Investing offshore should never be a knee-jerk reaction to events, but rather a decision taken as part of an overall financial plan. Your personal circumstances and risk tolerance should govern how much of your portfolio you should take offshore and into which asset class.~ Tamryn Lamb, head of client servicing, Orbis.
Offshore investments are any investments made in countries other than your country of residence. The key to offshore investing is to not only invest in a different country but also in different economies, markets and currencies, thereby diversifying your investment portfolio. It’s a good way to avoid keeping all your eggs in one basket. South Africa has a relatively narrow market and relies on only a few big stocks. It sits as the 17th largest stock market in the world, and for these pertinent reasons, you should be considering bigger opportunities in more developed markets. There are substantial and growing sectors to explore in global markets such as, Healthcare, Energy and Technology.
Factors to consider when investing offshore – or why your financial planner is vital:
Global investment portfolios differ according to the timespan you are willing to invest. How fast or slow you want your returns will be affected by your personal risk aversion. Looking for quick returns can be a risky business, especially on international markets which can become volatile.
Tracker/Index funds or Actively Managed Funds
The former track the performance of a particular market benchmark—or “index”—as closely as possible. Index funds tend to be more tax-efficient and have lower expense ratios than actively managed funds because they generally trade less frequently. Alternatively, actively managed funds try to outperform their benchmarks and peer group average. However, there is risk involved because these funds can also miss their goals, resulting in losses for the fund—and therefore also, the investors.
Tax and Estate Planning
This will also affect your choice of investment. You will need to ensure that you derive maximum benefit from your assets during your life time, whilst also ensuring that you will be providing for maximum transfer of wealth to the next generation.
Choosing the funds right for you
Firstly it is important to lay out your objectives and consider what type of an investor you are. In this way, you are more likely to achieve the portfolio that’s specific to you. Your financial planner has not only the expertise, but also vital access to global insights and the world’s leading companies and fund managers. You need to work together to create a customised portfolio, choosing the right funds that will meet your individual requirements as closely as possible, taking into account your goals, family and current life stage. https://fosterwealth.co.za/model-portfolios/offshore/
Advantages of investing offshore
- The South African financial market comprises only one percent of the global market, so you should give yourself the opportunity to invest in companies that have an international footprint, and which may therefore generate substantial profits.
- By allocating just a portion of your investments offshore, you can spread risk, and enhance the possibility of generating better returns.
- Offshore investing also gives you access to sectors that you would not find on the JSE.
- A longer time frame is essential because of the dual volatility of currencies and the markets.
- In addition, Estate Planning may benefit from investing in an offshore trust, and your financial planner can advise on this.
- Investing offshore can also be a way of providing for your children’s tertiary education at overseas universities, or your own travel ambitions, or any plans you might have for retiring overseas.
- Offshore investing offers a hedge for people who fear political or social unrest.
- Offshore is also a way to protect your investments against the depreciation of the rand.
At the Foster Group, we take into account – whether short term or long term – your risk profile, your personal goals and other factors. Besides having a personal advisor who is backed by a team with extensive and diverse experience and qualifications, we have multiple investment strategies. We do not just offer you a product, we take you through our advice process and find you an investment solution best suited for you.
Adding quality to every stage of your life
The Foster Group, backed by a proud 28-year history, believes in working for only the best results in all areas, from investments through to retirement planning, and including insurance matters. Creating a personal partnership with each client – and mindful of every individual’s plans, dreams and goals – we are there to guide and advise you on each milestone of your financial journey, not only during your working years but well into retirement. For us it’s about more than just generating income and retaining capital in investments, it’s about the quality of your life each step of the way and your peace of mind. That’s why we focus on building sound relationships based on professionalism, experience, and friendship. Find out more about us at: www.fosterwealth.co.za