Experts Offer Advice on Investing in 2010
Andrew Leckey

How would you invest $10,000 in the coming year?

We pose that question annually to a panel of investment experts.

Returns from the selections made a year ago have been remarkable, with not one taking a dive. The leading performers focused exclusively on exchange-traded funds, or ETFs, that trade like stocks.

Top performer for the third time in four years was Richard Cripps, chief investment officer with Stifel Nicolaus of Baltimore. His hypothetical 10 grand in the ProShares Ultra Dow 30 (DDM) ETF rose nearly 40 percent.

Next with a gain of more than 32 percent was Sheldon Jacobs, contributing editor of The No-Load Investor newsletter, Brentwood, Tenn., with a portfolio of the PowerShares FTSE RAFI US 1000 (PRF) ETF and Vanguard Total Stock Market Fund (VTSMX).

Those results are considerably more encouraging than the recommendations for 2008 in which only a couple of experts kept their portfolios above water.

With hopes for an improved economy, the panel peers into its investment crystal ball for 2010:

--Cripps of Stifel Nicolaus:

"Investors will remain risk-averse, trying to mitigate risk when they do purchase stocks by choosing well-known, higher-quality stocks. Invest $10,000 in the Dow Jones Industrial Average through an ETF such as Diamonds Trust, Series 1 (DIA) that replicates that index of 30 stocks. Furthermore, dividend yield on the Dow is 2.6 percent versus 1.5 percent for the average stock. Foreign investors are underweighted in U.S. stocks, so when the dollar stabilizes they'll increase U.S. exposure through larger stocks."

--Jacobs of The No-Load Investor newsletter:

"I expect the Standard & Poor's 500 to go up between 4 and 7 percent next year. We'll see one or two significant corrections and I'd take these as buying opportunities. There will be a slow-growth economy of 2 to 3 percent and the Federal Reserve will probably keep rates low awhile. Put $5,000 in stocks and $5,000 in bonds. Equities would be split among Spartan Total Market Index (FSTMX), PowerShares FTSI RAFI US 1000, Small Cap Enhanced Index (FCPEX) and Spartan International Index (FSIIX)."

--John Rekenthaler, research vice president, Morningstar Inc., Chicago:

"Put $2,500 each in Dodge & Cox Balanced Fund (DODBX), which took a beating in 2008 but roared back and is well-positioned for 2010; Jensen Fund (JENSX) that specializes in quality U.S. growth companies; and Loomis Sayles Bond Fund (LSBRX), whose manager Dan Fuss has a superb 10-year record. Finally, put $1,500 in iShares MSCI EAFE Index (EFA) and $1,000 in Utilities Select SPDR (XLU)."

--Curt Weil, certified financial planner and president of Lasecke Weil Wealth Advisory Group LLC, Palo Alto, Calif.:

"We expect a depressed market in 2010 with decent--but not great or good--returns for the stock market and poor to middling results from bonds. Put $3,000 in a U.S. stock fund such as Thornburg Value Fund (TVAFX); $1,500 in iShares MSCI EAFE Index Fund (EFA); $1,000 in First Eagle Overseas Fund (FESOX); $1,000 in iShares Dow Jones U.S. RE Index (IYR); $1,000 T. Rowe Price New Era Fund (PRNEX); $1,000 in PIMCO Floating Income Fund (PFAX); $500 PIMCO Foreign Bond Fund (PFOAX); $500 Vanguard High Yield Corporate Bond Fund (VWEHX) and $500 in a money-market fund."

--James Paulsen, chief investment officer, Wells Capital Management, Minneapolis:

"There's more market upside in 2010, with a recovery in jobs telling investors that recovery is sustainable. The Federal Reserve will raise short-term rates if jobs improve, but only about a half-percent. Put $3,500 in domestic stocks; $3,000 in a diversified emerging markets fund; $1,000 in a diversified developed countries fund; and $1,500 in alternative investments such as commodities, a diversified hedge fund and real estate investment trusts. Then put the rest in cash and bonds."

--Hugh Johnson, chairman, Johnson Illington Advisors LLC, Albany, N.Y.:

"A recovery in the economy and profits has begun and will continue through 2010, though it will be anemic by post-World War II standards. Inflation and interest rates will rise. I recommend a portfolio of ETFs, with $6,000 in equities and $4,000 in fixed income. Equities would include SPDR S&P 500 (SPY); MidCap SPDR (MDY); iShares S&P Small Cap 600 Index (IJR); and iShares MSCI-EAFE Index Fund."

--Martin Kurtz, president-elect of the Financial Planning Association and president of The Planning Center, Moline, Ill.:

"Expect volatility to continue or increase in the future, so aggressive, opportunistic rebalancing of a portfolio and global diversification become more important. Interest rates will need to increase over time to reward the safe investor with some sort of return. In my practice, a common portfolio is 60 percent stocks and 40 percent in bonds. Stock portions of that overall mix would be 28 percent U.S.; 27 percent international; and 5 percent emerging markets."

--Paul Nolte, managing director, Dearborn Partners, Chicago:

"Expectations for the coming year may be the opposite of 2009, with some strength early in the year as investors carry momentum forward. We then expect markets to struggle and perhaps trade lower over the course of the year. The Fed should be on hold much of 2009. Put one-third in an index fund such as SPDR S&P 500, one-third in iShares MSCI Emerging Markets Index (EEM) and one-third in fixed income such as Loomis Sayles Bond Fund."