Putting lower-risk blue chip stocks and the top ETFs that hold those stocks into your portfolio will let you tap into the best conservative investments for long-term gains

Conservative investing is an investment strategy that involves a focus on lower-risk, predictable and stable businesses. This strategy typically includes the purchase of some of the best conservative investments like blue-chip stocks and other low-risk investments.

A conservative investor is typically someone who builds a stock portfolio with the goal of achieving steady returns, including dividends, while maintaining a lower level of risk.

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Keep long-term goals in mind to profit the most from a selection of the best conservative investments

In our view, your goal as an investor, particularly if you follow a conservative investing strategy like the one we recommend, is to make an attractive return on your investments over a period of years or decades. Failure means making bad investments that leave you with meager profits or losses.

Unsuccessful investors can still make some profits. They just don’t make enough to offset the inevitable losses and leave themselves with an attractive return. If you focus on the idea that you never go broke taking a profit, you may be tempted to sell your best investments whenever it seems the investment outlook is clouding over.

On occasion, you may succeed in selling just prior to a major downturn, and buying back at much lower prices. More often, prices will soon hit bottom and move up to new highs. If you buy back, you’ll pay higher prices. If you had followed this strategy with Canadian bank stocks, for example, you could have missed out on some big gains over the years.

In hindsight, market downturns are easy to spot. Spotting them ahead of time is much harder, and impossible to do consistently. After all, if you could consistently spot market downturns ahead of time, you could acquire a large proportion of all the money in the world, and nobody ever does that.

The problem is that you’ll foresee a lot of market downturns that never occur. All too often, the market-downturn clouds disperse soon after skittish investors have sold. Good reasons to sell do crop up from time to time, of course, even if you follow a long-term conservative investing approach, but “You’ll never go broke taking a profit” is not one of them.

Invest in blue chip stocks and you will have some of the best conservative investments working to make your portfolio profitable

At TSI Network we feel that stocks that have been paying dividends for over 10 years are some of the safest investments you can make. Dividends are a sign of quality and a company’s financial health. Types of stocks that we consider to be safer investments include Canadian banks and utilities.

There are also a host of other key indicators to determine if a stock is a safer investment, like management integrity, its growth prospects and its stock price in relation to its sales, earnings, cash flow and so on.

For a true measure of stability, follow our Successful Investor approach and focus on those companies that have maintained or raised their dividends during economic or stock-market downturns.

All in all, we think investors will profit most—and with the least risk—by buying shares of well-established, dividend-paying blue chip stocks with strong growth prospects.

You can use ETFs to include some of the best conservative investments in your portfolio

The best conservative ETFs represent a low-cost, tax-efficient way for investors to make money over the long term. They offer well-diversified portfolios with exceptionally low management fees.

However, we think you should stick with “traditional” ETFs. Traditional ETFs follow the lead of whoever sponsors the index, although the sponsors do from time to time change the stocks that make up the index. They also can tinker with the rules for calculating the index. ETFs change their portfolio holdings to reflect these changes, without considering the impact those changes may have on the performance of the ETF portfolio.

However, when an investment product faces booming demand as ETFs do today, investment companies try to expand sales by creating “new” versions of the underlying formula.

These “new” ETFs use a conventional stock-market index as a base, but add their own refinements. These refinements are tailored to current investor preferences or prejudices. That’s distinctly different from traditional ETFs, which, as mentioned, simply aim to mimic an index. These newer, theme varieties may attract attention—and sales—but they frequently carry higher management expense ratios (MERs).

Use our three-part Successful Investor approach to find the best conservative investments for your portfolio

1. Invest mainly in well-established, dividend-paying companies;
2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
3. Downplay or avoid stocks in the broker/media limelight. 

Have you ever invested in a stock that you felt was a conservative investment, only to then have the stock’s risk level increase significantly? What did you do?

What conservative investments do you keep in your portfolio, and how do you decide when to sell them?