Higher returns, lower risks

Diversifying offshore can increase your returns and lower your risk, Duggan Matthews, an investment professional at Marriott, says.

In terms of market capitalisation, the JSE represents less than one percent of all the world’s stock markets, he says, so investing in global markets exposes you to many more opportunities.

Matthews says many companies in developed countries have bigger balance sheets, longer track records, more customers and stronger brands. Consequently, the operational risks in these businesses are a lot lower than the South African alternatives. He says that besides lower risks, returns should be better, as the emerging middle class continues to grow.

Short-term movements in the rand exchange rate can create volatility in returns when investing offshore, but over the long term the primary driver of returns are re-invested dividends and capital growth, Matthews says. The more time you give your offshore investments, the less you have to worry about currency fluctuations, he says.