Offshore in Context - In partnership with Coronation Fund Managers is a three-part podcast series hosted by Cape Talk breakfast host Refilwe Moloto. Together with Pieter Koekemoer, Head of Personal Investments at Coronation Fund Managers she explores the hot topic of offshore investing. By the end of this series, listeners can expect to understand all there is to know about the basics of investing outside of South Africa.
You've listened to the first two podcasts in the series and understand why you should invest offshore but, where to from here? In the final episode, we investigate the practicalities of investing internationally, getting into the nuts and bolts of the different ways in which you can invest offshore, and provide a summary of this series.
As a quick reminder, South Africans have three routes to investing offshore as was discussed in Episode One.
1) Members of pension funds or retirement annuities have automatic offshore exposure by way of their retirement portfolios as these investment vehicles can invest up to 30% offshore.
2) Or, if you have money to invest over and above your retirement savings (often called discretionary savings), you can increase your offshore exposure by investing in rand-denominated local unit trusts (which provide exposure to offshore assets with no limit on the amount that you can invest).
3) A third option is to increase your offshore exposure by investing directly offshore in a foreign currency-denominated unit trust fund (where you will require clearance from the South African Revenue Service if you want to invest more than R1 million).
Investors who want to increase their offshore exposure by way of a rand-denominated or foreign currency-denominated unit trust fund can do so by investing:
– directly with the investment manager of your choice;
– through an independent linked-investment services provider (where you have access to a selection of investment managers; or
– by wrapping your direct offshore investment (often called externalised rands) into an endowment policy (where you may achieve some tax benefit).
If you are still unsure about how best to go about investing offshore to meet your individual needs, it’s often best to seek independent financial advice. The following guidelines may be helpful:
– If you are closer to retirement age and have a more sizeable portfolio, you are most likely to benefit from independent financial advice. Drawing up a plan with an adviser has the added benefit of providing you with more comfort and the confidence to stick to it over time.
– If you are a younger investor just starting out with a smaller portfolio, it may make more sense to invest by way of a multi-asset fund as was discussed in Episode Two.
Appreciate the importance of time
Once you’ve decided on the most appropriate way to invest offshore, you may wonder how best to hold your investment manager to account?
While there may be multiple ways to go about measuring investment performance, the biggest issue that you need to get right as an investor is to appreciate the importance of time, as it helps you to ride out any short-term volatility (the ups and downs of the markets) and benefit from the probability of steady growth over time. While from time to time, the outcomes will be disappointing, for a pure offshore investment, you need to look at a five to 10-year time horizon to really evaluate performance properly. And, to protect yourself from yourself, it would be wise not look at your statement more than once a year.
It’s a commitment
It is important to remember that offshore investing is a long-term endeavour and, that if you're positioning your portfolio across multiple asset classes, you're ultimately protecting yourself against a variety of different outcomes.
By practicing patience, weathering the storms, and ensuring that your portfolio is diversified, you are taking the right steps to reap the potential rewards offered by offshore investing.
Missed the first two episodes? Click here to listen as we unpack why offshore investing may be a good component of your investment portfolio and, what we can learn from history when considering investing outside of South Africa.
The world is yours. To diversify offshore and grow your wealth with Coronation Fund Managers, visit Coronation Offshore. Coronation is an authorised financial services provider.