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Investment Strategy
Sunday, December 27, 2015 - 03:16
Numerous challenges

The recent weakness of the rand, coupled with negative consumer and business confidence, has seen increased interest by South Africans in investing abroad.
The past two years have been lucrative ones for South African investors who have taken a leap of faith and invested offshore. However, moving money offshore comes with numerous challenges, according to Alexander Forbes Financial Consultant Stephanie Wittles.
“South Africans can only take R1-million offshore per annum without tax clearance or R10-million per individual with tax clearance. Limitations also present themselves in other forms, particularly in the retirement planning space, where funds must comply with Regulation 28, limiting our offshore exposure to 25%.”
Wittles said those who want to invest overseas should first decide whether to use a fund manager’s offshore allowance, or their own. “Your choice mainly depends on whether you want to invest in rands or foreign currency, and how much you wish to invest.”
Feeder Funds are an attractive option for Investors who value simplicity, and don't want to expatriate their assets. “The advantages of this route include not having to buy foreign currency nor require tax clearance. If you require diversification through offshore investment, with exposure to numerous asset classes not available in South Africa who seek a hedge against rand currency depreciation; or if you have used your maximum personal offshore exchange control allowance, a feeder fund may be the perfect solution for you.”
For investors who prefer not to be restricted to the funds on offer in South Africa, Wittles said the simplest route to investing in foreign currency offshore unit trusts was through an offshore platform operated locally.
“While the rand has weakened significantly this year and economic growth is uncertain, it is important for investors to remember that most of this negative news and sentiment is already priced into the currency and investment market. The question many investors ask is: can it get worse? It certainly can but good news and positive developments, either globally or locally, can also improve the markets.”
Investors should be aware of past lessons learnt. “Many South Africans took money out of South Africa in December 2001 when the Rand was at R11.60/$ only for it strengthen to R5.70/$ by Dec 2004, wiping out much wealth and any investment gains. History may not repeat itself but don’t let negative short term sentiment and conditions impact your decision making. Investment decisions should be based on the underlying characteristic of the investment itself.”

Copyright © Insurance Times and Investments® Vol:28.12 1st December, 2015
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