While immigrating from one country to another, your investment portfolio is one of the most important things to look at and, if necessary, change.
Whether you have money in an investment account, a retirement savings plan, or some other type of investment vehicle, or if you own exchange-traded funds, mutual funds, bonds, or stocks, it’s essential to evaluate your holdings and your financial relationships for several reasons.
The Israeli Market: A Good Place to Invest
Even though past performance isn’t always a good indicator of future performance, there are some very good reasons for investors to put their money in Israel. After Covid-19 caused a big drop, the Israeli market has kept its strong position and is now back on track. In fact, this year in January, the Israel Stock Market (TA-125) achieved a historical all-time high of 2158.12.
There are signs that it will keep doing well in the long run. Even though the world economy is slowing down, the fundamentals of the Israeli economy are strong. Israel’s economy doesn’t have many of the systemic financial problems that other markets do. The banking sector is still stable because lenders are very afraid of taking risks, and there are no problems with subprime mortgages.
So, even though Israel’s market depends on and is linked to other markets worldwide, it has more reason to expect long-term gains compared to other Western markets. The banks have increased the fixed interest rate since the Bank of Israel’s rate of interest started to go up in April 2022, from 0.5% to 3.25%.
Therefore, it is crucial to monitor interest rates.
Investing in Different Currencies
How often have you thought about what to do with your money from back home? Should you keep your investments outside of Israel or move them there? Should they be changed into shekels and put into investments, or should they be kept in euros, pounds, or dollars? How quickly should you change your money? Should you do it all at once or over time?
These are some of the most common questions. As with most money problems, there is no one answer that works for everyone. So, how do you make a hard choice that could have huge long-term effects?
Here are some things you should consider:
Banks That Streamline the KYC Process
Processing payments fast and easily is a must. You may safeguard your company against money laundering, financial fraud, and terror funding by choosing a financial institution that ensures a thorough KYC, and you’ll also save money on AML compliance expenses.
Some banks like ONEZERO, a new Israeli Bank, have started using AI-automated customer verification and KYC solutions. One major advantage of employing an automated KYC verification system is that it enables you to authenticate a person without asking them to supply further information. This has helped financial institutions to raise their annual total of newly onboarded customers by cutting the time it takes to onboard them by as much as 80%.
Exchange Rate Risk
The financial system of Israel presents unique constraints and opportunities. Everyone’s finances need to be changed when they move to a new country, and for most people, that means getting more used to the local currency. When you save and invest in the currency you spend most of your money in; you reduce the risk of the exchange rate going against you.
Because of this, people in most countries invest most of their money in local stocks, bonds, etc. This is called a “home investment bias.” It always has to do with how far away something is within a country. Investors tend to put a lot of money into the assets of companies close to them, regardless of whether they are in the same country or not.
Choosing the Best Exchange Rate
With the dollar falling against the shekel, it’s hard not to think about what to do with your foreign currency savings. Should you convert now, or should you wait? You can’t usually time the currency market, so you can’t always expect to get the best rate for your dollars. Instead, you should look at long-term trends and your short-term and long-term needs to figure out what you think is a reasonable long-term exchange rate.
Be honest and don’t give in to the urge to be greedy. When your currency gets to the level you want, you can start changing it. So, for example, if you think that 3.4 NIS to the dollar is above the long-term average, you shouldn’t wait. Don’t look back after you’ve made money.
How Taxes Work
Make sure you are aware of how your decision will affect your taxes. If you have money saved in a retirement account, taking it out to turn it into shekels could result in a big tax bill. If you don’t plan ahead, selling a business or a home could also leave you with a big tax bill.
If you don’t have enough information to make an informed choice, you should talk to your financial planner or accountant before making any big financial moves to avoid getting taxed in ways you hadn’t planned.
Changes in How Money Comes in
It’s crucial to consider how this money will affect your long-term cash flow when determining how much and when to convert your funds to shekels. If these savings are the only money you’ll ever make in a foreign currency, you might not want to convert the money you have abroad because you want to have more than just your income and savings in shekels. If you plan to retire in Israel and all of your retirement income will be in dollars, change more of your savings into shekels right now.
Over time, having money close by has become more and more important to people. International financial rules are getting tougher and tougher. If you deposit and invest money in your home country, it can make your life easier and help you avoid situations where you can’t get your money abroad for a variety of reasons. As you get older and want to simplify your finances, this ease of access becomes more important.