Beyond The Break

I often have conversations with people who admit they’ve kept their long-term savings in the bank, usually for one of the two reasons:

1) investing in shares feels unfamiliar or overwhelming.

2) they think that bank savings alone is sufficient to grow their long term wealth.

Both views are completely understandable. Investing can seem technical, and banks feel familiar and safe. But the idea that long-term wealth can be meaningfully grown solely through bank savings is a common misconception. Investing doesn’t need to be difficult or exclusive, and understanding the role of different asset classes is an important part of making informed long-term decisions.

A common objective for most people (regardless of where they are in their financial journey) is to grow their long-term savings in a way that maintains or increases their purchasing power. In other words, it’s not only about how much money you have, but what that money can buy in the future. For your purchasing power to grow over time, your money needs to increase at a rate faster than inflation.

Having cash reserves, emergency funds and peace of mind are all important purposes that bank accounts serve. But for long-term savings, bank interest rates often move close to inflation (sometimes a little above, sometimes a little below). When this happens, your account balance grows, but your ability to buy goods and services does not meaningfully improve.

If I can use a very simplistic example to prove my point:

Let’s say you have R1,000 today, and that amount buys a typical basket of groceries.

If those groceries increase in price by 5% over the next year due to inflation, the same basket will cost R1,050. If your R1,000 earns 5% interest in the bank, it also becomes R1,050 after one year. In this instance, your balance is higher, but your purchasing power hasn’t improved because you can still only buy the same basket of goods as before.

For long-term savings, most people aim for more than that.

While no asset class is guaranteed to outperform in the future, equities have historically delivered higher long-term returns than cash and most other asset classes. This includes global markets and notably, US equities, which have been among the strongest contributors to long-term wealth creation over several decades.

This is why many investors choose to include equities as part of their long-term portfolios. (not instead of the bank, but in addition to it!)

For South Africans, offshore markets (especially the US) offer:

• access to some of the world’s strongest companies,

• diversified global sectors, and

• currencies that have historically strengthened against the rand over long periods.

Whether you're a potential client exploring offshore investing, a new client building your first portfolio, or an existing client wanting to deepen your understanding, our goal is always the same: to help you grow and protect your long-term savings.

If you’d like to learn more about building an offshore equity portfolio, we’d love to talk. Reach out to us anytime