LICS/ETF's or other?

I have 2 questions, but will ask the first one for know.

Firstly,
- I know the basic differences between LICs and ETF's
- We have about 30K in a trustee account for our children - CBA, and wish to invest with the best possible outcome for the long term future.
-Contributions are made to the kids account on a monthly basis,
-I have have linked a share trading account to their accounts.
-

What would be the best 3, maybe 4 LIC's/ETF's to invest the kids money in over the long term for them?

 

Beginner's Guide to Investing in Listed Investment Companies

Time well spent.

Come back informed and ask more specific questions you will have and many here will do their best to answer your queries.

 

Scott Pape The Barefoot Investor suggested AFI, ARG as LIC.

I have ARG and MLT as well as VAS (ETF) as the main ones.

You might want to read the LICs threat in The Assets for a more informed decision.

 

ETFs I would look at index trackers only. VAS and VGS are two I hold.

LICs mentioned already would be fine. AFI and WHF have bonus share plans (BSP) and dividend substitution share plans (dssp) that might be advantageous given tax issues with minors. Not aware of ARG or MLT having these.

All the above are set and forget.

 

The Best LICs for Dividend Investors - The Australian Dividend Investor

 

It was in 2011 when I first heard Scott Pape talk about AFI and ARG. He used to mention them ALL the time during his podcast on Melbourne's MTR station. It was the first I heard about them back then. He kept saying that they were low fee, well managed and was run to benefit shareholders rather than line up their own pockets. He also made it clear that he would not make a cent out of recommending these LICs but still did it anyway becuase they were great creators of wealth over the long term.

Incidentally he looked down upon investment properties as an asset class. He was a big fan of paying down your home loan. "Owning successful business through shares is how you build generational wealth" is what he used to say.

Unfortunately I did not listen to that advice back then. Instead I went down the investment property route. I would have been in a MUCH better situation if I had just invested in AFI and ARG the monies I spent on the IPs. I would have saved myself numerous headaches along the way including one which involved a tree falling over one of our IPs. Even today I am nervous about what is going to happen to my Brisbane IPs with all the rain and flash flooding happening there.

You live and you learn.

NOT advice. Do your own research. Also, NOT an endorsement of Scott's philosophy on finance; plenty of things I disagree with as well.

 

Perhaps for Kids something that also offers great growth prospects without dividends and associated tax during accumulation. Eek, did I say no dividends.

Not an ETF / LIC but probably the best diversified investment in the world being Buffet's BRK.B for "international" growth. Known as an internal compounder (@Il Falco be kind please). I don't follow Barefoot Investor but from memory BRK.B is another huge favourite of Scott Pape along with AFI and ARG.

For "Australia" maybe AFI and take advantage of the the Dividend Substitution Share Plan to avoid paying tax now.

So in summary:
Australia
AFI (with DSSP) - 50%

International
BRK.B - 50%

Set and forget except for periodic buying, no tax during accumulation.

Not liscenced to give advice so DYOR.

PS: Well there goes my membership with Dividend Investors Anonymous.

 

You are right, he mentioned he owns BRK too. I watched BRK.B at $74 in 2009 from memory and had no clue, it is now doubled that.I live and learn.

 

On the plank with you!

 

Oh well looks like there's only one way out of this mess, works every time:

 

Thanks for everyones replies so far. I'll do a bit more reading and post back when I have a few more minutes to spare....

Q. How would you invest in BRK.B in Australia? Can you do it from the CBA online investing platform?

 

Yes i think you can , you need to contact Comsec to have that option.

 

Yes, just open an international trading account:
CommSec - International Shares - Trade on over 25 leading global share markets

I prefer NABtrade though as the rates are much cheaper and there is no need to complete a W-8BEN form every three years. In fact the brokerage fee is the same as trading local shares. With NABtrade it's seems as easy as trading on the ASX.

I haven't used CommSec so someone else here might be able to tell you more.

 

Interesting. Is there any annual fee for the internationals? I think CBA has one which turned me away.

 

The idea of the DSSP is interesting indeed with the perspective of investing for a child.
Would there be any complications in terms of taxation at time of transfer?
I think i remember reading something along those lines on the forum somewhere? Perhaps @Terry_w will remember something about it?

I was under the impression an investment bond was a better option in that regard, but I cannot remember the exact elements that drew me to this conclusion.

Obviously if it is as simple as opening a commsec account acting as trustee for the child, without complications come transfer time, that would be ideal. Need to talk to the accountant about this.

 

Usually a custodian fee which is waived if you do at least one trade a year from memory. Simple, only a small single trade each year to avoid the fee. So not usually a problem.

From Comsec:

 

Was discussed on InvestChat awhile ago:
Buying shares in kids names

GET YOUR STRUCTURING RIGHT BEFORE INVESTING FOR KIDS.

@Terry_w may like to comment but has already done so in the above link.