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

Charles Massimo of CJM Fiscal Management in Melville, N.Y., also advocates going against the grain in the current risk-off environment. “When the financial markets are in turmoil and European markets feel like they may implode, [most] investors stand on the sidelines,’’ he explains. “With valuations low and perceived risk so high, this offers the greatest opportunity for return.”

LPL Financial writes in its 2012 outlook that investors are best served by taking on risk selectively. Given its outlook for slow global growth, it recommends stocks in cyclical sectors which are expected to grow earnings at a faster pace than stocks in the more popular defensive sectors. LPL specifically likes the stocks of copperand other commodity producers , U.S. small and mid-cap companies and those in emerging markets.

While all investors are affected by the global headwinds affecting stocks, how much risk they should take on in 2012 is a matter of personal circumstance. In the short-term, Miller suggests a prudent approach of subtracting your age from 100 to determine your weighting to risk assets. A 55-year-old investor, for example, should have about 45% of their portfolio in stocks and other higher risk investments.

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