Many people think you need to be an Israeli, live in Israel and know Hebrew in order to invest in Israeli stocks, bonds or real estate. The truth is, you don’t. If you’ve thought about investing in Israel, or have considered it because of your faith, this information is for you. You can:
Open an Israeli investment account
By opening an Israeli investment account, you can invest directly on the Tel Aviv Stock Exchange, and buy Israeli stocks, bonds or mutual funds via phone or using an online order system. Israelis and non-Israelis may open an investment account in an Israeli bank or brokerage firm remotely from their own countries. These accounts may be self-managed or managed by professional portfolio managers. Many of these firms’ online trading platforms support English, so you’ll feel at home with the interface. The commissions are relatively low. Wise Money Israel writes about where to open an investment account and is dedicated to providing you with the practical information so that you can accomplish your goal. Wise Money Israel also offers investment advising and portfolio management services.
Invest in Israeli stocks on Wall Street using your existing brokerage account
There are a number of Israeli companies listed on Wall Street. You can buy their stocks on the NYSE or NASDAQ, in the same way you would with any other U.S. corporation. These American Depository Receipt (ADR) stocks trade in U.S. dollars, pay dividends, and for all intents and purposes are like all other stocks listed on those exchanges. To help you find them, Wise Money Israel has a list of the Israeli stocks traded on U.S. markets and their ticker symbols. Remember that investing in an Israeli stock on Wall Street keeps your money in the U.S. and in U.S. dollars (not in Israeli Shekels), which can lose value as the dollar erodes. Investing directly in the same stock on the Tel Aviv Stock Exchange places your money in Israel, and in Shekels.
Invest in an ETF or mutual fund of Israeli stocks
A few American Exchange Traded Funds (ETF) and one mutual fund buy only Israeli stocks. These funds provide a decent way to invest in Israeli stocks (not bonds), due to their diversification and ease of trading. Israeli stock ETFs on Wall Street are one way to see dollar-denominated returns while investing according to your convictions. These ETFs and mutual funds are not very liquid (little amount of trading daily) with relatively high management fees. They also don't give shekel-based exposure to the whole Israel market, and don't give exposure to Israeli bonds. By purchasing ETFs or mutual funds directly on the Tel Aviv Stock Exchange via an Israeli brokerage account, you gain the whole universe of 1,500 mutual funds and ETFs.
Use your IRA
You can purchase Israeli stocks, bonds, mutual funds or ETFs on Wall Street directly from your Investment Retirement Account. The advantage of doing this is that you get to defer the tax burden on your capital gains. Very few people know that you can use your IRA to open a foreign brokerage account and invest in foreign stocks, bonds and mutual funds.
Invest in Israel State Bonds in your own country
Israel Government bonds provide a steady income stream with virtually no risk of default. Israel bonds help Israel, are a useful means of portfolio diversification, and you receive a safe return on your capital. These Bonds are sold in many countries in the local currency.
The economic infrastructure of Israel is built through these bonds, so purchasing an Israel State Bond is contributing to the infrastructure improvement of Israel. This provides more jobs for Israelis, reduces poverty in Israel, and allows for continuing technology, agricultural and medical innovations that Israel has produced during its 60-some years of existence.
These investment grade bonds have durations from 2-5 years. You will be in good company because purchasers now include more than 1,700 labor unions, 1,800 foundations, numerous U.S. states, municipalities, corporations, insurance companies, associations, union pension funds, banks, financial institutions, universities, synagogues and private investors. Over 70 U.S. state and municipal public employee pension and treasury funds have invested more than $1 billion in these bonds. A whopping 50% of the U.S. states have invested in State of Israel bonds.
Interest rates are generally higher when purchasing the same type of Israeli government bonds directly on the Tel Aviv Stock Exchange, as there is no middle-man (the Development Corporation for Israel, that administers the purchases, is a private company), and your holdings will be held in Israel in shekels.
Buy an Israeli corporate or government bond using your brokerage’s bond desk
Some brokerage firms around the world have foreign stock and bond desks or departments that can purchase some Israeli securities on your behalf. Also, the State of Israel recently listed a $1.5 billion sovereign bond on the NYSE, making the Israeli government-backed debt securities available for trading on the NYSE bond market. The Israel sovereign bond matures March 26, 2019. The new listing will make the bonds available to additional investors and will amplify the trade volume. This marks the first time an Israeli bond has been listed on a regulated market in the United States. The bond will be traded under the ticker symbol “Israel.”
Typically, not all securities are purchasable through your brokerage's foreign desk - inquire as to whether the securities you're interested in can be acquired through your account. This is usually done via a brokerage-assisted transaction (each purchase/sale is accompanied by full-brokerage fees and transaction fees of $100 or more).
Invest in real estate
The Israeli real estate market has shown consistent price appreciation over time because of its special geopolitical circumstances and the mentality of the Israeli people. Israeli real estate can be purchased by foreign residents. If you are interested in owning Israeli property, check out our real estate section.
Still feeling the language barrier?
We’ve written about how to invest in Israel securities without knowing the language. You’ll find that there are some good Israeli capital market and financial websites in English. You can also check back regularly with Wise Money Israel to get updates, tips, ideas and help.
There are many ways that you can invest some of your portfolio in Israel without ever living in Israel. Opening a brokerage account remotely, Israeli stocks on Wall Street, ETFs and mutual funds, using your IRAs, State Bonds and real estate are all ways in which you can enrich your investment returns through international diversification.
Let us know what you think about investing in Israel by leaving a comment below or you can contact us directly if you have any questions.