Global Investing – the world is your oyster!

Back to Money advice
26 October 2021
An Apple a day……….keeps the investment on its way!

Apple, Microsoft, Amazon, Facebook and Tesla are undoubtedly companies leading the advancement of the human race. These companies are known throughout the world for their contribution towards making lives and societies more efficient.

Global companies such as these are successful businesses generating promising returns for their shareholders, and thanks to advances in global investing they could do the same for local South African investors!

Wouldn’t it be great to get exposure to one of these global giants, to share and profit from their success and boost your local investment portfolios?

Today the world is truly a faster and smaller place than it was 20 years ago. Technological advancements and infrastructures can literally connect the entire world, yes even Parys to Paris. Global investment markets too have become more accessible and less exclusive allowing ordinary South African investors to share in world-wide wealth creation.

Staying in South Africa does not mean your money must! 

South Africa makes up less than 1% of the entire globe’s gross domestic product (GDP). Is it prudent to have all your investments exposed to only 1% of the globe and possibly miss out on 99% of other investment opportunities? Sharing 100% in “Earth Incorporated’s” success just sounds so much smarter!

So what are the benefits of Global Investing?
 
Diversification

When it comes to investing, whether locally or globally, the principle of diversification is a key strategy helping to spread and lower unnecessary investment risk and generating long-term investment success.

Diversification allows an investor to be present in multiple zones in manageable sizes to take advantage of the good times, while limiting exposure to risk and loss in the bad times. Diversification is probably one of the greatest benefits of investing globally.

Some diversification benefits for South Africans to consider when investing globally:

  1. Political Risk Diversification

Political risks are a major factor to consider before investing as this risk reflects the overall stability of a country. If all your money is invested in one country where political risk is high this might not be a prudent strategy. South Africa, like most countries, is exposed to political risk and instability and hence global diversification can safeguard against this risk.

  1. Sector Diversification

International sectors such as technology, mining, textiles, manufacturing and pharmaceuticals are investment options for SA investors. Think about the COVID-19 pandemic and the rapid advances in medical science coming from some of the biggest pharmaceutical companies in the world. These international pharmaceutical sectors have the potential to offer great value on investments that South Africans can now access and capitalize on.

  1. Geographical Diversification

With global investing, your money can be working for you in various regions around the globe. America, Asia, Europe, the Middle East, you name it. If you favour a certain area of the world then global investing can take you there.

  1. Company Diversification

As mentioned, global investing gives SA investors exposure to some of the greatest companies in the world that were previously not available to them. This exposure can generate potentially better returns than being confined to SA only. There are always great investment opportunities within SA but via global investing SA investors can benefit even further. SA investment portfolios can literally include the best of the best that the world has to offer.  

  1. Asset Classes Diversification

Access to a superior spread of asset classes like equities (shares in companies), bonds, cash and property is possible through global investing.

As an example, you could invest your cash in local South African money market funds where yields are extremely competitive, while investing in technology stocks in the US on the NASDAQ stock market where annualized returns have been in excess of 15% p.a. over the last 20 years.

  1. Developed and Emerging Markets Diversification

Global investing unlocks doors to new and established international investment markets and destinations for SA investors. Your money can be strategically split to take advantage of new global emerging opportunities as well as benefiting from the stability of investing in established world markets.

A Weakening Rand

Besides the advantageous diversification benefits associated with global investing another benefit is taking advantage of a weakening rand over time.

The South African rand has been steadily depreciating over time and may continue into the future. A weakening rand over time is undeniably another big advantage to investing globally.

The more the rand weakens against major international currencies (Dollar, Pound, Euro) the better for investors that have exposure to these currencies. International currency exposure gives your local South African investment portfolio an additional investment boost over the long-term. Currency investing has its risks, but generally for the South African investor, over the long-term the rand depreciates which works wonderfully in our favour.

In this day and age we are certainly lucky as South African investors to be able to share in the financial success of the world’s greatest companies and markets. Global investing can enhance your local SA portfolio and offer some investment peace of mind in these uncertain times.

Review your local SA investment portfolio mix and turbo charge it today with some global flare.

 

Gareth van Deventer, CFP®
OUTvest is an authorised FSP and powered by OUTsurance. All investments are exposed to risk, not guaranteed and are dependent on the performance of underlying assets. Ts, and Cs apply.
Latest Money advice articles
Become an Investor in 4 Easy Steps
OUTvest Market Commentary - June 2022
OUTvest Market Commentary - May 2022