Building an Investment Portfolio

How to build a diversified portfolio based on age, goals, and risk tolerance — including examples and strategies.

Building an investment portfolio means deciding how to split your money across different types of assets — stocks, bonds, real estate, and cash — in a way that matches your financial goals, timeline, and comfort with risk. In Israel you also need to factor in the unique tax-advantaged accounts available to you.

Asset Allocation Basics

The single most important decision is your stock-to-bond ratio. Stocks offer higher long-term returns but with more volatility. Bonds provide stability but lower growth. A common rule of thumb is to subtract your age from 100 to get your stock percentage — so a 30-year-old might aim for 70% stocks and 30% bonds.

Building an Israeli Portfolio

A well-diversified Israeli portfolio might include: an S&P 500 or global equity index fund for international exposure, a Tel Aviv 125 fund for local market participation, a government or corporate bond fund for stability, and optionally a small allocation to real estate or commodities.

Using Tax-Advantaged Wrappers

In Israel, where you hold your investments matters as much as what you invest in. Max out your Hishtalmut fund first for tax-free growth. Then use a Kupat Gemel for investments to defer capital gains tax. Only after filling these should you invest through a regular taxable brokerage account.

Rebalancing Your Portfolio

Over time your portfolio will drift from its target allocation as some assets outperform others. Check in once or twice a year and rebalance — sell a bit of what has grown beyond its target and buy more of what has lagged. This disciplined approach keeps risk in check and can actually boost returns.

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The information on this page is for educational purposes. Please consult a professional before making financial decisions.

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Frequently asked

+−What is asset allocation?

Asset allocation is how you divide your money between stocks, bonds, real estate, and cash. It is the single most important investment decision and should reflect your goals, timeline, and risk tolerance.

+−What order should I fill Israeli investment accounts?

Max out your Hishtalmut fund first for tax-free growth. Then use a Kupat Gemel for investments to defer capital gains tax. Only after filling these tax-advantaged accounts should you invest through a regular taxable brokerage.

+−How often should I rebalance my portfolio?

Check once or twice a year. Sell some of what has grown beyond its target allocation and buy more of what has lagged. This keeps your risk level consistent and can actually boost long-term returns.

+−What percentage should I allocate to Israeli vs. global investments?

There is no single right answer, but many advisors suggest limiting Israeli exposure to 20-30% of equities given the small size of the TASE. The rest can go to global markets for better diversification.

+−Should I include real estate in my investment portfolio?

Real estate exposure can be added through REITs or real estate funds without buying physical property. If you already own your home in Israel, you may already have significant real estate exposure.

+−What is the role of bonds in portfolio construction?

Bonds reduce portfolio volatility and provide steady income. Israeli government bonds (Shahar, Galil) are considered very safe. As you approach retirement, gradually increase your bond allocation to protect accumulated gains.

+−How do Israeli tax-advantaged accounts fit into portfolio construction?

Fill tax-advantaged accounts first: maximize your Hishtalmut, then Kupat Gemel for investments. Place high-growth assets in these accounts to shelter the most gains. Use taxable accounts last for remaining investments.