Investment portfolio management is suitable for every type of client: private clients, institutional clients, private companies, and public companies. In portfolio management, funds are managed within the bank account and do not exit the bank. This requires opening an account that is only for investment and transferring the funds intended for portfolio management to this account; this way, the client has complete control and oversight over the funds, which can be viewed in the bank account.
The advantages of investment portfolio management
Solvency: all the investment portfolio’s assets are solvent or invested in tradable securities that can be executed according to various changing needs.
Transparency: the solvent funds and the financial assets in your investment portfolio remain in your bank account and in your name, in local Israeli banks or in banks abroad.
Personal adjustment of the portfolio: the portfolio manager builds the portfolio according to your personal needs, which have been clarified for you, and adjusts the mix of investments to your needs, unlike provident fund products (savings policy, investment provident fund, etc.).
Reduced costs: portfolio managers have the advantage of size, since a portfolio that is managed at a low cost usually receives exemption from account management fees as well as lower service charges for buying and selling.
Professionalism: portfolio managers are licensed by the Israel Securities Authority, and they must pass tests in order to receive the investment management license.
Choosing a portfolio manager
Here are the relevant points for choosing your portfolio manager:
- The seniority of the body that manages the funds in the capital market.
- The managing body’s field of expertise: is it better at managing Israeli investments or investments abroad? Does it have advantages in small stocks or in bonds?
- Your personal portfolio manager’s experience.
- The managing body’s management fees.
Types of investment portfolios that are currently available
Standard investment portfolio: this portfolio is spread out over several main investment channels – Israeli stocks, stocks abroad, corporate bonds, and government bonds.
Usually, a standard portfolio is made up of 70% bonds and 30% stocks. The distribution of bonds and stocks depends on the portfolio’s investment sum: the higher the investment sum, the more direct holdings, while a portfolio with a lower investment sum also includes mutual funds in order to achieve a broader dispersion and reduce the portfolio’s exposure to a single product at higher percentages.
Index tracking portfolio: this portfolio usually holds several anchors of index tracking funds and exchange-traded funds (ETFs).
Examples of stock indexes: Tel-Aviv index – 125, Tel-Aviv index – 35, Nasdaq – 100, S&P – 500, DAX, Euro Stock – 50, and Euro Stock – 600.
Examples of corporate bond indexes in Israel and abroad: Tel Bond – 60, Tel Bond – 20, IBOXHY Tel Bond yields, government bonds index, and, of course, corporate and government bond index tracking abroad.
Advantages of the standard investment portfolio
- Dispersion: broad geographic and sectoral dispersion with no exposure to or risk of a single security.
- Cost: internal costs are lower than traditionally managed mutual trusts.
- Flexibility: the ability to change the products to a whole investment sector at the click of a button.
Advantages of the index tracking portfolio
This portfolio mostly consists of bonds in different channels and for different ranges, with few dividend stocks. Thus, the portfolio creates a current monthly income flow (a sort of annuity) to the family unit; this flow deals with needs that arose from the clarification of the family’s needs.
The index tracking portfolio’s advantages:
- Flow: the current income flow is known and planned ahead of time.
- Alternative: this portfolio can serve as an alternative to investment in a real estate asset that gives a “rent” flow and solvency, as opposed to investment in a realized yielding asset (especially when one is tired of taking care of constant real estate problems and wants peace and quiet).
The process of opening an investment portfolio
- Choosing the managing body based on the expertise type of the desired portfolio manager.
- Conducting a meeting with the portfolio manager to adjust the investments to your personal needs (i.e., clarifying the personal needs).
- Opening a designated bank account that will manage the portfolio, transferring the funds to this account, and assigning the portfolio manager to the account.
- Ongoing guidance – observing and tracking the portfolio manager’s performance and comparing it to selected alternative products in order to see whether the portfolio manager is giving us the expected managerial advantage.
