Here’s a great idea most likely no one has ever told you about. It’s a well kept secret about investing in top Israeli stocks on Wall Street. Most people don’t know that there are two highly diversified Israeli stock funds that have performed extraordinarily well that can be traded on the U.S. stock exchanges as a single stock. They are called Israeli stock ETFs (Exchange Traded Funds). There are two such funds traded on American stock exchanges (NYSE, AMEX) that own top Israeli stocks. Consider investing in one of these funds instead of investing in an S&P 500 tracking fund, or taking a portion of your portfolio intended for international allocation and allocating it to one of these funds.
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:
- Unlike mutual funds, ETFs can be bought and sold immediately just like a single-company stock
- There is a single brokerage commission to own multiple stocks
- You gain automatically diversification among many Israeli companies without requiring you to open an Israeli brokerage account
- 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 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 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.
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.