Where to Put Investments Before a Crash

When unemployment reaches high levels and foreclosures are commonplace, it’s natural to worry about the economy and your investments. If most of your money is in the stock market and it crashes, you might not have time to wait for a possible recovery. Several options exist besides the stock market. If you think a crash is likely to occur, you might want to look into some of them.

TIPS

You can buy Treasury Inflation-Protected Securities from the U.S. Treasury or from a bank or broker to provide you with some protection against inflation. Your principal would increase with inflation and decrease with deflation. This is measured by the Consumer Price Index. You can buy a TIPS that matures in five, 10 or 30 years. Interest is paid twice a year and is applied to your principal. At the time of maturity, you receive whichever is greater between your adjusted and your original principal.

Precious Metals

Invest in precious metals — gold, silver, platinum and palladium — if you are concerned about the dollar losing value. People historically have held precious metals as a way to diversify their portfolios. A popular saying used in many advertisements is that the price of metals fluctuates but never drops to zero — a come-on, yes, but one that contains some truth. You can invest in precious metals by buying stock that holds shares in mining companies, by buying exchange-traded funds that hold bullion or by buying coins — both antique and newly minted ones.

Foreign Currency

If you are concerned about the dollar being weak, you might want to invest in foreign currency. If you choose the wrong currency, however, you could lose money if it drops below the dollar. You have the option of investing in many different foreign currencies to hedge your bets. Investing in foreign currency is risky, so you need to gauge your risk tolerance. It’s best to work with a financial intermediary, said Carl Resnick, a Rydex SGI portfolio strategist, in Bankrate.com.

Savings Accounts

Put your money in savings accounts and certificates of deposit if you are worried about a crash. They are the safest vehicles for your money. The Federal Deposit Insurance Corp. and the National Credit Union Administration insure your money in savings accounts, checking accounts, certificates of deposit and money market deposit accounts up to $250,000 per depositor, per bank.