Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Watch List

What it is:

A watch list is a list of securities that regulators, brokerages, research firms, or other entities are interested in monitoring.

How it works (Example):

Watch lists can be good or bad. An investor can start a watch list, for example, of stocks that he or she wants to keep current on and receive news alerts about.

For example, Moody’s, Standard & Poor’s, and Fitch evaluate companies, countries, states and other entities and assign a creditworthiness rating. These evaluations involve reviewing a company’s competitive environment, financial performance and management ability. When the ratings agency has concerns about a company in light of its current rating and wants to see how the company performs for a while before changing the company’s credit rating, it puts the company on a watch list. This means the agency may lower the company's credit rating.

Why it Matters:

Being placed on a watch list can be harmful to a company’s shareholders and lenders because it is generally a predecessor to receiving a lower credit rating, regulatory investigation or other significant negative event. As mentioned, however, being placed on a watch list can also be a benign event.