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Here you will find a few of the more common questions asked by fellow Dogs of the Dow investors.
How does a Wall Street Journal decision to change the composition of the Dow Jones Industrial Average effect the Dogs of the Dow approach?
When the Wall Street Journal announces that they will change some of the stocks which make up the Dow Jones Industrial Average, no action is necessary up until your Dogs of the Dow anniversary date (i.e. the one day per year that you have chosen to adjust your Dogs of the Dow portfolio). Simply continue to hold on to your current Dogs of the Dow stocks. When your anniversary date arrives, choose the Dogs of the Dow and/or Small Dogs of the Dow using whichever 30 stocks make up the Dow on your Dogs of the Dow anniversary date .
The editors of the Wall Street Journal want to ensure that the Dow is composed of 30 large, blue chip stocks which will best serve as a proxy for the market as a whole. As the U.S. economy evolves, so too must the Dow Jones Industrial Average.
We have created a Dow Deletions table listing the changes over the last 90 years.
You will not find a mutual fund that invests 100% of their assets in the Dogs of the Dow since SEC rules dictate that no mutual fund can invest more than 5% of its portfolio in any one stock. As for funds that invest a portion of their assets in the Dogs… The Hennessy Balanced Fund puts half of its assets into the Dogs of the Dow and half into Treasury Bills. The Payden & Rygel Growth and Income Fund invests half of its assets in the Dogs and half in the stocks which make up the S&P 500 index. The Dogs of the Market Fund places half of its assets in the Dogs and the other half in other high yielding stocks. Keep an eye on the fees since they can get well above 1% (per year) of your investment. We believe that fees for index type mutual funds should be well below 0.5% and in fact should be comparable to other index funds with fees around 0.2% (per year). One final note, you should also consider the opportunity costs of these “hybrid” funds. Fifty percent of the portfolio may be placed in investments that may not perform as well as the Dogs of the Dow. If this is the case, there is a cost associated with this diversion of funds.