Dollar Hits New Low

Today the U.S. dollar hit a new low against the euro.

Where is the value of our currency going? No one can say for sure, and we sure don’t believe in guessing and market timing. For sure, whichever way the currency moves there will segments of the economy that benefit and others that don’t do as well.

This is one of the principal reasons we believe in being broadly invested across asset classes.

Jonathan Clements the well-regarded personal investments columnist at The Wall Street Journal was recently asked what investors should do to insulate their portfolio from the impact of the dollars decline.

Clements advice was the same he regularly gives on portfolio construction: have 30% of your portfolio invested internationally.

By maintaining a 30% international exposure, according to Clements, our portfolio will be better diversified and our performance will likely be smoother. (Remember, we want asset classes that are not correlated - don't move the same way in like markets.)

He suggests that focusing on large international and also investing in emerging markets and international small cap.

Clements guidance is very similar to the construction we follow with our Asset Class Portfolios. We also hold an allocation of 30% international. Our portfolio composition is closer to a third in each large, small, and emerging. Emerging and small international have historically provided excellent performance and portfolio diversification.

Clements says that more than 30% international is not needed in an investor’s portfolio even if the dollar falls more or even stays low for an extended period of time.

His reasoning is that we invest to use our wealth at some point to purchase goods and services principally here in the United States, so we want to keep a substantial position in U.S. securities.