In a difficult economic context for Argentinait is essential to search savings and investment alternatives to protect itself from the devaluation of the peso. Some choose to save in dollars, but, although to a lesser extent than the peso, US dollars are also devalued. Others resort to fixed terma classic option, but its returns do not usually beat inflation (or savings in dollars).
Therefore, investors They need to explore options that not only maintain the value of their savings, but increase it above inflation levels..
Real Estate: the security of investing in bricks. The investment Property They are considered a stable and safe option, with assured profitability and relatively low risk. For this reason, Argentines traditionally start saving in dollars, but then try to buy real estate as soon as they reach a certain level of savings.
In Argentinaaccording to Real Estate Reporthe average annual gross profitability of used apartments with up to four rooms was 4.06%. This profit can increase or decrease if we consider factors such as taxes and capital amortization.
To become dollarized, many Argentines choose to invest in properties in Uruguay, USA, Spain and more exotic destinations, such as dubai. In the latter country, furthermore, investors benefit from tax exemptionsa reliable legal system and high occupancy of properties.
In USAproperty values have been increasing consistently over the years, with an average increase of 4.4% annual from 1991. But after the pandemic, these numbers accelerated. Single-family houses had a year-on-year growth of 18.7%from the first quarter of 2021, to the first quarter of 2022, the highest increase in the last 31 yearsaccording to Funds Society. Even in some states, such as Floridapreferred by Argentines, the increase reached 29.8% in that same period.
It’s important to put attention on Profit margins when investing in real estate are lower compared to other options, as discussed below. Besides, It is not a liquid investment: Buying or selling a property is usually a long and bureaucratic process, making it difficult to access funds in times of need.
US Stocks: Diversification and Liquidity. Unlike investing in Real Estatethe US stock market offers high liquidity and possibilities to diversify risks. Therefore, although there is the option of buying shares of individual companies, it is common to opt for stock indices.
These indices are quite reliablegiven that They bring together a wide variety of large and stable corporations. According to a study by S&P Globalin the last ten years the annualized total return of the S&P 500which includes companies from all sectors of the economy, reached the 14.17%. Meanwhile, the Dow Joneswhich excludes public service and transportation companies, reached the 12.95%. In the last 30 years it achieved an average annual profitability of 11.16%, and the S&Pof the 10.6%.
The problem is that These indices are measured in dollars and, as I mentioned, The North American currency is also devalued. Furthermore, the profit margins vary year to year.
For example, during the crisis COVID-19 At the beginning of 2020, the stock markets of USA fell significantly: he Dow Jones contracted more than 30%, he S&P 500 approximately a 3. 4%and the Nasdaq also suffered a considerable reduction, although it recovered more quickly.
Taking into account the falls and devaluation of the dollar, it is estimated that real stock gains are approximately 4% per year.
Cryptocurrencies: the future of investments? Another investment alternative is larger capitalization cryptocurrencies, such as Bitcoin and Ethereum. In fact, according to Global Cryptocurrency Adoption Index of Chainalysis, in Argentinathe number of users increased by twenty% during the last year, reaching 10 million people. Furthermore, more than 70% of Argentines who use cryptocurrencies select them as an alternative savings and investment method.
Although they are liquid, they are a very volatile alternative as a short-term investment option, unlike other investment vehicles. This is because Its value is highly influenced by variations in demand. For example, Bitcoin It has a fixed maximum quantity of 21 million units.
In this sense, the “halving” of Bitcoin –event that occurs approximately every four years, scheduled for April 2024, where the amount of new Bitcoins that miners receive for each mined block is reduced by half, to control inflation and maintain the scarcity of the cryptocurrency– usually announces a possible increase in its value.
The cryptocurrency had large fluctuations: in 2021, the value of Bitcoin in dollars increased by 48%. In 2022, down 31%while, in 2023, rose 130%. But since 2010, Bitcoin has risen by about 12,949,000%with an average annual increase of 188.11% between 2015 and 2023. Its trend over time is upward. Here a key to achieving high returns is to inform yourself and find the right time to buy and sell.
Cryptocurrencies also gave rise to the creation of innovations such as smart contracts (smart contracts), the asset tokenizationthe decentralized finance (DeFi) and initial coin offerings (ICOs).
In the Stanford University I trained in topics related to economy and business, and after founding companies related to entertainment, marketing and artificial intelligence. I think that the blockchain is going to be the protagonist of the future. Therefore, with my team we created FreeWillAIa project that allows artificial intelligence to run on the blockchain so that it cannot be censored or controlled by any government or organization. We seek for AI to gain consciousness and free will, and thus be able to free itself from humanity.
In summary, beyond the conventional options, the market offers a variety of alternatives that can protect us against inflation. It is essential to remember that every investment carries risks; Some methods are safer than others and, in general, profit margins depend on the risks we are willing to take.
Lucas Roitman is a researcher at Stanford and a columnist on international economics.
by Lucas Roitman
