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Risk-Off Mentality Could Benefit Contrarians
CNBC.com | January 18, 2012 | 09:50 AM EST

One of financial advisor David White’s clients, a wealthy 65-year-old real estate investor, told him recently, “For the first time in my life I’m scared.”

Amid a plethora of worries ranging from political unrest in the Middle East to slowing growth in China, the hope normally associated with the start of a new investment year has been trumped by fear. Rather than downplaying risk, investors are obsessing over it.

“You need to be a little risk averse,’’ says John Papa, an advisor with Diversified Planning Strategies in Caldwell, N.J., rattling off his main concerns — record debt limits, continued high unemployment and a lack of leadership from world governments.

Europe appears to be the tipping point in formulating investment strategies for the New Year.

White, who runs an advisory firm in Bloomfield Hills, Mich., says the best way to deal with the EU overhang is to bet against it by shorting the euro and European banks . He is placing clients with tactical fund managers who have a track record using shorting strategies .

While he couldn’t name funds, options here include ProShares Ultra Euro and ProShares Ultra MSCI EAFE , which aim to deliver double the inverse return of the euro and European stocks, respectively.

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