The case for offshore investing and the urgency of trusted financial guidance

In an increasingly interconnected yet uncertain world, South African investors face a unique set of challenges. Local market volatility, political risks, and the persistent threat of a weaker currency have led many people to look beyond our borders for security and growth. 

However, offshore investing is far more than simply ‘chasing returns’ abroad; it’s a strategic and powerful tool for long-term wealth building, risk diversification, and building financial security. Nonetheless, navigating this complex landscape requires more than just a desire to invest globally and ideally necessitates professional guidance from a financial adviser. 

The value of global diversification

One of the primary benefits of global investing is diversification. By spreading investments across different economies, currencies, and industries, you can reduce the impact of local market downturns on your overall portfolio. Not only does South Africa comprise a very small proportion of the global economy, but a portfolio solely exposed to the local market is heavily concentrated in a few key sectors, such as financials, resources, and industrials. In contrast, global markets offer access to a vast universe of opportunities, particularly in sectors where South Africa has limited representation.

For instance, the global technology sector, a significant driver of returns in recent years, is home to innovative companies, which are not listed on the local exchange. 

Another reason to invest offshore is to fund future international expenses, particularly for those considering emigration. 

Investing in different currencies acts as a hedge against the weakening of the rand. When the local currency weakens, the value of your offshore assets increases in rand terms, helping to preserve your wealth. This dual benefit of accessing new markets and protecting against currency risk makes offshore investing a non-negotiable component of a well-rounded financial strategy.

The complexities and risks of going it alone

While the benefits are clear, the complexities of offshore investing are significant and can easily lead to costly mistakes without expert guidance. The journey is riddled with potential pitfalls, including:

• Exchange controls and tax implications. South African investors are subject to specific exchange control regulations, which include a single discretionary allowance (SDA) of R1 million per year and a foreign investment allowance (FIA) of R10 million. The latter requires a tax clearance certificate from the South African Revenue Service (Sars). Mismanaging these allowances can lead to compliance issues. Similarly, the tax treatment of foreign income, capital gains, and estate duty is intricate and varies by jurisdiction, making professional advice essential to avoid unexpected tax liabilities.
• Navigating market volatility. Global markets are not immune to volatility. For example, during the sharp market drawdown caused by President Trump’s tariff announcement in early April, a novice investor might panic and sell off assets at a loss. A financial adviser provides the disciplined guidance needed to stay the course through periods of market fluctuation.
• Investment fund selection. The global investment landscape is vast and can be overwhelming. Simply investing in an offshore fund without understanding its underlying strategy and risks can be dangerous. An adviser can help you understand these nuances and choose solutions that align with your risk tolerance and financial goals.

Why financial advice matters more than ever

Financial advisers are not just intermediaries; they are essential partners in a successful investment journey, providing the expertise and reassurance needed to make confident, informed decisions that are aligned with each person’s individual context.

Investing offshore can provide benefits such as market and currency diversification, potential tax advantages, asset protection, and access to specialised expertise. However, it also involves risks such as currency risk, geopolitical risk and regulatory risk. It’s essential to carefully consider the risks and benefits and consult with a qualified financial adviser or investment professional. 

Investment platforms can help advisers deliver comprehensive and efficient investment solutions while enhancing the client experience. A reputable investment platform provides advisers and their clients with a convenient and accessible way to invest in the financial markets and grow their wealth over time.

* Landman is the CEO of wealth management at Momentum Wealth.

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