Where to Invest in 2011
Earlier this week I wrote about how the markets performed in 2010 and what to keep in mind for investing in 2011. So where should investors place their stock bets in 2011?
For bonds, the story is not great. Interest rates are starting to rise and in response bond values are falling. Watch my segment on Bond Market Turmoil - What to do now..
Investors are taking note: bond funds have experienced the first month of net-outflows in two years. Bond king and fund manager Bill Gross has said bonds have seen their best days.
As for stocks, the future is more promising. Here are three investment strategies that could make money in 2011:
- Go Global: When creating your portfolio strategy, think of yourself as a global investor living in the US instead of being a US investor with a little global stock exposure. US investors suffer the "home bias" and thus typically allocate a small portion of their stock portfolio to foreign stocks. But think about this: over 55% of the world stock market value is from companies outside the US, so the proportion invested should be higher. I suggest 30 percent or more. And the focus should be on emerging market stocks, or funds and exchange traded funds that concentrate here. They may have more volatility, but trend over the next five years is expected to be higher than that of US stocks.
- Large Cap Multi National Stocks: Stocks of large well managed US companies with operations in emerging markets will also get a boost for fast growing economies abroad. They will also have the cash to make stock boosting financial maneuvers such as raising dividends, buying back shares and making strategic acquisitions.
- Alternative investments: Consider an allocation of at least 5 percent of your portfolio in something different than cash, stocks and bonds. That means buying a basket of investments that focus on precious and industrial metals, mining and energy stocks and agricultural products. The US dollar is likely to continue to be under pressure from an increasing national debt and a sluggish economy. That means it will take more dollars to buy these products, so continued gains here seems like a reasonable bet.
View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.
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