The falling dollar, inflation and your retirement
Protect your portfolio
What can you do to help protect your portfolio against the falling
dollar? One way is to maintain exposure to international stocks
and bonds. Trotter recommends foreign currencies, which his bank
offers, in the form of money markets and CDs. Check the yields on
EverBank's foreign currency CDs and you'll
see that some countries offer better returns than you'd get with
a U.S. bank CD. But do your homework before investing or you could
"Don't look at the list and go for the highest
yield," Trotter says. "Iceland has an eye-popping rate,
and if someone says 'I'm going to earn 12 percent on this,' they
could be in for a big surprise. It's a small country with a volatile
currency, and it's always subject to ratings changes by Standard
"Our viewpoint is that you should build a portfolio
of three or four of the major currencies," he explains. "Pick
something out of Asia -- maybe Japan or Singapore -- Europe, Sweden,
Norway and the South Pacific, like Australia. That way you're diversified
against any one sector's change, and you're not in a currency that's
likely to have a precipitous drop based on some small event."
EverBank's CDs are Federal Deposit Insurance Corp.-insured,
but that's against bank failure, not a deflating currency. There's
considerable risk in currency movements and you can lose principal.
||EverBank's foreign currency CDs
A different international view
Flurry agrees that international exposure is needed but believes
it should be in stocks and bonds. "Currencies and gold are
a zero-sum game because they don't produce anything. With currency,
it's just speculation. If our currency goes up in value, it means
somebody else's went down in value. The next time it might go the
other way. It's not like anything was really produced; it's just
prices and value that have changed. They will change again. So,
trying to predict that and make investment decisions on that is
just pure speculation.
"You definitely need overseas exposure,"
he says. "The percentage depends on how conservative or aggressive
you are. There are three factors in this model and they're the same
whether they're U.S. stocks or overseas: How much exposure you have
-- how much of the portfolio is in stocks versus bonds, for instance.
How much of it is in large companies versus small companies. And
how much is in growth companies as opposed to value companies."
Flurry says, traditionally, about 15 percent of a portfolio should be in foreign investments. That said, he advises conservative investors to put no more than 5 percent to 7 percent of their portfolio in overseas investments; while people who have a higher tolerance for risk might want to go out as far as 20 percent.