The FBD Blog – investments, insurance, pensions, savings in Ireland

Fear and Greed in uncertain times

In simpler times, depositors were only concerned with getting the best deposit rate. People motivated by Fear stuck with deposits while those seeking an additional return (is it fair to call this Greed?) invested.

Every day, we now hear from clients who have perfectly understandable fears about what was once the safest asset – money in the bank. So, what should you do? The answer, of course, is that it depends! It depends on your outlook and attitude and addressing some of the key questions below will help you establish yours:

1. Are you aware of the different Deposit Guarantee Schemes and the differences between them? If not, you should educate yourself before making any further decision. 
2. Are you confident about the future? 
3. What is your feeling on the possibility of Euro breaking up?  
4. How important is rock-solid security to you? Is it less important than getting a return?

At this point, you can address the issues. Having read extensively in this area – and the commentary ranges from the balanced to the hysterical – here are some personal observations and opinions which might be of interest:  

• The greater balance of probability suggests that the Euro area will muddle through, probably from crisis to crisis, but that the Euro will survive.
• The Deposit Guarantee Scheme is of great benefit; even the gloomiest forecasters are comfortable with the €100,000 limit per head.
• If you have money in An Post, are you aware of the status of the State Guarantee? You should be….
• Perhaps we should all consider having Gold or Precious Metals in our Portfolios?
• If you are really nervous, and willing to accept a puny return, German Government Bonds represent a safe bet without the dangers associated with currency changes.
• Moving to a non-Euro currency is very risky if you have to live here and pay your bills here. Here are some current monthly volatility levels which demonstrate that you can easily lose money by dappling in currencies:

Euro Swiss        16%                                                  Euro Sterling       9%                                                Euro Aussie      11%                                                  Euro Dollar        13%

To highlight the risks of investing overseas the attached article is worth a read. When switching between currencies there are many, many variables and therefore additional risks to be considered.

http://on.ft.com/swissfrancFT

If you would like to discuss any of these matters, please email me on ian.cooke@fbdlife.ie and I would be happy to help if I can.

 -Ian Cooke