Real Return
Your return after subtracting inflation. If your portfolio gained 7% while inflation was 3%, the real return is roughly 4% — that is how much wealthier you actually became.
Financial Glossary for the Israeli Investor
A financial glossary for the Israeli investor — short, clear definitions with zero jargon: from compound interest and capital gains tax to mortgages, pensions, and model portfolios. Every term links to related ones so you see the full picture, not just a definition.
Market Basics (12)
Nominal Return
The gross return before inflation. The number your broker statement shows — but not the one that determines your purchasing power.
Inflation
A general rise in prices that erodes the purchasing power of idle money. In Israel, the CBS (Central Bureau of Statistics) measures it via the Consumer Price Index.
Consumer Price Index (CPI)
An index published by the Israeli CBS tracking a basket of goods and services. Mortgages, rents, and contracts are linked to it, and it is the basis for real-return calculations.
Compound Interest
Earnings generating their own earnings. Over decades this effect turns modest savings into substantial capital — the central engine of financial independence.
CAGR (Compound Annual Growth Rate)
The smoothed annualized return. If ₪100k becomes ₪200k in 6 years, the CAGR is about 12.2%.
Volatility
How much an asset price swings. Higher volatility means deeper dips along the way — and usually higher return potential. Equities ~15-20%, bonds ~5%.
Diversification
Spreading investments across assets, geographies, and sectors so no single failure sinks the portfolio. A global index fund does this for you automatically.
Risk Tolerance
How much drawdown you can endure without panic-selling. The decisive factor in choosing your asset mix — selling at the bottom "locks in" a loss that was only on paper.
Asset Allocation
Splitting the portfolio among equities, bonds, cash, and other assets. Research shows it explains most of a portfolio's risk and return — more than picking individual securities.
Dollar-Cost Averaging (DCA)
Investing a fixed amount monthly without trying to time the market. It averages your purchase price and removes timing anxiety. An automated payday transfer is perfect DCA.
Liquidity
How quickly an asset can be converted to cash without a significant loss. Listed stocks are highly liquid; property is illiquid (weeks to months to close).
Investment Products (11)
Index Fund
A fund that replicates a market index (like the S&P 500) instead of trying to beat it. Low fees, instant diversification, and long-run performance that beats most active managers.
ETF (Exchange-Traded Fund)
An index fund that trades on an exchange like a stock — buyable and sellable any time during market hours. The core vehicle of DIY passive investing in Israel and worldwide.
Irish UCITS ETF
An ETF domiciled in Ireland. For Israeli (non-US) investors: 15% US dividend withholding instead of 30%, and immunity from US estate tax. That is why CSPX/VWRA beat VOO/VT for non-US persons.
Expense Ratio (TER)
The annual percentage a fund charges. 0.07% (CSPX) vs 1.5% (an active fund) sounds tiny — over 30 years it equals tens of percent of your final balance.
Mutual Fund
A fund bought through a brokerage house (not on-exchange), typically with higher fees. Israel has cheap passive mutual funds too — compare before buying.
Bond
A loan you give to a government or company in exchange for interest. The "brake" component of a portfolio — less volatile than equities, with lower expected return.
Dividend
A share of company profits paid to shareholders. In an accumulating passive portfolio, dividends are auto-reinvested, accelerating compounding.
Accumulating ETF
A fund that reinvests dividends internally instead of paying them out. A tax advantage in Israel: no annual taxable event — tax is due only when you sell.
Model Portfolio
A predefined asset-allocation recipe (like 60/40 or the Golden Butterfly) with historical backing. An excellent starting point for anyone who does not want to reinvent the wheel.
Rebalancing
Restoring the portfolio to its target mix when markets drift it. Sell what rose, buy what fell — a discipline that adds return and reduces risk.
Emergency Fund
3-6 months of expenses in accessible cash. The buffer that prevents selling investments at a bottom when something breaks. Built before a single shekel is invested.
Taxation (6)
Capital Gains Tax
In Israel: 25% on securities gains (30% above a large threshold). Key: tax is due only upon sale — as long as you hold, you owe nothing.
Realized Gain
A paper gain becomes realized only when sold — and only then triggers tax. That is why accumulating funds are tax-efficient.
US Withholding Tax
The US taxes dividends paid to foreign investors: 30% standard, 15% for Irish-domiciled funds (treaty). Inside an Irish accumulating fund the drag is even lower.
Tax-Advantaged Account
Vehicles where growth is not annually taxed: Keren Hishtalmut (fully exempt), Gemel Lehashkaa (taxed at withdrawal), pension funds. Many Israelis leave these allowances unused.
Israeli Dividend Tax
Israeli-source dividends are taxed 25% (30% above the threshold) — withheld at source. Foreign-source rates depend on treaties. One more reason to prefer accumulating funds.
US Estate Tax
A non-US person holding US-domiciled ETFs above $60,000 can expose heirs to up to 40% estate tax. Irish funds are fully exempt — another UCITS advantage.
Pension & Savings (5)
Keren Hishtalmut (Study Fund)
Israel's most tax-advantaged vehicle: tax-deductible contributions, fully tax-free growth, liquid after 6 years. Every salaried employee should max it to the cap.
Gemel Lehashkaa (Investment Provident Fund)
Free contributions up to ~₪106k/year, liquid anytime (25% gains tax at withdrawal), fully tax-free after 15 years. The natural home for money beyond Keren Hishtalmut.
Pension Fund
Retirement savings: tax-deductible contributions, tax-free growth, taxable annuity at retirement. For employees, the employer contributes a significant share.
Pension Management Fees
The annual percent charged on your pension balance. Every 0.1% saved over a 30-year career is worth tens of thousands of shekels. Negotiable — and worth negotiating.
Managers Insurance (Bituach Minahalim)
A legacy pension product with high fees and indexation. In most cases transferring the balance to a pension fund or Gemel saves percentage points per year.
Mortgage & Real Estate (5)
Mortgage
A loan for buying property, secured by the property itself. The biggest financial decision of a lifetime: a wrong track mix can cost hundreds of thousands of shekels.
Interest Track
Mortgage components: fixed unlinked, Prime (moves with Bank of Israel), CPI-linked, variable. A balanced mix spreads risk across tracks.
Prime Rate
Bank of Israel's base rate plus the bank's margin. Prime tracks are not CPI-linked but change with every rate decision — flexibility in exchange for uncertainty.
Index Linkage
A track where the principal updates with CPI. It protects the bank from inflation — and raises your payments when the index climbs.
Home Equity
Property value minus remaining mortgage. Remember: illiquid, and not a substitute for a diversified portfolio.
Indices & Metrics (9)
Sequence-of-Returns Risk (SORR)
The risk that a market crash early in retirement depletes the portfolio even if the long-run average is fine. Defense: a 2-3 year cash buffer.
Safe Withdrawal Rate (SWR)
The annual percent you can withdraw in retirement with low depletion risk. The 4% rule is the classic; longer retirements use 3.25%-3.5%.
FI Number
The capital that lets you live off portfolio returns permanently: annual spending ÷ withdrawal rate. ₪40,000/yr ÷ 4% = ₪1M.
Savings Rate
The share of income you keep. The strongest lever on time-to-freedom: going from 10% to 30% cuts a decade or more off your working life.
Net Worth
All assets (portfolio, pension, home, cash) minus all liabilities. The true progress metric — track it quarterly.
Drawdown
How far the portfolio has fallen from its peak. Full equity portfolios historically saw 50%+ drawdowns. Those prepared for them benefit from the recovery.
Sharpe Ratio
Return per unit of risk. Enables fair comparisons: a high return with huge volatility can be less efficient than a calm moderate one.
Market Capitalization
The total value of a company's shares. Cap-weighted indices weight companies by size — Apple outweighs a small firm. No need to guess winners.
Fee Drag
The gap between market returns and your returns caused by fees, commissions, and tax. Minimizing it is the most reliable way to improve outcomes.
Sources:
- Israel CBS — Consumer Price Index
- Israeli Capital Markets Authority — savings vehicles
- Israeli Tax Authority — capital gains & withholding
- Bank of Israel — Prime rate
The Execution Arm
See this concept in action?
FixYourFI explains the foundation — Tickerio executes: stock research, fundamental analysis, and GEMS scoring for picking securities.