Financial Planning Matters… a monthly insight with Jonathan Beardmore, an IFA at Pearson Solicitors and Financial Advisers.
It’s all Greek to Me – It’s a tragedy spending other people’s money until it runs out……
YOU MAY have noticed recently a man dressed as a biker running around Germany and other EU countries begging for money so Greek workers can retire at 57 and their government can continue to employ people to do ‘important’ jobs like count the moon.
It’s an economic plan so brilliant that I suspect even economists of distinction, like Charlotte Church and Russel Brand, swoon over it.
However, there is a slight problem – it’s a plan based on other people’s money. Even if a deal is worked out (or by the time of printing has been worked out) it will only kick the can further down the road until the next major showdown when a ‘Grexit’ will be on the cards once more.
So what would a Greek Exit mean for your investments?
Actually Greece is a sideshow in terms of global investment markets. There has been a perceived increase in risk because of the never-sending Greek saga, which has led to some market falls in recent weeks.
It should be remembered that Greece is a tiny county and the impact of it leaving the Euro or not has been largely factored in by market participants.
Although a Greece Euro exit will cause some contract confusion, all serious economic agents will have well prepared plans to minimise any adverse impact.
The bigger issue is where a Greek Euro exit leaves other countries. A Greek departure may make it marginally more politically acceptable to exit and this may boost the anti-austerity (which means anti-Euro, although they won’t say it) factions in other peripheral counties.
I could tell you that low long-term interest rates will make bonds fall (yields rise), equities will start to weaken (as prices are linked to yields) and you should take a “tactical” view and simply hold cash.
Obviously this would be ill advised and you could be left high and dry. As I have mentioned many times trying to predict the markets is a fool’s game.
So instead I will tell you to continue with your original long-term investment strategy, adopt the appropriate asset allocation, attitude to risk and capacity for loss.
Investing should not be considered a short-term activity. And, of course, always seek the advice of an independent financial adviser.