Best Advice: Stay Put

I'm

a loser, financially speaking. In the past year my HSBC Asian equity investment fund has lost 31% of my already laughable savings. Sure, February 2000 was probably not the time to jump into the market, but I'd put off investing for so long that I felt I had to ignore common sense and just do it. Bad idea. Equities have gone downhill ever since. Of course, I'm not alone: millions of people across Asia have seen their net worths shrink dramatically in recent months. Other than weeping ourselves to sleep and kicking ourselves in the pants, how can we ease the pain? Chastened by my own experience, I've been polling investment experts for tips on what to do in an economic slump.

Sadly, there appears to be no magic stock or sector that's going to ride to the rescue. Unlike the crisis of 1997-99, which was limited to this region, the U.S. downturn leaves all economies stuck in neutral. On the principle of first in, first out, you could invest in the U.S. where the economy will likely rebound before anyplace else. Which American stocks make sense? The safest bets are companies whose products are always in demand, downturn or no downturn—pharmaceutical manufacturers, for instance, or big food companies.

If, like me, you're already neck-deep in Asian equities, the best advice is to stay where you are. Pulling your money out in panic can only mean losing more. Better to wait for the markets to recover, unless you have absolutely no faith in a company's fundamentals—or there is a ".com" in its name. If you're feeling adventurous, this might actually be a good time to buy. Most of Asia's stock markets are trading close to their five-year lows in terms of price-to-earning ratios.

If your stomach flops at the thought of investing any more of your money, perhaps it's time to put it into something more reassuring, like a capital guaranteed fund. You park your money for a predetermined period—typically three-and-a-half years—and at the end of that time they guarantee at least your original capital back, and possibly more. At worst, if they don't perform you'll end up losing what you would have made had you stuffed it in a savings deposit. Many guaranteed funds are linked to indexes around Asia. Other funds cover biotech, pharmaceuticals or geographical areas. Warning: look for funds with lots of investors. Funds with few takers don't do as well because they don't have as much money to invest in higher return opportunities, having to keep a larger percentage of the money in bonds and cash to cover the guarantee. While it isn't exactly the adrenaline rush of day trading, at least you'll be able to face yourself the next morning.