The economy should continue to gradually improve in 2011 much in the same way as it has in 2010, but that doesn’t mean the same investment strategy will work in the new year, says Oliver Pursche, president of Gary Goldberg Financial Services,
When it comes to stocks, ample free cash flow and financial stability will be the keys to success, especially given the increased volatility Pursche sees coming. That makes high-quality, high-paying dividend stocks more relevant than ever. “We prefer the U.S. multinationals that pay a strong dividend and have demonstrated the capabilities of growing their businesses internationally,” Pursche says.
When it comes to bonds, fixed-income investors can look forward to more gains in 2011, but it’s important to focus on shorter maturities, such as bonds coming due in three, five or seven years. “That helps reduce interest rate risk,” Pursche says, and helps insulate a portfolio if a bond bubble should indeed materialize.
Lastly, commodities should have another strong year, but the darlings of 2010 — silver, gold, platinum and palladium — will likely take a backseat to more prosaic elements in 2011. “We think energy is going to be the place to be, in particular, coal,” Pursche says, adding that investors must be prepared for extreme volatility.
For more on Pursche’s 2011 investment outlook, see the video above.