How do I choose the correct investment advisor?

Choosing an investment advisor may be one of the most important decisions you make for yourself and your family. Taking the necessary time to choose an advisor who is professional, competent and trustworthy, and has specialist knowledge is important. When people say they specialize in everything, watch out, because no one can specialize in everything. Those who focus on a specialized area, will have more expertise, and will offer better qualified advice, than those who try to master a wide range of areas.

Another key question to ask is client workload. If an advisor has more than a couple of hundred clients, they may be spreading themselves too thin. Be thorough when selecting a trusted investment advisor. After all, you’ll be entrusting this person to help you turn your financial dreams into reality.

Why do I need to invest offshore?

Investing offshore allows you to access opportunities not available in South Africa. Some of the factors that may influence your decision to invest offshore include:

  • Spreading the risk – The cornerstone of any investment plan involves diversification – across assets, currencies and regions. Exposure to various world markets decreases overall risk. Exposure to mature markets – you gain access to a vast array of investment products available worldwide, and many are not offered in South Africa. South Africa’s stock market constitutes less than 1% of the world stock market capitalisation, and as such, by going offshore you gain exposure to various mature stock markets that invest in more developed sectors than on offer in South Africa, improving returns. This is achieved by gaining access to new markets and industries that are not available in South Africa. The performance of offshore investments, as with all your other investments, should be considered in light of a well determined long term time horizon.
  • Rand Hedging – This again reduces risk against the exchange rate volatility, and ensures your money is performing in more stable currencies.

How much should I invest offshore?

The two key decisions that need to be made for any investment portfolio are asset allocation (how you will split your money between shares, property, bonds and cash) and regional allocation (in which countries and currencies you will invest your money).

South Africa is responsible for around 1% of global gross domestic product and around 30% of our producer price index is imported. For private investors, the consensus of opinion is that 30% of one’s total assets should be invested abroad. The volatility of the JSE in recent years highlights the need for geographical diversification. Over-exposure to any one region is hazardous, and most advisors recommend a global portfolio, where risk is spread across several regions and asset classes.

If you have any further questions, please do not hesitate to contact us.