Self-managed super fund (SMSF) investors who are in retirement, or soon to be in retirement, are likely to have two main goals when it comes to investing in the share market:

  1. Earn a growing stream of income from dividends, and
  2. Avoiding capital losses

Although this isn’t as easy as it sounds, I think investors can give themselves the best chance of meeting these goals by investing in (and avoiding) shares that best meet their risk-return requirements.

The first thing investors should do, I believe, is to rule out a few shares, including:

BHP Billiton Limited (ASX: BHP)

There is little doubt that some SMSF investors were sucked into investing in BHP on the promise of progressive dividends. This was always going to be a difficult promise to keep considering the mining giant has very little control over the prices it receives for its commodities. Add to this the high capital expenditure required to develop and maintain its projects and its pretty easy to see why any investor should not invest in mining companies on the basis of perpetually growing dividends.

Santos Ltd (ASX: STO)

Like BHP, Santos has little control over the prices it receives for its oil and gas products and this means the company has little control over its ability to pay growing dividends. Santos has also been unable to protect shareholders’ capital during the latest downturn and it would be fair to say that most investors have been hit with pretty significant capital losses over the past couple of years. The company’s highly leveraged balance sheet also means it is probably best avoided by conservative investors.

AMP Limited (ASX: AMP)

AMP has once again disappointed investors with another profit result that came in below market expectations. The wealth manager has been a serial long-term underperformer and has delivered an average annual shareholder return of just 1.2% per year over the last 10 years. AMP has also been unable to consistently increase its dividends to shareholders, despite having a market-leading position in one of the fastest growing sectors of the financial industry.

Instead of these three shares, SMSF investors should consider shares that can consistently grow their earnings such as:

Westfield Corp Ltd (ASX: WFD)

The shopping centre operator might not be the most exciting stock on the ASX, but investors can be confident it will pay a consistent dividend and will not suffer huge capital losses. A lower Australian dollar will be a positive for the company and its earnings are expected to accelerate over the next few years as it completes a number of projects from its development pipeline.

Ramsay Health Care Limited (ASX: RHC)

A high quality, defensive healthcare stock like Ramsay should be considered by investors looking for growing profits and growing dividends. The current dividend yield might look unappealing to some SMSF investors but it is important to remember the company is likely to consistently grow its dividends for many years to come.

Source: Company Presentation

Source: Company Presentation

The private hospital operator has an exceptional track record and I believe it will have numerous opportunities to grow organically and through acquisition. The shares look a little expensive at the moment, however, and I would wait for a slight pull-back before buying a large parcel.

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Motley Fool contributor Christopher Georges 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.