Investors living in emerging markets should be looking to diversify a significant portion of their wealth into developed markets to protect themselves from economic and political instability and to gain access to a far wider array of investments.
Although global markets and currencies are volatile right now, if you’re serious about your financial wellbeing, it’s important to consider taking a portion of your investment portfolio offshore. It goes back to the advice of not keeping all your eggs in one basket. There are risks associated with keeping all your wealth strategies within the confines of your borders, especially if there is instability and a sound diversification strategy can achieve all types of benefits in terms of risk management.
Benefits of offshore investing:
- You gain access to other industries and strong companies across the globe
- The diversification benefits help to optimise your portfolio and reduce risk
- Developed markets can offer more stable growth, while rapidly expanding emerging markets can offer lucrative growth prospects
- Although currencies across Africa can be unpredictable, in the long-term they are unlikely to strengthen considerably in relation to main trading partners
- Having an offshore investment can ease investors’ concerns about economic or political instability. The reassurance of a ‘safe haven’ also tends to increase the commitment of staying invested for the long term.
A volatile local exchange rate is often one of the main reasons investors are skittish to invest internationally and many Africans don’t think they have the option to diversify. But the sad truth is that the only way to truly protect your wealth is to look outside of your borders. Now is the time to save assets and wealth in a secure environment if you have hard currency to invest.
“We generally advise our African clients to adopt the same approach to their investments as many investors in First World countries do – and that is to hold at least 40% of their wealth outside of the country in which they live,” says Scott Irving, General Manager Carrick Property. Investment options range from shares, unit trusts and exchange-traded funds to managed portfolios, structured notes, offshore bank accounts and property.
One of the key benefits of holding property offshore is having a tangible asset in a regulated and established market. “Offshore property is an extremely strong diversification tool and is considered safer and less volatile than other asset classes such as stocks and shares because it’s often less impacted by prevailing economic forces and political conditions,” says Irving. “Carrick Property is well-positioned to assist its African clients with investment in international real estate and has a number of exciting new developments on offer.”