5 offshore investment myths South African investors need to stop believing

The process of offshore investing seems intimidating to many people, but the reality is far less complex than it seems.

In an increasingly globalised economy, South Africans are turning to offshore investments to increase their earning potential, while diversifying their portfolios and hedging against domestic economic risks. However, many investors remain underexposed to foreign markets. It is key to distinguish between the psychological pitfalls of investing offshore and the fundamental truths and characteristics of global investing. We hope that by giving an informed perspective, we can help investors stay focused on the long-term potential rather than the short-term noise. With a balanced approach, it is possible to manage risk while capitalising on the unique opportunities of global jurisdictions.

Human behaviour often proves to be a greater threat to wealth creation than market volatility itself. Many domestic investors, though well aware of the need for diversification, remain emotionally tethered to familiar shores; a phenomenon known as home bias. This stems from an overconfidence in the local market, driven by comfort and perceived control, even when structural challenges and long-term currency depreciation erode long-term value.

This is further exacerbated by confirmation bias, the instinctive search for information that validates pre-existing beliefs while dismissing data that challenges these narratives. For example, “offshore investing is risky” or “the rand always bounces back”. Endowment bias further compounds the inertia: investors assign disproportionate value to what they already own, perceiving local assets as inherently “safer” simply because they are theirs. Together, these biases create an illusion of prudence while quietly constraining opportunity. 

Let’s unpack some common myths that discourage investors from exploring opportunities in the foreign market.

 Myth 1: “Investing offshore is complicated and only for experienced investors.”

Fact: With the right partners and sound advice, the process can be straightforward. There are accessible structures that can accommodate both active and passive assets, making it possible to customise solutions for individual needs. Through local platforms, discretionary fund managers (DFMs) and regulated investment vehicles, investors can achieve international exposure without needing to set up foreign accounts and navigate foreign tax laws on their own.

Why it matters: Global diversification helps investors spread risk across economies, asset classes, and currencies. This reduces vulnerability to a single country’s economic or political dynamics. Keeping everything local may feel “simpler,” but simplicity can be deceptive; it concentrates your financial future in the hands of one government, one currency, and one country’s economic cycle. Offshore investing, done thoughtfully, isn’t about complexity, but rather about resilience. It’s important to keep in mind that investing in rand-based global funds does not mean your assets have been protected from sovereign risks, as the investment is still domiciled in South Africa.

 Myth 2: “Investing offshore is expensive”

Fact: Many offshore fund providers’ management fees are generally lower than their South African counterparts. Investors can access global markets through mutual funds, exchange-traded funds (ETFs), and model portfolios at competitive fees. Many platforms have brought solutions to market with lowered minimum investment amounts, making offshore diversification affordable and accessible. All these instruments can be cost-effective and are domiciled in reputable, well-regulated jurisdictions.

Why it matters: The idea that offshore investment is costly often prevents people from diversifying. In reality, the benefits – such as access to stronger economies and a wider opportunity set of leading global investment vehicles – can often outweigh the costs involved.

 Myth 3: “Offshore structures often include a significant additional tax burden”

Fact: When structured and disclosed correctly, offshore investments do not need to create unnecessary tax complications. South African regulations provide clear frameworks, such as the R1 million single discretionary allowance and the R10 million foreign investment allowance, making it straightforward for individuals to invest globally within the law. While more complex cross-border structures may warrant independent tax advice, most investors can access offshore opportunities without onerous compliance. Many global platforms will ease the tax burden for advisers by administering this within the respective investment product. From a Capital Gains Tax perspective, direct offshore investments can be more tax efficient when the rand weakens, as gains realised in foreign currency may translate into smaller taxable amounts in rand terms.

Why it matters:

Perceptions of administrative or tax complexity often deter investors from pursuing offshore opportunities, but these fears can quietly undermine long-term wealth preservation. By understanding and correctly applying the available allowances, investors can access global markets with minimal friction and greater confidence.

Myth 4: “It’s better to trust the local names you know – offshore providers can be less reliable”

Fact: Many of the world’s leading asset managers, custodians, and investment platforms are global institutions with decades of proven track records, have navigated rigorous regulations, and have strong investor protection mechanisms in place. These providers often manage the very same underlying funds that local platforms provide access to via feeder funds, just without the additional cost of applying the currency swap and local custodianship. Familiarity may feel comfortable, but reputation, governance, and performance history are far more meaningful measures of trustworthiness.

Why it matters:

Comfort with local brands can create a false sense of security, anchoring investors to a limited opportunity set. Recognising that quality and credibility exist across borders helps investors make informed decisions rather than basing decisions on sentiment alone. This reframes offshore investing from something potentially daunting into a natural extension of a well-constructed portfolio.

Myth 5: “Gaining access to offshore assets is difficult”

Fact: With proper planning and compliance, beneficiaries can access their offshore assets with peace of mind. Products like global endowments can be used to invest offshore in a way that increases estate and tax efficiency.

Why it matters: the belief that offshore money is “locked away” discourages investors from going global. Offshore investing is designed to be transparent and accessible, giving investors both flexibility and peace of mind.

An effective way to take the “emotion” out of investing is to start with a solid financial plan that considers the long-term goals, risk appetite, and time horizon of the investor. Having a well-defined plan provides a clear decision-making framework that helps the investor remain focused on their goals and avoid reacting impulsively to short-term market movements.

While issues such as political instability and economic challenges often justifiably prompt South Africans to explore offshore investments, it is also important to note that these concerns are not exclusive to our country. Offshore investing should be seen not merely as protection against local instability, but as a deliberate and strategic strategy to diversify against global risks while tapping into international growth prospects.

Closing remarks

Tapping into foreign markets enables investors to access global industries, desirable global currencies, and growth opportunities not found locally. Having a considered global allocation can boost diversification and strengthen financial planning outcomes. With the rand showing renewed strength, investors also have a valuable window to diversify globally at more favourable levels. While the decision to externalise shouldn’t be solely driven by currency timing, an attractive entry point can assist in driving shorter-term returns, while over longer periods, the timing becomes less important. Naturally, the greatest emphasis when making this decision should be placed on the strategic rationale for externalising and positioning client portfolios for forward-looking resilience.

* De Nysschen is the portfolio manager at Sanlam Investments Multi-Manager and Glacier Invest.

** This article does not constitute financial advice. Please consult an authorised financial adviser before making investment decisions.

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