Does it seem like wherever you look at the moment someone is telling you to invest offshore? But what precisely is offshore investing? Why should an offshore investment be part of your portfolio? What countries and currencies should you consider?

The following article outlines the benefits of investing offshore.

Investing offshore allows you to diversify by spreading your risk and allowing you to benefit from a broader global universe of industries, companies, geographical regions, currencies and investment ideas. Offshore investing, in our opinion, should form part of your long-term investment plan but the idea of investing offshore can be intimidating to many.

Currently, South Africa only represents an estimated 1% of the global financial markets which essentially means that with only being invested locally you are giving up on 99% of the global market opportunity.

South Africa is an emerging market country and we would encourage individuals to diversify and invest part of your assets in developed economies. These developed markets can assist in providing your investment portfolio with more stable growth, a choice of different currencies, different asset classes and the fund managers may adapt different investment strategies.

The rand is a volatile currency and very often tends to overreact to economic, political and social unrest. International investing may also offer a hedge for individuals and investors who fear the depreciation of the rand.

Here are some key points to take into consideration when investing offshore:

  • Investment terms: It’s advisable to have a long-term investment objective. I encourage no less than five years in order to assist the portfolio to rebalance if there is economic or market volatility.
  • Risk appetite: Offshore investing can be risky, so investors need to have an appetite for high risk as the investment may be influenced by the market and currency fluctuations.
  • Goals and objectives: Investing offshore may make it easier to fund any international liabilities and help you meet your international goals. You may have future plans that involve emigrating, travel or children wanting to attend an international university.
  • Currency: Offshore investing allows you to invest in many different currencies such as the US dollar, the euro, the pound and many more. The currency you invest in will depend on what you want to achieve.
  • Foreign exchange control regulation: There are certain limits on the amount of funds that can be taken offshore per calendar year, these limits are:
  • If you are a South African resident, you can utilise your individual offshore allowances of up to R11 million.
  • R1 million single discretionary allowance: You can take up to R1 million offshore annually without having to apply for tax clearance.
  • R10 million foreign capital allowance: You can utilise a further R10 million a year, but you will be required to apply for tax clearance from Sars.

If you want offshore investment exposure, there are various ways to achieve this goal.  Please contact us to set up a meeting and discuss the various options.


Source: Moneyweb