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Diversifying your investment portfolio - don’t put all your eggs in one offshore basket

Diversifying your investment portfolio - don’t put all your eggs in one offshore basket
Kenny Meiring
By Kenny Meiring
6 Mar 2025
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By diversifying your investments across countries, you reduce the overall risks in your portfolio.

Question: The new Expropriation Act has been giving me sleepless nights. A friend of mine suggested that I should do as he has done and move all my investments into an overseas bank. Should I do so?

Answer: This is a very big decision, and you really need to think carefully. I will share a few factors that you should take into consideration when making your decision.

Risk


Your investment portfolio needs to be robust enough so that it can withstand the pressures of differing economic and political cycles. It is seldom a good idea to have all your eggs in one basket and, in terms of investments, you should not have all of them in one country. 

My standard recommendation is that you should convert some of your South African rands into dollars, euros or pounds and invest them offshore. 

Countries go through different economic cycles, so there will be times when the local market will do better than the offshore one, and times when the offshore investments will outperform the local one.

By diversifying your investments across countries, you reduce the overall risks in your portfolio.

You also immunise yourself against the risk of losing all your assets should the country where they are all housed experience political turbulence or be caught up in a war.

Where will you spend your money in the future?


Many of us have children living overseas and want to see them regularly. This can be extremely expensive if we are in a period when the rand is particularly weak. A better approach would be to move funds offshore over a period of time and literally take advantage of rand cost averaging.

If you do not have children overseas but consume items that are imported, such as cars, computers and Netflix, having access to offshore investments can immunise you to an extent against the rand’s weakening.

Advantages of offshore investing


By investing offshore, you will have access to significantly more investment vehicles and shares than if you invest only in South Africa, giving you a more diversified portfolio.

If the rand depreciates, then your investment growth will be improved. When we take the rand depreciation into account, offshore equities have outperformed every other asset class over the past five, 10 and 15 years.

Insider tip: Where possible, convert your rands into foreign currency before making an offshore investment. By doing so, you will save on paying capital gains tax on any gains you make through the rand depreciating. 

Disadvantages of offshore investing


If you do not structure your affairs correctly when you invest offshore, when you die you could lose up to 50% of the value of your offshore holdings in the form of situs tax and probate costs.

Be careful when dealing with offshore banks. Many have rules of engagement that do not suit South African conditions. Some will only communicate with you by mailed letters, for example, and others only by fax.

As with most financial decisions, the solution lies in being sensible and having some of your assets based in South Africa and some offshore.  The amount you move would depend on your circumstances and appetite for risk. 

But whatever you do, you must ensure that you make use of the correct structures when investing offshore. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to [email protected].

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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