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The US Dollar
Adding to the currently scary investment climate is the cheap (and cheapening) US dollar. Once considered THE reserve currency of choice, it is now one of a number of choices, and less of a standout every day.
Financial writing is most interesting when it predicts the future, as this article does: Why the U.S. Dollar Will Continue to Lose Value. While prophesies are entertaining, as a financial advisor I need to actually tell people what to do to prepare for the future.
It’s easy to play a bunch of What If games about the US Dollar, and whether it will grow or decline in value. At the end, you’re still left with a few decisions:
- How much to allocate to US vs International equities
- How much to allocate to US vs International bonds, including especially foreign exchange holdings
In equities, my general goal is to mirror the global economy with asset allocations, allowing for a tilt towards small and value companies. This means a hefty international component. Whether the dollar goes up or down, the long term bet is that the global economy will continue to grow, with outsize growth (and risk) coming from smaller companies worldwide.
My recommendations are also made based on predictions, in a sense, since I’m suggesting to people that the smart bet to play is on the long term health of the global economy - Capitalism writ large. It’s just a boring sort of prediction, since it’s been true over every 10 year period since the late 1800s.
I stress to prospective clients that the best way to view their portfolio is as something that will give them a boring 20 years, at the end of which they’ll have done better than anyone who tried to spice things up. They may not have any stories to tell about how they turned $20K into $300K, but they won’t have any skeletons to hide either about how they turned $400K in $0.
