By dollar, of course, I am referring to the US dollar. To my Canadian readers, I would advise you to enjoy the return of the strength of the Canadian dollar. How does a sunny vacation south of the border sound?
Let me mention clearly that I am not a global economist.
I am, however, a global citizen who watches the trends of several currencies. Still, I do not know what will happen to the US dollar. A year ago I felt that the US dollar was likely to lose some of its strength so I took steps to diversify my holdings out of US dollars into foreign currencies. In this post I am not trying to prescribe a course of action or predict the future, but outline some options for those who are concerned about the dangers of a weak dollar.
5 Ways To Protect Your Assets Against a Weak Dollar
Recognize the potential associated with a weak dollar
While there may be some dangers associated with a declining US dollar, there are also an equal number of opportunities. I have previously mentioned that even an economic crisis brings opportunity. If you think the dollar will continue to weaken you could diversify some of your financial holdings into foreign currencies. If you are worrying about the declining dollar, then diversify for the peace of mind. Everbank has account options that allow you to own foreign currencies, but I had a bad experience with Everbank, so I do not recommend Everbank. Currently, I keep foreign funds in overseas banks or in a safe (no, I’m not going to tell you where it is!).
Identify your own exposure to risk
What is happening to the global economy might not mean anything to your own personal finances. As a missionary who lives overseas, I am very vulnerable to the dangers of a weak dollar. If, on the other hand, all your payments and assets are in US dollars then unless there is a catastrophic event (huge drop in the dollar) you will likely be largely unaffected by the dollar fluctuation.
Adjust your lifestyle choices
Adjusting your lifestyle is an underestimated secret weapon. We have a huge defensive mechanism that hardly gets used – cut your spending. The declining dollar will impact certain parts of the economy more drastically, so just adjust your lifestyle away from areas that are more directly impacted. Take for example, the vacation you’re planning next year. Choice #1 is not to go. Choice #2 is to dollar cost average your currency purchase to diversify (you can do this using something like xe.com or other cheap foreign currency formats). Choice #3 Cut back on activities in light of the value of the dollar.
Invest in gold
Consider buying gold as an investment. I won’t say much about the gold option because I have dismissed it as a personal strategy. While I did own gold in 2009, I decided that it did not provide me with the stability I was seeking. But, it does appear as though the price of gold will remain strong even if there is a weak dollar.
Invest in foreign stocks
If the trend continues that the US dollar loses value against the world’s major currency, the more foreign stocks you own the more you will be protected from such fluctuations. Nevertheless, you do want to ensure you have a balanced portfolio. Talk to your financial advisor for assistance.
Again, I don’t know what will happen to the US dollar – I do have my thoughts, and I am acting in line with my assumptions. However, if you are concerned about the declining US dollar, these five options ought to sufficiently provide you with some valid options to safeguard against a declining US dollar.
Are you concerned about the possibility of a weak dollar? What other options are available to protect your assets?