Here’s a word for the wise: Don’t let the weak dollar dictate your investment strategy or your exchange traded fund (ETF) confidence. Individual investors can take advantage of the weakening dollar, and ETFs make currency plays easier than ever. Eileen Ambrose for The Chicago Tribune points out that Rydex Investments offers CurrencyShares, an ETF series that tracks the price of 8 currencies. Each ETF buys foreign currency that is held in a bank in London and shares go up or down based on the foreign currency’s value compared to the dollar. There is also the PowerShares DB G10 Currency Harvest (DBV) that tracks 10 currencies, going long on the top three currencies with the highest interest rates and going short on the "top" three currencies with the lowest interest rates.
Also in response to the falling dollar, investors can look to a non-dollar investment to balance their portfolio. Scott Burns for Chron.com gives examples of hedges against inflation and the falling dollar:
- International stocks, such as iShares MSCI EAFE (EFA).
- International bonds, with SPDR Lehman International Treasury Bond ETF (BWX).
- Emerging markets, one ETF is Vanguard Emerging Markets ETF (VWO).
- REITs, including Vanguard REIT Index (VNQ).
- Energy, ETF options include Energy Select Sector SPDR (XLE).
- Domestic inflation protected fixed-income securities like iShares Treasury Inflation-Protected Securities (TIP).
Read the disclosure, as Tom Lydon is a board member of Rydex Investments. Some of Tom Lydon’s clients own TIP.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.