In case you haven't been paying attention, those dollars you've got in your pocket have shrunk -- at least in the eyes of much of the world. The U.S. dollar has fallen into record-low territory in relation to various major world currencies lately. Consider the euro, for example. About six years ago, the exchange rate offered roughly 1.13 euros for a dollar. Recently, that had fallen to 0.73 euros for a dollar, reflecting a drop of 35%. Its relation to the British pound and the Japanese yen is similarly dismal.
Even Warren Buffett of Berkshire Hathaway
You might think that a falling dollar doesn't affect you, as you're not traveling anywhere. But if you're a broad investor, you may be more affected than you realize. For example, if you're invested in an American company that rakes in much of its money abroad, remember: That revenue will probably end up converted to dollars at some point, and a weak dollar means the company will collect more dollars than it would from a strong dollar. (See? A weak dollar isn't necessarily so bad.)
Lots of big American companies derive significant portions of their sales from abroad. The following rake in roughly half or more of their revenue overseas: Coca-Cola
What to do
So what now? Well, if your portfolio holds many global giants, you can look forward to some boosts from currency rates. If you're worried about things going the other way as our dollar strengthens, reassure yourself that many big global companies take steps to protect themselves against this "currency risk," so it's not always as debilitating as it may seem.
Meanwhile, you might want to look into adding some international investments to your portfolio's mix. If so, I encourage you to test-drive (for free) our new Global Gains newsletter for some recommended foreign investments.
You might also want to consider other alternatives. At EverBank.com, for example, you can plunk $10,000 or more of your moolah into FDIC-insured World Currency certificates of deposit (CDs). You can choose ones denominated in a single currency, or ones based on a basket of different ones. When they mature, the value of the investment is converted back to U.S. dollars for you, and if the dollar has further weakened, you'll collect more dollars, turbo-charging your return.
Certificates of deposit are good short-term investments, by the way, and can play an important role in your emergency fund. Learn more in our Savings Center.
Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola and PepsiCo. Coca-Cola and Berkshire Hathaway are Motley Fool Inside Value recommendations. Berkshire is also a Stock Advisor pick. Try any one of our investing services free for 30 days. The Motley Fool isFools writing for Fools.