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The Economy of Diversification in 2012

April 07, 2012 | Comments: 0 | Views: 111

Every year, investors analyze and worry a lot of the best sectors to put their money in. In some cases, they make the right choices and in some, they flop. With 2011 having caused a lot of sleepless nights to investors, with the majority fearing for the unknown, most of them would like to place their money in profitable sectors in 2012, hoping that the new year, has some pleasant surprises in store for them.

The market outlook and economics of 2012 are scanty but with a serious look at the previous year's happening and this year's projections, you can actually foresee where we are headed. Most economies might have reported some positive growth, however meager but the truth is, economic stability is everyone's wish. However, the indicators cast a gloomy cloud of unemployment, sky-rocketing food prices due to the undeterred cost of fuel.

On the positive side, the world has is gradually moving away from its worst recession period that began five years ago in 2008. However, whatever gains realized in the stock market especially after its serious come back from 2009 through to 2011 is now cooling down and investors have to spread their risks through diversifications.

Sector Diversification

Diversification is the surest way that investors will stay away from the woes and surprises that this leap year has in store for us. Investors will have to seek exposure in a variety of asset classes like bonds, cash and stocks as well as an assortment of mutual fund categories in the asset classes. You can cut the market risk by slightly increasing the amounts to particular sector funds. By purchasing ETFs, Index Funds or actively-managed specialty funds, you can increase your chances getting more exposure to different sectors.

Sectors You Need to Invest in 2012

With projections painting a gloomy economic picture of 2012, the best strategy an investor can employ is defensive mechanism. With a weak growth of even worse recession still with us, unemployment, downbeat consumer sentiment as well as poor corporate profits, there are a few sectors that bloom in such situations and smart investors know that is where they need to put their money.

The first and most important sector that is assured stability, with or without recession is health. People need medication all year around, doctors will still be needed to attend to accident victims and patients of terminal diseases. Investing in health may be the wisest decision investors have to make in 2012.

Utilities, just like health, people will still require their phones, gas, and electricity among others. Closely related are sectors dealing in consumer staples with basic commodities like food, beverages and household commodities.

To the high risk takers, sectors that do well in economic recovery like Real Estate, Financials, Technology may be ideal. Market timing may fail to deliver positive results but diversification will as the risks will be spread across key sector. When one sector is battered, the other can hand out of the waters.

John Conolly is an independent investor with many years experience of the stock market. His sites, such as iiforum.co.uk and nysharechat.com give fellow investors the chance to discuss and exchange share information.

Source: EzineArticles
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