Your Response Was Shocking...
The Dynamic Wealth Report
January 12, 2010
Last week I wrote an article titled, "Are
These Dog Stocks For You?" I never imagined the firestorm of
commentary I’d receive from readers. I didn’t pull my punches when it
came time to look at the system…
I thought you could do much better picking stocks yourself, and I said
so.
I gave out ideas on what stocks I thought were good… and which were bad. But some readers had questions… and others were looking for an easier
way…
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As I mentioned in the article, The Dogs of the Dow strategy hit the
big-time in the early 1990s. A book called Beating the Dow was
published showing how the average investor could beat the market. Since
then, the strategy has become very popular with investors.
The hook is the simplicity of the system.
Once a year, gather a list of all 30 stocks in the Dow Jones Industrial
Average. Calculate their dividend yields… then sort them from high to
low.
Simply by purchasing the ten highest yielding Dow stocks and capturing
the dividends and stock appreciation, you’d have a big pile of money to
drag to the bank. Then you do it all again the next year… and the next…
and the next.
Many investors are pulled into the strategy by the promise of market
beating returns with little effort.
No need to think about an investment strategy. No need to analyze
companies. No need to review the financials, income statements, cash
flows, or balance sheets. Who cares about the industry or the products
the company is selling.
The problem is the strategy hasn’t worked as advertised for years.
When the strategy was first uncovered, it showed very impressive gains.
By simply following the system, you would have outperformed the market.
But that didn’t hold over the last few years.
The Dogs of the Dow strategy has worked some years… and other years it
has fallen apart. That’s why I warned you to stay away.
I said if you want a better way, you should actually do some homework.
Cherry pick the stocks you think will do the best. Don’t just let some
arbitrary dividend yield number determine what to invest in… and that’s
what caused the commotion.
What’s a good stock?
How do I know if it’s right for me?
What should I look for?
Isn’t there an easier way?
I mentioned a couple of the Dow stocks I liked… Pfizer (PFE) and
Home
Depot (HD)… I also told you of a couple you couldn’t pay me to own…
Boeing (BA), and AT&T (T). However, I’d spent a good bit of time doing
my research.
I knew there is a much easier way to profit… just invest in the index
itself.
Instead of limiting your investment to the 10 highest yielding Dow
stocks, you just buy them all.
With one simple purchase, you can buy Diamonds (DIA).
Diamonds is a trust set up to mirror the Dow Jones Industrial Average.
They hold all 30 of the stocks that make up the Dow. So if the Dow goes
up 10%, DIA should go up 10%. If the Dow falls 10%, the DIA falls 10%. It’s very simple and it has a small expense ratio of only 0.17%.
It’s an easy way to capture the growth in the Dow without doing all the
research. You’ll never beat the index, but more importantly, you’ll
never have to worry about underperforming it either. In my mind, it’s a
much better and easier strategy than the Dogs of the Dow.
There are a number of companies on the road right now. Their back to
back to back meetings with investors is drumming up interest in a number
of IPOs. Since the roadshow takes about three weeks, I’m expecting to
see a number of companies price their IPOs soon. Watch for Symetra
Financial and Cellu Tissue to price their IPO next week.
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