Well what better time to provide a final update to my Dogs of the FTSE portfolio than when everything seems to be spiralling downwards into despairing oblivion!
Dogs of War
So one year on and my 5th experimental portfolio has, like many other portfolios, seen far better days.
As a reminder, here’s the Dogs of the FTSE strategy:
- Choose the ten FTSE 100 shares with the highest yield (subject to my criteria*)
- Invest equal amounts in all ten shares
- Hold for a year (give or take a week)
- At the end of the year, sell the ones no longer in the top ten, replace with new shares with highest yield
- Repeat from step 3
[*criteria being that shares already in my portfolio are not included, nor any where a dividend cut has been announced]
Here’s how the 2021/22 portfolio looked as at 10th June 2022:
A loss of –8.06%, but nearly breaking even at -0.26% if you include dividends paid out.
Over the same period, the FTSE 100 Total Return was 3.45%.
OUCH – look at those losses, especially the -85.96% loss suffered by Polymetal International, caught in the crossfires of the Ukraine war.
If I remove Polymetal, it would have been pretty much evens at 0.07%, and a nice 8.10% including dividends, but that’s not how it works, the strategy meant that I had to live with the bad Dogs as well as the good. Hey ho!
So, did the Dogs beat the markets? Looks like we might need a VAR check…
Year 1 (2017/18): Dogs 1% vs FTSE 100 TR (for same period) 0.85% – 1-0 Dogs (VAR check….)
Year 2 (2018/2019): Dogs 16% v FTSE 100 TR -2.02% – 2-0 Dogs
Year 3 (2019/2020): Dogs -11.7% v FTSE 100 TR -9.6% – 2-1 Dogs
Year 4 (2020/2021): Dogs 21.78% v FTSE 100 TR 18.68% – 3-1 Dogs
Year 5 (2021/2022): Dogs -0.26% v FTSE 100 TR 3.45% – 3-2 Dogs
VAR check on Year 1 gives the Dogs the win, so Dogs ‘beat the market’ 3-2 (however it was really a draw, wasn’t it?!)
Until recently, I hadn’t really considered why I was even running this experiment.
Mostly it was out of curiosity, I wanted to see if the strategy would work, and I thought it would be fun (spoiler – it was! 😀 )
However, ultimately, I think I was seeking a strategy which took the emotions out of investing, a strategy which had an element of ‘spoon-feeding’ – here I was being told what to buy and when to buy, and what to sell and when to sell. Easy peasy investing!
I have to say during times of volatility, my Dogs portfolio was the only part of my investments which I could look at and honestly shrug without a care, because I knew 100% I wouldn’t be doing anything with it since the strategy didn’t allow me to.
With the other parts of my portoflio, there was always the choice to do something and we all know that in investing, it’s not always easy having to decide to do nothing.
Whilst the strategy took all the emotion and decision-making out of investing, it was totally inflexible in that you couldn’t make any changes to the portfolio in reaction to world events, eg war/pandemic, although I guess that’s the whole point of it!
You could argue that if not for the pandemic or war, the outcome might have been different but there’s always some other world crisis which jiggles the markets in some way.
It was my intention to run this as a 5-year experiment so this is, sadly, the Dogs’ last outing. For now.
If the economical outlook didn’t look so dire, I would have probably continued with it, or thought about doing a sister Dogs of the FTSE 250 portfolio but I think right now, with my serious head on, I need to rein in this fun side of my investments and knuckle down until things improve.
Since this is the end, there’s no need for me to kick out unwanted mutts at a loss (to bring in new ones), I’m just going to wait for the market to recover and then see what happens.
I’ll likely be hanging on to some of the Dogs long term, possibly adding to a few, as part of the income producing part of my portfolio.
So, it’s goodbye from the Dogs..until we meet again!
In the meantime, keep calm and carry on investing!