How safe is your money?

How safe is your money?
18 April 2013

The Dow started the month closing higher for 10 straight days and the close on March 5th finally established a new all-time high! So, slightly more than four years after the crash low, the Dow surpassed the October '07 high of 14,165. Obviously, the remaining closes in the 10-day string also set new all-time highs.

The consistency of the month's climb was remarkable (up days outnumbered down days 3 to 1) and, there was not a single plus or minus 1% day in the whole month. Suitably, the month ended with still another new all-time high, the 10th new all-time closing high of the month. The DJIA (Dow Jones Industrial Average) closed March at 14,578.54, up 3.7% for the month.

Finally, to finish off the month in style, on the last trading day of the month the S&P 500 finally eclipsed its October '07 high as well, closing at 1569.19. Both the Dow and the S&P 500 closed the first quarter up more than 10%.

At the end of March and in stark contrast to market positivity, Cypriot authorities and international creditors reached an agreement on the terms of a €10 billion bailout for the island, eliminating the risk of immediate bankruptcy. Under the deal, the Cypriot banking system will be reformed, leading to the winding down of the country’s second largest bank, Laiki. While major depositors at the Bank of Cyprus are expected to face a "haircut" of up to 40% of their holdings, the new deal protects deposits below €100,000. Subsequently, Cyprus announced capital controls to prevent an outflow of Euros when the banks re-opened, becoming the first Eurozone country ever to apply such drastic measures.

How safe is your money?

Jeroen Dijsselbloem, head of the Eurozone finance ministers, caused further concern when he said that Cyprus could become a template for handling the region's other troubled countries.

To add to the negative sentiment around Europe, there was stalemate over the formation of a new government in Italy, which was reflected in tepid demand at an Italian debt auction. Separately, Italian bond yields rose during the week, with the cost of five year debt at its highest level since October 2012.

In the US, disappointing pending and new home sales dampened spirits, even though the prices for single-family homes gained at the fastest pace in more than six years. In Japan, the new central bank governor, Haruhiko Kuroda, reiterated the need for more aggressive monetary easing in order to achieve their 2% inflation target at the earliest possible time.

So perhaps it’s time to ask yourself, who owns your bank? And how safe is your money?

This has become an increasingly important question for bank customers since the credit crunch. After all, quite a number of expatriate savers who had money with the Icelandic banks had originally put their money with offshore subsidiaries of UK building societies Derbyshire and Cheshire.

Things of course have changed since then and now there are depositor protection schemes in the Isle of Man and the Channel Islands. But it’s better to know where the buck stops with your money before the worst happens.

Protect your assets

This brings me to the most important financial planning principle that there is and that is to protect what you have.

You’ll feel worse if you lose what you have than if you miss out on an investment opportunity. That safety-first option can also apply to your life and your salary. Insuring the first is generally inexpensive. Buying protection against losing your earning capacity is far more expensive, but consider it if you’re the breadwinner of the family.

Always check on the cover you already have from other plans and from employment before taking on more.

Your protection and investment strategy should always allow you to go to sleep happily and wake up without any worries. Sensible investing is about not losing out to insanity and it’s even more important to protect your family should anything happen to you. No magic solutions exist so meet with your adviser if you feel there are any lose ends.


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