The March performance figures for pension funds, insurance policies for retirement savings (bituah minhalim), provident funds and continuing education funds (kranei hishtalmut) will be published only in early April. Right now a rough estimate is the best we can do.
The general provident funds - those not on a designated investment track specializing in shares or foreign currency - are 30%-40% shares and high-risk assets. The rest of the assets are blue-chip corporate and government bonds.
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Provident funds have therefore probably lost 2%-4% since March 1st, similar to January's losses. Funds that have a higher share ratio will naturally have greater losses. This, however, is just a rough estimate, and there are differences between the various provident funds and continuing education funds. The markets are also highly volatile and figures that are correct for today will likely be different by month's end.
Is it worth pulling out of provident funds that have lost since the beginning of the year?
A provident fund should be chosen based on the client's needs, his age, and how much he loves or despises risks. In general, younger savers can risk having a provident fund that invests corporate bonds, for example because they offer higher long-term yields than government bonds. A saver approaching retirement age, on the other hand, should stick with a provident fund with a high government bond component.
Either way, choosing the right provident fund and the appropriate investment track should not be done under pressure from the crisis du jour.
Tumbling share prices are frightening, but anyone with a 10- or 20-year investment horizon should know that every few years the stock market crashes, wiping out the gains of the preceding years. The only solution is to stick with the long-term investment goal and be very patient.
I am planning a trip to the United States in late April. Should I buy dollars now or wait for the exchange rate to drop a little more?
No one knows whether the dollar will depreciate more or bounce back - in the short term or the long term. The fact that the Bank of Israel intervened in foreign currency trade last week could indicate that in the short term, at least, the bank will try to prevent the dollar from declining sharply against the shekel. Israel's central bank is not alone. Other central banks worldwide have begun buying dollars.
If you wait for a lower exchange rate, be aware that it could change direction at any time. If the risk that the dollar will suddenly strengthen is not for you, pay for your trip now and save yourself the worry.
Part of my mortgage payment is dollar-linked. Should I switch that loan and link the entire mortgage to the cost-of-living index?
That is a very difficult question, as no one knows what the dollar will do in the future. Anyone who took a dollar-linked mortgage in the past two years received a big gift - the loan shrank considerably due to the sharp drop in the exchange rate.
In retrospect, that deal paid off, but not in the originally intended term. Anyone whose salary is in shekels is usually better linking his future obligations to the shekel. Linking a mortgage to the dollar exposes you to a scenario in which the dollar's value rises while your income (your salary) does not increase or declines in real terms (increases by less than the inflation rate). Currently, that seems to be a distant risk, but the shekel has declined in value in the past, and may do so again in the future.
Of course, if part of your income is dollar-linked, then linking part of your mortgage to the dollar is a logical step.
The TA-25 index has dropped 22% since the beginning of the year. Is now a good time to buy shares?
Just like the questions concerning dollars, it is difficult to say whether now is a good time or not. From a historical perspective, a comparison of the profit/earnings ratios, equity multiples and sales multiples, reveals that share prices on Israel's bourse are not so high, but does not mean they will not decline more.
When the economy and the stock exchange start sliding, the mood changes and a crisis could last for years. In that case, the multiples we see today are not relevant because the companies' profits could nosedive.
The Tel Aviv Stock Exchange depends on economic developments in Israel and around the world, and at present all the news from abroad is bleak. It will probably be a while until we hear encouraging news. The American stock exchange began slipping even before the release of the official figures indicating a serious economic slump. The Israeli bourse also lost ground even though the local economic data is still favorable.
The question is if Israel's economy can hold its own even when the rest of the world slows down. On the other hand, it is important to remember that things will also start to get better before the numbers arrive. It is impossible to tell if we have already reached rock bottom.
Would Israeli real estate be a better investment? Should I buy an apartment, for example?
An investment in real estate is based on many considerations that are unrelated to the stock market. The worthwhileness of a property depends on its price, location, and the yield that can be generated from renting it. Anyone willing to make an effort can find good deals, and the low interest can make financing such a purchase easier.
Still, if the economy slows down and demand for apartments drops, real estate prices could decline, too. Furthermore, the Israeli real estate market has been influenced in recent years by the wave of apartment purchases by foreign residents. The strong shekel (and the weak dollar) have made it less worthwhile to buy an apartment in Israel, and this could also lower demand.
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