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Don´t slip up with over “Greece”ing

By John Hayward
This article is published on: 15th July 2015


The original cash machine?

With events in Greece taking prime news position, certainly the east side of the Atlantic, the main question that I am being asked is, “How will the Greek debt problem and referendum affect my investments?”.

It is said that, back in the BC years, Greece invented finance and all the baggage that it carries. It had the first financial crisis, with bad debt. Debt was subsequently written off and the currency devalued. Unfortunately this has not been an option for Greece now as they are part of the Euro.

Greece has defaulted on loans many times before, yet this never brought the rest of the world crashing to the floor. The word contagion is used an awful lot as the assumption by many is that the rest of the PIIGS (Portugal. Ireland, Italy, (Greece) and Spain) will follow suit. If this was to happen and Spanish banks, in our case, had problems, then there would be major concerns for those who had money with them. Bank risk in Spain has been around for a while and keeping a whole lot of money in a Spanish bank makes little sense. Here are some reasons:-

  1. Little or no interest paid.
  2. High charges for little or no gain.
  3. Inheritance tax liability for Spanish residents.
  4. Even greater inheritance tax liability for non-Spanish residents.

For those who are brave enough, a financial crisis is a brilliant opportunity to make money. Many are not prepared to be so brave with hard earned savings and, for these people, we have a proven solution with a household name. Very few people like volatility. In reality, volatility means that your money can go down in value, sometimes sharply. With the right approach, we can do away with volatility. Take a look at this graph illustrating the difference between the truly managed approach, the average cautious fund, and the FTSE100. See how consistent the managed fund has been compared to the roller-coaster ride of the others.

Managed Funds

Greece is the word at the moment but this shouldn’t mean that all our lives should be dependent on what happens there. Living in Spain, being part of the Euro is the one that I want.