Profiting in 2011: What Are Your 2011 Investing Strategies?

After a year of rocky economic recovery and a mixed bag of U.S. data, market strategists are waxing optimistic about the profit prospects in 2011.

"There is still an awful lot of pain out there for sure, but if you get this creeping confidence to accelerate a little bit, it's surprising how fast things can turn," Sandy Lincoln, chief investment strategist at M&I Investment Management, told MarketWatch.

A year plagued with Europe's debt contagion, the May 6 market "flash crash" and constant fears of a double-dip recession caused many investors to keep money parked on the sidelines.

But the Standard & Poor's 500 Index gained 12% this year, the Dow Jones Industrial Average rose 10% and Nasdaq Composite Index climbed 17%. Those who stayed in the game - and made the right plays - netted considerable profits.

Now those eager investors who sat out on 2010's bull market are determined to avoid that mistake in 2011. This surge of investing is what Money Morning's Chief Investment Strategist Keith Fitz-Gerald calls "professional performance anxiety."

"A lot of professionals were surprised by the ferocity of the run off of the March 2009 lows," Fitz-Gerald told Fox Business News' Varney & Co. program on Dec. 21. "And what that means is they, like a lot of small investors, have actually got money on the sidelines or they've just begun to put it to work and in 2011 they're going to be anxious to make up what could be a hole in their performance run rate over the last few years. That could add a nice tailwind in and of itself."

Those who avoided the market missed this year's gains and should consider giving stocks another chance.

For investors looking for 2011's hottest stock picks, Money Morning Contributing Editor Shah Gilani pointed to sectors expected to shine in his U.S. market forecast.

"The high-tech, energy, materials and commodities sectors will be hot in the New Year," said Gilani. "And the U.S. stock market will get an added boost from the fact that U.S. Treasuries, municipal bonds (munis) and euro-based investments will not."

Reader Question of the WeekInvestors who favored bonds in 2010 should also change their strategies.

Money Morning Contributing Editor Martin Hutchinson warned investors that the safe haven they sought with bond investing in 2010 will no longer pay off in the New Year due to low interest rates and rising inflation.

"[T]oday the forward-looking downside risk in bonds is in many cases much greater than it is in stocks. Indeed, as interest rates rise back toward their historic norms, bonds now seem poised for a long-term bear market," said Hutchinson.

Still, there are always ways to play the downside. Hutchinson recommended investors get out of low-yielding bonds and turn to an "inverse" bond exchange-traded fund to profit as Treasury bond prices decline.

This brings us to next week's Money Morning "Question of the Week:" What are your 2011 investing strategies? Are you changing your strategies in the New Year? What market sectors or investment vehicles do you think will do the best and worst?

Send your answers to [email protected]. We want to hear from you!

[Editor's Note: Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at [email protected]. Make sure to reference "question of the week suggestion" in the subject line.

We reserve the right to edit responses for length, grammar and clarity.

Thanks to everyone who took the time to participate - via e-mail or by posting their comments directly on the Money Morning Web site.]

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