Myth: Americans living in Israel can’t buy mutual funds.
Fact: Americans in Israel can buy mutual funds, but read carefully….
On last week’s The Goldstein On Gelt Show, I offered a free download of a 7-step list for investing in mutual funds. I generally get positive feedback from the free educational resources I provide, but this time I received a curt response, “Don’t you know that you cannot buy mutual funds in Israel?”
The writer of the email was partially right… and also a little wrong, too. If you are careful, you can buy mutual funds.
Mutual funds are popular investment tools because they provide both professional management of your portfolio and diversification. Since mutual funds do contain varying levels of risk, make sure to read the prospectus before buying.
Keep in mind that certain American mutual fund companies won’t allow you to invest if you live outside the United States. At the same time, your tax advisor should have told you that Israeli mutual funds are considered by the IRS to be PFIC (Passive Foreign Investment Corporation), and are taxed much more harshly than U.S. funds. (We don’t give tax advice. Speak to your own tax professional.)
Americans with overseas addresses can buy mutual funds through some companies. These are companies whose management has a more worldly view and welcomes international clients.
Another tool to diversify your portfolio (without having to buy lots of individual stocks) is to invest in Exchange Traded Funds (ETFs).
Americans living overseas can buy ETFs. An ETF has many similar characteristics to a mutual fund, and normally you can easily purchase it through your U.S. brokerage account.
Give me a call if you have questions about how to open a U.S. brokerage account when you live in Israel.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published August 24, 2018.