Foolish Four

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The "Foolish Four" is a discredited[1] mechanical investing technique that, like the Dogs of the Dow, attempts to select the member stocks of the Dow Jones Industrial Average that will outperform the average in the near future.

To identify the "Foolish Four," an investor determines the current dividend yield and current price for each of the 30 stocks comprising the Dow Jones Industrial Average. Then, the yield for each stock is divided by the square root of the stock's price. The stocks are ranked from highest to lowest using the number resulting from the division. The stocks ranking the second highest, third highest, fourth highest, and fifth highest in equal dollar amounts are bought. The highest ranking stock is not bought.

Subsequent review of this technique[1] suggested that it was unlikely to outperform a simple indexing strategy, and, after an extended period of resistance, the Motley Fool discontinued its promotion in December 2000.[2] [3]

References[edit]

  1. ^ a b Ann, Coleman (December 14, 2000). "Foolish Four Research Results". The Motley Fool. Retrieved 2 January 2013. 
  2. ^ Gardner, David, and Tom Gardner (December 11, 2000). "Farewell, Foolish Four". The Mottley Fool. Retrieved 2 January 2013. 
  3. ^ Ann, Coleman (December 29, 2000). "Fool Four Moves On". The Motley Fool. Retrieved 2 January 2013. 

External links[edit]