The drama playing out in Europe is clearly affecting volatility and wreaking havoc on short term returns.  But how will the current crisis in Europe affect even long term investors?  And how can those investors make the most of it?

Here are some expert opinions on what to avoid and where there might be opportunity.

Citigroup recently raised a red flag in a note to clients that U.S. companies with “meaningful sales and earnings coming from the continent…could experience weakness from Europe as GDP forecasts get trimmed overseas.”  More specifically, funds at risk could include those with substantial exposure to materials, auto, consumer staple, and industrial sectors.

SmartMoney columnist, Jack Hough, warns that investors should not look to beta as a measure of risk – a common mistake when taking cover from volatility.  Because beta is calculated based on the past 5 years relative to S&P 500, a formerly stable earner that has become recently volatile might appear less risky than it is in this current market environment.

Instead, he suggests investors look to price more than volatility.  One way to play that strategy would be to look for ETFs that “automatically select stocks with modest prices relative to factors like earnings, cash flow and dividends”.

For those already invested in foreign bond funds, Jonelle Marte, of SmartMoney, writes that they’re not all bad but urges caution that the average exposure of those funds to European debt is about 40%.  Though, she notes that some funds with even greater weightings of exposure have mitigated their risk by steering clear of the most risky nations of the troubled continent.

John Nyaradi, a financial media publisher and expert in ETF investing, thinks “investors should avoid getting bogged down in doomsday scenarios” and instead “try to flip Europe’s woes around through leveraged ETFs.”

So the question is…how will you make the most out of the European debt crisis?

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