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Europe is home to makers of luxury goods, engineering and machinery
-- all products that Americans and Asians will be happy to buy if a weakening euro drives their prices down. "Fears about Europe drive down the value of the euro," Webman says. "If I'm an exporter, this works to my advantage." Although the possibility makes most observers queasy, a splintering of the euro might help stronger economies by untethering them from weaker ones, Webman says. That could mean a resurgent euro currency and big gains for stocks and bonds based on the common currency, Webman says. For those seeking a truly risk-free experience, U.S. Treasurys remain the world's safest investment, experts say. Webman says most people should keep at least some of their portfolio in these good-as-cash securities. But the yield on the 10-year note hit a record low of 1.44 percent earlier this month, so the returns will be minuscule. "If you're looking for an insurance policy, U.S. Treasurys are as good a place to be as any," Webman says. "Just remember that's very costly insurance that you're putting into your portfolio, so size it appropriately." In other words, don't buy more Treasurys than you might need to convert into cash quickly. The rest of your investment dollars can be put to better use elsewhere. Low Treasury yields have made high-yield corporate bonds more attractive by comparison, says Tchir, the hedge fund manager. High-yield bonds
-- also known as junk bonds -- are issued by companies that don't have the sterling credit ratings of giant multinationals. They carry more risk but offer bigger returns. "These companies tend to be smaller and more domestically focused, so you don't see the same level of business slowdown for them" if Europe implodes, Tchir says. Another bonus for high-yield bonds: If Europe blows up, threatening the U.S. economy, the Federal Reserve could take more action to keep Treasury rates down. That would boost demand for higher-yield bonds, a boon for those who already own them. Because no one can predict the outcome in Europe, it's even more important that investors balance their portfolios across a range of investments, based on their risk tolerance
-- how much they're willing to lose for a shot at big returns. Too many U.S. investors have fled volatile markets and are keeping their money in ultra-safe accounts that will barely budge when the market eventually rises, Kelly says. He says that leaves many U.S. stocks cheap by historical standards. "Before you decide how you're going to incrementally deal with Europe risk," he says, "you have to ask: `Am I too conservative to start off with?'"
[Associated
Press;
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