5 Offshore Investment Mistakes Costing South Africans Millions in Rand Depreciation

Want to know why your local investments are slowly bleeding you dry while you sleep?

I’ve watched countless South African investors make the same critical mistakes with their offshore allocations over the past decade. They think they’re diversifying internationally, but they’re actually setting themselves up for massive losses. The rand has weakened from R8 to the dollar in 2011 to over R18 today. Most investors are still approaching offshore investing like it’s 1994. They’re missing the technology boom, getting fleeced by fund managers, and have no idea how much purchasing power they’re losing every single day.

Today, I’m walking you through the 5 most expensive offshore investment mistakes I see South African investors making and exactly how to avoid each one.

Mistake 1: You’re investing offshore through expensive South African fund managers instead of going direct.

This destroys more wealth than any other single decision I see among South African investors.

Most people think they’re getting offshore exposure by buying into local funds with international mandates. You’re paying double fees and getting watered-down returns. A typical South African fund manager charges 1.5–2% annually, then invests your money into offshore funds that charge another 0.5–1%. You’re bleeding 2.5–3% in fees before you even start.

You could invest directly into a Vanguard S&P 500 ETF for 0.03% annually. Over 20 years, that fee difference alone costs you over R2 million on a R1 million investment.

Here’s the math:

• Local fund charging 2.5%: R1 million becomes R6.1 million over 20 years
• Direct offshore ETF charging 0.03%: R1 million becomes R10.8 million over 20 years
• Cost of using local fund managers: R4.7 million

Stop enriching fund managers and start keeping those fees for yourself.

Mistake 2: You’re still believing the JSE will outperform global markets “eventually.”

I’ve been called names for saying this, but the numbers don’t lie.

The JSE hasn’t outperformed the S&P 500, MSCI World, or Nasdaq in a single year over the past decade. Not one. Every year, local asset managers publish reports claiming “this is the year” South African markets will shine. They’ve been wrong for 10 straight years, and they’ll be wrong for the next 10.

While you’ve been waiting for the JSE to recover:

• S&P 500: 16.7% average annual returns over 5 years
• Nasdaq: 36% in 2023 alone
• JSE: 17% in 2023 (sounds good until you realise it still underperformed)

The JSE represents 0.5% of global market capitalisation. You’re limiting 100% of your equity exposure to 0.5% of global opportunities. Financial suicide disguised as patriotism.

Mistake 3: You’re using your full R1 million allowance on day one instead of dollar-cost averaging.

Here’s a mistake that costs investors hundreds of thousands: they get excited about offshore investing and dump their entire R1 million allowance into markets on January 1st.

Exchange rates are volatile, and timing matters more than you think. The rand can swing 20–30% in a single year. If you invest everything when the rand is strong (say R14 to the dollar), you get fewer offshore assets than if you’d waited for the rand to weaken to R18.

Use this strategy instead: Split your R1 million into 12 monthly investments of R83,333. This smooths out exchange rate volatility. You avoid the pain of investing everything at the worst possible exchange rate. Historical data shows this approach reduces your average cost by 8–12%.

On a R1 million investment, that’s R80,000-R120,000 in additional wealth just from being smarter about timing.

Mistake 4: You’re not maximising your spouse and children’s allowances (leaving R4 million per year on the table).

Most families are only using one person’s offshore allowance when they could be using everyone’s.

Here’s what you’re allowed to take offshore annually:

• You: R1 million discretionary + R10 million emigration allowance
• Your spouse: R1 million discretionary + R10 million emigration allowance
• Each child: R1 million discretionary allowance
• Family of 4 total: R4 million discretionary + R20 million emigration

I meet couples who’ve been investing offshore for 5 years using only one allowance. They’ve left R15 million in potential offshore exposure on the table. At 10% annual offshore returns, that’s R1.5 million in lost wealth every single year.

Set up investment accounts for your spouse and children immediately. Use their allowances to build a proper offshore allocation of 60–80% of your total portfolio.

Mistake 5: You’re keeping too much in cash and bonds instead of riding the technology wave.

The biggest wealth creation story of our lifetime is happening right now in technology stocks, and most South African investors are sitting on the sidelines.

I’ve observed investors transferring funds offshore and then investing them in “safe” options, such as offshore money market funds, which yield 2–3%. The Magnificent 7 tech stocks (Apple, Microsoft, Google, Amazon, etc.) have created more wealth in the past 5 years than the entire JSE market cap.

Here’s what conservative offshore allocation has cost you:

• Offshore money market (3% annually): R1 million becomes R1.34 million over 5 years
• Nasdaq 100 ETF (18% annually): R1 million becomes R2.29 million over 5 years
• Cost of being “conservative”: R950,000 in lost wealth

You didn’t move money offshore to earn 3%. You moved it to participate in global growth. Stop being afraid of volatility and start being afraid of inflation eating your purchasing power while you earn nothing.

Every day you delay fixing these mistakes, the rand weakens a little more, global markets move a little higher, and your purchasing power erodes a little further.

Don’t be the investor who wakes up in 2030 wondering why everyone else got rich while you stayed poor in rand terms.

The window is still open, but won’t be forever.