Features to Know

Classification by Investment Channel – Mutual funds are clearly divided by sectors and industries, allowing investors to choose funds based on their preferences and risk tolerance. There are equity funds in Israel and abroad, including those specializing in specific industries, indices, regions, etc.; bond funds (general, government, corporate, shekel-based, inflation-linked, foreign, by risk level, etc.); mixed funds combining multiple investment channels; flexible funds that can invest in any channel; and other types.

 Tax Classification of Mutual Funds

• Exempt Fund – A fund exempt from paying taxes on its ongoing profits. Therefore, unit holders are subject to a 25% tax on real capital gains only when redeeming their units. The vast majority of funds in Israel are tax-exempt.
• Taxable Fund – A fund that pays tax directly to the Tax Authority on its ongoing profits. Therefore, unit holders of a taxable fund are exempt from additional taxes when redeeming their units.

Classification by Incorporation Structure 

• Open Fund – A fund that typically issues an unlimited number of units and allows purchase and redemption based on public demand at a price calculated at the end of each trading day. This fund’s units are not traded on the stock exchange.
• Closed Fund – A fund that issues a limited number of units in accordance with its prospectus. These units can be bought or sold on the stock exchange and their price is determined by supply and demand during trading.