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Are you put off by investing offshore because you think you have to be super wealthy or an investment expert? The truth is, you don’t have to be either, but you should understand the basics.

Why should I invest offshore?

Offshore investing can be a good way to diversify your investment risk. After all, you don’t want all your eggs in one basket – in other words, you don’t want to only be exposed to South African risks. SA currently only accounts for 1% of global stock markets, so 99% of investment opportunities lie outside our borders! Our stock market is also highly concentrated – there are lots of resources companies, for example – so looking further afield may be beneficial if you’re after something other than resources exposure.

Investing offshore can also be a good way to hedge against currency depreciation. If you think the currency is going to get weaker against say, the US dollar, you may want to invest in the US. If you’re right, and the rand depreciates, you’ll still benefit from the weaker currency when you convert, even if your dollar investment does badly in dollar terms.

How do I do it?

You can invest offshore either directly or indirectly. Doing it directly involves physically moving your cash from SA to an overseas bank account, and converting it to foreign currency. You can then do what you want with the cash, including invest it. Bear in mind you’re only allowed to take up to R11 million out of the country on an annual basis, subject to, among other things, being over 18 and a taxpayer in good standing.

The indirect route involves investing in funds.

Option 1: Invest in a local unit trust fund that is managed domestically and allowed to invest a portion of its assets overseas (a 45% offshore limit applies to this option).

Option 2: Invest in a foreign-managed unit trust fund that invests entirely offshore but is available to South African investors in rands - we call this a rand-denominated feeder fund.

At the end of the day, your ability to invest offshore will depend on your own individual financial circumstances, including your ability and willingness to take risks. It’s always advisable to contact a professional financial adviser who can help you figure all this out. As with all investments, you can make or lose money – nothing is guaranteed.