While both funds invest exclusively in Israeli stocks there are major differences in the investment style of each fund. By design, there is no investment overlap between the two funds. Both funds are not diversified. Market conditions, interest rates, economic or regulatory developments could significantly affect a single industry, a group of related industries or a specific issuer more adversely than other securities in the market as a whole. Prior to that, Mr. Rahav was employed by a large brokerage firm as a Tel Aviv Stock Exchange trader and as a fund manager.
Index funds offer several benefits.
The typically low portfolio turnover of index funds leads to less capital gains and thus to expected tax efficiency. Indexing also allows for lower research and operating costs charged to shareholders. Most importantly, index funds usually outperform managed funds concentrating on the same industries or markets. Over the long term, investors of index funds should benefit from expected tax efficiency and market-tracking performance. However, you should be aware that there is no assurance the fund will be successful in achieving its objective.