A simple way to stockpicking success

Taking a global approach to the 'Dogs of the Dow' investment strategy could yield big profits. Tim Bennett explains how it works, and reveals the markets most likely to profit.

The Dogs of the Dow' is a well-known investment strategy that involves buying the most beaten-up stocks in the market, betting that they'll bounce back. Now, reports Bloomberg, a paper from David M Smith, associate professor at the State University of New York, suggests the strategy can be taken global you can earn superior long-term returns by buying the world's worst-performing stock-market indices, using low-cost exchange-traded funds (ETFs). So how does this Dogs of the World' strategy work?

The logic behind the original Dogs strategy is to buy the stocks in any given index the Dow Jones, or FTSE 100, say with the highest dividend yields. A high yield suggests the stock is out of favour with investors (because when prices fall, the yield rises, assuming that the dividend payout stays the same). Why buy such battered stocks? Because markets often overreact.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.