The Dogs of Dow Jones is an investment strategy that involves selecting and investing in the highest-yielding stocks from the Dow Jones Industrial Average (DJIA). The strategy is based on the idea that the dogs of the Dow, or the highest-yielding stocks, are undervalued and will eventually outperform the rest of the stocks in the DJIA. The strategy is simple: at the beginning of each year, investors identify the top ten highest-yielding stocks in the DJIA and invest an equal amount of money in each of them. The portfolio is then held for one year, at which point the process is repeated.
One advantage of this strategy is that it is relatively easy to implement and does not require a lot of research or analysis. Additionally, the strategy tends to outperform the overall market, with an average annual return of around 10% over the long term.
In case you do not want to manage several investments in different stocks, several ETFs use the Dogs of Dow Jones strategy, including the SPDR Dow Jones Industrial Average ETF Trust (DIA), which tracks the performance of the DJIA and includes the top ten highest-yielding stocks. Another ETF that follows this strategy is the ALPS Sector Dividend Dogs ETF (SDOG), which invests in the five highest-yielding stocks from each of the S&P 500's ten sectors. This ETF has a higher dividend yield than the broader market and has also outperformed the market over the long term. However, investing in ETFs normally run other risk in addition to the risks of the Dogs of DJ Strategy.
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