The following is a guest post from Credit Card Compare.
Diversity has always been an important factor in the success of any financial portfolio. Finding the best assets to fill a portfolio is the quest of every investor. Here are 8 investments worth serious consideration.
Predicting the commodity market can be difficult. Commodities like wheat and rice can be severely impacted by unforeseen weather. There are, however two commodities that look very good in 2011.
Gold is at an all time high of $1,415 an ounce. This is mainly due to the last round of quantitative easing the Federal Reserve did. Ben Bernanke, the Federal Reserve Chairman, said the bank would likely increase its stimulus efforts during an interview on “60 Minutes.” This implies that another round of quantitative easing is on the way which would push the gold price even higher.
Independent consultancy firm GFMS is predicting the industrial use of silver will increase by 18% in 2011. Combined with another round of quantitative easing that the Federal Reserve is likely to implement in 2011, silver prices will certainly move further north.
[Kevin] Some call silver the red-headed stepchild of gold, and with its volatility it certainly sometimes seems that way. Gold hitting the $1400s was more reasonable, but I didn’t expect silver to hit nearly $40 an ounce so quickly! Depending on your inclinations this could be a good time to take profit or sit tight if your asset allocation has become out of whack.
Exchange Traded Funds
Exchange Traded Funds (ETF) are a great way to diversify. ETFs are a collection of bonds, commodities or stocks and the price is based on the overall performance of all the assets it covers. Here are two ETF positions that should be in your portfolio.
3. MSCI Emerging Markets Index Fund (NYSE: EEM)
Economic growth is on the rise in emerging markets in Asia and Latin America. There is no indication that it will slow in the foreseeable future so index funds like EEM are great investments in 2011. Another reason to like these index funds is the fact that many of the stocks in emerging markets are trading at a discount which adds to the upside.
4. Russel 2000 Index ETF (NYSE: IWM)
In 2010 small cap stocks outperformed the market. The profit margins for smaller companies are likely to follow along with an improving economy in 2011 which traditionally adds to the small cap performance. This should make 2011 a banner year for the Russel 2000 Index.
[Kevin] You also can’t do too badly by going for a set of Vanguard indexed funds which cover the entire market.
Generally the rewards can be much higher with shares of stock but so is the risk. A good balanced portfolio will take advantage of stocks to increase the potential returns while using other tools to mitigate the downside. Here are three stocks that are expected to perform very well in 2011.
5. American Express (NYSE: AXP)
One advantage American Express has over other credit card companies is the fact its market is on the higher end. They are seeing a reduction in charge-offs and delinquencies. The implied upside of 14.5% to a targeted price of $50.66 makes this a strong stock to acquire in 2011.
6. Teradyne (NYSE: TER)
Currently TER is very cheap with a price to earnings ratio of 9.2 vs. the industry group ratio of 21.7. Their fourth quarter earning were 3 times the previous years earnings and Goldman Sachs is predicting they will initiate a stock buy back in 2011. All of this makes Teredyne an attractive option in the tech sector which should continue to rebound strongly with the growing emerging markets.
7. Halliburton (NYSE: HAL)
In the energy sector, Halliburton is a great stock to add early in 2011. The stock price took a big hit as investors sold out on news of poor cementing in the December Deepwater Horizon explosion in the Gulf of Mexico. The price fell to $31 and is currently above $45. The price should continue to climb as oil and natural gas prices increase. The stock is still undervalued and now is the time to acquire it.
[Kevin] I don’t really go for individual stock purchases myself, but natural gas in particular interests me since there is so much supply right now that could be used to build a new energy infrastructure here in North America.
Dave is co-founder and editor-at-large of Credit Card Compare, an independent and free website to compare credit cards for businesses based in Australia.