Hi Neko S&p 100 highest top 10 dividends stock as a value selection method. He wrote stocks for the long run. It parallels the dow dogs method
High dividend yield implies either a utility/monopolistic type stock with little growth prospect and as such has to make up the difference by paying a higher yield, or it implies a stock under stress (below average price) and that could either continue on further down, perhaps to zero, or possibly recover and rebound strongly. The latter implies high risk/high potential reward. The higher risk implies a higher volatility which drags down annualised rewards (10% each and every year is better than alternations of 20% one year, 0% the next i.e. 1.1 x 1.1 > 1.2 x 1.0). Being higher risk you'd expect to be rewarded more than that of less risky alternatives.
Often value (such as above average yield stocks) and growth (such as small cap stocks) move counter-cycle to each other, so you might have a volatile growth progression of 0% one year, 20% the next when value might produce 20% one year, 0% the next. A combination of the two in equal amounts therefore averages 10%, 10% ..etc.
Total stock market (TSM) in contrast, being relatively safer than either value or growth alone might yield 9%, 9% ... etc, so the blend works out better than holding a TSM alone, whilst in terms of risk a combination holding both value and growth in two separate halves is similar to holding a form of TSM and hence TSM like risk expectation.
So Siegel's value selection criteria might be considered as OK, but perhaps not as a sole exclusive investment method alone. 25% value holdings, 25% growth, 50% cash could be an option. Or use a more dynamic allocation/weighting by letting AIM adjust the amounts held over time in a likely sensible and appropriate manner. i.e. one AIM of 25% value stocks, 25% cash and another of 25% growth stocks, 25% cash perhaps.
If you go for individual stocks make sure you hold lots of different ones (diversify) and don't invest much in any one individual stock, so if any one does go broke its a relatively small loss compared to the total amount invested. ETF's are a good alternative to the multiple individual stock route as they already hold relatively small amounts in a wide range of holdings.
If you do opt for the individual stock route, then you can just bunch a set of stocks into your own virtual ETF and AIM the collective total stock value for all of those individual holdings. You can buy or sell individual stocks as you see fit providing you keep the overall stock value to be around the same as indicated by AIM.
Best. Clive.
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