By Douglas Goldstein, CFP®

Unfortunately, very few new arrivals in Israel are lucky enough to have a great job lined up for them when they get off the plane. Rather, the vast majority of new olim need to learn Hebrew, set up their homes, and adjust to a new culture. Olim who are around retirement age may have a hard time meeting a similar income level to what they had back in the Old Country.

Bonds provide income

One traditional asset class used by folks looking for predictable income is bonds. Bonds are a loan that you make to a government (i.e., Treasury Bonds, Israel Bonds) or a company for a certain period of time. During the life of the loan, you receive periodic interest payments that you can use to supplement your income. At the bond’s maturity, you get back your principal, presuming the issuer is still solvent.

Are they safe?

Though bonds are traditionally less volatile than stocks, there are still risks. The bond market has ups and downs, and in certain circumstances, you could sell bonds for lower than the purchase price. Also, if the issuer of the bond defaults, you might end up with nothing.

How should I set up my bond portfolio?

A 60-something couple recently came to my office and said they wanted to switch a piece of their investment accounts to bonds. We constructed a diversified portfolio using corporate bonds issued by major corporations. We then prepared a table showing when each of the bonds would pay its interest, so the couple had a clear sense of the ongoing cash flow and could budget accordingly. If you want to examine the pros and cons of using bonds, speak to a financial adviser, or call (02-624-2788) to order your copy of Building Wealth in Israel, which dedicates a whole chapter to bond investing.