How To Invest In The Dogs Of The Dow

by Hank Coleman

How To Invest In The Dogs Of The DowHow to invest in Dogs of the Dow is simple. Rookies to the stock market know that there are certain people who succeed. They’re the ones with a plan. They have a strategy. That’s where the Dogs of the Dow investing strategy comes in.

People are intimidated by investing in the stock market. They often make it more complicated than it needs to be. The Dogs Of The Dow investing strategy is simple. Anyone could understand it. Yet, it has effectively made money for a lot of people.

How To Invest In The Dogs Of The Dow

Highest Dividend Yield

The Dogs Of The Dow investing strategy is based on the company with the highest dividend yield.

When you’re investing with the Dogs Of The Dow investing strategy, you will be putting your money in the top ten of the dog list, instead of the complete Dow Jones Industrial Average list of 30 companies.

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An Equal Amount In Dogs Of The Dow

Instead of putting a larger sum of money in a company that earns the most or has the highest growth rate, you will put in the same amount money in the ten stocks in the Dow Jones with the highest dividend yield. These often are the stocks that have the lowest share price.

Each investment should be equal in each company no matter their rating or the share price of the “dog”. Of course, you should make sure your equal shares are only within the top ten for highest dividend yield.

You May Have To Change Out A Few Stocks Each Year

It’s important to understand that the dog may fluctuate year to year. Companies lose and gain profits.

Typically, investors only have to change four of their stocks or less. It’s either because the company has fallen out of the top ten, or it has left the list.

The company you are leaving behind will most likely not be doing better than it did past few years. In fact, it’s possible that their stocks are performing worse. But, because their share price is declining with their dividend payout remaining the same, their dividend yield will increase putting them in the Dogs Of The Dow investing strategy.

Dogs Of The Dow Is A Long Term Strategy

If you’re looking to make money quickly in the stock market, the Dogs Of The Dow investing strategy isn’t for you. There are those years when the Dow Jones Industrial Average out performs the Dogs Of The Dow investing strategy. But, more often than not, the Dogs of the Dow have proven to be a better return than all 30 stocks year in and year out.

You need to have a certain level of patience when investing in the stock market using the Dogs Of The Dow investing strategy.

Dogs Of The Dow Relies On Rebounds

The Dogs Of The Dow investing strategy relies on the plan that the ten worst companies in the Dow Jones Industrial Average will make a comeback. The strategy suggests a pricing imbalance when you buy shares in the ten worst stocks in the Dow Jones and sell them later in the year.

The Dogs Of The Dow investing strategy benefits from periodic rebalancing, selling those stocks whose prices have risen to bring their dividend yield back into balance with the index. And, then you simply buy the ten worst again. They may be the some of the same stocks, or they could even ben ten new stocks from the index with new higher dividend yields.

This strategy wouldn’t exist if people weren’t finding success with it. Many have found that this is the perfect way to gradually build their net worth.

Have you heard of investing in the stock market using the Dogs of the Dow? Have you tried it? I’d love to hear your experiences with it.

How To Invest In The Dogs Of The Dow

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 578 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 1 comment… read it below or add one }

Robert

I have not heard of this strategy bur it makes sense. It seems like there are cracks in the stock market that can be exploited. Everything points toward the importance of investing in the long term. It could be a too big to fail syndrome where those companies on the bottom see the writing on the wall and swim that much faster.

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