In recent years, the investment landscape has undergone a significant shift. With the advent of digital platforms and increased global connectivity, investors can now diversify their portfolios not just across asset classes but also across borders.
For South African investors, this opens up a vast world of opportunities. Harry Scherzer, chief executive of Future Forex, a prominent name in the field of offshore investments, believes this diversification can bring extensive benefits – if done wisely.
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Understanding the dynamics of offshore investing, especially from South Africa, requires a deep knowledge of the processes, laws, and nuances that shape international investments. Scherzer believes that without a thorough understanding of these elements, even the most promising offshore investments can result in less than optimal returns.
One key factor that all potential offshore investors should know about is the regulations around annual investment limits. “Before moving any of your investments offshore, it’s crucial to know how much you can move across,” advises Scherzer.
Over the past years, the South African government has gradually loosened the exchange controls, allowing investors to hold a larger proportion of their wealth in foreign markets.
“Currently, individuals can invest up to R1 million a year offshore without requiring any special permissions,” Scherzer explains. “With the correct permissions, known as an Approval of International Transfers (AIT) from the South African Revenue Service (SARS), they can move an additional R10 million a year offshore without any constraints.”
Yet, investing offshore isn’t just about the amount you can move. It’s equally vital to consider the costs involved. Most transactions related to foreign exchange come with fees. Transaction fees are the most common, and these can be a set fee or a percentage of the total transaction. However, investors may also encounter commission fees, typically based on a percentage of the transaction amount, and account maintenance fees.
The most significant fee, Scherzer warns, is the exchange rate margin or “spread”. The spread is the difference between the rate at which a forex provider buys a currency and the rate at which it sells it. Scherzer highlights that transparency in these fees is critical for any investor.
“All providers charge a spread, and many rely on it to make a profit. However, many forex providers don’t do so transparently or consistently. As an investor, you need to insist on transparency to ensure you’re getting the best possible pricing.”
Understanding the intricacies of the forex market extends beyond just the transaction fees. One needs to keep a watchful eye on the exchange rates as well.
“Exchange rates are rarely a major concern for the average person,” Scherzer notes, “But if you’re planning on investing offshore, it’s something you should keep a close eye on. A few cents difference in the exchange rate can translate to thousands of Rands being lost or gained.”
While no one can accurately predict the movement of exchange rates, Scherzer believes that choosing a forex provider who is responsive and proactive can save investors from unnecessary losses. “A forex provider with their finger on the pulse can help you avoid sending your funds during high market volatility, ensuring you get the best value for your money.”
Lastly, Scherzer stresses on the importance of diversification in offshore investing. He warns against the complacency of simply moving money offshore and investing it in a single asset class or jurisdiction. “Diversification is key,” he states. “Once your money is overseas, ensure it is diversified between different asset classes (cash, bonds, equity) and jurisdictions according to your risk appetite.”
The importance of this point is underscored by the fact that it’s the only piece of explicit investment advice Scherzer feels comfortable giving. By spreading investments across various asset classes and markets, investors can mitigate risk and take advantage of growth in different sectors and regions.
Investing offshore can be a powerful tool for wealth generation and preservation, but it requires careful planning and strategic execution. With the right knowledge and an experienced partner like Future Forex, investors can navigate the complexities of offshore investments to maximize their returns.
As the investment landscape continues to evolve, the need for sound advice and trustworthy service providers becomes even more critical. With their commitment to savings, consistency, and transparency, Future Forex is poised to guide South African investors through the intricate world of offshore investments, helping them secure their financial futures. In the words of Scherzer, “Taking these steps can help you make your money work for you. And that’s what we’re here to help you achieve.”