Investing offshore is a sensible strategy

Feel free to reach out to PSG Wealth adviser Ross Marriner directly.

A question often asked is what percentage of one’s total investment portfolio should one invest offshore.In most cases, this percentage would range from 30% to 50% depending on certain factors such as age, risk profile and cash flow requirements.

The JSE accounts for less than 1% of the global economy and the range and quality of shares available to local investors is relatively limited. By investing offshore, you gain exposure to a wider range of investment options and have access to businesses such as Alphabet, Microsoft, Apple, Meta, Amazon, Visa, Nestle and many other blue-chip companies not listed on the JSE.

There are various ways for you to invest your money offshore. Firstly, you can physically transfer funds into an investment located and managed offshore using your foreign exchange investment allowance. Performance would then be reported to you in a foreign currency such as the US Dollar, British Pound or Euro. The administration process associated with such an investment involves the physical transfer of funds via the Foreign Exchange department of a commercial bank into an offshore investment.

Alternatively, you could invest in a Rand denominated offshore investment domiciled in South Africa. In this instance, you would not need to utilise your exchange control allowance as the funds would remain in South Africa. In both instances, the investments are in the form of direct interests in entities located outside South Africa. You would benefit from any growth, or be exposed to any loss in the value of the underlying assets, as well as deriving benefits from the strengthening or weakening of the exchange rate.

The decision as to where you invest your funds can be extremely challenging due to the vast number of offshore investment products, asset classes and service providers available. A decision you should avoid is attempting to time the currency or equity market, as this is often a futile exercise. Waiting for the Rand to strengthen, or waiting for the global equity markets to weaken, will only make reaching your investment goals more difficult. Spending time in the market, rather than trying to time the market, is a far more effective investment strategy.

South African investors currently have a great deal of choice and access to offshore investments and this is an excellent opportunity to successfully diversify a portion of your wealth into offshore funds. An experienced Certified Financial Planner® will be able to assist you to navigate through the rules and regulations associated with offshore investing and help you make sound financial decisions.