The Motley Fool

3 ASX shares for low-risk investors

Most Australians know the local share market has performed better than property and cash over the long term.

Yet so many people avoid investing on the ASX because they don’t understand how shares work, haven’t bothered to understand why prices rise and fall every day, and why things don’t always go according to plan.

Loss aversion bias is the tendency to view the pain of losses worse than the pleasure of gains. How many times have you heard, “the sharemarket is like gambling”, or “I lost so much money when I bought shares of XYZ.”

At the other side of the spectrum, there are those who only talk about their winners (yet it’s usually the people who aren’t as ‘loud’ that are the best investors).

From my experience the thing that separates the best investors is time — not their willingness to take on more risk. They recognise poor day-to-day or year-to-year performances as just that — short term.

They stick to their guns and know time is the best tool for unlocking the potential of share markets.

These ‘low-risk’ investors don’t chase 100% share price gains down a lithium-filled warren. They buy shares of decades-old dividend-paying companies like Westfield Corp Ltd (ASX: WFD) and Cochlear Limited (ASX: COH), reinvesting their dividends and pocket the gains from capital growth over the long-term.

Chances are you know both Westfield and Cochlear for their quality service and dominance in their respective markets.

Successful low-risk investors also recognise their limitations. They stick to the industries they know best, don’t buy just one or two shares, and avoid following the herd.

These investors stick a big chunk of their wealth overseas, in passive investments such as the iShares Global Consumer Staples ETF. Found on Google Finance as ISGLCOSTP CDI 1:1 (ASX: IXI), this pooled investment (which you buy on the ASX like any other stock) simply tracks 1,200 of the world’s most reputable companies, like Nestle and Coca-Cola. It’s yet another low-risk investment for successful investors to consider.

Foolish takeaway

Textbooks will tell you shares are a riskier investment than term deposits and cash. Indeed, if you approach your investing with the wrong attitude towards what is and what isn’t risk, it certainly is.

However, if you are smart with your finances, keep cash in reserve and avoid excessive debt and spending, the share market is most likely to produce the best results over the ultra-long-term.

I own shares of Cochlear, but I'm also looking for other - faster growing - dividend shares to add to my portfolio, like the one The Motley Fool's expert analysts hand-picked as their best dividend share idea for 2016.

Indeed, our resident dividend experts named their Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is growing and trading on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

Motley Fool Contributor Owen Raszkiewicz owns shares of Cochlear and has a financial interest in the iShares Global Consumer Staples ETF. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

The Motley Fool Australia owns shares of iShares Global Consumer Staples ETF. 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.