Understanding Investment Strategy - 'Dogs Of The Dow'

  • Jan 05, 2019 AEDT
  • Team Kalkine
Understanding Investment Strategy - 'Dogs Of The Dow'

The investors need to carefully analyze the macroeconomic factors which have been impacting the global stock markets before taking any decision in the present environment. The macroeconomic factors are impacting the global markets, and these factors are also impacting the investors’ sentiments. Let us try and understand the strategy named “Dogs of the Dow.” As in the name suggests, the strategy takes into consideration the stocks which are in the Dow Jones Industrial Average. According to the strategy, the market players need to pick out top 10 stocks which are possessing the highest dividend yield. The market players need to make a note that this should be done when the last trading session of the year is completed.

When the new year starts, as per the strategy, the market players need to deploy the amount in every stock which has been selected by them. The deployment needs to be of the equivalent amount. It can be assumed that the “Dogs of the Dow” strategy is for the investors who are willing to invest for the long-term. The investors need to keep the stocks in the portfolio for the entire year. Also, this exercise needs to be repeated whenever the new year commences.

However, the market investors should be aware that the strategy would be less reliable for the traders as it happens to be a strategy for long-term investors. Moreover, it can be said that the strategy is to be used by the players who are not very much active in the stock markets as they are busy to take out time to track the everyday news of the broader markets. However, the strategy can also be adopted when the investors run out of the options to trade in the markets or when they are in the dicey position. In these types of situations, the market players find it very difficult to participate in the markets largely because there are several factors which are weighing over the markets. The investors need to carefully analyze the global market environment as well as macroeconomic factors before they decide to enter the equity markets.

In the present scenario, the global markets are being exposed to several risk factors. One of the crucial factors which are weighing over the investors’ mind is the slowdown in the economy of China. This slowdown is being witnessed largely because of the trade war between the US and China. However, the market players need to note that the efforts have been made towards the settlement of the trade dispute. If the trade battle settles down, there are expectations that it would help the global markets and the sentiments of the investors.

With this slowdown, there are increased fears about the weakening of the global economy. It is important to note that when financial markets encountered a downturn, it also impacts the oil markets. This happens primarily because with the weaker financial markets there are increased tensions related to the global slowdown which further increases the concerns related to the oil demand.


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