File Image: IOL
File Image: IOL

You may not be able to travel, but you can invest your money globally

By Vernon Pillay Time of article published Sep 9, 2021

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Covid-19 may have restricted global travel and kept South Africans at home, but it did not prevent the impressive performance of local and offshore investments over the past year.

Gontse Tsatsi, Head of Retail Distribution at Old Mutual Investment Group, says "amidst the economic uncertainty produced by the pandemic, unit trust investors benefitted from the post-lockdown market rallies across the world and could continue to do so on the back of the recovering global economy".

He says investing offshore is an important component of most investor’s portfolios and it is quite simple to do.

"Unit trusts are the best way to own a piece of the world and diversify risk very cheaply. From as little as R500 a month, you can let your money go globe-trotting. Local unit trusts that invest globally offer investors simplicity, a wide choice of asset classes and flexibility, without worrying about getting a tax clearance certificate from SARS," says Tsatsi.

One way of investing offshore is physically moving money out of South Africa by converting Rands to a foreign currency and reinvesting it in an international market. This process tends to be more appropriate for wealthy investors since the minimum amounts required to do so are relatively high. These individuals can deal with the extra complexity of repatriating their funds and can afford the higher minimum investment amounts required, which – understandably – most investors cannot.

But many of the complexities of offshore investing – like regulation, differing terminology, and the sheer magnitude of options – are mitigated by merely investing in a locally registered unit trust with exposure to offshore assets.

"Doing so gives investors exposure to global growth assets such as quality shares and international property assets, all without the investor's money physically leaving the country and reducing their investment risk by diversifying their investment portfolio".

And investors can benefit further, says Tsatsi, by using their tax-free investment allowance through a tax-free unit trust with global exposure.

"This means that when investing through a tax-free unit trust, investors will pay no tax on any interest earned, no tax on dividends and no capital gains tax, which should be a great incentive for investors with a long-term investment horizon, including first-time investors".

While offshore markets have staged impressive performance to date, there is no guarantee that this kind of performance will continue in the short-term. Investing in growth assets like shares in local or global markets is however a long-term proposition. It is therefore important for investors to consider an appropriate offshore component as part of an overall, well-diversified investment portfolio for long-term investing.


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