Question: Small dogs of the Dow and other beginner friendly ideas

Discussion in 'Learn how to trade or invest by asking questions' started by Pimemoriam, Sep 29, 2017.

  1. Pimemoriam

    Pimemoriam New Member

    First of all hello everybody!

    I am currently 21 years old living in Germany and studying mechanical engineering.

    Recently I had the chance to do my bachelor thesis at a big company and they pay good money for it. Because I am also an avid photographer I recently spent a large part of my savings to acquire new gear. Even though I don’t regret doing that at all I still feel like I should start working on a regular saving plan and decided now that I have a (for me) large income of 800€ a month I could invest 500€ a month in stocks.

    I am totally fine with the risks involved as long as the idea behind it is long term saving and money appreciation. I realise that I could potentially (although unlikely) lose money for a decade before the market is favorable for me and I start to generate some extra money (which I would reinvest). I have now spent the last 2 weeks reading several books and plowing through websites and posts and I have to say the more I learned the less I seem to know. From what I know the small dogs of the Dow strategy might be a good strategy to employ as it is very simple and apparently the only requirement is discipline over a long period.

    Thing is I have also read several posts saying it is all bogus and one should rather buy large indexes.

    I also looked at the current small dogs as well and it seemed like buying Coca-Cola, General Electrics and Pfizer seemed like a really stupid idea so only Intel and Cisco Systems are good stocks to invest in at the moment and for the future. I assumed this is due to the nature of the strategy and the idea was that the 2 good ones would bail out the bad ones and at some point one of those 3 weak ones would maybe become a good stock and bail out other bad ones and so on. Now the obvious idea was to not buy those 3 weak ones and replace them with better looking ones. Thing is I can’t believe it would be that simple to improve this strategy and I’m afraid by trying a stunt like that I might ruin the overall idea of the strategy and that way simply lose money. Is there something I am missing or is modifying the Dogs strategy a valid approach?

    I had the feeling the strategy was mostly designed for people who do not want to spend the time to look after their investment and just set it and forget it. So if I was willing to spend the time would it be realistic to improve that strategy?

    Again thanks a lot for your help and please feel free to correct me on any mistakes I might have made.
    Last edited by a moderator: Oct 2, 2017
  2. Acstudio

    Acstudio Well-Known Member won penny contest 44x won weekly contest 40x won weekly contest 41x simulator winner 20x

    I believe buying something when it is down is as good a strategy as any and I wouldn't limit myself to the DOW. And if you want to actually increase your probability of profit learn how to sell options against stock positions to reduce cost basis over time...see "covered call" for starters.

    If your goal is to outperform a benchmark, in this case the DOW, the only way to do that and get predictable results is by lowering your cost basis. And the only way to lower cost basis is to give up potential upside by selling something against it. As in a "covered call".

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