|DANIEL WAGNER, AP Business Writer|
Junk bonds, companies that make consumer products and even some European stocks could add a healthy shot of profit to well-designed portfolios, analysts and traders say.
For the third straight spring, fear about
The next date to watch is
Global markets would probably whip and dive if that happens. But if the worst fears don't materialize, global markets will probably see a short-term "relief rally."
The trouble is that nobody knows how the European crisis will unfold. So investors need diverse portfolios that won't crumble if things get ugly _ or miss the updraft if
In uncertain times, a company's products matter. The more necessary the product, the better its producer can weather a typical economic downturn, says
"People are still going to brush their teeth, even if the economy gets into difficulty," Webman says. He likes companies that make boring yet necessary products like food, dustpans and dental floss.
The exception: any company that depends on exports to
"People want to be cautious about anybody who's exporting to
For example, cosmetics maker
That might make Avon a better bet, experts say, because it appears to be less dependent on spending by European consumers.
The same logic applies to European companies that depend on exports. In the world of multinationals, it matters less where a company is based than where its customers are, says
He points to two multinational food companies: Nestle, based in
"Their businesses are a lot more similar than people realize," Tchir says. "What you really should do, across the board, is look at European companies that are as global as U.S. companies, but where the stock has sold off significantly."
In fact, for those with strong enough stomachs _ and time to do their homework _ European stocks might be the best value around, several experts say. They tend to have bigger dividends than U.S. stocks. And European markets have lost more value than U.S. indexes _ a disparity that bargain-hunters can exploit.
Although the possibility makes most observers queasy, a splintering of the euro might help stronger economies by untethering them from weaker ones, Webman says. That could mean a resurgent euro currency and big gains for stocks and bonds based on the common currency, Webman says.
For those seeking a truly risk-free experience, U.S. Treasurys remain the world's safest investment, experts say. Webman says most people should keep at least some of their portfolio in these good-as-cash securities. But the yield on the 10-year note hit a record low of 1.44 percent earlier this month, so the returns will be minuscule.
"If you're looking for an insurance policy, U.S. Treasurys are as good a place to be as any," Webman says. "Just remember that's very costly insurance that you're putting into your portfolio, so size it appropriately."
In other words, don't buy more Treasurys than you might need to convert into cash quickly. The rest of your investment dollars can be put to better use elsewhere.
Low Treasury yields have made high-yield corporate bonds more attractive by comparison, says Tchir, the hedge fund manager. High-yield bonds _ also known as junk bonds _ are issued by companies that don't have the sterling credit ratings of giant multinationals. They carry more risk but offer bigger returns.
"These companies tend to be smaller and more domestically focused, so you don't see the same level of business slowdown for them" if
Another bonus for high-yield bonds: If Europe blows up, threatening the U.S. economy, the Federal Reserve could take more action to keep Treasury rates down. That would boost demand for higher-yield bonds, a boon for those who already own them.
Because no one can predict the outcome in
Too many U.S. investors have fled volatile markets and are keeping their money in ultra-safe accounts that will barely budge when the market eventually rises, Kelly says. He says that leaves many U.S. stocks cheap by historical standards.
"Before you decide how you're going to incrementally deal with
|Copyright:||(c) 2012 The Associated Press. All rights reserved.|