Look east, but make sure you have solid foundations at home

What is indisputable is that, particularly if you are retired or approaching retirement, medium and long-term performance of quality equities and some strategic portfolio changes are now more important than ever.

So, if you are Mr or Mrs Normal Investor, you've got to take action now.

Did you miss the 50 per cent recovery? Now, therefore, is the moment to take some decisions which will achieve both capital growth and income.

Some inflationary pressure may already be evident and that means wise investors are already adopting an offensive strategy rather than defensively sitting tight in an attempt to retain wealth.

First base in your portfolio review is to establish a sensible investment balance, recognising personal circumstances and the increasingly dangerous economic condition of western countries.

Preservation should still be the watchword whether you are inclined to high or low risk.

Start at the easy end and emulate the best-of-class general growth funds.

This means that you will be seeking out a ground level of fixed interest investments – probably no-compromise, best-quality corporate bonds.

Next, consider the central core of the portfolio – the equity content. Indeed, let's dwell a little on this, the most important investment section. Where did growth return to first?

The answer of course is the Far East – specifically China and, to a lesser extent, other Asian markets – so why are investors not universally diverting their investments into these markets?

The simple answer is that there are very few pure China plays, but help may be at hand with the announcement that Anthony Bolton, the best known of all the UK's investment gurus, reckons that China represents "an almost unprecedented investment opportunity".

"China is in the first year of a multi-year bull run," claimed Bolton, who also observed that by the end of 2010 China will overtake Japan as the second biggest economy in the world.

He believes it is now uniquely benefiting from strong secular growth driven by centralised government, although in stockmarket size is only the tenth largest.

In marked contrast, we have Pivotal Assets, the well respected Monaco-based house, taking a very bearish view. With both industrialisation and structural modernisation largely complete, Pivotal argues that China's future long-term capital formation needs are being grossly overestimated.

Indeed, it expects infrastructure growth from the gigantic stimulus package last year to halve this year, and perhaps go negative in 2011.

This becomes a more compelling argument with steel production greater than the European Union, Japan, the United States and Russia combined, and in terms of cement production, where China produces and consumes more cement than the rest of the world put together.

So who does one believe? Both Bolton and Pivotal, of course, are correct in what they say, but with serious headwinds for western economies, Asia must now call for serious consideration as a powerful component in any investor's equity portfolio.

Bolton goes live with his fund early next year, so some funds at the high-risk end of the portfolio should sensibly be allocated to this interesting play.

Gold must also spike much higher in 2010 against the prospect of inflation – or at least rising interest rates in medium term and perhaps, anomalously, when the central banks' strategies of quantatitive easing begin to ebb.

So a holding in gold must make sense, as does an investment in oil stocks, which will tend to move in tandem with gold while the dollar remains weak. This is in spite of the US Treasury's indication that it might not need to borrow as much as it had thought in bailing out the US financial system.

International oil and gas and energy shares are therefore de rigueur in this new era investment portfolio, not least because of the scrummy dividend yields that are currently on offer.

Essentially, the reconstruction of investors' portfolios is now a case of "back to basics", so advantage can be taken of bullish conditions in the long-term in certain asset classes with a low level of risk.

Then put the share certificates in the proverbial bottom drawer and resist the temptation to fiddle with your sensibly balanced portfolio.

That said, you might have a word from time to time with your investment guru, but infrequently. If you obey these rules, you'll take me out to lunch to celebrate in ten years' time.

Yuil Irvine is managing director of Dunedin Independent.