An extreme case of hyperinflation occurred recently in Zimbabwe. Investors buy all types of assets during hyperinflation to escape currency devaluation, including equities, which have some real value behind the shares. Zimbabwe was no different, and the country's stock market appreciated 322,111% in 2007, while the currency officially depreciated by about 12,000%.
An American investor who put $10,000 in the Zimbabwe stock market at the start of the year would have seen his or her portfolio grow to $32 million, ignoring the currency depreciation. Once the currency was returned to dollars, the investor would be left with a still healthy $270,000. If the investor hedged his or her exposure, though, the return would have been the full $32 million.
For those investors who worry about currency devaluation in Japan in the long run but expect Japanese stocks to rally, DXJ is the ETF to consider.
-- Written by Don Dion in Williamstown, Mass.At the time of publication, Dion had no positions in stocks mentioned.