No, European Union woes don't mean you should spurn overseas stocks

For the past few months, all eyes have been on Greece — a country that produces about as much in goods and services as Connecticut. In almost every client meeting, the question of what will happen with Greece comes up. The question behind the question, though, is, "Will what happens with Greece and the European Union make me poor?"

Let me blow the ending: Unless you own a bunch of Greek property or businesses, the impact of Greece's decision will not determine your financial future. As with all financial decisions, there are winners and losers, and they are often the same.

Here is a quick primer on how to think about the E.U. We have 50 united states. The U.S. government collects tax dollars to fund its operations. Each taxpayer sends in their federal tax and then the government spends it on a host of things — including subsidies to the various states from whose individuals they collected money. Some states get more in aid than their constituents pay (think Mississippi) and others get less (think Minnesota). This sort of happens with the E.U. as well, but rather than states, they are countries, and rather than sending the money to the weaker countries, they loan it. Some financially strong countries (Germany) are the backstop for financially weaker countries (Greece). So far so good.

Why would Germany do this? Because if Germany was on its own, its currency would be so strong that neither you nor I, nor virtually any non-German consumer in the world, would be able to buy German goods. Since the euro consists of financially strong and weak countries, the value of the combined currency is lower than if strong countries stood on their own. This is simple diversification. Because of this, no country has more to lose from a breakup than Germany.

Picture it this way — if Wisconsin left the United States and issued its own currency, the cheeso, it would have some advantages and disadvantages. People who lived in Wisconsin and only bought goods that were 100 percent manufactured in Wisconsin, might happily spend their cheesos any way they wish. The state could collect tax cheesos and use them only to subsidize Wisconsinites. And Wisconsin could ship beer and cheese out of its state, get paid in dollars, and convert those dollars into cheesos at very favorable rates. But since the cheeso would be weaker than the dollar, any time residents had to buy goods priced in dollars, it would cost them way more cheesos. Out-of-state college education, cars manufactured by someone other than Briggs & Stratton and things like avocados would eat up cheesos faster than a Clay Matthews rush. Worse, people who were working in Wisconsin and paid in cheesos would probably drive across state lines to find higher paying jobs in places that used the dollar. If Wisconsin owed money to other states — and had to repay those debts in dollars — the cost would be extremely painful.

The biggest flaw with the concept of the euro is that while each independent country shares a currency, they have separate economies. If Greece had its own currency, it might have been able to borrow drachmas when the country was in better financial shape and repay the loan with cheaper drachmas as things fell apart. But since it can't control its currency, the country is stuck.

The problem is that everyone is stuck. Greece leaving the European Union would be inconvenient, but in no way financially devastating for the rest of the countries. But how can something be united when it has come apart? The euro was intended to be a club that countries could join, but never leave. More than the immediate financial impact, the precedent that a Greek exit from the monetary union would set — and what that might mean for other countries in similarly tough shape — is the primary concern.

So, how are we impacted and what should we consider?

International investments have generally performed better than U.S. investments this year, despite all of this uncertainty, and this should continue. Some of the reasons may seem counterintuitive, but here's why.

First, the European Central Bank has recognized that austerity programs have not led to a recovery, so it is flooding the markets with cheap money, similar to what our Federal Reserve did when our economy collapsed in 2008. It's not a coincidence that international stocks have rallied in tandem with this.

Second, a strong dollar means our exports are more expensive for international buyers, thereby reducing their attractiveness. Also, international sales when converted to dollars are worth less. Both of these have already had an impact on U.S. corporate earnings.

Third, we are seven years into our stock market rally and (slow) economic recovery. It's unlikely that interest rates will stay this low and U.S. stocks will maintain the returns of the past few years.

This means that despite the bad international news, you should make sure that you have ample international holdings, preferably diversified through mutual funds. Almost every new client that comes into our office has a smaller international stock position than we think that they should have.

Also, if you have any short-term financial needs coming up, use this as a time to take some profits that you have made on your U.S. holdings. While markets often stay kind up until a presidential election, don't save for short-term needs with volatile investments.

Lastly, if you have money to invest, don't invest all at once and don't wait; simply set up a plan to invest monthly over the course of a year to take advantage of large market swings.

Don't let Greece impact your long-term investment plan and don't try to corner the market on cheesos.

Ross Levin is the founding principal of Accredited Investors Inc. in Edina.