Let me start by saying I’m not negative about South Africa’s long-term prospects and I would never encourage disinvestment in this country – quite the opposite.
What I do always encourage, though, is portfolio diversification – that old “don’t put all your eggs in one basket” adage.
The South African stocks market is quite undiversified compared to others – if a dominant player like Naspers drops on the JSE, there’s a ripple effect. This makes putting 100% of your investment into the local market risky.
There are of course risks in offshore markets, too, like the currency fluctuations you are exposed to. But broadly speaking, if you invest in a wider range of stocks and themes, you reduce your exposure to risk.
Having a portion of your portfolio invested offshore is a great way to diversify, and now’s a great time for South Africans to do just that for a few reasons.
South Africa is facing a lot of negative headwinds at the moment – at least in the short term – and yet the Rand has been quite strong since the start of the year, so it is an opportune time to get some offshore exposure.
