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Author Topic: Going offshore  (Read 23856 times)

t_Rex

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Going offshore
« on: January 24, 2019, 06:56:47 pm »
Hello everyone

I am brand new to this forum, led here by the Investor Challenge blog (which I have recently discovered and am really enjoying!) I am a student from Cape Town trying to grow and diversify my savings and investments.

I'm hoping someone on here can help me with some tips regarding offshore investing.

Basically, I'd like to start investing in foreign currency denominated ETF's in small amounts on a regular basis, but am really unclear on the most practical and cost effective way of doing so. My search thus far has led me to the following conclusions:

(1) Locally-based platforms with international brokerage facilities (e.g. Investec, PSG etc) cater to the wealthy and have prohibitively high minimum account balances.

(2) I've looked at Easy Equities USD account. However, their fees seem quite hefty - 300bps forex spread + USD4 per trade + a value-based fee (correct me if I'm wrong).

I've also read about TD Ameritrade, Interactive Brokers and De Giro. Anyone with personal experience with these? How costly is it to fund one of these offshore accounts? Is a local foreign currency account a good way of doing so? What kind of costs would I be looking at if I wanted to fund an account with, say, the USD equivalent of R2000 monthly?

Any hints/tips/advice would be much appreciated! Hope somebody sees this!!!!!!!  :laugh: :'(

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Patrick

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Re: Going offshore
« Reply #1 on: January 25, 2019, 10:48:37 am »
Welcome t_rex. There are a bunch of smart people here, so hopefully you'll find the info you need.

I personally think the locally based options are too expensive. I have accounts with both DeGiro.ie and interactive brokers. I prefer interactive brokers but if you have under $100 000 De Giro will be cheaper. They insist that you have a European bank account. I managed to open one up through a friend and used that to make the initial deposit with De Giro.

I keep meaning to write a guide on this, but the lack of an easy option for a Euro based bank account is still a stumbling block. If you have >$100k then there's no issue as you just go to IB, but very few people have that.
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andre

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Re: Going offshore
« Reply #2 on: January 26, 2019, 11:00:13 am »
Quote
What kind of costs would I be looking at if I wanted to fund an account with, say, the USD equivalent of R2000 monthly?

Here's your biggest challenge. You have no way of transferring such a low amount cost-effectively - most FX options really only make sense over R100k
Swift will have a spread of 3-4% and along with the fee could eat as much as 10% off your R2k. Apart from that Interactive Brokers will charge you $10 per month (minus what you spend on commission) until your portfolio reaches $100k

Besides, the obvious question would be why do you want to invest directly in foreign currency? You could easily spend much more on fees than anticipated and unless you plan on eventually using USD/EUR directly it might be better to invest in low-cost ZAR based products which just gives you the global exposure. Something like the Satrix MSCI World ETF (0.33% TER) with Easy Equities .
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conradl

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Re: Going offshore
« Reply #3 on: January 28, 2019, 05:53:07 pm »
I wrote a long story on Sunday trying to put what I thought about your dilemma. @Andre put it concisely what I was thinking... You have to start somewhere and until its worth it only then do you convert to IB or a broker like that. I paid all those school fees but in hindsight I can't say I could have done different...
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