The euro zone offers a whole new area for investment - or does it? Whether you are interested in shares or property abroad, it pays to tread carefully or - say some experts - to wait a while, writes Jane O'Sullivan, Markets Correspondent

THE arrival of the euro has meant different things to different people.

For the holiday-maker, it means knowing exactly how much that Italian latte or Spanish cerveza really costs. For the businessperson, it has eased the headache of operating across borders. And for the investor, it has opened up a whole continent of new investment opportunities which don't involve currency risk.

Traditionally, investors who ventured beyond Irish shores have looked no further than Britain, with a few straying into the US in recent years. The similarity of London's legal and financial systems, a common language and general familiarity with Britain have made it the first port of call for those investing outside the Republic. Buying property in London or investing in Barclays Bank was nearly as natural as owning a place in Dublin or holding Bank of Ireland shares. The main negative was sterling and its gyrations.

Meanwhile, the rest of Europe, with its jumble of currencies, languages and systems, was strictly off-limits for all but the most sophisticated investor. But the arrival of the euro has changed all that, making the Paris bourse and the Berlin property market worth a look for those with a few bob to spare.

Investors keen to tap into the fortunes of European companies, many of them household names like Danone, DaimlerChrysler or Deutsche Bank, have three main ways in which to do so.

The most obvious way is to buy the shares directly but this is not without its pitfalls. Stockbrokers warn that the third-party settlement fees involved in buying euro-zone shares can make it prohibitively expensive for the small, private investor.

"Given the costs involved, we would advise that the minimum investment in a direct equity should be around €10,000," says Nigel Poynton, senior portfolio manager with NCB Private Clients.

This is all very well for the wealthy or for those investors who are so confident of their favourite euro stock's prospects that they are prepared to venture all of their hard-earned lump sum on it. But for those who prefer to spread their risk over a number of shares - the option recommended by nearly all investment advisers - there are two alternatives.

They can either plump for a unit-linked mutual fund or an exchange-traded fund.

There is a wide range of mutual funds on the market with most of the main financial institutions offering products that provide exposure to euro equities. Most are broad-based equity funds while euro managed funds, which have a bond, property and cash component, are also available. Although Hibernian offers a euro bank fund, those interested in investing in specific sectors in the euro zone may have to contact one of the large overseas fund managers who specialise in such investments such as Gartmore or HSBC.

The other alternative is to go for an exchange-traded, index-tracking fund, which is more like a share as it is dealt on a recognised stock exchange. Such funds, which track high-profile stock market indices such as the FTSE or Dow, are well-known in Europe and the US, although they are a novelty in this country. Only a few track euro stock market indices at present. US broker Merrill Lynch administers one fund, known as LDRS, which follows the Dow Jones Euro Stoxx 50 index of blue-chip shares and is available through financial institutions here.

According to Poynton, such funds offer "liquidity, tradeability, diversification and accessibility" while the charges involved are usually relatively low. But given the calamitous performance of global stock markets in recent months - some of the euro funds offered by Irish finance houses have lost more than 40 per cent of their value this year, to date - should investors be getting into euro equities at all?

As always with investments, views vary widely. Some experts believe now is the time to start drip-feeding cash into the market.

NCB believes that European equities offer good value relative to the US and other asset classes such as bonds and cash. "Dividend yields are in excess of cash in many cases for people prepared to look at investing for the medium-term," says Poynton, who recommends a gradual switch into European equities.

Others, however, are less sure that there isn't more pain to come, particularly with the threat of war in Iraq hanging over all stock markets.

Paul Coghlan of independent financial advisers Financial Planning Strategies, remains bearish on euro equities. "For the general man in the street, it is not an opportune time to be bailing into the European equity markets. There are so many if, buts and maybes at the moment, the smart money is on the fences if you're prepared to miss out on the bottom which is always hard to call."

For those who prefer the safety of bricks and mortar, there are plenty of options in the euro zone, provided investors have a decent lump sum to start them off.

Drawn by the sunshine, Irish investors have piled into the Spanish market in recent years. Recent estimates suggest that they now account for 16 per cent of all property sales on the Costa del Sol, second only to the British, who make up 66 per cent of buyers. But such property no longer comes cheap.

Noreen Hynes, managing director of Aquarius Properties, which markets property in Spain and Portugal, says investors are unlikely to get anything along the Spanish coastline for less than €130,000 with €150,000 a more realistic estimate.

Throw in the fact that financial institutions will usually only lend up to 70 per cent of the purchase price to non-resident buyers and costs of around 10 per cent of the purchase price to cover VAT, legal costs and stamp duty and buyers need at least €50,000 to €60,000 to get started. While Spain is the most popular market for Irish buyers, there has also been interest in Portugal. But property specialists caution that investors cannot count on all-year-round rents there, given its less protected position on the Atlantic.

The number of Irish people buying apartments in Paris has also grown in recent years; but buyers in France need to be wary of complex local rules on capital gains tax, inheritance and maintenance.

ONE Irish apartment owner in Paris notes that under French law, the facade of a building must be done up every 15 years with all occupants sharing the cost. "If the refurbishment hasn't been done for 14 years, and you've just bought the apartment, it can be a serious extra cost," he warns.

So what about a commercial property fund for those who would like to get exposure to European property, but without the hassles of ownership? Unfortunately, there are no euro-zone property funds geared to the smaller investor, as there are for the British market, at present. But it is probably just a question of time before they become available.

Meanwhile, for those with €150,000 to €200,000 to spare, accountants BDO Simpson Xavier have put together syndicates to invest in office property in Amsterdam, Berlin and Madrid.

Bill Ledwidge, senior partner at BDO, says the syndicates, which typically involve 10 to 20 investors, aim for an annual return in excess of 12 per cent over the lifespan of the investment - usually three to seven years.

For one of its next investments, BDO is considering the Czech Republic, a market that has opened up dramatically in recent years. Until two to three years ago, there was no mortgage finance available in Prague. "Everything was rental property or in state ownership. Nobody owned anything," says one seasoned observer of the property scene there.

Now, as with other Eastern European countries poised to join the European Union in two years' time, there are plenty of opportunities. The need for rental property for a growing expatriate community, a commercial sector attracting big names such as Sony and Xerox and burgeoning residential demand mean there is lots going on.

However, property in such cities as Prague and Budapest has become increasingly expensive in recent years. Reflecting its popularity, prices in the Czech capital are estimated to be just 10 to 20 per cent cheaper than Dublin, largely because of lower labour and construction costs.

For real value, those seeking to get in on the ground floor may have to look to the next batch of EU aspirants such as Romania and Bulgaria. One market source suggests that Transylvania could be the next "in" place for those keen to be ahead of the posse.

But despite Romania's hopes of joining the EU in 2007, for most Irish investors Count Dracula's homeland is still very far away.

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