With Asian central banks buying up the US dollar in an attempt to arrest its slide, the greenback situation is starting to look sketchier than ever. If you are sitting on a dollar-based savings account, or your portfolio isn’t hedged against dollar weakness, you may be feeling the pinch. Dolans has a good article on how to profit from a weak dollar. Here are four of their tips:
1. Consider investing in U.S. companies that have substantial operations overseas that may be able to take advantage of currency differences. Their products or services may be cheaper due to a weaker dollar. That should mean increased sales and higher profits.
2. Look at international stock (large-cap and emerging markets) and bond mutual funds for a portion of your portfolio. Check with Morningstar to see how well those international funds have performed. Limit your selections to funds that have done well for at least the past 5-7 years.
On this subject, MarketWatch says:
Most investment advisers recommend committing a minimum of 15% of a total portfolio outside of the U.S., including 12% to developed areas and 3% to emerging markets.
3. Although gold is approaching all-time highs (the all-time high was hit on March 18, 2008 when it almost touched $1034/oz.), consider investing a small percentage (5%-10%) of your portfolio in mutual funds or ETFs that invest in gold and precious metals. Gold is priced in dollars, so people tend to buy it when the dollar is weak because they get more bang for their buck. Increased demand drives the price higher.
4. Learning more about international CDs and hard currency money market funds that bet against the U.S. dollar. For illustrative purposes only, a couple of places to start are www.money-rates.com/intsavings.htm and the Merk Hard Currency Fund at www.merkfund.com.
This advice is general, and needs to be weighted against your own common sense. However, it’s worth thinking about if you feel like your portfolio hasn’t yet been adapted for the dollar’s slide.