Why investing offshore may be top of mind and how to approach it
Offshore in Context - In partnership with Coronation Fund Managers is a three-part podcast series hosted by Refilwe Moloto which explores the world of offshore investments with Pieter Koekemoer, Head of Personal Investments. By the end of this series, investors can expect to understand all there is to know about the basics of investing outside of South Africa. Subscribe so that you don't miss out on the series.
The one thing to understand about investments is that, much like any other human endeavour, it is very susceptible to cycles, fashions, fads, or changes in viewpoints and sentiments. Quite clearly, all South Africans are very aware of the incredibly tough economic situation the country finds itself in. This is reflected in very mediocre return outcomes produced by the local market over the last few years. At the same time, we’ve seen a very strong equity bull market, especially in the United States.
Going great guns offshore, lots to be worried about locally.
It is then only natural to look at what has happened over the last several years and conclude that it makes sense to rather allocate your hard-earned money to offshore markets rather than the local market.
This ‘all or nothing approach’ has resulted in an unusual relationship with offshore investing, with many South Africans being burnt by incorrect timing. We believe this is the wrong way to approach investing offshore.
Diversification is important – across geography and across asset classes
Instead of deciding whether to invest all or none of your money in global assets, informed by the sentiment of the day, the question should be how [do you] appropriately structure your portfolio between a combination of both local and offshore assets? And to remind yourself that investing is a long-term endeavour to be considered with a clear plan to achieving your financial goals.Pieter Koekemoer, Head of Personal Investments – Coronation Fund Managers
Here are the three main ways for South Africans to invest offshore:
If you are a member of a pension fund or retirement annuity, up to 30% of your retirement portfolio would already be invested in true (direct) offshore assets. Further, given that 60% of the companies listed on the JSE do business outside of our borders, that 30% then moves closer to 50% of your total pension portfolio.
As an individual investor, you have two options: rand-denominated local unit trusts which provide exposure to offshore assets (with no limit on the amount that you can invest) or direct offshore investment in a foreign currency denominated unit trust fund (where you may require clearance from SARS if you want to invest more than R1m).
To summarise this episode, Refilwe Moloto explains: "The best thing to do in investments is to ensure that you appropriately structure your portfolio between a combination of both local and offshore assets. It’s not about all or nothing. To then allow your investment to benefit from growth over the long term, consider investing it with the experts [who are] able to decide on the appropriate allocation of assets on your behalf."
The world is yours. To diversify offshore and grow your wealth with Coronation Fund Managers, visit Coronation Offshore. Coronation is an authorised financial services provider.
Refilwe Moloto and Pieter Koekemoer get their hands dirty and find out how offshore investing works, practically.Read More
What is considered perfect timing for investing outside of SA? We find out when to do it, how long to be there and when to get outRead More