If you are considering investments that are (relatively) safe
against declines in the value of the dollar, don't neglect TIPS (Treasury
Inflation Protected Securities) and I-bonds.
These are investments which are adjusted directly for inflation,
which is, of course, what we're really worried about when we worry
about the decline of the dollar against foreign currencies.
TIPS are just like regular US Gov't bonds, except that their
principal is adjusted for inflation, and their interest is paid
based on the inflation-adjusted principal. TIPS are traded just
like other bonds, so they are completely liquid. There are a number
of mutual funds that invest primarily in TIPS or similar
securities.
I-bonds are inflation-protected US Savings Bonds. Instead of
adjusting the principal, they carry an interest rate which consists
of a fixed rate added to the inflation rate. The interest is
compounded, and is payable on redemption of the bond. They can't be
transferred or traded, but they can be redeemed for their full
value after 5 years, or with a 3-month interest penalty after just
1 year. You must be a US citizen or resident or a US gov't employee
to own them.
For a risk-averse investor, I would think that inflation protected
investments are safer than foreign currency denominated
investments. Barring complete collapse of the US government, they
are probably also safer than precious metals and the like. All
IMHO, of course... (I am not any kind of financial professional.)
Comment statistics for Alex R on the Electrolite blog
The most recent 20 comments posted to Electrolite by Alex R:
Show all comments by Alex R.