"People go and invest in the S&P 500 out of greed, persist, tell themselves 'don't sell when the market is down,' then get scared and want out," says Asaf Banai, founder and co-CEO of Profit Financial Services. Given the increasing volatility of capital markets around the world, including in Israel, and the discussion about the effectiveness of concentrated investment tracks such as the S&P 500, the importance of safe investment has become gerater than ever.
As part of the Financial Growth Track series, Banai spoke to "Globes" news editor Bar Lavi. Banai warned against emotional biases, called for avoiding trends, and recommended the general investment track as the safest choice for most investors.
Losing one’s head
The fluctuations on Wall Street have shaken the market, with the S&P 500 falling from an all-time high in February by about 8%. Although the US stock market has recovered from that initial fall, it is still at a significantly lower level than estimated by analysts at the beginning of the year. Now, the question arises as to how investors will react to this market turmoil.
Banai explains that he is not a fan of the concentrated investment track – investing all of one’s money in a single index – precisely because of its volatility. "Most people are not built for such volatility, let alone in their pension products. This sort of investment seems to be right. An individual looks at long-term investment, and believes that if he invests over time in one of the leading stock indices, he will have a higher return over other portfolios. But experience shows that most people struggle with market fluctuations and end up losing money through overly frequent trading."
Banai is among Israel’s most influential figures in financial planning. Together with partner Shlomi Elberg, he is behind the Profit Financial Group – the largest entity in the sector in Israel. He emphasizes that despite the strong trends in investment policy in what he calls "pure" or "concentrated" tracks, people need to know what suits them, and understand how to deal with changes in the markets. "That's why I prefer the general track It represents wide diversification and reduced volatility. I don't recommend it exclusively, but I do say, ‘Don't follow the trends. It's dangerous, and you can lose money easily that way."
His words seem particularly apt in these times.
In a previous interview with "Globes," Banai warned of a market upheaval that would cause investors to flee at a time of sharp volatility in the S&P 500 – exactly like the one which occurred after the Trump tariff plan was announced. At the time, Banai said: "I lecture a lot to high-tech companies, and they really like this track. But I know that in two-three years… at some time, the S&P 500 will fall sharply. How do I know that? Because it's always happened. When that happens, many will run because they will be dealing with other challenges at the same time: layoffs, devalued options, bonuses that won't be paid. There are situations in life that you just can't predict."
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Do you see an improvement in this regard? Are investors still scared?
"We chart a consistent improvement in consumer awareness, and our customers are less frightened than they were in the past." The reason, according to Banai, is the critical role of the agent and the financial planner. "They provide a safety zone for customers against errors, such as clients attempting to time the market. That’s a mistake which stems from arrogance or not understanding how things work. So, despite the panic happening on the stock exchange, investors are less upset by events today than in the past."
Another element that Banai emphasizes, and which many investors miss, is moving from track to track. "Every time people try to time the market by switching tracks, they forget there are two days when their portfolio isn’t on any track. There’s zero return for the day you exit the old framework, and zero return for the day you enter the new framework." Why does it matter? Because even within this range there can be market ups and downs that will affect the investment. Banai illustrates with an example, "If you look at the last ten years and take just the ten best trading days, you lose about a third of your investment return, and if you take the best 20 days, you lose two-thirds." In other words, exiting the market even for just a day or two can destroy returns. Timing is doomed to failure.
The task: Create value
After returns on US stock exchanges reached double-digit levels last year, investment houses were hoping for another positive year on Wall Street, along with savers, who put all their money on the American market rally. However, as noted, global capital markets continue to demonstrate high volatility against a combination of geopolitical pressures and very bleak forecasts for global growth.
Until about three months ago, a recession scenario seemed almost impossible. Wall Street was trading at an all-time high, and AI sector was euphoric. But Trump's tariff plan, tariffs on iron and aluminum, followed by a delay in executing some tariffs, led to a market slowdown and a decline in consumer confidence. Now, more and more economists are talking about the possibility of a recession, and the great optimism that accompanied the election of the US president has dissipated. A succession of weak macro data reports combined with the trade war, has increased the sense of panic.
Data from the International Monetary Fund published last month paint a bleak picture for Western economies, led by the US. The growth forecast for the US economy for 2025 fell to just 1.8%, compared with 2.8% in 2024, a sharp decline that is attributable, among other things, to a decline in both private consumption and in consumer confidence.
Yet, you still see quite a few companies offering "pure plans". What do you think about that?
"In the past, the best plan was based on the S&P 500, and now it’s concentrated on the Israeli tracks. I also predicted that market performance here would be better than the rest of the world. Again, this is based on the principle that, in the long run, returns tend to align with the average performance of each index. But then what? We don't know what will happen in a year's time. And this isn’t suitable for most of the public, I repeat, the general track will yield a good, secure pension, that's all." Indeed, since the beginning of the year, the Tel Aviv 125 index has risen by 6%, while the US is still trying to avoid declines: the S&P 500 index has fallen by 3.5% and the Nasdaq by about 7.5% since the beginning of the year.
For this reason, Banai calls on others in the savings industry: "I appeal to my fellow agents: don't sell from on the basis of returns or management fees, don't make promises. We need to be service people, not prophets. Our job is to create professional value, not to chase after trends." When it comes to investment, Banai praises the entire sector and the entities operating in it. "All institutional investors in Israel are investment management professionals, and when you look at the general track, the multi-year average is a 7% return. You just have to stick with it."
Hedge funds for the public?
The conversation then turned to a new product, which has been grabbing headlines lately: investing in mutual hedge funds. For years, hedge funds have rightly been considered a financial instrument for high-net-worth individuals only. Anyone wishing to invest in a hedge fund is required to be a "qualified investor," i.e., with a liquid assets of almost NIS 10 million, or must be an institutional entity such as a pension fund or provident fund.
What do you think about this? Is this sort of investment suitable for the general public?
"I'm very ambivalent about this product and I'll explain why. I’m afraid this may be a lobbying action by those who want to create a situation in which even an unqualified investor can invest in a hedge fund. I’m concerned that the main motivation may be the possibility of increasing management fees, plus success fees."
Banai also comments on the issue of "qualified" investors and the gap that exists, according to him, between the legal definition and the reality on the ground. "There are many investors who are not qualified under the law, but are super qualified in practice," he says, adding: "The current definition does not include financial understanding, experience or sophistication – only income or capital. This is a superficial view that prevents good people from accessing complex instruments." In the context of mutual hedge funds, he emphasizes: "I'm an open-minded person and I think there should be such products, but I'm not in a rush to bring in unqualified investors."
Could this product be of interest to investors? According to Banai, the product is not yet mature. But he understands that such products should be made available if there is interest. Those who are interested in purchasing this product can do so, either through the banks or through the investment portfolios of the various investment houses.
There are people with cash who are debating what to do with their money. What is your recommendation?
"First of all, don't leave it in cash in your checking account, it's the worst place there is for your money. It's a catastrophic, zero-percent interest situation. In real terms, the value of your money is eroded."
Banai's second recommendation is to invest in general tracks, whether in a savings policy, an investment provident fund, or am advanced training fund for self-employed people. "Spread out the money and invest it. If you're conservative with your money, put it in money market funds, because deposit accounts don't offer a sufficient return." Banai goes back to the numbers and points out that hundreds of billions of shekels are held in current accounts by the public and another trillion are held in deposits accounts with relatively low returns. "It's simply a failure." He reiterates that his and Profit’s mission is to encourage people to withdraw their money from their checking accounts and deposits.
Ultimately, Banai's message to investors is simple: the market may be unpredictable-but investor mistakes rarely are. Anyone who goes with gut feelings, chases after trends, or tries to time the market, will pay the price. On the other hand, those who stick to the principles of diversification, consistency, and personalization will be able to build long-term savings for themselves with peace of mind.
This article was originally published in "Globes" in Hebrew on May 7, 2025.
The "Globes" Financial Growth Track series took place in collaboration with Profit.
Published by Globes, Israel business news – en.globes.co.il – on July 1, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
