MOAR Than Dogs of the Dow

One of the most significant investment mentors I have is a guy named Michael O’Higgins. 

Until last month, we had never met, despite the fact that he gave my book, Millionaire Teacher, a very kind pre-publication endorsement.

O’Higgins was recently in Singapore, capping off his annual round the world holiday.  We shared a few laughs over a meal, and the best selling investment author—who’s an extraordinary investor– shared his latest money making strategy with me.

It’s a value based indexing method that anyone could follow.  And it would have gained 14% annual returns over the past 39 years.  Its worst performance would have been a drop of just 5% in 1981, so it’s geared towards investors who want to sleep soundly at night.

I outlined the strategy for Assetbuilder here, and it will soon be featured in an upcoming Canadian Business article, once I finish the final touches. 

 





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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8 Responses

  1. Larry C says:

    Hi Andrew,

    You mentioned that Michael's strategy was designed for people who want to sleep at night. What if you're looking for more risk (eg. most of your savings is in a good government pension)?

    In that case, did you get a sense if Michael would recommend increasing the equity or gold/platinum component and reducing the government bond component?

    Is his desire for governments bonds a way to reduce volatility so people don't bail out or is he concerned about deflation and falling stock prices and thinks these bonds will actually provide positive returns?

    Any insights?

    Thanks,

    Larry

    • Hi Larry,

      I just know that Mike created a model for the lowest historical volatility coupled with the highest gain. You have to admit, the returns have been outstanding, no? And the volatility has been low. Reaching for more than these returns could spell trouble, perhaps. After all, it has beaten the market, and with less volatility. Having said that, history is one thing, the future can be another.

  2. Barry says:

    I was surprised that Greece was not in there?

    40% Dogs of the world: 8% France (EWQ); Poland (EPOL); 8% Spain (EWP); 8% Russia (RSX) ; 8% Italy (EWI).

    I see MOAR was able to produce a 27.49% gain in 2009

    I also read "Since 1971, this investing approach would have produced compound average annual returns of 14.65% versus 9.84% for the S&P500, with only three mildly losing years ranging from –5.07% in 1981 to –0.71% in 2008 compared to the S&P’s nine losing years, some of which, such as 2008, were as large as –37.00%"

    Barry

    • Hi Barry,

      Mike refers to the cheapest investable countries. This would rule out any country index unavailable on the NYSE. I also made the selection look a bit simpler than it is. He has a slightly more complicated method of valuing the markets; he uses a form of "earnings" measurement. I get into more detail with my upcoming Canadian Business article.

  3. Rick says:

    Is there a site that lists the worst performing indices?

  4. Phil says:

    Hi Andrew – can you check the link to the Assetbuilder article again? Already have the book!

    Cheers.

  5. Larry C says:

    Hi Andrew,

    A couple of points about the MOAR.

    I found an interesting article from Michael posted on his website that showed how his Moar strategy performed from 1971 to 2011. Up until 1999, MOAR and the S&P were pretty much equal performers. After 1999, MOAR really started to outperform because of the strong performance of gold and bonds. I couldn't find out how much buying the Dogs of the world stocks helped performance because he didn't separate that component out of the total MOAR return.

    First concern, I wonder how a portfolio of 25% S%P, 25% gold, 25% intermediate, 25% long term bonds would have performed compared to the MOAR. Is it appropriate to compare MOAR to only the S&P 500?

    Second concern if your are Canadian or Australian, your returns using MOAR would have been a lot lower because your currency has appreciated so much compared to the US dollar since 1999. For example, the Canadian dollar is up about 40% vs. the US dollar since 1999. This would reduce your return on gold and on the Dogs of the World stocks which are both priced in US dollars. But then again, from 1971 to 1982, the Canadian dollar performed well vs the US dollar. Perhaps they balance each other out. I don't know.

    Is it worth it for use Dogs of the World instead of TSX for your 25% allocation when you factor in currency risk? Maybe today it's a good idea to take on currency risk if you believe the Canadian dollar is overvalued vs. the US dollar? So complicated; more questions than answers!

    • Very good eye, and some valid concerns Larry. I don't think the currency differences would make much of a long term difference—the U.S. dollar, during other time periods, also crushed the Aussie dollar (and others) so I think it would work out as a wash over a lifetime, especially considering the diversification across currencies. This strategy, however, didn't beat the market until the last dozen years. Well done pointing that out. I will be sticking my my tried and true investment method, but this strategy is fascinating to discuss and examine.

      Cheers,

      Andrew

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