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The original idea was simple. After the stock market closes for the year, one should select 10 of the highest paying dividend stocks in the Dow Jones Industrials Average. On the first trading day of the new year, one should then invest equal amounts of capital into these 10 stocks. An investor should hold onto these stocks for the entire year and then repeat the process again. However, we feel this process is flawed for just focusing on best-paying dividend stocks is not a great strategy in the era of hot money. We have come up with the Tactical Investor Dogs of the Dow methodology.
The idea here is to invest equal amounts of capital only in the stocks that are trading in the extremely oversold ranges on the monthly charts. Note that monthly charts provide a very long term outlook of what is going and it takes a long time for a stock to move from the overbought ranges to the oversold ranges.
This strategy is vastly superior in terms of returns as it takes more work and more importantly you are putting the concept of Mass Psychology and Contrarian investing into play. One is focusing on stocks that have great potential but are disliked by the masses. History indicates that the masses are always on the wrong side of the markets. Additionally, one does not need to hold the stocks for the year, you hold onto them until they trade into the overbought ranges and then you close the position out and find a new replacement. Tactical Investor Dogs of the Dow Theory
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