Trick play: The best widow and orphan stocks might not be stocks at all
If you're not ready to pick the stocks that could benefit your heirs for decades after you're gone, there's an easy way to get the benefits of rock-solid stocks with even lower market risks. You might consider a low-cost index fund, which lets you ride the stock market's general long-term gains without tying your fortunes to the long-term performance of any particular company or stock.
Let's imagine setting up a portfolio for your future heirs in 1925, referring to the Dow Jones Industrial Average (^DJI +0.58%) index as a source of investment ideas with solid long-term prospects. This Dow Jones Industrial Average only held 20 stocks back then, expanding to 30 in 1928, but most of those industry titans have fallen away over time.
The railroad equipment, sugar refining, and giants of that time, for example, faded out over the next four decades. Leading retailers like Woolworth's and Sears had more staying power but succumbed to changing consumer tastes in the end. Only six of those 20 giants survived as investable businesses over the next hundred years. And in that small group, only Dow (DD -0.85%) held on to its Dow Industrials membership for a full century (with a couple of name changes along the way).
Index funds weren't a thing in the early 1900s, but if you found some other way to match the Dow Jones Industrial Average, you'd have a ton of cash today. The Dow value stood at 2,200 in early 1925, rising to nearly 36,000 in the summer of 2023. The list of Dow components changed dramatically, the market experienced several crashes and recessions, and anybody who picked the correct long-term survivors from the Dow members of 1925 should thank their lucky stars.