For South Africans looking out at the rest of the world, it’s become an increasingly tricky environment in which to invest as the year has progressed. The steep depreciation in the rand shows that all is not quite right on the home front and has put the dilemma of whether to be investing offshore on the table of many investors again.
With risks abounding, the only way to cushion yourself against these is to go back to investment basics: set up and/or stick to a long-term investment strategy that meets your investment needs, including diversifying globally and across asset classes, and, whatever you do, don’t panic – because remember panic is not a strategy!
To avoid making the decision to invest offshore for the wrong reasons, here are some questions worth asking yourself:
Why are you thinking of investing offshore – to protect yourself against currency depreciation or to gain long-term, diversified exposure to other financial markets?
With that in mind, do you still want to diversify your exposure outside SA? Does it make long-term sense for you?
If yes, are you looking for the lower long-term volatility historically found in the developed markets – or the greater upside potential growth that emerging markets have tended to offer?
Have you done your homework on where to find the best value in asset classes offshore and locally and which countries offer the better value?
Do you want exposure to a single asset class or balanced exposure across asset classes?
Do you want your money managed actively or passively tracking an index?
How much risk are you willing to expose yourself to (cautious, moderate or aggressive) and why are you investing (to generate income, to achieve capital growth or a combination of the two)?
Do you want your portfolio to be denominated in hard currency (for instance dollars) or do you want it to be rand-denominated (invested offshore but with the performance translated back into rand)?
Are you confident enough to go it alone or do you need the help of a financial adviser?
If you have answered all these decisions and you still find the idea of investing offshore compelling, then… go ahead and invest!
This is an edited extract of the feature article in our quarterly magazine, sim.sense. To access the full magazine, click on the relevant link: English | Afrikaans
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