The Beginning Investor's Kit

Do you want to invest in the market but don't want to spend much time researching stocks or mutual funds? Consider using the Dow Dividend Strategy, otherwise known as the "Dogs of the Dow."

When a radio announcer crows, "The market was up 40 points today," he's probably referring to the Dow Jones Industrial Average. It is an index of 30 large companies that reflect America's industry. Retailers like Sears and Wal-Mart, financial companies like American Express and Citigroup, oil companies like Exxon and Chevron, tech companies like Hewlett-Packard and IBM, even Disney and McDonald's are part of the index.

The Dogs of the Dow strategy requires that you buy ten Dow stocks with the highest yield--the ratio of the dividend that the stock pays relative to its current trading price. Typically, these ten stocks provide a high yield because their stock price has been beaten down by investors for poor company performance or a bad industry outlook, hence the name Dogs of the Dow. In theory this strategy works because it allows you to invest in a company with historically good fundamentals during a time when its stock price is relatively cheap.

The Dogs of the Dow investing strategy is simple to do and takes less than an hour every year. Best of all, it has produced good returns compared to the performance of the Standard & Poor 500 stock index, a wider measure of stock performance.

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