Guillermo (53) is a Miami-based executive for an Argentine company and Olivia (50) is a college professor in Florida. The couple, both green card holders, have two teenage children who currently attend a private school and plan to enroll in four-year colleges in the United States or Europe.
Guillermo is compensated through a combination of base salary paid in U.S. dollars and a stock-based bonus that is denominated in Argentine pesos. He also has sizable holdings of restricted company stock, most of which has vested, that is also denominated in pesos.
Olivia draws a salary based on U.S. dollars and maintains a 403(b) retirement savings account through her employer, was granted tenure last year and the couple plans to remain in the U.S. at least until retirement. They have a substantial mortgage on a home in Miami and own another home free and clear in Buenos Aires.
Challenges
- With inflation rampant in Argentina and the value of the peso continuing to be devalued, Guillermo and Olivia are concerned about their future purchasing power of their money and would like to diversify their exposure to pesos and dollars.
- Guillermo owns a portfolio of domestic U.S. growth stocks in a taxable account with a financial advisor but is concerned about the lack of diversification of his investment holdings.
- He and Olivia are also concerned about free-falling property values in Argentina and plan to sell their home there when the real estate market is more stable.
- They are not sure what to do with the proceeds of the sale of the house
- They have been contributing to college savings accounts for their children through U.S. mutual fund companies but need guidance on whether similar vehicles are offered for European education.
Solution
By diversifying their investments outside of both Argentina and the U.S. they can hedge their bets and take advantage of investment opportunities in international markets and shelter a portion of their assets from political risk in Argentina. Furthermore, by adding Swiss francs to their mix of currency holdings they can add resiliency to their portfolio and hedge against potential peso devaluation.