“When should I invest offshore?” is the question I often get asked. I think it is important to rather ask: “What is our reason for investing offshore?” If your reason is currency diversification, geographical diversification and Rand hedging then anytime is the right time to invest offshore.
Investing offshore is not about timing the market but rather realising we live in a small part of the world. If one only invests in the JSE, which is a fraction of the world’s markets, investing offshore is accessing the rest of the investible universe.
Our currency will continue to weaken given the inflation differential between South Africa and developed countries like Europe and America. Our economic and political instability will further add another 1-2% weakening and the possibility of a Moody’s downgrade will add to our currency continuing to weaken.
“But I need allot of money to invest offshore”, is another comment I get. If you want to invest offshore in a discretionary investment, then you would need disposable income. This can be done either monthly or a lump sum. Currently the annual foreign investment allowance is R1 million and a further R10 million with SARS tax clearance. If you want to invest offshore in your retirement annuity or preservation fund, you can do so by either the unit trusts you choose or using a managed stock broker portfolio or Private Client Securities. We have found the costs to be very competitive when using a Private Client Securities or managed stock broker portfolio, which is very advantageous for you the investor.
When investing offshore in a discretionary investment, you can invest directly or through asset swap. The advantage of investing directly is that once the capital is offshore, it is held offshore and can be paid into any offshore bank account when repurchased. We prefer to have two or more owners on the offshore investment, so in the event of death of the owner, the capital can remain invested and need not be repurchased providing a succession plan for the investment.
If your view is long-term planning and protection from a depreciating Rand, geographical diversification and Rand hedging then then investing offshore is the best solution. We live in one of the most beautiful countries in the world and we have access to worldwide markets, best we use this to our advantage.