Investment Strategies if concerned about an Irish exit from the Euro:
Given the uncertainties outlined in the article about Bank Deposits, it should come as no surprise to find that there is no perfect hedge, save for physical holdings of internationally tradable assets (precious metals for e.g.) and non-Euro cash. Nevertheless, the following are worth consideration:
- Buying German/ Swedish/ Danish/ Swiss or Norwegian (i.e. non Euro, or ‘strong’ Euro) Government bonds. The downside to this is that you will be lending your money to these Governments for not much more than 3% p.a. This would of course seem like a pretty attractive deal in the event of a break-up.
- Buying precious metals and having access to hard currencies that are resident outside the state.
- The simplest is investing in unit-linked funds which hold non-Irish assets. Notwithstanding the fact that unit-linked funds are quoted in euros, many of them hold assets in non-euro currencies. When translated back into a devalued Punt, assets denominated in Sterling, Dollar, Yen and other non-euro currencies receive a translational benefit, all else being equal.
- Invest in a Capital Protected Bond like the Global Absolute Return Bond which offers Capital Security while following a diversified investment strategy
- For more info:
Email: richard.cotter@growthinv.ie
Summary:
The first task in dealing with concerns about the Euro is to put those concerns in context. I suspect that you would not wager a large sum of money on the flip of a coin. A coin flip, though random, is a 50/50 bet. I’d argue those odds are better than economists’ ability to predict future events - like the break-up of the euro.
On the basis that this is possible, but not probable, you must work on the basis it won’t happen, but take it into consideration with a portion of a portfolio
Contact richard.cotter@growthinv.ie for more information