THE strong rally in world stock and bond markets over recent months means being conservative is the best policy for investors right now, say financial advisers. Investors should diversify their risks with a broad portfolio and retain the highest weighting in safe havens such as global bonds and European stocks. The advisers said the outlook for most assets remained positive, but warned that the run-up in US stocks, the record-setting spree in Europe, and the sharp rebound in most Asian bourses meant investors should be in no hurry to enter. Many markets were likely to see some sort of pull-back in the next month or so which would provide a better opportunity for investors. Harris Fraser International director Thomas Chan said: 'We are conservative and we suggest investors seek out the less-volatile markets.' He said investors would be best-placed in the current environment by putting 80 per cent of their funds in the mature markets of Europe and the US. 'A lot of fund managers expect Europe will be a good area. Europe has lagged behind the US but it has copied the US model of improving shareholder value.' Mr Chan said investors looking for European exposure could buy stocks directly through a recognised broker, or they could buy into a European fund. 'A fund saves a lot of time and, for private investors, it is difficult to pick the best targets for mergers or privatisations. I would leave that to a fund manager.' The average investor should put no more than 20 per cent in Asian and emerging market assets given the rapid rebound in these markets over the past few months and the high level of uncertainty that remained. He said: 'People are looking to come back to Asia. There has been a rebound, but the volatility is high, so it is only for aggressive investors. It is for gamblers.' Mr Chan said much of the bad news about the impact of the Asian turmoil was still to come out and would weigh on stock prices this year. Towry Law International director Bill Tatham agreed that investors should be in no hurry. 'We are quite conservative because many markets seem highly priced. 'We do not think they are unhealthy, they just need to pause for a while. 'There could easily be a 5 to 10 per cent pull-back in many markets.' Mr Tatham recommended a portfolio with a bias in favour of bonds and European stocks. 'For a balanced portfolio aimed at an Asian investor, we suggest 30 per cent global bonds, 15 per cent in US smaller companies, 25 per cent in general Europe, 20 per cent in Asia, and 10 per cent in cash.' He said the 20 per cent earmarked for Asia should be kept in cash in readiness to enter the markets when they had consolidated. 'The rally in Asia has been much stronger than we expected but it has not really been justified. 'We have not seen enough of the earnings season to know the damage caused by the Asian financial crisis.' Mr Tatham said the best policy might be to wait until Easter and then see the state of world markets. Tresidder Tuohy & Partners partner Jacqueline Ho said the current uncertain environment meant she recommended a set of alternative investment vehicles instead of the usual stocks and bonds. She suggested a diversified portfolio including high yield bond funds, guaranteed funds, and diversified smaller company funds. 'The types of products we recommend provide more stable returns than the highly volatile stock markets we have seen recently. There is a lot of volatility this year and clients are looking for more stability.' Ms Ho said high yield bond funds were attractive given the uncertainty in stocks, while they still offered reasonable returns.