Stock-Net.com

Updating my previous Stock-Net post about profiting from the falling dollar, I now have some additional investment options to present. As many expect further declines in the US dollar, how can an investor position their investments to potentially profit from this decline?

One additional option is the Powershares DB G10 Currency Harvest Fund, DBV. This ETF holds a portfolio of currencies, and may combine long and short positions in various currencies.   The Currency Harvest fund combines long positions in 3 high-interest-rate currencies with short positions in three low-interest-rate currencies.  The net result is designed to produce lower volatility, and profit from currency trends and the net-interest carry.   The back-tested results of this strategy are impressive, but the fund has a relatively short history in live trading.  Before investing in this ETF, do your research and be sure that you are comfortable with the strategy being employed.

Several mutual fund options are available that are designed to hedge against a dollar decline. One is the Rydex Dynamic Weakening Dollar Fund, RYWDX. This fund has a relatively high expense ratio of 1.7%, and a front end load, and has returned a load-adjusted 11.1% over the past year.

Another fund that stands to profit from dollar weakness is the Profunds Falling US Dollar Fund, RDPIX. This fund has no load, with a minimum investment of $5K, and provides a yield of 3.7% in addition to its diversification benefits.

Finally, on the fixed income side, you may wish to consider the American Century International Bond Fund, BEGBX. This fund offers lower volatility than the others, has no front end load, yields 2.2%, and has an expense ratio of 0.82%, making this a good candidate to help diversify your portfolio.

With the US Dollar’s continued downward moves, Stock-Net shows you some ways to profit from this trend. Several new ETF’s are available that allow you to track the movements of foreign currencies. A sampling of the currency ETF’s include:

• CurrencyShares Australian Dollar, FXA
• CurrencyShares British Pound Sterling, FXB
• CurrencyShares Canadian Dollar, FXC
• CurrencyShares Mexican Peso, FXM
• CurrencyShares Swedish Krona, FXS
• CurrencyShares Swiss Franc, FXF
• Euro Currency Trust, FXE

Mutual Funds that track currency movements include Franklin Templeton Hard Currency, ICPHX, and Merk Hard Currency Fund, MERKX. The Franklin Templeton fund has a 2.25% load and an expense ratio of 1.19%, while the Merk fund is offered with no-load and an expense ratio of 1.30%.

These Currency ETF’s or Mutual Funds could be a valuable addition to your portfolio, offering additonal diversification opportunities and an offset to the effects of a weakening dollar.