I was so impressed by the performance of M’s ‘Underdogs’ portfolio (using the Dogs of the FTSE strategy), the winner of my Monkey Stocks League Challenge, that I was determined to set up a similar portfolio of my own.
Dogs of the FTSE?
The Dogs of the FTSE strategy is the UK equivalent of the US ‘Dogs of the Dow‘ strategy and setting up this portfolio is relatively simple:
- Choose the ten FTSE 100 shares with the highest yield.
- Invest equal amounts in all ten and hold for a year.
- At the end of the year, sell the ones no longer in the top ten, replace with new shares with highest yield.
- Pocket profit / reinvest / cry at losses* (*delete as applicable)
The rationale is that “a high yield indicates that a company is out of favour with investors. When that happens, its shares will be undervalued relative to its prospects and intrinsic worth. When the market realises this, the firm’s share are likely to rebound and give investors a decent profit.”
Still, according to Money Observer, over the past 15 years, the Dogs strategy has performed impressively, though of course, past performance is not a guarantee of future results, etc, etc. (*update 01/03/17- here’s Money Observer’s article about the success of the 2016 Dogs).
The strategy was considered back in 2010 by the ermine, although I can’t find an updated post on whether he followed through on it or not.
I could have just set up a ‘notional’ Dogs of the FTSE portfolio like other sound-minded folk, but risking some real money makes it more interesting for me and worth the effort of tracking the progress of the portfolio. Risking real money also satisfies my gambling gremlin!
I received a bonus from work as part of my severance package so decided to invest the entire lot (as close to) in this ‘experiment’. Note that this will lead to a massive boost to my savings rate for this month!
So, who are the mutts in my Doghouse?
- AstraZeneca plc (AZN)
- Capita plc (CPI)
- HSBC Holdings plc (HSBA)
- Intu Properties plc (INTU)
- Marks & Spencer Group plc (MKS)
- Persimmon plc (PSN)
- Royal Dutch Shell Plc (RDSB)
- Royal Mail PLC (RMG)
- SSE plc (SSE)
- Standard Life plc (SL)
Some of these were actually just outside the top 10 but I didn’t want to include any shares which I already held in my portfolio, or any where a dividend cut had been announced (hope I haven’t missed any announcements…).
The shares were purchased on 10th February 2017 (via regular investment to reduce costs). Here’s the live link, which I’ll stick on my header menu at some point. I’ll probably do quarterly or half-yearly updates.
Yes, I’m aware that this strategy is on the risky side, though not as risky as randomly and blindly selecting shares out of the hat like I’ve done before… However, these stocks represent only a small part of my portfolio, it’s a bit of fun (gosh, should investing actually be FUN?), plus I may make some profits along the way. Or not. This will also expose me to the pleasures/perils of buying and selling as opposed to my usual buying and holding strategy.
I was a little concerned at first about the timing of my purchases – stock market is currently high and likely to dip in the year with Brexit/Article 50 triggering, the end of the Trump rally or more shenanigans and other stuff happening in the UK and around the world which may affect the financial markets. Should I have waited to buy low?
I went ahead anyway because stuff happens all the time and I don’t know how to time the unpredictable market. Plus the money would be doing nothing if left to sit in my bank account, except to tempt me to spend it!
Anyone else tried this strategy before?
I’d be interested in any success/sob stories!
Anyway, have a great weekend all!