Ask five investors how much money should be invested offshore and you'll probably get six different answers. Some argue that South Africa's political and economic risks justify moving as much capital abroad as possible. Others point out that local assets can offer compelling value and that investors who make decisions based purely on currency moves often end up disappointed.
At Prospr, we see it differently: the primary reason to invest globally isn't fear — it's diversification.
Most South Africans are already heavily exposed to the local economy through their salary, property, business interests and spending patterns. Once you consider the value of future earnings, many households have the vast majority of their economic wellbeing tied to South Africa. That's a significant concentration in a country that represents only a small fraction of the global economy.
Investing globally gives you access to opportunities that are difficult or impossible to replicate on the JSE. Many of the world's leading technology companies, healthcare innovators, consumer brands and industrial champions are listed in international markets. A globally diversified portfolio allows investors to participate in the growth of businesses and industries wherever they emerge.
Global investing also provides important currency diversification. While exchange rates can move significantly over shorter periods, holding assets linked to multiple currencies can help reduce dependence on the long-term fortunes of any single currency or economy.
Importantly, gaining offshore exposure doesn't necessarily require transferring money offshore or making use of your foreign investment allowances. Within a retirement annuity, Regulation 28 currently allows investors to allocate up to 45% of their portfolio to offshore assets, giving retirement savers substantial access to global markets while remaining fully within the South African retirement-fund framework. This means investors can build meaningful international exposure without dealing with exchange-control processes or using their annual offshore allowances.
The objective isn't to choose between South Africa and the rest of the world. Both can play an important role in a well-constructed portfolio. South African assets may offer attractive opportunities, while global investments provide access to a broader opportunity set and additional diversification benefits.
At Prospr, investors can build portfolios that combine local and global investments in a way that suits their personal objectives and risk tolerance. The goal isn't to abandon South Africa — it's to avoid relying exclusively on it. A diversified retirement portfolio should give you exposure to the opportunities available both at home and around the world.