It won’t be an easy ride for investors in 2012 but you can get ahead of the pack if you read the markets correctly. Here’s what the experts think lies ahead for shares, property and cash. 
TIP: Believe it or not 2012 will be a good time to go shopping for value shares.
2011 saw a lot of drama unfold in equities, driven by the debt crisis in Europe. Benny Sada, analyst from the Australian Stock Report says Europe will continue to shape the ASX’s performance in 2012. 
“We would expect to see the market continue to face bouts of volatility, punctuated by strong rallies and big falls - similar to what we have witnessed over the past six months”, says Sada.
Another GFC-style crash would be possible if the situation in Europe was to deteriorate - say, if a country was to default on its debt.
With the ASX 200 trading at almost a 20% discount, John Abernethy, Chief Investment Officer of Clime says it is a good time for investors to buy shares. “It’s a perverse sentiment out there – the herd mentality of panic and bad sentiment among investors and consumers is great from a buyer’s perspective”, says Abernethy. Investors can expect to make modest gains this year, with yields of almost 5%.
Which sectors will make the loudest noise on the market? 
Michael Kodari, Managing Director of Kosec highlights the mining sector as a strong player. “Mining and industries that service mining companies will continue to have strong earnings and revenue going forward”, he says.
An improvement in the resources sector will be shaped by the strength of China’s exports to the US and Europe. “Commodities tend to lead equity market recoveries, and we feel concerns of a hard landing for China’s economy are overblown”, says Sada. 
Whilst the Europe debt crisis has pushed up the cost of off-shore funding for Australian banks, the big four remain profitable. With banking stocks being currently under-valued, the average yield among the financials is a nice 7.5%.
What will the year bring for Chi-X, the new stock exchange? “We see Chi-X making incremental inroads into ASX’s market share, but we don’t expect it to become a serious competitor”, says Sada.
TIP: Don’t sell real estate unless you absolutely have to (or you have definite capital gains in the bag already).
The property market is clearly not the stand-out asset class for this year. Michael Karagianis, Investment Strategist at MLC expects property prices in capital cities to fall by 10-15% throughout 2012-2013. 
“Residential property is significantly overvalued and more than likely, returns would be pretty poor,” says Karagianis.
This means capital gains and high yields will be hard to come by, once the property’s maintenance costs have been accounted for. 
House prices will vary nation-wide. Property prices in the Gold Coast and Sunshine Coast are tipped to suffer, whilst towns such as Gladstone are expected to perform better.
Karagianis stresses this isn’t a catastrophic move for the market, but a moderate unwinding of overvalued prices. As such, he recommends that less than half any household’s wealth should be allocated to property investment.
“The reality is that equities took their pain after the GFC, and maybe property is in for its bout of pain next”.
TIP: It’s still a safe haven and bank deposits are guaranteed but don’t sit on too much cash for too long if you want to make real returns. 
The returns on cash investments are also likely to be disappointing this year, as a result of recent (and future) interest rate cuts. 
In 2012, you can say goodbye to 6.5-7% returns. Although banks are a safe haven, returns on cash are expected to be a dismal 4-5% this year, which will push people into examining other investments. 
“It’s not particularly tax effective for people that aren’t in pension-phase, and for those who are, it’ll really cause them to tighten their belts”, says Karagianis.
Karagianis highlights there are other alternatives worth looking at. Equity income funds aim to minimise market volatility and provide an income return by investing in the equity market. Bond funds are a flexible option - you can take credit exposure, focus on absolute return investing and have active management in these funds. 
The way ahead?
Diversify. Don’t put all your eggs in any one asset class in the year ahead. Look for bargains if you’re cashed up and be patient. Although the year doesn’t look rosy across all asset classes, the classic principle of diversification continues to be the mantra for investors in 2012.
-- By Stephanie Hanna