Dog Days are Over – Dogs of the FTSE final update

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:

  1. Choose the ten FTSE 100 shares with the highest yield (subject to my criteria*)
  2. Invest equal amounts in all ten shares
  3. Hold for a year (give or take a week)
  4. At the end of the year, sell the ones no longer in the top ten, replace with new shares with highest yield
  5. 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!

Five-Year Experiment

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?!)

Why???

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.

Conclusion

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.

What Next?

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!

6 thoughts on “Dog Days are Over – Dogs of the FTSE final update

  1. Always interesting seeing these types of experiments. Although emotion is taken out of it, so much is still down to luck, such as starting one one day and not a month earlier/later, or going with 5 stocks instead of 10, or 20 instead of 10.

    At least it was only a small part of the overall strategy.

    • Hi David

      Yes, there is a lot of luck to it, as with any investing. If I’d timed the bottom of the COVID markets, then that would have been a massive winning year, if I didn’t have Polymetal, another win etc.

      I’m not daft/confident enough in the strategy to pump a lot of money into it!

  2. That’s interesting weenie. It sounds like the experiment served its purposes especially with being fun too. I often thought of doing something similar myself but instead chose a small but still decent amount punt on crypto (to ride the wave for a bit was the hope), not quite the same though… my dog has run away from home .

    TFJ.

    • Cheers TFJ.

      ‘Punt’ being the right word for your crypto! Hopefully you don’t lose everything but at least you went in with your eyes open to the risk.

      I’m comforted by the fact that I’ve still got my £2.5k pretty much intact which continues to throw off dividends (yield around 7%) until I decide to sell up.

  3. It was entertaining to follow this experiment Weenie, thank you for taking the time.

    Does the FTSE 100 TR count the dividends or just the share price?

    Cheers,

    • Hey Tony
      Glad you enjoyed it!
      I’ve always assumed that ‘Total Return’ meant that it included dividends but I wasn’t sure, so just Googled and got: “The total return for the FTSE 100 includes the price return of index and also any dividends that companies listed on the FTSE 100 have paid out to investors over the period.” So, yes, it counts the dividends! 🙂

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