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."
Whether it's historically stronger or weaker isn't going to have an impact on you; the forex exposure you have is going forward if the exchange rates change you will have missed out on having more or less value by leaving it in a certain currency.   (Ignoring fees) Say you exchange €85 for $100, if while you're in the US the Euro gets stronger than it currently is, and the exchange rate changes to €8:$10; then you will lose out on €5 if you try to change it back, and the opposite is true if the euro gets weaker than it currently is you would gain money on exchanging it back.  Just look at it as though you're buying dollars like it were a commodity.  If the euro gets stronger it buys more dollars and you should've held onto it in euros, if it gets weaker it buys less dollars and you were better off having it in dollars.  You would want to use whichever currency you think will be weaker or gain the least against the dollar while you're here. The default of the country will affect the country obligations and what's tied to it. If you have treasury bonds, for example - they'll get hit. If you have cash currency - it will get hit. If you're invested in the stock market, however, it may plunge, but will recover, and in the long run you won't get hit. If you're invested in foreign countries (through foreign currency or foreign stocks that you hold), then the default of your local government may have less affect there, if at all. What you should not, in my humble opinion, be doing is digging holes in the ground or probably not exchange all your cash for gold (although it is considered  a safe anchor in case of monetary crisis, so may be worth considering some diversifying your portfolio with some gold). Splitting between banks might not make any difference at all because the value won't change, unless you think that one of the banks will fail (then just close the account there). The bottom line is that the key is diversifying, and you don't have to be a seasoned investor for that. I'm sure there are mutual funds in Greece, just pick several different funds (from several different companies) that provide diversified investment, and put your money there. Although not technically an answer to your question, I want to address why this is generally a bad idea.   People normally put money into a savings account so that they can have quick access to it if needed, and because it is safe.  You lose both of these advantages with a foreign account.  You are looking at extra time and fees to receive access to the money in those australian accounts.  And, more importantly, you are taking on substantial FX risk.  Since 2000 the AUD exchange rate has gone from a low of 0.4845 to a high of 1.0972.  Those swings are almost as large as the swings of the S&P.  But, you're only getting an average return of 3.5%, instead of the average return people expect with stocks of 10%. A better idea would be to talk to a financial adviser who can help you find an investment that meets your risk tolerance, but gives you a better return than your savings account. On a final thought, the exception to this would be if you plan on spending significant time in Australia.  Having money in a savings account there would actually allow you to mitigate some of your FX risk by allowing you to decide whether to convert USD when you are travelling, or using the money that you already have in your foreign account. How can I calculate my currency risk exposure?  You own securities that are priced in dollars, so your currency risk is the amount (all else being equal) that your portfolio drops if the dollar depreciates relative to the Euro between now and the time that you plan to cash out your investments. Not all stocks, though, have a high correlation relative to the dollar.  Many US companies (e.g. Apple) do a lot of business in foreign countries and do not necessarily move in line with the Dollar.  Calculate the correlation (using Excel or other statistical programs) between the returns of your portfolio and the change in FX rate between the Dollar and Euro to see how well your portfolio correlated with that FX rate.  That would tell you how much risk you need to mitigate. how can I hedge against it?  There are various Currency ETFs that will track the USD/EUR exchange rate, so one option could be to buy some of those to offset your currency risk calculated above.  Note that ETFs do have fees associated with them, although they should be fairly small (one I looked at had a 0.4% fee, which isn't terrible but isn't nothing). Also note that there are ETFs that employ currency risk mitigation internally - including one on the Nasdaq 100 .   Note that this is NOT a recommendation for this ETF - just letting you know about alternative products that MIGHT meet your needs. This is called currency speculation, and it's one of the more risky forms of investing.  Unless you have a crystal ball that tells you the Euro will move up (or down) relative to the Dollar, it's purely speculation, even if it seems like it's on an upswing.  You have to remember that the people who are speculating (professionally) on currency are the reason that the amount changed, and it's because something caused them to believe the correct value is the current one - not another value in one direction or the other. This is not to say people don't make money on currency speculation; but unless you're a professional investor, who has a very good understanding of why currencies move one way or the other, or know someone who is (and gives free advice!), it's not a particularly good idea to engage in it - while stock trading is typically win-win, currency speculation is always zero-sum. That said, you could hedge your funds at this point (or any other) by keeping some money in both accounts - that is often safer than having all in one or the other, as you will tend to break even when one falls against the other, and not suffer significant losses if one or the other has a major downturn. "Having savings only in your home currency is relatively 'low risk' compared with other types of 'low diversification'. This is because, in a simple case, your future cash outflows will be in your home currency, so if the GBP fluctuates in value, it will (theoretically) still buy you the same goods at home. In this way, keeping your savings in the same currency as your future expenditures creates a natural hedge against currency fluctuation. This gets complicated for goods imported from other countries, where base price fluctuates based on a foreign currency, or for situations where you expect to incur significant foreign currency expenditures (retirement elsewhere, etc.). In such cases, you no longer have certainty that your future expenditures will be based on the GBP, and saving money in other currencies may make more sense. In many circumstances, 'diversification' of the currency of your savings may actually increase your risk, not decrease it. Be sure you are doing this for a specific reason, with a specific strategy, and not just to generally 'spread your money around'. Even in case of a Brexit, consider: what would you do with a bank account full of USD? If the answer is ""Convert it back to GBP when needed (in 6 months, 5 years, 30, etc.), to buy British goods"", then I wouldn't call this a way to reduce your risk. Instead, I would call it a type of investment, with its own set of risks associated." "I suggest that you're really asking questions surrounding three topics: (1) what allocation hedges your risks but also allows for upside? (2) How do you time your purchases so you're not getting hammered by exchange rates? (3) How do you know if you're doing ok? Allocations Your questions concerning allocation are really ""what if"" questions, as DoubleVu points out. Only you can really answer those. I would suggest building an excel sheet and thinking through the scenarios of at least 3 what-ifs.  A) What if you keep your current allocations and anything in local currency gets cut in half in value? Could you live with that? B) What if you allocate more to ""stable economies"" and your economy recovers... so stable items grow at 5% per year, but your local investments grow 50% for the next 3 years? Could you live with that missed opportunity?  C) What if you allocate more to ""stable economies"" and they grow at 5%... while SA continues a gradual slide? Remember that slow or flat growth in a stable currency is the same as higher returns in a declining currency. I would trust your own insights as a local, but I would recommend thinking more about how this plays out for your current investments.  Timing You bring up concerns about ""timing"" of buying expensive foreign currencies... you can't time the market. If you knew how to do this with forex trading, you wouldn't be here :).  Read up on dollar cost averaging. For most people, and most companies with international exposure, it may not beat the market in the short term, but it nets out positive in the long term.  Rebalancing For you there will be two questions to ask regularly: is the allocation still correct as political and international issues play out? Have any returns or losses thrown your planned allocation out of  alignment?  Put your investment goals in writing, and revisit it at least once a year to evaluate whether any adjustments would be wise to make.  And of course, I am not a registered financial professional, especially not in SA, so I obviously recommend taking what I say with a large dose of salt." There's a possibility to lose money in exchange rate shifts, but just as much chance to gain money (Efficient Market Hypothesis and all that). If you're worried about it, you should buy a stock in Canada and short sell the US version at the same time. Then journal the Canadian stock over to the US stock exchange and use it to settle your short sell. Or you can use derivatives to accomplish the same thing. "You might find some of the answers here helpful; the question is different, but has some similar concerns, such as a changing economic environment. What approach should I take to best protect my wealth against currency   devaluation & poor growth prospects. I want to avoid selling off any   more of my local index funds in a panic as I want to hold long term.   Does my portfolio balance make sense? Good question; I can't even get US banks to answer questions like this, such as ""What happens if they try to nationalize all bank accounts like in the Soviet Union?""  Response: it'll never happen. The question was what if! I think that your portfolio carries a lot of risk, but also offsets what you're worried about.  Outside of government confiscation of foreign accounts (if your foreign investments are held through a local brokerage), you should be good.  What to do about government confiscation?  Even the US government (in 1933) confiscated physical gold (and they made it illegal to own) - so even physical resources can be confiscated during hard times. Quite a large portion of my foreign investments have been bought at an   expensive time when our currency is already around historic lows,   which does concern me in the event that it strengthens in future. What   strategy should I take in the future if/when my local currency starts   the strengthen...do I hold my foreign investments through it and just   trust in cost averaging long term, or try sell them off to avoid the   devaluation? Are these foreign investments a hedge?  If so, then you shouldn't worry if your currency does strengthen; they serve the purpose of hedging the local environment.  If these investments are not a hedge, then timing will matter and you'll want to sell and buy your currency before it does strengthen.  The risk on this latter point is that your timing will be wrong." First, currencies are not an investment; they are a medium of exchange; that is, you use currency to buy goods and services and/or investments. The goods and services you intend to buy in your retirement are presumably going to be bought in your country; to buy these you will need your country's currency. The investments you intend to buy now require the currency of whatever country they are located in. If you want to buy shares in Microsoft you need USD; if you want shares in BHP-Billiton you need AUD or GBP (It is traded on two exchanges), if you want property in Kuwait you need KWD and if you want bonds in your country you need IDR. When you sell these later to buy the goods and services you were saving for you need to convert from whatever currency you get for selling them into whatever currency you need to buy. When you invest you are taking on risk for which you expect to be compensated for - the higher the risk you take the better the returns had better be because there is always the chance that they will be negative, right down to losing it all if you are unlucky. There is no 100% safe investment; if you want to make sure you get full value for your money spend it all right now! If you invest overseas then, in addition to all the other investment risks, you are adding currency risk as well. That is, the risk that when you redeem your investments the overseas currency will have fallen relative you your currency. One of the best ways of mitigating risk is diversification; which allows the same return at a lower risk (or a higher return at the same risk). A pure equity portfolio is not diversified across asset classes (hopefully it is diversified across the equities). Equities are a high risk-high yield class; particularly in a developing economy like Indonesia. If you are very young with a decades long investment horizon this may be OK but even then, a diversified portfolio will probably offer better rewards at the same risk. Diversifying into local cash, bonds and property with a little foreign equities, bonds and property will serve you better than worrying about the strength of the IDR. Oh, and pay a professional for some real advice rather than listening to strangers on the internet. "No money is gone.  The movement of the existing currency has slowed down.  Currency moves through the economy through deposits or loans to banks, and withdrawal from banks as proceeds from loans or return of deposits.  When a bank makes a loan they provide a balance in a bank account, which isn't converted to hard currency until withdrawn.  So those bank loans essentially count as currency, and thus effectively multiply the stock of currency available.  Deposits into money market funds, and those funds loans into the commercial paper markets, have the same effect.  Banks and money funds are now making fewer loans.  In particular they are not funding ""companies"" that invested in securitizations of home mortgages and credit card receivables, but they are also lending less to businesses and consumers.  Because they are lending less they are ""effectively multiplying"" the currency less.   Think of deposited and lent currency as spare cycles on a desktop computer.  You let your computer help decipher the genome when you aren't using it yourself.  If you somehow feared that you would lose those cycles, slowing down your own computing, you would be less likely to lend those cycles out.  There would still be the same number of computing cycles in the world, but the stock of those available for actual computing would appear to be diminished.  The technical term for this concept is ""monetary velocity"" and it is a crucial factor in determing the level of overall economic activity, banking stability, and inflation." "Just to get the ball rolling, here's an answer: it won't affect you in the slightest. The pound happened to be tumbling anyway.  (If you read ""in the papers"" that Brexit is ""making the pound fall"", that's as valuable as anything else you've ever read in the papers.) Currencies go up and down drastically all the time, and there's nothing you can do about it. We by fluke once bought a house in Australia when that currency was very low; over the next couple years the currency basically doubled (I mean per the USD) and we happened to sell it; we made a 1/2 million measured in USD. Just a fluke. I've had the opposite happen on other occasions over the decades. But... Currency changes mean absolutely nothing if you're in that country. The example from (2) was only relevant because we happened to be moving in and out of Aus. My various Australian friends didn't even notice that their dollar went from .5 to 1 in terms of USD (how could it matter to them?) All sorts of things drastically affect the general economy of a given country. (Indeed, note that a falling currency is often seen as a very good thing for a given nation's economy: conspiracy theorists in the states are forever complaining that ) Nobody has the slightest clue if ""Brexit"" will be good bad or indifferent for the UK. Anything could happen. It could be the beginning of an incredible period of growth for the UK (after all, why does Brussels not want your country to leave - goodwill?) and your house could triple in value in a year. Or, your house price could tumble to half in a year. Nobody has the slightest clue, whatsoever about the effects on the ""economy"" of a country going forward, of various inputs." "If you live and work in the euro-zone, then even after a ""crash"" all of your income and most of your expenses will still be in euros.  The only portion of your worth you need to worry about protecting is the portion you intend to spend on goods from outside the euro-zone (i.e. imports).  In that case, you may want to consider parking some of your money in short-term government bonds issued by other countries, such as the UK, Switzerland, and USA (or wherever else your favorite goods tend to come from).  If the euro actually ""massively devalues"" (an extremely unlikely scenario), then you can expect foreign goods to cost a lot more than they do now.  Inflation might also pick up, so you might also want to purchase some OATis." There are some ETF's on the Indian market that invest in broad indexes in other countries Here's an article discussing this  Be aware that such investments carry an additional risk you do not have when investing in your local market, which is 'currency risk'  If for example you invest in a ETF that represents the US S&P500 index, and the US dollar weakens relative to the indian rupee, you could see the value if your investment in the US market go down, even if the index itself is 'up' (but not as much as the change in currency values). A lot of investment advisors recommend that you have at least 75% of your investments in things which are denominated in your local currency (well technically, the same currency as your liabilities), and no more than 25% invested internationally.  In large part the reason for this advice is to reduce your exposure to currency risk. "Others have mentioned the exchange rate, but this can play out in various ways. One thing we've seen since the ""Brexit"" vote is that the GBP/USD has fallen dramatically, but the value of the FTSE has gone up. This is partly due to many the companies listed there operating largely outside the UK, so their value is more linked to the dollar than the pound. It can definitely make sense to invest in stocks in a country more stable than your own, if feasible and not too expensive. Some years ago I took the 50/50 UK/US option for my (UK) pension, and it's worked out very well so far."