Among the risks faced by U.S. investors is a decline in the value of the dollar. Some analysts believe that our budget and trade deficits could lead to a steep fall in the value of the dollar, or even a currency collapse.
To protect your portfolio against this risk, consider investing in some exchange-traded funds (ETFs):
- iShares Comex Gold Trust. This ETF makes it easy for individuals to invest directly in gold. Historically, gold has proven to be a hedge against a falling dollar because it has gained value when paper currencies have dropped.
- Euro Currency Trust. This ETF invests in euros so it rises when the dollar falls against the euro (and vice versa). This gives investors an opportunity to invest directly in a currency other than the dollar. Even if the U.S. dollar does not drop precipitously, the euro may rise if the European Central Bank raises interest rates, which is widely anticipated during 2006.
