Dogs+of+the+Dow

The Dogs of the Dow Strategy: By: Kevin Yoo and Sean Han
 * The Strategy:**

Investment strategy proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks whose dividend is the highest fraction of their price. (AC)

with the highest percentage yield (which means they are currently near the bottom of their business cycle and are likely to see their stock price increase faster than low yield companies). The investor usually updates the stock list every year, replacing it with the new stocks with the highest percentage yield.
 * Investing in blue chip stocks (corporation with a national reputation for quality, reliability, and the ability to operate profitably in good times and bad)

The inventing strategy's simplicity is one of its most attractive attributes. The Dogs of the Dow are the 10 of the 30 companies in the Dow Jones Industrial Average (DJIA) with the highest divided yield. (Fixed by Ho Soo)

* In the Dogs of the Dow strategy, the investor shuffles around his or her portfolio, adjusting it so that it is always equally allocated in each of these 10 stocks. (Fixed by Ho Soo)

(Current companies with the highest percentage yield) >
 * How to find the blue chip stocks with the highest percentage yield:**
 * The DJIA (Dow Jones Industrial Average) shows the companies with the highest percentage yield.
 * These companies are currently in the bottom of their business cycle and are likely to bounce back and operate profitably.
 * Why Dogs of the Dow?**
 * Blue chip companies with high percentage yield are companies that are temporarily out of favor (low business cycle), and they are still good companies because they are in the DJIA. The theory is that it will eventually rebound throughout the year and give returns to investors.
 * As is the case with the other strategies we've looked at, the Dogs of the Dow strategy is not fool-proof. The theory puts a lot of faith in the assumption that the time period from the mid-20th century to the turn of the 21st century will repeat itself over the long run. If this assumption is accurate, the Dogs will provide about a 3% greater return than the Dow, but this is by no means guaranteed. (Fixed by Ho Soo) 


 * Expected Return:**
 * 3% every year if all goes according to plan.

**Video of the Dog of the Dow:** media type="youtube" key="CUD8RaW_lAw" height="315" width="420" align="center"

**Advantages with Dogs of the Dow:**
 * It's easy to operate
 * It's relatively low risk
 * Strategy is pretty simple (Fixed by Ho Soo)


 * Problems with Dogs of the Dow:**
 * __Transaction Costs:__ The transaction costs are inexpensive at start and you could use a brokerage account and buy a few stocks every year, but depending on how you weight the stocks, there will be additional commissions. Also, another issue is taxation, whether it will be long term or short term capital gains.
 * __Growth and Risk:__ Dogs of the Dow does not account for the growth and risk aspects of investing. It solely relies on dividend yield.
 * It is the long-term averages that proponents of the strategy rely on so it takes some time. (Fixed by Ho Soo)


 * Questions:**
 * 1) What is the expected return of this strategy?
 * 2) How do you find the companies with the highest percentage yield?
 * 3) How do you know if the company is a blue chip company?
 * 4) Why does this strategy work?
 * 5) List one Pro and a Con with the Dogs of the Dow strategy. (Fixed by Ho Soo)


 * References:**
 * 1) http://en.wikipedia.org/wiki/Dogs_of_the_dow
 * 2) http://www.investopedia.com/university/stockpicking/stockpicking8.asp
 * 3) http://seekingalpha.com/article/255299-dogs-of-the-dow-investment-strategy-does-it-work-or-not