Personal Investing Advice

How to Protect Your Portfolio From a Weak Dollar and Runaway Inflation

The U.S. dollar continues to be weak. With all the deficits, bailouts and stimulus packages from Washington, there is a chance that inflation will take off.

If the dollar continues to fall and inflation ramps up substantially, how should you invest your portfolio to preserve your purchasing power?

Your first thought might be to invest in gold. But gold is a better hedge against war and disaster - not inflation. During the last 34 years, the purchasing price of gold has increased less than 3% per year - before expenses.

You might then think about treasuries. But they also don’t return much after inflation. Even Treasury Inflation-Protected Securities (TIPs) won’t do well under high inflation.

Instead, you should focus on the products that do well in the early stages of inflationary periods. These include agriculture, copper, oil, and uranium. They should experience a bull market.

Therefore, a good strategy might be to start buying the stocks of companies involved in the international sales, mining and production of the above commodities.

Some possible examples include Archer Daniels Midland (agriculture), Southern Copper (copper), Cameco (uranium), Titanium Metals (titanium), and Viterra (agriculture). Southern Copper is based in Peru, but the other companies are headquartered in the U.S. and Canada. They are easily available from any broker.

These companies all have the added benefit that, besides protecting you against inflation, they provide excellent hedges against a weaker dollar. This is because they all have substantial foreign product sales and own undeveloped land outside of the United States.

Please t.com/”>visit my blog to learn more and to download a preview of my book “Stock Trading Riches” absolutely free. I don’t even ask for an email address.

Praveen Puri has a passion for simplicity and has been a programmer, full-time trader, and vice-president at a major bank. He is the author of Stock Trading Riches, which teaches his simple and successful stock trading system.

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