An old-fashioned term for a very relevant investment strategy

Widow and Orphan Stock: An old-fashioned term for a very relevant investment strategy

Widow and Orphan Stock: An old-fashioned term for a very relevant investment strategy

At one point, both the widow and the orphan faced an uncertain future and a serious need for income. Write “Widow and Orphan Stock” – basically shares of blue-chip companies with a solid track record of profits and dividends.

They promise reliability and returns for weak investors through established and profitable companies that are less susceptible to cyclical ups and downs. You don’t get the risky stock offer of growth, but you do get relative security and a steady return.

David Christianson, a certified financial planner and portfolio manager at National Bank Financial Wealth Management in Winnipeg, Canada, says it’s been almost a century since the term “widow and orphan stock” first appeared, and much has changed since then.

“[The term] “When people think the stock market is a place to speculate, to enrich it, to bet on the next big thing, to make a big, quick return,” said Christianson.

And today? In this volatile market, everyone can benefit by behaving like widows and orphans.

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This technique is the secret sauce

While the term is outdated, Christianson says the principle behind it survives – in fact, it has replaced other strategies for becoming an investment approach.

“In general, what was called widow and orphan stocks has generally surpassed other classes which are … growth stocks,” Christianson said.

It is not difficult for widows and orphans to find safe and stable stocks. Think of big banks, products or utilities – businesses that provide essential services or products that are still needed regardless of the state of the economy.

Depending on how you define it, some examples might include Verizon (VZ), WalMart (WMT) and power company Exxon Mobil (XOM).

However, experts will remind you that with “low risk stocks”, zero risk is never associated with the stock market.

“I think it’s really important to remember … that [you] Still investing in the stock market, ”said Ryan Gubik, a certified financial planner and founder of MRG Wealth Management in Calgary, Canada. “There is no definite return. Such stocks may have a lower history than some high-risk options, but you can still lose money. “

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Choose your portfolio wisely

The widow-and-orphan strategy is annoying, but it has a track record of working.

Gubic advises his clients and DIY investors who follow this procedure to remember to stick with it. You don’t follow your gut or insights about any way I think so The market will go. Instead, evaluate your goals, how much risk you can take compared to how much you are willing to take. Then – and only then – you should pick your investment.

“Let’s just say I feel comfortable with a ton of risk,” he said. And they are, for example, single mothers with three children at home and for many other reasons, the power does not match their comfort level, ”said Gubik.

“A proven recipe that sticks to a plan and a strategy for the long haul that helps people achieve their goals, vs. market time,” says Gubic. “And I think that’s a common big mistake that some investors try to make themselves.”

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This article provides information only and should not be construed as advice. It is provided without any warranty.

– With Samantha Emon’s file

This article provides information only and should not be construed as advice. It is provided without any warranty.

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