How to manage a level-headed investment portfolio?

Any investment in the financial market requires capital, a strategy and a well-structured portfolio and risk management. In the context of a bearish stock market, the risk appetite will plunge in 2009. Experts polled by Wall-Street, recommend, above all, an in-depth analysis on each investment opportunity in the current poor macroeconomic climate.

Paul Brendea, financial analyst at Prime Transaction brokerage firm, recommends any hot investment or share with an encouraging liquidity, in the midst of a bearish market trend.

“If we start from this premise, we can choose any type of shares, bonds or more complex instruments. If you don’t keep in mind the liquidity criterion, you will have to deal with a higher risk, because of the buyers’ prudence”, said Brendea.

“I strongly recommend more attention in portfolio management. Whether there are bonds, or shares, investments have become very attractive, and therefore I would rather consider an individual in-depth expertise of each investment opportunity in the current crippled macroeconomic environment”, says Mirela Maxim, director at Bucharest branch of Interdealer Capital Invest.

Higher share in bonds or stocks?

According to Interdealer’s representative, some investors will re-evaluate the shares traded at Bucharest Stock Exchange, and they will seek for the underpriced shares, while other segment will prefer to invest in bonds rather than valuable shares.

“It is the perfect year to monitor certain issuers who have regained their weight in the eyes of the market watchers, after the massive depreciations of last year”, Mirela Maxim stressed.

Diversifying the portfolio would depend upon the risk that each investor is willing to take, said Marius Pandele, analyst at Vanguard. “For those willing to assume a higher risk, in the hope of a higher return, the stocks may have a higher share in the portfolio. For investors with a higher risk aversion, bank deposits and probably bonds will be their number-one choice”, he said.

Pandele added that in both situations, the stakes must work hand in hand with an active portfolio management.

According to Brendea, the bonds will enjoy a better success this year if the National Bank of Romania decides to cut the benchmark lending rate, changing them from saving instruments into profit-making investment placements.

“However, I recommend a stock investment, based upon the liquidity criterion”, Prime Transaction analyst added.

Marius Pandele believes that stocks could yield profitable returns, only if the portfolio management takes into account the macroeconomic events and the market momentum.

Of course, bonds render a more stable return; however we must keep in mind that the local currency can notch down even more, which would make euro-based bonds’ returns take a significant nosedive, Vanguard’s analyst concluded.

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