Where to invest in 2002?

Usually by this time in January investors are pretty tired of receiving advice. But 2002 is rather different. The experts have been distinctly shy and retiring this year, and investors are still asking where to invest in 2002.

With the Dow Jones dipping back below 10,000, and the NASDAQ struggling to keep its head above the 2,000 mark, this may not be the moment to invest anywhere. Certainly Dr Marc Faber's column on this website is warning that stock markets are still too high, and that a major correction could happen anytime soon.

To be fair Dr Faber suggests that Asian shares may offer value for those who feel compelled to invest. Another option could be to take a position in the new European single currency. HSBC this week tipped the euro as likely to rise in 2002.

Meanwhile, in the Gulf many local Arab investors are deciding that their own stock markets are undervalued and offer good value. Hence the upturn in GCC bourse seen in 2001 has carried over into the New Year. However, it will be interesting to see how far investors are prepared to push GCC share values in the face of another downturn on world markets.

This is all very frustrating for investors, and frustrating for a financial website like AMEInfo/FN which has two main functions, to deliver the news and to provide market analysis for investment. So AMEInfo/FN can continue to provide a daily update of financial news and market data, but can not really offer any positive options in the second area.

Perhaps this fact should be enough to caution investors. If the professionals that AMEInfo talks to are at a loss to know where to turn in 2002, then the private investor is surely out in the cold too.
Caution is the watchword for 2002. You are unlikely to miss out on any big investment opportunities by sitting on your cash, perhaps speculatively deposited in euros. But if you are fully invested then the downside could be considerable.

So on balance the risk-reward equation is stacked towards doing nothing. After all, if you remain static while others fall, then you will still have advanced in relative position. To have cash when a market really bottoms out is a great position to be in. But how many investors are really that sensible?