So you want to support Israel, and be part of her economic success. But you don’t live in Israel, and don't travel there often. So how to do it? This article will help.
In other articles, we discussed why we invest in Israel. We described reasons such as currency and global diversification, and the desire to support the Land and people of Israel. Other reasons include participating in the prosperity Israel is experiencing since its rebirth, and enjoying the fruit of a strong and robust economy.
So how can this be accomplished practically? By investing in Israel's capital market via Israeli stocks, bonds and mutual funds. This is done by opening an investment account with one of the established Israeli brokerage firms. Accounts may be opened through the mail - no need to travel to Israel to open the account. Citizens of all countries may invest in an Israeli brokerage account.
Israel investment accounts are regulated and supervised by the Israel Securities Authority. An investment account can be funded with all currencies (U.S. dollars, Canadian dollars, Euros, etc.) via a direct wire transfer to the brokerage’s bank. Investment account may be opened as an individual account, joint account, partnership, organization, corporation, or a through a U.S. retirement account (IRA, 401k, 403b, etc.). Once funded, foreign currency is converted to Israeli currency, and then securities are purchased directly into the account (stocks, government or corporate bonds, mutual funds and ETFs). Those securities are listed directly in the account holder's name on the Tel Aviv Stock Exchange (TASE).
What can I invest in?
Investors and non-investors alike can invest in a wide array of investments, ranging from Israeli stocks offering dividend payments, to secure Israeli government bonds, through inflation-protected corporate bonds paying fixed quarterly interest payments, to ETFs tracking market indices. The choice of how secure the portfolio is to be (or how adventurous) is entirely up to the account holder.
Israel's national exchange offers all the major business sectors offered in other markets around the world, including: technology, real estate, industry and manufacturing, communication, biomedical, agrotech, insurance, finance and banking, commerce and services, chemical/rubber/plastics, food, transportation, etc. Of particular interest is the new oil/gas exploration sector, given Israel’s recent large-scale discoveries of these commodities. Companies in these and other sectors are listed on the TASE.
Types and size of accounts
Accounts may be self-managed, advisor-assisted, or portfolio managed. Self-managed investment accounts can be opened with a minimum of 20,000 shekels ($5,000 USD).
Do I need to know Hebrew to invest?
No. Israeli brokerages provide an English web interface to buy and sell securities, and mail monthly English statements to addresses in Israel or abroad.
How much does it cost to hold an Israeli investment account?
Israeli brokerage commissions are usually 0.1% of the value of a given transaction (mutual funds are commission-free). Additionally, the brokerage charges a 1/4 of 1% custodial fee per year (based on funds in the account), and a flat $5/month fee. For a $30,000 account, this amounts to about $150/year (or a half percent).
Must I hold my investment for a certain period of time?
When investing in Israeli stocks, bonds, ETFs and mutual funds, transactions are electronic (online) and immediate, with no penalties, extra commissions or sales loads upon withdrawal. Investors buy stocks, bonds, ETFs or mutual funds for a day or for ten years, with no difference in fees.
How are funds withdrawn?
A signed email request to the brokerage can withdraw any or all of the account's funds via an immediate wire transfer back to the listed bank account.
What options are available for capital preservation?
Those interested in preserving their wealth more than in growth will tend to invest more in government bonds, denominated in Israeli shekels. Those bonds are backed by the Government of Israel (which has never defaulted on an interest or principal payment). These bonds pay quarterly or yearly interest payments which can be unlinked, linked to inflation, or variable according to interest rates.
There is no taxation on moving funds abroad. There is no tax on simply holding Israeli stocks and bonds. For the investor residing outside of Israel, virtually all stock and bond gains are not taxed in Israel. Therefore, investors report gains to their own country in the year the gain occur. Israeli gains are taxed like regular gains in the country of residence.
Investing in Israel is possible and straightforward. Investors are able to diversify their holdings globally and participate in Israel’s economic success. Investment accounts are secure and manageable in English. One can invest to either preserve capital or to receive good, solid returns. All this, while supporting Israel and its people.