LIC & LIT Beginner's Guide to Investing in Listed Investment Companies

Great link @CatCafe ! Lots of information and further links about various aspects of share investing/buying etc

 

Great link, overflowing with valuable info and great comments from @austing .

Peter's rookie investment advice
William: So here's a question for you, if you were about to start investing right now, what would you tell somebody let's say in their 30s? Besides taking out some debt against their property? What would you advise?

Peter: The sad part is that the media gives the impression that there's something magical about shares that you need to buy numerous books on how to trade on how to invest.

You don't.

My simple suggestion would be simply to GET STARTED with whatever you can find, whether it's $1,000 or whatever: just get some exposure.

Standing close to the fire allows you to feel the heat and from that you can judge what to do next. Start with whatever you can afford – but I don't want people to go crazy because I have observed on a couple of occasions people thinking "Brilliant!" And they save like crazy, invest it all and then of course their car breaks down and they have to buy a new one and the only way they can do it – because they have no other funds – is to sell some of their shares and sod's law says that when they do, the market will be down, so they are roundly cursing me for having lost their money.

So start modestly - they have plenty of time and it's time that does the hard work for them. It's not them working hard at trying to make money, the time will do it.

Gear modestly, and just let it build and get used to the discipline of adding and every time there is a share market crash put your hands together and say "Thank you, Lord". It's a totally counter-intuitive way of looking at it but good heavens it is served my wife and me so well over the years!

DYOR, not advice

 

Hi @austing , in the beginners guide FAQ, the first entry is "Why Invest in more than One Similar LIC?".
The reasons written are:
- participate in SPP's (no brokerage, discounted price).
- management risk mitigation.

The maximum SPP purchase for set dollar value is $15,000 irrespective of the number of shares owned.

The major LICs don't seem to do SPPs based on your share holding (prorata).
Is there any other reason then to start ownership by choosing one LIC in the ranges (large, large-medium/medium, small etc) and putting almost all LIC holdings into them, but putting a few bob into a couple of the others just for the SPPs. This should give maximum option to SPP but not complicate the initial purchase and holdings - ie. with $100,000 to invest, choose $54,000 ARG, $34,000 MLT, $9,000 WAX then spread the remaining $3000 into the rest: AFI, AUI, BKI, CIN, MIR, WAM.

Given the PT LICs have been around for a while, I'm not sure that the second reason - management risk mitigation - is all that applicable: the LICs have proven themselves over a long period so are effectively "the same" in terms of risk within their size groupings (big assumption!), so just choose one management team/style in a size range.

Of course, taking up the SPPs in the minor holdings over time will change the makeup of the portfolio, but I was merely thinking of the start of a (lumpsum) journey.

What do you (and others) think of this as a starting point? This is a bit different to @Realist35 starting journey (which has been great to read BTW).

 

You missed the other important reason:

I can't give advice. You don't have to do all these things. Simplicity is also important. Perhaps just start with one or two LICs then as your knowledge and comfort level grow add more if you feel the need. Just do what you feel most comfortable with.

I'd rather others give some feedback as my comments are likely to be getting repetitive, stale and boring to most here. Fresh input from others would be welcome.

 

I'm still new to investing LIC, when I first started I want to have 'everything' in one go too! 2 more experienced investors raised a few things that I can do better next time (when I post I already bought), but you might consider the followings:

1. $3000 for 6 purchases would mean high % in brokerage
2. WAX, WAM & MIR is currently at a high premium
3. 4 LIC by PT are AFI, ARG, MLT & WHF

 

I was actually thinking about the same thing the other day. I decided to invest very small amounts across BKI, QVE and MIR (the latter two to get away from the concentration risk). Even though QVE and MIR are apparently at significant premiums, it will give me a chance to participate in their SPPs.

It seems like WAM and WAX are quite popular amongst more experienced investors here. What I don't like about them is that they currently trade at ridiculous premiums (close to 30%), very high fees and relatively short history (cca 15 years). Maybe even key person risk?

 

BKI just had 1 but only a tiny 1% discount

 

Thanks @austing, I appreciate all the help you've given to the community.

Never stale and boring I can definitely say. As I learn a little more, I go back over the old threads and they make much more sense: again and again and again and...!

 

Yes, I agree. To brokerage fees would only be used to get the toehold for SPP's, nothing more.
The premium looks incredible at the moment I agree. A few percent I can work through and probably don't really need DCA - in 5 years that will be nothing. But 30%!? If things change quickly that 30% could go to 0 or negative and that would take a long time to recover from. Maybe I'll buy half a share .

 

Be patient, no investment's that great that it's worth paying a large premium for.

 

Pretty sure I have recently made some assumptions and been wrong about exactly the same things I made the same mistakes about a year ago . No knowledge growth here, just a simple goldfish.

Glad I have started investing in a way that protects me from myself.

 

Hey, thats me!

If I could only recommend one dividend based book it would probably be the Single Best Investment. It focuses on individual companies, but the real takeaway is that the trajectory of dividends can give a pretty good heads up as to the trajectory of your investment. Some of the other books veer into some wonky territory which I personally enjoy but may or may not be useful.


I’d post more often here and here abouts but at this point I don’t have a lot to add to discussions. Most of the decisions are really around the margins and in general I think as long as you are investing sensibly and consistently then you will probably be fine.


I’ve also got some slightly out there ideas about share buybacks and debt paydowns but that might be a topic for another time and place!


PS: I deleted @austing 's comment on my blog because everytime I mention property on my blog I get a million messages from everywhere, and 90% of them are just people rolling their faces across keyboards. Plus he was stirring the pot He was alluding to the fact that I used to write about my property investing too – no surprises that a dodgy little property investing blog received approximately 100x the views of my other one.

 

@OscarBravo I am interested in hearing your views and ideas around share buy backs and debt pay downs - particularly with regards to LICs.

 

He he me stirring the pot, surely not.

Be warned @OscarBravo secretly loves property, he's not to be trusted:

 

Perhaps should have specified that those things are specific to dividend paying companies as opposed to LICs.


Truth be told I spend almost zero time thinking about my LIC holdings until tax time!

 

My love for property is no secret! What other asset class will bankers lend 80% against without asking you any questions about what you plan on doing with the cash...

 

The reason I asked - is because AUI have been doing buy back for over a year now. I have been curious about it.

 

To reduce NTA discount and improve liquidity.

 

So - this is good - right? I do like this particular LIC.

 

It depends. LICs would generally prefer that their shares traded around NTA rather than a discount. In the case of AUI however the buy-back seems to be a responsible action by the Board. They've been around a long time, It appears to be a very safe LIC.

It was the first LIC I ever bought over 30 years ago on the advice of Daryl Dixon. From memory Daryl (via his SMSF) is still in AUI's top 20 shareholders.