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The Surprising Investing Strategy That Made Money in a Horrendous 2022

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This has been a terrible year for the stock market, and many investors have found themselves with huge losses compared to where they started the year. All in all, the Dow Jones Industrial Average (^DJI 0.11%) actually managed to hold up far better than broader benchmarks like the S&P 500, but it still came into the last week of the year down almost 9% from where it started 2022.

Those who had hoped to avoid losses by putting some of their money into the bond market were equally disappointed, as many bonds actually lost more ground than the Dow.

Interestingly, though, one strategy that many people have followed for years not only managed to outperform the struggling Dow Jones Industrials but also looked poised to eke out a modest gain for the year. Those seeking a simple approach (that’s easy for even brand-new investors to follow) often turn to the investing method known as the Dogs of the Dow, because it involves making just a single decision each year and then sitting back to see what happens.

Below, you can learn more about why the Dogs of the Dow were so successful in 2022 and see what might be ahead for 2023.

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Image source: Getty Images.

Why investors love the Dogs of the Dow

If you don’t want to spend a lot of time on your investing, the Dogs of the Dow strategy has a ton of appeal. Following the strategy involves investing in just 10 stocks, which isn’t enough to form a well-diversified stock portfolio by itself but can complement other individual stocks or various exchange-traded funds and mutual funds.

Here’s how the strategy works: At the beginning of each year, you look at the 30 stocks in the Dow Jones Industrials and put them in order by dividend yield. The 10 top-yielding Dow dividend stocks become the Dogs of the Dow for the coming year. Buy those stocks in equal dollar amounts at the beginning of January, and then hold them for the entire year.

You don’t have to do anything along the way except collect dividend checks. And if you want, you can do the same thing the following year, holding on to any stocks that stay on the list and selling those that no longer qualify to buy the newcomers.

2022 performance: Dogs of the Dow vs. Dow Jones Industrial Average

Dogs of the Dow (Decline) Dow Jones Industrial Average
(1.6%) (8.3%)

Data source: DogsoftheDow.com. As of Dec. 23. Based on price change only and omits positive impact of dividend payments on total return.

As you can see from the chart above, 2022 was a great year for the Dogs of the Dow. In fact, if you add in the dividends that the 10 stocks paid during the year, it extends the edge the Dogs had, and it also pushes their total returns into positive territory by about 2%. That might not be a lot, but it’s better than the steep losses most stock investors suffered this year.

It’s not surprising to see the Dogs do well, though, because 2022 was a great year for value stocks. The Dogs of the Dow tend to do well when value investing comes into favor, because it’s often the most beaten-down stocks in the Dow whose yields rise enough to make the Dogs list. Moreover, value investors like the stability and reputation that come from being a Dow component stock.

Two stocks were largely responsible for the Dogs’ big win. Chevron (CVX 1.26%) jumped more than 50% on the year, buoyed by persistently high energy prices that rebounded sharply from the disruptions early in the pandemic.

Also, drugmaker Merck (MRK 0.23%) posted gains of around 45%, with strong sales of its cancer drug Keytruda and the excitement generated by its innovation in working toward a potential cancer vaccine that’s personalized to individual patients’ needs.

Starting a streak?

To be clear, the Dogs of the Dow don’t always beat the Dow Jones Industrials. With growth stocks having done so well recently, the Dogs’ win in 2022 will be the first in four years for the strategy. Yet for those seeking simple investing approaches, the Dogs of the Dow remain attractive — and proponents have high hopes for another year of outperformance in 2023.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool has a disclosure policy.

 

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OMERS names capital markets head as next chief investment officer – The Globe and Mail

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Ontario Municipal Employees Retirement System (OMERS) has named capital markets head Ralph Berg as its next chief investment officer, succeeding Satish Rai.

Mr. Berg starts as CIO on April 1 after two years as global head of OMERS Capital Markets, where he oversaw the public-market investments that make up more than half of investment assets at the pension plan.

In April, Mr. Rai will move to an advisory role and plans to retire from OMERS late in 2024. He has been CIO since 2018 and also led OMERS’ capital markets arm during his eight years at the pension plan, while helping guide its expansion into Asian markets. He was previously CIO at TD Asset Management, a division of Toronto-Dominion Bank.

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Mr. Berg has been at OMERS since 2013. He joined the pension plan as global head of its infrastructure arm after a career in banking at Credit Suisse Group AG and Deutsche Bank AG.

“Ralph is a proven investor and a seasoned executive,” said OMERS chief executive officer Blake Hutcheson, in a news release.

Mr. Berg’s successor as head of capital markets has yet to be announced.

OMERS had $119.5-billion of assets as of June 30 last year. Over Mr. Rai’s tenure as CIO, it has shifted more of its assets from public to private markets, which helped OMERS post steady results in the first half of last year, losing only 0.4 per cent despite difficult market conditions.

That came after two volatile years in the COVID-19 pandemic that included an 11.4-per-cent loss in 2020 – when OMERS marked down real estate and private equity holdings that were affected by strict public health measures – and a rebound in 2021 that saw the plan’s assets gain 15.7-per-cent.

As Mr. Rai prepares to step down, Mr. Hutcheson said: “I look forward to his continued commitment and counsel” in his advisory role.

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Ark Invest Cathie Wood: artificial intelligence chatGPT – CNBC

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Forget ChatGPT — an AI-driven investment fund powered by IBM's Watson supercomputer is quietly beating the market by nearly 100% – Yahoo Canada Finance

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The Watson-powered ETF is beating a total market fund by nearly 100%.PhonlamaiPhoto/Getty Images

  • While the language bot ChatGPT has gone viral, a Watson-powered ETF is making nearly double the returns of the broader market.

  • The AI Powered Equity ETF is up 10.4% in 2023, whereas the Vanguard Total Stock Market Index is up 5.67%.

  • IBM’s Watson supercomputer helps balance the fund’s portfolio holdings.

The popular language bot ChatGPT has shown a humanlike ability to render articles, emails, and even dating-app messages. But if you ask it to generate a portfolio that can beat the market, it spits out boilerplate information and reminds you it doesn’t have access to live stock data.

Yet, the $102 million AI Powered Equity ETF (AIEQ), which launched in 2017, has been quietly fulfilling that request so far this year. Issued by ETF Managers Group in partnership with the fintech firm Equbot, the fund leans on IBM’s Watson supercomputer to balance its portfolio.

That 114-holding portfolio is up 10.4% so far in 2023, while the Vanguard Total Stock Market ETF is up 5% over the same stretch.

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Still, as ETF.com highlighted, the former is actively managed, and thus more expensive than the benchmark fund, cutting into actual returns to investors. The AI-powered ETF charges 0.75%, whereas Vanguard’s costs 0.03%. Both funds include JPMorgan and UnitedHealth Group in their top-10 holdings.

Chris Natividad, the chief investment officer of Equbot, said the Watson-powered fund can look beyond standard market data and cull information from tweets and earnings calls, according to ETF.com.

“We’re focused on investment related data, looking at how these different types of signals impact security practices across different time horizons,” Natividad said, per ETF.com.

“The best days of the fund are still ahead of it,” he added. “And just as you’ll see ChatGPT’s responses change and evolve with time and data, so will our fund.”

Meanwhile, ChatGPT’s parent company, OpenAI, this month secured a $10 billion investment from Microsoft this month, and the technology continues to make waves across sectors.

Online media outlet BuzzFeed announced last week it plans to leverage the technology to create content, educators are warning about the bot’s repercussions in schools, and chipmakers are poised to cash in.

Read the original article on Business Insider

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