Let’s cut right to the chase. If you are a US citizen living in Israel and are reading this, then you are probably all too familiar with the dreaded four-letter word – PFIC.
In over-simplified terms, it basically means that unless you are in the mood to be paying penal levels of tax on your Israeli investments to the IRS, you should not be saving or investing your money using the same vehicles that most of your non-US brethren are doing (e.g. Israeli mutual funds, ETFs, certain Kupot Gemel, etc).
Now, if you have a large amount to invest, then you or your investment manager could construct a portfolio of individual stocks and bonds, or you could even buy another piece of real estate.
But what if you don’t have millions of shekels to invest, or you don’t feel confident enough to construct your own portfolio, but don't want your money just sitting in the bank? What if you don’t want to deal with an investment property in Israel? What if your US brokerage firm is no longer dealing with accounts for non-US residents (which is becoming more and more common)?
With over 120,000 US citizens living in Israel, this is a major challenge.
But all is not lost. Whilst there is no denying that the investment options in Israel for US citizens are far more limited, if you look around carefully, and are creative enough, you will find opportunities. So below, we bring you 5 interesting investment options that we have found that may form a useful part of your portfolio without your CPA hollering four-letter words down the phone at you (the aforesaid ‘PFIC’ of course).
Of course there may be other options as well, but as the series is called “5 Things You Didn’t Know…”, we decided to stick with the theme.
1. Lending platforms that, through their algorithms, provide short term loans to hundreds of different pre-vetted Israeli businesses. The minimum to invest is 2,000 Shekel.
2. Fjord Investments – A robo-advising platform that invests in US-based ETFs. The minimum to invest is $3,000.
3. Wealthstone – Israeli real-estate backed investment vehicle, providing a pre-agreed level of interest on the investment. Minimum to invest is 300,000 Shekel. (See a previous article we have written on the concept.)
4. Prudent Fund – A fund specializing in Brazilian short-term loans, with insurance against default, who offer a US-citizen friendly option. Asset management behemoth PIMCO recently invested into the fund. Minimum for investing in the fund is between $10,000 - $100,000
5. Profimex – An investment company that invests in large US Real Estate projects together with their investors. Minimum to invest is $50,000.
Before we end the article, a few important caveats of course:
(i) The above should not be taken as investment advice, and before any investment is made your particular requirements, risk-profile and asset allocation must be taken into account.
(ii) Whilst we are familiar with and can provide an introduction to all of the above investments, IAL has no corporate connection with the above investment providers.
At IAL we assist English-speakers from all countries with their savings and investments in Israel. Get in touch with us here to book a consultation!