Dogs of the Dow
What is Dogs of the Dow?
This refers to a long-term investment strategy where a trader holds an equal value of securities in the ten companies with the highest dividend yield in the Dow Jones Industrial Average (DJIA) at the start of each year.
Where have you heard about the Dogs of the Dow?
A trader named Michael O'Higgins was the first person to advocate this approach in his book 'Beating The Dow'. He believed that Dow Jones companies' share prices were cyclical, so firms currently performing relatively poorly would soon enjoy an upward swing.
What you need to know about the Dogs of the Dow.
This is a long-term strategy based on the theory that all companies in the DJIA are successful and worthwhile investments. If a trader can pick up securities when the prices are low, they can then sell them at a higher price when performance improves. The trader can then pick up new instruments and begin the process again. Companies in the DJIA are usually stable, with strong reputations and balance sheets, and can survive a period of poor performance. However, this approach is not infallible, and losses are also possible if a firm's share price does not recover.
Find out more about the Dogs of the Dow.
Find out more about the Dow Jones Industrial Average here.