Looking ahead, we think the stock market could return 7% to 10% over the next 12 months. By Janet Bodnar, Editor-at-Large December 2, 2010 On October 7, Kiplinger's staff had its first meeting to plan our economic and investing outlook for 2011. Talk about a tough assignment. Not only were we discussing the new year nearly three months in advance (with an election still to come), but we were also faced with an economy and a stock market in flux.Even as we met, the controversy over banks' foreclosure paperwork was unfolding, threatening to stall the economic recovery (read our take on its impact and our outlook for the housing market). With money pouring into emerging markets, analysts were worrying that foreign governments would impose investment restrictions to keep their currencies from rising, or that some unexpected event would upset the apple cart (see our recommendations about investing abroad). Meanwhile, market watchers at home feared that the massive flight to fixed-income investments, notably Treasury securities, would lead to a bond bubble (we tell you how to invest for income sensibly). And even our own editors couldn't see eye to eye on everything. For instance, we finally decided to let gold bull Andrew Tanzer, who has 5% of his portfolio in the metal, duke it out with gold bear Bob Frick, who keeps a solitary Krugerrand in his sock drawer (see them square off). Andrew, who wrote our general forecast, likes gold because he's pessimistic about the economic outlook. He worries about the lingering hangover of household debt, the backlog of foreclosed homes -- the housing market, he says, "remains in a depression" -- and the plight of small and medium-size businesses, which are hard-pressed to find banks willing to lend. Advertisement Nevertheless, looking ahead 12 months, Andrew thinks the U.S. stock market could return 7% to 10%, based on dividends and the pace of corporate earnings growth. Over the past 12 months (through November 5), the market returned 17.3%. Of course, it took a fits-and-starts, up-and-down route to get there, including the heart-stopping "flash crash" on May 6, followed by a brisk pickup later in the year -- and lots of sideways motion in between. Cover your bases. Given persistent volatility, plus the usual shortcomings of human nature and statistics, no one can predict the market's course with 100% accuracy. So it pays to be prepared. I'll kick off 2011 with three pieces of advice. First, stick with stocks in whatever percentage of your portfolio you feel comfortable. They're still your best bet for long-term growth (see our favorite companies for 2011). Then, hedge your bets with other investments, some of which traditionally move out of sync with stocks (our suggestions). My personal bogey is inflation, so I'm partial to commodities and Treasury inflation-protected securities, or TIPS. Finally, sit on some cash. Never mind that you're earning next to nothing. If you're concerned about losing your job or preparing for retirement, or you just want ready cash to pounce on investment opportunities, money in the bank buys peace of mind in turbulent times. If the economy declines, cash won't lose value. And if inflation perks up, you'll be able to take advantage of higher interest rates. Either way, you'll have a happier 2011. P.S. You may be wondering what you can expect from the new Consumer Financial Protection Bureau. To find out, read our exclusive interview with consumer czar Elizabeth Warren.