Archive for March, 2022

Roads across the World: international trade and investment

Investing in international stocks – shares of companies located outside South Africa – creates diversification for your portfolio, which in turn hedges against risk and taps into growth in economies beyond our own. Given the vast amount of choice that currently awaits in global stock markets, it is generally considered a good move.

The value of international trade

  • International trade is the exchange of goods and services between countries, and as such allows countries to expand their markets and access goods and services that otherwise may not have been available domestically.
  • As a result of international trade, markets become more competitive, which ultimately results in more competitive pricing – and at the end game, reduces prices on products for consumers.
    International trade and investment are critical drivers of economic growth. They support the long-term viability of companies, and are therefore important to a country’s prosperity.
  • Participating in a global economy encourages opportunities for foreign direct investment in countries, thus contributing to more efficient growth of economies while enabling greater competitiveness, social development, and job creation.

A map of many roads

  • If an investor wants real exposure to international stocks, they will look to invest in international funds and indexes.
  • Investing internationally may help boost your returns by exposing your investment to favourable conditions such as progressive government leadership, tax incentives, and faster growing economies. However, keep in mind that stocks and bonds have different risk and return profiles in different countries.
  • By investing in a different country’s companies, you’re also almost de facto investing in another currency. This creates opportunities of its own for growth, should these other currencies appreciate against the dollar.
  • While some domestic index funds offer limited exposure to international stocks, this often doesn’t go far enough to ensure broad diversification.
  • As companies continue to combine trade with investment to develop supply chains, expand in new markets, and access knowledge, etc – global value chains will ever sharpen interdependencies between trade and foreign direct investment.
  • The old idiom applies – don’t put all your eggs in one basket. Owning a variety of stocks across different geographies, industries and sizes of companies, is a simple way to boost long-term investment returns while reducing risk.

The world and its risks

There are two major risks to investing in international stocks: currency and geopolitical. Put succinctly, this means beware of turmoil. Some countries may be liable to violent swings with regard to politics, economic uncertainty, foreign currency rates, corruption, or even war.

Currency Risk: If the US dollar becomes stronger against other currencies, your international stock could return a weaker performance.
Geopolitical Risk: The very same geopolitical conditions that may allow foreign companies to experience exceptional growth can leave your international holding vulnerable. In addition to political unrest or economic instability in a region, there’s also the possibility that an investment might experience limited liquidity – meaning that countries may limit foreign investors from withdrawing their money in times of crisis.

The Tax Turnup: Almost any investment sold for a profit outside of a tax-advantaged account will incur some level of tax. International stocks are no different. The country of origin of your stocks will likely retain a portion of your dividends for local taxes—or even charge a capital gains tax. While filing your home income taxes, you should receive a foreign tax credit or deduction for foreign taxes you have paid.

The importance of professional guidance

  • As with all new investments, you should ensure a professional advisor is along for the ride. They can walk you through the tax issues and other implications of owning international stocks.
  • Information is key to making the right decisions; always follow informed decision-making processes. A professional will assist you to preferably start small and scale up over time.
  • Investors should continually re-evaluate their investment horizon, risk against returns preferences, financial goals, and level of risk tolerance, before investing in international stocks.
  • Compliance with the exchange control regulations, reporting of foreign assets and income, as well as compliance within the country of investment, are crucially important aspects that require the valuable guidance of an experienced financial advisor.

Foster Wealth: steering business, driving wealth

At Foster Wealth innovation, agility and in-depth market acumen are our daily fare. The volatility of markets, unexpected events and fluctuating values continually take us to new levels of interest and possibility. Constant re-assessment and evaluation are how we keep ahead of the curve – but our hard work, professionalism, attention to detail and personal attention are the hallmarks of our business and will never change.

Find out more about us at: www.fosterwealth.co.za

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Invest it Forward: the promise of post-Covid opportunities


“In the wake of Covid-19, Africa has the chance to transform much of what the world sees as insurmountable challenges into monumental opportunities.” – Christopher OH Williams, president of African Leadership University.

With only around 2% of the world’s recorded Covid-19 cases to May 2021, Africa proved itself in general less affected by the world pandemic than expected. While the economic fallout has been severe, and has compromised the growth trajectory considerably, Africa on the whole has placed itself in a favourable position for economic resilience – a position which translates to plenty of investment opportunities as a post-pandemic future unfolds.

Areas under the growth spotlight

         Technology

  • The pandemic allowed discovery and exploitation of the real power of technology to support local and regional value chains, enabling cost-effective delivery of a host of services to consumers confined in their homes.
  • Online education blossomed, and many businesses have sprung up from this new method of schooling on a broad basis. Post-Covid, more online education platforms are developing programmes and curricula to achieve scale, reaching out to larger student populations at a lower cost, without the traditional brick-and-mortar investment.
  • Initiatives to build and train leadership and motivate entrepreneurial skills are also finding new ground for development and expansion. These are directions that are geared to grow robustly in the next decade.
  • The financial technology industry (Fintech), with its mobile-enabled payment platforms, ensured that large volumes of transactions could still be processed despite the pandemic. It represents support for economic activity with regard to isolated farmers, small enterprises and self-employed individuals. Before the pandemic, Fintech was already thriving in Africa, and the future is looking very bright.

         Health

  • The pandemic highlighted the fact that a country’s prosperity depends on the health of its people. At the beginning of the coronavirus outbreak, many African countries found themselves at the bottom of the Global Health Security Index – a position that can only improve with the drive of new investments in the health sector, including: pharmaceuticals, the design and development of diagnostic testing kits, medications, and over-the-counter treatments.
  • Many countries on the continent, including Mauritius, South Africa, Kenya and Ghana, were already growing their health sector to become a backbone industry, but are now looking forward to even greater interest and investment opportunity to support and grow that industry.

         Manufacturing

  • With the pandemic disrupting international supply chains, many countries in Africa resorted to quick-fix home-grown solutions, especially with regard to the production of Covid-related medical equipment and supplies. Textile factories supplied local communities with masks; Nigeria helped alleviate the shortage of oxygen; South Africa issued a tender for the production of ventilators.
  • The impending African Continental Free Trade Area (AfCFTA) is another useful leverage for new business opportunities; it will present a unified market of over one billion consumers.
  • In addition, the need to ensure food security across a wide market is expected to drive evermore investment across the full scope of agri-business and food-processing supply chains.
  • All this has shed light on the ability of local manufacturing to substitute effectively in place of imported goods and supplies.

New rules of business engagement

Africa’s recovery

It is envisaged that Africa’s recovery will be Africa-led, with home-bred entrepreneurs and investors poised to benefit first-hand from an era of new opportunities. Following on this perspective, South African investors are well placed to be part of the journey. With a stagnating economy and political uncertainty in South Africa, the incentive to take advantage of broader business opportunities across the continent is looking positive.

People have more money

Due to lack of spending during a series of lockdowns, people have more money to spend and as result, retail sales are surging. To succeed in this new ‘rush’ so to speak, companies need flexibility and access to real-time data in order to maximise speed and efficiency for greater profit.

Data will power business

In the post-Covid-19 influx of customers, data will power the digital machinery of business. Digital tools will help business leaders navigate the massive amounts of data generated by customers. From this data, insights will enable companies to ramp up to meet the demands of post-Covid-19 business.

Employees are now more empowered

New business software on cell phones has grown in demand during the lockdowns; employees are now more empowered with the tools necessary to operate in the new digital economy. The short lesson is that it’s time to invest in the available business tools and processes in order to prepare for the windfalls of a post-Covid economy.

Foster Wealth: steering business, driving wealth

At Foster Wealth innovation, agility and in-depth market acumen are our daily fare. The volatility of markets, unexpected events and fluctuating values continually take us to new levels of interest and possibility. Constant re-assessment and evaluation are how we keep ahead of the curve – but our hard work, professionalism, attention to detail and personal attention are the hallmarks of our business and will never change.

Find out more about us at: www.fosterwealth.co.za

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