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Simple Money Management – The Art of the Watch List

Remember that simple money management begins with simple goals! As we discussed in our example of earning 10% per year for ten years, consistency is what matters when managing your money. With the goal in mind, we now set out to find investments that meet our criteria. This all relates to having a strategy or process for picking, buying, managing and exiting positions for our portfolio. The investment universe is so large we need to have a process to scan and filter the list down to a manageable set of opportunities. I don’t have the time or space to talk about all the details in performing this task, but we can cover simple steps to build a watch list. The watch list, for me, is the key ingredient to simplifying the money management process.

Let’s start by breaking this down into three primary categories of lists to build:

  • Ideas – Yes, ideas! This can be anything you hear about in the news or your neighbor telling you about the company she works for, etc. For example, home-builders have been beaten down during the financial crisis. Look for a bottom and reversal on earnings improvement. Tax credits are extended for solar energy? Watch FSLR or TAN for entry points. The key is to keep a list of all the ideas you hear, or create yourself. Filter them periodically based on specific criteria for investing adding to your portfolio based on specific objectives.
  • Fundamental Data – How boring! Maybe, but the last two earnings periods have produced some winners by following rising earnings quarter after quarter. Dividend scans are effective for building longer term income and growth portfolios. Take your pick of strategies and build a Watch List accompanied by a specific strategy for entry, exit and target.
  • Technical Data – Trend analysis, pattern breakouts, momentum indicators, or price and volume. There are plenty of methods for applying technical analysis to investments. Define the ones you like and build a Watch List based on the strategy. When they hit your entry point, put them into your portfolio and manage them according to your objectives and risk tolerance.

Building a watch list is just that simple. Start by defining your criteria for an investment to be added to the watch list. Once built, apply a specific strategy for entry, exit and target. This is all part of building discipline into your strategy for simple money management.

Every day we are surrounded with investment ideas. You don’t have to spend all you time reading financial reports or filtering the financial news looking for the perfect investment. Stop for one moment and think about your day, what did you hear of interest? Apply it to investing? What did you read? Who did you talk to that shared an interesting idea? Take the day to day events and filter through them, add the good ideas to your watch list. Keep a journal of ideas and filter for invest-able opportunities.

British Petroleum (NYSE:BP) was on every major network recently regarding the oil spill in the Gulf of Mexico. I received hundreds of emails asking me what I thought about investing in BP? My reply was directed more towards the opportunities created in other companies such as, Conoco Phillips (NYSE:COP), or Chevron (NYSE:CVX). What about companies that specialize in cleaning oil spills? Would crude oil rise in price as a result? You get the point, consider the pieces that make up the whole! Other companies stood to potentially benefit from the disaster that BP created. There would eventually be an opportunity in BP as the well was capped and an end in sight. They all became my Gulf Oil Watch List.

Building a Watch List is as simple as coming up with and idea. Once the list is built, define a strategy for entry, risk management and targeted gain. We will talk about how to do this in a future article, but defining the opportunity relative to risk/reward is important. Keep the process simple enough to find opportunities and have fun building the watch list. Don’t limit yourself, be creative. Some of the best ideas and opportunities sound crazy at one point. Enjoy the process of building and watching your list develop. Once the list is defined we can now go to the next step, building a strategy for putting them in our portfolio, and making money from the ideas! Stay tuned for our next Simple Money Management article.

VIDEO – For more help on creating a Watch List view our video on FINDING THE WINNING SECTORS.

You can watch Jim Farrish each evening on the Daily Exchange and listen each morning on American Scene Radio via the web. You can also review more Sector and ETF commentary every day on
Disclosure Statement: Jim Farrish is the Founder and Editor of and His primary goal is to educate people about investing.  He has taught workshops locally and nationally for over 25 years, teaching thousands of individuals, business owners, and advisors how to focus on achieving financial independence. Jim Farrish is the CEO of Money Strategies, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Money Strategies, Inc., web site.


Disclosure: no positions