×

We've got news for you.

Register on TimesLIVE at no cost to receive newsletters, read exclusive articles & more.
Register now

Investing: Now is the time to invest abroad

11 December 2011 - 03:16 By ADELE SHEVEL

Relentless global uncertainty means there are no safe havens for investors.

While this scares most people away, some have an appetite for risk and scour the globe for investment opportunities.

So how do those with the stomach for potential losses take advantage of the current turmoil?

Investors need to consider several factors. Keeping money in cash or a money market account may protect it, but it's unlikely to keep up with inflation. Most savers in SA are close to retirement, so people who have money to invest are not keen to take on risk.

Several experts say investment in established multinational companies is a good place to start. Investors should look at companies which are well established, have recognised brands, solid balance sheets and are flexible enough to move their revenue sources around the world.

Kevin Lings, senior economist at Stanlib, says one should invest in companies that are fundamentally solid and will be around for the next 10 years "and you're not worried about some short-term weakness".

Lings talks of Coca-Cola or Microsoft or Nestlé.

He suggests global brands, particularly those that are in the industrial space or whose products land on consumers' table.

He says investors should be careful of ploughing money into companies dependent on a single energy source, especially energy which could be replaced with alternative energy sources.

Alan Miller, head of Absa Investments, says there are opportunities in US equity markets with some good companies trading at attractive valuations, in many cases lower than their South African peers. "Although the short-term direction of prices is impossible to predict, these shares offer good potential for long-term capital appreciation," Miller says.

He would invest in General Electric and Pepsico, as well as Johnson & Johnson. Miller says South African investors can buy these shares using their offshore investment allowance. A simpler solution would be to invest in a South African unit trust that invests in international shares, he says.

Peter Brooke, head of Macro Strategy Investments at Omigsa, said South African shares are fairly cheap relative to property and bonds. And, with local inflation higher and interest rates still low, sitting on cash and doing nothing is an expensive option.

"A longer-term investor must be able to ignore the rampant noise in the equity markets. So, determine what's right for your personal risk/ return profile and your investment time horizon in particular," Brooke says.

"For the long run, you should buy equities because not only are they reasonably priced, but they pay dividends which are an important source of income and, if re-invested, can contribute handsomely to investment growth."

What the ordinary investor can do

Investor who put money in a 32-day notice account will find it eroded by inflation over time.

"You can draw comfort from the fact that you're protecting your income, but you are going backwards," said Kevin Lings, chief economist at Stanlib.

Investors could look for longer-term investments, such as one- or two-year bonds.

Instead of keeping the cash under the mattress or putting money in a bank's savings account, look at an income fund which should generate a better return. - Adele Shevel

subscribe