To Invest or Not to Invest in 2012

The European debt crisis has proven to be a perfect culprit over the course of the past few years. It abates mildly just when things teeter on the verge of total collapse, yet unerringly returns for more action, as soon as the situation begins to look anywhere better than grim. For both traders and economists, it is unrelentingly difficult to determine what if any lessons can be drawn from this year’s big winners, duds and disappointment, and which of these lessons can help you figure out how to invest intelligently in the coming year.

The vast majority of the world’s current major stock markets this year have season seats in negative territory. Yet there have been instances of funds and individual shares that have performed impressively well in the face of a seemingly insurmountable obstacle of the debt crisis in the euro zone. Will these success stories of investment persist in the year 2012, or will they abate to cede space to other underdogs? Statistics for the year show that almost all of these outperforming funds are either corporate or government bond funds. These funds have typically profited from recurring waves of investor panic. Their futures rose in surges, as riskier assets crumbled and people flocked to safer havens.

Precious Metals funds have been one of the best success stories of the year. Several prolific firms posted more than 22% in futures increases over the year, thriving on the perpetually-rising global inflation rates. Each time high-profile investments such as crude oil or copper faltered, traders dropped all of their holdings and ran to the gilt sector to wait out the crises. Yet, the question remains: will the sector continue to thrive in 2012, or should safe haven-reliant investors look elsewhere?

Many analysts consider that gilts are simply overpriced. They appeared overpriced this year, and with the impressive gains they have built up so far, an investor looking to place money into a safe asset, gilts will simply look too expensive. Both gilts and U.S. Treasury bonds have enjoyed a profitable year-long run on the charts. However, that growth more or less crippled their advancement projections in 2012, as they are already circling their metaphorical ceiling. The lack of sureness over the path Europe’s debt crisis will take in the coming year also makes investments in gilts much more of a gamble than a safe bet.

Strong, well-established companies with long-proven sustainable earnings are the choice of many economists for the year. Though the developed world likely faces a protracted bout of stalled growth, it also possesses the underlying foundation to sustain a crisis. Companies that yield sustainable dividend growth and earning potential are still present even in these tough economic times.

Some of the most evident well-established sectors that will likely hold their own in 2012 are the food, drink and pharmaceutical sectors, otherwise known as the defensive sectors. These have performed well in the face of the continually unravelling debt crisis in Europe, and there is little in terms of obstacles to suggest a reversal of that path. Defensive sectors exhibit steady growth, rather than strong rallies however, and they provide little opportunity for quick profit. Yet for those who want to commit to a strong and well-rooted investment, pharmaceuticals especially can be a solid base.

Companies manufacturing computer chips have also outperformed this year. The perpetually rising demand for mobile phones, specifically “smarter” mobile phones ensure traders with plenty of growth potential, and make chip makers a wise investment strategy.

Some analysts have been advising people to convert their assets into cash until the market stabilizes itself, and until a cleared path of action becomes evident for the European crisis. Yet the wild fluctuations that most sectors have displayed over the course of the year suggest that those carrying cash may well run the risk of missing out recovery opportunities.

European leaders’ repeated inability to provide the addled region with an apt resolution measure have also instigated massive opportunities to buy into falling equities. Those relying on a more concentrated plan of attack for Europe in the year 2012 may benefit greatly from these investments once the markets begin bouncing back.