By Jan Faure
Investing offshore is often a daunting idea for investors. It is mistakenly seen by many as overly complex, costly and even risky. For investors who are already aware of offshore investing and the benefits thereof, the challenge is choosing the correct asset manager to manage their funds.
Investing offshore is a simple concept: it is the allocation of your savings to investments in a country other than your own. By investing offshore, the investor gains diversification with an added risk variable being currency risk. Two of the most important factors behind long-term investment success is diversification and low investment cost so investing offshore certainly helps tick one of these boxes. Low investment cost or low fees can be the silent assassin to returns and so it needs to be well understood and defined from the outset of any investment (local or offshore).
This is where knowledgeable and experienced asset management is important. An asset management company takes care of your offshore investments on your behalf. They often have a selection of portfolios for clients to choose from, to invest in. Different investment portfolios will invest in varying degrees in asset classes such as equities, property and bonds (or fixed income). The allocation to these asset classes will define the risk of the overall portfolio (or fund). High allocations to equities are considered high risk and vice versa. High allocations to bonds are generally considered as low risk. A low-risk investment typically yields lower returns while a high-risk investment typically yields higher rewards.
What the aforementioned makes clear is the importance for an investor to understand their risk appetite or risk profile. It is critically important for an investor to understand not only their emotional tolerance for risk but also the risk that their lifestyle and savings can tolerate. To get to the bottom of this the investor should undergo a thorough risk assessment (and be honest!). All too often investors select high-risk investments simply because they like the prospect of higher returns. As Warren Buffet so aptly said, “You only find out who is swimming naked when the tide goes out”. If things go wrong, and they do, you don’t want to find yourself in a permanent predicament.
Wealthpoint Capital is a licensed asset management firm specialising in the management of global Exchange Traded Fund (ETF) portfolios. We are based in Sandton, Gauteng, South Africa. With more than 20 years’ experience, Wealthpoint Capital offers a professional and widely trusted offshore investment service. To find out more about our and about investing funds in offshore markets, feel free to contact us.
Email us at email@example.com