The Royal Gazette put to the Island's investments managers. Their recommendations are notable for their differences -- like economists, its hard to get brokers to agree on anything, and when they all do they are probably wrong -- but they also return with some good guidelines for any investor: Diversify through investing in mutual funds and invest for the long term.

A good spread Mr. J.J. Custance Baker, senior manager, investment at the Bank of Bermuda, said: "With $10,000, the investor has an opportunity to provide a platform for the future with which he can build.'' Over the long term, equities or stocks outperform bonds, which outperform cash, he added.

If this money is not "life savings'' or "panic money'' the investor needs neither immediate access nor absolute safety of the capital and therefore cash is not a requirement.

Risk can be reduced through diversification but $10,000 is not sufficient to allow a good spread and it is therefore prudent to invest something which is already diversified, he continued.

According to Mr. Custance Baker, a mutual fund provides the ideal vehicle. He recommends; $3,000 Bermuda International bond fund because of the diversity, low risk and good medium return expectations.

$7,000 in Bermuda International Equity Bond, which offers diversity, medium risk, and excellent long-term growth opportunities.

"The result is simple, cost effective and if more money becomes available, the portfolio would be added to rather than changed,'' he concluded.

Try money funds The Bank of Butterfield, considering a one or two year horizon, and the need for a client to preserve his or her capital investment, recommended the Buttress Money Market Fund or a deposit with Butterfield Mortgage and Finance.

"The Money Market fund is very attractive during this period of rising interest as its daily yield quickly reflects changes in the US interest rates,'' the bank said. "Butterfield Mortgage and Finance deposits may give the investor a higher return initially but the rate is fixed for the entire term of the deposit.'' For investors with a five to 10 year outlook, with additional risk, the bank recommended diversifying across a number of Buttress funds. It is beneficial for the investor to diversify across various asset classes such as fixed income, equity and money market.

The bank suggested; Buttress Money Market $2,300; Buttress Capital Appreciation Bond Fund $4,000; Buttress Equity Fund $2,700; and Buttress Asia Fund $1,000.

"This allocation would be reviewed periodically by the investor with his or her investment advisor to take advantage of shifts in the economic environment,' said Ms Susan Monkman, assistant manager with the Bank of Butterfield.

"The allocation will vary between individuals based on their risk tolerance, time horizon, and income expectations. We promote the Buttress funds to the smaller investors because they provide the investor with professional management, diversification and reduced transaction costs due to cost efficiencies of managing a large pool of money rather than numerous small accounts.

"In addition, there are no sales or switching fees charged on the Buttress funds if the applications are made in Bermuda. The initial investment in each of the above funds is $US1,000 and they trade weekly except for the Buttress Money market fund which trades daily.'' Risks and rewards Mr. Andrew Doble, Ardent Investment Management Ltd., prefaced his response with the need to "know your client''.

This is "vitally important'' for the client and the advisors, he added. For this exercise, Mr. Doble gave the investor a five-year plan, with a "reasonable risk'' frame of mind but not one to gamble, and the client has no other equity or bonds.

Over the long term, equities have tended to outperform other types of investments.

"`With $10,000 to invest, the best way into equities is through mutual funds,'' he said. Because of the greater choice, an investment in US dollars should provide a better risk/reward profile than one in Bermuda dollars. The risk/reward profile can be further enhanced by splitting the $10,000 into several amounts.

$5,000, in a broad-based global equity fund. Most major fund groups offer such a fund -- our favourites being GT Investment and Fidelity International. These funds can outperform the core of virtually any portfolio.

$2,500 in a broad based-emerging markets fund. Again, most major fund groups offer such a fund and we have no hesitation in recommending either GT or Fidelity again. Although higher risk, such a fund should, over the long term provide a higher reward.

$2,500, place it in a broad-based smaller company fund, such as GT Global Small Companies. Smaller companies tend to outperform larger ones over the long term, if chosen carefully. "Be aware that the above model portfolio will probably not suit needs exactly. And if you have ten times $10,000 to invest, not a good idea to just multiply the above suggestions by 10!'' he commented.

Bullish on bonds Mr. Scott Lines, managing director, Lines Overseas Management Ltd., broke the $10,000 into nine amounts.

"Assuming the client was willing to undertake a fair level of risk we would place a portfolio with a one year investment horizon in the following investments; 30 percent in US treasury 63 July 1999 at $ 94.75; 30 percent in US treasury 57 February 2004 at $87.50; 10 percent Southwestern Gold at C$11; 5 percent Aztec Mining at $1.90; 5 percent Canbrova Mining at DG 20; 5 percent Philips 1998 warrants at $6.35; 5 percent GT Japan Warrants Fund at$6.35; 5 percent GT Latin American Fund at25.20; and keep five percent in cash.

"We would place 60 percent in dollar-denominated fixed income instruments,'' Mr. Lines said. "We are positive on the bond market 1995 and believe that US economic growth has peaked and interest rates will peak in the first quarter of 1995.

"Current five and 10 year bond yields are over discounting future inflation in the US economy and we view 7.75 percent yields, in combination with the potential for capital gains, as very attractive at present.

"Continuing growth in the world's economies and the growing demand for basic consumer durables in the Third World will continue to support commodity prices over the next 18 months,'' he said. "We would have an exposure to a leverage copper mining stock, a gold exploration company, and other minerals.'' Mr. Lines also said growth in the emerging and developing markets over the next five years will be of "enormous benefit'' to companies in the consumer durables sector.

"Philips, having a presence in almost every established and emerging market will benefit from growth. The company continues in its restructuring and contains very good underlying value. Its holdings in listed Polygram (audio) and the Taiwan semi-conductor subsidiary is equal to Philips current market capitalisation.

"We believe both Japan, as it welcomes a new central bank governor, and Latin America as it is enfolded into NAFTA, will also be good markets in 1995.'' Serious money Mr. David Bolden, president of Emerald Financial Services, said the investment firm and broker must understand the client's personal investment profile.

Mr. Bolden said he assumed the major purpose of the investment would be to maximise the long-term growth of savings and there is not a need for steady income flow from this investment. He also assumed the client has a horizon of three to five years, is at least 10 years from retirement and has one-quarter of his investment portfolio in stocks.

He also assumed the $10,000 was serious money -- that is the investor does not want to lose the money by trying to outguess the market through picking individual stocks, but prefers to utilise the service of proven money managers via mutual funds. Mr. Bolden suggested: 30 percent in Templeton Growth Fund, a fund which has averaged 15.6 percent growth since it started in 1954; 20 percent in Trimark Fund, which has a 10 year average of 16.4 percent; 20 percent in Fidelity International Portfolio, (six year average return 13.1 percent); 20 percent in Universal World Asset Allocation Fund, whose managers have averaged 13.6 percent since 1986; The remaining 10 percent in C.I. Pacific Fund, with an average 18 percent return since its inception in 1981.

Balancing risk Mr. Randy Somerville, financial advisor with First Bermuda Securities Ltd., split the $10,000, 60-40-10.

50 percent in an intermediate equity fund; 40 percent in the emerging markets; and 10 percent in the stocks of the three Bermuda banks -- the Bank of Butterfield, the Bank of Bermuda and Bermuda Commercial Bank.

"The $5,000 in intermediate fund will offer the investor the advantage of getting into different economies. This portion will offer a balance of economies,'' he said.

Put $4,000 into emerging markets because they offer good growth opportunities, he added.

"Historically all three banks have done well. They have a good offshore position and have a good return locally and overseas.'' The banks also offer an individual a chance to benefit from the economies of the US, Europe and Japan, he said.

According to Mr. Somerville, this plan is somewhat conservative and he gave it about a 60/40 conservative to aggressive investment split.

Three options Buy Elan Corporation -- that is the prime suggestion from Ms Carolyn Hall, managing director at GulfStream Securities. Elan, a drug enhancement company, trades in Dublin, and lists on the New York Stock Exchange, and is one of only two companies of its kind, she commented.

"They have good earnings and good products,'' she added, noting the company's price/earnings ratio is under 20, a value Ms Hall likes. The P/E is the price of a stock divided by its earnings per share.

Picking up some Bank of Bermuda warrants would be a good idea as well, she continued.

If the investor wants to gets some diversification out of his $10,000, she suggested picking up some other BSE listings, like Chips Ltd. and two of the Island's three banks.

She also favoured GT or Jardine Fleming mutual funds.

If the investor is looking for gains in fewer than five years, buy Gibbons deposits, US government strip coupons or Bank of Bermuda 9% US dollar notes.

If looking for more than five years, go with the equity scenario, under five years go with one of the three stocks, Elan, warrants, or thirdly, a combination of four or five local stocks.

The third option, if looking for a period longer than five years, are the mutual funds.