I decided to add something new to my portfolio. Something to mix things up from the bland stock, ETF, and mutual fund world of my investments. I decided to invest in bonds… Israel Bonds.
What are Israel bonds? Similar to the savings bonds that American grandmothers have been buying their grandkids for many years, Israel bonds are debt securities issued by the Government of Israel. Initial investors in Israel bonds were largely members of the Jewish community who wanted to help Israel strengthen its economic foundations. However, as securities became more diverse and market-responsive, the investor base became increasingly widespread. Israel bonds were seen as a two-fold investment that not only helped Israel, but were a useful means of portfolio diversification.
Currently, there are six different classes of bond available, which you can view them and the current rates by clicking HERE. I elected to begin my Israel bond investing by purchasing some of their “eMitzvah bonds”, which are fixed rate 5-year bonds; $36 minimum investment and increments of $18. The interest is paid upon maturity, so on July 1, 2018 I will see my first matured bond able to be cashed out.
According to Israel’s Finance Ministry, “Israel has never defaulted in the payment of principal or interest on any of its internal or external indebtedness.”
According to the Congressional Research Service of the Library of Congress, as of 2002, approximately $40 billion in loans to Israel by the United States Government have waived by the United States Government, rather than repaid by Israel.
Capital is raised through the following four organizations: Development Corporation for Israel (US), Israel Bonds International (Europe and Latin America), Development Company for Israel (UK) Ltd., and Canada-Israel Securities Limited.
How is the rating of these bonds as investments? Well, on April 25, 2013, Fitch Ratings affirmed Israel’s credit rating at ‘A,’ with an outlook of ‘stable.’ The agency predicted 3.70 percent growth for 2013.
I think it is really neat that these bonds are helping to aid in the development of a country. Capital from the sale of the bonds are designated by Israel’s Finance Ministry for economic development projects, many of which were essential to solidifying Israel’s post-independence economy. More recently, capital raised through the sale of the bonds has been used for undertakings such as:
- The building of homes and creation of jobs for hundreds of thousands of Jews who made aliyah from the former Soviet Union and Ethiopia during the massive wave of immigration throughout the 1990s
- Ben-Gurion International Airport expansion
- Extending Israel’s rail network
- Improving the national highway system
- Enabling national infrastructure
Israel bonds will also help fund development of the Negev desert, Israel’s largest remaining open area, comprising approximately half the country’s land mass. In addition, plans are underway for industrial parks in the Galilee to further expand Israel’s hi-tech sector.
I highly recommend checking out Israel Bonds. I am no expert, but they seem to have a solid track record.