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Dogs of the Dow Performance

Many financial experts recommend the Dogs of the Dow investing technique. For those of you who are not familiar with it, read this article and see whether it is suitable for you.

Dogs of the Dow Strategy

The Dogs of the Dow represents a mechanical investment strategy that includes the picking the ten stocks of the 30 stocks of the Dow Jones Industrial Average, which have the highest dividend yield.

How it works? Each year the investor selects the stocks by their dividend yield. After this s/he invests equal amounts of money. After the year is gone, the investor reexamines the Dow and sells the stocks with the decreased dividend yield. The sold stocks are replaced with those that show up as the top 10 regarding dividend yield.

Dividend yield calculations are done on the basis of the current stock price. If the dividend yield is high, the stock price should be low.

Generally, such stocks are considered to be overlooked by the market, but provide good prospects for future growth. As a result investors start buying them and push the price up.

Dogs of the Dow Performance

The performance of this investing technique follows a cycle of ups and downs.

The technique has many times consistently outperformed the S&P 500. However, in 2004 the Dow experienced a 3.3% positive performance, whereas the Dogs of the Dow almost remained unchanged. Some of them even experienced a negative return.

As you can see, the Dow did not enjoy a high performance during this time period. On the other hand, the S&P 500 and the NASDAQ were the places where the most interest was directed.

Despite this, the Dogs of the Dow is recommended to those of you who are searching for an investment strategy that requires little time and efforts. So, implement this technique whenever you feel the need to.

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