Wendy Myers | Head | Securities | PSG Wealth | mail me |
Many people tend to default to investing in the JSE because they are familiar with these listed companies. However, this limits the diversification benefits that come from investing in offshore shares.
Diversification across economies, political jurisdictions and asset classes is achieved when a portion of total assets is invested offshore. This strategy often results in a portfolio that has greater resilience to global macroeconomic events.
In economic diversification, returns are not tied to the performance of a single market. Political diversification works similarly but focuses on reducing a portfolio’s exposure to one country or political jurisdiction. This helps investors navigate inherent political risks, which are often reflected in a country’s currency.
To limit Rand exposure, consider investing in offshore shares, as this reduces currency risk and enhances investment returns. It also allows access to a wider range of global opportunities. By doing so, investors can protect their portfolios from localised downturns, benefit from currency diversification, and achieve more stable long-term growth.
Unpacking asset class diversification
While about 400 South African companies from different sectors are listed on the JSE, offshore markets provide access to thousands of global companies unavailable locally.
For perspective, the MSCI World Index includes 1,429 global companies, and the World Federation of Stock Exchanges lists roughly 58,200 companies worldwide. By adopting a global outlook, investors can diversify portfolios and access industries and innovations that are not available on the JSE. Investing in offshore shares, therefore, opens doors to opportunities that would otherwise be missed.
Artificial Intelligence (AI) is a clear example of how South African investors can benefit from including global companies in their portfolios. The rapid progress in AI began in the late 2010s and gained international prominence by the early 2020s. As chatbots went viral, governments began taking AI risks seriously, and the public started understanding its true potential.
Fast-forward a few years: big tech giants are in fierce competition to outperform each other in AI. In 2025 alone, the US’s largest tech companies invested $155 billion in AI development. This exceeds the amount the US government spent on education, training, employment and social services combined in the 2025 fiscal year to date.
There is no sign of slowing down. Quarterly financial reports for Meta, Microsoft, Amazon and Alphabet (Google’s parent company) show that these companies’ year-to-date capital expenditures already total tens of billions of dollars each.
The meteoric rise of AI has created a new frontier for global investment. Local investors need to ensure their portfolios include exposure to such companies to benefit from these growth opportunities.
Offshore investing key to managing concentration risk
Diversification limits the negative effects of market fluctuations, enabling investors to achieve more stable returns in times of crisis. It also helps optimise investment outcomes by creating opportunities across sectors and regions. Sector diversification lowers portfolio risk because different asset classes perform well at different times.
If one business or sector fails, investors with diversified portfolios will not lose all their money. Having a variety of investments with different risk profiles balances overall portfolio risk.
Investors aiming for long-term success should work with an adviser. A financial expert can help with global diversification and guide investors in investing in offshore shares to protect and grow their wealth.
