A couple weeks ago, Andrew Hallam wrote an article about the book Beating the Dow written by Michael O’Higgins. One system is to finding the 10 highest-yielding stocks in the Dow Jones industrial average. Dogs of the Dow 10 – buy the stocks in equal proportion. The second strategy was called Dogs of the Dow 5 – buy the 5 lowest priced stocks among the top 10 yielders. The idea is to invest in blue-chip companies that have fallen on tough times – they have a huge infrastructures, long histories, extensive customer bases and big revenue streams. Generally, something will come along to fix the companies to push them back to past glories ie new management; strategic changes.

At the end of year one investors reassess their portfolio and stocks that no longer meet their original criteria are sold and new ones are bought.

Between 1991 and 2016 the $10,000 would have risen to $201,000. This is a very healthy return the problem would have been between 1995 and 2005 the strategy did not work. This is when many people would have changed strategies. Mr. Hallam believes rather than jump between strategies, you should try to find a successful one and stick to it. Knowing the market sometimes favors growth investors; sometimes it favors value investors. Mr. Hallam says whether you are a growth investor, value investor, index-fund investor or a high dividend investor stick to the method because all of them work over long term and 10 years is not long term.

There is mountain of evidence that buying index funds is a great long term method because the company which manages the indexes drops off losers and adds winner every 6 months or a year. If you only have a fund with winners it will go up over the years.

If you are a dividend fund books to read include: The Future for Investors by Jeremy Siegel and Michael O’Higgins Beating the Dow.

Growth investors should read Philip Fisher’s Common Stocks and Uncommon Profits.

Value Investors should read Benjamin Graham’s The Intelligent Investor

Everyone should read Howard Schilit’s Financial Shenanigans: How to Detect Gimmicks and Fraud in Financial Reports.

Linking to dividend paying stocks, investing in profitable companies that pay dividends from their profits is a good way for your money to grow in the long run. Sometimes the price goes up as the others see how good the companies are (trade at higher multiples) but the reason you buy them in the first place is the dividend payments. Over the years they increase and you are wealthier. As the dividends increase the shares go up, split and soon your net worth has increased because you had the foresight to invest in good companies.

There are more questions than answers, till the next time – to raising questions.