If you are a long term investor (or you’d like to be), here are the full details of how you can beat the market. I call it “The Small Dogs of the Dow” strategy, what I think is the simplest investment strategy ever and it works incredibly well over the long term. Here are the details.
So writes Andy Crowder (wyattresearch.com) in a paraphrased introduction to his original article* entitled The Only Investment Strategy You’ll Ever Need.
[The following is presented by Lorimer Wilson, editor of www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Crowder goes on to say in further edited excerpts:
The Small Dogs of the Dow is a simple and effective strategy that has outperformed the Dow and the S&P 500 significantly over the last 20 years. Let me present this in simple terms:
“Small Dogs” of the Dow
What is the “Small Dogs of the Dow” and how does it work?
While the Dogs of the Dow strategy invests an equal sum of money in each of the 10 highest yielding stocks in the Dow Jones Industrial Average at the beginning of each year, and rebalances the portfolio annually (that’s just one transaction per year), the “Small Dogs of the Dow” strategy simply takes the 5 lowest-priced Dogs of the Dow stocks and invest an equal sum in each stock and every year, the whole process starts over. Oftentimes, most of the stocks will remain on the list from one year to the next, simplifying things from a taxation perspective (no gains or losses to report) and also helping to lower commission costs.
In order of current yields, the 2014 Small Dogs of the Dow are made up of the following stocks:
The Dogs have beaten the performance of the Dow 30 Industrial Average in 2 of the last 3 years but it’s the long term record that has me convinced that this is a winning investment strategy.
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Of particular interest to income investors is the fact that the Dogs start every year with a distinct advantage over the rest of the Industrials. This time around it’s a combined yield of nearly 4%. Compare this with a yield of 2.6% for Dow Jones Industrial Average, and the income advantage is clear.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
* http://www.wyattresearch.com/article/investment-strategy/ (© 2013 Wyatt Investment Research)
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