Falling Dollar Need Not Crush Investors
Just because the dollar is tumbling, doesn’t mean the average investor has to fall down with it.
According to several financial experts, smart investors could take advantage of the weak dollar, which hit record lows last week against the Swiss franc, German mark and Japanese yen.
“The weak dollar means that anything we sell outside the United States becomes cheaper and anything imported from those foreign country’s which have a stronger dollar, becomes more expensive,” said Stan Chadsey, president of Manhattan’s Capital Planning Associates.
“So, if you have investments in Japanese, German or Swiss mutual funds or bonds, you are in a very good position. And if you have investments in products that compete with Japanese, German or Swiss products in the U.S. - products like Mercedes Benz or Japanese steel, etc., which will become more expensive here - those, too, will be very strong investments.”
The weak dollar was triggered by the imbalance between our imports and exports, the president’s inability to get Congress to help Mexico and the failed balanced budget amendment, according to analysts.
But it won’t last forever.
In the meantime, several noted financial management experts have some advice to help you make your investment decisions.
Patience: The basic rule of thumb is that no matter what your current investments are, don’t panic. What goes up must come down and vice versa. So, if you have the majority of your money in U.S. mutual funds and stocks, stand pat, experts advise.
“Historically, American stocks and mutual funds are quite rewarding over the long haul with a return around 9 per cent to 20 per cent. So, be patient,” said Ron Rutherford, chairman of Manhattan’s Rutherford Asset Planning Inc.
Invest in foreign and international stocks and bonds for the short term. “If the dollar is weaker, then the foreign currency is stronger,” said Rutherford. “It gives you a multiplier effect when you buy foreign securities.”
If you already have a hefty chunk of change in the international market, now might be the best time to sell. “If your investments in the foreign market are doing well, now may be a good time to sell before the dollar comes back,” said Karen Altfest, president of L.J. Altfest & Co.
“Recognize the difference between a currency crisis - which will have an impact on your investment returns, but will it is hoped be temporary - and the economic fundamentals of the markets where you are invested,” said Charles Hughes, founder of C.G. Hughes Co. “For example, if the prospects in Germany or Japan continue to look favorable, don’t let the temporary currency difficulty prompt you to sell too soon.”
Buy domestic bond funds: “Then, it doesn’t matter what other people think about our dollar,” said Altfest. “Domestic bond funds should be strong over the next few years.”
If you’re looking for a shortterm return, you shouldn’t be investing in mutual funds or stocks at all. You are advised to put your money in Treasury bonds.