We recently met with a couple that has been long time clients of ours who posed the question to us “What are we to do to hedge against a falling U.S. dollar?” Well, we thought it was probably a good time to discuss this topic since the dollar’s long-term prospects don’t look so bright.
Well first let’s look at the dollar recently, and note that it has shown some recent strength since it began its decline last March. So, it may not be a bad time to consider adding to your investments outside the dollar.
With that said, let’s look at three categories you can almost always bet will help hedge against a declining dollar: Currency Funds, Hard Assets (Commodities), and International Stocks.
Currency Funds: Currency ETF Funds help capitalize on the strength of foreign currencies relative to the U.S. dollar. Whenever a U.S. investor buys a currency ETF they are automatically short the dollar in the corresponding currency. This type of strategy allows you to hedge against the weakness in the dollar.
Hard Assets: Owning assets not generally correlated to the dollar protect one from the decline of it. Hard assets such as gold and silver have enjoyed a newfound resurgence in popularity. You can either buy the physical metal; the disadvantage here is having to store and insure it; or purchase ETF funds in these metals.
Go International: Add some emerging-markets stocks and shares of small foreign companies to your anti-dollar portfolio. Small overseas companies tend to have more exposure to domestic economies and currencies.
Hopefully, these ideas have helped you understand ways in which you can protect your dollar! Please give us a call if you are interested in finding our more about any of these ideas. If you need invetsment adivce and you are in the Atlanta area, please don't hesitate to contact Hinton-McCurry.
Russell C. Hinton, CFP