With so much uncertainty around global markets at present, now is the perfect time to diversify and add new ways of saving and investing to your basket.
The year 2021 is poised to be as tough a market as its predecessor, with many investors looking at ways to diversify their portfolios to hedge against inflation and volatile markets.
With budgets tightening and companies struggling to grow amid a worldwide pandemic, many South Africans will be looking at the best and most efficient ways to invest extra income this year.
From gold and commodities, to stocks and foreign currency, we look at some ways to diversify your savings.
And one of them may just be a great option for the present moment in time.
While the stock market is the go-to investment vehicle and has proven over time to grow consistently, 2021 poses some difficulties for the growth of companies amid the Covid-19 pandemic.
Gold, silver and commodities
For hundreds of years, gold, silver and other commodities have played a big role as stores of value during times of market stress. Gold is considered scarce, a portfolio diversifier, has a long track record and is a hedge against inflation.
Investing in gold though also comes with its risks, such as losing capital. Investors should only trade in gold if they are well versed on the risks associated with this type of investment.
One of the best ways currently on the market therefore to save is in investing in foreign currency.
There are many reasons presently why investing in foreign currency makes sense for your short, medium and long-term goals. These include
- A large, liquid market
- Portfolio diversity
- Hedge against volatility
- Costs, fees and trading times.
In times of market stress, such as during a pandemic, investing in foreign currency can act as a hedge against uncertain markets. It can also be a great way to diversify your investment portfolio.
Like all investments, there is some risk too. Foreign currency fluctuations could be subject to the decisions of Central Banks in their respective countries. This could impact the value of your Foreign currency investment, which could fluctuate higher, but also pose a loss risk.
Many established institutions and banks in South Africa offer safe and less time-consuming options for everyone to invest in foreign currency.
For one, Nedbank's foreign currency account (FCA) allows clients the ability to diversify their investment portfolio through investing in foreign currency.
Perks of a foreign currency account
With the Nedbank FCA, you can invest in up to eight international currencies, giving you the ability to hedge against adverse market fluctuations.
At a minimum investment of R1500, the FCA allows investment of up to R11 million per year in the US Dollar, British Pound, Euro, Japanese Yen, Australian Dollar, Canadian Dollar, Hong Kong Dollar or Israeli Shekels.
Some of the other perks of the account include:
- saving in order to invest offshore;
- hedge against adverse currency fluctuations without moving funds offshore;
- transfer from your foreign currency account to a travel card, and visa versa;
- Rand proceeds are transferred to a Nedbank transaction account (for Nedbank clients);
- A functional app that allows you to view balances and transact.
No monthly service fees
Unlike other currency accounts currently on the market, the Nedbank FCA charges no monthly service fees, no fees to transfer between the FCA and a current account, and only 2.1% commission for transfers between the FCA and a travel card.
There have been few better times to diversify your savings strategy by investing in foreign currency, for both Nedbank and Non-Nedbank clients alike.
Non-Nedbank clients interested in opening up a FCA can do so by first opening a Pay As You Use transactional account - a no-frills transparent account with zero monthly fees and free Gold cheque card, allowing clients to pay only for what they use.
To learn more, go to Nedbank.co.za, and apply online or using Nedbank's Money app to open a foreign currency account today.
This post was sponsored by Nedbank and created by BrandStudio24 for Fin24.