How to mitigate the risk of Euro Stoxx 50 ETF?
While you would reduce risk by diversifying into other stock ETFs across the world, Developed Market returns (and Emerging Markets to a lesser extent) are generally highly correlated with another (correlation of ~0.85-0.90). This implies that they all go up in bull-markets and go down together in bear markets. You are better off diversifying into other asset-classes given your risk tolerance (such as government bonds, as you have mentioned). Alternatively, you can target a portfolio owning all of the assets in the universe (assuming you're trading in Frankfurt, a combination of something similar to H4ZJ and XBAG, but with higher volumes and/or lower fees)! A good starting resource would be the Bogleheads Wiki: https://www.bogleheads.org/wiki/Asset_allocation You could go with either of: Choosing this you'd pretty much have minimized your risk by using the whole world asa market.
"I agree with Grade 'Eh' Bacon's answer, but there are a couple of ideas that are relevant to your particular situation: If I were you, I would invest at least half of the cash in growth ETFs because you're young enough that market variability doesn't affect you and long term growth is important. The rest should be invested in safer investments (value and dividend ETFs, bonds, cash) so that you have something to live off in the near term. You said you wanted to invest ethically.  The keyword to search is ""socially responsible ETFs"".  There are many, and if this is important to you, you'll have to read their prospectus to find one that matches your ethics. Since you're American, the way I understand it, you need to file taxes on income; selling stocks at a gain is income.  You want to make sure that as your stocks appreciate, you sell some every year and immediately rebuy them so that you pay a small tax bill every year rather than one huge tax bill 20 years from now.  Claiming about $20600 of capital gains every year would be tax free assuming you are not earning any other money.  I would claim a bit more in years where you make a lot. You can mitigate your long term capital gains tax exposure by opening a Roth IRA and maxing that out.  Capital gains in the Roth IRA are not taxable.  Even if you don't have income from working, you can have some income if you invest in stocks that pay dividends, which would allow you to contribute to a Roth IRA. You should figure where you're going to be living because you will want to minimize the currency risk of having your money in USD while you're living abroad.  If the exchange rate were to change by a lot, you might find yourself a lot poorer.  There are various hedging strategies, but the easiest one is to invest some of your money in securities of the country you'll be living in. You should look into how you'll be converting money into the foreign currency.  There are sometimes way of minimizing the spread when converting large amounts of money, e.g., Norbert's gambit.  Shaving off 1.5% when exchanging $100k saves $1500." If we knew for sure that euros are only going to be more expensive in the future, then the answer would be easy: Buy them all at one time, so that we are getting them at the best price.  Of course, we can't assume that to be the case, they could get cheaper, so the answer gets more complicated. Focusing strictly on monetary considerations, there are two factors to examine: Using answers to this Travel Stack Exchange question as a reference, you see that the cost of currency conversion can be as low as 1%-2% if you make the transaction with a debit card, but can be as high as 15%.  So, buying 1000 euros a month would cost between 20 and 150 euros. Examining a two year chart of the Euro-Canadian Dollar exchange rate gives us an idea of how much the currency fluctuates. Over the past two years, a euro has cost has much as $1.54 CAD and as little as $1.26 CAD, a 22% spread. Looking at it on a month-to month basis, we see that monthly changes have been as high as .05 to .07 (4-5%).  As such, buying 1000 euros a month could cost 50 CAD more (or less) on a monthly basis due to variance in the exchange rate.   If we anticipate our overhead cost of currency conversion to be more than 5%, it doesn't make sense to do multiple transactions; the costs are likely to outweigh the benefits. If we can keep them under that amount, then multiple transactions are advantageous when the euro is cheaper. The problem is somewhat analagous to that of someone who wants to make an annual investment in a mutual fund and is unsure of whether to make the purchase all at once, or to divide it over multiple purchases. One can't know for sure which way the mutual fund price is going to move over the time period Dollar cost averaging, spreading the purchase over regular intervals, is the generally accepted solution to this problem.   As such, so long as we can keep the overhead cost of currency transactions low (<5%), doing transactions on a regular basis positions ourselves to take advantage of possible drops in the price of euros and reduces the risk of buying euros when they are most expensive.  If we can't keep the cost low, then currency fees would be greater than potential price drops and we would be better off doing a single transaction. "First off, the jargon you are looking for is a hedge. A hedge is ""an investment position intended to offset potential losses/gains that may be incurred by a companion investment"" (http://en.wikipedia.org/wiki/Hedge_(finance)) The other answers which point out that put options are frequently used as a hedge are correct. However there are other hedging instruments used by financial professionals to mitigate risk.  For example, suppose you would really prefer that Foo Corporation not go bankrupt -- perhaps because they own you money (because you're a bondholder) or perhaps because you own them (because you're a stockholder), or maybe you have some other reason for wanting Foo Corp to do well. To mitigate the risk of loss due to bankruptcy of Foo Corp you can buy a Credit Default Swap (http://en.wikipedia.org/wiki/Credit_default_swap). A CDS is essentially a bet that pays off if Foo Corp goes bankrupt, just as insurance on your house is a bet that pays off if your house burns down.   Finally, don't ever forget that all insurance is not just a bet that the bad thing you're insuring against is going to happen, it is also a bet that the insurer is going to pay you if that happens.  If the insurer goes bankrupt at the same time as the thing you are insuring goes bad, you're potentially in big trouble." "Well I disagree with the economists who claim Bitcoin can't (or wouldn't) be a currency.  As far as I'm concerned, Bitcoin is the best-established digital ""unit of account"", and in the event of a Dollar/Euro crisis you are likely to see some entrepreneurs figure out ways to speed its adoption.  I don't own any Bitcoin now, and I wouldn't put more than 15% of my total portfolio in it, simply because it's not possible to predict if something like that would catch on.  But I own a ton of silver (about 20% of which is physical and the other 80% is via Sprott's ETF).  I also don't own physical gold, but I own a lot of Swiss Francs, which in my view are a good proxy for gold and a safe haven given the fact Switzerland owns so much gold-per-capita.  You get the benefits of gold AND a captive, skilled tax-livestock.  Soros indicated recently he thinks the Euro won't last much longer than a few months.  I'm always amazed by how the elite can push things off, though.  So I hold about 50% of my savings as cash USD.  In the event of market turmoil (you'll know it when you see it, like 2008) you can use this to scoop up some cheap stocks and gold/silver coins.  Don't beat yourself up over missing opportunities, though.  The main thing is just to steer clear of government bonds and the stock market.  If you do that, you're going to come out in the top 20% over the next few years." "to answer the question in the title of your post...  + convince your fellow Euro nations to accept austerity,  + convince them to elect responsible governments,  + demand transparency from your leaders, and...  + make sure this never ever happens again.   Alternatively, build a time machine and go back in time to either...  + immigrate to another part of the world,  + sabotage the corruption of the PIGS nations,  + prevent the formation of a shared currency, or finally,  + do something to ensure Germany didn't lose WWII, as letting them be in charge of everybody's money would appear to be a sound financial decision.   That is how you negate the impact of the Euro collapsing.  Now, on to the details of your question...  I believe your initial assessment is correct. If one accountable nation were responsible for the solvency of its currency, it could be trusted indefinitely. As is the case with the Euro, as no one country is directly responsible for it, the less responsible governments are in a race to exploit it as much as possible.  Remember, ""Spain no es Zimbabwe!""  I think Euro zone nations will be lucky if all that comes of this is the fall of the Euro. Wars between nations have been fought over less significant developments than what Greece, Italy and Spain have done to the financial stability of their Euro zone counterparts.  Foreign gold trusts, possession of physical precious metals and precious metal ETFs (GLD is one stock ticker of such a fund, although I would look to a similar fund issued by a company with better physical gold audits) can hedge your currency risk. Check with local laws regarding physical possession of gold. In the USA when we left the gold standard for our currency, the government confiscated all privately owned precious metals and raided customer bank security boxes. Assess your own risk of that sort of thing happening." My understanding is that all ETF options are American style, meaning they can be exercised before expiration, and so you could do the staggered exercises as you described. What are the risks pertaining to timing on long term index   investments? The risks are countless for any investment strategy.  If you invest in US stocks, and prices revert to the long term cyclically adjusted average, you will lose a lot of money.  If you invest in cash, inflation may outpace interest rates and you will lose money.  If you invest in gold, the price might go down and you will lose money.  It's best to study history and make a reasonable decision (i.e. invest in stocks). Here are long term returns by asset class, computed by Jeremy Siegel:  $1 invested in equities in 1801 equals $15.22 today if was not invested and $8.8 million if it was invested in stocks.  This is the 'magic of compound interest' and cash / bonds have not been nearly as magical as stocks historically. 2) How large are these risks? The following chart shows the largest drawdowns (decreases in the value of an asset) since 1970 (source):  Asset prices decrease in value frequently.  Financial assets are volatile, but historically, they have increased over time, enabling investors to earn compounded returns (exponential growth of money is how to get rich).  I personally view drawdowns as an excellent time to buy - it's like going on a shopping spree when everything in the store is discounted. 3) In case I feel not prepared to take these risks, how can I avoid   them? The optimal asset allocation depends on the ability to take risk and your tolerance for risk.  You are young and have a long investment horizon, so if stocks go down, you will have plenty of time to wait for them to go back up (if you're smart, you'll buy more stocks when they go down because they're cheap), so your ability to bear risk is high.  From your description, it seems like you have a low risk tolerance (despite a high ability to be exposed to risk).  Here's the return of various asset classes and how the average investor has fared over the last 20 years (source):  Get educated (read Common Sense on Mutual Funds, A Random Walk Down Wall Street, etc.) and don't be average! Closing words: Investing in a globally diversified portfolio with a dollar cost averaging strategy is the best strategy for most investors.  For investors that are unable to stay rational when markets are volatile (i.e. the investor uncontrollably sells their stocks when stocks decrease 20%), a more conservative asset allocation is recommended.  Due to the nature of compounded interest, a conservative portfolio is likely to have a much lower future value. Go to fidelity.com and open a free brokerage account. Deposit money from your bank account into your fidelity account. (expect a minimum of $2500, FBIDX requires more I believe) Buy free to trade ETF Funds of your liking. I tend to prefer US Bonds to stocks, FBIDX is a decent intermediate US Bond etf, but the euro zone has added a little more volatile lately than I'd like. If you do really want to trade stocks, you may want to go with a large cap fund like FLCSX, but it is more risky especially in this economy. (but buy low sell high right?)  I've put my savings into FBIDX and FGMNX (basically the same thing, intermediate bond ETF funds) and made $700 in interest and capitol gains last year. (started with zero initially, have 30k in there now)