The following bonds are all rated A- or above by the international rating agencies, and like all bonds, guaranteed principal and interest payments per its payment schedule. Bonds on the Tel Aviv Stock Exchange, using an Israeli brokerage account, can be purchased and sold online, with very low commissions, just as stocks are purchased.

There are three types of interest-rate payments for Israeli bonds: fixed-rate, adjustable-rate, and inflation. Learn more about the differences in our article Solid Bonds - Higher Yields. The Duration of the bonds below is relatively short, so you're less exposed to bond price fluctuation due to interest rate changes.

When purchased during U.S. business hours, there are no bond minimums (you can buy a single bond for $1), and it can be sold before maturity during any trading day (need not hold until term). Contact Wise Money Israel for more information on how to invest in these Israeli bonds.

We think the opportunity to invest in Israel, gain exposure to the shekel and economy here, and make 8% annual return on your money from solid bonds is an opportunity not to be missed.

Learn more about opening an Israeli brokerage account remotely here.

Update [Oct. 3, 2014]: Please note the table below, especially yields, were listed as of the writing of the article in February, 2012. Obviously prices and yields change over time, so the yields are not correct anymore. Please check with the Tel Aviv Stock Exchange website or Wise Money Israel to obtain current yields.

Many of the bonds yielded above 8%/year during this period. Therefore current yields are lower. Please see this Hebrew-translated chart to see what the bonds below yielded between Feb. 24 2012 and Oct. 3, 2014

Click to Enlarge: Historical yield of selected bonds

The post Earn 8%+ with Israeli Bonds appeared first on Wise Money Israel.

One suggested way to do this is to add bank bonds. Bank bonds issued by the top two Israeli banks (Bank Leumi and Bank Hapoalim) are highly-rated by the Standard & Poor's rating agency (A+ to AA+). These bonds typically give 1% extra yield over their government bond counterparts, factoring in that they are corporations and not the government. So, by augmenting your portfolio with bank bonds, you increase the overall yield. While the leading Israeli banks are limited liability companies, and can theoretically delay or default on interest or principal payments, the chances of an Israeli bank defaulting are slim. Even in the recent global banking crisis of 2008-2009, Israeli banks didn't default on their bond payments or go bankrupt, and therefore did not require any bailouts.  Their international sub-prime mortgage loan exposure was low due to the strict banking regulatory environment, and such risky loans didn't even exist (and still don't) in the Israeli real estate market. The Government of Israel also gave an implicit backing of the banks to indicate to the markets that Israel wouldn't let it's banks fail.

Bond types

There are three primary types of corporate bonds: fixed-rate, adjustable-rate and inflation-indexed. Both Bank Leumi and Bank Hapoalim offer bonds from each type.

Fixed-rate bonds tend to yield the highest levels of interest, but are more subject to price decreases when interest rates rise. Long duration fixed-rate bonds should be avoided if you plan to redeem your bond before full-maturity.

Inflation-indexed bonds adjust according to the Israeli Consumer Price Index (CPI). Israel's current inflation rate expectation is 3%. Therefore, when you buy an inflation-indexed bond, you receive the listed interest rate (such as 3.5%/year) plus the inflation index (for example, 3%/year). In this case, your annual effective yield would be 6.5%.

Adjustable-rate bonds pay a variable interest rate, depending on what the government interest rate is at the time. For example, if you purchase an adjustable Bank Leumi adjustable-rate bond listed at 3.6% now, and three months from now the Bank of Israel raises interest rates by 1%, your bond will pay you interest at the rate of 4.6%. This continues during the whole life of the bond. As we're experiencing historically low interest rates globally, experts believe the only reasonable direction for interest rates to go is up. Currently, the Bank of Israel interest rate is 2%, but we could easily see it at 6% in a few years time. At that time, the same bond would pay a 9.6% yield yearly. Therefore, adjustable-rate bonds are recommended by many experts today.

Ratings

There are two internationally-recognized bond rating agencies that examine Israeli companies' ability to repay their debts: Standard and Poor's and Moody's. Listed below is the meaning of each of their rankings. The S&P's rank can add a fine tuning of + or -; Moody's can add a fine tuning of 1,2 or 3 to better rank a bond within a specific category.

If you would like Israeli bonds in your portfolio, please contact us.

The post Solid Bonds – Higher Yields appeared first on Wise Money Israel.

Some investors purchase only stocks, whose prices can be volatile, with no guarantee of gain and no safety net for capital loss. Others purchase only government bonds, missing out on the higher yields of corporate bonds. Most investors are not familiar with the convertible bond which is yet another bond type that can be very profitable. It carries the upside of stocks without as much associated risk.

A convertible bond is a corporate bond with regular, guaranteed interest and principal payments, but with a kicker: this bond can be converted, if the holder desires, to stock of the same company. This option on the stock allows the bond price to vary with the price of the stock, without the possible downside of owning the stock and riding its volatility. If the stock price goes up, the price of the bond goes up, and the bondholder can convert his bonds to stock to continue the ride upward.

But, the bond need not be converted to profit from the rising of the stock price: the bondholder can enjoy the price appreciation and continue to receive interest and principal payments. Israeli convertible bonds are liquid and traded on the Tel Aviv Stock Exchange, so capital gains on convertible bonds can be realized virtually at any time by selling the bond.

Here are a few Israeli convertible bonds to consider:

• Ogen Yielding Real Estate: Real Estate and Construction (76% stock gain YTD)
• British-Israel Investments: Real Estate and Construction (34% stock gain YTD)
• Delek Group: Investments in energy, car import and finance (35% stock gain YTD)
• Space Communications: Satellite communications (16% stock gain YTD)
• Scailex Corporation: Communication and media - Orange Israel cellular telephone carrier parent company (12% stock gain YTD)

If the company's stock price goes down, the convertible bond suffers much less in price, and interest payments and principal are still paid on the full amount promised. Thus, if the bond is held to maturity, there is no downside to the originally promised Yield to Maturity (YTM).

This gives the convertible bondholder the potential upside of a stock, while providing the downside protection of bond interest payments with the principal guaranteed. The worst case, usually, is that the stock price doesn't rise (although a convertible bond can go down in price just like any other security), and then the bondholder receives the agreed upon regular interest payments. The best case is that the stock price rises, and the convertible bond price rises with it. In this way, a solid bond can make double-digit returns without the risk of owning stock (with double-digit loss potential).

For a more full explanation on convertible bonds, and more details about which Israeli convertible bonds can be the most profitable, please contact Wise Money Israel.

The post Stock Gains with Bond Safety: Convertibles appeared first on Wise Money Israel.

Two financial vehicles that can help us are government and corporate bonds that are linked to the cost-of-living index. This type of bond provide a steady stream of income while interest payments and principal increase lock-step with inflation. The link to the cost-of-living index provides peace of mind, knowing that our buying power isn't being eroded by inflation. Before each interest and principal payment is made to the bondholder, the payment is automatically adjusted to the Israel Consumer Price Index (CPI), the inflation gauge. Specifically, the government of Israel offers such a bond: the Galil Bond. The current yield to maturity on a 4-year Galil bond is 0.3% annually above inflation (effective yield is 0.3% + 3% inflation expectation = 3.3% per year), and on an 11-year Galil Bond is 1.8% above inflation (which translates to a 4.8% effective yield per year).

Another relatively safe inflation-hedge is buying indexed corporate bonds. Solid investment-grade indexed corporate bonds usually provide a better rate of return than indexed government bonds, with some more risk. Their payments are indexed exactly the same way as indexed government bonds. Here are some corporate bonds you can look into:

Ratings

There are two internationally-recognized bond rating agencies that examine Israeli companies' ability to repay their debts: Standard and Poor's and Moody's. Listed below is the meaning of each of their rankings. The S&P's rank can add a fine tuning of + or -; Moody's can add a fine tuning of 1,2 or 3 to better rank a bond within a specific category.

If you would like a portfolio with indexed bonds, please contact us.

The post Avert Future Inflation with Indexed Bonds appeared first on Wise Money Israel.

Investing choices can be boiled down to one axiom: "No Risk, No Gain". All investment options are placed somewhere on the risk-reward spectrum. The more one risks (larger ups and downs on one's invested funds), the more one stands to profit (or lose). Generally, the less one risks (less willing to see ups an downs on the value of one's investments), the less one can profit in the market (but you are mostly protected from potential losses).

Each investor must determine for himself what his comfort zone is for risk and reward before investing in any market, whether it be the stock, bond or the real estate market. Some of us want to have the security that all our money is safe (that its value won't decrease over time), and that we have some upside to make profits. Others want our money to make us a higher profit, and are willing to take more chances to achieve that bigger reward.

Below, you'll find a list that categorizes Israeli investment options based on their risk level. Investors that have many future years to accumulate capital (i.e., younger investors and those still earning income) likely can take more risk with their capital so as to benefit from higher returns. They are willing to invest in stocks, for example, as these usually have a greater potential for high annual returns compared to government bonds. The more speculative investments listed below may be suited to them.

Often, a combination of asset classes will provide proper diversification and the correct balance of risk vs. reward.

Here is a list of financial vehicles offered on the Tel Aviv Stock Exchange, starting with the most solid choices (least volatility, least risk), to the more risky vehicles that present the greatest chance of growth and profit.  The less risky investments ("solid") will more likely preserve your capital with some profit potential. All of these investment instruments can be purchased online from an Israeli investment account.

Solid: low risk

Government bonds

• Fixed interest rate
• Adjustable interest rate
• Inflation-indexed
• Short-term Treasury bills

Highly-rated corporate bonds (AAA, AA, A)
Bond mutual funds

• Government
• Corporate
• Mixed

Bond Exchange Traded Funds (ETF)

Solid: moderate risk

Lower-rated investment-grade (BBB) bonds and not-rated corporate bonds
Convertible Bonds
Structures

Somewhat Speculative

Stock Exchange Traded Funds (ETF)

• Market index-tracking funds
• Sector funds

Stock Mutual funds

Speculative

Individual stocks
High-Yield Bonds
Tel Aviv Index Options

Highly Speculative

Warrants
Futures/forwards
Currency and commodity ETFs
Currency trading

Contact us for assistance or direction in investing in any of these investment types in Israel.

The post What Are My Investment Choices? appeared first on Wise Money Israel.

Suggested adjustable-rate corporate bonds

Current Yield to Maturity and other information for various Israeli corporate bonds can be found at the Tel Aviv Stock Exchange English website here (expand the table to see all the columns).

Ratings

There are two internationally-recognized bond rating agencies that examine Israeli companies' ability to repay their debts: Standard and Poor's and Moody's.  The S&P's rank can add a fine tuning of + or -; Moody's can add a fine tuning of 1,2 or 3 to better rank a bond within a specific category.

The post Safety in Troubled Times: Corporate Bonds appeared first on Wise Money Israel.