New for 2017 is the Howling Dogs Of The Dow Portfolio. Most investors know the strategy behind the Dogs Of The Dow Portfolio.
The Dogs of the Dow is an investment strategy popularized by Michael B. O’Higgins in 1991.
The concept was simple. An investor picks from the Dow Jones the top 10 stocks whose dividend was the highest fraction of their price. Basically the stocks with the highest dividend. This is done at the start of each year. At the end of the year the portfolio is rebalanced by removing the lowest paying dividend stocks and replacing them with those stocks paying the highest dividends.
The concept is fairly sound when you think of it. By removing by year-end those stocks paying the lowest dividend, normally you are removing stocks that have risen the most in that year, which results in the dividend falling in value as the stock climbs in value.
By replacing those stocks with new “Dogs” that are paying the highest dividends, you should be buying the stocks that are at their lowest levels for the year.
In the most basic of terms you are being forced to buy stocks low and sell them high. Since it is always from the Dow 30 stocks, you are rotating normally within the same set of stocks.
How Has Dogs Of The Dow Performed?
The strategy has been back tested all the way back to the 1920’s by many investors. The problem with calculations though are that it depends on what year the strategy is first picked.
For example, if we look at the years from 1961 to 1998, the Dogs Of The Dow Strategy beat the Dow by 1.7% each year. However from 1999 to 2014 the strategy has fallen behind the Dow itself.
Some years have been downright terrible. In 2007, the portfolio included Citigroup, J.P. Morgan Chase, GM and General Electric. It was a terrible year. In 2009 GM was a member of the Dogs Strategy and went bust wiping out many years of profits. The belief behind the strategy was that the stock of the Dow were the cream of America’s businesses however the bear markets of 2000 to 2003 and 2007 to 2009 ravaged this and many other strategies seeking above average passive investing returns.
FullyInformed’s Howling Dogs Of The Dow Strategy
My strategy is different. I believe the investment world since 1999 has become more volatile and investors need to use option strategies to both protect and try to increase the Dogs Of The Dow Strategy portfolio.
The “Easy-Chair” Investor
To that end I am pleased to offer the FullyInformed’s version called Howling Dogs Of The Dow Strategy which is designed for those investors seeking a reasonable return with limited amount of trading. This portfolio is more for the “easy chair” or “couch-potato” investor who wants to make some trades during the year but not spend his days in front of a trading monitor or smartphone app.
Howling Dogs Of The Dow Portfolio
The rest of this article including the stocks in the portfolio and all trades done are for members.
The rest of this Howling Dogs Of The Dow Portfolio article is for FullyInformed Members.
Howling Dogs Of The Dow Update – Feb 9 2017
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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. The author assumes no liability for your investment decisions. Read the full disclaimer.
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