'Diversify to control risk'

Invest 25% in Israel, 75% abroad, broker says

By SHARON WROBEL
August 30, 2006 04:24
1 minute read.

 
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Given the current geopolitical situation and a steady interest rate, investment managers are recommending Israeli investors modify their portfolios to spread three-quarters of their assets into international markets while keeping one-quarter in the local market. "Abundant focus and exposure to the Israeli market, in particular when taking into account the uncertainty and instability of the country, is poised to bring about unnecessary risks," said Yoram Gershoni, deputy general manager of investments at Green Bull Investment House, which is part of Israel Discount Bank. Green Bull, maintains that the Israeli investor should modify the mixture of his portfolio because of this week's downgrade of Bank Hapoalim by HSBC and Deutsche Bank, the effects of the war and the fragility of the peace and the Bank of Israel's decision to leave interest rates unchanged. "Taking into consideration a situation of political uncertainty in Israel and an interest rate level that nearly equals the interest rate in the US and a fairly low shekel-dollar exchange rate, the suitable division for the reasonable Israeli investor is to allocate his assets 25 percent in the local market and 75% in the international markets," said Gershoni. According to Green Bull, the most attractive countries to invest in are the US, Australia, Italy, Finland, New Zealand, Belgium, France and Spain. Gershoni recommended that about 50% of the global portion of the portfolio be allocated in the US market and that the rest should be divided up proportionally among the rest of the countries. Green Bull's tip for the standard investor, who has no substantial experience in the global markets is to invest in selected shares of companies of, for example, the S&P 500 such as Exxon Mobil, Bank of America, Procter & Gamble, Yahoo, Starbucks, Walt Disney and other.

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