For those looking to stay in the game, there are some alternatives, says RBC's Flader, who is about to enter his 27th year as an advisor. He has confidence in managed futures strategies that incorporate covered calls and puts as well as tactical funds.
"It limits the upside, but also limits the downside," Flader says. "When the market starts to look ugly they have the flexibility to go into cash and some have the ability to go short; giving managers [the] flexibility to get out of the market completely if they don't like it."
Convertible bonds and commodities can also be decent places to look going into 2013, according to Flader. "It's not like a safety valve, but they would have substantially less risk," he says. "[And] we do think commodity prices are going to be helpful going forward."
When clients watching the markets call in with knee-jerk reactions to bad news, Flader offers a level-headed reminder: "I'm almost sarcastic: 'What paper do you have that no one else has?'" he asks clients. "If you're reading the same information as guys who manage Yale's pension endowment and pension plans across the country, you don't know anything they don't know. How do you know that the news that you're reading isn't already factored in?"
No matter what the allocation looks like at the end of 2012, the key is that the client is comfortable. "A lot boils down to what helps them sleep at night," White says. "While on paper something may look like the logical right thing to do, if that client is going to worry [himself] to death over it, we might alter that recommendation to something that might give him a comfort level that he can live with."