Thursday, January 2, 2014

Once Upon an Accident

T’was a typically hot winter day, when one brave man (me) stepped forth and posed this question: “How does one invest in Israel?” Because this man is Israeli (me, again), he thought that the best way to find the answer would be to just ask people. Here is what they said: 
  • “But who has money to invest?”
  • “Why wouldn’t you just keep it in America?
Good questions. Surely, I thought, if I answer these questions, these people will tell me how to invest in Israel. Actually, they would not. They have no idea how to invest in Israel and were just being difficult. However, I am an exceedingly good person, so I’ll answer these questions anyway.

Who has money to invest?

Perhaps more people than you think. You, in fact, may already have some. Sure, the "traditional" way of getting money was to "earn it". And, in Israel, you are not likely to earn as much money as you did in America. But there are more sources for savings than you may know:
  • You may have a keren hishtalmut (קרן השתלמות) at work in which money is being saved for you every month. (If you don't know what this is, you should keep reading this blog, because I’m going to get to that eventually. In the meantime, just let me say that it is the best thing since sliced pita. Go open one if you don’t already have it.)
  • You may have a pitzuim (פיצויים) fund at work that is being saved for you. When you leave for your next job, you may keep it as part of your pension, or you could take some of it out in cash. At that point, you could spend it, or maybe, you could save it for non-retirement expenses in the future.
  • You may have money that you saved in America. If you are like most American olim, you probably spent most of it to make aliyah. But, you may also have some leftover that is still there. 
Besides these lesser known savings, you may also have money that you are saving in retirement accounts, either in America or in Israel.

So why don't you just keep it in America?

That seems to make sense. After all, America is awesome. It's huge and everything there is big: the cars, the coffee, the people, and the returns on your investment portfolio. The only trouble is that you are living in Israel and that big expense you are saving for probably will happen to you in shekel.

Your expenses in the short term (food, clothing, cars, bat mitzvahs, food, bar mitzvahs, kids’ weddings, houses, big family vacations, food, houses) and in the long term (retirement, funerals) are in shekel. If your investments are in dollars, you are at risk for that money not being there when you need it most. 

True story:
  • In the beginning, we decide to make aliyah. The shekel is around 3.5 to the dollar, down from its highs in the 4’s. We figure it will just go back up… so why worry?
  • We decide to buy a house just before we would make aliyah. The shekel is around 3.2 to the dollar. We panic and can’t afford the house. We decide not to buy the house and not to make aliyah. Crisis averted. We’re American, so we keep all of our money in dollars.
  • We change our minds and make aliyah, mostly just by accident. We decide that we’ll wait a couple of years to buy a house because prices will come down. (Ha ha!) The shekel gains against the dollar and goes back up into the 4’s. We keep our money in dollars, because now it is so much safer. And, we’re still American.
  • We decide to buy a house. We move all of our money into shekel because we finally realize that it’s been ridiculous to take on all this stress. We transfer at 3.8 and lament that we didn’t get 3.9. 
  • The dollar sinks lower as we pay the builder for our house. We are thankful that we got 3.8 when we did.
I operate entirely by accident which is why it took me a few years to understand what happened. In turns out, that during this time I was speculating on the dollar and shekel. (No wonder it was so stressful!) It turns out I did ‘ok’ in the end with my major purchase, but only because I got lucky.

Until recently, it actually made a lot of sense to keep your money in dollars. The exchange rate pretty much moved only one way, with the dollar consistently getting stronger and the shekel consistently weaker. That changed around 2002. In the past decade, the dollar and shekel have been dancing between 3 and 4 with lots of what the financial people would call, “volatility.” Here is a deeply compelling graph to convince you of this point because it demonstrates that I’m super into the details:

Deeply Compelling Graph

Actually, a graph like this is fairly easy to make. You can do it yourself right from the Bank of Israel’s website. All the options you need are right there on the “Currency and Period” tab. Except for the annotations, of course. I added those myself as a gift to you. You’re welcome.

So, there you have it. That just about answers the questions that were meant to answer my question. I am not expert at this, but I want to invest in Israel because (a) I have money that I want to invest, and (b) I don’t want to do it in dollars because I’m investing for a life in shekels.

So, tell us then: how exactly can one invest in Israel?

Well, there is some good news and some bad news. The good news is that you can. The bad news is that it will be just about as hard for your money to make aliyah as it was for you. But I’ll help you. Just call me, “kesef b’kesef”.

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