Here are some of the best investments for 2012 especially since the world economic conditions appear to still be settling. It also seems that economic growth has apparently stopped or stagnated in both Europe and the United States. With all of the debt that is owed by the United States including trillions of dollars of unfunded social security and Medicare payments, as well as the debt crisis that is occurring in Europe, it is clear that there are some investment options that are better than others.

If a situation of very high inflation develops – or periods of low growth - then there are some investments have fared better than others in the past. To begin with it is vital to understand that real income is very difficult to maintain during inflationary times. Workers that enjoy good income find that their real salaries are drastically cut. And the people that rely on pensions, investment income, or saving for a living are in a bad situation.

The interest received from savings deposits or bonds depreciate to the point of offering no real value. Corporate stocks during these times may pay meager dividends or none because management needs the money for capital building, working capital, or speculation. And, the owners of rental property may not fare any better because the need for income begins to have an enormous effect on the true price of many investments and properties.
Downward Eurozone graph

Any cash that is held can lose its value quickly, and in many cases it can be the worst investment. Bank deposits may also become as worthless as cash. Bonds and mortgages typically fall in value even faster than cash during periods of high inflation. Real estate properties can fare well if the owners are able to hold them because people that sell during the high inflation periods tend to fare poorly because of the low real price levels received.
How to Preserve Capital

Capital can be preserved by purchasing objects with lasting value such as jewelry, art, stamps, antiques, and rare coins; along with, of course, rare commodities such as gold. Also, common stocks are deemed to be a hedge to protect from the rise in prices and also to profit, but it is difficult in practice. Stock prices can fall drastically when inflation or low growth is prevalent. These market fluctuations give rise to speculation that makes it very easy to purchase the wrong stocks or purchase or sell at the inappropriate time.

People that typically held stocks with a well diversified portfolio of solid and established companies and were able to holdout through the periods of stagflation (both low growth - stagnation - and high inflation) were able to save their capital and even profit. However, there are several pitfalls along the way especially if the investor gets greedy or fearful. The investors that fared the best were the ones that were able to maintain calmness and were able to detach emotionally from their investments. They also had strong confidence in their selections of the well managed companies and they resisted any speculative temptations and were immune to the anxiety and excitement of the times.

The sharp advances and declines found in the market during these tough economic times make it appealing for speculators. And many investors tend to wind up as traders and mostly do as badly as most amateur speculative traders perform. Many even conclude that speculation was the only logical strategy left since the financial structure and the entire economy seemed to be crumbling. But, those that waited with confidence, a solid investment portfolio in the best managed corporations, and had patience seemed to fare out best.

Also, people that were able to hold their funds in stable currencies or in gold were able to save their capital. The governments may try to set up a system to control foreign exchange if inflation continues, and if that is the case then a black market will flourish. The people that typically make out the best are the minority of people that invest in gold early before the paper currency loses too much value.

However, there are some considerations regarding gold. During the Great Depression of the 1930's all private gold in the United States was seized by the government. And, the possibility exists that they will repeat this strategy once the foreign investors stop purchasing the T-bills.

If very high inflation morphs into hyperinflation (which is unlikely but technically possible), then it’s a good idea that while gold and silver is still in private hands and has increased dramatically in value to sell these precious metals and payoff any outstanding debt or invest in assets that hold their value. The window for this opportunity is small perhaps a few weeks.

The other option would be to hold the gold for the long term and assume that the government will default in its obligations. If this happens then be prepared to hide the gold and do not trust the bank's safety deposit box because they will probably be confiscated by the government and in return the owners receive paper money that is worth much less.

In short: stocks and shares are a bad bet in uncertain times, which is why the price of commodities (such as rare metals like gold) has shot up in recent times.