A 10-step rulebook of how to invest in 2012

Whether you are simply dabbling in finance or committed to it thoroughly, it is equally jarring to delve into the field at this tough time for global economics. And with the New Year rapidly approaching, now is a crucial time for economists, analysts and fund managers to buckle down and set to work. Being a mere overseer of market fluctuations is scarcely enough to retain control of your investments, and knowing your mark before and after investing is a major component of amassing revenue and holding onto one’s sanity today.

The questions currently weighing on the minds of traders are innumerable, and for the most part impossible to predict: Will China’s economy tumble? Will another recession rage through the addled euro zone? Which paths will gold take in the coming year?

Though you will be hard-pressed to find an economist who does not take his own projections as gospel, and though a grain of salt is an irreplaceable asset in finance, some educated steps can be taken to ensure that you are at least better-equipped to make sound decisions on the floor.

The following list consists of ten predictions of how to invest and/or observe the markets in the year 2012. Some may prove rather ordinary and well-established, while others may appear conflicting and off kilter. Yet there are all unified in the fact that they follow extensively mapped out patterns and are built to sustain the tremendous amount of strain a questionable global economy can place on any particular investment sector.

  1. One of the most important things to remember when investing is that plenty of things occur that no forecaster and no economist could ever predict. This may seem obvious enough, yet each year it jilts millions of investors. Tracing the source of these unexpected occurrences is easy enough. They rely entirely on the courses and consequences economic and political events take throughout the year.
  2. The opposite of that phenomenon is equally accurate. Plenty of seemingly evident predictions perpetuated by any and all analysts will fail to take place next year. Due to unforeseen underlying factors, “six sigma events” and the typical anomalies that permeate the market every hour of every day.
  3. There will be a small amount of the most far-fetched projections deemed ludicrous by the vast majority of the sector that will come true seemingly out of thin air. Those who predicted them will therefore be proclaimed rarefied experts, despite their spotty track record and general incompetence.
  4. All projections for all investments will be tweaked endlessly as the year unfolds, in order to render each individual prognosis as close to accurate as possible.
  5. The fund managers that happen to outperform their initial expectations for the year will cite their abnormal skills, intelligence and foresight to no end. They will also advertise their single-serving success along with carefully constructed disclaimers stating that past returns are in no way a guarantee of future ones.
  6. The fund managers who under-perform will inevitably pass off the less than clement year to the fact that gears shift and seasons change, and that the next year, the tide will turn, as it has no chance but to do so. Again, their ability to time the market aptly, intelligence etc., will be billed as the reason for this time bomb investment strategy.
  7. Dividends will time and time again prove to be far more important than capital gains. Unless of course the market advances upwards in an extreme fashion. If and when that happens, capital gains will of course be more important than dividends.
  8. The CEOs of this nation will undoubtedly and without fail finish in the top quartile of the nations collective income, and their paychecks will reflect that.
  9. Those CEOs, and the people on the inside of the industry, will continue to play their irreplaceable roles in the state of the world’s economy.
  10. And last, but not least, it is all too important to forget that markets will always fluctuate. Investments can be smart or rash, well-rooted or innovative and forward-looking, but all assets will rise and fall throughout the year. Like clockwork.

By Chris Termeer