Editor's note: Most Americans aren't aware of the single largest investment in their portfolios... And according to Vic Lederman from our corporate affiliate Chaikin Analytics, that investment has weakened recently. In this essay, originally published in the free Chaikin PowerFeed e-letter, Vic explains how you can diversify your portfolio today to offset this weakening asset.
Your Biggest Investment Just Fell 5% By Vic Lederman, editorial director, Chaikin Analytics
Most working-class Americans have something in common when it comes to investments... A quick peek at their 401(k)s will likely reveal a mix of stock and bond holdings. But whether they own more stocks or bonds, most Americans aren't aware they hold one particular investment. In fact, it's the single biggest investment in their portfolios. I'm talking about the U.S. dollar. Most Americans' investments, fixed assets, and income are denominated in the currency. And as you'll see, that might be a reason to diversify your portfolio right now...
| Recommended Links: |
 Too Big to Crash? When the AI Elephant in the Room Gets Sick Tech is a massive stick propping up the markets right now... Nvidia, Amazon, Alphabet, Meta Platforms, Microsoft, Apple, and Tesla are just 1% of the stocks in the S&P 500 – but they account for 30% of investment dollars. And now they're starting to crack. That's why you need to hear an urgent message from Altimetry founder Joel Litman, whose research is so groundbreaking, the Pentagon and FBI have consulted him on financial issues. Click here to see the full report. | |
|---|
|
Now, you might think this idea doesn't make sense. You might reason that your own currency can't be an investment. But put yourself in the shoes of, say, an Australian investor who owns shares of Alphabet (GOOGL) or Apple (AAPL)... or who has invested in 10-year U.S. Treasury notes. They need to buy U.S. dollars before purchasing any of those assets. If the U.S. dollar gained against the Australian dollar, the Australian investor would've made an extra profit when converting back to their currency. In this way, the U.S. dollar is an investment to them. It rises and falls against other currencies. And that's factored into the final return they get from any U.S.-based investment. Again, Americans typically have all their investments and assets denominated in U.S. dollars. Their entire lives revolve around the dollar. It's a part of everything they own and everything they buy. That's why it's difficult for most of us to see the dollar as an investment. To many folks, it's simply a currency – the only currency – they use every day. And they think that a dollar today is always going to be the same dollar tomorrow. That's flawed. We realize this when we travel overseas. If you've done that, you've likely found out that $100 often buys much more in another country than it does at home. But when the dollar weakens against other currencies, the reverse is true... We end up spending more dollars abroad than we would on the same things back home. A weaker dollar also makes everything we own cheaper for folks from other countries to get. And it makes it more expensive for us to buy things from those countries as imports. I'm bringing all this up today for a simple reason... The dollar's value has weakened recently. We can see that through the U.S. Dollar Index. It measures the value of the dollar against a basket of six other currencies. And it's down about 5% in less than three months. It could get worse soon, too. If the Federal Reserve makes good on its all-but-certain interest-rate cuts in its announcement later today, the dollar will likely lose more ground to other currencies. That means buying goods made overseas is going to get more expensive for Americans. And the same is true for American businesses – including many U.S.-listed stocks. In other words, only owning U.S.-based investments exposes you to a different kind of risk. You might think you're diversified if you hold a combination of stocks and bonds in your portfolio. But in reality, most investors are often still too exposed to one currency. Now, a weakening dollar isn't the end of the world. And this weakness doesn't mean less opportunity for U.S. investors. But if everything you own is denominated in U.S. dollars, you might want to look abroad for some extra diversity in your investments. Put simply, investing in other countries (and currencies) can help offset a falling dollar. Good investing, Vic Lederman
Editor's note: This week's Fed meeting could send shock waves through the U.S. economy. And you won't want to miss what Chaikin Analytics founder Marc Chaikin has to say about the aftermath... Tomorrow, September 19, at 8 p.m. Eastern time, Marc is going public with a critical warning that he says could safeguard your wealth in the next 90 days. He'll shed light on a market event that's already shaking up U.S. stocks... and what you can do with your money to prepare now. This online event is free to attend... You can RSVP in advance right here. Further Reading Recession fears have grown after last month's volatility... And the Fed's interest-rate announcement today will impact where the U.S. economy goes from here. But you shouldn't buy into the doom-and-gloom predictions... Read more here. "You never know where the big winners (and losers) will come from," Whitney Tilson writes. You can't know for sure which of your investments will make the biggest gains. But if you want a smart mix of stocks to help you build wealth over time, one strategy could crush the S&P 500 Index... Learn more here. |
| 
