I’ll be blunt.  When it comes to investing, most people have no idea what the hell they’re doing.  But it doesn’t have to be that way.  Israel’s financial system has a fantastic system in place in order to help people invest safely and wisely.  And the best part is that quality, objective financial advice is usually free.

Before you need to invest, you need to know why you are investing.  Investing in order to save for a down payment on a mortgage is not the same as investing in order to preserve the value of money, nor is it the same as investing for retirement. Each of theses goals has a specific rationale behind it that impacts the risk one is willing to take, the amount of investment and the oversight required.

Once you know why you are investing and how much you are looking to invest, the next step is to find someone to help guide your investments.  In Israel, the person to look for is a yoetz hashkaot, a certified investment advisor.  This is not the same as a meshavek hashkaot­, someone licensed to sell investments.  Only a yoetz hashkaot is entirely objective, a term with significant legal ramifications.  Buying investments from a meshavek hashkaot is like buying a second hand car and relying on the car salesman for a fair assessment.  I am not saying that the meshavek hashkaot is lying, but his goal is to sell you the best financial option that he has to offer, not necessarily the best financial option from among all the options available.

Finding a yoetz hashkaot is easier than you think; just go to your bank and ask for one.  Speaking with your yoetz hashkaot at the bank and receiving his advice an analysis is free, although the bank does take a commission of 0.4% – 0.7% on buying and maintaining some investments.  Some banks do not offer investment counseling unless you have a lot of money.  If you have a bank like this, I suggest speaking with the manager or telling your banker to #&@% off; many banks offer free advice, regardless of how much money is being invested.  I bank at Mercantile, and I received free investment counseling even though I began with only NIS 7,000 (I am not sure if the policy of offering and limiting investment counseling depends on the bank or the specific branch.)

Alternatively, you can look for a private yoetz hashkaot who will take a different commission (or maybe just a fee for his advice and analysis) and will do the buying and selling of investments for you or show you how to do it yourself.  If your Hebrew isn’t that great and your bank doesn’t have someone who can speak English, it may be worthwhile to find a yoetz hashkaot who speaks English.  Also, if you’re not comfortable with your bank’s yoetz, you should find a private one.  Just make sure that the person you find is a yoetz hashkaot, not a meshavek hashkaot.

Once you know why you’re investing and you have a yoetz hashkaot, you’re almost ready to go.  The yoetz will begin by explaining his liability to you and then give you some simulations to test how you feel about risk.  In most cases, your yoetz will take a few minutes to talk you out of investing in the currency market and begin to direct you to mutual funds (as a Dave Ramsey fan, I appreciate this).  Depending on your adversity to risk, the yoetz will find a few funds that match your preference.  Finally, you’ll compare funds by discussing the risk, the sharpe, and fees.

A good yoetz hashkaot is not just someone who can give you good advice, but is also someone who holds your hand and explains everything to you clearly so that you can make a decision.   Let me say that again – so that you can make a decision, not him.  Don’t invest anything if your not 100% comfortable with the decision.

What has your experience been investing in Israel?  Is there a bank or yoetz hashkaot that you recommend?