It’s the time of year that anyone writing about money dreads. The time to look back over your tips to see what went wrong, and what went right — particularly difficult in a disastrous year in which cash is pretty much the only thing to have delivered a positive return.

At the start of the year very few people, least of all me, said pull all your money out of markets and put it under the mattress.

One area where I have fared better, though, is with commodities. In May I was worried about the amount of money pouring into the sector, and specifically the JPM Natural Resources fund. Not because I had anything against the fund — Ian Henderson has an excellent long-term track record — but because of the danger that investors were piling in right at the top.

Oil promptly plunged from its peak of $147 (£98) in July to below $40 on Friday, and JPM Natural Resources is down a painful 57%, making it one of the 10 worst-performing funds of the year as of December 11, according to data firm Lipper.

But with Opec oil ministers agreeing to cut output by 2.2m barrels a day on Wednesday, their biggest-ever reduction, is now a good time to start buying again?

Oil fell more than $3 a barrel, despite the Opec agreement, after weekly data showed American oil inventories continued to rise, suggesting investors are more worried about the impact of global recession on demand than they are about reduced supply. Even Arjun Murti, the Goldman Sachs analyst who predicted earlier in the year that crude could hit $200 a barrel, slashed his forecast to $45 last week.

The last bull turning bearish is, of course, the classic signal to buy back in, but another spike in the price of oil looks unlikely while the extent of this recession remains unclear.

Again in May, I had the unusual experience of getting excited about bonds. This is normally a staid part of the market, but with interest rates having plunged, it’s been the place to be. Bonds pay a fixed return and, when interest rates fall, this becomes more attractive and prices rise. The top-performing sector of the year, again according to Lipper data, looks set to be global bonds with a 9% gain, closely followed by UK gilts, up 7%.

Admittedly, I was more interested in corporate bonds than government ones and they haven’t done as well as gilts. Corporate-bond funds are down by an average of 12%, but that still puts them in the top 10 sectors this year.

A further admission — the bond fund I chose for my own money, Henderson Strategic Bond, is down 14%. I’m sticking with it, though.

Government bonds are the more obvious choice, with the Bank of England looking increasingly likely to slash interest rates to near-zero. However, yields on one-year gilts have already plunged to 0.6% in anticipation, while two-year UK government bonds are paying only 1.25%. While yields may fall further (and prices rise) on longer-term gilts in the short term, I think corporate bonds are a better long-term bet.

The government has to fund next year’s £118 billion borrowing requirement (worth about 8% of gross domestic product) somehow, and the gilt markets are likely to be the first port of call. That supply has to put pressure on prices.

Meanwhile, most corporate bonds are trading considerably below par (their maturity value) because of concerns over the risk of companies defaulting on their debt. Most managers think these fears are overdone (unless you believe in the Armageddon scenario of depression and deflation), meaning you will get big capital gains when traders eventually start looking forward to recovery.

One area where I didn’t cover myself with glory was in the so-called frontier markets. Earlier in the year, I was impressed with the outlook for Africa in particular, which hadn’t had the flood of hot money seen in the Bric markets (Brazil, Russia, India and China) and looked undervalued.

I’d made the classic mistake of thinking some markets could “decouple” from the credit crunch in the West. In fact, the one lesson of the year has been that, in a crisis, pretty much everything goes down.

So what of prospects for 2009? A look at the year’s performance tables can prove instructive as there is a strong tendency for the best performers to drop to the bottom of the tables the next year, and vice-versa.

It doesn’t always work, but it does give some idea as to where the hot money is going, and therefore which sectors are most likely to be overvalued. The best funds of 2007 were dominated by Bric funds — including Gartmore China Opportunities, Jupiter China, Allianz RCM Bric Stars. This year they are down 35%, 43% and 52% respectively.

That doesn’t bode well for this year’s top performers, which are almost exclusively global bond funds.

This year’s worst 10 performers, meanwhile, are heavily weighted towards the UK. SVM UK Opportunities, Rathbone Special Situations, and Close Special Situations are all down more than 55%.

It would be a brave person who bought the UK right now, with sterling heading for parity with the euro, and with the economic news worsening by the day. But bear in mind that one of our best fund managers, Anthony Bolton, thinks that a new bull market will have started by the beginning of next year. He’s not infallible, but you could do worse than make regular savings into a UK fund in 2009.

Kathryn Cooper is editor of the Money section

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