Hunt the 'Dogs of the Dow' With Mutual Funds
NEW YORK — Investors have long played the game of investing in the "dogs of the Dow."
Once each year, they buy the 10 highest yielding Dow stocks on the theory that these are beaten-down underachievers ripe for comebacks. They hold them for a year, then buy a new year's dogs.
Over the past 25 years, that strategy has delivered annual returns of about 17 percent, beating the 30-stock Dow by a hefty four percentage points a year. Of course, there's no guarantee it will keep working.
But if you want join in the game, at least three US mutual funds allow investors to buy into the dogs of the Dow.
No bones about it, these funds haven't exactly chewed up the landscape in 1997. And like individual investors, some of them add a twist or two to the "dogs" theory.
Hennessey Balanced Fund (800-966-4354) is up 3.3 percent. The fund buys the dogs and cushions the risk by burying half the fund's assets in safe US Treasury bills.
O'Shaughnessy Dogs of the Market Fund (800-797-0773) buys Dow dogs along with other non-Dow dogs. Alas. No hot dog here, experts say. The fund was up 0.4 percent through March 31.
Payden & Rygel Growth & Income Fund (800-572-9336) buys both dogs and SPDRS (Standard & Poor's Depository Receipts), which trade on the American Stock Exchange and mirror the S&P 500 index. The fund is up 3.7 percent this year. Woof!