What Is the Dogs of the Dow Strategy?


Quick Answer

The Dogs of the Dow are the 10 companies with the best dividend payoffs in the Dow Jones industrial average. The Dogs of the Dow strategy shows the investor how to adjust his portfolio so it is evenly apportioned with each of these 10 stocks at all times, according to Investopedia.

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Full Answer

The Dogs of the Dow was made popular through Michael Higgins' book "Beating the Dow." It is a very simple investing strategy, and it does not require much work from the investor. It is common that the investor only needs to replace three to four stocks annually. Stocks are exchanged when their companies are no longer in the top 10 of the Dow, states Investopedia.

The Dogs of the Dow investing strategy gave a 20.3 percent average annual return in the period between 1973 and 1996. By using the strategy, individuals can historically expect to outperform the Dow by 3 percent. This is not guaranteed, however, according to Investopedia.

Companies admitted to the Dow are strong companies that survive shifting markets and are, in theory, clever stocks to hold in a portfolio. The Dogs of the Dow investing strategy is long-term and consequently needs time to produce results, reports Investopedia.

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