BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

Avoid real esate investment trusts. Too expensive. Avoid high-yield bonds. Overvalued. Avoid long-term bonds. Too risky. Avoid commodities. Too expensive. In general, don’t hedge. Expensive and inefficient.

So, what should you consider buying? Short-term bonds – those that mature in less than five years. Large-cap stocks, both U.S. and foreign developed-market companies. Emerging market stocks due to their cheap valuations.

That was the advice given by Brian Kazanchy, chairman of the investment committee at RegentAtlantic in Morristown, in a talk in Ridgewood.

Kazanchy, who is a CFA and CFP, said that his company – one of the largest financial-planning firms in the state, if not the largest -- looks for bargains. “We’d rather own mundane stocks rather than Facebook or Twitter. And we’d rather own Total, a European oil stock, rather than Exxon or Chevron, because it’s cheaper.”

One area he likes is master limited partnerships, in oil and gas pipelines, which rose 28% last year. The yield is about 6%.

Among other investments that he doesn’t like: closed-end funds, which have been losing money because of their use of leverage; and utility stocks, which have become expensive.

What about the stock market in general? Worries: stocks aren’t as cheap as they were recently, there’s uncertainty about taxes and about the debt ceiling, there’s another possible government shutdown, the Fed is cutting back on buying U.S. bonds. Good signs: the economy was up 2% last year, consumer confidence is returning, home prices have been up, businesses are more conservative.

This year has certainly begun badly, what with the market down 4% in January, but Kazanchy pointed out that the market has been down in only eight of the last 34 years. And even during the 26 years that wound up in the black, there have been intra-year declines – averaging 14.4%.

As for index funds, Kazanchy said that he prefers “fundamental” index funds, where stocks are chosen for their valuations, such as their low price-earnings ratios or low price-book ratios. As it is, the most popular indexes are filled with stocks whose prices have been going up and up – and therefore may be overly expensive.

Two fundamental indexes he mentioned: Schwab Fundamental U.S. Large Cap Index (SFLNX), rated highest by Morningstar, and Schwab Fundamental International Large Cap Index (SFNNX), rated average by Morningstar.

How much cash should investor have in a portfolio? he was asked. His answer: a six-month supply is good enough.

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Don Phillips of Morningstar: “Packs a lot of great counsel in a short amount of space. I wish I’d had this guide when I was 21. It took me a long time to learn many of these lessons — and even now I can benefit from the reminders. I hope many readers take advantage of this invaluable advice.”