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Letter to the editor

Will the dollar keep sinking?

Do you think the dollar will keep sinking or are you looking for a rebound? Has the decline in the dollar affected you?

By Helen Huntley, Times Personal Finance Editor
Published October 7, 2007

We asked

Do you think the dollar will keep sinking or are you looking for a rebound? Has the decline in the dollar affected you?

The threat facing the United States is that the euro, a strong currency backed up by some of the world's strongest economies, is beginning to look like a reliable alternative to the dollar. The explosive increase in euro-based international transactions suggests the worrisome possibility that foreign investors may have found a place other than the United States where they can safely store their money. Indeed, a recent survey of central banks showed that two-thirds of the world's 65 richest nations were planning to shift investment dollars into euros. The vaunted status of the dollar as the world's preferred currency is rapidly fading.

Robert B. Fleming, St. Petersburg

You asked

My wife and I have our retirement accounts invested 65 percent in mutual funds American Funds and Franklin Templeton, 30 percent in bonds (Verizon) and 5 percent in cash (CDs and money markets). What would be a good plan for this investment should we find ourselves getting into a recession? I am concerned since I paid initial loading fees for the mutual funds, and hate to sell as buying them again would entail paying them all over again. However, I do not want to take an $8,000 loss like we did in 2001-2002.

I am not able to provide individual portfolio analysis. However, I can offer some thought to help you review your portfolio. First you need to understand what you own better before you consider changing it. American and Franklin Templeton have many different types of mutual funds. Your money might be in U.S. stocks, foreign stocks, long- or short-term government bonds or high-yield bonds or perhaps some combination of all of these. Maybe even other things too.

I recommend you spend some time learning more about investments. You might get a basic book such as Investing for Dummies or just explore a good personal finance Web site such as moneycentral.msn.com. Then sit down with your financial adviser, since obviously you have one, and talk about your goals and how your assets should be allocated to meet those goals.

Most people should have some money in stocks, some in bonds and some in cash. The percentages of each will vary, depending on your tolerance for risk. Since you seem to be risk-averse, you want to avoid getting into aggressive funds.

I am concerned that you mention having 30 percent of your money in the bonds of one company. That's putting too many eggs in a single basket. I recommend having no more than 10 percent of your money in any single company's securities (stocks or bonds). You want to be sure you have adequate cash to cover potential emergencies.

Next week's question

How have student loans affected your financial life? If you had to do it over, would you borrow the money?

To ask a question, make a comment or answer the Money Question of Week, e-mail hhuntley@sptimes.com or write Helen Huntley, P.O. Box 1121, St. Petersburg, FL 33731. Visit her MoneyTalk blog (blogs.tampabay.com/money) for more money information.

[Last modified October 5, 2007, 23:27:24]