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

I think in the context of this being a beginner thread, whether its viable to use leverage in order to 'leap frog' into a decent parcel size. Given the dividends are generally higher than rental yields, poses an opportunity for the leverage costs to be completely covered.

Another beginner question is whether any attention is paid to whether an LIC is XD/CD/whatever status at time of buying?

And do most do drp or prefer to reinvest/spend the dividends on their own choosing.

 

Cool,

I use equity from IPs to buy larger parcels of LICs. Agree that at these low IRs, LIC yields could cover costs. I will be looking at longer term as well as IRs will increase and there may be a point when the yieldis are lower than IRs.

From memory @austing 's beginner's guide goes into DRPs etc.

 

Please help me edumacate my partner.....

In introducing 'silent investor' to my new world, he asks....

"if LICs are so easy and lower risk, why isn't everyone doing it??"

My response - LICs aren't sexy or things you can touch and hold, and people don't like to put money away for longer periods of time and not 'do' anything...

I would be interested in other responses??

 

This is supposedly a beginners introduction to LICs. It seems advanced to me

An introduction to Listed Investment Companies

 

Because the stock market is for gambling.

Same question could be asked of index funds or lower fee unlisted funds (IML for example). Most people are total suckers for get rich quick and marketing, lack patience and generally have NFI. They are born to be sold to in other words, and LICs (old school ones) don't promote.

 

Maybe this one for a beginner? Listed Investment Companies - Barefoot Investor

 

Agree that everyone needs the latest 'new and shiny' thing. Peter T said that it was pretty hard to sell the approach as it wasn't exciting and shiny.

 

Mine is even worse. See attached if haven't already.

 

Cheers @Perthguy , these are interesting links. I like the beginners guide as it's for those with a little insight to the world of investing, but leads into the beginner mechanics of the world of LICs. Thanks @austing and co. for bringing this together, I am building my info for a day with 'silent investor' and a glass of wine or three

 

Also, the returns are too close to the market. Nobody wants to be the market! Your average punter thinks 20% pa is sustainable (they need that to hit their goals man!) so that's what they target... with predictable results!

 

Yes, thank you for posting. I have read this a number of times. It does seem very foreign to me. I am starting to get the hang of it though. Next thread: LICs vs ETFs

 

The input from @truong on quantity in that is golden

 

Its not the best chart below, but it not everyone is willing to hold on for the ride when the value of their portfolio takes a nosedive like this

Imagine you had $300k in the market and it kept dropping as with the below and you had no idea where or when it would stop

A 50 percent loss requires a 100 percent gain to recover and an 80 percent loss necessitates 500 percent in gains to get back to where the investment value started.

Now imagine you had gearing via a margin loan or line of credit invested also



@austing saw it as a buying opportunity

Anyone recall Navra shares back in the day?

 

For sure keep pumping funds into the chosen lic's and keep boosting the quantity of shares held and tune out the noise! Easier said than done tho!

 

And the recovery (sans dividend boosts and compounding)

 

Great charts @Redwing , and shows the need for nerves of steel when the price keeps moving - one possible reason why people don't like shares - you can log in at any time and watch the price in real time - sometimes the tide will be with you, other times it will be very much against.

Mantra to self - long term game.

 

As @truong once said, it isn't about the share price, it's about the dividend stream.
Listed Investment Companies (LICs)

My goal is to buy enough LICs to pay me enough to retire. Yield at the moment is around 4% grossed up to around 6%. If the prices of LICs go down, yields will go up, allowing me to achieve my income goal faster.

Share price is only relevant for buying. I am buy / hold.

Although thinking carefully about that statement, what should we do if one LIC increased in price so much that it was totally overvalued and the percentage yield low. Would that be a time to sell that LIC and buy a higher yielding one?

E.g. ARG increases in price to $15 with a yield of around 2%. Everything else stays the same. Do we sell up and buy BKI/MLT to double our yield?

 

Wouldn't your existing yield on ARG still be 6% or above because of your initial purchase price was low? then your income need is met anyway? so stop buying ARG and buy the ones with higher yield?

 

2013 article here

Why LICs are no longer the dogs of the ASX

A few years ago, the media referred to LICs as the “dogs" of the ASX, such was their terrible performance

 

Because lics are shares and they're risky as hell
Everyone knows property is the only way to make easy gains with leverage
It sounds silly but these are common beliefs of many ppl hence why everyone isn't doing it. That's what I reckon anyway