World stock markets endured a torrid time last week amid growing speculation that Greece may depart from the euro.
There are fears that a messy Greek exit from the single currency, dubbed a Grexit, will create a crisis that would quickly engulf weak euro-zone economies, such as Spain, Ireland, Portugal and Italy. The fear is that, if Greece fully and formally defaults on its sovereign debt, investors will stop investing in sovereign bonds from the other countries, making it impossible for them to roll over their national debt as old bonds come up for repayment.
Banks, particularly French banks, that lent heavily to southern Europe would have to write off their investments, making them vulnerable.
Stage two of such a disaster scenario would see countries dropping out, or getting kicked out, of the euro currency, creating volatility in currency markets and gyrating values for any euro-denominated asset.
The potential disaster scenario is serious, with many possible negative effects for the local investor. With that in mind, we asked five financial planners to devise a portfolio that would protect investors from the worst effects of such a crisis.
Rick Adkinson, managing director of Private Capital