Question

The rand has improved against the US dollar over the past year. Is this a good time to move money offshore?

Answer

This is a really relevant question. The Rand / Dollar exchange rate is currently around R16.50 compared with a rate of 18.50 a year ago.  However, against this must be weighed the performance of the JSE which delivered 37% last year.

So,  does it make sense to move your funds offshore at this attractive exchange rate or should you rather invest it in the local market?

As it was with most financial issues, there is no simple, straightforward answer.  A lot depends on your personal circumstances and your broader investment plan.  I will walk through some of the issues that I would consider when making  this decision

Your offshore  investment needs to be part of a broader investment plan. A proper plan must do two things:

1. Provide long-term growth
2. Provide protection against risks you cannot control  These risks would include currency risk, political risk and regulatory risk.

A question I often ask my clients is if you lived in the UK, would you invest 100% of your assets in South Africa?  Most people would immediately recognise that as a high-risk strategy.  Yet many South Africans have all their assets here — not because it’s optimal, but because it feels familiar.

South Africa makes up less than 1% of global GDP.  The Johannesburg Stock Exchange, while sophisticated, represents a tiny slice of global opportunity and is heavily concentrated in a handful of sectors and companies.

By contrast, the global opportunity set includes:

• Thousands of companies
• Multiple currencies
• Exposure to innovation, technology, healthcare, and global consumer trends that simply don’t exist locally at scale

Ignoring that opportunity is risky.

Diversification is one of the few free lunches in investing.  True diversification works on several levels:

• Across asset classes (cash, bonds, equities, property)
• Across sectors
• Across currencies
• Across countries

There will be times, like now, when the JSE will outperform offshore and there will be times when offshore will outperform the local market.  The trick is to hedge your bets by having a mix.  This table below may give you sone perspective:

A well-constructed portfolio allows you to participate in local opportunities without being overexposed to one outcome.

How much should be offshore?

The appropriate level of offshore exposure depends on your personal circumstances, including.  Factors to consider would include:

• Where you plan to retire
• Your future spending currency
• Your income sources
• Your tolerance for volatility
• Your overall asset base

That said, as a broad guideline, most of my clients aim to have between 25% and 45% of their assets physically offshore.  Not because offshore is “better”, but because balance matters.

So… should you invest offshore now?

There isn’t a single right answer — and for some people, now may not be the right time at all. What matters is understanding how much offshore exposure makes sense for you, given your circumstances, goals and existing portfolio.

That’s where a conversation with your financial planner helps: to assess your overall asset mix, consider the role offshore investments could play, and decide whether a gradual move — or no move at all for now — is appropriate, especially given the solid opportunities still available in South Africa.

Offshore investing shouldn’t be an emotional response to headlines or currency moves. It’s most effective when it’s aligned with long-term objectives and thoughtfully integrated into your broader financial plan.