If now is the time to invest, what stocks might you consider putting money into? Fiona Reddanreports

IF, AS famous banker Baron Nathan Rothschild once remarked, the time to buy is when "blood is running in the streets", surely now couldn't be a more apt time to look at getting back into the stock market?

The credit crunch of the past 16 months has led to the collapse of global banks, plunging stock markets, and government intervention of an unprecedented scale. Closer to home, the end of the property boom has led to a collapse in bank shares and global recession means shares generally are reaching unparalleled lows on the Irish market.

While investors have been chastened by events of the past year, and may fear getting their fingers burnt, there can be no doubt that "blood" is definitely running through the world's financial markets.

But is it really time to move? While deposit accounts are looking particularly attractive at present, both in terms of the interest rates on offer and the Government's guarantee, history tells us that, in the long run, stocks out-perform equities. Moreover, as the surge in share prices that often heralds the start of a new bull market often happens before economic conditions improve, normally by about three to six months, those investors holding back might miss a chance to get in at very cheap prices.

In any case, some of the world's top investors certainly think now is the time to invest.

In October, renowned stakeholder Warren Buffet wrote a letter to the New York Times saying he believed now was the time to get back into the market. "Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors," he wrote.

So if now is the time to be greedy, what type of stocks should investors be looking to put their money into? Investors may be tempted to take a punt on the Irish banks, which have hit record lows over recent weeks - with both Bank of Ireland and Anglo Irish Bank plunging below the € 1 level. However, share prices might yet go to zero before they get to five and, as such, analysts are advising caution.

John Cantwell, a banking analyst with NCB Stockbrokers, says that interest in Irish banks is mainly coming from retail investors, with most institutional investors "sitting on the sidelines" until there is more certainty with regard to the proposed consolidations and recapitalisations.

Given the dramatic decline on the Irish market, which has plummeted by about 63 per cent over the past year, investors might also look to avoid all Irish stocks. However, Ross McEvoy, an analyst with Bloxham Stockbrokers, doesn't think they should.

With the corporate debt market effectively closed, and the days of high leverage a thing of the past, the ability for companies to self-finance rather than rely on bank debt will be key, he says. As such, he has selected five Irish companies with considerable cash holdings that he thinks offers investors "deep value" - but they must be willing to hold tough for a while.

Leisure firm Paddy Power is identified as a good bet because of "its substantial cash balances, economies of scale and ability to drive costs lower".

Surprisingly, house builder Abbey also makes the list, on grounds it has been among the most conservative house builders over the past five years "by sensibly maximising their cash resources".

The other stocks to consider, McEvoy says, are food group Fyffes, recruitment firm CPL, and spread betting firm Worldspreads, which Bloxham favours because of its "growth, momentum and robust balance sheet".

For investors looking to benefit from the historic lows, David McCarthy, managing director of McCarthy Associates, recommends that inexperienced investors only invest a small amount and says they need to be prepared to keep their money invested for at least three years.

"The problem at the moment is that logic has gone out of the market and fundamentals have gone out of the window," he says, adding that people should approach any investment with caution, research the market and buy a stock with which they have some familiarity.

However, he adds, "you can never get in at the bottom, or get out at the top", and for those investors who do start making money, he advises that you "make your money and take your profit".

What about stocks that have lost more than 50 per cent of their value over the past year? McEvoy cautions that just because something looks cheaper doesn't mean it is cheap. "The reality is that some of these companies might go bust," he says.

For investors looking for a more diversified exposure to stock markets rather than individual stocks, an index-linked, or exchange-traded fund (ETF), might be more appropriate.

A major advantage of these types of funds over actively managed ones is that they usually incur far lower fees - for no major difference in performance. London's Cass Business School released a survey this month showing that only 2 per cent of all actively managed funds in the UK outperform their benchmarks.

Index-linked funds are looking particularly cheap at present. Quinn Life offers a number of funds that track certain stock market indices and enable investors to get access to many markets around the world.

This means an investor can buy into stocks in the Euro Freeway Fund, which tracks as closely as possible the aggregate performance of the 50 largest companies in Europe using the Eurostoxx 50 index and which has fallen by about 46 per cent over the past year, at very low prices.

Another alternative is to consider exchange-traded funds (ETFs), which provide investors with exposure to a diversified basket of shares and so are also less risky than picking particular stocks.

Traded on stock exchanges and purchased from a stockbroker, the Irish Stock Exchange currently offers Irish investors access to global and European sectors such as water, alternative energy, nuclear energy, agri business, coal, steel, gold, basic resources, oil gas, utilities, shipping and US large and small cap stocks.

However, McEvoy recommends that investors look carefully at the breakdown of companies in any such fund, as it might be over-weight in certain sectors that investors may wish to avoid, such as financials.

For example, the Iseq 20 ETF has a weighting of 15 per cent in financials - although the extreme decline of banking stocks over the past year means that their weighting in the fund has also declined.

Something else investors should consider when transferring savings from a deposit account into the market is to "average in", a technique that helps protect investors against the variability of the market.

For example, if you have about €10,000 to invest, you might look at investing about €2,000 each month over six months. According to McEvoy, this is a less risky approach than investing your entire lump-sum at once.

Bear necessities: tips for investing

Approach with caution and don't invest money you cant afford to lose.

Average in - dont invest everything at once.

If investing in an ETF or an index-linked fund, pay close attention to what sectors the fund tracks, as you may end up overweight in a sector youd rather avoid.

Invest with at least a two/three-year horizon.

Do your research before investing. Just because something looks cheap doesn't mean it is cheap.

Remember there is no such thing as a sure bet.

Choose cash-rich companies if youre looking to invest in particular stocks.

- Fiona Reddan