Pity the poor "mum and dad" shareholders, those conservative investors who acquired their holdings in some of the big floats and privatisations of the 1990s and have held onto their shares resolutely since. Recent share-price volatility has not been kind to them and chances are their shares have underperformed even the falling market.

Nevertheless, the outlook is not all bad. Some experts believe it is exactly these shares that will lead the market back up, once a recovery gets under way.

The term "mum and dad investor" is based on the Mums and Dads Index, an inspired creation of Commonwealth Securities. This is an index of equities such as Woolworths, AMP and Commonwealth Bank of Australia that were created in a series of major floats, privatisations or demutualisations.

These were the first stocks many investors had owned, exploding share ownership in Australia during the 1990s.

The listing of the first tranche of Telstra in 1997 created 559,000 first-time shareholders and the AMP demutualisation in 1998 led to a further 730,000.

Many of these investors have held their shares. Surveys by the Australian Securities Exchange have found that in many cases these are the only shares they own. In the latest survey, in November 2006, 20 per cent of all Australian shareholders were found to own only one stock and a further 22 per cent owned just two or three.

The Mums and Dads Index has changed over the years due to merger activity - Colonial was acquired by Commonwealth Bank, TAB by Tabcorp and Coles Myer by Wesfarmers. Today it comprises nine stocks: AIG, AMP, Commonwealth Bank, Qantas, Suncorp-Metway, Tabcorp, Telstra, Wesfarmers and Woolworths. Until recently many were strong performers.

But during 2008, to late June, the index fell 17.4 per cent, compared with a 15.8 per cent decline for the All Ordinaries index. Over a 12-month period the figures were 18.2 per cent and 15.6 per cent respectively. Only two stocks in the index - Wesfarmers and Telstra - have performed relatively well, although both are still modestly down for the year. At the other extreme, rising oil prices mean Qantas has fallen more than 40 per cent.

"The simple explanation for the relatively poor performance is that the Mums and Dads Index does not include any resource companies," says Craig James, chief equities economist for Commonwealth Securities.

"If investors had diversified into some of the resource companies, the performance of their portfolios would have improved."

Elio D'Amato, chief executive at the funds management and stock market information company Lincoln Indicators, sees positives and negatives in the stocks of the Mums and Dads Index.

"A lot of mum-and-dad investors are exposed to the larger-cap companies and these have a lot of attractions when you do not necessarily have the time to be focusing on your share investments on a daily basis," D'Amato says.

"You get the safety of a broader revenues stream and, generally, a more stable earnings flow.

"But the one thing I stress is that our business really dislikes apathy when it comes to investing. Yes, large-cap does give you more of an element of security but it does not guarantee long-term share market performance. The fact that you have held a stock for the past five years or 10 years should not necessarily determine whether you should continue holding it into the future."

Mike Byrne, large-cap portfolio manager at Souls Funds Management, agrees some of the large blue chips, including some that are in the Mums and Dads Index, are looking attractive.

"The situation now is very similar to 1992-93, to 1998-99 and to 2002-03, which was when we had our last economic slowdown," he says.

"If you look back, what do those periods have in common? They had dramatic economic slowing, which we have now. They had a dramatic stockmarket fall, which we are having now.

"And two or three years after the event it turned out that they were great buying opportunities.

"If you look at the banking sector now, you could be getting a dividend of around 7.5 per cent, fully franked. That is nearly an 11 per cent gross dividend yield. I do not think I have seen that too often in my 20 years looking at the Australian market.

"Another thing to talk about when we consider mum-and-dad stocks is that debt is the enemy. When the party is going, debt is good, but when the music stops the first chairs to be taken away are the debt chairs."

Byrne says many of the companies in the Mums and Dads Index have strong balance sheets, are able to take advantage of some distressed assets and are also able to continue to reward shareholders with handsome dividends and dividend growth.

"When we look back in the rear-view mirror in 2009 or 2010 this will have turned out to be a very good buying opportunity," he says.

Byrne's recommendations of seven blue chips include four in the Mums and Dads Index: AMP, Telstra, Wesfarmers and Woolworths, along with Brambles, Coca-Cola Amatil and QBE.

"Some of these would have dividend yields averaging 5 or 6 per cent, along with franking. All these companies have the ability to grow at a rate higher than the inflation rate, which means real dividend growth."