Last Updated on June 9, 2024

This article is for general educational purposes only and should not be viewed as legal, tax, or investment advice. These investments and platforms may not be the right for you and we always recommend conducting independent research before making any financial decisions.

Many Americans living in Israel want a better understanding of the investing options available to them beyond their employee sponsored retirement and pension plans. The confusion around this issue is compounded by the PFIC problem, discussed more below, which makes many Israeli investment and savings plans bad choices for Americans.

This article will specifically focus on the somewhat limited options available to Americans that don’t require a US address and are generally not considered a PFIC (Speak to an accountant for specific advice). We will update this post as new platforms become available. If you are looking for personal guidance on everything mentioned in this article, be sure to check out our guided investment program (with a track built specifically for Americans in Israel.)

Investments Americans should be especially careful with

First, here is a list of some of the common problematic investments in Israel for Americans. While it is always recommended you consult your accountant before making any investment, this is especially true with regards to all of the following:

• Kupat Gemel Lehashkaha (קופת גמל להשקעה)
• Insurance Savings Policy (פוליסת חיסכון)
• Any Israeli ETF (קרנות סל) or mutual fund (קרן נאמנות) bought in a regular brokerage account.
• קרנות כספיות – Israeli money market funds
• An Israeli RIET (such as RIT1)
• A self-employed person contributing to a Keren Hishtalmut (קרן השתלמות)
• A self-employed person contributing more than the minimum required to their pension
• The provident fund track (קופת גמל) offered as one of the options in the government savings plans for kids (חיסכון לכל ילד)

I know the simplistic title of this article implies that you “can’t” invest in these as an American but the details are far more nuanced than can be captured in a title. You definitely can legally own these, the main question is whether or not that would be advisable. US citizens that own PFICs (Passive Foreign Investment Companies) such as non-US-based ETFs or Mutual funds outside of specific retirement and pension accounts in Israel could be subject to very punitive US taxation and costly reporting requirements. 

Without getting too much into the tax weeds, the fact is that it is often just not worth it for an American to own a PFIC, given the costs and better alternatives available.

US accountants in Israel take varying “PFIC positions” on some of the investments mentioned above depending on your individual circumstances. It is always a good idea to understand the risk and benefits of each approach and to press your accountant for information on different options. Getting specific advice from one or more qualified US accountants in Israel is highly advisable.

What Americans can invest in

If you do maintain a US address while living in Israel, most US platforms will be available to you. Here is a list of investments and platforms available to Americans living in Israel with no US address.

Please note that this article is focused on longer-term investments. For Americans who are looking for short-term savings options in Israel, a Pikadon in your Israeli bank account is likely one of the best & simplest options. For a deeper understanding of different savings vehicles in Israel, see our full article “How to earn more from your savings in Israel“.

International Brokerages

One of the easiest and cheapest ways to avoid PFICs is by using a US brokerage in Israel to buy US stocks, bonds and ETFs. Thanks to platforms like Interactive Brokers and Charles Schwab, maintaining a globally diversified portfolio from Israel is easier and cheaper than ever. With Interactive Brokers, this can be done easily even if all the funds you want to invest are coming from an Israeli bank account.

Israeli Brokerages

There are two main ways an American can use an Israeli brokerage to invest while avoiding PFICs:

1. Buy individual stocks and bonds trading on the TASE rather than Israeli ETFs and mutual funds (avoid REITs and ETNs)
2. Israeli brokerages offer access to US markets where you can buy US stocks, bonds, and ETFs within an Israeli platform

The obvious drawback with these options is the complexity. With option #1 it is much more difficult to manage a portfolio and diversify. With option #2 you need to be very careful that you are actually buying a US ETF and not an Israeli ETF that tracks the US market. In addition, Israeli brokerages charge much higher fees and commissions than US brokerages.

Be careful using your Israeli bank to make investments – their fees are generally much higher and there are some advisors at banks who are not aware of the PFIC issue. Meitav Dash and IBI are both brokers here in Israel which will likely be cheaper than using your Israeli bank and will open accounts for Israeli Americans. 

If you are not sure which brokerage is right for you, check out our full article “US vs Israeli brokerage – which one should I choose?”

Series I Savings Bonds

Series I Savings Bonds are 30-year bonds issued by the United States Federal Government with an interest rate that goes up or down based on inflation. You do not need to be a US resident to buy these bonds but you will need a US bank account. Bonds being issued between May 2023 and October 2023 have an initial annual yield of 4.3%.

Take note that these bonds cannot be traded, must be held for at least 1 year, and have a slight penalty if redeemed within 5 years. The minimum purchase amount for Electronic I Bonds is $25. Each individual investor can purchase up to $10,000 in electronic bonds per calendar year. To purchase these bonds you must have a social security number but do not need to be living in the US.

To buy these bonds you must open an account on Treasury Direct and connect to your US bank account. While the site is pretty old-school (last updated in 2002!!), the process for purchasing these bonds is pretty straightforward once (if) you get your account set up. Unfortunately, some people that are trying to sign up will be automatically blocked from opening an account and required to take extra verifications steps not easily accomplished from Israel. It is unclear how many people this is happening to or why it is happening, but getting unblocked or having your identity verified can be challenging.  

Real Estate

Buying an investment property can be a great way to build wealth and generate income. It can also increase your risk and overly concentrate your investment portfolio. It is also worth noting that Israel generally has a high price-to-rent ratio and once you include transaction costs, mortgage interest, taxes and maintenance your actual rental income could end up being negative. In addition, if you are a US citizen, you may be subject to higher tax rate on rental income than a non-American Israeli would be. Real estate in Israel may be a great investment for some with the right opportunity but it certainly is not the “sure thing”.

Fjord “Robo Advisor”

WARNING: We have received complaints about this product from our readers and other financial professionals. While we can’t independently verify all the claims that have been made, we have concerns. Please make sure you review the fees and trading strategy carefully before investing using this service.

Fjord is a “Robo advisor” which builds and actively manages an investment portfolio for you based on US ETFs. Essentially, the platform will ask you 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 contributions based on the portfolio you choose. Portfolios are made up of traditional asset classes including: stocks, bonds, real estate and natural resources.

This service has a minimum of 10,000 ILS and charges an AUM fee of 0.5% (+VAT!). More importantly, Fjord is using the “Interactive Israel” (אינטראקטיב ישראל) platform, a service based out of Cyprus. Even though your account will be held at Interactive Brokers, because of this partnership with אינטראקטיב ישראל you will pay more than 7X the trading fees you would pay for a regular IB account on each transaction. As Fjord is an active trading algorithm which periodically buys and sells different ETFs, some users have discovered that it can at times generate disproportional fees from trading commissions alone.

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

P2P lending platforms

Peer-to-peer lending platforms have grown in popularity amongst Americans in Israel looking for a relatively stable shekel based investment vehicle that avoids the PFIC issue. Some popular Israeli peer-to-peer platforms include Blender, Tayra and BTB Israel. Essentially, any money you add to the platform is divided up amongst many different loans and you earn some of the interest generated by those loans. Take note that during the last major financial crisis in 2008, peer to peer lending was still in its infancy. There isn’t much data available on how peer-to-peer loans would perform during a time of a major liquidity crisis or in the event of many users rushing to pull their money out at the same time.

Venture Capital

While most are not qualified to invest in this asset class as you generally must be considered “accredited“, it is still very interesting to know about. To be an “accredited” investor in Israel you must meet very high net worth and/or annual income requirements. OurCrowd is a platform built in Israel which gives high-net worth individuals and companies the ability to easily invest in startups from all over the world.

Crypto

There is certainly a healthy level of debate on whether or not Crypto should be included in a list of investing platforms. While we are not going to weigh in on this debate here, there are clearly some people in Israel looking to buy crypto coins with a (hopefully) small portion of their investment capital. Take note that generally the platforms that are easiest to access in Israel such as Binance and Bit2C charge very high fees. In addition, Israeli banks can make it extremely difficult to transfer funds from any crypto platform to your Israeli bank account.

As of January 2024, gaining exposure to Bitcoin can be done easily through an ETF. 11 of them were approved by the US regulator and can be purchased like any other US ETF as described above in the “International brokerages” and “Israeli brokerages” sections.

Qualified Electing Fund (QEF)

A fund that meets the complex QEF requirements – while still considered a PFIC – can simplify annual PFIC reporting thereby potentially reducing accounting fees and some of the punitive taxation. The amount of funds that meet the QEF requirements in Israel are extremely limited and often have higher management fees than comparable none-QEF funds. The reporting can still be relatively complex and will likely still require using an accountant with relevant experience. Given the higher fees and very limited options, this often isn’t a better choice than other investment vehicles mentioned in this article.

Professional Advisory Services

There are professional investment advisory services that will open brokerage accounts and manage your investment portfolio for you if you meet their minimums (around $500K or more) and are willing to pay their fees (1-2%). Some of the firms in Israel that specifically offer services to Olim and are likely to be well versed in the PFIC issue include:

Labinsky Financial, Lighthouse Capital, Maimon Wealth, Nardis Advisors, Pioneer Wealth Management, and Profile Investment Services.

Some of these firms are set up to manage investments in both the US and Israel. Others may only offer investment management services using platforms that are based in one country or the other depending on how they are licensed. Before contacting a firm you can always do independent research on what the firm offers and try and speak with someone who is currently a client.

While we don’t offer specific investment advice or manage investments, we do offer a guided investment program designed to teach you how to build and manage your investments on your own.