'Dow Five' is a popular and profitable strategy among investors

The Ticker

October 18, 1995|By JULIUS WESTHEIMER

IN BOTH STRONG and weak stock markets, people continue to ask about the astonishing "Dow Five."

It's a strategy that since 1973 would have returned $712,000 (!) for a one-time $10,000 investment. Average annual return: 20.6 percent.

The "Dow Five" strategy is a five-stock, high yield-low price technique.

Because low-priced stocks climb faster than high-priced shares, the "Dow 5" uses the five lowest-priced of the 10 highest-yielding stocks in the Dow Jones industrial average.

Each year, on the anniversary of the first purchase, investors rearrange the list if any of the "Dow Five" have changed. If not, the investor sits tight.

Early this week the "Dow Five" were Chevron, Eastman Kodak, GE, 3M Corp. and Sears. Your broker has details.

WHERE TO LOOK: Where are the best "retirement" jobs? According to October's Money, they are:

(1) Consulting. ("The powerhouse of the next 10 years.")

(2) Temping. ("Temporary jobs are big business, mostly in accounting, legal, sales and marketing.")

(3) Franchising. ("Should grow 10-12 percent annually. Good opportunities for oldsters in accounting, tax services, advertising, direct mail, real estate sales.")

(4) Computer engineer. ("America's hottest category, demand will double by 2005.")

(5) Physical therapy. ("Another hot area, openings to rise 88 percent by 2005.")

(6) Teacher. ("Best areas in special education, including for disabled and chronically ill.")

COLLEGE AHEAD? "Conventional wisdom says parents, hoping to save taxes, should build college funds by transferring assets to children.

"But this may be wrong. When your child reaches 18, he or she is entitled to the money, no strings attached. There's no guarantee the money will go for college.

"Better way: Keep funds in your name. Buy low-dividend, growth mutual funds, and when it's tuition time give appreciated securities to your kids, who then sell shares and pay gains tax at a lower rate." (Moneypaper)

HOT OFF PRESS (1): Money magazine, November, just out, ranks "Baltimore Stocks" No. 4 of 24 cities under "3rd-Quarter Change Over 2nd Quarter," up 12.9 percent.

(2): "It's fashionable today to tell folks to put everything in stocks. This is the worst advice you could give them." (Mark Hulbert in the new Forbes, Oct. 23.)

WRONG DIRECTION: "The median U.S. wage-earner in September 1979 earned (in inflation-adjusted dollars) $498 a week, or $25,896 a year. In September 1995, he or she took home only $475 a week, or $24,700 a year.

"In 16 years he or she suffered a wage cut of about $100 a month, or 4.6 percent." (New Yorker, Oct. 16, in "Who Killed the Middle Class?")

HOPEFULLY HELPFUL: "Dealing with the IRS is scary, but this fall things get scarier.

"Already under way is a long list of queries known, ominously, as 'The 27 Questions,' an audit tool to dig out hidden income folks aren't reporting. Heaven help you if you're chosen. It's like a strip search.

"Advice: Don't meet IRS people yourself, but send your tax adviser instead. And never let IRS agents visit your home or office unannounced." (Forbes, Oct. 9.)

MID-MONTH MEMOS: "Buy utility stocks over T-bills for better growth of principal and income." (Mark Luftig, utility analyst, on "Wall Street Week" last Friday.)

Consumer Reports, October, says, "In Maryland call (800) 492-6116 for auto insurance questions and complaints."

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