I’ve Opened My Account; What’s Next?

Evan Liberman Articles, How To 1 Comment

Congratulations on opening your Israeli investment account! You're on your way to being a successful investor in Israel. Here are your next steps toward setting up your financial investment portfolio. First, decide how you'd like to manage your account. There are different ways to manage your Israeli investment account: self-managed, where you manage your own account independently, using consulting as needed, and a managed account. To help you choose your preferred method, first [post=2947 text="read about investment account management options"] before proceeding.

If you choose to self-manage your account (with or without consulting), here is a short list of your next steps:

  1. Fund your account. You likely did this by depositing an initial amount into your account when you opened it. But if not, you can wire transfer funds from your bank to your Israeli brokerage or bank. Contact us if you need details about the wire transfer process with your chosen broker.
  2. Convert your currency. If you funded your account in a foreign currency, such as dollars, you're next step will be to convert them to local currency, as transactions on the Tel Aviv Stock Exchange are executed in Israeli Shekels. Brokerages usually give good conversion rates (very close to the Bank of Israel representative rates, sometimes within 0.5%), so you won't lose much in the transfer. Also, brokerage fees can be waived if you work with the right brokerage. Currency exchange can be executed by calling your brokerage/bank's customer support and in some cases (depending on your choice of broker) via an email request. If you're calling, refer to our [post=1373] article for details on how to call and what to request. Typical turnaround time for currency conversion is one business day in which currency trading occurs (Monday-Thursday).
  3. Research what securities you'd like to purchase. This is the key step, of course. Which securities (stocks, bonds,  Exchange-Traded Funds, etc.) to buy and when to buy them is at the heart of every successful investment story. Buying under-performing securities, not purchasing solid companies stock or bonds, or buying too early or late can make all the difference between a winning year of gains or disappointing loss at year end. Assess how much risk you're willing to take, how much loss of capital (if any) you're willing to suffer for potential gains. Bonds (government and corporate) are interest-bearing investments that for the most part return you 100% of your initial investment years down the road, with a certain interest percentage paid every year for "renting out" your money. The chances of losing money on solid bonds and solid companies is typically less than investing in stocks. On the other hand, stocks provide the possibility of gaining tens and sometimes even 100% or more when choosing the right stocks to invest in at the right time. Investing in stocks bears the risk of losing a portion of your initial investment if the company under-performs or worst case, the company even goes bankrupt. Research well the various options that you have, and weight the pros and cons against your risk tolerance, investment time frame, current financial situation and cash needs. The Wise Money Israel website is full of information about [post=3507 text="investment options"] and our consultants can help you with this as well. If you plan to purchase Israel government bonds, read our Government Bond series for practical information on what types of bonds are available and how to determine their current prices, yields and security numbers (needed for your purchase order).
  4. Determine portfolio allocation. Once you've chosen which investment vehicles you feel comfortable with (stocks, government or corporate bonds, ETFs, mutual funds, index funds, etc.), you should diversify among different asset classes, market sectors, industries and securities to lessen risk if one security or sector under-performs. For example, you can allocate 60% to bonds and 40% to stocks. Within your 60% bond allocation, you could buy three different bond types, each totally 20% of your portfolio. You could purchase an adjustable interest rate government bond, a fixed-rate inflation-adjusted corporate bond, and a 12-month Bank of Israel "Treasury" note (Makam). Then, you could spread your 40% stock allocation among two stock mutual funds, two broad-based market index ETFs, a sector ETF or three individual strong company stocks. There are as many combination as there are people, so consult with your financial advisor for what combination is most suited for you.
  5. Execute your order(s): If you wish to execute your trades via phone, our article called [post=1373] will give you the details on how to call and what to request.  If you'd like to execute your purchases/sales using the bank or brokerage's online trading platform, contact them for details on installation and usage. Wise Money Israel can help you with the installation and training: see "Independent Investment Account Consulting Services" on our [post=2790 text="pricing sheet"] and/or WMI consultants can create your execution orders for you.

That's it! Sounds like a lot? [post=2790 text="Wise Money Israel personnel can help"] walk you through this process: just contact us. Once you've executed your transaction(s), follow your securities' performance and market conditions [post=268 text="online"] because at some point you may want to sell and/or move into potentially better investments when the timing and market conditions are right. If you haven't already done so, you'll want to sign up for WMI email updates, full of helpful tips, investment ideas and important information about investing in Israel.

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