New last year was the Howling Dogs Of The Dow Portfolio. Very few adjustments were made during the year. The portfolio was started in February 2017 and closed Dec 29 2017. A new portfolio is started today, Jan 2 2018. This is not a recommendation or even a suggestion. This is a portfolio that is being designed to try to replicate the original Dogs Of The Dow investment strategy, but with various adjustments and changes. It is meant for very passive income investing and at times includes options for safety and income.
Original Concept:
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 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
FullyInformed’s Howling Dogs Of The Dow Strategy is a strategy being tested for a second year. It is designed to seek a reasonable return with limited amount of trading. This portfolio is more for the “easy chair” or “couch-potato” type of investing where there are limited trades and adjustments during the year.
Howling Dogs Of The Dow Portfolio – 2018
The rest of this article including the stocks in the portfolio for 2018 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 – Jan 2 2018
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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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