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Q&A: Should I be concerned with the devaluation of the dollar?

April 5, 2021 | Investing

Today, we’re sitting down with LifeGuide Partner and Chief Investment Officer, Zak Lutz, to answer some of the most frequently asked questions we receive. This is the fourth part in our six-part Q&A series.

Q: Should I be concerned with the devaluation of the dollar?

 

A: This is a great question. As of this posting, the value of the dollar has been going down. And this devaluation often causes people to feel concerned or scared.

What we’re currently seeing, though, really needs to be viewed in the context of how high the value of the dollar has been. Its value has been within a five-year range and is now simply getting towards the lower end of that range. It’s not that it’s absolutely low right now, it’s just relatively low compared to how high it’s been in the past.

In fact, it may feel counterintuitive, but we actually don’t want too strong of a dollar! A strong dollar can be just as bad as a weak dollar.

Instead, we want balance.

When people talk about the value of the dollar dropping or devaluing, they tend to think of this in a negative way. However, it can actually be positive and helpful. For instance, with a weaker dollar, goods and services produced by companies here in the United States are more competitive globally. Because other countries can purchase our exports for less, our manufacturing becomes more competitive.

Bottom line: When you hear about the devaluation of the dollar, it’s usually presented in a negative or scary way. Yet the reality is more nuanced.

 


 

The information provided does not constitute investment advice and it should not be relied on as such. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information, and “LifeGuide Financial Advisors, LLC” shall have no liability for decisions based on such information. View and opinions are subject to change at any time based on market and other conditions. Investing involves risk including the risk of loss of principal. Past performance is not indicative of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss, and the reinvestment of dividends and other income. Diversification does not ensure a profit or guarantee against loss.
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