Where and how do you invest in practice?
Once you understand the principles of investing, you need to decide where to manage your money and how to make the investment in practice. On this page, we will compare a trading account at a bank or investment house with a managed portfolio and managed investment products, and move step by step from defining your goal to making and monitoring the investment.
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After discussing principles, risks, and investment instruments, it is time for the practical stage: how do you connect all of this to real life, and where do you put the money?
There are several main ways to invest in the capital market. The choice among them depends on the level of involvement you want, the costs, and your personal goals.
Investment platforms: bank, investment house, or managed investment product?
In the section about investment products and money management, we expanded on the different ways to invest in the capital market. The table below summarizes the common options, but it is worth visiting that section and reading about each one in detail.
| Feature | Kupat Gemel LeHashkaa (קופת גמל להשקעה; investment provident fund) | Savings policy | Managed portfolio | Self-managed through a bank | Self-managed through a Beit Hashkaot (בית השקעות; investment house) |
|---|---|---|---|---|---|
| Who manages the money | Professional provider | InsuranceA contract under which an insurance company undertakes to compensate the insured in the event of damage in exchange for a periodic payment. company | Investment manager | The investor | The investor |
| Investor control | Medium | Medium | High | Full | Full |
| LiquidityThe speed and ease with which money can be withdrawn from an investment and converted into cash in a bank account without significant penalties. | Full | Full | Full, subject to sale | Full, subject to sale | Full, subject to sale |
| Tax deferralThe ability to pay capital gains tax only when money is withdrawn from the plan, rather than when the gain is generated. | Yes | Yes | No | No | No |
| Tax events | Only on withdrawal | Only on withdrawal | On sale | On sale | On sale |
| Tax benefit at retirement age | Yes, as a tax-exempt annuity | No | No | No | No |
| Switching providers | Yes, without tax | Requires realization | Requires realization or transfer | Can be transferred to an investment house | Can be transferred |
| Deposit limitThe maximum amounts that may be deposited into certain savings products in order to receive tax benefits. | Yes, annual | None | None | None | None |
| Costs | Medium | Medium to high | Medium to high | Low to medium | Low |
| Who it suits | Flexible medium- to long-term investment | Flexible managed investment with no limit | Anyone seeking a personalized approach | Anyone who wants full control | Anyone who wants full control at low cost |
How do you invest in practice? A checklist
Have you decided to start investing? Here is the recommended sequence:
- Define the goal and time horizon: First ask what the money is for. A trip in 2 years, a home in 7 years, or retirement in 30 years? The time horizon will affect the level of risk and the products that suit you.
- Build an emergency cushion and review your finances: Before investing, make sure you have insurance against catastrophic events, accessible money for emergencies through an emergency fund, and no expensive debt — such as costly overdraft or a high-interestThe "price of money" – the amount paid for the use of someone else’s money, as income to the depositor or as a cost to the borrower. loan — that should be addressed first.
- Choose an investment strategyThe set of rules and criteria established by the fund manager regarding how assets are selected and the level of risk.: Decide what suits you. A lower-risk or more equity-heavy investment? Broad-market indexes or other products? A one-time deposit or regular monthly deposits?
- Choose an investment platform: Open an account that meets your needs — for example, a self-directed trading account at a bank or investment house, a managed portfolio, a Kupat Gemel LeHashkaaA flexible savings vehicle that allows withdrawal at any time, or receipt of a tax-exempt pension after age 60., or a savings policy.
- Deposit the money: Make a one-time bank transfer or set up a monthly standing order, for example using DCA, or dollar-cost averaging, to invest gradually over time.
- Make the investment: If you chose self-management, enter a buy order for the securityA general term for a tradable financial asset (such as a share, bond, or unit in a fund) that represents a right to an asset or to profits. you selected, such as an exchange-traded fund that tracks a broad stock indexA virtual "basket" of shares grouped according to a certain criterion (such as market capitalization or industry), used to measure the performance of a specific market segment.. If you chose a managed product, the investment manager does this for you according to your selected track.
- Monitor it — but not obsessively: You do not need to check every day. It is usually enough to review the portfolio once a quarter or every six months and make sure the investment still suits your goals and risk level.
Frequently asked questions
Should I invest through the bank simply because it is convenient?
For small amounts, it may be convenient. As the portfolio grows, however, bank fees — especially custody fees — can reach thousands of shekels (שקלים) per year. Moving to an investment house may save you a great deal of money over time.
What is the "Sharpe ratio" shown on Gemel-Net (גמל-נט)?
It is an efficiency measure. It checks whether a fund achieved a high return simply by taking extreme risks or because it was managed wisely. The higher the Sharpe ratio, the more efficient the fund is considered.
In summary
Our journey through the capital market ends here, but your investment is only beginning. You now understand the concepts, have chosen an active or passive strategy, know the available tools, and know where and how to take the first step.
Remember: time is your best friend in the capital market. The earlier you start and the more consistently you continue, the more powerfully compound interestA situation in which the returns accumulated on an investment are reinvested and generate additional returns themselves, creating accelerated growth of the money over time. can work for you.