Best Funds for a Falling U.S. Dollar

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The U.S. dollar recently hit a 12-year high versus the euro, which may make for a compelling and contrarian entry point now for the best funds that profit from a falling dollar.

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Just this Wednesday, stocks fell sharply on data showing unexpectedly weak U.S. durable goods orders. Commerce Department data showed business investment spending plans fell for a sixth straight month in February, according to a Reuters report.

This kind of news can lead economists to lower their first-quarter U.S. growth estimates, and cause the Federal Reserve to delay interest rate hikes.

Therefore, a near-term case for a U.S. dollar crash is a simple scenario of a correction downward from a 12-year high that could be too bullish on a strong U.S. economy and the miscalculation that the Fed will raise rates sooner rather than later. And voila, you have a dollar correction.

But you don’t need to be a market-timer or make big short-term bets on currency fluctuations to use any of these 3 best funds for a falling dollar.

Best Funds for a Falling U.S. Dollar: SPDR Gold Trust (GLD)

Gold is the classic hedge against a falling dollar, and the most accessible way to do it is with an ETF like SPDR Gold Trust (NYSEARCA:GLD).

spdr-state-street-185Historically the price movement of gold has had low-to-negative correlations with most broad asset classes, which makes the precious metal a tactical tool for both short-term traders and long-term investors.

Therefore, you don’t need to make a big bet that the dollar will fall or that financial Armageddon is drawing nigh to add GLD to your portfolio.

Adding to the contrarian narrative, gold is now hovering around $1,200, which is nearly 8% off its 2015 high. If the dollar shows any weakness at this point, GLD stands ready to jump higher. It’s already gained about 2.5% in the past five trading days.

The expense ratio for GLD is a reasonable 0.40%

Best Funds for a Falling U.S. Dollar: Vanguard Total International Bond Index

When the dollar falls in relation to foreign currencies, global bond funds like Vanguard Total International Bond Index (MUTF:VTIBX) can do well.

VanguardStaying within our theme of hedging against a falling dollar in the short term, but looking at funds that can be smart long-term plays,  global bond funds can be an integral part of a diverse portfolio.

Although VTIBX is a little less than two years old, the performance looks solid in that time frame. The 1-year return is 8.7%, compared to -0.61% for the average international bond fund.

Top countries for regional exposure include Japan, France, United Kingdom, and Germany. This keeps a lid on the worst of global debt crisis concerns.

The expense ratio for VTIBX is a low 0.23%  and the minimum initial investment is $3,000.

Best Funds for a Falling U.S. Dollar: Vanguard 500 Index (VFINX)

Funds that invest in large companies with multinational operations can do well when the dollar is falling, and Vanguard 500 Index (MUTF:VFINX) is a great choice here.

VanguardVFINX can be used as a core holding in a diversified portfolio for long-term investors, but it can also do well when the dollar weakens.

Big, multinational companies can see higher profits because of an advantageous currency conversion. In simple terms, the companies have to translate foreign earnings into weaker dollars, which may be all it takes to advance stock prices after coming off of recent highs in the dollar.

The top holdings in VFINX, such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), or Johnson & Johnson (NYSE:JNJ), sell products around the world.

Topping things off, VFINX has a rock-bottom expense ratio of 0.17%. The minimum initial investment is $3,000.

As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/best-funds-for-falling-us-dollar-gld-vtibx-vfinx/.

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