It’s no secret that we live in tumultuous times. It’s difficult to have faith in a secure financial future when you’re living in a time of such political and economic risk. But, instead of panicking (or getting into too many Facebook arguments), you simply need to plan ahead. One of the ways to overcome potential currency depreciation is to diversify your portfolio by investing offshore in hard currency such as US Dollars.

Why Offshore?

Investing your money offshore isn’t only valuable to protect against the challenges facing South Africa’s ever-unsteady economy. It also gives investors options to grow their wealth across different markets and asset classes. You can benefit from more opportunities and some high-quality assets and companies that aren’t necessarily available on home soil.

Think Microsoft, Amazon, Johnson & Johnson. Global equities have broadly returned in the region of 28% in USD terms over the last three years, so there are certainly benefits in diversifying your asset base offshore.

How does it work?

You’re allowed to send R1 Million offshore each calendar year without SARS approval, as part of your discretionary allowance (travel spending is also included in this). You can also send up to R10 Million offshore by obtaining tax clearance. You’re also able to donate money to your spouse, free of donations tax, allowing your spouse to send the money offshore in their own names. Therefore, it is possible for each couple to externalise up to R22 million per annum. Maystone Wealth will assist you in obtaining tax clearance and trading Rands into the currency of your choice.

When it comes to where to put your money offshore – the options are broad, and each one comes with its own benefits and pitfalls. You could look at one of or a combination of the following investment strategies:

• a customised multi-asset portfolio (for example, if you want to stay away from an equity-only option).
• discretionary share portfolios.
• capital-guaranteed structured products which guarantee your capital against falling markets, whilst providing upside linked to various indices.
• fixed income portfolios if you’re looking for monthly income generation with the potential for capital growth.

Not so fast

Before you go ahead and move your money offshore, consider the following: 

1. It is important to compare market valuations of your home country vs. market valuations of the country you are investing in. 
2. Consider the price of the currency you’re selling versus the price of the foreign currency you’re buying. 

When assessing these two factors, you must ensure not to let fear get in the way of reaching your financial dreams. Buying into an expensive market with a cheap currency is a quick way of diluting wealth. 

Most importantly, it is vital to consider the tax implications of investing offshore. Simply externalising funds and investing them without a proper structure could expose you to Situs Tax (offshore estate duty) of up to 40%.  For this reason we recommend a consultation to see which structure suits you best. 

The best way to begin your venture into offshore investing is to partner with experts who will tailor-make a solution for you. There is no one-size-fits-all approach; the only way to ensure you’re not overspending on the benefits you’re getting is to talk to someone who will look at your current financial portfolio, your future goals, your risk appetite and your potential challenges – and then develop a plan that works for you specifically. You’ll also want to continuously monitor and adjust your plan if necessary, so make sure you’re meeting regularly with your financial advisor. 

Talk to a consultant about your offshore plan today.