Not what you thought: we checked which index in the stock market is the most profitable over time

Since the beginning of the week, the leading stock indices in the Tel Aviv Stock Exchange have been breaking records every day. Wednesday also opened with new highs and strong gains, which were erased towards the end of the trading day in the shadow of reports of a shuffle in the negotiations with Iran. The strengthening of the shekel and assessments of the improvement of the security situation made the local stock exchange one of the highest yielding in the West with increases of more than 24% since the beginning of the year (in the Tel Aviv index 35), compared to Only about 7.5% in the S&P 500 index and even less in the European indices. TA 35 has broken no less than 27 records since the beginning of the year, twice the average for its historical year, TA 125 has broken 24 records and TA 90 – 11 records.

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Three central indices have become synonymous with the local stock exchange: TA 35, TA 90 and TA 125. Which of them concentrates the most money, and how should one choose the most preferred index of all? Globes makes an order.

In terms of the composition, the indices differ from each other mainly in the market value of the companies included in them. TA 35 includes the 35 largest stocks on the local exchange (in terms of market value), TA 90 includes the 90 largest stocks after them, and TA 125 unites them. “Before 5, everyone thought that TA 90 was the relevant index and TA 35 was a dead index,” recalled Yaniv Pagut, VP of Trading of the Tel Stock Exchange spring “How much would he have died? He was followed by NIS 7 billion in imitation funds. Half of what was followed after TA 90.” The public simply voted with their feet.

The reason for this was mainly the sharp fall of Teva shares in 2015-2020 and the weak performance of the other pharmaceutical stocks as well. However, since then the picture has changed and today the volume of passive assets that follow the Tel Aviv 35 index stands at NIS 19 billion, not far from the NIS 21 billion that follow the Tel Aviv 90 index.

“A classic story of risk versus return”

In 2025 and also from the beginning of this year, the Tel Aviv 35 index leads Tel Aviv 90 in returns. In previous years, the lead changed: between the years 2004-2015, the Tel Aviv 35 index showed excess performance for most of the period (9 out of 12 years), while since then the Tel Aviv 90 index has mostly provided excess performance (7 out of 11 years), and another year with the same return for both.

“It’s a classic story of risk versus return,” says Eldad Tamir, CEO and owner of the Tamir Fishman Investment House. “Over time, Tel Aviv 35 offers a lower level of risk but also a more moderate return while Tel Aviv 90 presents a higher return potential alongside higher volatility and risk. The Tel Aviv 125 index is located in the middle, with a balance between the risk level and the return potential.” Ariel Moldovan, VP Investments at the Pasternak-Shahem investment house, agrees and points out that “historically, the Tel Aviv 90 index has beaten the Tel Aviv 35 index by a significant margin over the years.”

But the investment managers emphasize that the historical comparison is not necessarily appropriate in this case since the indices themselves have changed a lot over the years. “In the last decade, the face and characteristics of the indices have changed, among other things due to the reform of the indices of the stock exchange and the boom in chips and finance” says Yuval Beer Even, director of peer investments at Migdal Insurance and Finance. “TA 35 today abounds in finance companies (banks, insurance), chips (Tower, Camtech and Nova) and profitable real estate (BIG, Azrieli, Melisron, Mebane and Amot). The concentration in it is relatively high, but so is the liquidity, as the most tradable stocks on the stock exchange are included in it.” Prominent security stocks such as Next Vision can also be added to this. Pagut of the stock exchange emphasizes: “Today it is not the same index at all. There were no insurances and security and technology and semiconductors (chips)” and according to Beer Even: “TA 90, the index of medium-sized companies, is characterized mainly by shares from the residential real estate sector, renewable energy, IT and industry and services.”

The investment managers emphasize that the historical comparison is not necessarily appropriate in this case, since the indices themselves have changed greatly over the years. Yuval Beer Even, director of peer investments at Migdal Insurance and Finance, says that “Tel 35 today abounds in finance companies, chips and profitable real estate”.

Beyond the sectors, there is a fundamental structural difference between the indices: the weight ceiling of a single share. TA 90 has a ceiling of only 2% per share. In TA 125 the limit is 5% and TA 35 – 7%. Pagot from the stock exchange explains the meaning: “TA 35 and 125 are more classic indices of market value, so each ‘star’ stock affects the index much more. TA 90 index in this respect is closer in DNA to an index that gives equal weight to all stocks.”

Most of the public prefers not to choose

Moldovan from Pastrank that they prefer the TA 90 index and explains that “TA 35 is made up of the largest and most mature companies in the economy. These are stable companies, but their growth potential is limited because they already dominate the market.” In contrast, “TA 90” consists of medium-sized companies that are in accelerated growth stages. It is easier for a company worth NIS 2 billion to double itself than a company worth NIS 50 billion. Tel Aviv 90 is also more dispersed and these companies are the “beating heart” of the local economy.

Tel Aviv 90 investors benefit from the entire meteoric growth phase of the company, and sell it to Tel Aviv 35 investors when it is already big and expensive. And, when big money enters the market, it first enters the big stocks, which become more expensive. Then the investors look for opportunities for a higher yield among the medium and cheaper stocks.”

On the other hand, Be’er Eben of Migdal says that “when you look at the performance graph, it is evident that there are periods when the TA 35 is at a record surplus value and there are periods when the 90 performs better. It is difficult to schedule this, therefore for a passive investor without sectoral preference and without liquidity considerations, we think that TA 125 provides great diversification and good exposure to the market.” Pagot from the stock exchange adds that “in the end TA 125 is a blend.” That means you buy both. The anchor of the portfolio should be the 125 index. It is more spread out.” Indeed, the majority of the public does not choose one of these indices at all but buys them all together. Almost NIS 51 billion follow the Tel Aviv 125 index, more than the other two major indices combined.