LIC & LIT Investing For Income? You Are Doing It All Wrong

Discussion in 'Shares & Funds' started by Chris Au, 21st Dec, 2018.

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  1. Chris Au

    Chris Au Well-Known Member

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  2. Nodrog

    Nodrog Well-Known Member

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    Nothing new there. Trouble is identifying growth shares / fund Mgrs early on (higher risk, some turn out to be duds) and / or not way overpaying for them. Who isn’t chasing growth cause there ain’t a lot around on ASX at the moment and high capital growth generally equals faster growing dividends.

    If you buy an index ETF / old style LIC you’ll get bit of everything with a LOW FEE. The growth shares that become successful will shuffle up the index order so you won’t miss out if you own the index. And LICs are always on the look out for same. That’ll do me.

    There are smaller cap Mgrs chasing growth but by the time fees are extracted and higher turnover, tax inefficient capital gains are returned to the investor it’s hit and miss if you’ll do any better than the main index. And those that do well for awhile then go to crap. Trying the identify the next winning Mgr is a very difficult task. Of course someone might bring up the likes of WAM as a possible growth LIC but even if they can continue their enviable record are you willing to pay over a 20% premium for it?

    Hopefully others will comment as that’s the best I can do on a Friday afternoon.
     
  3. PKFFW

    PKFFW Well-Known Member

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    The article seems like a long way of saying "beware the yield trap".

    I agree with Nodrog that the trick is finding the "growth stock". It seems pretty easy in hindsight as the author demonstrates. However, for every Altium Ltd chosen by the investor how many OneTel's are also chosen I wonder?

    Ideally one would have the foresight to pick the winners each time but failing that I'm happy to pay a low fee to have a mostly passive approach that will by definition end up with all the winners. (and yes, also the losers ;) )
     
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  4. Snowball

    Snowball Well-Known Member

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    Nothing to add :)
     
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  5. Nodrog

    Nodrog Well-Known Member

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    “END UP WITH ALL THE WINNERS”! And therein is the secret which is not obvious to many investors because they fall victim to vested interests trying to maintain the focus on the losers in the index which is far less significant. The following article explains why owning ALL winners regardless of losers / poor performers in the portfolio is so important. I’ve posted this previously but if you haven’t seen it this is well worth a read.
    The Math Behind Futility
    An overlooked statistical concept shows why it’s so hard to beat a benchmark.
    Bloomberg - Are you a robot?
     
    Last edited: 21st Dec, 2018
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