Unless you pay attention to foreign exchanges, you may not have known that the value of the dollar against a basket of international currencies has fallen over 10% this year.
It's a massive drop.
It's the biggest drop since 1973 and I'm not being hyperbolic. It's a perfect storm of rising deficits, trade wars, tariff uncertainty, and with the latest bad jobs report, it appears the U.S. economy may be weak too.
But fortunately, this is something you can hedge against – here are the best hedges against a weakening dollar.
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Gold
Gold has been a reliable store of value for millennia. If you're worried about a weaker dollar or inflation, gold is one of the best ways to hedge against both concerns. Gold is consider a safe haven and one of the reasons why its gone up in value over the last six months is because the dollar has gotten so weak.
Gold hasn't changed, how much of it you can buy with the dollar has.
You don't have to go to your local pawn shop to buy gold – you can buy online from stores like JM Bullion and APMEX.
Alternatively, did you know you can buy gold within a self-directed IRA? You get the benefits of investing in gold plus the tax advantages of an IRA.
👉 Click here to learn more about Gold IRAs
Real Estate
A lot of experience investors see real estate is a great hedge against inflation because homes are expensive to build.
As inflation erodes the purchasing power of your dollar, the price of raw materials and the labor to build it will all go up. As a result, property values will go up especially in areas of high demand.
You can own residential real estate that generates rental income or you can rely on platforms that aggregate commercial properties to generate cash flow. Commercial property has always been tricky for smaller investors because it's difficult to buy an office park, but with real estate crowdfunding sites, you can now get a smaller piece of a larger pie.
Cryptocurrency
Cryptocurrency is sometimes called digital gold because it follows some of the same principles. There is a limited amount of cryptocurrency and the government can't decide to print more of it.
Not all cryptocurrencies are the same. If you want to dip your toe in these waters, stick with the known names like Bitcoin and Ethereum. Avoid alternatives coins with little history.
If you don't want to own the coins directly, there are a lot of cryptocurrency ETFs that get you the same exposure without as much work. The iShares Bitcoin Trust ETF has an expense ratio of just 0.25% and only holds bitcoin and a tiny bit of cash. As of August 1st, it held $85 billion in bitcoin with a small cash holding of $130,940.74.
International Stocks
If the U.S. dollar is getting weaker, then value of international stocks will rise.
If you think the dollar will further sink, a good hedge would be investing in international companies. A good way to do this is by selecting mutual funds or ETFs with worldwide exposure so you don't deal with any country or industry specific risks.
You could keep things simple and invest in Vanguard Total International Stock ETF (VXUS) and pay a mere 0.05% expense ratio. It hold over 8,500 stocks with a median market cap of $42.4 billion all across the world. Personally, this is what I do because the investing landscape internationally is far too complicated for me to understand.
Artwork
It might sound crazy but hard assets and collectibles, such as art, can be a good hedge against a weaker dollar because they hold their value due to demand.
If you own a piece made by Banksy, it's rarity and demand will help it retain its value as the dollar weakens. The challenge with art is that it's difficult to buy and store.
Fortunately, startups have solved that problem by letting you buy a small piece of a major piece of art and they're responsible for storage. The most well know company in this space is Masterworks. Not only can you buy shares of art as they come on the market, they even have a secondary market so you can sell your shares if you need to.
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