In our previous article, we painted a cautionary picture for 2012. Continued volatility in stocks, low interest rates, problems in Europe, slowing growth in Emerging Markets. All this being said, this is not the time to stuff your funds in a mattress.  There are opportunities to outperform the miserly returns being offered by money market funds, bank accounts and the like.
 
First, we have always advocated broad diversification.  Some market sectors are always doing well.  So, look at all of your holdings and see if you have representation from a broad cross section of investments.

Every portfolio should include from 20-60% fixed Income.  This means bonds and similar instruments that pay a stated rate of interest. Cash is not an investment, it is a holding instrument for funds that might be needed without notice.
 
Within your fixed income holdings should be high quality corporate bonds, some high yield or "junk" bonds, emerging market debt, and possibly, master limited partnerships. The allocation of fixed income investments is dependent on your age, temperament and goals. While U.S. treasuries are safe, the yields are low and likely to remain so.
 
Major domestic corporations had a pretty good year in 2011.  While profit margins are likely to be lower in 2012, they still offer an opportunity for handsome returns relative to risk. The Dow Jones Average was up 5% in 2011. This is an index made up of 30 of the largest U.S. Corporations. If you add an average dividend yield of 2%, that's not bad. Particularly if you compare it to the return on your savings account of less than 1%. Right now, cash is actually losing value, because inflation is higher than the interest being paid. We will have a lot of volatility, just like last year, but don't let that cause you to run and hide.
 
There are still many opportunities overseas. While the rapid growth of recent years has disappeared, there are still many reasons to be optimistic.  For one, several markets have large consumer segments with strong desire to own the products that typify the American consumer: smart phones, designer jeans, fast cars.  India, Brazil and several companies in Asia are examples of markets with large consumer populations, with money to spend.
 
Every portfolio should be reflective of the personality of the owner. Some are skewed for income, some for growth. Every investor should have some representation in all market sectors in order to capture a reasonable portion of growth opportunities.  We are happy to provide sample asset allocations, please contact us at anadolna@associatesgroupinc.com