Choosing your broker

By: Lev Kantor

Updated: Mar 2021

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Now that you know the basics of investing, it's time to get your hands dirty and actually try it yourself! In order to be able to buy stocks you will need to open a brokerage account. Unfortunately, Israeli brokers are not the most user-friendly. Usually the banks have their own trading platforms that are available in Hebrew language only. On top of that, the usability of those platforms is poor and they charge very high fees. It might be very discouraging to try and use your bank's app to buy stocks. At least that's what happened to me. But don't get discouraged, today there are a few international brokers that also work in Israel! We are going to focus only on the brokerages that are available in English.

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Things you need:

  • I.D. (Teudat Zeut) or passport.

  • Proof of residence (Blue paper with your address from Misrad Hapnim or utility bill with your name and address).

  • Israeli bank account.

Pros +

  • Low commissions

  • Interface in English

  • Access to many stock markets

  • Low initial deposit 

Cons -

  • You have to file taxes yourself

  • Deposits to your account are done only through a bank wire 

  • IBKR Lite (the commission free version) is not available for Israelis 

Interactive Brokers is one of the biggest US-based discount brokers and it has been around since 1979. This broker is regulated by several financial authorities globally, including the big ones like the UK's Financial Conduct Authority (FCA) and the United States' Securities and Exchange Commission (SEC). What does that mean? It means it's safe and your capital is protected by the government. IB has a long track record, it's financials are transparent and it's a publicly traded company - all of that indicates that this broker is safe and trustworthy. That's one of the most popular international brokerages in Israel.

Commissions:

  • Currency conversion: $2;

  • Stocks: $1 per trade (buy or sell);

  • Monthly activity fee: $10, If monthly commissions are less than $10 then Activity Fee = $10 – commissions.

 

Example: 

Monthly commissions = $6;
Activity Fee = $10 – $6;

Activity Fee = $4;

Learn more

Conclusion:

It's an international broker and one of the cheapest platforms to invest for Israelis. The only problem is filing taxes. Since it's an international broker you will be responsible for your taxes. The broker will provide you with all the necessary forms that you will have to use to file your Income Tax report to the Israeli IRS. You also have an option to hire an accountant to do that for you but be prepared to pay anywhere up to 1500 NIS for his or her services. Interactive Brokers has a bank account in Israel that's why you can deposit and withdraw funds in Shekels. 

Note that there is also Interactive Israel - a brokerage house that is registered in Israel. This is a middle man between an investor and Interactive Brokers. They charge higher fees and offer the same service. The only difference is they have customer support in Hebrew and clean some of your taxes for you (you still will have to file income tax yourself twice a year).

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Things you need:

  • I.D. (Teudat Zeut) or passport.

  • Proof of residence in English (Blue paper with your address from Misrad Hapnim or utility bill with your name and address).

  • Israeli bank account statement in English

Pros +

  • $0 commissions for U.S. stocks

  • User friendly interface in English

  • No deposit minimum to open an account

Cons -

  • A lot of bureaucracy to open an account for Israelis

  • No access to foreign exchanges 

  • Need help of a certified translator to file some of the documents to open an account

  • You have to file taxes yourself

TD Ameritrade is one of the larger online brokers in the U.S., so it offers multiple platforms aimed at different levels of expertise. The extensive educational offerings help new investors become more confident and encourage them to explore additional asset classes as their skills grow. For active investors and traders, the thinkorswim platform offers all the data, charting, and tools needed to find market opportunities. The sheer number of tools and research available through TD Ameritrade can be a bit overwhelming.

Commissions:

  • Currency conversion: $0;

  • U.S. Stocks: $0 per trade (buy or sell);

  • ETFs: $0 per trade (buy or sell).

  • Minimum account deposit: $0;

Conclusion:

TD Ameritrade is a great broker if you plan to invest only in the U.S. securities. The sign up process can be challenging but you get to enjoy $0 commissions. Just as with Interactive Brokers, you will be responsible for your taxes and will have to report it to the Israeli IRS. 

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Things you need:

  • I.D. (Teudat Zeut) or passport.

  • Proof of residence (Blue paper with your address from Misrad Hapnim or utility bill with your name and address).

  • Israeli bank account

Pros +

  • $0 commissions for stocks

  • Great app and website in English

  • You can buy crypto

  • You can deposit funds via credit card or PayPal

Cons -

  • $10.000 first funds deposit (then from $50)

  • Takes a while to get your account approved

  • You have to file taxes yourself

eToro is a well-known Israeli fintech company, a social trading broker, established in 2007. Investors can make their portfolios public and share them so that other people could see their returns, stock choices and they can even copy their investing strategies. Besides stocks and ETFs you can also buy cryptocurrency on the platform. Even though eToro was founded in Israel it's registered in Cyprus that's why it's considered a foreign broker and you will have to file your taxes yourself.

Commissions:

  • Funds withdrawal fee: $5;

  • U.S. Stocks: $0 per trade (buy or sell);

  • ETFs: $0 per trade (buy or sell).

  • Minimum account deposit: $10.000;

Conclusion:

eToro is a great platform for investing in stocks and ETFs with $0 commissions. You also get exposure to cryptocurrencies which none of the other brokers mentioned in this article do. Besides, it was founded in Tel Aviv! If you have $10.000 for initial deposit this can be a great option for investing. And again, since this broker is considered foreign, you will have to file taxes yourself.

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