What effect would currency devaluation have on my investments?
Stocks, gold, commodities, and physical real estate will not be affected by currency changes, regardless of whether those changes are fast or slow.  All bonds except those that are indexed to inflation will be demolished by sudden, unexpected devaluation. Notice: The above is true if devaluation is the only thing going on but this will not be the case.  Unfortunately, if the currency devalued rapidly it would be because something else is happening in the economy or government.  How these asset values are affected by that other thing would depend on what the other thing is.  In other words, you must tell us what you think will cause devaluation, then we can guess how it might affect stock, real estate, and commodity prices. "First, a clarification. No assets are immune to inflation, apart from inflation-indexed securities like TIPS or inflation-indexed gilts (well, if held to maturity, these are at least close). Inflation causes a decline in the future purchasing power of a given dollar1 amount, and it certainly doesn't just affect government bonds, either. Regardless of whether you hold equity, bonds, derivatives, etc., the real value of those assets is declining because of inflation, all else being equal. For example, if I invest $100 in an asset that pays a 10% rate of return over the next year, and I sell my entire position at the end of the year, I have $110 in nominal terms. Inflation affects the real value of this asset regardless of its asset class because those $110 aren't worth as much in a year as they are today, assuming inflation is positive. An easy way to incorporate inflation into your calculations of rate of return is to simply subtract the rate of inflation from your rate of return. Using the previous example with inflation of 3%, you could estimate that although the nominal value of your investment at the end of one year is $110, the real value is $100*(1 + 10% - 3%) = $107. In other words, you only gained $7 of purchasing power, even though you gained $10 in nominal terms. This back-of-the-envelope calculation works for securities that don't pay fixed returns as well. Consider an example retirement portfolio. Say I make a one-time investment of $50,000 today in a portfolio that pays, on average, 8% annually. I plan to retire in 30 years, without making any further contributions (yes, this is an over-simplified example). I calculate that my portfolio will have a value of 50000 * (1 + 0.08)^30, or $503,132. That looks like a nice amount, but how much is it really worth? I don't care how many dollars I have; I care about what I can buy with those dollars.  If I use the same rough estimate of the effect of inflation and use a 8% - 3% = 5% rate of return instead, I get an estimate of what I'll have at retirement, in today's dollars. That allows me to make an easy comparison to my current standard of living, and see if my portfolio is up to scratch. Repeating the calculation with 5% instead of 8% yields 50000 * (1 + 0.05)^30, or $21,6097. As you can see, the amount is significantly different. If I'm accustomed to living off $50,000 a year now, my calculation that doesn't take inflation into account tells me that I'll have over 10 years of living expenses at retirement. The new calculation tells me I'll only have a little over 4 years. Now that I've clarified the basics of inflation, I'll respond to the rest of the answer.  I want to know if I need to be making sure my investments span multiple currencies to protect against a single country's currency failing. As others have pointed out, currency doesn't inflate; prices denominated in that currency inflate. Also, a currency failing is significantly different from a prices denominated in a currency inflating. If you're worried about prices inflating and decreasing the purchasing power of your dollars (which usually occurs in modern economies) then it's a good idea to look for investments and asset allocations that, over time, have outpaced the rate of inflation and that even with the effects of inflation, still give you a high enough rate of return to meet your investment goals in real, inflation-adjusted terms. If you have legitimate reason to worry about your currency failing, perhaps because your country doesn't maintain stable monetary or fiscal policies, there are a few things you can do. First, define what you mean by ""failing."" Do you mean ceasing to exist, or simply falling in unit purchasing power because of inflation? If it's the latter, see the previous paragraph. If the former, investing in other currencies abroad may be a good idea. Questions about currencies actually failing are quite general, however, and (in my opinion) require significant economic analysis before deciding on a course of action/hedging. I would ask the same question about my home's value against an inflated currency as well. Would it keep the same real value. Your home may or may not keep the same real value over time. In some time periods, average home prices have risen at rates significantly higher than the rate of inflation, in which case on paper, their real value has increased. However, if you need to make substantial investments in your home to keep its price rising at the same rate as inflation, you may actually be losing money because your total investment is higher than what you paid for the house initially. Of course, if you own your home and don't have plans to move, you may not be concerned if its value isn't keeping up with inflation at all times. You're deriving additional satisfaction/utility from it, mainly because it's a place for you to live, and you spend money maintaining it in order to maintain your physical standard of living, not just its price at some future sale date. 1) I use dollars as an example. This applies to all currencies." "My question boiled down: Do stock mutual funds behave more like   treasury bonds or commodities? When I think about it, it seems that   they should respond the devaluation like a commodity. I own a quantity   of company shares (not tied to a currency), and let's assume that the   company only holds immune assets. Does the real value of my stock   ownership go down? Why? On December 20, 1994, newly inaugurated President Ernesto Zedillo   announced the Mexican central bank's devaluation of the peso between   13% and 15%.  Devaluing the peso after previous promises not to do so   led investors to be skeptical of policymakers and fearful of   additional devaluations. Investors flocked to foreign investments and   placed even higher risk premia on domestic assets. This increase in   risk premia placed additional upward market pressure on Mexican   interest rates as well as downward market pressure on the Mexican   peso.  Foreign investors anticipating further currency devaluations   began rapidly withdrawing capital from Mexican investments and selling   off shares of stock as the Mexican Stock Exchange plummeted. To   discourage such capital flight, particularly from debt instruments,   the Mexican central bank raised interest rates, but higher borrowing   costs ultimately hindered economic growth prospects. The question is how would they pull this off if it's a floatable currency.  For instance, the US government devalued the US Dollar against gold in the 30s, moving one ounce of gold from $20 to $35.   The Gold Reserve Act outlawed most private possession of gold, forcing   individuals to sell it to the Treasury, after which it was stored in   United States Bullion Depository at Fort Knox and other locations. The   act also changed the nominal price of gold from $20.67 per troy ounce   to $35. But now, the US Dollar is not backed by anything, so how do they devalue it now (outside of intentionally inflating it)?  The Hong Kong Dollar, since it is fixed to the US Dollar, could be devalued relative to the Dollar, going from 7.75 to 9.75 or something similar, so it depends on the currency. As for the final part, ""does the real value of my stock ownership go down"" the answer is yes if the stock ownership is in the currency devalued, though it may rise over the longer term if investors think that the value of the company will rise relative to devaluation and if they trust the market (remember a devaluation can scare investors, even if a company has value). Sorry that there's too much ""it depends"" in the answer; there are many variables at stake for this.  The best answer is to say, ""Look at history and what happened"" and you might see a pattern emerge; what I see is a lot of uncertainty in past devaluations that cause panics."
"First of all, just for the sake of clarity, the Federal Reserve doesn't actually ""print"" money - that's the job of the BEP. What they do is they buy US Treasury bonds - i.e., loan money to the US government. The money they do it with are created ""from thin air"" - just by adding some numbers in certain accounts, thus it is described as ""printing money"". The US government then spends the money however it wishes to. The idea is that this money is injected into the economy - since the only way the US government can use the money from these loans is to spend them on buying something or give it to some people that would spend them.  As it is a loan, sometime in the future the US government would pay these loans back, and in this moment the Fed would decide - if they want to ""contract"" the supply of money back, they just ""destroy"" the money they've got, by erasing the numbers they created before. They could also do it by selling the bonds they hold on the open market and then again ""destroy"" the money they got as proceeds, thus lowering the amount of money existing in the economy. This way the Fed can control how much money is out there and thus supposedly influence inflation and economic activity.  The Fed could also inject money in the economy by buying any assets after creating the money - for example, right now they own about a trillion dollars worth of various mortgage-based securities. But since buying specific security would probably give unfair advantage to the issuers and owners of this security, usually US treasury bonds if what they buy. The side effect of increased supply of money denominated in dollars would be, as you noted, devaluation of dollars compared to other currencies." Public debt and risk of currency devaluation are two very, very different things.  Until the BRICS are able to buy commodities on a significant scale using a market basket of their own currencies, the USD will remain one of the (if not the) safest currencies in the world. Is it true that due the to the increase in interest rates that inflation is likely to increase as well? It is typically the reverse where inflation causes interest rates to rise. Interest rates fundamentally reflect the desire for people to purchase future goods over present day goods.  If I loan money to someone for 5 years I lose the ability to use that money.  In order to entice me to loan the money the borrower would have to offer me an incentive, that is, they would have to give me additional money at the end of that 5 years.  This additional money is the interest rate and it reflects the desire of people to spend money in the future versus the present day.  If offered the same amount of money today versus 5 years from now almost everyone would chose to take the money now.  Money in the present is more valuable than the same amount of money in the future. Interest rates would still exist even with a currency that could not be printed. I would still prefer to have the currency today than in the future. If the currency is continually devalued (i.e. the issuer is printing more of the currency) than borrowers may charge additional interest to compensate for the loss in purchasing power when they make a loan. Also, it is hard to compare interest rates and inflation.  Inflation is very difficult to calculate. New products and services, as well as ever changing consumer desires, continually change the mixture of goods in the market so it is nearly impossible to compare a basket of goods today to a basket of goods 5, 10, 20, or 30 years ago. It can take a while for inflation to seep into all aspects an economy and be felt by a consumer. Often, things that consumers use the most (like gasoline, wheat products, corn products, soy products, and sugar), are commodities spread across global markets with their own pricing which may be impacted by inflation in any given country.  Also, inflation can be beneficial in some ways. A $500/month mortgage payment was a big deal 30 years ago, and now would be considered trivial. That's entirely because of inflation.  Run-away inflation, where people are burning the currency to stay warm, is a different beast altogether. Be wary of people who conflate inflation, consumer pricing, and destructive currency devaluation, because they're not the same things. "In general, yes. If interest rates go higher, then any existing fixed-rate bonds - and hence ETFs holding those bonds - become less valuable. The further each bond is from maturity, the larger the impact. As you suggest, once the bonds do mature, the fund can replace them at a market price, so the effect tails off. The bond market has a concept known as ""duration"" that helps reason about this effect. Roughly, it measures the average time from now to each payout of the bond, weighted by the payout. The longer the duration, the more the price will change for a given change in interest rates. The concept is just an approximation, and there are various slightly different ways of calculating it; but very roughly the price of a bond will reduce by a percentage equal to the duration times the increase in interest rates. So a bond with a duration of 5 years will lose 5% of its value for a 1% rise in interest rates (and of course vice-versa). For your second question, it really depends on what you're trying to achieve by diversifying - this might be best as a different question that gives more detail, as it's not very related to your first question. Short-term bonds are less risky. But both will lose value if the underlying company is in trouble. Gilts (government bonds) are less risky than corporate bonds." Anything related to the central bank will have a large impact, as they are the ones who determine interest rates, and interest rates have a big effect on currency flows.  GDP is also important, as when there is an economic slowdown it may result in the central bank reducing rates to boost economic activity. The opposite is also true, large increases in GDP may mean that an interest rate hike might be needed. Inflation data is also very important. Again, large changes in inflation either way may push the central bank towards changing rates. This data typically is in the form of CPI Note that each central bank is different. They all have specific mandates and specific pieces of economic data that they place emphasis on. The Federal Reserve as of late has closely been watching inflation data, especially wage inflation data, and employment. Significant deviations in these data points from whats expected by investors can greatly move the market. However, these specific factors are a little less important for, say, Mexico, which is mostly concerned with headline inflation. Read the statements issued by the central banks to find out whats important to them. Central banks also issue expectations for things like growth, CPI, etc. If these expectations are not met, it may result in a policy change, or at least talk of a policy change, at the next meeting of the central bank. Anticipating these policy changes and trading accordingly is one strategy to be a profitable forex trader Also, there are several forex news calendars online that indicate what is likely to be high impact news. These can be helpful starting out. Now, is there any clever way to combine FOREX transactions so that you receive the US interest on $100K instead of the $2K you deposited as margin?  Yes, absolutely. But think about it -- why would the interest rates be different? Imagine you're making two loans, one for 10,000 USD and one for 10,000 CHF, and you're going to charge a different interest rate on the two loans. Why would you do that? There is really only one reason -- you would charge more interest for the currency that you think is less likely to hold its value such that the expected value of the money you are repaid is the same. In other words, currencies pay a higher interest when their value is expected to go down and currencies pay a lower interest when their value is expected to go up. So yes, you could do this. But the profits you make in interest would have to equal the expected loss you would take in the devaluation of the currency. People will only offer you these interest rates if they think the loss will exceed the profit. Unless you know better than them, you will take a loss. It depends on the asset and the magnitude of the exchange rate change relative to the inflation rate. If it is a production asset, the prices can be expected to change relative to the changes in exchange rate regardless of magnitude, ceteris paribus. If it is a consumption asset, the prices of those assets will change with the net of the exchange rate change and inflation rate, but it can be a slow process since all of the possessions of the country becoming relatively poorer cannot immediately be shipped out and the need to exchange wants for goods will be resisted as long as possible.