It’s well-known that Israel is one of Southwest Asia’s most advanced countries in terms of industrial and economic development. Thanks to its growing and robust economy, it’s easy to see why Israel is one of the leading exporters of pharmaceuticals and technology, and why it has more NASDAQ-listed companies and start-ups than any other country worldwide outside North America.
If you’re an international investor looking for alternative investments , you may want to consider investing in Israel and finding the best way of building exposure into a more diverse investment portfolio. After all, this is one of the best portfolio protection strategies .
The Economic History of Israel
It’s fair to say that the economy of Israel started out on a relatively rough note, even though today it has become extremely successful. Following the declaration of its independence in May 1948, Israel faced a severe economic crisis due to the 1948 Arab-Israeli War that devastated the country. Luckily, the $3 billion Marks that Germany paid to Israel in the 1950s to compensate for the Jewish persecutions during the Holocaust help to offset those losses.
Although the 1940s and 50s saw economic difficulties, the next few decades saw the Israeli economy enjoying impressive rates of economic growth, although that came to an end in 1983 when the bank stock crisis caused the annual inflation rate to come in at almost 450%. Fortunately, 1985 saw an effective and successful plan for economic stabilization which was implemented and established the foundation for rapid economic growth in the country during the 1990s.
Today’s Strong Modern Israeli Economy
The economy of Israel may not be the world’s largest in terms of its GDP, however, it’s leading the world in several industries including pharmaceuticals, semiconductors, telecommunications, and software. With more NASDAQ-listed companies and startups than any other country outside North America, Israel’s economy is growing rapidly. Not only does Israel have a strong rate of economic growth, but its central bank has also managed to maintain an extremely successful monetary policy. In mid-2012, the country had a $60 billion surplus, and its unemployment rate was considerably lower than that in other developed countries.
ETFs And Israel Investments
One of the easiest ways to invest your money in Israel is to use ETFs. Index funds such as the dividend aristocrats ETF are a popular choice among investors looking for high-dividend blue-chip stocks that are a relatively safe investment. ETFs offer you instant diversification in one single U.S-traded security. One example is the iShares MSCI Israel Capped ETD, which has almost $80 million of assets under management. This popular option is an ideal choice for any investor who wants more exposure to the Israeli economy. Although this ETF offers a diversified exposure thanks to the 67 stocks within its portfolio, you still need to bear in mind that around a third of this fund exposes you to the financial sector while virtually a fifth is invested in Teva Pharmaceutical Industries LTD. Also, the expense ratio of this fund is 0.61% - pretty much in line with most other country ETF funds. If you’re interested in directly investing, you may want to choose ADRs (American Depository Receipts). These offer you U.S-traded exposure to individual organizations.
There are many popular Israeli stocks and ADRs that are traded in the USA. They include:
Cellcom Israel Ltd
Teva Pharmaceutical Industries Ltd
Mellanox Technologies Ltd
Check Point Software Technologies Ltd
Nice Systems Ltd
What Are The Risks And Benefits of Israeli Investments?
Although the economy of Israel is growing and dynamic, there are several risks faced by this country that you should consider as a prospective investor. For example, there are several geopolitical risks faced by Israel from other countries as well as financial risks stemming from the size of its banking sector.
Some of the advantages of Israeli investments include:
Its strong ecosystem for startups. Israel is famous around the world for its strong industry of venture capital and startup companies. So much so, in fact, that many investors have compared it to Silicon Valley. An effective and stable central bank. A lot of economies tend to lose steam if their central bank fails to act properly, however, Israel’s central bank is one of the world’s top-rated. There are also some risks, of course, as there are with any form of investment. These risks include:
Political policies. The Israeli government has some potentially controversial political policies with regard to Palestine as well as the tactics it uses to deal with Iran.
Geopolitical risk. Since Israel is in one of the most volatile parts of the world, geopolitical risks are always going to be an issue.
Should I Invest In Israel?
Israel certainly represents a strong opportunity for investment in a volatile but lucrative world region. Investors who are seeking more exposure can find a number of U.S.-traded ADRs as well as ETFs if they wish to take a comprehensive approach to building greater exposure into their investment portfolio. If you’re ready to improve your financial prospects, it could be time to consider an Israel investment.