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Presidential Plans

Argentina’s President-elect Javier Milei is no fan of the peso. He wants to ditch his nation’s currency for the U.S. dollar to leave economic upheaval behind. Milei also wants to strip Argentina’s central bank from its powers.

The South American country is no stranger to financial turmoil, having previously defaulted on its debt, and running triple digit inflation. So what could the good old greenback do?

Why Dollarization?

Switching to the U.S. dollar – a process known as dollarization – has historically helped certain countries achieve greater economic stability. Because local central banks aren’t able to print U.S. dollars, it can avoid hyperinflation, for example.

If Milei succeeds, Argentina would join Ecuador, El Salvador, and Panama in using the U.S. dollar.

Potential Pitfalls

While dollarization can be a step in the right direction, it’s not a panacea that will instantly cure Argentina’s economic struggles.

For one, economists doubt that Argentina has the funds to actually complete such a project. Also, without the security of its own currency and central bank, Buenos Aires would be much more exposed to macroeconomic threats from swings in export prices and commodities.

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Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
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Food quality is slipping as manufacturers change recipes to keep costs low.

You may not be super new to investing, but is your portfolio mostly concentrated in one type of investment?

Perhaps it’s stocks, maybe you’ve snuck in some exchange traded funds, or ETFs, which allow you to invest in a basket of things. Whatever your portfolio looks like at the moment, the central question you should ask yourself is this: Is it diversified and balanced?

In the simplest terms, diversifying your portfolio means you don’t put all your eggs in one basket. That way, if there’s market volatility, your hard-earned money may be more protected, or that’s the idea, at least.

Diversifying has the potential to help you reach your financial goals faster. For example, you may allocate a portion of your investment budget to riskier categories, like growth stocks, which are companies that have a lot of growth potential. You then balance out that allocation with traditionally safer, lower-yielding investments like bonds. Again, not all eggs are in one basket, but some of those eggs could produce some juicy returns.

How you allocate your portfolio also has something to do with your phase of life, and what you’re trying to achieve.Younger people’s portfolios may be more geared toward high returns, while people closer to retirement may prefer investments that bring in a lower-risk, regular return.

What Different Asset Classes Can Offer You

The first step to diversifying is to understand all the different types of investments you may have access to. That’s essentially all asset classes are: a group of investment types with certain characteristics.

No doubt you know about stocks, or equities; they’re an asset class. You can invest in single companies, tracker funds that follow certain industries, or even the whole market. Many people who are invested in the markets also own bonds, or fixed income, which traditionally provide a lower-risk, and lower return.

If you feel less comfortable outside of these two, read on.

Money market funds are very liquid investments, which means they can be easily and quickly converted back into cash.

Commodities include oil, gold, agricultural products like dairy, or wheat. Different commodities are correlated with different economic factors. For example, demand for oil is related to global economic growth, as well as supply of the fossil fuel from oil-producing nations. Meanwhile, gold is a traditionally considered a safe haven asset that investors often flock to in times of market turbulence.

In real estate investing, you’re betting on rising property values, or generating income through rents. You can also put money into this category through real estate investment trusts, which are traded on the market. Real estate is traditionally less correlated to the market.

Diversifying your portfolio is important, but it’s okay to feel overwhelmed by just how much is out there. Did you know SoFi offers you access to certified financial planner professionals to plan for your future? Learn more about how to book your first consultation here.

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Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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