Month: May 2020

Offshore Investing in the World of COVID-19

Offshore Investing in the world of COVID-19

Stephanie Bakhuis

Given recent events and the uncertainty around the world, queries about offshore investing are at an all-time high. Although COVID-19 certainly has a role to play, questions and discussions around investing offshore are always extremely topical amongst South Africans. This topic evokes emotion and brings up many questions, which if answered correctly, will enable you to make sound financial decisions in keeping with your long-term financial plan.

The Why

Why Should I invest offshore? Well, as South Africans, having exposure to offshore assets is essential for the following reasons: it provides protection against inherent risks in South Africa and the depreciation of the Rand; it helps to diversify investments, and it allows access to a greater range of opportunities to invest in.

The How

There are two ways in which you can invest offshore. The first is taking a direct route, which means that you physically buy offshore currency, for example, US Dollars. Once the money is in offshore currency, you can invest those US Dollars in various offshore investments.

The second is through asset swops or feeder funds. By investing via asset swops or feeder funds, your money never has to change from Rands to an offshore currency. It is the chosen investments of underlying funds that you choose that gives you the exposure to offshore assets.

Your Financial Plan

The big question is, does investing offshore make sense in terms of your Financial Plan? Direct versus asset swop offshore investing often has a different place in investors’ portfolios, and we often forget that many of us already have offshore exposure.

At Chartered, we separate clients investments into Retirement Assets and Surplus Assets.

With clients Retirement Assets, we aim to have the right balance between local and offshore exposure. This is based on expected future growth and the need to beat inflation in South Africa. This would be done via asset swops, because this money is needed to fund future expenses, and therefore needs to be flexible and liquid. Often bringing money back from overseas is costly and impractical.

With Surplus Assets, we tend to invest this money directly offshore. This allows us to buy foreign currency which will be held offshore and doesn’t need to come back to Rands. This route of investing is often seen as a kind of “insurance policy” for South Africans. In some circumstances, depending on the amount, you may need to apply for clearance.

Investing directly offshore is generally warranted with larger amounts given currency fees and the costs of investing offshore. Making use of asset swops can be a great opportunity to gain offshore exposure with smaller amounts.

The When

Is now a good time to invest offshore? It is a gamble to try and time currency because the Rand is volatile. We forget that the Rand went to more than R16 to the Dollar in 2016.

At the time, this seemed impossible. In 2020 we have gone from R14 to over R19 and all the way back to around R16.50 in a matter of a few weeks. At the time of writing, the Rand is back up to R17.20.

If we stay true to the long-term nature mentioned for Surplus Assets or Assets that are not needed over 10+ years, then what we pay for our US Dollars is less important.

Global markets are still trying to make sense of the virus, the impact on economies and the effect of all the stimulus packages seen around the globe.

With such uncertainty, both globally and locally, any investing should be done with extreme caution and in line with your Financial Plan. The decision should not be an emotional one. Now more than ever, professional advice is crucial to making the right decision for your long-term wealth.

For a more in-depth discussion on this topic, listen to our podcast.


Given recent events and the uncertainty around the world, queries about offshore investing are at an all-time high. Kim Potgieter and Stephanie Bakhuis delve deeper into the why, the how and the when of offshore investing, and how it ties into your Financial Plan.


The importance of a Financial Plan during uncertain times


Once again, our family congregated around the television for our President’s address last night, hoping that the rules may be relaxed a little further, even if just to be allowed to stock up on some wine, see some friends and possibly exercise in the afternoon. It looks like we will need to be patient until the end of the month.

My three sons and I have taken to playing golf during lockdown. We tee off at 4:30 pm every afternoon and play nine holes. Our games last 20 minutes in total, and to date, we have played 47 games. This golf is a little different to the golf we all know, and does not include beautiful fairways and manicured greens. Our holes are the base of the many trees in our garden, and the only club required is a sand wedge.

This time spent with my sons has allowed us to chat about the many aspects of Chartered Wealth. They see me enter my office at 8.30 and emerge again at 4.30, and wonder what it is I do all day.

I explained to them that the core of what we do is ensuring that every client has a RetiremeantTM Plan. You may recall your first meeting at Chartered and remember how, although you wanted to invest some money, we insisted that before you do this, we need to put a plan together. The purpose of the plan, simply put, is to understand what the money is for. In most cases, we work this out together in a life planning discussion. We then work out what return you need on your money to enable you to live the life you aspire to, and then ideally get your money to outlive you. Lastly, we try and understand your risk profile, and ensure that your money is invested appropriately . The critical work is the planning that follows – what we call reviews. I often tell clients that we plan as if that road through life is straight. However, along the way, we are going to experience unexpected events that will require revisiting your plan and adjusting it accordingly.

This Covid-19 virus is one of those unexpected black swan events. These events usually have a significant impact, not only on your money, but on your life too. We have all had first-hand experience of this over the past eight weeks. Our Retiremeant™ and Wealth Specialists have been working hard over this time, trying to reach out to each of you to ensure that your plan is on track and making the necessary changes. It is during these times that importance of a plan is evident as it helps us stick to the longer-term goals and not be distracted by the recent events.

The lockdown moved from a level 5 to a level 4 at the end of April, and with this certain businesses, including Chartered, were allowed to go back to work. However, we have decided that in the interests of our clients and our staff we will continue to work from home for the foreseeable future. We closed the business a week before lockdown when there were 65 confirmed cases and about five new infections a day. It is not prudent to now open our business when there are 12074 cases, and this figure is growing by almost 700 per day.

Thank you to all of our clients who have joined us in adapting to this new online world. Please contact us should you have any questions or concerns. Enjoy your exercise time and stay healthy.

Warm regards


Cash vs Equity – Which investment carries more risk?


There is no doubt that the year 2020 will go down in history for a number of reasons. When considering the stock market, it will never be forgotten. This year we saw one of the fastest and most aggressive equity downturns in the last 100 years, rivalled only by the 1929 stock market crash.

In late December and early January, the investment community began hearing rumblings of a virus in China that had local authorities slightly concerned. Most of us didn’t give it a second thought. By the middle of February, the virus, now known as Covid-19, had spread across the world, causing panic amongst health professionals and financial markets alike.

At one stage, a Bloomberg reporter said, “if it is listed on an exchange, it is being sold.” Not even Bonds, Gilts, Treasuries or Gold could escape the sell-off. Countries began closing their borders, and governments shut down business activity. Financial markets plummeted 30% or more as the global economy came to a grinding halt. It has been a stark reminder of how quickly equity markets can move against you. Many investors will be questioning the need to be invested in riskier assets. Is the risk worth the reward?

When asked the question “Which investment carries more risk – cash or stocks?” what would you be inclined to say? Stocks, most likely. The answer, Warren Buffett argued in a letter to his shareholders, is cash, hands down, without a doubt.

Many retirement investors think cash is a safer investment than equity. But, it should be the other way around. Due to inflation, a relentless force that destroys purchasing power, cash is the absolute loser.

The problem, Warren Buffet argues, is that investors, textbooks, and business schools incorrectly equate volatility with risk. While this makes for easy teaching, volatility is far from synonymous with risk, he says. Fluctuations in stock prices are not risk; they are opportunities. Risk should rather be defined as permanent loss of capital, caused by inflation. You cannot reverse inflation. But an investment in the equity market, while it may rise and fall, can reverse downturns, and yield a positive, real return. Buying publicly traded shares is not risk- free but avoiding stocks for the “safety” of cash is a mirage and dangerous for your retirement portfolio.

To preserve the long-term purchasing power of your wealth, investors need to generate a return that is equal to or preferably higher than inflation. In any given period, equities could underperform cash, but if your return requirement is more than cash can deliver, holding cash will guarantee that it falls short of this objective. With historically low-interest rates, investors need higher-risk strategies to achieve that required return.

In South Africa, however, over the last five years, cash has yielded higher returns than S.A equities. But over the longer term, stocks have significantly outperformed cash. We will never know for certain how equities might perform, but what we do know is that investing in cash will always cap your potential upside to no more than 2% above inflation.

A widely used stock market phrase says, “It is time in the market, not timing the market” that counts. It is often argued that for long -term investors, the most effective entry point is when headlines are gloomy, and the market is weak and cheap. Emotionally, this is easier said than done, and it is not easy fighting your cautious instinct. That is why, getting invested and staying invested through a balanced, globally diversified portfolio with a significant weighting to equities has consistently given clients a much better chance of preserving and growing their wealth throughout different economic cycles.

Your RetiremeantTM Specialist and Investment Consultant always take these factors into consideration when structuring your investments.


Money habits – Going back to Basics


We all have our own money story; we call this our relationship with money – this is shaped by our values, history, what our parents and grandparents taught us, experiences and general money habits. As Covid-19 has hit hard throughout the world, it may be a good time to sit back and try and understand what our relationship with money is, and whether or not this has changed over the last few months.

Do we have money habits that have been shaped by our history? Will these habits enable us to become financially free, or will they steer us into a never-ending money trap?

What if I told you six months back that Covid-19 was coming in 2020? That the stock market would be down 35%, and your salary would be cut by 20%? Would your money habits have changed, or would they be the same?

We’ve had numerous discussions with clients around this topic. On the one hand, clients have had to completely review their money habits – they have done a complete 180. On the other hand, we’ve had clients who have been unaffected, because they have ‘prepared’ themselves for black swan events such as this; they have not overextended themselves and know about every cent that goes in and out of their accounts.

In a time of panic and uncertainty, as is the case now, it’s extremely important that you go back to the basics and do a quick reflection about your own money habits. This will be different for each one of you, depending on which phase of life you are currently in.

Here are five tips to help you manage your money during this time:

  1. Take some time to revise or redo your budget – it’s vital that we understand what comes in versus what goes out and whether we are living within our means – we should be updating our budgets at least once a year, or when a material financial transition occurs.
  2. Remember to pay yourself first – you are investing in your financial freedom, and this should be on the top of the list.
  3. Pay off short term, high interest-bearing debt.
  4. Do not go into debt to maintain your lifestyle – this short-term gratification can have disastrous effects for your long- term goals.
  5. Last, but not least, don’t panic – although uncomfortable, it’s critical that we do not make emotional decisions and stick to our financial plan and investment strategies.

We are living in a time of chaos, and it is uncertain and uncomfortable for us all, but by understanding our relationship with money and tweaking our money habits (or even keeping the same), we can ensure we get through this pandemic stronger, and wiser.


If you knew six months ago that COVID-19 was coming, what financial changes would you have made? Wade Hoal and Kim Potgieter discuss money habits and tips to help you manage your money during this crisis.

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