WASHINGTON - Here's a prediction for 2010: Another wild ride in the stock and bond markets, in real estate and in interest rates. The economists and analysts are all over the place when it comes to this year, leaving individual investors on their own to prepare for anything and everything.
You can actually do that -- prepare for anything -- by sticking to what's most controllable about investing: Stay diversified and keep your investment fees low.
Beyond that, there are a few other bets to make for 2010. Here they are, based on the advice of analysts who get paid to make investment predictions:
-- You can bet that stocks won't go up in a straight line. The first day or two of 2010 was encouraging for stock market investors, but don't expect a rocketship to great returns. The Dow Jones Industrial Average already is up almost 50 percent from 2009 lows, and there's still a lot of joblessness, deficits, rising oil prices and more for the economy and the stock market to digest. So, some pros are predicting a lot of volatility, and some sell-offs, on the road to an overall okay, but not fabulous, year.
Save some catastrophic events or galactically stupid moves by our government we should be on the road to full recovery, says Jeff Hirsch, publisher of the Stock Traders Almanac (www.stocktradersalmanac.com). There will be fits and starts along the way, and I wouldn't be surprised if we didn't see a significant bear market in the middle of the year.
Hirsch expects the DJIA to end the year not very far from where it is now -- flat or slightly up.
Investors who want to make the most of that volatility might watch their portfolios more closely than they otherwise would -- buying shares during bad times, and rebalancing to lock in gains on a regular basis.
-- You can bet on prosperity in other countries. Emerging markets such as Brazil or China have captivated the attention of investors for a few years already, but their run is not over, say T. Rowe Price managers who opined recently that emerging markets may continue to offer the best opportunities in 2010.
Gonzalo Pangaro, manager of the Price Emerging Markets Stock Fund, says emerging markets have strong fundamentals and less debt than developed markets. The firm further expects Chinese stimulus and Brazilian currency reserves to keep those markets particularly strong. The bottom line for investors? Don't go all in to foreign stocks that have already shown sizable gains, but do keep your portfolio internationally diversified.
-- You can bet that interest rates will rise, but not in a big hurry. Federal reserve Board Chairman Ben Bernanke spoke recently about the Fed's readiness to raise rates when recovery takes hold. And the current 0.01 percent rates common in money market mutual funds are not going to keep savers and investors happy for very long. When rates do rise, investors in long-term bonds could get slammed. Even William Gross, managing director at the bond-focused Pimco, is telling investors to put money into utility stocks in lieu of bonds. But he's also predicting that the eventual rise in rates won't happen in a big hurry. The best strategy for investors? Keeping some money liquid, so you can capture future rate hikes isn't bad. Any long-term bond investing should be done carefully, by spreading out maturities of the bonds you are investing in. That's another way of diversifying.
-- You can bet that commodities will continue to get pricey. That's a simple matter of more economies chasing the same limited supplies, said the International Monetary Fund in a new report. Looking ahead into 2010, prices of many commodities are likely to increase further. The demand side should generally be the main source of upward pressure, as global activity is widely expected to expand at a faster pace. But the group also said that many countries already had high inventories of most used commodities and the probability of another commodity price spike would seem remote over the near term. And investors hoping to hedge against inflation might especially heed that warning as it pertains to gold, which has already almost tripled in the last four years.
-- You can especially bet on this: Not every sure thing will turn out to be true, and even the most likely outcomes have a way of not materializing. The Wall Street journal did an analysis of the most recommended stocks for the decade in 1999 and the ones that were flying under everyone's radar. If you'd put $1,000 into those unappreciated stocks in 1999, you'd have ended 2009 with $32,937. And if instead you'd put $1,000 into the top recommendations of 1999? (You remember AOL, Lucent, Texas Instruments, right?), you'd have $291 now. That means the bottom line for investors is to read the tea leaves, listen to the experts, and focus on cutting fees and staying diversified.
(editing by Gunna Dickson )