A strengthening rand can reduce the rand value of an offshore holding even when the foreign asset itself has risen. A weakening rand does the opposite. Currency is doing work in the result either way.
South African investors spend much of their lives in rand and are already exposed to the local economy through income, property and employment. Offshore investments can spread some of that concentration across other countries, currencies and industries.
But offshore does not simply mean safer or higher-returning. Global markets can fall, foreign assets may be expensive, and exchange rates can move in either direction. Tax, product structure and permitted access also matter.
Local assets still have important roles. They may match future rand spending, provide exposure to domestic interest rates and avoid unnecessary currency mismatch. The suitable balance depends on goals, liabilities, time and the rest of the household position.
Try this now
Estimate your overall local and offshore exposure across investments, not just the fund names. Include global assets held inside local funds. Then list the currency in which each major future goal will be spent.
Ask your advisor
- What concentration problem is the offshore allocation intended to solve?
- How much of the result could come from currency movement?
- Which tax, exchange-control or product rules apply to the route used?
Geographic diversification reduces some risks; it does not remove market or currency risk.