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There are two ways of going global

Your first option is to take your money offshore as part of your annual R4m offshore allowance. R1m may be transferred overseas every year without asking SARS for a tax clearance certificate. You would need an offshore bank account, which could involve some effort to open, but the benefit is that you do not have to bring the money back into the country when you disinvest; it can be paid out into your offshore account, which is helpful when you have plans to emigrate. Offshore based funds have minimum required investment amounts of at least R100 000.

Your second option is to invest in a locally domiciled global fund. You can invest the money from your SA bank account and when you disinvest, the money returns to your SA bank account. The fund manager will invest your money in offshore assets, though. You can invest amounts as small as R5 000 through this type of fund.

How much is enough?

Due to the volatility in exchange rates and the impact on the stability of your portfolio’s market value, it’s not a great idea to invest 100% offshore, unless you’re planning to emigrate. But if not 100%, how much then?

From a currency perspective, the ideal is to match your future expenses to your portfolio’s offshore exposure. In other words, if you expect 50% of your future expenses to go towards overseas travel, imported items (that would include fuel) and perhaps the international education of your children, it would makes sense to put 50% of your money in offshore assets.

However, if your retirement fund is your main source of long-term savings, legislation restricts that fund’s offshore exposure to 25%. If you want to have more offshore exposure, you would need to also invest through other vehicles, such as unit trust funds or electronically traded funds (ETFs).

Which offshore fund?

Most SA investment houses now offer global unit trust funds (called “mutual funds” overseas). You can choose between funds classified as global equity, interest bearing, real estate or multi asset (a balanced offshore portfolio with varying levels of exposure to equity markets). With a worldwide multi asset fund the fund manager enjoys complete freedom to invest 100% locally or 100% offshore or split the portfolio between regions, depending where he finds opportunities. A regional fund is restricted to markets in particular parts of the world, such as Asia or Europe. You do not have to use a fund where the assets are actively managed by a manager. Passive exposure to a market index, for example the FTSE100 or the MSCI World Index, is also available either through an ETF or an index tracking unit trust fund.

Remember why you are going offshore

When the rand depreciates, the rand value of your offshore portfolio increases; when the reverse happens, the value of your portfolio falls. While it is tempting to wait for a strong rand before you go offshore, it is extremely difficult to correctly time the market. The primary value of investing offshore lies not in profiting from currency fluctuations, but in the benefits of a diversified portfolio and knowing that you are not placing all your bets on one economy.

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