How Safe is Investing in South Africa Right Now?

24th November 2020

By: Creamer Media Reporter

     

Font size: - +

The 2020 Global Wealth Migration Review cited that an estimated 4000 of South Africa’s highest nett worth individuals – worth R17 million or more – have left the country over the past ten years. Wealth migration data such as this report is said to serve as a clear indicator of the health of the economy. 

However, these statistics do not necessarily mean that it is no longer safe to invest in South Africa, this according to Leigh Riley and Greg Strachan, Wealth Managers at independent advisory firm, AlphaWealth. 

“The local investment landscape is shifting, but these changes should be taken in context and not seen as the ‘death spiral’ of the local economy,” Strachan explains. 

These shifts present opportunities for fresh thinking and new strategies around investments.

Lowered interest rates  around the globe are having a significant impact on investment strategies and Riley cautions that it’s important to be realistic about one’s returns. “Take emotion out of the equation when determining your investment strategy. Start by asking yourself, ‘what am I trying to achieve with this investment?’ Identify that objective and constantly re-evaluate your income strategies to ensure that they are aligned.” 

Riley suggests clearly evaluating the opportunity, the risk, the costs involved and additional options such as diversifying offshore rather than being scaremongered into irrational decision-making. “Understanding your investment decisions and feeling comfortable with them is as important to the process as the asset allocation itself”.

Time to Diversify Your Investments?

When it comes to choosing between allocating assets locally versus offshore, there is no clear victor.

Rather than favouring one approach, it’s best to take a diversified approach to both local and global assets.

“Allocating assets both locally and abroad is a key element of portfolio construction. Whether this exposure is achieved with physical offshore assets or through locally based unit trusts is another important consideration,” says Strachan.

While some firms may recommend that  a set percentage of their client’s assets to be allocated offshore, both Strachan and Riley caution that this should be determined on a client-by-client basis.

Strachan’s suggested asset allocation approach is as follows:

“I’m a firm believer in matching your assets and your liabilities in the same currency. Following this, surplus capital, or capital in excess of what is required to meet these liabilities, can then be externalised into ‘hard currency’,” he says.

“This approach ensures that the allocation to offshore assets either in hard currency or via rand-denominated offshore unit trusts is determined by the specific outcomes required for the client – rather than investing with a specific percentage in mind”.

Tips for Building a Diversified Portfolio

Riley and Strachan share a few of their practical tips for investing:

  • Conduct your own research. It is easy to get caught up in the mayhem of the moment and let fear be your overwhelming guide when deciding where to put your money – don’t let that happen.
  • Be wary of social media and fearmongering.  Take a step back and try and understand what factors may be contributing to the situation, and if that source may be trying to further a certain agenda. This will help you to identify opportunities that others might be missing.
  • Listen to the experts. Engage with industry commentators whose opinion you trust (we’d always recommend consulting a licensed financial advisor) and use their insights to make an informed decision.
  • Understand your short, medium and long-term investment objectives.  Investment horizons together with your objective influence the amount of risk/volatility your portfolio can withstand. This then determines how much exposure you should have to any one asset classes (of which offshore assets are classified) 
  • Diversify your exposure. Through both local and offshore asset allocationsyou are able to diversify your portfolio and  therefore able to spread risk.
  • Consider your assets objectively. Too often, we see investors making the common mistake of buying investments based on the assumption that current market conditions will continue. The market is unpredictable, don’t be swayed by past events.

 

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION