I was thinking about the Dogs of the Dow the other day and it got me thinking, would something like that work for crypto ? I think it probably could.
For anyone who doesn't know the concept, I'll explain briefly.
The Dogs of the Dow is a long term investment strategy whereby every year you buy 10 of the most promising Dow Jones Industrial Average companies and hold them for a year. The selection criteria is quite simple, it's just the 10 companies that have the highest dividend to share ratio, ie which ones are paying the best dividends as a percentage of their share price.
Apparently it's been tested from today back to the 1920's and its worked every year... It's not important for this topic, but if you want to read more about the actual system then you can find it through this link here (no affiliation to me).
So anyway, this isn't actually about the DotD but a similar system I remember that works on the London FTSE 100 index of the 100 largest companies in the UK (it was just the DotD that reminded me lol).
This system is very similar, pick 10 of the most likely to perform stocks and hold them for a year. In this case, the 10 stocks chosen are the 10 most recent stock to be added to the index.
Why the 10 most recent companies to make the index ? Well it means that those 10 companies have outperformed (or increased capitalisation) over 10 companies that were already in the index and failing, so the 10 new companies must be on the way up.
Now I've never tried this system myself so I can't personally attest to it, but I can see how it's supposed to work and probably does well. In any case, it made me think that maybe a similar system would work for crypto, as new crypto are popping up every single day !
For the record, I don't trade in crypto, never have and probably never will, so this is just an intellectual exercise for me, but someone clever might be able to make something of it. This in no way constitutes financial advice, so if you do it and it loses money, don't blame me....
So, onto the theory -
You find a crypto exchange that lists a lot of coins (like the Dow or the FTSE lists companies). You pick the last 10 coins to be added to the exchange, for the reason that their market capitalisation must have increased to a value where they are now big enough to be listed, and therefore are likely to increase in price further.
Because of the fast pace of new crypto issues, you could have a system modifier to keep it current. Every month for example, you could pick the next 2 coins or so to be listed, and drop 2 of the lowest performing coins from the 10 coins that you picked already. That way you would be constantly 'weeding out' the duds and concentrating on the higher earners.
This is pretty much a stock portfolio technique to grow capital over long periods, but I don't see how it wouldn't work with crypto instead of shares. Then again, I know nothing about crypto so may be missing something here..
Let me know what you think anyway, and if you manage to become a millionaire out of it then chuck a few Steem points my way next year :-)
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Header image credit : discovermagazine.com via Google image search, no affiliation.
Ftse image : investorsbuz.com via Google image search, no affiliation.
Disclaimer : If you blindly act on the advice of strangers from the internet then you're an idiot and probably deserve to lose all your money. There's no fast track to success. Do your own research and make informed decisions based on all available evidence.