Wednesday, July 30, 2014

Keren Hishtalmut: Part II

Q. “Keren Hishtalmut” means “education fund,” but what does it have to do with education?

A. Nothing. It was originally created to help people save for education expenses and was later expanded. You can still use it to save for education. In that case, instead of waiting 6 years to withdraw the money tax free, you can do so after just 3 years.

Q. Where can I invest the money?

A. Your Keren Hishtalmut is held by an investment company of your choosing. Each company has different “מסלולים,” or investment funds, that you can choose from. This is a very large market in Israel with many investment companies offering Keranot Hishtalmut services.

Q. How do I choose which company to use?

A. First, you should decide on your investment objectives and then on a target allocation. For example, you may decide that you want to invest the money for the “medium term” and allocate 60% to stocks and 40% to bonds.

Next, you can then go to a website like this one and look for all of the funds that meet your target allocation. From this long list, you can decide on which firm to use by performing appropriate non-expert research. For example, you could chose the one with the most colors on their website, or the one whose name rhymes best with words that you like.

Q. That sounds like a lot of work. Could you just tell me which companies to look at?

A. I could, but I wouldn’t do that because I am not a bank. If I were a bank, I would definitely provide you with a “free” consultation in which I would independently recommend a company for you to use based on thousands of hours of in-depth research that I preformed in a strictly objective manner that I cannot explain to you because it would be highly proprietary.

I would offer you this research absolutely free, and I certainly would not be taking a kickback from the fees that you will pay to the investment company without telling you. I also definitely would not deny that I am taking a kickback until you call me on it explicitly. This absolutely would not happen. However, if it did, I most certainly would not get in your way of negotiating a more reasonable fee with the investment company that I recommended.

I wouldn’t do any of this because I know that if I did, you would just move your investment to a different company.

Q. It is too bad that you are not a bank. What is reasonable in terms of fees?

A. The fees are assessed as a percentage of your investment like any traditional money management fee. It should not be higher that 1% and could be as low as 0.5% or less if you have a large amount of money in your account.

Q. I know that you are not a bank, but in your research are there some companies that stand out in terms of performance, fees or service?

A. Yes, but I won’t write about it on my blog because that really isn’t my style. However, you can email me and we can share stories directly.

Q. Is it a good idea to invest more money in a Keren Hishtalmut above the amount that is tax free?

A. No. There is no advantage to this and you will just make your taxes more complicated to manage.  Above the amount that is above the tax free ceiling, you will have to pay tax on the money you deposit and on any gains from these deposits at the time of withdrawal. If you have more money to invest beyond what you are saving in a Keren Hishtalmut, you should just invest it in a regular brokerage account.

Q. I still have more questions. Is it ok if we continue next week?

A. Absolutely. This was only Part II. We could go on about this for weeks.


  1. I think you should keep going until all tunnels are destroyed.

  2. another point of view. maybe they would stop firing rockets if they were elegible for hishtalmut?

  3. Is tunnel warfare like investing?

  4. I think the Hamas is mad that people living in Gaza are not able to get hishtalmut like the people working just a few kilometers to the north. Are they allowed to invest in the TLV stock market or are they restricted to even so that?

    1. They should be pretty upset about this. I didn't see this on their list of demands for a cease-fire, but I assume they don't need to state it because it is obvious. Also, I'm with Hamas on strategy in this case. Any time I don't get my way with the bank, I launch rockets at them. This always works.