{"id":6517,"date":"2022-11-28T13:58:26","date_gmt":"2022-11-28T13:58:26","guid":{"rendered":"https:\/\/moneybetter.co\/?p=6517"},"modified":"2022-11-28T13:58:26","modified_gmt":"2022-11-28T13:58:26","slug":"how-to-invest-offshore-without-sending-money-offshore","status":"publish","type":"post","link":"https:\/\/moneybetter.co\/za\/2022\/11\/28\/how-to-invest-offshore-without-sending-money-offshore\/","title":{"rendered":"How to invest offshore (without sending money offshore)"},"content":{"rendered":"\n

How to invest offshore (without sending money offshore)<\/h1>\n\n\n\n

<\/p>\n\n\n\n

How to invest when the rand is getting weaker<\/h2>\n\n\n\n

South Africans have become used to the rand\u2019s volatility, but the past few months have been a crazy, white-knuckle ride for even the most experienced investors.<\/p>\n\n\n\n

The reasons for the currency\u2019s weakness against the dollar are varied \u2013 rising global inflation<\/a> and concerns about a global recession<\/a> are just two of them. Both these factors mean that investors have been buying dollars, which are seen as a safe haven, and selling emerging market currencies like the rand. And when there\u2019s a sell-off in the rand, the value of the currency drops.<\/p>\n\n\n\n

\u201cIt is likely that the rand will always be more volatile than developed market economies due to various risks associated with emerging markets. However, volatility is not always constant and tends to change through time,\u201d says DMA\u2019s Charlotte Van Tiddens.<\/p>\n\n\n\n

The bottom line is that these \u2018macro-economic\u2019<\/a> factors behind the rand\u2019s weakness are beyond the control of individual investors. But knowing that there\u2019s nothing to be done about a falling rand doesn\u2019t really help when you see your hard-earned cash losing its value against a super-strong dollar, and your investments starting to shrink in global terms.<\/p>\n\n\n\n

The secret to staying one step ahead and securing some financial peace of mind lies in understanding what strategies can protect your investments; and using this knowledge this to your advantage so that you know how to invest when the rand is getting weaker.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Winners and losers<\/h2>\n\n\n\n

A weaker rand is going to positively or negatively affect local companies, which in turn will affect their share prices \u2013 and your investments. If you\u2019re the kind of investor who buys shares in individual companies, bearing this in mind and asking the question, \u2018Who stands to gain when the rand is weak?\u2019  can be helpful when deciding which shares you want to invest in.<\/p>\n\n\n\n

For some businesses a weak rand is good news, particularly if they are exporters. That\u2019s because they receive dollars for the products that they sell, and so when the dollar price is high, they\u2019ll receive more money in rand terms. But there\u2019s always a downside, right? A weaker rand is generally not good for companies that import products. Because they have to buy products in dollars, they\u2019ll be spending more rands when the dollar goes up and the rand goes down. Prices of their products get hiked, and consumers end up buying less of them. Not good for the bottom line or the share price.<\/p>\n\n\n\n

Research<\/a> shows that when the rand is weaker, as it is now, companies that offer communication services and consumer staples tend to be better off. On the other hand, companies that focus on real estate or those that depend on consumer discretionary spending (in other words, spending on non-essential items) tend to be worse off.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Take it offshore<\/h2>\n\n\n\n

The other critical component for a South African investor is to ensure that a portion of your portfolio is invested offshore \u2013 or not in your country of residence. This is exactly for the reason that because offshore investments are not rand-denominated, they are protected against the currency\u2019s devaluation.<\/p>\n\n\n\n

There are an increasing number of ways for South African investors to get offshore exposure.  You can literally move your money offshore by exchanging your rands for a foreign currency and in turn investing this foreign currency into offshore domiciled shares or funds. This can be very admin-intensive and involve factors like exchange controls or tax-clearance certificates etc.<\/p>\n\n\n\n

A more straight-forward option can be to invest in local funds that provide offshore exposure. These would include unit trusts that have underlying investments in international companies, or locally listed feeder funds such as the array of ETFs that one can buy on the JSE that track an offshore basket or index. What\u2019s great about these ETFs and feeder funds is that they don\u2019t require large initial investment amounts, so even if you only have a small amount of money you can still have access to investment opportunities.<\/p>\n\n\n\n

It can also be comforting to know that even if you\u2019re investing in big South African companies rather than taking your money offshore, you\u2019re often likely to be protected against a weak rand. Many South African listed companies are \u201crand-hedged\u201d, or protected against the ups and downs of the local currency.<\/p>\n\n\n\n

\u201cThese companies generate the bulk of their revenue in foreign currencies like the dollar. Their expenses are not incurred in rand either. When the rand weakens and loses value, all else equal, their rand profit increases. Examples of rand hedges include the tobacco and luxury goods sectors and include stocks like British American Tobacco and Richemont,\u201d says Van Tiddens.<\/p>\n\n\n\n

Other examples of rand-hedge stocks are Aspen, BHP Billiton and Glencore.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Make sure you mix it up<\/h2>\n\n\n\n

As always, that classic investing mantra \u201cDiversify Diversify Diversify\u201d applies, and even more so when you\u2019re wanting to invest when the rand is weak.<\/p>\n\n\n\n

There are so many moving parts to the investment landscape, and unless you are a full-time investing expert it can be extremely complex to keep a handle on all the factors affecting the value of your investments. Bearing that in mind, one of the most important ways to protect the overall value of your investments is to make sure that they are diversified \u2013 in other words, exposed to a variety of asset classes, such as cash, equities (shares) and property so that you don\u2019t have all your eggs in one basket.<\/p>\n\n\n\n

This helps to spread the risk, and means that when one asset class is under pressure or under-performing, the other assets are not affected.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

How to invest offshore (without sending money offshore) How to invest when the rand is getting weaker South Africans have become used to the rand\u2019s volatility, but the past few months have been a crazy, white-knuckle ride for even the most experienced investors. The reasons for the currency\u2019s weakness against the dollar are varied \u2013 […]<\/p>\n","protected":false},"author":1,"featured_media":6520,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[51,18,4],"tags":[],"class_list":["post-6517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-offshore","category-south-africa","category-written"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t