Stepping into offshore investing for the first time can be daunting, but also very exciting. The scope of investment opportunities compared to the JSE is simply immense. Offshore investing is not necessarily about chasing higher returns but getting access to a vast array of global investment opportunities. South Africa’s economy accounts for less than 1% of the global economy. It stands to reason that global investing enables South Africans to invest in the other 99%. If someone lives in any country other than South Africa, they would likely invest very little of their assets in this country.
The liquidity in large listed global companies dwarfs the trade on the JSE. To put this into perspective, Apple shares trade more by value every hour in the US than the entire JSE trades by value in a day. Looking at it another way, the JSE’s total market capitalisation of US$1.4trn is only c. 38% of Apple’s market capitalisation of US$3.8trn.
Numerous captivating investment themes are globally accessible, but are barely available to JSE investors, if at all. Themes such as AI, cloud computing, semiconductors, electric vehicles, autonomous vehicles, robotics, cybersecurity, biotech, and defence are just a few examples of what global investors can tap into.
The ability of global tech companies to scale quickly is unprecedented. Previously, brick-and-mortar companies would grow slowly, piece by piece, over many years. Often, global diversification would be almost impossible for these companies to achieve. However, tech companies seem to speak a common language everywhere in the world. An innovative piece of software can be sold anywhere in the world. Imagine being shut out of investing in these world-class, global tech companies?
No matter where you reside, there is immense value in diversifying your assets geographically. No single country or region can maintain a top performance indefinitely. By diversifying geographically, you can smooth out investment returns and the emotional ups and downs of investing. There is almost always a bull market somewhere in the world at any given time. Moreover, individual currencies can be volatile. Global investing can help mitigate the fluctuations between different currencies. With a truly global portfolio, you are likely to sleep far better at night, knowing your investments are spread across the world.
