Yellin Lapidot Tops July Returns in Israeli Provident Funds Amid Overall Negative Performance

In July, Israeli provident funds (Kranot Hishtalmut) experienced mostly negative returns, with the general track recording a decline of about 0.5% and the equity track falling approximately 0.9%. However, the S&P 500 track is expected to rise by around 2.4%, driven by a strengthening US dollar against the shekel, which added roughly 3.2% to shekel-based returns despite the index's dollar-denominated drop.

Yellin Lapidot's general track is forecasted to lead July's rankings but remains last in year-to-date performance after reducing equity exposure in recent months. Altshuler Shaham is projected to top the equity track for July, showing recent improvements, though it must maintain this momentum to climb into the top third of annual rankings. Harel is expected to report weaker July results following relatively strong returns earlier in the year.

Year-to-date, Clal leads the general track with a 6.8% return, followed by Mor at 6% and Harel at 5.9%, with the average general track return at 5.4%. The same trio leads the equity track with returns of 11.2%, 10.3%, and 10%, respectively.

The article highlights the significant tax advantages of provident funds, which offer tax-free deposits, earnings, and withdrawals. Both employees and self-employed individuals can benefit, with employees typically contributing 10% of their salary (7.5% employer, 2.5% employee) up to a monthly salary cap of 15,712 shekels. Self-employed contributors can deduct 4.5% of taxable income up to 13,203 shekels in 2026 and deposit up to 20,566 shekels annually with tax-free gains after six years.

Opening a provident fund for the self-employed requires active business operations and may involve administrative costs and reporting obligations, which can reduce net benefits if income is minimal. Funds become liquid after six years, allowing continued tax-free growth. This makes provident funds a valuable long-term savings tool, especially for self-employed individuals.