Forget the frugal investor.
Set aside, for argument's sake, the typical personal finance rules of being safe and steady. That may be the wisest course. But face it: CDs and U.S. Treasury bonds are boring and their yields are practically nil.
In hope of finding bright spots in this dim economy, we asked a smattering of investment pros their advice on the best-performing short-term (one-year) and long-term (five-year) investments. Say you have $50,000 to spend in the new year and accept a moderate to high level of risk. Where should you put your cash in 2011 to get the maximum return?
Some were more reluctant than others to embrace risk, citing the cautious nature of their personal and corporate strategies. And nearly all stressed the need to be flexible if market conditions abruptly change. "If you're buying something based on a forecast, sometimes you could be deadly wrong," warns Steve Athanassie of Trademark Capital.
Moreover, no neophyte should try this exercise without professional help. "It's an absolute minefield out there today," said Robert Gries, manager of Gries Investment Funds. "If you don't know what you're doing, you'll get your clock cleaned immediately."
What four money managers see as potential moneymakers this year
JOE COTTON, publisher of Cotton's Technically Speaking (www.cottonstocks.net), St. Pete Beach
Rather than investing in mushy portfolios, Cotton suggests loading up on specific stocks with strong potential.
Short-term: Buy equal amounts of Cel-Sci (CVM), Sandridge Energy (SD), Citigroup (C), ReneSola (SOL) and Bank of America (BAC). Cel-Sci, a small biotech company "with great technology" is about to start Phase III trials for Multikine, a head and neck cancer drug. Sandridge Energy is an oil and natural gas play. Citigroup and Bank of America are relatively cheap bank stocks. ReneSola is a solar stock "with projected good earnings" that's down 40 percent from its high of $15 in October.
Long-term: Buy equal amounts of Microsoft (MSFT), Wal-Mart (WMT), Lowe's (LOW), Arch Coal (ACI) and Bank of America (BAC). All five stocks are solid blue chips that will appreciate over time, now selling at "attractive, and relatively low historic prices."
Other advice: "We believe that buying any large positions of 5-, 10-, 20- or 30-year bonds is very dangerous, and is tantamount to committing financial suicide. We expect rates to move up from here. … We don't think they can go lower."
SEAN KELLY, certified financial planner, St. Petersburg wealth management group of Raymond James & Associates
Kelly calls large-cap, dividend-paying stocks "the sweet spot" in 2011. ("Large-cap" stocks are investments in mega-companies with big market capitalization that traditionally don't have as much room to grow as smaller firms.)
"We've heard it's been the lost decade for stocks, but what it's really been is the lost decade for large-cap stocks," he said. "I think we're entering an environment (of rising interest rates) where large-cap stocks can outperform."
Short-term: Among his other recommendations: Stock up on more high-yield bonds; invest in financials, a lagging sector that should rally; and seek commodity plays as global energy demand should continue to propel energy prices higher.
Set aside some of the $50,000 for international stocks, maybe through an actively managed exchange traded fund, Kelly also suggests. But he cautions that much of the runup in the BRIC (Brazil, Russia, India China) funds is over. Countries like Singapore may be poised for faster growth.
Long-term: Kelly likes the retail sector, which stands to improve significantly when unemployment improves, and health care, particularly the generic drug market.
On the flip side, he suggests avoiding government securities.
STEVE ATHANASSIE, president of Trademark Capital, Dunedin
To Athanassie, the great uncertainty of 2011 is whether the economy will continue to gradually improve or the United States' creditors will lose faith in our lack of financial discipline and spark a dollar crisis.
"We're either transitioning into an improving market that could lead to a sustainable bull market or getting ready to move into the next leg down," he says.
Under either scenario, he says, some long-term plays like commodities should do well. If the economy improves, commodity prices go higher; if there's a dollar crisis, commodity prices still go higher.
Short-term: Given $50,000 to split up, Athanassie suggests putting:
• 25 percent into dividend-paying stocks, maybe through an exchange-traded fund like the SPDR S&P Dividend fund (SDY). Dividend stocks are somewhat attractive because yields are so low now.
• 10 percent into emerging markets.
• 10 percent into a small-cap fund like the iShares Russell 2000 Index fund (IWM).
• 10 percent into a technology-heavy fund like QQQQ.
• 15 percent into a gold fund (GLD) to capitalize on the possibility of a dollar crisis.
• 10 percent into an inverse interest rate play like the ProShares Short 20+ Year Treasury fund (TBF) that goes up when interest rates rise.
• 20 percent kept in cash.
Long-term: He's steering clients toward commodities and, if you're willing to wager a little, dabbling in gambling stocks. "The more I've studied some of the problems the states have experienced, the more I think they may look to legalized gambling to shore up their budgets," he said.
JAMES CORDIER, president and head trader of Liberty Trading Group, a Tampa commodities trader
Major commodities were among the biggest winners of 2010, rising more than 50 percent.
"Short-term, over one year, I think they still have a lot of room to run, believe it or not," Cordier says.
One big reason is the emerging middle class in China.
"A billion people just entered the middle class. That's no bubble — that's the real thing," Cordier said. "The average Chinese citizen bought their first pair of blue jeans a year ago. … They're driving more cars. They're eating better."
Hence, two of Cordier's preferred commodities over the next one to three years are oil and soybeans. In the first case, he sees demand overseas and a recovering U.S. economy pushing gas prices to $4 by the spring. In the second case, he sees swelling global demand — in China in particular — for more protein-rich diets, boosting soybean prices.
Luxury food commodities like cocoa and sugar may not lead the markets, but they should also be part of one's investment portfolio, he suggests.
Given the uncertainty of the global economy, Cordier declined to speculate on the best bang for your buck five years out. "In five years, we could be in the greatest depression ever," he said, "or in the roaring 2010s."