How To Invest Your Money Offshore As A South African | Money Marx
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- čas přidán 23. 07. 2024
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You’ve probably heard that as a South African, you need to diversify your investment portfolio by investing your money offshore, but seeing that this adds an extra layer of complexity, you may not know exactly what this means and how you can actually do it the right way.
Well, you are in luck, as in today’s video, I will explain exactly that. I will start by presenting the case for why you should consider investing offshore followed by how much of your portfolio would be reasonable to put into the offshore markets. I will then give you the three best strategies and platforms that you can use to optimize your returns, and compare each one with the other so that you can make an informed decision on which strategy will work best for you.
It is really important that you understand all the principles around offshore investing that I will cover today, so I would highly encourage you to watch through the whole video, trust me, your future self will thank you for it!
Chapters:
00:00 Introduction
01:12 Why should you invest your money offshore?
06:01 How much of your money should you invest offshore?
07:54 Strategy 1
12:05 Strategy 2
14:59 Strategy 3
17:19 Comparing the costs between the three strategies
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My name is Dr. Pieter Marx de Villiers, and I'm a Veterinarian turned Financial Advisor from South Africa who aims to retire by the age of 35. Follow me in my journey towards Financial Freedom in (hopefully) just 10 years! :)
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Pieter ek likes jou video. Everything is very easy to understand en jy is baie oulik 😊. I'm learning so much from you. Thank you for sharing your knowledge with us ❤
Great video! Thank you. We need this so much as South Africans investing offshore.
Thanks man! Glad it was helpful! :)
Thank you Peter. Keep up the good work!!
I liked this video after you said that I should smack the like button hahahaha
Haha thanks Shaun!
Thank you for sharing the information.
Only a pleasure Lebogang! :)
🖤🖤 Thank you so much for your hard work.
It's only a pleasure Seabelo! :)
Great video man, top.
Thanks man! Glad you enjoyed it!
Thank you Pieter :)
Only a pleasure Jackie 😀
Fantastic video! Thank you so much.
Your humour is excellent.
Thank you for the nice comment. Glad you enjoyed it!
Fantastic video!! Loving this series. Please make that interactive brokers tutorial soon!
Thanks for watching! Here is the Interactive Brokers Tutorial: czcams.com/video/gITZxNd_Iqk/video.html
Great video man
Thanks Mauricio! Glad you found it to be helpful! :)
awesome video!
Thanks Leeroy! :)
Pieter, jy het baie moeite ingesit in die video. Het gelik en sub vir die effort.
Dankie Erik, ek waardeer dit opreg! :)
Thanks bro
You're welcome :)
Excellent. Interactive Brokers is a very good option.
Thanks Jannie! IBKR is a bit more challenging to get used to, but once you are done with the registration process and figured out how to fund it, it is quite simple actually.
I would love to see a video on choosing ETFs to buy on IBKR, and why you have chosen VWRA. Thanks for all the great information!
Hey Teagan. That is an excellent suggestion for a video! I will probably make one in the future, but as to why I decided on VWRA, you can check this video in the meantime czcams.com/video/-10iIBnwITg/video.html
Good Morning Pieter. Great video. You have done your homework. Why is it not possible to fund IBKR account with rands and purchase foreign currency on their platform? I have attempted and failed. Regards Mike
Great video as always Grah.... I mean Pieter :P Can't wait to get to the point in my investment journey / nett worth to be able to push a sizeable sum of cash to ibkr.
Hahaha! It would be an honor if a mere peasant like me gets associated with the Great Graham Stephan! 😅 But jah, I do take loads of inspiration from his videos as clearly what he is doing is working really well! 😀 Jah IBKR becomes really useful if you have large amounts to invest at a time. I try to save up around R15k before I transfer it in order to dilute out the flat rates. But if you only have smaller amounts then the EE USD account will work just fine. The Estate tax only really becomes a problem after you have invested around $200k, which equates to roughly R3 million, so it is a great place to start. You can always also just transfer your positions from EE to IBKR once you are more comfortable with using the platform.
@@MoneyMarx you mention here that the estate tax only becomes a problem after you have invested around $200k, but in the video you said $60k - would you please explain the part I am missing here. I would really like to invest offshore directly to hedge against the rand long-term but I want to ensure I understand all the intricacies re tax, avoiding or reducing situs tax etc.
Hi Pieter! These videos are so helpful thank you! Just a question, you mentioned estate duty tax from the IRS, but this is the same kind of percentages apply to South Africa' estate duty tax if I'm not mistaken. I wanted to ask if there are any other downsides other than after your death for having an investment in dollars?
im shorting the south african market wish me luck
Okay eks laat maar het n vraagie, as ekt bele in n rand denominated offshore fund. Gaan die fluctuations tussen ZAR en foreign currency klaar ingebou wees in die mark prys wat wys of EE? So vir CGT doeleindes gaan ek nogsteeds net CGT betaal op die profits op EE?
Hi Money Marx
I find your content very helpful and simple to understand. Lekker man.
Would you be able to create a video of all the regulations that would apply if you as an individual would borrow capital from overseas to fund your business in South Africa? And what the steps would be. Thanks in advance! Keep up the great work!
Hey Frederick. Thanks man I appreciate it. Where do you want to borrow money from? Are you referring to getting funding from overseas venture capitalist? Or taking out loans from banks overseas?
@@MoneyMarx
Hello,
Yes, Venture capitalists or banks are possibilities to consider. The concept is to purchase rental properties at a reduced loan rate and repay the investor/bank. This could potentially open the door for the average Joe on the street in South Africa.
Bra you just gained a subscriber. My worry is rand to dollar exchange when investing in US market.
Thanks Gorden and welcome to the tribe! I continue to change my rands to dollars and invest in the offshore markets regardless of the exchange rate as I believe that it is important to hedge against the falling rand and diversify my investments overseas
This is a great video! Well done! I wanted to know if you any advice on setting up a will if you have investments on the IBKR platform (irish domiciled). Perhaps a future video?
Thanks Pieter for this informative video 👏🏽
If the average inflation rate of SA (for past 60 years) is 7.96%
and vanguard total world stock etf average annual return, since inception, is 7.8 %…
Is it a good idea to invest in the total world stock etf? Or better to invest in MSCI world etf that has had average annual returns of 10.8%?
Also, if we are an ‘emerging market’ and already by default heavily invested in SA, why do we need additional EM exposure?
If anyone could please share their thoughts…
Hey DeeCarli. Excellent question! The MSCI World is only focused on the Developed markets and seeing that the Developed markets outperformed the Emerging markets by quite a margin the past couple of years/decades, the MSCI World will by default yield higher returns. And if we concentrate even more on only the US markets, the S&P 500 and the Nasdaq 100 outperformed the MSCI World the past couple of years as well. This is all great to know about the past, but as we know, past performance is not a reliable indicator for future performance, so we cannot really say for sure of the US/Developed markets will continue to outperform the Emerging markets in the next decade.
SA forms part of the Emerging market yes, but only about 10% I think, so if you want to get exposure to other developing countries like China, most of Asia and South America, you will have to invest in some sort of ETF with Emerging market exposure.
It really depends how simple/complicated you want to make your investing strategy. If you want a simple, straightforward strategy then just go Vanguard Total World ETF. The markets do always go up in the long run, so you should be okay with this ETF. If you want to optimize returns, then you will have to use a combination of research, conviction and luck to decide which sector will perform the best in the future. With that said, you can't go wrong with the MSCI World or even the S&P500, as these are already very well diversified. It just comes down to your own preference and strategy. :)
I hear you. Thank you for your response
Hey Pieter! What type of Irish Domiciled ETF would you prefer - an accumulating or distributing one? With the distributing one, does the dividend received from the ETF become liable for income tax in South Africa?
Many thanks for your videos, they helped me greatly when setting up my IBKR account :)
Hey Ryan. Only a pleasure! :) I prefer the accumulating ones as they generally offer higher returns in the long run. Yes you will need to pay taxes on the dividends received from both ETFs, but later on when you sell your ETF holdings for a profit and you trigger Capital gains tax, your DWT can be written back as a tax credit. Distributing ETFs makes the whole tax calculation a bit easier, but for me personally, I opted for the higher returns as I am not doing my own taxes haha. I would strongly advise to appoint a good tax practitioner to file your tax returns if you decided to invest in the offshore markets, as there are many possible traps that you can fall into if you do it yourself. I opted for the VWRA ETF and will make a video in the future to compare a couple of the best options, but in the mean time you can check out this video which explains it quite well: czcams.com/video/-10iIBnwITg/video.html
@@MoneyMarx Thanks a million!
Nice video man.. Guy's need help.. Can you open a bank abroad without having to go there.. Thing is I want to invest in UK pounds and Euro and gaining interest monthly
What are your thoughts on going with offshore ETFS such as Nasdaq or s&p 500 for the TFSA as apose to only SA ETFs. Does it make a difference if you go for the offshore ETF within the TFSA or instead just in the normal investment account?
Hey AW. That is a good question and requires a video on its own to explain, which by the way is a great topic for one, thanks haha! But in essence, within a TFSA environment you wont pay tax on any local or offshore interest, local or offshore capital gains and local dividend withholding tax. But you will still pay tax on offshorr dividend withholding tax, which, if you are invested in the US, will be 15%. So In that case, you will only save 5% in local DWT which is not much. But over a long investment period where your investments will likely grow to a substantial amount, it is the capital gains tax that you will get klapped with when you sell your porfits. But luckily in a TFSA there is no tax payable on either offshore or local CG.
And as explained in this video, rand denominated offshore ETFs do well both when the share price increase znd when the rand weakens. And based on history, the rand will most likely continue to weaken against the dollar every year. So using this reasoning, offshore ETFs should grow bigger than local ones, and thus the savings on CGT will be much higher when you do decide to sell one day.
But if you are looking to score the most on DWT savings, then local ETFs will be better suited in a TFSA as then you get to save the whole 20%, not just the 5% as with offshore ETFs.
I hope this makes sense haha.
@@MoneyMarx Thanks for the in depth response! All males sense. I am holding for the long haul so it is CGT that I am looking to save on the most. And personally I trust the us/world market more than the SA market so I would prefer to go more into those ETFs with a smaller portion in the SA Etfs
Dankie vir die verduideliking Pieter. Antwoord wat ek nodig gehad het.
Hi Pieter.If we are concerned about the tax after passing away why not make use of investing in a company account which your family inherit?
Hey Buks. That is an option. If you have a large number of assets (property, cars, etc) then setting up a trust is also a good idea to save on taxes. I haven't researched this too much yet, but will probably make a video about it one day in the future.
@@MoneyMarx Setting up a trust is expensive.A pty ltd is cheap and quick
Please make interactive brokers content
Hey Sokhana. Will sure do :)
I've been trying to open account with them, it's so hard to do so their site is problematic.