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Facts to know about investing offshore

There is no right or wrong time to invest offshore, according to Mike Fannin, area manager of the deVere Group SA.

He provides tips for when investing offshore:

Investors should adhere to the timeless investment adage that "time in the market is more rewarding than timing the market".

Look offshore primarily for greater diversification.

Obviously there is the rand hedge element, but investing offshore ensures greater diversification not only in terms of currency, but also across assets and geographies, he said.
 
Offshore investments should form part of a balanced investment strategy. South Africa is less than 1% of global financial markets, so keeping all your eggs in one basket means that some are bound to get broken.

The biggest risk is the additional currency risk.

As a result of being based in South Africa, investors will experience significant volatility due to the rand’s reaction to changes in emerging market sentiment.

If it looks too good to be true, it usually is.
 
While there is a massive range of investments available offshore, it is easy to be seduced by the latest “flash in the pan”.

There are many stories of investors following the latest bright young thing, only to suffer catastrophic losses when markets change.

Go with the big names.

Investing offshore for most people is a medium to long term exercise, and while a small boutique might occasionally have a year or two where it shoots the lights out.

Stick to investing with the big names, which are well capitalized and based in well regulated jurisdictions.

Use an advisor authorised by the FSB.

Capital gains as a result of currency fluctuations can lead to significant tax implications and should be planned for carefully.
 
Also, be aware of the various structures available to help minimise tax exposure.

Some of the vehicles sold in the past are significantly out of date, so it is worth spending the extra time to pick the right “home” for your investment to “live in”.

You can invest up to R5m offshore annually.

South Africans can invest R4m a year, subject to tax clearance with an additional R1m without clearance from the SA Reserve Bank.

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