How to Buy the RIGHT Commodities  and Currencies for Your IRA

By Sean Hyman

I just read that over US$2 Trillion was lost in retirement funds during the 2008 investment year.

So if your retirement plan is hemorrhaging, trust me – it’s not your fault. After all, who could have predicted that stocks would drop like a rock around the entire world?

No, the problem is most retirement advisors only tell their clients to buy stocks or stock-based funds for their retirement portfolios.

However, you need greater diversity in your portfolios more now than ever before. You need to be able to take advantage of growth that lies outside of the typical “stock realm.”

So how can you do this in your IRA accounts? You can prepare for the next inflationary cycle to come NOW, so that when it comes, you will be there to take advantage of it.

Allow the “Money Printing” Fed to be Your Retirement Account’s Best Friend!

What do we know thus far? We know that the Fed is printing money like madmen. So we know inflation is coming even though we can’t set our watches and say it’s coming on a certain day and time.

We know that commodities (which are essentially inflation embodied) will benefit from this move as a glut of dollars chase a finite amount of goods.

Knowing this, what benefits and more importantly, what instruments do you need to place in your retirement account to take full advantage of this?

For starters, you need to own the commodities that will directly benefit from this inflationary wave such as gold, oil and even silver.

How can the regular investor do this? You can buy these commodities through their ETFs within your IRA at your stock brokerage firm. Here are a few to consider: GLD (one of many gold ETFs), SLV (silver ETF) and USO or USL are both Oil-based ETFs.

However, to further broaden your diversification, you need to own the country’s currencies that benefit from the rise of these commodities and the fall of the U.S. dollar.

Aussie Dollar – the First to Profit When Inflation Hits the Fan

So which ones are they and how can you buy them in your IRA? You will want to consider owning the Australian dollar. Why? Because it’s one of the countries that will benefit from the rise in commodity prices, when we hit the next inflationary cycle.

Australia also hasn’t gotten as banged up as other countries have in this global slowdown. Therefore it will be one of the first to benefit from the next inflationary boom. Also, China will ramp back up quicker than many nations and they will be buying huge sums of commodities from Australia once again.

In your retirement plan, there are a couple ways to invest in Australia. You can do so through an Australian dollar ETF or an Australian dollar CD. Australian dollar ETFs are simple to buy – they’re available on the major exchanges. So you only need to call your tockbroker and request it for your IRA.

And CDs are available through both foreign banks, and EverBank here in the United States. To invest, you simply call the bank of your choice and fill out the appropriate paperwork. Make sure to ask them about retirement plan options.

Why Bet on the Anti-Dollar for the Long-Run

Any type of inflationary cycle is bad news for the buck, and all the other dollar-based investments in your retirement plan. But there’s another foreign currency you can use to minimize your exposure to the buck.

Remember, the best “anti-dollar” out there is the euro. Since the U.S. Fed is bent on printing money, and there’s nothing that you or I can do to stop it, we might as well benefit from the outcome by essentially selling dollars and buying euros.

In the Forex market, you would do this by buying the EUR/USD pair. But in your retirement plan, you need to get a bit more creative. You can buy a euro ETF (there are several available through Rydex, ProShares, WisdomTree and others), or hold euros in a CD or portfolio.

I know Europe is in a mess, no denying that. But I also know that the U.S. Fed will out-print any central bank out there.

As commodities benefit from the glut of dollars chasing a finite amount of commodities, inflation returns. As it does, your dollars become diluted and it will be better to be in other foreign currencies than it will be to be solely in dollars.

Therefore you can bring about a lot of upside to your retirement account and further diversify by buying in the handful of investments that look to benefit (namely the Aussie dollar, euro, and key commodities).

fact, we are starting to see some strengthening of these currencies against the buck already. Check out the chart below.

The Euro and Aussie dollar recently
Broke Downtrends vs. the U.S. dollar!

Plus, it’s worth noting that the dollar has lost more than 80% of its purchasing power since Nixon took us off the gold standard in 1971. That’s because the Fed has continued to print money to cover our debts ever since, and it stands to reason they will continue to do so in the future.

Knowing this, it means that your dollar denominated retirement account will buy less and less as you approach retirement UNLESS you do something about it now.

The course of action NOW will determine when you can retire. By buying other country’s currencies, you will be preserving your net worth as most Americans lose their purchasing power by holding 100% dollars. Ingenious isn’t it?

EDITOR’S NOTE: Few people know that it’s actually fairly simple to diversify your IRA into foreign currencies. You can do so with ETFs, currency CDs or portfolios and even more speculative investments like principle-protected notes. Our just-published currency course, Cracking the Currency Vault explains how to dive into all these investments…and gives you beginner’s tricks and tips for Forex trading, currency options trading and more. Click here for the full details on this new course.