The idea is to make stock picking somewhat easy and relatively safe, the latter because the universe is limited to blue-chip stocks. As a tactic, Dogs of the Dow goes like this: After the stock market closes on the last day of the year, select the 10-highest dividend-yielding stocks in the DJIA. Then, on the first trading day of the new year, invest an equal dollar amount in each of them. Hold the portfolio for a year, then repeat the process at the beginning of each subsequent year. Simple, right?
For most nonprofessionals, though, investing is never that simple, especially with the myriad of strategies out there. So, it behooves the average individual investor to understand what they are doing with their money. Hence, Dogs of the Dow tools abound. Just browse the internet to see Dogs of the Dow opinions, commentary, analyses, calculators, charts, forecasts, and stock screeners. There’s even a Dogs of the Dow website.
Because this is intended to be a low-maintenance, long-term strategy that mimics the performance of the DJIA, it shouldn’t be surprising that the long-term results are similar. There have been years when the Dow has outperformed the Dogs and vice-versa, but its performance over time is impressive.