Monday 22 January 2018

How to keep your money safe as the entire world implodes

Turmoil in stock markets has sent investors running for cover. Louise McBride looks at some possible 'safe havens' for your savings

NIGHTMARE ON WALL STREET: Traders in America and Europe could only watch in horror last week, as investor panic spread and stocks fell to their lowest level in two years
NIGHTMARE ON WALL STREET: Traders in America and Europe could only watch in horror last week, as investor panic spread and stocks fell to their lowest level in two years

THE latest stock market bloodbath, which last week pushed European stock markets to their lowest level in two years, has investors running scared.

Rumours that France could be the next in line for a credit downgrade after the United States sparked panic across Europe. Concerns about the European debt crisis, and the prospect of a break-up of the eurozone, clearly haven't gone away.

With this in mind, many of us are wondering just where to stash our spare cash. Is it time to move some of our money into strong non-euro currencies?

Is it time to invest in gold? Clearly, you would be mad to pour all of your spare cash into gold -- or to move all of your savings into another currency. But it might be time to consider other homes for your savings and investments -- as long as you don't put all of your eggs in the one basket. The secret is to spread your money across a mixture of investments. So what might be worth throwing into that mixture?


The easiest way to put your money into Swiss francs is to open a foreign currency account. Along with international banks such as HSBC Private Bank Ireland, Barclays and Investec, some mainstream Irish banks allow you to open a deposit account in Swiss francs.

You can open a currency deposit account in Swiss francs with AIB, National Irish Bank and Permanent TSB, for example.

If opening a Swiss franc savings account with an international bank, you usually need to have a large sum of money ready to put on deposit.

With HSBC for example, you need at least €3m (or currency equivalent) to open an account in Swiss francs, and you usually need about €2m to open a foreign currency account with Barclays.

With Investec, you need at least €20,000.

Don't expect to earn the same interest on a Swiss franc savings account as you will on a euro savings account. Investec, for example, only pays 0.25 per cent interest on its 12-month Swiss franc deposit account and 0.15 per cent interest on its six-month account.

Bear in mind that you will be hit with charges for foreign exchange transactions and for transferring money out of your Swiss franc account. It is important to get a good foreign exchange rate when transferring your euro into Swiss francs -- otherwise, you could lose a good whack of any euro you change into Swiss francs. If currency movements go against you (that is, if the value of the Swiss franc falls against the euro), you could lose between 10 and 15 per cent of your savings. Switzerland's central bank last week said it would take steps to curb what it described as a "massively overvalued" franc.

The Norwegian kroner is another currency in which you might consider parking some of your money. It is considered by some to be one of the world's safest currencies.

Like Swiss franc accounts, you can open a Norwegian kroner account with Investec, Barclays and HSBC -- though you will need a few million euro to open such an account with HSBC and Barclays. You can also open a Norwegian kroner account with AIB and National Irish Bank.


The price of gold hit new record highs last week when it rose above US$1,800 an ounce. About a year ago, it was about $1,160 an ounce. If you invested in gold back then therefore, you could be sitting on a tidy profit.

No one knows for just how much longer the price of gold will go up. The investment bank JP Morgan said last week that the gold price could hit $2,500 an ounce by the end of the year.

Wealth managers have long warned that gold is a bubble which will soon burst. As gold prices are at record highs, it is an expensive time to invest in gold -- and you could get burned if prices start to fall. It's worth remembering that those who got burnt most by the Irish property collapse were those who bought at the top of the market.

You can invest in gold by buying gold bars or coins or a gold certificate. The Dublin company, GoldCore, offers a gold certificate (the Perth Mint Certificate) which allows investors to buy gold bullion stored in a warehouse in Perth, Australia. The certificate can be sold at a later date.

You can also invest in gold by buying shares in a gold exploration or mining company or investing in a financial product that tracks the price of gold directly, such as a gold-backed exchange traded fund (ETF). However, do your research beforehand. If you invest in a gold exploration company that is badly managed, you could lose money.


If you are still worried about the Irish banks and the debt problems in Europe, short-dated German government bonds could be a good home for your money, according to Vincent Digby, founder of financial advisers Impartial. The interest paid on these bonds, however, is very low, at about 0.7 per cent. If you put money into these bonds therefore, you will be purely doing so to keep your money safe -- not to make a good return.

Canada's low government debt has also prompted some investors to eye up short-dated Canadian government bonds. This is a road that should be trodden carefully, however, warns Digby. "If you are running for safety, it's important to remember that you'd be taking on a currency risk if you invest in Canadian bonds," he says.

Canadian bonds might be suitable as part of a well-diversified investment portfolio but pouring all your money into them is an investment no-no, according to Digby. The interest paid on these bonds is currently below 1 per cent.


If you are happy to leave your money in the Irish banks, you could earn 4 per cent interest or more on your savings. Permanent TSB's Interest First deposit account, for example, pays 4.1 per cent interest (before tax) on lump sum savings of €10,000 or more. EBS's 18-month fixed return savings account pays 4.29 per cent a year on savings of between €3,000 and €50,000.

Most Irish banks are covered by the Deposit Protection Scheme, which protects your savings up to €100,000 per bank.

You could also put your money into a State scheme. The 10-year National Solidarity Bond pays 4.14 per cent interest a year -- as long as you can tie up your money for 10 years.


Capital guaranteed deposit accounts -- where the interest earned on part of your savings is linked to the performance of certain stocks and shares -- are an alternative to straightforward deposit accounts.

It's worthwhile getting the advice of a wealth manager or financial advisor before choosing one of these products as some capital guaranteed products have hefty costs built into them. One that might be worth considering is Investec's Emerging Markets Dual Deposit account. KBC Secure Income Plus Account Series 3 was closed to new investors earlier this month, but a new series could be launched over the next few months.


Liquidity funds and enhanced cash funds are considered good low-risk alternatives to stand-alone deposit accounts.

Most banks, including Rabobank and Investec, offer liquidity funds. Barclays, Blackrock and Pimco are among those that offer enhanced cash funds.

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