Alert readers will know I have thrown some cold water on the enthusiasm some feel for what’s commonly known as “The Dogs of the Dow” strategy and that I have, in return, had a bucket or two tossed my way.
Not to say it’s a terrible strategy. Just that, typically, finding these great strategies after the fact (I don’t know anyone who was recommending it 25 years ago, in advance of its great results) is not quite the same as knowing how markets will perform over the next 25 — if only because great market strategies, once widely known, become “self-disfulfilling.” (Now ain’t that a great academic term. I picked it up interviewing a Nobel laureate.) This is to financial physics what Heisenberg is to electrons. (When you shine the light of day on something, be it an electron or a secret formula for success, the mere act of shining changes the trajectory of what you’re looking at.)
Anyway, click HERE to see what the statistically savvy folks at Morningstar have to say about the Dogs. They don’t say it’s a terrible strategy, either, just that it may not be quite all it’s cracked up to be. (Heisenberg, unaccountably, is missing from their analysis.)
I know it’s a pain to click and wait, and you’re wondering why I don’t save you time and just stick their copyrighted column right here. But if you don’t think I’m saving you time, check out the URL we had to type to make HERE work — http://text.morningstar.net/news/Ms/strategist/dogs/whyitmightnot.html.
Move over, antidisestablishmentarianism.
Quote of the Day
In 1800, 75% of [an American's] working man's expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%.~The Wall Street Journal, September 20, 1996
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