Welcome, new readers!
On April 18, 2007, the Dow completed its recovery of losses from the correction to close at a new record high above 12,800 points. One week later, on April 25, 2007, the Dow passed 13,000 for the first time in trading and closed above the milestone at 13,089.89.
Today, we continue higher.
Everyday, stock investing individuals are subjected to an infinite onslaught of financial investment ideas and data, which thanks to the information age, only seems to increase exponentially over time. As the financial noise that forever surrounds us is amplified, we are distracted and derailed further from the objective of what should be a tangible task at hand – that of making money in stocks; minimizing risk and maximizing returns.
In a so called “financial black-hole”, thousands of equity investment vehicles can be found for any individual to choose from. While many are represented by professional talking heads who at least guarantee to profess fortune telling wisdom, nothing can be more frustrating than to later discover that the vast majority of mutual funds and their respective financial gurus, under-perform the returns of the stock market averages (as represented by the S&P 500 benchmark index) year in and year out.
It has often been said if one prefers to eliminate most Wall Street odds associated with stock investing, along with the demanding time required for company research (and not to mention the brain damage!) you are best served by simply investing in an S&P 500 Index fund, and then just walk away. Many investors spend time chasing hot stocks (sometimes only to ride them back down!), including jumping in and out from a pool of 14,000 funds, only to under perform the market every year.
In the long run, the S & P 500 and many Index Funds for that matter, are a better choice than virtually all other alternatives for passive investors. (FYI: for the past five years, the S&P 500 has beaten approximately 73 percent of large-cap managed mutual funds, while the S&P MidCap 400 has outperformed 79.7 percent of midcap funds. This does not even take into account the "hidden" fees the said institutions charge yearly. If you buy mutual funds from a broker, you could pay a commission, or "load," of up to 5.75%. Annual expenses can also vary among funds, from 1.5% or more a year to as little as 0.1%. Fix: Choose no-load mutual funds with low expense ratios. You can buy them directly from investment companies such as Fidelity, T. Rowe Price, and Vanguard).
So let’s take a step back in an attempt to turn off all the noise ...
First off, there will always be investment opportunities in certain equities which can potentially better the averages, and secondly, passive vs. active fund debates will continue on forever. (This is not the intent of this blog and the topic can be discussed at a later time). But the fact remains that whether in life, on Wall Street (or in lost Vegas), understanding and evaluating the odds presented before you is the key for greater success and a winning outcome overall.
Having stated the above however, and finally unveiling the fundamental nature of this blog, there is one strategy I have explored, fine tuned and back-tested for sometime which seems to continue to outperform the S&P Indexes considerably in both short and longer term. Though it may initially come as a surprise to many, this reliable and profitable strategy simply focuses on a collective stock universe of only ... 30 companies!
In essence, this Dow Jones Trader “blog” is best summed up and represented as follows;
If The Dow Jones Industrial Average is a price-weighted average of ultimately 30 top blue-chip stocks that are generally the leaders within their industry, then how successful can one really be if we were to limit ourselves to only trade the Dow 30 component stocks, and nothing more?!
Recognizing these are all real proven solid companies, with real earnings, and which constantly have tremendous institutional support at any given time, The Dean Jones Trader (DJTP) is a trading portfolio with a focus in capitalizing on positive momentum shifts and riding the trend until a reversal confirms it is time to "sell". We are using a relatively straightforward proprietary technical system: When price moves above the prime average and money flow is positive, we "buy". When price moves below the prime average and money flow is negative, we "sell"!
The Rules?
The Dow Jones Trader portfolio began with a cash position of $100,000 in January 1, 2007, and every "buy" position is executed with an initial commitment of $10,000 flat or in $5,000 increments thereafter. In turn, all "sell" orders are executed when diminishing or weak institutional support and a breakdown in technicals is confirmed. The process then continues full circle. Furthermore, there is no minimum or maximum number of stock positions the portfolio can hold at any given time. Depending on both the market's strength and individual stock strength, the portfolio can contain holdings of say 5, 10, or 20 stocks at once.The Philosophy? Simple. Like with any investment and as best said by the legendary Warren Buffet, "Capital preservation is Rule #1 ... and Rule #2? ... Don't forget Rule #1 --- In our Dow Jones Trader portfolio you will notice there are rarely any losing stock positions! ... With an aversion to risk, all losers dipping below -5% in the Dow Jones Trader portfolio are almost thrown out immediately, and we let the winning stocks run. Conversely, if the entry "buy" point is proven to be wrong, (i.e. a losing position), we figure at $9.99 per trade there is no shame in tossing out that sour acquisition and then continue to focus on the next opportunity. It can be viewed as a small price to be pay for say, "insurance"!
Again, Rule #1 is the only rule to invest by, period.
In having communicated this strategy to several friends and family members who subsequently then seemed to say, "now show me the money!", I have decided to expose this Dean Jones Trader portfolio (DJTP) in the cyberspace spotlight for anyone to follow along and monitor its progress, all within the comfort of this easy access public platform! I will continue to attempt posting any updates regularly and in real time.
Like everything else, in measuring success only time will actually determine its true net worth.
So let the bulls run!
- Dean
“The market is not an invention of capitalism. It has existed for centuries. It is an invention of civilization.”
--- Composition of the Dow ---
At present the Dow Jones Industrial Average consists of the following 30 companies:
3M Co. NYSE: MMM conglomerates, manufacturing
ALCOA Inc. NYSE: AA aluminum
Altria Group Inc. NYSE: MO tobacco, foods
American Express Co. NYSE: AXP credit services
American International Group Inc. NYSE: AIG property & casualty insurance
AT&T Inc. NYSE: T telecoms
Boeing Co. NYSE: BA aerospace/defense
Caterpillar Inc. NYSE: CAT farm & construction equipment
Citigroup Inc. NYSE: C money center banks
Coca-Cola Co. NYSE: KO beverages
Du Pont de Nemours E.I. & Co. NYSE: DD chemicals
Exxon Mobil Corp. NYSE: XOM major integrated oil & gas
General Electric Co. NYSE: GE conglomerates, media
General Motors Corp. NYSE: GM auto manufacturers
Hewlett-Packard Co. NYSE: HPQ diversified computer systems
Home Depot Inc. NYSE: HD home improvement stores
Honeywell International Inc. NYSE: HON conglomerates
Intel Corp. NASDAQ: INTC semiconductors
International Business Machines Corp. NYSE: IBM diversified computer systems
Johnson & Johnson NYSE: JNJ consumer and health care products conglomerate
JPMorgan Chase & Co. NYSE: JPM money center banks
McDonald's Corp. NYSE: MCD restaurant franchise
Merck & Co. Inc. NYSE: MRK drug manufacturers
Microsoft Corp. NASDAQ: MSFT software
Pfizer Inc. NYSE: PFE drug manufacturers
Procter & Gamble Co. NYSE: PG consumer goods
United Technologies Corp. NYSE: UTX conglomerates
Verizon Communications Inc. NYSE: VZ telecommunications
Wal-Mart Stores Inc. NYSE: WMT discount, variety stores
Walt Disney Co. NYSE: DIS entertainment
Recent Changes in the Dow companies:
On November 1, 1999, Home Depot (NYSE:HD), Intel (Nasdaq:INTC), Microsoft (Nasdaq:MSFT), and SBC Communications (NYSE:SBC) joined the Dow Jones Industrial average, replacing; Sears, Roebuck & Co. (NYSE:S), Chevron (NYSE:CHV), Goodyear Tire & Rubber (NYSE:GT), and Union Carbide (NYSE:UK)On March 17, 1997, Hewlett-Packard, Johnson & Johnson, Travelers Group, and Wal-Mart joined the Dow Jones Industrial average, replacing; Bethlehem Steel, Texaco, Westinghouse Electric and Woolworth.
