Even if a stock has been in the Dogs of the Dow list for several years, you will still have to eventually pay long-term capital gains in taxable accounts when it gets removed from the list. The purest form of the strategy involves switching out the Dogs of the Dow stocks and rebalancing your portfolio at the close of each calendar year.Īs a result, you could trigger short-term capital gains for shares held less than 1 year. There are changes every year in the ten Dogs of the Dow stocks - that means that you are going to have to make trades. Criticisms of the Dogs of the Dow Strategy Requires rotation of stocks every year The note is thinly traded (<10,000 shares a day), and has an expense ratio of 0.75% - a very high expense ratio given that the strategy could be managed like an index fund. You can invest in an exchange-traded note (ETN) that follows the Dogs of the Dow strategy. Click To Tweet Dogs of the Dow Exchange-Traded Note (ETN) The Dogs of the Dow strategy returned approximately 9.1% from 1996-2016, versus 8.4% for the Total Stock Market Index. The average annualized return of the Dogs of the Dow strategy from 1996-2016 is approximately 9.1%, compared with 8.4% for the Total Stock Market Index. Using approximate annual return data (stock return + dividend yield from previous year) from, a website dedicated to the strategy, here is a chart of how $10,000 would have grown using the Dogs of the Dow strategy compared with the Total Stock Market Index (using data from Portfolio Visualizer)ĭata Sources:, Portfolio Visualizer Historical Returns of the Dogs of the Dow Strategy Here is the list of the ten Dogs of the Dow holdings for 2018, according to : CompanyĬombined, the ten Dogs of the Dow stocks for 2018 have a dividend yield of 3.47%, significantly higher than the S&P 500’s dividend yield of around 2%. You then hold the stocks for the year and replace them with the new Dogs of the Dow for the following year (rebalancing to make sure you have the same amount of money in each stock). To execute the Dogs of the Dow strategy, you need to purchase the ten stocks with the highest dividend yield at the end of the previous year in equal proportions. It has captured the imagination of millions of investors not only because of its catchy name but also because of its simplicity.īut more than 25 years after its introduction, is the Dogs of the Dow still a relevant investment strategy in 2018? The Dogs of the Dow Strategy The Dogs of the Dow strategy was initially described in 1991 by John O’Higgins in the book Beating the Dow: A High-Return, Low-Risk Method for Investing in the Dow Jones Industrial Stocks with as Little as $5,000. I’ve heard of the Dogs of the Dow strategy for as long as I’ve been interested with investing.
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