In our ever-changing global economy and shrinking choice of investment opportunities on the JSE, diversification is key to a robust investment strategy. One question that often arises is how to effectively incorporate offshore investments into a well-rounded portfolio. Today, I’d like to share some insights on this topic, focusing on two popular methods: direct offshore funds and feeder funds.
Why consider offshore investments? By expanding your investment horizon beyond our borders, you’re not only spreading risk but also tapping into growth opportunities worldwide.
Let’s break down these two investment routes:
1. Direct Offshore Funds:
- Invest directly in foreign currencies
- Utilises your personal offshore allowances (R1-million SDA and R10-million AIT annually)
- Requires SARS & SARB approval for larger amounts
- Withdrawals can remain in foreign currency
2. Feeder Funds:
- Invested in Rands, then ‘fed’ into offshore funds
- No need for personal offshore allowances or SARS clearance
- Generally lower minimum investment amounts
- Withdrawals are paid in Rands
It’s worth noting that due to recent regulatory changes and South Africa’s greylisting, direct offshore investments may face additional scrutiny and longer processing times. On the flip side, feeder funds offer a smoother, more familiar process for local investors. Both options have their merits, and the choice largely depends on your circumstances, investment goals, and risk appetite.
Tax implications also differ between these two routes. Direct offshore investments don’t factor in currency movements for tax calculations, while feeder funds include these in their daily pricing, potentially affecting Capital Gains Tax.
Choosing the right offshore investment strategy is not a one-size-fits-all decision. I’m here to help you navigate these waters. My philosophy is simple: your financial strategy should be as unique as you are, reflecting your dreams, goals, and values. Whether you’re dreaming of a comfortable retirement, planning for your children’s future, or aiming to tick off items on your bucket list, a well-structured investment strategy can help you get there.
I believe that with the right guidance, you can achieve all the above-mentioned dreams and more. If you’re interested in exploring how offshore investments could fit into your financial plan, or if you have any questions about your investment strategy, I’d be delighted to chat.
Get in touch with me and let’s start charting your course to financial success – both at home and abroad.
