Coincidentally, I had just written an e-mail last night to a young professional who was looking into investment ideas to protect against dollar collapse. Here are my thoughts:
My overall philosophy is that individual investors should manage their own investments via very low-cost mutual funds and ETFs -- the money they save by not paying advisors really adds up.Of course, I left out real estate. Real estate is a brilliant inflation hedge because it's typically highly leveraged. Buy a home with an FHA loan and a phony 3.5% down payment, and you're essentially getting it for free as inflation erodes the value of your debt and future payments to nearly zero. The downside of that leverage is that if we're wrong and we get recession rather than hyperinflation, you're way underwater on an overpriced house. But that's OK with an FHA loan, as you can just walk away and hand the house back to the government.
A few of my favored low-cost vehicles are:
VWO, VEA -- Vanguard emerging markets and EAFE index ETFs
SWISX -- Schwab international index fund
EWA -- Australia stock ETF
EWC -- Canada stock ETF
FXA -- Australia currency ETF
FXC -- Canada currency ETF
Everbank.com -- savings accounts and CDs denominated in many different currencies
PFUIX -- Pimco Foreign Bond (unhedged)
GSG -- Goldman Sachs Commodity Index ETF (yes, they are evil, but their index is OK)
GLD, SLV -- gold and silver ETFs
GDX -- gold miner index ETF
gold coins -- pick them up at your local dealer for $50 -$70 per ounce above the spot price of gold
For most investors with a long time horizon, I'd recommend a very diversified portfolio with most or all of the above in addition to significant chunk of US stocks (VTI -- Vanguard total index is the only thing you need to hold there) and a good chunk of cash/short-term CDs.
There are other great advantages to managing your own money -- like managing your own tax liability. Professionally managed funds generally generate capital gains, but if you manage your own you only take gains when it makes sense for you. And you can actually manage tax losses to offset 3k per year of ordinary income.
Also left out were TIPS. TIPS are a fine choice for the most conservative savers, but the real return is near-zero. You may protect your purchasing power, but your money is not going to grow. And TIPS are based on government CPI, which may or may not reflect the true cost of living. The government has an incentive to understate inflation in the CPI as this reduces payments like SSI and keeps taxpayers in higher CPI-adjusted tax brackets.
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