According to Bank of Israel data, Israeli banks have more than NIS 506 billion (as of the end of March 2023) in current accounts, which is even higher than the state budget for this year – NIS 484 billion. In the past year, the Bank of Israel interest rate has increased from 0.75 per cent to 4.75 per cent. Therefore, at this time, the importance of examining the investment alternatives of current account balance has increased significantly.
Do we know how much money we have in the account? As part of the beginning or continuation of the process of managing a household budget, this is certainly an issue that deserves proactive attention. Checking all of the family's bank accounts, if there are current account balances and how much, is the beginning. The decision of what to do with the balance, if any, depends first and foremost on needs and plans for the near future.
The first test is whether it is possible to reduce credit, and to do so after examining conditions and meanings. Then, if the plan is to use the balance or part of it in the short term, then its investment in the existing alternatives is in some cases less preferable. One world of alternatives is that of deposits. A few points to emphasize in this channel: In general, the longer liquidity is waived, the higher the interest rate should be obtained. Beyond that, the interest rate is subject to negotiations between the customer and the financial institution.
Another alternative is monetary mutual funds. These are funds that are committed to investing in solid short-term channels. The average life of financial assets in a fund is limited to 90 days. Investments include government bonds, bank deposits, corporate bonds and high-grade commercial securities. Each fund has a specific policy that can include characteristics and restrictions. The monetary funds can be sold on any day on which trading is conducted on the stock exchange.
Investors in an exempt monetary fund are subject to capital gains tax on real profit (profit minus inflation) at a rate of 25%. It is also possible to offset losses from other securities of the same client against profits from an exempt monetary mutual fund, which cannot be done against profits from deposits.
The above is not a substitute for investment advice that takes into account the data and needs of each person and is not tax advice.
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