A growing economy

Israeli GDP grew at seasonally adjusted 7.2% in the fourth quarter of 2014. According to Tel Aviv-based Meitav Dash Investment House, “The economy is certainly not in slowdown or recession, but growing at a quite high rate of 3% [annually] - that rate would arouse the envy of many countries in the world.” According to Alex Zabezhinsky, chief economist at Meitav Dash, this growth rate “does not represent the [actual] state of the economy. [This] growth is attributed to several factors whose influence are transitory.” The economist indicates that following Operation Protective Edge in the summer of 2014, there was accelerated economic activity to compensate for the stagnation during the war. A similar phenomenon has been seen in the past, for example, after the Second Lebanon War. Secondly, the tax regime change created a considerable increase in the purchases of vehicles by businesses and by private consumers. Thirdly, increased government consumption in the second half of the year is believed to be related at least in part to replenishing equipment after the war. Based on data from the Israeli Central Bureau of Statistics, the corporate sector's GDP, recorded in the fourth quarter, was even higher growth - an annual rate of 8.8%.

Israeli housing prices keep going up

Israeli house prices continue to rise. Having never experienced a sub-prime crisis as the rest of the world did in the Great Recession of 2008-2009, economists wonder if a price correction is in sight. The price of housing in Israel is one of the highest in the world. It costs an average of 140 monthly salaries (almost 12 years) to buy an apartment in Israel. Because of potential future VAT-reduction legislation, there was stagnation in the real estate sector during Q4, 2014. The legislation was scuttled. Investments in fixed assets (investments in residential housing and the construction, equipment, and vehicles sectors) were down by an annualized 1.9% in the second half of 2014, following a 6.8% drop in the first half. Bank of Israel Governor Karnit Flug says, “If construction continues at the pace set in 2013 and 2014, in other words 44,000 building starts, and if it includes high-demand areas, then there is a reasonable chance that we'll see stability and even the beginning of a drop in prices.” Despite the rhetoric, house prices continue to rise. According to the latest Bank of Israel Monetary Committee, in the 12 months ending in November, 2014, house prices increased by 5.8 percent. The trend of decline in the number of transactions has continued in recent months, though it was concentrated in the purchases of second-hand homes. The number of new home purchases, particularly those in the price range that would have been included in the zero-VAT plan, has increased sharply since September (when it became clear that the zero-VAT plan wouldn’t happen), and between August and November there was a moderate decline in the number of new homes available for sale. The pace of building starts and building completions remains relatively high.

Low inflation or deflation?

While Israel ranks #1 globally for inflation stability, for much of 2014, inflation was lower than expected (sub-1%). Then in November, 2014 and January, 2015, the month-over-month CPI readings were negative (technically deflation). Dr. Karnit Flug said she believes that inflation will reappear in the second half of 2015, but is “unwilling to even consider raising the interest rate.” Meitav Dash’s Zabezhinsky estimates inflation to be only 0.5% over the next 12 months, with interest rates rising only 0.25% to 0.5% during that period.

Banking System

Dr. Flug indicates that the banking system is more resilient than it was on the eve of the global credit crisis, but the banks are still too big to fail. The largest bank, Bank Leumi, is embroiled in controversy surrounding an investigation into its assistance to U.S. customers to evade American taxes. Bank stocks, which had been up as much as 10% in 2014, have been tumbling in the past six months (not withstanding a 3% jump in mid-February based on improved GDP readings). Despite this, CPI-linked Israeli bank bonds held stable and even gained ground during that time.

Exchange Rates

Click to see full-size

For U.S. investors adding funds to their Israeli brokerage accounts, the shekel-dollar exchange rate is key to gaining the most shekels with the same USD. The second half of 2014 was uncharacteristic of the longer-term trend of shekel strengthening. The U.S. dollar strengthened against other world currencies, including the shekel. By year-end, one USD could purchase 14% more shekels. Having met resistance at 4.0 NIS/$, the shekel has regained strength against the dollar by 3%, and may indicate a trend reversal. Dollar-heavy investors should strongly consider converting currency to shekels at this time, while the dollar is still relatively strong.

Capital Market Review

The Tel Aviv 100 stock index gained 7.5% in 2014, and continues on a similar pace in 2015. After having uncharacteristically low returns in 2014, solid Israeli corporate bond indices began 2015 with gains of almost 2% (as of mid-February). Of particular note in 2015 so far, is the Tel Aviv Real Estate 15 stock index, which has returned 9% in just the first month and a half of this year. The small-cap stock index has also outperformed, with a 6.9% gain so far.

Employment, GDP, National Debt and Government Spending

Israel’s unemployment rate continues to be low, at 5.7%, with Gross Domestic Product (GDP) estimates at 3.0% growth for 2015. Israel’s GDP-to-Debt ratio continues to be one of the developed world’s best at only 67% (vs. 102% for the U.S.).

The Bank of Israel expects the total government deficit in 2015 to be slightly under the 2.5 percent of GDP target ceiling. According to a Bank of Israel’s Press Release this month, government expenditures in 2014 were slightly lower than the original budget, despite the NIS 7 billion supplement to the defense budget due to the direct costs of Operation Protective Edge (Gaza War).

Business sentiment, exports and tax revenues

Israel’s largest investment firm indicates that consumer and business sentiment in the economy continues to improve. Businesses expect an increase in recruitment and in work activity. There was particularly marked improvement in construction and industry. Data on manufacturing exports shows significant growth mainly in the pharmaceutical and electronic components areas. The increase in tax revenues is indicative of an improvement in economic activity. Meitav Dash expects the next elected government not to need to take significant fiscal restraining steps. The international rating agency Standard & Poor’s (S&P) confirmed its rating of Israel. The company noted a drop in international support for Israel could harm future rankings. In light of the above, Meitav recommends corporate bonds with average maturity of about three years, with preference on floating-rate bonds over short-term shekel bonds.

Conclusion

In summary, the Israeli economy has shown solid growth and sound fundamentals. The capital market, while challenged by multiple factors, continues to provide a good way to invest in Israeli innovation and ingenuity. The current exchange rate provides a comfortable entry point for those with U.S. dollars.  Sources: Globes, Meitav Dash, Bank of Israel, Calcalist, Trading Economics, Israeli Central Bureau of Statistics The above is the opinion of the writer and should not be taken as financial advice, nor is it a commitment to achieve any future returns. Past performance does not ensure similar future returns. At the time of authorship, the author may or may not hold securities mentioned in the article. This publication does not constitute an offer to purchase, sell or hold securities or units in a fund, and is not a substitute for investment and/or tax advice that takes into account the special needs of each person. Please consult a professional investment advisor concerning your specific situation before making personal financial decisions.

The post The Amazingly Resilient Israeli Economy appeared first on Wise Money Israel.

Question: Ran, what are market conditions like now in the Israeli capital market?

Ran: The capital market is doing well in Israel, especially the corporate bond market. We've seen a recovery over the last number of months.

WMI: Your firm currently manages about 250 million shekels in client assets (portfolios and mutual funds). Question: What sectors do you believe will outperform the overall market in the next 12 months?

Ran: In the stock market, we're recommending exposure to the overall market, for example, through the Tel Aviv 25 index. As the recent natural gas discoveries begin to deliver cheap gas to the Israeli economy (and potential gas exporting), lessening its dependence on imported Arab oil, the economy should see a significant boost to GDP, which should help the large Israeli companies' bottom lines.

Interesting Stock Sectors

Question: What stock sectors would you recommend at this time?

Ran: One specific sector that is of interest to us currently is the Israeli banking sector. The major bank stocks are currently  inexpensive on an historical basis. In most cases, their prices reflect a less than 1.0 Price-to-Book multiplier (which generally is a sign of an undervalued banking sector), and historically has led to price increases for bank stocks (in 2003, 2008 an 2011). Their market capitalization is less than their listed equity, a situation which may reflect the market's recent history fears of economic issues or a global financial meltdown. But, the Israeli banks are in an enviably strong financial condition, with strong balance sheets and consistent earnings (unlike their U.S. bank counterparts). The Israeli banks' strong earnings in 2012 is expected to continue into 2013.

Ran: No Israeli bank failed in the global banking/financial crisis of 2008, and Israeli banks didn't fall into the sub-prime crisis because of strong regulation and conservative loan practices (30% down payment, no undocumented loans, etc.). In 2002, when one small bank did fail due to one employee's embezzlement (Bank LeMizhar), the Bank of Israel returned all money to investors.

WMI: Many of our readers are interested in the oil and gas discoveries happening now in Israel. Question: What is your opinion on the Israeli oil/gas exploration stocks?

Ran: These companies now have positive momentum. In April 2013, one of the largest discovery fields is scheduled to start producing gas and selling it to the national electric company and other large industrial companies. These recent discoveries have revealed a huge potential for gas and oil reservoirs in the offshore drilling taking place now in Israel. One of these discoveries was considered the largest discovery in the world in the past decade. [editor: Zury Ilan, Chief Analyst at Cramim, indicates that the future government royalties (before corporate taxes!) from the recent two discoveries alone could pay off all of Israel's national debt]. The revenue alone from these latest two discoveries is expected to add 1% to GDP.

Ran: The initial investments for these drillings are already paid for, and these companies will soon start to show cash flow of billions of shekels. Their risk is lessening (the spotlight now is on quality of execution, and not on whether they will discover or not), and their future earnings are becoming more secure. This could cause their stocks and bonds to increase in price.

WMI: There are a number of good real estate public companies in Israel. Question: Would you buy those at this time?

Ran: I would invest in those companies with diversification in foreign real estate markets. I would buy them as a small percentage of my portfolio: they've done well, but their prices may be a bit high for now. Rather, I would more likely invest in these company's corporate bonds (those with collateral) and focus on those that weren't invested in Eastern Europe's real estate and industry, as those that survived the 2008 crisis emerged stronger. The profitability of these companies isn't high, so there isn't as much upside for their stock, but because of their financial strength, the chances they'll pay their bond obligations is high.

Corporate Bonds

WMI: Your firm is quite expert in corporate bond investing. Question: How do you select the corporate bonds you invest in?

Ran: Cramim invests in corporations that have strong balance sheets and good cash flow. We meet with the firms approximately once every six months in our offices, and ask their management tough questions regarding their future abilities to fulfill their debt obligation. We have our own in-house analysis department that performs independent, objective works of fundamental analysis on each company.

Ran: We prefer companies with strong, specific collateral and bank covenants, and yields higher than the overall Tel-Bond 60 index. After the 2008 crisis, the banks began demanding stronger collateral, making the current bond series more credit worthy than before the crisis.

Ran: Many Israeli bonds are inflation-indexed, ensuring the investor's buying power is keep intact, even if higher inflation begins to development. Israel's current inflation is around 2% annually.

Question: Would you purchase fixed-rate bonds now or inflation-linked?

Ran: We are currently buying less fixed interest rate bonds now, and keeping our bond durations on these shorter. This lessens the chances of price depreciation when the Bank of Israel raises interest rates, and somewhat lessens the impact of inflation erosion. We're also buying variable interest rate bonds (government and corporate) as we may soon see interest rates hikes by the Bank of Israel. We tend to buy a lot of inflation-linked corporate bonds.

Question: How does Cramim view the credit rating agencies ratings?

Ran: The bond ratings provide one indicator on the credit worthiness of a company or bond series. But this is not the only thing we look for. We rely much more strongly on our in-house research to determine future cash flow and the current value of companies. When we do look at ratings, we look in the BBB+ or above region, or we look at unrated bonds with strong collateral (which sometimes offers interesting investment opportunities overlooked by larger investment houses which don't dedicate their research arms to smaller, unrated bond series).

Convertible Bonds

Question: Are you finding interesting corporate convertible bonds in the Israel market today?

Ran: Currently, there are not many convertible bonds in the market that are close to their stock path. Those that do exist are very much out-of-the-money [editor: and therefore give less bond yield without the possible stock upside]. Some are in risky medical/pharma companies where the risk is too high for us to invest in them. There is one convertible bond series from real estate and gas exploration companies that we do invest in.

Mutual Funds

Question: What do you look for in an Israeli mutual fund?

Ran: Look for corporate bond mutual funds (we have three such funds) with good diversification that outperform their peer groups and overall market. These funds have shown outstanding performance in the past year compared with stocks.

Government Bonds

Question: Do you invest in Israeli government bonds?

Ran: Even though yields on Israeli government bonds are relatively low currently, we invest in these bonds to some extent to add a strong anchor to our portfolios to provide stability. As interest rates rise, we also believe these bonds may provide an interesting investment vehicle unto themselves.

Israeli Elections

Question: How have the recent elections affected the capital market?

Ran: There is a positive atmosphere in Israel because of the surprising results of the January elections. The public showed less interest in national political and security issues. Rather, social and economic issues are now beginning to take center stage. The government will now will be forced to take a hard look at high taxes, equal Army service, and other social issues. This may help the middle class and overall economy, as the burden is spread to more market participants, and more ultra-religious persons enter the workforce. Focus on making housing more affordable may succeed in lowering the average cost of living. Also, the left-wing Labor party, which has traditionally represented unionization and resisting tycoons and big money received less mandates (votes). This may produce a more constructive middle class and competitive business atmosphere.

Disclaimer: Cramim Capital Markets clients currently hold positions in the Tel Aviv 25, gas/oil securities and mutual funds, corporate bonds and banking securities.

The post Israeli Investment House CEO’s Perspective appeared first on Wise Money Israel.

Natural Gas Discoveries

The considerable natural gas discoveries of the past few years have put Israel squarely on the world map as a global supplier of gas. The large gas discoveries so far have confirmed that the Levant basin of the Eastern Mediterranean Sea off the coast of Israel contains significant quantities of natural gas and, potentially, crude oil. The Leviathan field is the largest offshore discovery of the past decade, and is estimated to hold as much as 17tn ft³ of gas.  BusinessWeek estimated the reserves' value at $240 billion. The development of these untapped Israeli resources may alter the geopolitical and financial climate of the country in the next decade.

Mr. Zury Ilan, Vineyards Capital Markets - Chief Analyst

Mr. Ilan indicates that if we look at the gas discovered already (not including the considerable amounts estimated, but not discovered yet), the capitalized cash flow from the two largest discoveries alone are greater than the entire national debt of Israel.

The Israeli government and economy will both benefit from the increased revenue and export of this natural resource, making the Israeli financial market more attractive, and the shekel a more attractive currency.

Please note that many of these company are investable via bonds and stocks only on the Tel Aviv Stock Exchange.

Debt to GDP decreasing

Israel's national debt is decreasing, while many other western countries' debt levels are increasing. Israel's Debt to Gross Domestic Product ratio has been dropping in the past 10 years to a current level of 74%. This good economic trend can be compared to the U.S. increasing debt trend, and current level of 103%. Investors are seeing the correct direction of Israel's debt-to-GDP ratio, and putting their confidence in the shekel, increasing its value.

Israel's Credit Rating Upgrade

Zury believes that there is a good chance that in the next two or three years, Israel's credit rating will increase one rating notch. This is because the international credit rating agencies (Standard & Poor's, Moody's, etc.) will recognize the 1% GDP increase based on government royalties from the production of natural gas from offshore drilling. Because of this upgrade, more foreign institutions will want to buy Israel government bonds (and corporate bonds because of the jobs created due to the production and export of the gas). The influx of dollars to the Israeli market to buy the bonds will increase the value of the shekel, as more dollars will chase fewer shekels.

How Can I Take Advantage of a Strengthening Shekel?

In order to invest on the Israeli national stock exchange (TASE), you need to open a shekel-denominated investment account with a bank or brokerage. Contact us if you'd like assistance in this process.

The post Making Money From a Strong Shekel appeared first on Wise Money Israel.

That would mean a 20 percent capital gains rate, and a dividend rate at income tax levels, which could revert to the Clinton-era 39.6 percent for the highest earners. The Affordable Care Act in 2013 adds 3.8 percent to those rates for the wealthiest Americans.

As you may know, your U.S. retirement account (IRA, 401k, etc.) can fund an Israeli investment account and keep the funds tax-deferred. But sometimes, it is wiser to take out your funds and pay the taxes now, while the tax rates are relatively low, instead of waiting until next year when the tax rates may be higher. Read PR Newswire's short article on the surprise that awaits many IRA owners in 2013.

If you've considered opening an Israeli investment account in the past, you may be able to save tens of thousands of shekels by taking a lump distribution from your IRA in 2012 before tax rates go up. For example, if your IRA had $100,000 of dividends and $100,000 of capital gains, the tax you could pay in 2013 would be up to $33,400 more than if you paid the tax in 2012. That is 125,000 more shekels with which to invest in Israel if you act quickly. The Israeli investment account itself can be funded in 2013.

What can be done to prevent automatic tax increases on your retirement account (IRA, 401k, etc.) from going into effect for you? Consider calling your retirement fund administrator or downloading their simple form for withdrawing your funds in 2012 before the Bush tax cuts expire on December 31, 2012.

The post Earn Shekels: Cash In IRA Before Fiscal Cliff appeared first on Wise Money Israel.

Over 175 Israeli stocks pay out dividends of over 3% per year, and 12 of those listed below pay double-digit dividends yearly. Investing in stocks carries associated risk of market volatility, so before making decisions on which stocks to purchase, choose wisely by consulting an expert so you can ensure that your choices are in-line with your financial needs, etc. The list of dividend stocks below make up the Tel-Div 20, an Israeli Stock Exchange index comprised of shares that deliver the highest dividend yields (and also meet strict high market capitalization, liquidity and free float % rules of the Stock Exchange). This index can be purchased as one stock transaction via one of the many ETFs that track the index ,with one small commission through your Israeli investment account. This strategy provides stock diversification over many large, dividend-paying companies from various sectors.

Historically, dividend-paying stocks have provided more stability and resistance to stock market volatility. Here is a chart of the last 3 years' performance of the Tel-Div 20 vs. the broader market index (Tel Aviv-100). The dividend index far outperformed the broader market, almost doubling its performance over time. Keep in mind, past performance is no guarantee of future results.

Another avenue to get stock exposure and receive dividend payments is to purchase a few of the individual stocks that pay dividends (some are listed below). Keep in mind that unlike some dividend stocks on Wall Street where the dividend payments are generally the same amount and paid out each quarter, some of the Israeli stocks listed below don't give equal payouts and/or don't pay out quarterly, so the dividend yields here reflect actual payouts over the past 12 months.

To learn how to invest in these or other Israeli stocks and bonds, contact us at Wise Money Israel.

The post Generating Income From the Israeli Market appeared first on Wise Money Israel.

What is a REIT?

A REIT - Real Estate Investment Trust - buys, develops, manages and sells rental real estate assets and real estate loans (mortgages).  Its professionals manage a portfolio of real estate properties that generally include commercial rental properties (such as shopping centers, office buildings, hotels, etc.) that return rental income for shareholder, typically through large dividends and long-term capital appreciation. Instead of paying higher corporate taxes, the company is allowed to pass lower taxes onto the individual investor, creating an efficient management organization.

This type of specialized company offers shareholders ownership of real estate through the purchase of stock. Investing in a REIT stock versus the direct purchase of real estate has become a popular way for individual and institutional investors (pension and mutual funds, insurance companies, etc.) to easily gain exposure to the real estate market. This type of investment provides several advantages, including giving liquidity to these investors, as they can trade their real estate holdings at any time without actually buying and selling real estate themselves (with all the associated costs and effort). In the U.S., REITs are a $400 billion dollar industry.

Why own an Israeli REIT?

Real Estate prices are on the rise in Israel. After a decade of stagnating real estate prices, prices in Israel have risen meteorically in the past few years. This type of investment fund takes advantage of these price increases. Here are the top reasons to own a REIT stock:

Tax benefits

A investor in a REIT pays taxes only at dividend rates and/or generally long-term capital gains rates on their stock investment (instead of higher ordinary income rates). These taxes can often be much lower than buying real estate directly (with buying, maintenance, property management and selling fees), and this investment avoids high government property capital gains tax upon the sale of the real estate asset. Also, usually 95% of a REIT's income from rents is paid out to shareholders. This guarantees that management fees are kept low, allowing the investor to see the fruits of the real estate rent.

Ease of ownership

Owning a REIT stock gives the small and larger investor exposure to the real estate market and large real estate projects without having to go through the hassle of a direct investment in real estate. The investor will save the cost and effort of the property search, capital raising/loan procurement, real estate agent and legal fees, contracts and negotiation, management and maintenance, sale and bookkeeping overheads normally associated with real estate investing. A share in multiple real estate assets can be obtained through a few mouse clicks online in your investment account or a simple phone call to your Israeli brokerage firm.

Low investment minimum and transaction costs

Once you have an Israel investment account, shares of a REIT can be purchased in quantities as small as 2,000 Shekels ($570), with transaction costs under 1/4 of 1%.

Liquidity

Shares of a REIT are publicly traded on the Tel Aviv Stock Exchange, and can be bought and sold immediately during any business day.

Low correlation

Real estate typically has a low correlation to other stock sectors: property prices don't always move in tandem to the ups and downs of the stock market in the long-term. Investing in real estate assets through a REIT investment can theoretically therefore offer a way to diversify your stock portfolio to reduce volatility, though Israeli REIT prices can often mimic other Israeli stock price trends.

Diversification

Because the REIT holds many properties, the investor enjoys diversification among various forms of real estate and real estate locations. Owning property is part of most asset-allocation models, meaning that it serves as a good diversification tool.

A publicly traded REIT in Israel

One such Israel real estate investment trust (REIT) is called "REIT 1", which was the first publicly traded REIT on the Tel Aviv Stock Exchange. The main aim of the fund is holding and managing real-estate: office buildings, shopping centers, industrial buildings, residential apartments for rent, etc., for purposes of profit. According to Israeli law, the REIT must hold at least 95% of its assets in the Israel real estate market. It is listed in the Tel Aviv Midcap 50 index as well as the Tel Aviv Dividend 20 index. With a market capitalization of 708 Million Shekels (~$200M), this stock has gained an impressive 24% in the past six months, and 86% in the past two years (see the two-year stock chart below).

Alternatively, for those interested in exposure to Israel real estate with the security of bonds, REIT 1 also offer three bonds for purchase (adjustable-rate and inflation-indexed). While these bonds effectively yield 3-6% annually, one of them even returned a 36% capital gain in the past 12 months.

REIT 1 recently purchased a new 5,300 square-meter commercial center in Netivot, Israel, making this the twentieth property owned by REIT 1. This 100% occupancy mall should return a 9-10% yield. REIT 1 owns property totally 185,000 square meters, for an asset value of 1.4 Billion Shekels (~$400M).

In summary, REITs provide an interesting asset-class diversification strategy, with good liquidity, low barrier of entry, and diversification across multiple real estate assets. Smart investors should consider this strategy to enhance their portfolio.



The post Large Gains for Israeli Real Estate Stock 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.

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.

Why is this a good idea?

By investing in one of these ETFs, you diversify your Israel investment over multiple stocks, reducing price fluctuations due to any one stock’s volatile performance. This is by far the easiest way to invest in Israeli stocks, because:

1. Unlike mutual funds, ETFs can be bought and sold immediately just like a single-company stock
2. There is a single brokerage commission to own multiple stocks
3. You gain automatically diversification among many Israeli companies without requiring you to open an Israeli brokerage account
4. As an added bonus, all company dividends and special distributions are paid to you, the shareholder

Here is a quick look at the two funds:

EIS

EIS earned an 81% return in 2009, compared to the 28% return of the general market (S&P 500) in the same period.

This fund is the iShares MSCI Israel Capped Investable Market Index Fund (ticker: EIS). The fund holds fixed percentages of shares of the largest Israeli company from all sectors, including Teva Pharmaceutical (TEVA), Israel Chemicals, Bank Leumi, Bezek, Bank Hapoalim, NICE Systems (NICE), Partner-Orange (PTNR), Elbit Systems (ESLT), Cellcom (CEL) and others. Additionally, EIS paid a 3.04% 12-month dividend yield (as of 7/30/2010). The fund seeks investment results that correspond generally to the price and yield performance of the MSCI Israel Capped Investable Market Index.

ISL

ISL earned a 89% return in 2009, compared to the 28% return of the S&P 500 during the same period.

Aberdeen First Israel fund (ticker: ISL) holds varying percentages of shares of large Israeli companies from eight sectors such as Teva Pharmaceutical (TEVA), Bezek, Check Point Software Technologies (CHKP), Israel Chemicals, Perrigo (PRGO), Bank Leumi, Bank Hapoalim and others. The fund seeks long-term capital appreciation by investing primarily in equity securities of Israeli companies.

If you are deciding between the two funds, the market cap of ISL is one quarter that of EIS’s, and the daily volume is much lower than EIS, so if you’re looking for liquidity, EIS is the fund that will deliver that to a much greater degree.

Bottom line

Both of these funds are a great way to get in on investing in Israeli companies directly on Wall Street without having to open an Israeli brokerage account. You'll be invested in Israeli top performing companies, diversified across sectors and industries, and if you are already are an investor in the U.S. stock market, this is a simple step you can take to participate in Israeli company growth and Israeli innovation. To purchase one of these ETFs, just use your current broker or online brokerage account and specify EIS or ISL as the ticker symbol.

Do you invest in ETFs? What percentage of your portfolio should you invested in ETFs? Share your thoughts with us or comment below.

The post Little Known Profitable Secret for Investors appeared first on Wise Money Israel.