Smart Places to Invest Your Money NowThe financial markets and the economy are entering new territory, creating new risks and opportunities for investors.

America's slow recovery is gaining momentum, unemployment is declining and there are even signs that inflation will start to pick up. And while it will be years before before consumers and the federal government fully repair their broken balance sheets, housing prices recover and the majority of the unemployed get back to work, for the first time since 2007, the financial landscape is no longer defined primarily in terms of the crisis. The economy is moving forward.

As all economic transitions do, this moment of change is creating new possibilities in the financial markets. As the landscape shifts again, it's important that investors understand where these opportunities are and where they can put their money. Here are 11 areas experts think you should consider right now:

1. Commodities

As the global economic recovery accelerates, fears of deflation have been replaced with concerns about inflation. The prices of commodities and raw materials such as gold, oil and agricultural products have been rising for some time, but businesses have largely been unable to pass those higher costs along to consumers. That may change. While few experts believe inflation is likely to be a major problem, it can't be ignored.

"We are not big inflation bears right now, but that is not the point," says Seth Masters, chief investment officer for blend and defined contribution strategies at asset manager AllianceBernstein. "Even if there's only a 10% or 20% chance that inflation becomes serious, that is a big problem for investors. It will be bad for stocks and very bad for bonds, so it makes sense to have some protection against inflation, even if that is not the central case," he warns.

Real assets such as commodities can provide protection in an inflationary environment, says Kristi Mitchem, a senior managing director at asset manager State Street Global Advisers.

Rather than looking for the next hot commodity, invest in a broad range of commodities by tapping a mutual fund or an exchange-traded fund. "Investors should be well-diversified in commodities," says Mitchem.

Allocation toward real assets will vary depending upon the age and risk tolerance of the investor, but Mitchem says something in the 10% to 15% range is probably suitable for a broad range of people.

2. REITs

Certain kinds of real estate investment trusts can provide a hedge against inflation as well, according to Masters. REITs that comprise 15-year leases may provide no protection at all. "But a hotel REIT that is based on room rates that can be adjusted as the market demands may be very sensitive to inflation, although that is not always the case," Masters says.

3. Inflation-Protected Bonds

Inflation eats away at the value of traditional fixed-income securities, because the dollars you earn in interest aren't worth as much as they were when you made the investment. Over the years, financial institutions have created a number of products that shield credit from the ravages of inflation. TIPS, or Treasury Inflation-Protected Securities, are one way to go about this. TIPS offer a fixed interest rate, but the amount of principal fluctuates, as does the actual amount of interest the investor collects. At maturity, TIPS should be worth at least as much as they were when they were purchased.

Investors can also purchase I-bonds, a form of savings bond in which the interest rate, not the principal, fluctuates over time. Step-up bonds, in which the interest rate rises every year, can be found in the corporate and government agency credit markets.

4. Australian Dollars

The U.S. Treasury market was a huge beneficiary of the global flight to quality during the financial crisis. Soaring demand drove down interest rates and funded the stimulus that helped bring America out of recession. But now, the Treasury market is saturated with supply -- just look at the record $1.65 trillion 2011 deficit it's funding -- and demand as falling as the global economy recovers.

There are alternatives to U.S. Treasurys, though. "One way to hedge it is with the Australian dollar," says Steve Persky, managing partner of Dalton Investments, a $1.1 billion hedge fund based in Los Angeles. Australia came through the financial crisis without falling victim to the credit pressures faced by the U.S. and much of Europe. Its debt-to-GDP ratio was an estimated 22% last year, compared to 59% for the U.S. Furthermore, its proximity to China and the other Asian growth markets is expected to help the country boost its GDP by 4.25% this year.

5. Municipal Bonds

Given the level of alarm about the municipal bond market, investors might wonder if putting money into this sector is akin to buying subprime mortgages in 2007. Yet most issuers in the municipal bond market will repay their obligations without any problem.

Muni bonds yields -- say, 4% for 10 year bonds -- are attractive, especially considering their tax-free status. The question is how to protect yourself from weaker issuers. John Taft, the CEO of RBC U.S. Wealth Management (RBC), says he prefers general obligation bonds and revenue-backed bonds that are linked to essential services such as water and sewer service, not special projects. Some experts suggest that larger issuers with higher ratings tend to be safer, but Taft believes that independent research by an investor or analyst before buying is key.

6. Large-Cap Stocks

In the midst of the financial crisis, investors fled the equity markets and credit prices soared. As the first signs of the recovery took hold, investors began moving back into stocks. The Standard & Poor's 500 is now at 1,330 -- up nearly 100% from early 2009.

Yet there's still opportunity in stocks, even if a market correction occurs. "Large-cap stocks are relatively undervalued," Taft says. The S&P 500 index of large companies is up 24% over the last 52 weeks, while the S&P SmallCap 600 index is up 35% over the same period of time.

7. Dividend Stocks

Research shows that dividend-paying stocks tend to beat the long market. According to that theory, it's always a good time to invest in them. Wharton finance professor Jeremy Siegel researched the S&P 500 from 1957 through 2009 and found that the top 100 dividend stocks had an annualized return of 12.5% over the entire period, while the 100 companies with the lowest dividend yields returned 8.8%.

"Dividends are issued by quality companies that have a history of cash on their balance sheets -- and they are often large-cap companies, which are currently undervalued," Taft says.

8. Health Care and Consumer Staples

Investors who cycle out of the broad market in springtime and shift into defensive stocks such as health care and consumer staples tend to beat the market, according to Sam Stovall, chief investment officer of S&P Equity Research Services.

The S&P 500 has returned about 6.1% a year since 1995. But if this simple rotation -- undertaken in April and lasting for six months -- is employed, investors' returns are boosted to 9.7%, according to Stovall. He says the results are even more pronounced among smaller companies. The spring defensive rotation boosts the return to 12.5%, compared to 9.7% for the broad market of smaller companies.

What accounts for this seeming mystery? Stovall says the broader market tends to perform better during the end of the year and late winter, thanks to the availability of bonus money, tax returns and other forms of liquidity. The rotation provides a defense against a traditional seasonal downturn for equities.

9. Stocks with Low Debt-to-Equity Ratios

If inflation picks up -- as many experts believe it will -- "investors may want to take a look at companies with low debt-to-equity ratios," Stovall says. As the cost of debt capital rises, companies with cleaner balance sheets will have less exposure. The debt-to-equity ratio for the broad market is 51%, but several industries have much lower ratios, including tech, with a ratio of 28%. "Tech companies tend to become self-funding because their median profit margins are high, at 15.4% compared to 9.2% for the broad market," Stovall says.

Other sectors with low debt to equity ratios include energy, with a ratio of 39%, and industrials, with a ratio of 46%.

10. Oversold Stocks

For the technically minded investor, some standards measures suggest when stocks are under- or oversold. The relative strength indicator (RSI), for example, tracks stocks' performance over the last 14 days and ranks them on a scale of 0 to 100. Scores below 30 suggest that a company may be oversold.

Stovall said that as of Feb. 15, investors might want to consider these stocks with RSI's under 30: Celgene (CELG), CVS Caremark (CVS), Dreamworks Animation (DWA), Family Dollar Stores (FDO) -- now the target of a $7.6 billion takeover bid by investor Nelson Peltz -- and Peoples United Financial (PBCT).

11. Cash

Finally, most experts say its wise to keep a certain amount of your assets in cash. "There is nothing wrong with keeping 10% or 15% in cash," Taft says. "Warren Buffett always said to wait for the home-run pitch. That is how you make money."

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I would like to say that high dividend stocks could help slow down the eroding effects of inflation. Lower returns are expected from the stock market as the global economy slowly recovers at a modest pace. As a result, more investors are taking a medium to long term view towards their investments and dividend stocks is one avenue through which they can grow their wealth slowly but steadily.

November 05 2012 at 6:45 AM Report abuse rate up rate down Reply

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October 22 2012 at 10:03 AM Report abuse rate up rate down Reply

Due to the ongoing damage caused to the earth through pollution we are now entering a time of global change. The 'Green Boom' is providing a historic opportunity to get involved at the early stages of the market, creating the ideal time to maximise return whilst doing our bit for the environment. It is not just financial institutions that are getting involved whilst the current buy price of offsets is relatively low. Governments themselves are buying into the reduction of carbon emissions and are the very drivers of this market through legislation.

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July 19 2012 at 9:43 AM Report abuse rate up rate down Reply
Chris Walsh

You could also just pan Gold and sell it. If you live in a area where it is in abundance why not just dig for it? Where I live there is some decent Gold and I have not had a chance to go pan any yet but my roommate does and he has found some very nice gold. Then of course sell it. I think Gold prices are still pretty high right now.

February 09 2012 at 5:32 PM Report abuse rate up rate down Reply
Matej Princic

Invest some of your money in Gold and make you pension safe or better you can also retire sooner than you think.

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December 27 2011 at 2:31 PM Report abuse rate up rate down Reply

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May 29 2011 at 1:16 AM Report abuse rate up rate down Reply

Hello Icemanbill23.....I bought many of your First Strike Silver Eagle off Ebay from you. Thank you!!! I enjoy your posts here on Silver/Gold...This is Joe from Peekskill,NY

February 21 2011 at 1:07 AM Report abuse rate up rate down Reply
world of noise

Like how all these financial writers seem to have simultaneously gotten the memo to push the end of the recession in their articles. Well, the government may have concluded the recession officially ended but you'd be hard pressed to get that consensus from the average American. The so-called "recovery" was accomplished through arbitrary printing billions of dollars, changing the definition of unemployment and bailout after bailout. The market is up to pre-recession levels, and the Wall Street clowns are pushing stocks again, so they can sell on you and convert assets to gold. Unfortunately a lot of people will buy at the peak and be burned again. The U.S. economy still does not produce, has fewer jobs, and massive and increasing government debt. The Obama administration has no real solution, and is just treading water. The Republicans in Congress are aiming to cut only the programs they disagree with, but refuse to cut foreign aid and military spending to get the national debt under control. China is buying gold and silver, investing in Africa and the Middle East, and preparing to being abandoning the U.S. Now, you can take Mr. Rosenbush's advice, and buy some nice CVS shares, or think for yourself. History repeats itself, and the rich Wall Street types have begun setting everyone up for the next fall. Recovery.. ha.

February 20 2011 at 8:49 PM Report abuse rate up rate down Reply

Ronsjigslures123......Nice post...Investing in silver (and i know a few who have), made a small fortune over the last yr....And i believe silver is or had been the best investment over the last yr....Some of the things mentioned here are gambles also....Not sure about aus dollar..But the forex market and such (thats investing in the EURO AND such, against the US dollar), are high risk investments....So be careful....Yes, you can make a fortune, and they will tell you that, and you can lose it also, very easy....Even the funds or bonds have some risk, and depends how much percent you wish to make with them.....The higher percent, the higher the risk....Kind of like walking into a casino....You can make a small fortune there also (and yes, ive known many who have), but unless you know the games, be careful....Good luck.....

February 20 2011 at 3:25 AM Report abuse rate up rate down Reply

Here comes inflation and QE3 , hope you bought silver and gold ...Fiat currency is history baby! And as for the great US economic recovery ....keep dreaming!

February 18 2011 at 9:26 PM Report abuse +2 rate up rate down Reply