Some investors use a technique called the "Dogs of the Dow" to invest. They pick several stocks that are performing poorly from the Dow Jones group (which is a composite of 30 well-known stocks) and invest in these. Explain why these stocks will probably do better than they have done before.

Explanation:

Dogs of the Dow strategy works on the principle that by investing in blue-chip companies near the bottom of the business cycle - determined by their high dividend to stock ratio - an investor, in the long term, can outperform the overall market.

Strategy:

The steps for Dogs of the Dow are as follows:

How It Works:

This strategy works because the under-performers in the DJIA (the dogs) are still among the very good companies. Hence, despite going through temporary setbacks, they generally return to health as they adapt to the changing market dynamics.