How to Defend Yourself From the Declining Dollar
- 1). Figure out how much money you need to survive comfortably, and invest the rest. Estimate your disposable income by taking your monthly take-home pay and deducting all the bills you must pay. Make a budget that includes not only your monthly bills but also your other living expenses, such as health care, medicines, groceries, entertainment and incidentals. What's left after all those expenses are accounted for is the amount you can afford to invest.
- 2). Find a good investment broker. Investigate the brokers you are considering working with and make sure they have good reputations. Avoid brokers who "churn" clients' money, meaning they move it in and out of stock investments frequently just to generate more broker fees. Talk to a broker about a proposed investment and make him explain clearly why he thinks it is a good investment. Also, read any disclosure statements from brokers. They may include information that shows they get extra compensation when selling particular stocks. A good broker will disclose the pros and cons of any investment, and should have a clean NASD record, which you can check online.
- 3). Invest in commodities that continue to gain value against domestic and foreign currencies. While investing in the euro or other foreign currency does help you defend yourself from the declining dollar, these investments are being outperformed by commodities like gold. Gold has gained so much ground that it compensates for the decline of the dollar over the same period. From January 2001 to January 2011, the value of gold increased from $255.30 per ounce to $1423.70 per ounce. Other commodities have also been effective as a hedge against inflation.
- 4). Keep your investment portfolio diversified. Investing all your money in any one stock, bond fund or commodity is risky, and unless you are fortunate enough to have that investment rise dramatically forever without ever taking a fall, you are likely to be at a disadvantage. Spread your money around among foreign markets and domestic ones, and among commodities and stable stocks.
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