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Offshore exposure offers two obvious benefits: a much bigger investment universe and protection against currency weakness
|||The world has changed fundamentally in the past two decades. As global citizens, we aren’t necessarily confined to a single country when it comes to work, education, leisure or, indeed, retirement.
South Africans have been increasingly comfortable with investing offshore in recent years and, seen within this broader context, it’s not surprising. Exchange controls and limits on offshore allowances have steadily relaxed, while new products and platforms have been brought to the market, making offshore exposure simple.
Benefits of investing offshore
Offshore exposure offers two obvious benefits: a much bigger investment universe and protection against currency weakness. The JSE has fewer than 500 listed companies compared to the tens of thousands available globally. Beyond the numbers, there are sectors and markets that are simply not available on our local market. Social networking (Facebook), e-commerce (Amazon), motor manufacturers (Tesla or Ford) or biotechnology (Gilead) are just a few examples.
If you wish to invest offshore, any such investment will form part of your offshore allowance. Residents have a single discretionary allowance (SDA) of R1 million a year, which can either be used for offshore travel or an offshore investment. They also have an offshore investment allowance with a limit of up to R10 million, provided a tax clearance certificate is obtained from SARS and submitted to their financial institution.
When you invest using your offshore investment allowance, your money is exchanged to foreign currency (unless you already have funds in a foreign bank account). Regular contributions mean your conversion rates will average out over time. This means you’ll be able to ride out currency fluctuations and you won’t have a scenario where you move a large chunk of money offshore at, say, R15 to the dollar (which carries with it risks of the rand strengthening from that position).
Monthly offshore investing with the Recurring Dollar Endowment Plan
Discovery Invest offers investors a number of offshore investment options, including the new Recurring Dollar Endowment Plan. This plan enables investors to invest a minimum of $200 per month, with monthly contributions capped at $4 000. There is no clearance required because the investor’s R1 million single discretionary allowance (SDA) is used.
For those who want to make a lump-sum investment, the Offshore Flexible Investment Plan allows you to invest offshore with access to your money as needed. Discovery’s Offshore Endowment Plans also offer numerous benefits, including the Offshore Upfront Investment Integrator for qualifying investors.
For more information about the Recurring Dollar Endowment Plan, speak to your financial adviser.
This article is part of an investment series by Discovery Invest.