International investing/saving

[Grieta Thanburg]

Hi there.

So I've been chatting to some friends about investing and one of my friends mentioned he "invested" in an offshore account. Here's the problem. What I know about finances and investing is scary.

It seems like an interesting idea to "invest" or rather save in a different currency. He linked me to https://www.fnbci.co.uk/current-account/index.html as an example of what he is using.

I'm not too clued-up, but with the rand deprecating, is something like this worth it? What are the tax implications?

tldr: What advice can you give me around non ZAR saving and or investments for small amounts like R 1k a month?

 

[Speedster]

Hi there.

So I've been chatting to some friends about investing and one of my friends mentioned he "invested" in an offshore account. Here's the problem. What I know about finances and investing is scary.

It seems like an interesting idea to "invest" or rather save in a different currency. He linked me to https://www.fnbci.co.uk/current-account/index.html as an example of what he is using.

I'm not too clued-up, but with the rand deprecating, is something like this worth it? What are the tax implications?

tldr: What advice can you give me around non ZAR saving and or investments for small amounts like R 1k a month?

Simplest is to open an Easy Equities account and buy some foreign index tracking ETFs such as MSCI world. Your investment will still be in Rand, but since it is tracking a USD index it is hedged against the rand. You effectively have a USD based investment even though you deposit and withdraw Rand.

 

[Digilus]

The other option - depending on the bank - is to open a Foreign Currency Investment account. (Some banks offer it) Basically like a savings account but in the currency of your choice (okay - limited choices - but the major ones should be supported). Then basically it is like a savings account, in that currency. You won't get great interest rates but considering the R/€ has deprecated about 12 % since Dec .. I've effectively earned 12% on the money I put in there. Yes, this counts towards your R1 mill allowance per year.

I just treat it as a savings account - instead of having like a short term fixed deposit sitting in Rands.

Other options would be a proper full on off-shore account (most require nasty minimum balances) - or the EasyEquities route as mentioned above. Until then I'm just building up a little non-Rand reserve fund (starting small)

 

[Tomtomtom]

I'm not too clued-up, but with the rand deprecating, is something like this worth it?

First untangle the difference between saving and investing.

Saving cash is good for emergencies but it's a bad way to store value over time - in any fiat currency. They are all inflated away by governments eventually.

And if you're saving foreign cash for emergencies you might want it to be in the form of banknotes. When things really go south the government finds ways to reach into your bank accounts.

When you invest in an asset (like equity, real estate, bonds...) the currency no longer matters, even if you continue to read the price in that currency.

What obviously does matter is the country of domecile of the asset, its market conditions and prospects etc. Then it's not the "Rand depreciating" that's what you're worried about but "South Africa declining". Then you're looking not for Dollars, but for offshore assets generally.

As it happens, Eskom's bonds have been quite profitable for international investors...

 

[Snyper564]

Also dont do this or any real investing if you have any debt otherwise you "funding" investments using existing debt

 

[Grieta Thanburg]

Also dont do this or any real investing if you have any debt otherwise you "funding" investments using existing debt

Let me ask this. Would it still be better to pay back a home loan first than to invest in something that does not devalue as quickly? I hope the question makes sense.

That's the only debt I have and will still have for a couple of years.

 

[Speedster]

Let me ask this. Would it still be better to pay back a home loan first than to invest in something that does not devalue as quickly? I hope the question makes sense.

That's the only debt I have and will still have for a couple of years.

I would focus on the home loan if it were me

 

[Snyper564]

I would focus on the home loan if it were me

I echo this, its a tough one to swallow though. The reality is if you invest you are essentially paying that investment using your HL.

Settle earlier esp with rising interest rates.

Use your flexi and you can pull it in an instant.

 

[Grieta Thanburg]

I would focus on the home loan if it were me

I echo this, its a tough one to swallow though. The reality is if you invest you are essentially paying that investment using your HL.

Settle earlier esp with rising interest rates.

Use your flexi and you can pull it in an instant.

Can't argue with the logic. The plan was to drop 1k a month into my HL and the other 1k into something else, but I guess, paying off the HL first is wise.

I already decided to change spending habits a bit and drop the 13th every year into the HL as that actually makes a noticeable difference as hard as it is to do. It does mean no new toys/cars/phones/anything else for a couple of years.

I am concerned that my money will be worth nothing in a couple of years unless we see some change, so that was the driving reason for the initial question, but like I said, I'm not great with finance so will take this advice.

Thanks for the input to everyone that contributed.

 

[Snyper564]

Can't argue with the logic. The plan was to drop 1k a month into my HL and the other 1k into something else, but I guess, paying off the HL first is wise.

I already decided to change spending habits a bit and drop the 13th every year into the HL as that actually makes a noticeable difference as hard as it is to do. It does mean no new toys/cars/phones/anything else for a couple of years.

I am concerned that my money will be worth nothing in a couple of years unless we see some change, so that was the driving reason for the initial question, but like I said, I'm not great with finance so will take this advice.

Thanks for the input to everyone that contributed.

Your actual approach as I did for many years is dump every single cent you have into your flexi.

Use your CC for cashflow only pay want you will settle that month.

Receive salary - Settle CC - Dump EVERYTHING into flexi.

Rinse repeat. Save hundreds of thousands if not millions.

 

[Jehosefat]

Let me ask this. Would it still be better to pay back a home loan first than to invest in something that does not devalue as quickly? I hope the question makes sense.

That's the only debt I have and will still have for a couple of years.

It's only worthwhile to invest instead of putting the cash into your home loan if you are confident that you can get returns after Capital Gains Tax that are better than your home loan interest rate.

So if you think that you can get 14ish%+ annual returns on average until your loan is paid off then investing is the better option. Otherwise, as everyone has said, just chuck it in your home loan at basically zero risk.