Can’t decide whether better to invest offshore or locally?

Can’t decide whether better to invest offshore or locally?

The financial aspects of our lives can be vast and overwhelming, so it’s easy to understand why it causes confusion, or perhaps anxiety and distress.

The task of managing your personal wealth can be broken down into many little pieces, and key among them, whether you’re an experienced investor or just starting out, is to ensure that your risk is well diversified. We live in an era where we can invest in a variety of asset classes, through various service providers and in multiple countries at the press of a button. You increase your risk by focusing on only one area or by doing nothing, simply because you can’t make a decision.

Some experts recommend that, based on the past few years’ tough economic environment, their clients should withdraw funds from their local investments now and invest in the “better-performing” US. They forget, however, that from May 1999 to May 2009, the US didn’t show any growth in rand-terms. In fact, it delivered negative performance over that period.

South Africa has one of the lowest correlations with the US, which means you can’t always draw a parallel between their economic performances. If you had invested 50% of your capital in South Africa and 50% of your capital in the US 20 years ago, South Africa would have been responsible for your portfolio’s performance in the first 10 years while the US suffered, and the US would have been responsible for good performance over the last 10 years while South Africa suffered. Investing in both countries, therefore, as opposed to only one of them, clearly seems to be the healthier option.

Diversification is at the heart of any healthy financial plan. We can assist you in best allocating your investments. The sooner you get on track towards your financial plan, the better.

Adapted article by Schalk Louw – PSG


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