If you don’t invest, chances are you’re losing money to inflation. Put simply, inflation is a decrease in the purchasing power of a currency, which may be caused by a variety of factors.
In Brazil, for instance, what you can buy with R$5 today might not be the same as what you can buy with R$5 in a couple of months. This happens because the price of goods and services may rise as a result of increased demand for them, due to an increase in production costs, or due to an expanding monetary supply, for instance.
Below is a chart showing how the Brazilian Real has lost over 80% of its purchasing power in its 27 years of existence.
Fun Fact: Brazil has had many currencies before the Real, such as the Cruzeiro, Cruzeiro Novo, Cruzado, Cruzado Novo, and Cruzeiro Real – none of which are still around today.
- Consider dollarizing your portfolio
One way to protect yourself from inflation is by diversifying your investments across sectors, asset classes, and currencies. The US Dollar, for example, has historically held its value better than the Brazilian Real (past performance does not guarantee future returns, though).
All money in your Passfolio Securities account is held in US Dollars and you can access thousands of investment opportunities on Passfolio’s app or web platform. There are literally over 4.000 US stocks, ETFs and REITs to choose from.
Investing can be important because allocating money into assets that have an Annual Percentage Yield (APY) greater than the rate of inflation may help you preserve wealth.
- Consider crypto assets
When it comes to fiat currencies like the Brazilian Real or the US Dollar, the amount of currency in circulation tends to increase every year, which in turn tends to devalue these currencies. Some crypto assets like Bitcoin, on the other hand, are different and can even be anti-inflationary (keep in mind that this is not investment advice).
All units of Bitcoin, the most well-known cryptocurrency, have been and will be created according to a mathematically metered, predictable and predefined schedule. What’s more – many cryptos are not issued by any central authority, which makes them somewhat protected from government manipulation or intervention (Argentina and Venezuela are prime examples of why decentralized assets can be important).
If you’re interested in venturing into a new asset class, there are 44 cryptocurrencies available for trading on Passfolio through Passfolio Financial LLC, including a wide range of digital assets and ERC-20 tokens.
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