LIC & LIT Could you please critique my portfolio?

Hi all,

Hope everyone is having a great day

My goal is to retire on LICs and live purely on income. As I accumulate more and my portfolio is getting larger, I am becoming more nervous on the "safety" of my portfolio. The following questions come to my mind - can the companies go down, can I lose money, will I have sufficient income to live on. In that sense, could you please critique my portfolio?

MLT 25%
WHF 25%
AUI 13%
CBA 10%
MIR 10%
ARG 8%
QVE 3%
WES 2%
WBC 2%
BHP 2%

My aim is to sell individual companies and invest in the LICs above. Would you have good sleep at night retiring on the above portfolio? I know this is individual; I used to have good SAF but it's decreased lately

Thanks

 

Yours looks similar to my shares portfolio outside of super and separate from properties and our supers which also invest in some shares.

Have you included both in and outside of super and no other investments?

I think it depends on how much your portfolio will generate in the future. If it will generate say 120-150% of your spending need imho the current allocation would be fine.

I think ARG returns better than MLT so would increase in allocation to ARG be considered?

I am planning to increase my allocation to international As yours is fully Australian shares. Perhaps you could in the future when the dividends reach sat 70-80% of your spending needs then you might want to increase your funds toward international shares. (Not advice of course)

 

Does it really matter if you have 20% in MLT, 0.03% in ARG, 2643% in AUI and 43643287423% in WHF? It's all the same thing, you would achieve something similar (likely better) with just VAS. That's it.

Regardless, my SAF factor would be at 0% if I only invested in Australian equities.

0%.

 

Agree theres significant overlap amongst all those similar holdings. Not sure the poofteenth difference in any short (sub 30 year) period warrants one big lic as opposed to another. More than 2 or 3 for manager risk possibly overkill. If you 'look through' you're heavily exposed to CBA in particular.

VAS as mentioned covers the lot. That said I'm still a LIC convert more for the DSSP option in accumulation which might sway you more toward AFI or WHF. I'd prefer AFI for you as WHF isn't as liquid and I'd like more over time without competition .

Zero is quite harsh. That's meth driven clockwork orange up all night gnawing at eyelid level SAF. Maybe if the whole country $hits itself ...... but it'll be shotguns and beans at that point.

 

I'd love to invest in VAS but looks like from the tax perspective it's more efficient for me to be invested in LICS (after I retire in Europe I would pay more tax on VAS).

 

businesses (and LICs ) can fail absolutely ( total loss ),or have a persistent string of poor results ( ORG , MYR , AMP and several more ) this is an age old risk of investing

now not so long back QVE have attracted a take-over predator , there is SOME chance another predator will have an attempt in the future ( and leave you sitting on the footpath with a handful of cash ) so keep an eye out for a suitable replacement , again this risk is NOT exclusive to QVE , and could happen to any under-valued company or LIC , although arguably CBA and BHP would be highly resistant to such a move

also you should realize WES is an investment vehicle ( arguably a LIC as well )

a relative died as left me the remains of the share portfolio despite many household names bought since 1970 only 4 shares remained in 2010 ... APE , QAN ,CSR and WOW


the QAN has been sold , WOW heavily reduced , CSR added to , and APE is currently my largest single holding jumping an easy 5 times in value in just 10 years .. who would have picked APE to outperform WOW but a factor of two in just ten years ( by share price value )

good luck picking the next 10 years , let alone 20 or 30

there is ALWAYS risk in investing otherwise there would be no reward

cheers

 

Why are they the only remainders? Have you sold the rest or have they been delisted, taken over etc?

 

NO the other companies failed or were taken over over the passage of time

not every business is blessed with sound management over 30 or 40 years

gone are the infamous Poseidon Nickel ( not to be confused with the current one )

Nylex ( changed to Moulded Products and then disappeared )

Ansett and TAA gone ,

Mount Isa Mines taken over

McWhirters gone

Maryborough Sugar Refinery was taken over by CSR

Red Comb is gone ( stock foods , etc )

Rinker a spin-ff from CSR was taken over

and they are just the ones i have found the paper-work for ( i was surprised by the ones where no paperwork existed .. no banks , no TLS , no healthcare stocks etc etc etc )

of the four inherited (APE , CSR , QAN , and WOW )

i exited QAN , sold down WOW (but not before they spun-off SCP ) sold about 80% of the WOW holding

CSR i added extra , then reduced to roughly double the original holding

APE now my largest holding i bought extra in 2011 BEFORE the share split , reduced in 2013
added more by buying into AHG before the APE take-over of them , , and then bought more in March 2020 as the share price plummeted , reducing again in June 2020

looks complicated but the opportunities were there to be taken

with APE at least two directors ( one former one current ) claim they are really frustrated real estate investors

i would have loved to have just 'bought and forget ' but the opportunities if you are alert !!

yes it took some effort , learning and research , but it was probably worth it just for the learned skills

 

If it were me I would offload all the 2 and 3% stuff, and probably CBA, given the banks would be well represented in your LICs.

I would also be inclined to look to some unhedged global funds as well, to diversify beyond Australia.

Just my 2c, not advice, etc etc

 

my current TOP 10 ( calculated this evening )

by $value )

1. APE ( at some cash risk )

2. MQG. ( 'free-carried )

CASH

3. BHP ( some profit taken )

4. WES ( at full cash risk )

5. PME ( 'free-carried )

6. API ( full cash risk )

7. CMW ( at full cash risk )

8. JHG ( full cash risk )

9. .CDM ( full cash risk )

10. CUP ( full cash risk )

and LNK ( full cash risk ) close behind ,

DYOR

currently NO holding is 5% ( or above ) of the portfolio but APE is close ( maybe 4.5% )

i very much like to take opportunities as they arrive and bias new purchases into areas i see mid-term opportunity

i also consider WES as a LIC while it it's current strategy

you may notice i am deliberately underweight in the major banks , but that MIGHT change if the price is right . ( i bought extra WBC in 2020 but not enough to make the top 15 )

MQG and PME are held at very large profit ( both crystallized AND 'paper profit ' ) and at my buying price mouth-watering div. yield ( don't forget your div. yields and franking )

good luck

YOUR time-frame is very important

 

Hi Anne. Thanks for your comments.

The above portfolio I posted is all outside of my super. I don't rely on super very much considering I want to retire early but that's probably a mistake. I think I have a decent international exposure in super. Sounds like your investments are similar to mine.

What's your take on AUI considering it's way less diversified than say MLT? I'm thinking of considerably increasing my investments in AUI but the lack of its diversification is the only thing holding me back.

I quite like ARG but whenever I had cash available it traded quite high to NTA with relatively low yields. I try to invest in LICS when their yield is close to 4%.

 

I don’t have AUI so can’t comment. Pls look at this latest report, should have AUI performance to compare with others. When I had a quick look, I think ARG total return was a bit higher than MLT.

https://www.firstlinks.com.au/uploads/2021/IIR-Monthly-LMI-Update-Mar-2021.pdf

 

international exposure only really works when you suspect your nations economy is travelling worse than the pack

given recent events do you believe that is true

one danger of international investments is a MAJOR war , and your assets over there are stranded ( you can't maintain control or cash-flow .

now i tilted towards NZ and Asia ( and less so towards the UK , but still a positive tilt ) between 2015 and 2019 .

with all LICs ( i hold or do not hold )entry price is important and so is strategy , but also if i can run a similar portfolio better myself ( in my eyes ) in earlier years i held an ETF SLF ( an ETF of REITs ) thinking about it i realized i had already cherry-picked the best REITs , and wasn't particularly impressed by the rest of the ETF portfolio , so took the opportunity to crystallize a modest profit on the exit .

for instance i hold a fair amount ( for me ) CDM , where the fund and i hold the same companies , we seem to use opposite strategies ( and bizarrely still make a profit on the adventure ) , maybe we both see opportunities in those same companies , who knows

now of course you seem to be trying to have a portfolio were you put in minimal effort , that is putting a LOT of trust on the fund managers , if you don't have a great understanding of what they are doing , how will you know if they are doing a great job , relying strictly on the manager's say so could lead to a Bernie Madoff situation ( Bernie never bought or sold a single on behalf of the clients portfolios , just faked the paperwork and recycled incoming cash )

and Bernie was so liked and trusted he even had a seat on one of the exchanges ( so the regulators refused to believe early allegations )

almost compulsory reading for any new investor , research Bernie Madoff to see how BIG gaps in the system happened ( Bernie had apathetic accomplices )

cheers

 

Thanks for your valuable comments mate.

Bernie case sounds very scary. That's probably the reason why I invest only in old Australian lic's (mentioned in my OP) that have been running 50+ years. They are also process driven. With this type of investing, I believe it's pretty safe to switch off and go about your normal life or would you disagree?

I really don't remember last time I read a LIC report

 

there is an old saying , 'as above , so below '

in this case it COULD happen here , a trusting regulator , a manager needing funds for whatever reason , but the driving force were inattentive ( trusting ) investors

now my 'normal 'life is very different to yours , but i agree you should enjoy yours BUT keep a watchful eye on your assets , you MIGHT miss a pivotal decision , there will be a tendency for fund managers feathers to be ruffled , for example Wilson's is on an aggressive acquisition quest ( when many fund-managers are struggling to generate returns , but have kept up cash reserves ) .. that makes tempting take-over targets suddenly a manager is trying NOT to make bad investments but is distracted by the antics of a predator , so far just a little scary BUT what if the predator borrows extra cash to force the deal through ( part cash part scrip ) the predator has bought the FUM for pennies on the dollar

certain predators can be good , BUT others are intent of building an empire USING YOUR FUNDS ( another tactic is becoming a major shareholder and grabbing investment control of the fund , and of course giving themselves performance shares to cement their control of the entity.

i am not saying any particular fund manager is bad , but this is an important time to be watchful

any CMW investor would have watched the extraordinary effort made by a rival to wrestle investment control from the previous management ( and only needing 30% of the shares to do so )

BTW i AT LEAST glance at all the ones i hold ( i study carefully certain ones every time ) they all give their own perspective of the investment world and the economy , AKA spot different clues in the big picture

 

Seems a sound approach but beware of those who wear these.

 

LOL

just because i am paranoid doesn't exclude SOME are rarely out to get me

 

Thanks mate. I believe you have a similar approach and invest in similar LICs? Do you have much involvement in your investments, as in constantly reading company reports etc.?

 

First, go and read the excerpt in this post. After you've read it think deeply about what it means to you.

After that, have a browse through this thread if you haven't already. A number of the posts clearly refer to disengagement and the approach to that.

Listed Investment Companies (LICs) 2021 [LIC & LIT]

I'll be very brutal. Stop faffing about and get it as simple (or, God forbid, as complex) as you prefer. Write your investment plan down and if it's more than ten paragraphs of one line each you're probably overdoing it.

I don't know you age and I don't want to know but I'll guess some LICs have been around longer than you have been alive. What are the odds of them going bust or no longer paying dividends? Get back to us once you have read the chicken entrails and have come up with a number.

 

@twisted strategies

My FIL had a boxful of bottom drawer stocks, I had a look through them all one day, all spec stocks, mostly resources, many had delisted or had multiple name changes, some resource stocks suddenly became twch stocks when tech boomed..end result, an old fashioned LIC (no Index funds back then) would have served him better