottomline
Stock market watch lists are an essential and most-used tool among investors. Beginners can start to navigate the stock market with its help. The stock market has a large number of companies. Categorisation and selection among them can be cumbersome. Therefore, a stock watch list can help investors analyse them thoroughly and keep a keen watch on them.
However, certain factors, like investment objectives, risk appetite, market ratios, etc., can be considered while making a stock watch list. Beginners can use brokerage apps/websites for it or build an Excel. Investors should consult their financial advisors for more details.
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FAQs
Q1. What is a watch list for the stock market?
The list, including desired stocks, is known as a watch list. It is formulated by investors based on their investment aspirations, affordability, preferred sectors, market conditions, etc. It helps investors stay updated with market conditions and make informed decisions. Beginners can use this watch list to start their stock market journey.
Q2. Do I have to invest in the stock market before creating a watch list?
No, investors don’t need to invest before creating a watch list. Moreover, a watchlist should be made before investing to determine the potential stocks, analyse them and tap suitable prices in the market. The creation of a stock watch list should be preceded by an analysis of the required factors.
Q3. Which tool can I use to create a stock watch list?
A stock watch list is a crucial feature available in most brokerage applications/websites. Investors can only name it and start adding desired stocks. Also, more than one stock watch list can be made. Moreover, investors can use MS Excel and Google spreadsheets to make this list.
Q4. How to create a stock watch list for beginners?
Beginners should use a stock watch list to navigate the stock market. There are ample stock scripts in the market, but selecting a suitable stock requires analysis. A stock watch list can facilitate it. Investors can create it on brokerage websites or apps. Moreover, investors can also use spreadsheets or Excel to make it.
