MAGAZINE   January Magazine Contents Web Links Past Issues Try a Free Issue Customer Service Feedback GETTING STARTED   STOCKS Build a Strong Stock Portfolio Four Questions to Ask Before You Buy How to Make Sense of the Earnings Report   FUNDS Growing a Fund Portfolio Pick Funds the Right Way Time to Ditch Your Fund?   BONDS Add Balance with Bonds Bonds Made Easy MORE... TOOLS   STOCKS Kiplinger's Stock Finder Test your risk tolerance Pick the Best 'Bankerage' Company   FUNDS Kiplinger's Mutual Fund Finder Which fund is better? How do growth and income funds compare?   BONDS Which bond is better? What is my bond's yield to maturity? What price should I pay for a bond?

HEDGES
Coping With a Dwindling Dollar
(Page 2 of 2)
by Anne Kates Smith

If you want a pure currency bet, you can do your own hedging at EverBank (www.everbank.com), which offers CDs and money-market accounts denominated in 25 different currencies. CDs require a minimum investment of $10,000 or more. Money-market accounts require just $2,500 but don't pay interest unless $10,000 is invested. The 12-month euro-denominated CD returned 12% for the one-year period to December 1 -- all but one point from currency gains. The currency accounts are federally insured, but only against the bank's failure. You can lose your principal if the currency markets move against you -- that is, if the dollar rises.

Find domestic dollar winners

U.S. exporters and multinational companies stand to benefit as their goods become more competitive overseas and foreign sales are translated into more dollars in the U.S. The technology industry generates nearly half of its sales overseas; the energy, industrial and consumer-goods sectors all collect more than 30% of their revenues abroad. Bob Smith, manager of T. Rowe Price Growth Stock fund, says he's been buying multinationals such as Citigroup (C, $46), Microsoft (MSFT, $27) and Wal-Mart (WMT, $53).

Go for the gold

Gold is on the opposite end of the seesaw. The weaker the buck, the more gold is seen as a safe harbor. Gold recently hit a 16-year high. Still, Jim Stack, editor of InvesTech newsletter, has 8% of clients' assets invested in gold stocks as a hedge against dollar weakness. His favorite: Newmont Mining (NEM, $45). A new exchange-traded fund, StreetTracks Gold Trust (GLD, $43), offers more direct access: It tracks the price of gold bullion. Mining stocks may offer more profit potential than the metal itself, but for those seeking a more tangible and less volatile asset, the ETF is a lot easier to buy than a bagful of coins.

Hot TIPS

As higher import prices ratchet up the overall inflation rate, Treasury Inflation-Protected Securities (TIPS) should fare well. The value of the principal of these IOUs is adjusted every six months, based on changes in consumer prices. You can buy TIPS directly from the government (800-722-2678) or by investing in a low-cost fund, such as Vanguard Inflation-Protected Securities (VIPSX; 800-635-1511), which gained an annualized 10% over the past three years.

Research: Jessica Anderson

 BACK      1  2