Expert: Gina Boykin - 8/20/2007

Question
Hi.  If things get progressively worse in the next year or two and the dollar slids quite a bit what foreign currencies would be the best bets and how could I go about getting some? I already have gold and silver. How would you compare these two approaches to maintaining value?
                                    Thanks, -Jim S.

Answer
Investing in a foreign currency usually is done by investing in a currency pair, and would involve looking at both currencies.  If the dollar goes down in relation to the Euro for example, then the Euro/USD will increase.  If you purchase the Euro/USD, you are buying the Euro and selling the USD.  If you believe the dollar will continue to devalue, then any pair where you are selling the USD is the best bet.  To purchase a currency pair, you would set up a FOREX account with a broker (just like you would with stocks).  Most brokers provide demo (practice) accounts so that you can understand what you're doing.  Once you open a real account, you can purchase and sell currency pairs online.  The FOREX market is open 24 hours a day starting Sunday evening through Friday evening.

www.babypips.com has a great tutorial on the forex market.

As far as brokers go, you want to make sure the broker is registered with with the NFA - National Futures Association.  The NFA also has an online forex training program on their website.

ww.nfa.futures.com

When people invest in foreign currency pairs, they either invest in one pair or they use a hedge (two or more pairs) to limit their risk.  The hedging system I use has been successful (www.4xrules.com), but there are hundreds of other systems out there that you can try as well.  Once you've read some of the BabyPips tutorial, you'll be able to decide what type of system works best for you.

Now to your other question-

I know that gold is considered a good hedge against inflation; but is not good as a short-term investment.  It may take many years to see significant price changes.  If your primary concern is value (as opposed to increase)over the long-term, though, gold is the best option.  If you want to make money in price appreciation (and depreciation), you should invest in currency.