When US dockworkers went on strike earlier this week, it sparked panic buying in some parts of that country. While ordinary consumers were panicking, investors around the globe were watching closely. Now thankfully on pause until January, the strike would have been the latest in a long list of events that have impacted global economies and, as a result, investments over the past few years.
Since COVID-19, markets have been hit by Russia’s ongoing war in Ukraine, escalating conflicts in the Middle East, and rapidly rising interest rates, among other factors. For South African investors, those concerns have been exacerbated by things like load shedding, a stagnant economy, and major infrastructural issues.
As such, any local investors wanting to see significant returns and protect their wealth have had to be clever. That includes investing as much as possible offshore. While that can be an effective strategy, Harry Scherzer, CEO of fintech Future Forex points out that truly savvy investors should not only focus on how much they invest offshore, but also on choosing the right international money transfer provider to facilitate these otherwise complicated transactions.
“Even if South Africa’s economy had boomed rather than stagnated over the past decade and a half, investing offshore would still make sense for diversification purposes,” he says. “What many investors may not realise, however, is how big of an impact choosing the right international money transfer provider can have.”
An investment imperative
Of course, South Africa’s economy has actually struggled for many years now. As a result, investing offshore has become an imperative, rather than a diversification tactic. One need only look at the performance of the JSE All Share Index versus that of the S&P 500 to see how imperative it’s become.
As an investment note by Moonstone points out, if you’d invested R100 in the JSE All Share Index in December 2010, you’d have around R360 today. In dollar terms, that means that US$100 invested then would only be worth around US$126 today. By contrast, US$100 invested in the S&P 500 would be worth US$539 today, more than four times as much.
While there have been some positive economic steps in South Africa in recent months, the advantages of offshore investing are still evident. In the months leading up to July this year, the JSE Top 40 Index delivered returns of 6.1%, while the S&P 500’s returns were 14.4%. Factor in the comparative weakness of the rand and it becomes clear why growing as much of your money offshore as possible is so important.
Effective international transfers
As Scherzer notes, however, while technology has made it easier than ever to invest offshore, there are still complexities involved, particularly for those looking to manage their investments themselves.
“Investing offshore isn’t just a matter of paying money from one bank account to another. You have to ensure that you’re within your annual discretionary and investment allowances (totalling R11 million) and that you’re compliant with all other SARS and SARB regulations. Along with this, you’ll need to submit the right balance of payment (BoP) codes and ensure that all other forms of documentation are in order.”
This, Scherzer adds, makes choosing the right international money transfer provider incredibly important.
“A good international money transfer provider will have the in-house expertise required to help guide you through those processes and will also help you through any complexities that may occur during the transfer,” he says. “This kind of commitment to customer service is also what sets great providers apart from banks, which typically display poor levels of customer service.”
Another area where banks fall short, Scherzer says, is fee transparency.
“We’ve seen first-hand how many people think they know what a bank’s going to charge them for an international transaction based on the advertised fees, only to be shocked when they’re charged much more than expected,” he says. “That doesn’t just hurt investors when they’re taking money offshore, but also when they’re trying to bring their returns onshore.”
As such, Scherzer recommends using an international money transfer provider that prioritises transparency.
“Aside from the financial hit, investors should always look for certainty among the risk,” he says. “Financial service providers, and more importantly those that specialise in international money transfers, should do everything they can to provide that certainty.”
The right approach, at every investment stage
Ultimately, Scherzer says, this is the approach all investors looking to protect their wealth and grow their investments should take, no matter what stage they’re at in their investment journey.
"Your investments are key to a comfortable retirement, taking holidays, and navigating any unforeseen circumstances later in life,” says Scherzer. “The last thing you need is for outmoded practices and ways of doing things to impact your long-term financial success in any way.”
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