CURRENCY
BY JAMES PAYNTER
Understand The Rand
Critical When Investing Offshore
O
ne of the most critical factors when
investing offshore is the exchange
rate. F i rst ly, because t he R a nd is
(unfortunately for us South Africans) one of the most
volatile currencies around, and secondly, because the
average person (in fact, more than 80% of us) gets it
wrong – time and time again.
We tend to sell when we should be buying (through
fear and panic), and we tend to buy when we should
be selling (through hope and greed).
Ask any offshore investment advisor or manager,
and they will conf irm that when the Rand is
relatively strong, investors are complacent and don’t
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Offshore Handbook 2014
want to invest offshore, when, in fact, they should.
And when the Rand has weakened substantially,
investors suddenly panic and rush to protect their
wealth by investing offshore, when they should
instead be looking to capitalise on the move by
converting some hard currency back to Rand.
This is human tendency, and it is because our
emotions play havoc with our rational thinking. It
is, therefore, imperative that we not only understand
the market we are trading in, but that we also
understand ourselves. Then, it is crucial to have some
strategy to counteract these natural tendencies to
make irrational, emotional decisions, so that we can,
instead, make rational, informed decisions.
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