Offshore Investing 101

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It’s said that home is where the heart is — in most cases a comforting sentiment, but rather unfortunate when it comes to investing and the composition of investment portfolios. If you are looking to make the most of your available assets, offshore investing is a route you should consider.

Whether you know it as international, global or offshore investing, the meaning is the same. Simply put, offshore investing refers to placing your money in assets, in a jurisdiction other than your country of residence. In attempting to demystify the world of offshore investing, we’ve put together this primer on what it is and why you should incorporate it into your current investment strategy. 

Until very recently, the world of investing was a minefield of paperwork and expenses that made sending your money offshore an option reserved mainly for elite investors. Technological advances have however made transacting more seamless and appealing to a broader range of people. But why go offshore in the first place?

The first and most important reason is diversification. Any investor, economist or vaguely competent financial advisor will tell you the same: it’s essential to diversify your investments across different asset classes, such as equities (shares), bonds, property and cash. This will ensure that your risk is spread, so if one asset class performs poorly, the value of your other investments can make up for this. If you want to protect your wealth, you’ll need to diversify.

There are many dynamics at play that can affect individual assets or classes of assets, such as natural disasters, political unrest, pandemics, and fluctuating property and oil prices, to name but a few. Once again, a balanced portfolio will help mitigate the worst effects of one or more asset classes performing poorly, because the others can make up for it.

Another reason why offshore investing is so appealing is that it gives the investor access to opportunities that may be unavailable in South Africa. South Africa comprises only 2% of global domestic product and represents just 1% of all investment opportunities. A significant majority of investment potential is beyond our borders. So if you’re looking to take advantage of the broadest possible range of investment opportunities, going offshore is the only viable option.

South African law allows every resident over 18 an international investment limit of up to R10-million per calendar year, but access to offshore investment platforms can start with contributions of as little as R1 000 a month. Deciding where and how you deploy this capital is the next step in the offshore investment process.

— Tshiamo Seape