Many of us want to invest passively, in a "zombie" portfolio where we "set it and forget it". Usually this is also the best investment method there is.
What's better than setting up a standing order (Hora'at Keva) for a certain amount, say 1,000 ₪ a month, and simply forgetting about it?
It's completely clear why this is the preferred way of investing for most of us, and in the long run it will also, almost always, be the most worthwhile.
Which instruments on the market allow you to do this?
Until recently, the most suitable instruments for this were the investment provident fund (Kupat Gemel LeHashkaa) and the savings policy (Polisat Chisachon). But today, many of the brokers that provide a self-directed trading account service also let you do the same "set and forget": a standing order that runs in the background and that we don't need to deal with. Setting up the order takes six clicks and another five at the bank.
Is it worth it? Let's see:
Let's assume an average long-term return of 9% a year, which is roughly the market return for periods of a decade or more.
If we invest 1,000 ₪ a month in an investment provident fund with management fees of 0.7%, then after 10 years we'll have about 186,000 shekels. Not bad, right? On the other hand, if we invest the same monthly amount in a self-directed trading account, with management fees close to zero, at the end of ten years we'll have about 193,000 shekels. 7,000 shekels more. Is it a life-changing amount? No. On the other hand – opening a self-directed trading account and setting up a standing order takes about a quarter of an hour. I'll be generous and say half an hour. Which of us earns 7,000 ₪ in half an hour?
And if we're talking about saving for retirement or for the children, and we want to invest for 20 years?
Here the difference will already be about 55,000 ₪. Does anyone want to rob their children of 55,000 ₪ because they were too lazy to devote that half hour???
I assume not.
So how do you set up a standing order in a self-directed trading account?
The explanation below uses screenshots from the Altshuler Trade website, but it's very similar at all the companies, and today there are many companies that offer this option, such as Fair, Excellence Trade and others.
So let's dive into the explanation
We've already opened a self-directed trading account.
Log in to the account and click the three lines at the top right
Choose "Account actions" and then "Recurring investment"
Choose a security. The example should not be seen as a recommendation, it really is just an example
After choosing, we get to the next window with the security's details
And then to the most important window, where we set the amount, the purchase date and its validity
And finally – a window where we see the summary of our order and confirm, or go back to correct it
Links for opening trading accounts at various companies:
Disclosure
The above should not be considered investment advice, and everyone is asked to do their own homework before making a decision or to consult a professional
I may receive commissions from some of the companies appearing on the website in certain situations; if so, they are at the company's expense and not at the customers' expense.