What Should I Invest In for 2012? Part-1

Financial Forecaster

I originally set out to write a wrap-up of investing strategies for 2012. The focus of the article was going to be much the same propaganda I usually spout, such as keeping a balanced portfolio of stocks and bonds, sticking with a plan through thick and thin, investing in solid dividend paying stocks, and not getting lured into the high yield trap etc. But I’ve said that so many times before…

While I was writing this post, the thought occurred to me why not ask the other well known bloggers and financial writers what they think? I’ve corresponded with all these authors and writers, some on a regular basis. So I thought this would be a great opportunity to share their wisdom with my readers.

Here is what I sent them, hoping for a small paragraph:

“Short of hauling out the crystal ball, because your guess is as good as mine, I also wanted to know what sectors are in your radar, or even what stocks are on your favourite list – if you’re so inclined to share with my readers.”

“What do you think is the most important lesson investors need to remember going into 2012? Where do you think the best investment opportunities for investors will be? ”

I was hoping to fill a one page post. However, I was delighted with the response I received, and it’s now turned into a much larger two-part post. I would like to thank all who participated: The Canadian Couch Potato, Robert Wasilewski (DYI Investor), Andrew Hallam, Young and Thrifty, The Dividend Guy, Derek Foster, Susan Brunner, The Passive Income Earner, and My Own Advisor (not really my advisor).

Here is what they think the best investment strategies and opportunities are for 2012 (Part -1):


The Canadian Couch Potato

“When we look back on 2011, it’s obvious that things didn’t turn out like most investors expected. US stocks dramatically outperformed Canada, despite the struggling American economy. S&P downgraded the US Treasury’s credit rating, yet bonds had an outstanding year, especially at the long end. We’ll face a number of surprises in 2012, and by definition, we can’t know what these will be. When faced with uncertainty, the best strategy is always to diversify. If I have to make one prediction for 2012, it’s that the Leafs will finally make the playoffs.”

www.canadiancouchpotato.com


Robert Wasilewski (DIY Investor)

“To me 2011 was a microcosm of how the market works over the long term. Just when things looked the bleakest it took off. On 10/3 markets were worried about a dysfunctional U.S. government, Europe was falling apart, and odds of a recession were high. From that point to year-end stocks were up 17%.”

“My clients were up 2% to 4% for the year, depending on the particular model they tracked. Not overly sexy but we’ll take it given the alternatives of practically zero on money funds and t-bills and 1% on CD’s.

“I am not at all surprised that many hedge funds experienced double digit losses. It looks to me that dollar cost averaging held in well for the year given the year end push upwards.”

“2011 also gave me a better appreciation for dividend payers. Reading your blog and the blogs you highlight led me to give a higher weight to dividend paying ETFs. I’m sticking with it in 2012. For my longer-term investors, several years from retirement, I’m increasing a bit the European exposure in the international sector.”

rwinvesting.blogspot.com


Andrew Hallam – The Millionaire Teacher

“I think the best investment opportunities for 2012 will be in the area or areas destined to probably do lousy in 2012. If we’re talking about individual stocks, the best stocks to buy in 2012 will be those that go on to stink in 2012 (even after you’ve purchased them). The best profits came from buying great, out of favour businesses, and continuing to buy them when they dropped in price.  It takes guts, and patience.  It often takes years to see the results. “

“A great stock purchase doesn’t usually start making money right after you buy it.  In fact, if you’re getting a great deal on a great company, things usually get a lot worse before they get better.  And it can take years of underperformance before you see your stock rocket. Investors, I believe, should think about the long term, not what they speculate will occur during the next 12 months.  So…the best picks for 2012 will be the stocks that could end up stinking up 2012, but making you a small fortune by 2020.  If you’re buying a stock in 2012 because you expect it to do well in 2012, then you’re either buying it too late, or speculating too much. “

“If you look at the worst industry in the United States right now, it has to be the building supply industry.  My investment club has been picking up shares of United States Gypsum, anywhere from $9 to $11 per share.  For serious money (looking well beyond 2012) I think someone could do a lot worse than buying United States Gypsum shares right now.  They’re the largest wallboard manufacturer in the U.S., and when housing turns around, so will they. “

www.andrewhallam.com


The Dividend Guy

“2012 will be similar to 2010 and 2011 on the stock market: a lot of volatility, concerns about government debt problems, and healthy profits from companies. This is why it is important to focus on the fundamentals. Companies are making profits and they are undervalued with current government debt concerns. On the Canadian market, I would look at the energy sector since most companies have been hit in 2011 and Telecoms for a more defensive play. Canadian REITs should continue to perform well in a low interest rate market and this is why I think they are a good investment for 2012 as well.”

“Several U.S. economic indicators also seem to point in the right direction. Employment creation went from 57,000 jobs in August to 200,000 jobs in December. The Unemployment claims are below 400,000 and the unemployment rate broke the 9% mark to reach 8.50% by the end of last year. Finally, new home construction average over 650,000 units per month for the past 3 month. This will surely lead to more strong financial results from American companies in 2012.”

www.thedividendguyblog.com


Young and Thrifty

“I think the most important lesson investors need to remember is that the roller coaster is still going and it’s going to be rocky sailing for this year, for sure. What are the best investment opportunities? Value stocks, stocks that have been beat up but are solid companies that pay regular dividends. Or if you don’t want to play the gambling route, then go for index investing. That’s pretty generic advice, and I’m sure the other people you’ve interviewed say the same thing, but hey, it’s true.” ;)

www.youngandthrifty.ca


Conclusion

Remember, the most important point is to save and invest regularly, keep away from consumer debt, and have an investment plan. In the end it doesn’t matter whether you are an index investor or a dividend investor. Patience, persistence, and staying the course are the keys. Remember, buy or add to your holdings when prices are low, and keep your asset allocation in check!

Thanks for reading! And be sure to read Part-2 also posting this week ;)

Readers: What’s your take? Do you agree? Do you think there are other opportunities for investors in 2012?

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11 Responses to “What Should I Invest In for 2012? Part-1”

  1. The Dividend Guy Blog

    Jan 22. 2012

    Hey Ninja!

    great job on the interviews! wow!

    thx for the inclusion!

  2. 101 Centavos

    Jan 22. 2012

    The distilled sentiment seems to be to find good, undervalued dividend investments with large moats. Good idea on the interviews.

  3. youngandthrifty

    Jan 22. 2012

    Thanks for the inclusion! I’m honored to be on the same page as these well-respected investors :)

    I like that my comment is the most generic and uneducated sounding lol!

    • The Dividend Ninja

      Jan 23. 2012

      youngandthrifty Generic and uneducated? Doubt it! I think you hit the nail on the head :)

  4. My Own Advisor

    Jan 24. 2012

    Great stuff Ninja.

    I really enjoyed reading what everyone had to say. I liked what Andrew said, I think it aligns with my long-term plan to hold dividend-paying stocks through some testy waters:

    “So…the best picks for 2012 will be the stocks that could end up stinking up 2012, but making you a small fortune by 2020.”

    Robert was great to say what I was thinking for 2012, which will be in your Part 2:

    “For my longer-term investors, several years from retirement, I’m increasing a bit the European exposure in the international sector.” Sounds like a great recipe.

    As for Dan’s comment, the Leafs making the playoffs, ugh, I hope not! :)

    Thanks for asking me to contribute, a small time investor along side some bright minds!

    • The Dividend Ninja

      Jan 24. 2012

      MOA I really liked Andrew’s comment, and found it pertinent as well. For example I bought CSCO and SPLS last year, when investors were ready to throw these companies in the trash. We know they are already on the way up :) I feel Husky is also a similar company.

      Yes the European market is a real bargain right now. You could invest in some great European companies right now (i.e. Nestle being the obvious one) at bargain basement prices. I’m glad I already purchased TD e-series International Index Fund a few months ago, which gives me exposure to this sector. But it is definitely a long-term value play.

      Small investor? Didn’t a young and savvy investor name you as one of his must read blogs in the Globe & Mail just a while ago?

      Cheers
      The Dividend Ninja

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