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Investment Strategies
Categories
- Value Investing
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Growth Investing
|- Income Investing
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Market Capitalization
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Momentum Investing
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Technical Investing
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Buy and Hold Strategy
- Buy What You Know
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Contrarian Investing
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Turnaround Investing
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Tobin’s Q
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Responsible Investing
- ADR's
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Global Investing
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The Dow Theory
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Odd-Lot Theory
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Election Cycle Theory
- Dow Dividend Theory
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Penny Stocks
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Initial Public Offerings
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Dollar Cost Averaging
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Drips
- Risk Tolerance
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Dow Dividend Theory
The Dow Dividend Theory is more commonly known as
“The Dogs of the Dow.” This seems to be a safe and somewhat proven stock
buying technique. Simply stated, at the beginning of each year, you purchase
the 10 highest yielding Dow Jones Industrial stocks in equal dollar amounts.
At the end of the year, you rebalance your portfolio to the 10 highest
yielding Dow stocks at year-end. For over a quarter of a century this
system, on average, has beaten the Dow averages. Using this approach, you
will pay taxes on stock gains, as well as on the dividends. You also need to
watch the transaction costs. In most cases, you are buying blue chip
companies that are out of favor or have hit a speed bump. These types of
situations have a tendency to make good investments.
The issue
that I have with this strategy is that you may have a true dog in the group.
If you don’t like one of the companies on the list, why invest in it? You
should only follow this theory if you are comfortable with each and every
security in the group that you are purchasing.
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