A Practical Guide To Global Investing

Many South Africans have stuck their heads in the sand when it comes to their global assets – or lack thereof. What should you consider if you’re serious about investing offshore?

- Candice Paine

You’ve no doubt heard the statistic that South Africa’s gross domestic product (GDP) contributes less than 1% to that of the world. This implies there is a lot more growth, larger markets and a diversity of industries elsewhere. As a consequence, all South Africans need some global exposure in their portfolios. Maintaining all your assets locally disqualifies you from a plethora of good investment opportunities abroad and uncorrelated returns.

Knowing you need to invest globally, and implementing this in your portfolio, requires some application. First, you’ll need to understand your current portfolio positioning. Combining this with your unique financial requirements will help you decide how much and where to invest.

A good starting point is to look at your personal balance sheet. Collate all your assets (house, pension fund, investments, etc) and liabilities (home loans, car payments, school fees, etc). Detail is important. Construct your portfolio on a see-through basis to determine actual asset class exposures both locally and internationally, i.e. equities, cash, property etc.

The size of your debt should also be noted as this is a hindrance to building wealth anywhere.

How much is to be externalised necessitates answering questions like these:

How much time do you have to build this portfolio and let value unlock? Time and capital available must be balanced. The less time you have, the more important some of the other questions below become.

Is your retirement saving on track to meet your needs? This is your most important need in any investment strategy. If you can’t answer yes to this question, then focus only on this until the answer is yes. Remember that Regulation 28 allows for 30% of your pension fund to be invested offshore.