Many South Africans are justifiably concerned that their retirement capital will be insufficient to meet their post-retirement needs. This concern is exacerbated by the recent downgrade to junk status, which has detrimental long-term investment consequences.
But there is a bright light on the bleak domestic horizon – direct offshore investing.
South Africans have the opportunity to invest in a direct offshore share portfolio using their discretionary travel allowances. Individuals are allowed to take R1 million out of the country annually. With tax clearance an additional R10 million is permitted.
Despite credit downgrades the rand has not yet depreciated significantly. South Africans can use the attractive current exchange rate to their advantage by taking at least part of their hard-earned capital offshore to hedge against local political and socio-economic uncertainty. This should, however, not be the sole reason for doing so. Investors can gain exposure to pioneering growth sectors otherwise unavailable to them, including cyber security, electric vehicles and virtual reality. In addition, share portfolios can include international stalwarts such as Apple, FedEx and Visa.
Let us debunk two widely held beliefs:
- Investing offshore directly is only for very wealthy persons
- Investing offshore directly is expensive
Sadly both statements hold true in most instances. Large banks more often than not cite intensive administration as the rationale behind imposing significant minimum investment amounts (up to $500,000) and excessive fees. Maximizing profit margins is the top priority. They are unwilling to help rather than unable to help. Fortunately, there are international banks such as Swissquote that open trading accounts for smaller amounts at reasonable cost.
The global investment arena is transforming rapidly. Are your investments structured to participate in these growth opportunities?
- Frants Preis is an equities portfolio manager at VEGA Asset Management. VEGA Asset Management has a service level agreement with Swissquote Bank AG.
Compiled by: Frants Preis, CFA
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)