Where to put your money in yet another challenging year
SAN FRANCISCO (MarketWatch) — Many stock investors thought 2011 would be upbeat, but they got beat up instead. The year for stocks was a year of shocks, while bonds remained unbroken.
Understandably, people are more wary than usual about where to invest this year. As you review your portfolio, think about how 2012 might be different from 2011 and ways it could bring more of the same. It pays to keep in mind one of esteemed former Wall Street analyst Bob Farrell’s cardinal rules of investing: “When all the experts and forecasts agree — something else is going to happen.” Read more: 10 investing rules tailor-made for tough markets.
Before delving into what 2012 could deliver, let’s recap how MarketWatch’s 10 investment ideas for 2011 did. Not bad, in fact, especially considering the almost daily assaults on the markets.Read more: The 10 investment ideas we thought would make you money in 2011.
Most of the picks MarketWatch made in December 2010, based on recommendations and research from investment professionals, beat the Standard & Poor’s 500 Index (US:SPX) — though that’s not saying much about a year when the U.S. benchmark was flat on a price basis and up 2.1% with dividends reinvested.
The best advice was to run with the “Dogs of the Dow.” This strategy of buying the 10 highest-yielding stocks in the Dow Jones Industrial Average (US:DJIA) and holding for 12 months rewarded investors with stellar gains, up 17% for the year including reinvested dividends.
Adding consumer-staples stocks to consumer-discretionary stocks was another winner, with the staples sector gaining 10.5% and discretionary shares up 4.4%. Energy and technology sectors also outperformed the market, as did growth stocks.
The biggest losers: Materials-sector stocks, down almost 12%. Emerging-markets infrastructure plays and industrial-sector stocks also lost ground.
Nowadays investors’ mood is mixed at best. Mutual-fund shareholders have piled into bonds and fled U.S. stocks for several years; surveys of investment advisers show cautiousness about buying stocks, and hedge-fund managers appear increasingly bullish. Bond investors, meanwhile, have to question when this epic bull market will end.
Looking ahead, investors should tune out the noise, turn on the head lamps, and consider these 10 ways to position your portfolio in 2012:
1. Stick with 2011’s winners
Buy what’s worked and head for the beach? Not quite. But many of the headwinds investors fought in 2011 haven’t disappeared and could worsen, which means that some of last year’s winners could repeat.
Geopolitical and economic risks will, as always, impact financial markets and consumer prices short-term, with accompanying high volatility. Yet broadly speaking, in the current anemic global climate, where economic growth is increasingly scarce, pressure on interest rates and inflation isn’t much of an immediate threat.
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