With international markets such as Greece and China making the main headlines, some South Africans with offshore investments might be worrying a bit about their money.
No need to full out panic just yet though, as according to Graham Lovely, a financial adviser at PSG Wealth, in Cape Town things might be looking up for international markets.
Lovely said that it appears that the storm may have abated or even passed over.
“Just last week Chinese shares steadied and rose a bit, there was a deal put on the table for Greece and there was also finally a deal on the table regarding Iran, all of which are positive for the global market (for commerce, for bonds and equities),” said Lovely.
Adding to the Greece’s deal, and China’s shares steading, Lovely said that Japan's Nikkei share average climbed to near four-week highs on Tuesday, supported by growing expectations for strong first-quarter earnings.
Why should you invest offshore?
Lovely said that the one main advantage is the sheer range of opportunities available offshore.
“By taking advantage of global investment opportunities, you can share in the growth of the world’s most profitable industries and also benefit from holding investments in other currencies. Inclusion of global investments is an important part of building a diversified portfolio,” said Lovely.
He explained that research shows that spreading investments across different countries (asset classes, industries and currencies) is an effective way to produce better risk adjusted returns.
“In summary the pros of investing offshore include diversification and higher growth potential,” said Lovely.
What is the risk of investing offshore?
As with any investments, there are risks involved. Lovely said that the potential to lose all of your cash if you don’t invest in the right way in legitimate offshore financial centres, is definitely one of the risks.
He explained that costs for setting up offshore solutions can be expensive too – depending on what you opt for – although cost effective solutions are certainly available.
Where to send your money
Lovely said that where you decide to invest your money is an important consideration, especially with the consideration to international market’s performances lately.
To illustrate the point Lovely highlighted recent international market performances:
· In the US markets a major rally in Google last week pushed the Nasdaq to a second straight record high on Friday, but a drop in oil prices limited gains on the broader stock market, with the S&P 500 energy index down 1.07 percent to its lowest level since January 2013.
· Turning to China, Beijing’s efforts to prop up the market appear to have stemmed a slide that left markets with trillions in losses earlier this month.
· European stock markets have recently advanced on the back of a Greece-fuelled rally, which saw the debt-laden country reopen its banks after a three-week closure.
· Japan's Nikkei share average climbed to near four-week highs on Tuesday, supported by growing expectations for strong first-quarter earnings while gains in Chinese shares also underpinned sentiment.
Asset managers and stockbrokers have research teams and partners with investment processes often with a specific focus on asset valuation (valuation-driven approach), said Lovely.
Therefore, it is important to use one of these service providers to assist with your offshore portfolio allocation including geographical spread and overall risk allocation.
As with any investment, you should keep abreast of what various market commentators and analysts are saying.
At the end of the day though, Lovely said that you should never let your emotions guide your investment decisions and the reasons you went offshore in the first place.