Football, or soccer as the Americans call the beautiful game, is known as the one truly global sport. It is estimated that the FIFA world cup finals in Russia will reach a global audience of 3.4 billion people. This is 45% of the world’s population. Of course, football mad countries like Brazil, England and Germany will have far higher percentages. But what would the playing field look like if the world’s economy was ranked by Gross Domestic Product (GDP) and tiled onto a football?
The United States of America still dominates the state of play with just over 23%. The total of the old world European economies is very similar to the USA and comes in at 23% as well. China being the new major economy on the block is the rising star and added together with its Asian neighbours make a powerful force of just under 28%. The three power blocks of North America, Europe and Asia are responsible for about 80% of the world’s economy. This does not leave much to go around for the rest of the world. South Africa features as a mere speck on the global football, coming in at 0.46%.
Viewing the world’s economy as a football and the realization of just where South Africa fits into the scheme of things, should be a massive wake up call for all investors. When you are able to invest across the spectrum of the major world economies, why on earth would you want to put virtually all your eggs in the basket that represents 0.46% of the potential playing field. The increased risks and lack of diversification mean that you are literally playing a high stakes pressing game of football that is not for the faint hearted.
Just like soccer is a global game, so the world’s economy is a global play. Economic events in one area of the field have a profound effect on economies on the other side of the globe. There are many ways in which investors can obtain offshore exposure for their hard earned money. There are also many options and investment destinations that are marketed to investors. Wise tactics to follow for South African investors, would be to diversify and invest offshore and also to take sound and proper advice as to the most effective products and underlying investments that would be most appropriate.
The start of 2018 has seen extreme volatility being experienced across global equity markets. This should be seen as an opportunity to accumulate long term positions in quality global companies. As renowned long term investor Warren Buffet said; why are equities the only game in town, where everyone buys when they are trading at a surplus and avoids the share when it is discounted and a sale is on?
Activ8 Capital Management has a wide range of offshore investment opportunities to offer investors. It is our firm belief that South African investors should carefully review their level of offshore exposure and how cost efficiently that exposure is obtained. Feel free to contact one of the Activ8 advisors and set up an appointment.
