The Best and Worst Investments for 2012

It's impossible to predict what the markets will do in the future, but you can use research and trends to identify possible winners and losers.

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Now that we are a few weeks into 2012, you've likely given your finances an in-depth review and have set a goal or two to improve them. Maybe you're finally going to start saving more money, or maybe you need to update your retirement portfolio. Whatever the case, a heads up on which investments are expected to perform well this year (and which aren't) can help you accomplish these goals and more.

[See Where to Invest in 2012.]

While it's impossible to predict exactly what markets will do in the future, it is possible to use research and trends to identify the possible winners and losers in terms of returns. Below are various investments that could fall into the "best" and "worst" categories for 2012.

Stock Market

Best Stock for 2012: Apple (ticker: AAPL)

Even though Apple's stock has now reached the $420 price range (for just one share!), many analysts believe that AAPL is one of the most undervalued large-cap stocks.

Despite the loss of Steve Jobs last year, Apple has continued to gain value, and the trend is expected to continue through 2012 with the hotly anticipated iPad 3 and iPhone 5 releases. In fact, AAPL is predicted to hit $510 per share in the next year.

[See top-rated funds by category ranked by U.S. News Mutual Fund Score.]

Worst Stock for 2012: Bank of America (BAC)

Last year was rough for the financial sector, but Bank of America took a real beating. BAC was one of the worst performing stocks in 2011 (not even Warren Buffet could save it) with a loss of 59 percent.

Don't expect things to improve much this year. The bank is still struggling to recover from the 2008 Countrywide fiasco--it's even toying with the idea of selling off BAC shares to staff over giving cash bonuses in order to preserve capital. Too many of the problems that contributed to this decline in the first place (housing crisis, turmoil over European debt) will continue to be issues in 2012.

Currency Market

Best Currency for 2011: Canadian Dollar (CAD)

Although we're neighbors, Canada's economy shines in contrast to that of the United States. The country boasts a sound banking system and much smaller debt. Last summer, we even saw the value of the Canadian dollar surpass our own, reaching $1.06 at its highest point.

It now rests at 98 cents but has plenty of room to grow and offers a good hedge against any economic difficulties the United States may experience in 2012. Jim Rogers, legendary investor and author, has called it "one of the best currencies around."

Worst Currency for 2012: Euro (EUR)

The euro is very likely to fall in value in 2012. The issues plaguing Europe show no signs of abating anytime soon--as Charles Biderman, president and CEO of TrimTabs Investment Research, put it, "Europe is engaged in a slow motion train wreck."

The Foreign Exchange Outlook from Scotia Economics confirms this as well: "The EUR, which has been weakening since early September, should continue to lose value against the USD throughout 2012."

[See European Investment Opportunities Outside the Euro Zone.]

Commodities

Best Commodity for 2012: Oil

After rapidly falling in value midway through 2011, experts agree that the stage is set for the value of crude oil to jump in 2012. Major factors expected to contribute to the surge in value include increased demand, limited supply, and instability among major producers across the globe.

It's important to note that crude oil will remain a volatile investment through 2012, but should trend upward overall. Luckily, as one of the most popular commodities on the market, there are a number of crude oil investment options available.

Worst Commodity for 2012: Crops

Goldman Sachs predicts that the commodities market will fare well in 2012. Crops are likely to experience an early 2012 rally that will ultimately lead to a steady decline in prices over the rest of the year. Goldman anticipates commodities as a whole will gain 15 percent, while crops investors will see a loss of about 5.1 percent.

Bonds

Best Bond for 2012: Municipal

Since rising interest rates are a death sentence to bond yields, any improvements we see in 2012 among other investment types will make bonds a less attractive option.

Even so, when compared to treasuries, municipal bond interest rates remain competitive and the risk of default on a major muni bond is quite low, although not impossible. They probably won't perform at the same level as in 2011, but municipal bonds will take your investment much further than a savings or CD account, provided they're held to maturity.

[See The Outlook for Muni Bonds in 2012.]

Worst Bond for 2012: Long-Term U.S. Treasury

Long-term Treasury bonds are the safe haven for wary investors when economic turbulence prompts a "flight to safety." That means any improvement we might see in 2012 is a blow to already rock-bottom interest rates on these bonds. Additionally, a portion of any income from treasuries is lost to taxes, which is not so for municipal bonds.

Many investors also fail to realize that it's possible for a bond to lose value, as evidenced during the 2008 credit freeze. Treasury bonds are generally a good place to park money, but they will do little to help you grow it.

Remember that a successful investment portfolio never follows the eggs-in-one-basket approach. Betting on just one, or even a handful of investments that are expected to perform well, is a dangerous strategy. Consulting an investment advisor can help you determine the most appropriate--and diverse--mix of investments to help you meet your financial goals in 2012.

Casey Bond is editor-in-chief of www.GoBankingRates.com, which provides readers informative personal finance and investing content, as well as the best interest rates on financial services nationwide.

Disclosure: Casey Bond has no positions in the stocks mentioned above.

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