As a financial advisor, I am frustrated by the little or low return of our local stock exchange. Sure there are some returns, but many clients are asking: “Where can we get real return?” “Will we see inflation plus 4% or inflation plus 5% returns again?” I think the “Heyday” of South African stock market is gone and low or negative returns may be with us for the foreseeable future.
So where can we get growth? Given South Africa’s great banking and monetary systems we can invest in other emerging markets or in developed markets to get real growth. Our banking system offers us easy access to offshore markets and offshore investments.
I often get asked: “How easy is it to invest offshore” and “How quickly can I access my money?” There are several options to invest abroad, we can either invest directly or through asset swaps. Both are relatively simple and unless the investment is in a fixed-term investment, the funds can be repurchased and back in one’s account within a few weeks.
Asset swaps is when the asset management has invested offshore using their offshore capacity. The investor would invest in Rand’s into a local unit trust, and returns are repatriated and paid out in Rand’s. Asset swaps are ideal for investors who do not want to move their investment offshore yet and would like to benefit from offshore market exposure and growth.
Alternatively, an investor can invest directly offshore using their R1 million annual offshore allowance and a once-off R10 million allowance. The advantage is that the investment is now offshore and held offshore. The investor can choose to have the funds paid into their local or offshore bank account at full or partial withdrawal. Many clients like this option as should they require the funds offshore, (e.g. to pay for University fees or to buy an offshore property) the money is already in an offshore currency.
Like with any investment, there are different investment options, some are flexible and others are fixed. In some instances, beneficiaries can be chosen offering the investor transferability of the investment and the ability to build an offshore legacy for their families.
If it is real growth or building a legacy for your family and accessing the other 99% of the worldwide market, investing offshore seems to be the best alternative.
Sigrid Madonko
Certified Financial Planner ®
Professional Director at Quintus Wealth
info@quintuswealth.co.za