This post is one in a series in which over 50 newsletter advisors share their Top Picks for 2012.

By Jim Farrish, Sector Exchange

Looking towards 2012, Europe is the single biggest obstacle facing both investors and the financial markets. Therefore, my outlook is cautious, and any investment added to my portfolio should first measure the risk/reward of the opportunity.

Thus, we have focused our attention towards the defensive sectors of the market in 2012. Start by looking at consumer staples, utilities and healthcare for insight into these opportunities. The sectors consist primarily of large-cap value stocks that generally pay a dividend. That theme has been echoed by many analysts over the last several months.

To capture all of the major sectors with an emphasis on the dividend distribution, I like iShares Dow Jones Select Dividend Index ETF (DVY).

The current breakdown of this exchange-traded fund (ETF) is 31% utilities, 18% consumer staples, 15% industrials, 10% financials and 6% basic materials to round out the top five.

The current dividend distribution of the fund is 3.5%. In today’s low interest rate environment that is a competitive distribution relative to the risk of the asset.

As we move forward, the outlook for 2012 is questionable by any measure. It would be easy to say that the market values are discounted, but the outlook for economic growth is not substantial. Most estimates for GDP growth in 2012 are in the 2.5% range. This would translate into modest growth across the equity markets. Taking that into consideration DVY's dividend of 3.5% and projected 6% growth in principle value would equate to a solid return for 2012.

The key is to manage the risk of the position as well as the upside opportunity. Too often investors look to the gains and not the risk associated with capturing the move of a particular asset.

A move above $53.10 would break through the current resistance and break the down trendline in play off the May 2011 high. Plan your entry based on a defined strategy and plan your downside risk for worst case. I would use any move below the November low at $49.30 as a stop or exit point should the current trend reverse.

The outlook for 2012 is modest growth in the U.S. markets and one way to capture the benefits of this market environment is growth plus dividends and Select Dividend ETF fits the bill.

See all 50+ stocks from our Top Picks 2012 Report.

Steven Halpern's TheStockAdvisors.com​​​ offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.