The COVID-19 pandemic has wrought havoc on the global economy and investors are now facing serious challenges. The foremost of them is the uncertainty that comes from the great levels of volatility in all markets. Therefore, if you want to secure your future today, you need to choose what to invest in with extreme care. Options that are traditionally considered “safe havens”, like real estate, are also floundering today. Investing abroad is definitely the safest way to go for South African citizens. But when doing so, one must be aware of the losses incurred due to the foreign currency exchange (FX or forex) rates.

Reasons to Invest Abroad in the Post-Coronavirus World

Whether you invest in stocks, properties, or businesses today it’s best to look into the options abroad. South African economy has always been high-risk. But today the level of that risk has skyrocketed due to the devastating effects of the coronavirus pandemic. Right now, it seems that the market is recovering because the Rand is getting a little bit stronger. However, one mustn’t forget that in January it was the weakest currency in the world. Also, The South African Rand lost over 20% of the marketshare to the US Dollar when the pandemic started. All in all, the outlook for the South African economy is grim. The global economy as a whole is expected to go into a depression as the GDP contracts. As to South Africa, this process has already started. Moreover, it’s inevitable that the situation will get worse as the aftershocks of the pandemic’s economic impact will settle. Therefore, investing abroad is the only viable strategy for getting through this crisis. This isn’t a perfect solution because due to global economic volatility any kind of investment has become riskier. However, while there are some reasonably “sure” possibilities abroad, there aren’t such options in the domestic market today. But when becoming a global investor one must take into account the matter of currency. The volatility is affecting forex markets as well. Therefore, investors get a larger-then-usual dose of currency risk exposure.

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The Matter of Currencies and Forex

The biggest of all is the exchange rate issue. Simply put, FX rates fluctuate all the time. However, when the situation is as volatile as it is today, they become extremely unpredictable. If you are investing abroad, you need to understand that some part of your returns will be lost by default because of the currency exchange. You’ll need to convert Rand to some other currency in order to invest it in a different country. Then, you’ll have to do the reverse to use your returns in South Africa. The exact number of times you’ll need to exchange currencies will depend on your investment and general money management strategy. But no global investor can avoid doing this completely. Therefore, you are always exposed to FX risks. This means that you might lose all your returns and suffer losses on top of it if the FX rate shifts unfavorably. And the probability of this is high in the volatile global forex market of today. Moreover, even if you aren’t investing abroad, you are at risk now if you hold your savings in the Rand. As mentioned before, the Rand has not merely weakened but crashed this spring. Therefore, the value of all savings in this currency has gone down as well.

How to Cut FX Costs When Investing Abroad

Regardless of the money you lose due to foreign currency exchange, investing abroad is still much safer and more lucrative overall. However, the fact that you can’t avoid some losses due to FX rates doesn’t mean you can’t minimize them. In order to do this, you’ll need to choose the right kind of money transfer provider. Whether making payments for stocks/properties or converting your savings into different currencies, people usually go to banks. However, banks charge large fees and offer rather bad FX rates. Therefore, using a bank, you might lose up to 7% of every transaction. South Africa doesn’t have it as bad as some other regions of Africa where a transfer might cost up to 20% of the transfer volume. However, even 3% is a big loss for a private global investor. The solution is to use the services of the so-called FX or online money transfer companies. These services appeared specifically to provide cheap international money transfers. The demand for those in the globalized world of today is extremely high and these companies make their money off the volume of transactions they process. Therefore, it benefits them to keep their rates low to attract more customers. Using FX companies allows you to cut international money transfer costs to 1% and even less. The exact cost will depend on the company, currency pair, and mid-market FX rates. The main benefit of these services is that they use very low FX margins, which allows you to get a much better FX rate compared to banks.

What FX companies are available in South Africa?

However, there’s a catch for South African investors when it comes to these services. The problem is that while these providers are global, they don’t offer the same level of service everywhere. As such, only a handful of the 60 leading companies accept clients from South Africa. This is caused by stringent government regulations for all financial businesses and institutions. Therefore, people in the US, Europe, Australia, and even most of Asia have a lot more options to choose from. The leading FX company working in South Africa today is Currencies Direct. It’s also one of the top three providers of these services in the world. The company is truly global and has the largest number of offices globally. It supports 39 currencies at the moment and charges absolutely no fees for any transfers. Therefore, not only is it one of the most trusted services, but also one of the most affordable as well. When shopping around for an FX company note that you should consider not only the cost of the transfer. These companies also offer hedging tools as well as guidance on how to use them. These services can help you minimize your currency exposure risks by using forward contracts, options, etc. Therefore, be sure to study the FX company and its service packages thoroughly. This way you’ll be able to pick the best one for your personal situation.

Best Investment Opportunities Today: Currencies, Stocks, and Property

Currency

There is a way to protect yourself from losing your savings in Rand and it’s to have your savings in other currencies. But the trick is to choose currencies that will avoid crashing despite any global economic volatility. Usually, the USD, EUR, JPY, NOK, GBP, and CHF are considered the most stable. Unfortunately, the latest crisis affected even them, albeit to a lesser degree. Bear in mind that while forex market volatility increases risks for all currencies, holding your savings in the top stable ones is still a much safer option. At the moment, the USD remains the world reserve currency. Therefore, it’s basically immune to rapid devastating crashing even in spite of the US economy struggles. However, some experts say that the EUR might use the opportunity presented by this crisis to take a more prominent role. But it’s unlikely that the USD will be moved from its top spot anytime soon.

Stocks

Some industries have not only started to recover but are growing after the great stock market crash of 2026. But this is mostly happening in the countries with developed and string economies. For example, even despite the volatile economic situation in the country, some of the US stocks are doing really well. Tech companies are doing the best today, especially the ones developing remote work solutions and at-home entertainment. The healthcare industry stocks are also on the rise. Manufacturers of disinfectants and telehealth solutions are the most promising at the moment. Of course, pharmaceutical companies that are trying to create a cure and vaccine for coronavirus also get excellent funding. Energy companies, on the other hand, aren’t doing so well. They used to be seen as a safe bet for investors, but the energy industry is struggling with a crisis of its own. It’s expected that these stocks won’t make a full recovery for years.

Properties

Investing in real estate is a good idea even now. But you need to take into account that the pandemic has changed the world. Therefore, the fastest-growing sectors of commercial urban properties and recreational real estate in popular tourist spots are now almost dead. Residential housing, however, is still in demand. And the need for rental apartments will increase because a wave of foreclosures is sure to hit soon. This investment sector doesn’t provide very high returns. But it’s an excellent long-term investment that offers security.

Bottom Line: Investing Abroad to Secure Your Future

The best way to secure your fortune right now is to diversify your portfolio. And it’s even more important to invest in stocks that are low-risk. This means investing abroad in the countries that have bigger and more stable economies, such as the US, European countries, Australia, or Japan. Moreover, you shouldn’t limit your portfolio to a single type of investment. Instead, buy stocks and properties, as well as strong currencies. The more options you have, the lower is the risk that the next global economic crash can damage you irreparably.

Frequently Asked Questions

How do I invest internationally? By buying shares of foreign companies. How can I protect my assets and avoid huge forex costs when investing abroad? Read our guide on Investing abroad and how to protect your assets. Can South Africans invest abroad? Yes, the can. Does Covid-19 have an effect on investing money abroad? Some countries have placed restrictions on incoming investments Why do people invest abroad? To spread their investment risk among different companies and markets.