keep your investments diverse and stay the course. That is the advice from Vanguard's chief economist in Europe, on the best way to design portfolios to adapt to the economics woes gripping the euro zone.

Dr Peter Westaway explained how probable different outcomes for the European Monetary Union were, concluding that while it is not "sexy" diversification is still the best option.

"Don't position your portfolio like you know how it's going to play out, because that's a Mug's game," he said.

"A lot of people are out there talking about 'smart beta' and sexy hedge fund strategies.

"The simple strategies have done better though, and of course, they are also cheaper," Westaway told delegates at the SMSF Professionals' Association of Australia (SPAA) conference in Melbourne.

"Don't overweight your portfolios as if you know - stay diversified and stay the course," he said.

Westaway said that while he, or anyone, could not predict how the economic situation in Europe would play out, deciding factors would be Germany's grip on its "purse strings," and the ability for counties like Spain and Greece to make serious structural reform.

Commenting on Greece he said: "Everything possible they need to do ... they need to do better."

Another deciding point will be whether the recapitalisation of banks could happen simultaneously across the euro zone, not just as each country needed help, as government and euro banks are in a "deadly embrace."

Other serious challenges are whether the difference in growth rates across the entire euro zone can become less extreme, and if smaller countries can stop being so competitive.

"The periphery countries are falling behind [in GDP growth] so the level of GDP as a whole is well below its previous peak," he explained.