Explore Your Options by Tom Gentile
WHO LET THE DOGS OUT?
Happy New Year, traders! Each year, I take time to reflect on what worked and what didn’t in my account. If you were a bull last year, things got shaky in the third quarter of 2014 before heading once again to all-time highs. You might hear about the healthcare sector and how it outperformed the averages, but what about the “dogs” of the dogs of the Dow strategy? As of this writing, the small dogs of the Dow — or the flying five — had a below-average year of 6.6%. Comparing that to the Dow Jones Industrial Average (DJIA) return of 7.9%, they are holding their own. Let’s start the year out right by reviewing the dogs strategy, the com-ing year’s flying five, and the alternative ways of investing in them.
For years, money managers have hunted for the optimum way to make money for their investors. Unfortunately, most have trouble keeping up with the averages. But one such system has beaten the averages year after year, not to mention a lot of money management firms. It’s a system that requires your attention only once a year, but returns over 20% each year on average. This system is called the dogs of the Dow and it involves buying certain stocks in the DJIA. The DJIA consists of 30 stocks that change from time to time — but this doesn’t change anything in the strategy.