How to invest in the Swiss franc

With the threat of inflation looming around the world, the Swiss Franc provides one of the few safe havens investors have left. Here are four unique ways to invest in the Swiss Franc.

In an economy where just about every government in the world is dreaming up unique ways to devalue its currency, there are few safe places for investors to park their cash. Inflationary fears have driven up the price of gold more than 31 percent since the start of year, and they’ve buoyed the Swiss franc (CHF) as well. Since January alone, the U.S. dollar has dropped 13 percent against the franc putting the exchange rate at 1 USD to 0.79 CHF.

I expect that trend to remain intact as the Swiss government recently moved to dispel rumors that it would peg its currency to the Euro. That leaves the franc, and perhaps the Aussie and Canadian dollars, as three of the most attractive currencies on Forex. Here are four ways you can hedge against inflation by investing in the Swiss franc:

1) Currency trading. I wouldn’t recommend currency trading for beginners without a lot of time for practice and research. The currency markets are the most liquid and volatile markets in the world, and – since they’re so leveraged – they can wipe out your trading account in minutes. Still, if you’re willing to put in the time to learn, it’s probably a safe bet that the Swiss franc is going to outperform the U.S. dollar in the coming months and perhaps years. Try a Forex practice account with Zecco.com (my broker of choice) before putting real cash on the line.

2) Go long the Swiss Franc ETF (NYSE:FXF). The CurrencyShares Swiss Franc Trust has rocketed up more than 17 percent since the start of the year. The ETF tracks the franc against the U.S. dollar, which means a weak greenback is good news for FXF-holders. Best of all, FXF’s chart is in a slow and steady uptrend. So long as the Swiss government’s willing to put up with a strong currency, you won’t get the stomach-churning ups and downs that come with investing in precious metals.

3) Invest in Swiss stocks. While it’s not a direct play on the Swiss franc, you could consider investing in Swiss stocks. That might not be a bad idea since the economy in Switzerland looks as if it’s emerged relatively unscathed by the housing and financial collapses that have rocked the U.S. Unemployment currently stands at a mere 2.8 percent in Switzerland (compared with 9.1 percent in the U.S.). The iShares MSCI Switzerland Index Fund (NYSE:EWL) gives you broad-based exposure to the Swiss equities market, or you can add specific Swiss stocks to your portfolio including heavy-hitters like food giant Nestle SA (ADRs, which trade on the Pinksheets under ticker NSRGY), healthcare company Novartis AG (ADR) (NYSE:NVS), international finance company UBS AG (NYSE:UBS), or pharmaceutical company Roche Holding Ltd. (ADR) (PINK:RHHBY).

4) Open a Swiss franc bank account. An interesting play on the Swiss franc is simply opening a global currency savings account that allows you to deposit your cash in Swiss francs. Jacksonville, Fla.-based Everbank does just that. Everbank doesn’t currently pay you a yield for stashing cash in francs, but it doesn’t matter if every other currency around the world is falling. Just convert your dollars to francs, and don’t touch them for a year. When you exchange your francs back into dollars, you should gain quite a bit of purchasing power (especially if the dollar falls another 13 percent against the franc!).

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Here are five simple ways to bet against the dollar; from opening a savings account in a foreign currency to investing in precious metals or American Blue Chip stocks.

1) ETFs. Perhaps the easiest way to bet against the dollar is by investing in an inverse dollar ETF. The PowerShares US Dollar Index Bearish ETF (NYSE:UDN) is the best in class with a daily trading volume around 156,000 shares. UDN shorts futures contracts as it tries to track the Deutsche Bank Short US Dollar Index (USDX) Futures Index. A better option, though, might be shorting an ETF that’s long the dollar in the form of UDN’s sibling, the PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP). UUP has a trading volume that’s 16 times higher than UDNs, and some sources argue shorting long ETFs is a better strategy than going long short ETFs.

2) Buy gold. Since the supply of gold is relatively stable, the precious metal’s price tends to behave independently of the actions at the Fed’s printing press. If the value of the dollar goes down, gold prices can stay the same, but it’ll still take more dollars to buy the same amount of gold. Throw increased investor demand for gold into the mix when inflationary fears are building in the economy, and you’ve got a recipe for surging gold prices.

3) Convert your dollars to yuan. The Chinese government has loosened the strings it has the yuan of late, finally allowing allowing Americans to open yuan savings accounts directly in the U.S. The Bank of China branches in New York and L.A. allow investors to save cash in the form of renminbi (deposit up to $20,000 a year). Kiplinger also recommends checking out EverBank, which offers savings accounts in 20 foreign currencies (provided you pay a 0.75 percent transaction fee when you buy and sell currencies). Accounts can be started with as little as $2,5000.

4) Invest in multinational Blue Chips. While companies like tractor-manufacturer Deere & Company (NYSE:DE), The Coca-Cola Company (NYSE:KO) and software company Oracle Corporation (NASDAQ:ORCL) are all headquartered in the U.S., they derive significant portions of their income overseas. In the case of Oracle, 70 percent of the company’s revenues come from business outside of the U.S. Not only does these investments give you exposure to emerging economies, they hedge your exposure to the dollar while paying a modest dividend.

5) Invest directly in foreign companies. In the tech realm, the Chinese market operates behind what’s been dubbed The Great Firewall. American tech companies can’t get in, and a lot of the country’s biggest tech companies aren’t yet trying to capture audiences outside the domestic market. That means growth in your investment is unmoored from the performance of the dollar. In tech, consider SINA Corporation (NASDAQ:SINA), the maker of a Twitter-like microblogging service called Weibo. China’s financial markets has a new player in wealth management company Noah Holdings Limited (NYSE:NOAH) and the Chinese advertising industry looks like it’s led by Focus Media Holding Limited (NASDAQ:FMCN). There are also numerous plays in China’s solar industry from JA Solar Holdings Co., Ltd. (NASDAQ:JASO) to Trina Solar Limited (NYSE:TSL) to name a few.

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