Last Updated on April 9, 2024

The information contained in this article is for general educational purposes and should never be viewed as specific investment, tax, or legal advice.

So you have some savings that have just been sitting around in the bank and you’re ready to put them to work- where do you even begin? Say you already have an investment account set up but aren’t sure if it is really optimally invested or if your fees are as low as they should be – who do you turn to? Sometimes knowing where to start is the hardest part.

The fact is that most independent investment advisors and wealth management firms in Israel require a minimum of around five hundred thousand ($!!) or more just to get in the door. If the amount you are looking to invest isn’t in that range, you will need to look elsewhere.

The good news is that there are more options today then there have ever been to get started investing and building wealth while living in Israel, even with a relatively small amount of money. You can and should be earning a lot more from your long term savings.

The first goal is to identify the options that are available to you so that you can move forward with confidence. I regularly work one-on-one with individuals and couples in Israel on financial planning and investment education. If you need help sorting through the options below, feel free to reach out.

What are my options?

As someone who works both in investment management (outside of Israel) and financial education (in Israel), I understand that there aren’t one-size-fits-all solutions and each option has its own trade offs and benefits. The goal of this article is to explain some of the best long-term investment options that are actually available to you today (for shorter term savings, read more here). For all the US citizens who are reading this, given our unique US tax considerations, I will also include important things to watch out for in each category. A table summarizing all of the options will follow.

Bank advisors (ייעוץ השקעות)

Many banks in Israel offer investment management services directly to their existing customers. Banks generally require an initial amount ranging from 100K NIS to 500K ILS to get started. If you are not looking to invest that amount, skip this option. Getting started can be as simple as setting up a meeting in the branch, signing all the paperwork, taking a detailed risk questionnaire, and approving a portfolio proposal put forth by the advisor. Investment advisors at banks are unique in that they don’t maintain discretionary authority – this means that they must call you up and receive permission before making any trades on your behalf.

Aside from the high minimum, as you might expect when it comes to any service offered by an Israeli bank, common complaints about bank investment management include:

• Very high fees – banks are widely known to have some of the highest fees for comparable services, including a percentage of assets under management fee. Other (sometimes hidden) fees can include higher than normal commissions on every transaction, poor exchange rates on currency conversion, and other monthly account maintenance fees.
• Poor customer service – finding a bank advisor that both speaks English and is easy to get ahold of when you need him/her, can often prove very difficult.

If you go in this direction, look for advisors based on personal recommendations who are known to be responsive. Always negotiate with the bank for reduced fees.

US citizens: I have personally spoken to numerous Olim who were led directly into US tax traps by well meaning bank advisors. Many bank advisors have little to no familiarity with US tax considerations and extra caution is warranted before choosing any non-US licensed advisor.

Kupat Gemel Lehashka’a (קופת גמל להשקעה)

A Kupat Gemel Lehashka’a (KGL) is a professionally managed Israeli investment fund which offers a choice of different tracks (מסלולים) based on your risk tolerance – similar to your Israeli pension fund or Keren Hishtalmut. Any licensed insurance professional or pension advisor should be able to set one of these up for you. Switching between tracks can generally be done without additional fees and without tax consequences – money can be withdrawn at any time.

The maximum contribution to a KGL is around 76K shekel per year (2023). Beyond that limit, additional annual investments could be made to a savings plan (פוליסת חיסכון) instead. Despite having the same basic structure and fees as a KGL, a פוליסת חיסכון does not have any of the same retirement tax advantages. The relative simplicity and 0 shekel minimum can make this an attractive option for some who are just looking to get started.

It is important to point out though, that the tax advantages of a KGL are often exaggerated by the agents selling them and misunderstood by some of the consumers investing in them. From an Israeli tax perspective, withdrawals from a KGL are only tax-exempt if you hold it until the age of 60 and then transform the account into an annuity (קצבה).

KGL fees (both the published fee and the “hidden” הוצאות ניהול השקעות fee) can eat away at your profits, especially if you won’t end up qualifying for tax-free withdrawals. Even if you meet the criteria for tax-free withdrawals there are some situations where higher fees can dwarf the tax advantages you receive – see Reuven Shirazi’s KGL calculator for a detailed analysis on this.

US citizens: This type of investment is a PFIC and potentially a foreign trust which will lead to both high US taxes and costly accounting fees. Given this and other cons mentioned above, a KGL or פוליסת חיסכון is very unlikely to be a good investment choice for you.

Robo advisors

Robo advisors like Fjord, Videa, and Meitav Manager are essentially automated investment platforms that build an investment portfolio for you. When you sign up, the “robot” will ask you some questions to determine how much risk you want to take, create a portfolio based on your “risk score”, and then automatically allocate your initial contribution and future transfers based on the portfolio you choose.

Read our full guide to Robo investing from Israel: “Should you use a robo advisor to invest?“

US citizens: Fjord is currently the only Israeli robo-advisor that is built using a US brokerage and invests in US based ETFs. The other robo options available in Israel invest in PFICs and would therefore generally be a bad choice for a US taxpayer. Make sure you have a basic understanding Fjord’s trading commissions and their active investment strategy before proceeding. We would generally not recommend this platform.

DIY investing

The truth is that there are a lot of great and objective resources out there about investing (in English), but very few of them focus on the specific needs and tax considerations for those of us living in Israel. As such, it’s tricky to know exactly how to optimize your portfolio for taxes, fees, and returns.

Nadav and I are working hard to build more and more resources for do-it-yourself investors including completely free & detailed guides on many of the most important considerations. For those comfortable getting started entirely on your own, we hope these articles and videos will provide you a lot of value.

US citizens: If you are opening an Israeli-based investment account to manage investments on your own, you need to be extra careful that you are not buying non-US-domiciled ETFs or mutual funds. Both US and Israeli brokerage can offer you access to buy US ETFs that trade on US exchanges, thereby avoiding those pesky PFICs.

Step-by-step guidance

Looking at all the options above, we realized that there was a large group of people that were not really being served by any of them. There are so many people out there who want to start investing on their own, but find the process of learning to do so to be impossibly frustrating or intimidating. You are working hard enough for your money. With all the opportunities out there, there are 0 reasons why your money shouldn’t be working hard for you.

That’s why we put our heads together and developed a guided investing program specifically designed for English speakers living in Israel who want to get there money out of the bank. We walk you through every practical detail of building your investment plan and implementing it on your own.

It is designed for busy people who want to grow wealth and/or build a passive income stream. It gives you the tools to make the right choices in order to pay minimal taxes and fees. It’s for those who don’t want to pick stocks and have no more than 10 minutes a month to worry about their investments. The program is self-paced and accessible from anywhere so that your busy schedule won’t hold you back.

With over 150 students already having completed the program and confidently investing every month – we are extremely excited to see more and more joining. You can learn more and see everything you will learn, here.

US citizens: The best investment choices are completely different for Americans and non-Americans. Given that, we offer a version of our program designed specifically for US citizens, to help you focus only on the details that are relevant to you.

Summary chart

Choice	Minimums	Fees*	Services offered	Biggest cons
Independent investment advisors	$500k- 1 million	1-2% of assets per year	A-Z investment management, comprehensive financial planning, financial quarterbacking**	High fees and minimums
Bank Investment Advisors	100K ILS – 500K ILS	1.5-2.5% of assets per year	Investment management, pension advice	High fees and minimums, poor track record of customer service
Kupat Gemel Lehashka’a & Savings Plans	0	0.7-1.2% of assets per year	Automated investment management	High fees, not for Americans
Robo advisors	10k ILS – 100K ILS	0.8-1.5% of assets per year (+VAT)	Automated investment management	Higher fees, limited choices, low level of customer service
DIY investing	0	0	n/a	Initial effort required, self-reliance
Step-by-step guidance	0	1000 ILS one-time fee	A 4-week program that will give you the support you need to build your own investment portfolio confidently	Initial effort required

Why fees matter

No one likes paying high fees, but when it comes to investing, they can have a much greater impact than you might expect. The reason for this is (somewhat) simple – when you pay fees on your investments you don’t just lose out on the fee you pay but also on all the growth you would have earned had that fee remained invested. While this may seem like a small amount – compounded over a long-term investing career – the results can be shocking. A 1% fee may sound like a small number but what if I told you that a 1% fee could actually eat up more than 25% of your investment profits?

To see some simple examples for yourself, try out Schwab’s fee impact simulator. This isn’t to say that your most important focus should be eliminating or reducing all investment fees. There are certainly some financial professionals, products, and services that can bring more benefit than their cost. Nonetheless, you shouldn’t ignore the fact that these fees can have a major impact and determine whether or not you will achieve your financial goals. This reality has to be weighed carefully against the value you are (or are not) receiving from any financial professional or service.

Another very common misconception is that if you just find the right advisor, service, or money manager you will be able to have better returns than everyone else. If you are paying 2% fees but outperforming by 3%, that’s still a pretty good deal, isn’t it? The fact is that the overwhelming majority of active money managers and stock pickers significantly underperform a simple strategy of buying and holding a low-cost, broadly diversified index fund. Advisors can bring many benefits to your financial life – “beating the market” is not one of them.