Basics of Investing

Archive for January, 2009

Question: What’s the best 401k hedge against a falling US dollar?

I’m concerned about the fact that some portion of my 401k is in a money market fund (FRTXX) that is going to be hit by the falling US dollar. I don’t want to have everything in stocks. Is there anything I can do with that money market investment that would hedge against the dollar? Or perhaps I’m ignorant of how the fund works and won’t be adversely affected by a drop in the dollar?

Answer: The US dollar rises an falls CONSTANTLY against nearly EVERY foreign currency. It WILL come back in a year or two. If the US economy actually goes south far enough for the value of the dollar to matter, it won’t matter what your 401(k) is in.

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