Where My Dogs At?
I'm talking about the 'Dogs of The Dow' investing strategy, this strategy involves investing in the 10 Dow Jones Index stocks with the highest yielding dividend yield at the beginning of the year and holding onto these equities for a year. At the end of the year the strategy involves adjusting the portfolio of these 10 stocks at the beginning of each year.
This strategy first originated in 1972, and has remained popular among casual investors due to its ease, also there is an ETF (SDOG) which mirrors this investing strategy. There is the opportunity for investors to personally invest in these 10 stocks, however depending on transaction costs it may be more cost-effective to invest in this ETF. The ETF which best tries to emulate the Dogs of the Dow selects components out of the S&P 500 instead of the DJIA. SDOG weights all 10 sectors across the market, then includes 5 of the highest yielding dividend stocks in each sector.
History and Variations of the 'Dogs of the Dow' Theory:
All total returns in the graph depicted below are calculated using reinvested dividends, cost of commissions are not included, the mutual funds selected below are among the largest U.S domestic growth equity
funds.
An important aspect to understand of the Dogs return is that it is very skewed due to Hewlett-Packard. Although the Dogs theory hasn't outperformed the DJIA index by a large magnitude historically speaking the approach has shown a favorable return.
Other Variations of the 'Dogs of the Dow' Appraoch
- The Small Dogs of the Dow (Dow 5): Purchasing the 5 Dogs of the Dow that have the lowest per share price
- Dow 4: Involves purchasing the 4 highest priced stocks of the Dow 5
- Foolish 4: This strategy was originated by Motley Fool, and involves selecting the same stocks as the Dow 4 but allocates 40% of the portfolio to the lowest prices of these four stocks and 20% to the other 3 stocks
Ultimately this investing approach has proven to be popular with people that want to be more hands-off with their investing strategy as opposed to stock-picking. I have not practiced this method of investing, this article is simply for learning purposes.
Thanks for reading and if you have any questions feel free to comment!
Wow. I am literally shocked that this is still a thing. I was pitching this dizzy nonsense to investors 20 years ago.
Simple sells!
Voluptates qui asperiores nemo rerum. Omnis laboriosam ab asperiores dolores similique sunt. Vitae cupiditate ut ut accusamus vitae esse natus. Quis et accusamus rerum quidem omnis et assumenda.
Repellat et asperiores consequatur nobis beatae ipsam. Consectetur labore beatae magnam earum corrupti accusamus. Mollitia vero quibusdam non nesciunt. Rerum consequatur asperiores doloribus natus dolore suscipit voluptas labore.
Eaque dignissimos labore voluptatibus mollitia. Quisquam beatae hic nesciunt delectus explicabo quia. Impedit est voluptas laboriosam neque sunt quis. Et maxime error dicta corrupti porro sit ipsum. Qui eius possimus eius quia.
Enim et qui tenetur dolorum non ipsum. Velit officiis ipsum ipsa eius consectetur. Consequatur maiores ab corporis tenetur aliquid amet. Qui aperiam laboriosam neque harum enim dicta porro. Harum non consectetur sed ut nam enim est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...