Offshore investing: Why going global could be an important part of your investment journey

Building exposure gradually through regular contributions can be a practical way to incorporate offshore investing into a long-term investment strategy.

Breaking down the misconceptions

One of the biggest misconceptions is that you need millions of rands before offshore investing becomes worthwhile. While the appropriate starting amount depends on the investment vehicle, fees and individual circumstances, you can access offshore markets with relatively modest amounts.

Another misconception is that offshore investing requires you to select individual international shares. In reality, you can gain global market exposure through locally managed funds. This means that gaining global exposure does not necessarily require you to become an expert in international markets.

There is also a perception that offshore investing is simply about investing in the United States. While this represents a significant part of global markets, the offshore opportunity set extends across developed and emerging markets, currencies, industries and economies.

How much do you really need to get started?

Investors do not need to save up significant amounts before considering offshore exposure. Starting with an amount that is affordable and sustainable and increasing it over time can be more valuable than continually waiting for a larger capital base. Even more significant than the amount to be invested is understanding the role offshore exposure should play in your overall financial plan.

Accessing opportunities beyond South Africa

South Africa represents only a small part of the global investment universe. Investing offshore therefore gives South African investors access to businesses and industries that may have limited representation in the local market.

Consider areas such as global technology, artificial intelligence, semiconductors, healthcare, pharmaceuticals, international consumer brands, infrastructure and renewable energy. Many of the companies shaping these industries are listed beyond South Africa’s borders.

This does not mean that offshore investments are automatically better than local investments. Rather, the benefit lies in having a broader opportunity set. A global portfolio allows you to participate in different economic drivers and reduces reliance on the performance of a single country or economy.

Where do emerging markets fit in?

Offshore investing should not be viewed solely through the lens of developed markets. Emerging markets can play a valuable role in a diversified portfolio by providing exposure to economies with different demographics, consumption patterns and growth drivers.

For years, the default framing in global investing has been simple: developed markets are the ‘safe’ core, while emerging markets are an optional, higher-risk satellite. That framing is becoming less clear-cut. Many developed economies now resemble the heavily indebted, structurally challenged economies of two decades ago, while a growing number of emerging markets display the very characteristics investors once associated with the developed world – stronger growth, more favourable demographics, improving fiscal discipline and, crucially, more sustainable debt metrics. On average, advanced economies are running public debt ratios close to or above 100% of their gross domestic product, whereas many emerging markets have lower median debt burdens and higher trend growth, even as dispersion across these markets remains wide.

The objective of diversification is not simply to own more investments. It is to combine different markets and assets that can behave differently under changing economic conditions.

Taking the first step

For investors considering offshore exposure for the first time, the process can be straightforward.

Start by identifying your objective. Are you investing for retirement, long-term wealth creation, a child’s education or simply greater diversification? Next, look at your existing portfolio and establish how much offshore exposure you already have, including indirect exposure through local funds.

From there, consider an appropriate allocation based on your investment horizon, risk tolerance, liquidity needs and broader financial plan. You can then weigh up which investment vehicle is most appropriate, whether that is a diversified fund or a professionally managed share portfolio.

Most importantly, starting does not have to mean making one large investment. Building exposure gradually through regular contributions can be a practical way to incorporate offshore investing into a long-term investment strategy.

Think globally, invest deliberately

Offshore investing should not be about chasing the latest international investment trend or reacting emotionally to local market conditions. At its core, it is about building a portfolio that is diversified across geographies and is able to participate in opportunities beyond an investor’s home market.

For South African investors, the question is therefore not simply whether they should invest offshore. The more important question is how much offshore exposure is appropriate for their circumstances and how it can complement the rest of their portfolio.