While the ASX offers up a wide variety of companies which investors could buy, most investors prefer to limit the majority of their portfolio holdings to the biggest companies listed on the ASX.

A large cap/ blue chip strategy is an understandable choice – particularly for self-managed super funds – given that, in theory, these very large companies with their huge, established customer bases, should harbour lower risks.

So which three top-20 shares stand out as the most appealing?

Scanning the list of the S&P/ASX 20 (Index: ^AXTL) (ASX: XTL), I would immediately reject the four major banks.

Despite their high fully franked dividend yields, I’m nervous as to whether these dividends are sustainable. More importantly, I think there are downside risks to earnings expectations due to the likelihood of an increase in bad loans. This could in turn put pressure on the banks’ share prices, which could easily more than wipe out the gains from dividends.

While the big four banks don’t attract me, fellow top 20 constituent Macquarie Group Ltd (ASX: MQG) does.

As an investment bank with a global funds management business, Macquarie isn’t (in my opinion) as directly exposed to the credit cycle. Trading on an undemanding price-to-earnings multiple of 12 times, but with an attractive growth profile, this stock is one for the short list.

Next up it’s time to consider commodity-exposed stocks.

Given the point in both the resource and energy cycles, it seems reasonable to me to allocate a portion of a long-term portfolio to this space. Given its diversity of assets, I think BHP Billiton Limited (ASX: BHP) could be the best way for investors to gain exposure to the potential upside in a wide range of commodity prices.

Australia’s four largest insurers can also be found amongst the top 20 constituents, however, given the complexities involved with analysing insurance businesses, I think there are better opportunities elsewhere.

In contrast, the top 20 is also home to Australia’s two largest retailers Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) – businesses which are relatively easy to understand.

Woolworths’ woes have been extensively discussed and are reasonably well understood by many investors. While there is definitely a case that Woolworths could be a buy, for a conservative portfolio I think Wesfarmers with its solid balance sheet, growth opportunities (particularly Bunnings expansion into the UK), quality management team and pricing on a forward PE of 18.5x is a better choice.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.