Dogs of the Dow is a strategy where you take the 5 highest yielding stocks of the Dow Jones Industrial Average and buy them. After some holding period, say six months to a year, you repeat the exercise.
Why would a stock have a high dividend yield? Either their dividend went up or the price of the stock went down. So, the highest yielding stocks usually would be the lowest relative priced stocks in the index. They would have the greatest opportunity for price increase. While you wait for the capital gain, you book the dividend income which should be paying you more than bonds or savings accounts pay.
Does it work? Yes, sometimes. This is an investment strategy that does best in a rising market. It does not do well when the overall market is falling. In that case you run too much risk of one of your companies entering into bankruptcy. That event can erase years of income for a portfolio.
Dave sent in the returns on funds in his portfolio. Send in your best and worst, and we will share them for year end. One thing you might want to check Dave is the real diversity of your portfolio. I haven't checked, but you might have overlap in the holdings in the funds you own. Have your managers send you a list of all the stocks in the funds. You can dump them in a spread sheet and compare to ensure you really have the diversity you need. The higher the number of funds you hold, the more likely this becomes a problem.
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