International investments for South African investors
International investments allow you to explore opportunities beyond your local markets. Read our guide to learn more about investing internationally.
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In today's connected world, it's easier than ever for South African investors to explore options beyond local markets.
International investments can help you diversify your portfolio, tap into new growth areas, and reduce risks tied to domestic investments.
In this guide, we explore how you could benefit from investing internationally. We will also look at offshore investing and how it could help form part of your wider strategy.
What are international investments?
International investments are assets held in markets outside of your home country. Assets can include stocks, shares, bonds, funds and even real estate.
Unlike local investments, international investing opens the door to a world of possibilities. This is because they are not limited to local companies or government securities. Instead, you have access to a much wider pool of investment choices.
These investments can include:
- Direct investments: buying shares in foreign companies or government bonds.
- Indirect investments: investment funds or exchange-traded funds (ETFs) that pool assets across multiple countries.
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Offshore investing: what is it?
Offshore investing means moving part of your investments to foreign countries. There are several reasons for doing this:
- To better diversify an investment portfolio
- Tax efficiency
- To access products and services not available locally
Offshore investing is not solely for the wealthy or large institutions. It's accessible to individual investors through options like offshore accounts and international investment funds.
Many South African investors now turn to offshore investing. This is because it can help protect their wealth from the volatility of the local currency and economy. It can also help them gain exposure to international markets.
Some of the key reasons to consider offshore investing include:
- Diversification: Spreading assets across different regions to reduce risks tied to one country.
- Tax efficiency: In some cases, offshore investments may have tax advantages, but be sure to understand local tax rules.
- Asset protection: Offshore investing may help protect assets from local economic or political instability.
- Offset currency risk: Holdings in foreign currencies can offer protection if the Rand weakens.
Benefits of international investments
There are several reasons why South African investors should consider international investments:
Reduce portfolio risk
Investing internationally can help spread your risk. You aren't relying solely on South Africa's economy. This helps shield your portfolio from local market ups and downs.
Growth
You can tap into faster-growing economies. Markets like China, India, and Brazil often grow quicker than South Africa, offering potential for higher returns.
Currency exposure
Investing abroad means your returns may benefit if the Rand loses value against other currencies. However, currency risk also exists, so this can be both a benefit and a risk.
Access to new sectors
International markets provide access to industries that might not be well-represented in South Africa, like the tech sector, healthcare, or renewable energy.
Risks of international investing
International investments offer great opportunities, but they also come with risks:
Political and economic risk
Changes in foreign governments, policies, or economies can impact returns.
Currency risk
Foreign investments are in other currencies. If the Rand strengthens, the value of your offshore investments could decrease when converted back to Rand.
Liquidity and regulatory risks
Some foreign markets may have fewer buyers and sellers, making it harder to sell investments quickly. Different countries also have varying rules that could affect how you invest.
Taxation
Make sure you understand the tax rules for international investments. You may have to pay taxes both in South Africa and abroad, although tax treaties can help reduce double taxation.
How to invest internationally
There are many ways to gain international exposure. Below are some of the common options:
Direct investments
You can buy shares in foreign companies or bonds from other countries. This gives you control over which assets you invest in. As with any other type of investment, this requires research and picking assets that align with your goals and risk profile.
Funds and ETFs
Funds pool resources from multiple investors and invest in a mix of international assets. They offer an easy way to diversify, and less hands-on management is needed.
Global real estate
Aside from the typical asset classes, another way to invest internationally is in real estate. By investing in property, you will own a tangible asset that can provide a regular income through rental payments.
Forex trading
Some investors trade currencies on foreign exchanges. This allows them to profit from exchange rate movements. This is a high-risk strategy and not suitable for everyone.
International investments in emerging markets
Emerging markets can offer some exciting investment opportunities. Countries like China, India, and Brazil are growing fast, and there is a chance for investors to see higher returns in these locations.
You can access these markets through international investment funds that focus on emerging economies. This gives you exposure to stronger growth than in developed markets.
International investments: what to consider
There are some factors to consider when investing internationally in South Africa. Some of these include:
Currency exchange
The value of the Rand against other currencies can affect your overall return on investment (ROI). If the Rand weakens, your offshore investments can become more valuable when converted back to local currency.
Tax
South African residents are taxed on their worldwide income. This includes income from foreign investments. Understanding how foreign taxes work and whether double taxation agreements (DTAs) apply is essential.
Regulations
There are regulations in South Africa around how much money you can invest abroad. South African taxpayers can invest up to R10 million offshore per calendar year. These include locations outside the Common Monetary Area (CMA).
Investing internationally with Holborn Assets
Offshore investing can be a smart way to strengthen your financial plan. It is a strategy that can also provide several benefits. However, there is more to consider when you choose to invest internationally.
Holborn Assets offers a range of tailored investment solutions to help you reach your long-term financial goals. Our experts also provide asset and portfolio management services.
We are a global financial advisory firm. That means we have the local knowledge and expertise in the international markets to help you make informed investment decisions.
Book a free, no-obligation meeting to learn how we can help you.
Frequently Asked Questions
International investments involve investing outside of South Africa. This can include stocks, bonds, real estate, funds or any investment vehicles outside your home country.
