LIC & LIT Listed Investment Companies (LICs) Q3 2018

Yes but if the EMH is true, expected performance is the same for all managers because whatever they buy/sell the price is by definition fair. So it doesnt matter what they pick. If you dont believe in this, thats fine, it just means you dont believe the EMH gospel.

 

Good points but should CGT and one-off costs be the major drivers in making such a decision?

Maybe it could be viewed from the aspect of what is the best - in a broad sense - decision for the members of the SMSF.

As can be seen from the posts on EMH above, these aspects can also apply to SMSF's where it holds similar LIC's, etc. Possibly eliminate the effort and be OK with $3,000 or so tax free being plonked into your bank account each fortnight.

I've probably started the process by dumping one direct share holding yesterday. Smallest holding of the lot though. Tiny steps hehe

Sheese, SMSF discussion in an LIC thread but then they is shares so the crossover if valid in my twisted thought processes.

 

In my view NO. My wife is still in Accumulation (not preservation age yet) and I have a sizable Accumulation Balance even though I have maxed out the maximum allowable Super pension starting balance. Despite the CGT impact, for simplicity I reduced 13 holdings to 6. There was significant Capital gains but at mostly 10% CGT the franking credits offset much of it.

Same with our Family Trust. Had a gutful of legislative Risk, legal / accounting obligations, worry and now Labor looking to crack down further on them etc. Just extra worries I can do without. We’ve been selling assets and reinvesting in own names. Again being retired (no employment income) franking credits, income splitting and Concessional Super contributions etc have covered a lot of the CGT. Hoping to have the trust shut down after next Financial year.

So when it comes to simplicity, admin, legal / accounting obligations, peace of mind, health, stress, priorities, happiness and consideration of one’s heirs etc I don’t think tax / costs should by any means be the major driver!

 

Yup. To clarify I wasn't having a dig at you or your approach. Was ruminating in an abstract way. A process which assists me in deciding what I want to do - and it's all about me .

Seen it too often where investors and others focus only on tax aspects. Way down my list of concerns. It is what it is and although I attempt to minimise it's not an aspect I actively chase. Gawd, I've had to bite my tongue at many discussions when that matter comes up. I'd better not start or I'll have a rant!

 

I didn’t even think of your comment in a negative way and know you well enough to realise you were ruminating.

I was also agreeing with you. Even thought my comments elsewhere may suggest otherwise at times Tax is secondary. We own the house my MIL was living in. When she passed away recently we had no intention of hanging on to it as a rental because investment property causes me nothing but stress. So I happily sold it despite the significant CGT hit.

In the end you can’t put a price on peace of mind.

PS: I’ve forgotten what this thread is about.

 

People. Money has no emotion. It doesn't even know you exist or care.

 

Well, the EMH doesn't mean the market is right all the time. In fact, at any given moment, it's going to be wrong. It's just a grinding trend towards the best price guess, given the probabilities.

It's also factoring in people's prices for stocks for the short, medium, and long term. So when short termism takes hold, it's going to throw off opportunities for long term investors. However sometimes these turn out to be genuine problems, not long term buying opportunities, and the market was right to price in these "discounts." It's all about pricing risk and probability, which is never as black and white as it might sound.

One critical factor you mentioned there, is time - this hypothetical LIC would need to trade at a discount for an extended period of time. Sometimes the market takes a long time to become efficient again. But over time, it seems to head in that direction. Remember, "the market can remain irrational longer than you can remain solvent"

Another factor is the size / market cap of these companies. Markets are less efficient where there is less trading and valuing going on, so less efficient in the smaller end of the market. LICs usually fall into this category, and hence less efficiency. Some of them are truly tiny.

Just FYI i'm not a huge Boglehead or anything, I love when opportunities turn up in LICs.

 

I’m in:
Hamish Douglass, Lowys, Solly Lew back new listed fund

 

My heart may be in the right place but my mind isn't.

How many more of these bloody things?!

 

No. You are missing that a LIC is not a basket of stocks. It is a managed portfolio - managed being the key word. The markets view of the managements capability and future performance will influence discount / premium. This is a separate matter to fees. Then there is the matter of history / likelihood of cap raise / dilution which will also affect share price.

You are missing the distinction been LIC and an index fund.

 

No one knows when but geez you gotta think it’s gonna end in tears at some stage?

 

Right so the issues with GOW ; recent suspect acquisition that is chewing cash and doesn’t make sense (Surf Hardware), Question marks around valuation of its illiquid unlisted assets, - these aren’t mark do market, and then the financing of its move into regional resi development near top of cycle. EMH says that nobody believes this is worth stated NTA and I’d agree.

EMH isnt gospel but a reasonable heuristic. The further one gets off the beaten path the weaker it gets. Multi billion dollar LICs that thousands follow with easy access to NTA, reasonably efficient imho.

EMH does not infer that stocks need to trade at net tangible assets - NTA is only a component in valuation.....

 

Hearts and Minds stock picks are literally published in the AFR the day after. More directors fees for everybody!

 

I agree that an LIC is not an index fund (because I do not completely believe the EMH).

If the market views the capabilities of different managers differently, the market does not believe in the EMH either. Whether the EMH can be true even if the market thinks it is false is an open question

 

Just popped into my head, what happened to PM Capital’s so called innovative LIC in dealing with NTA discounts: PM Capital GO 2025 Limited (ASX: P25).

Did a quick search and found this on The Fool:

As I mentioned earlier in this thread given my psychic ability it would likely turn out to be a dud.

 

Unlike yourself, as I had no interest in the thing, I didn't even wonder.

What does it say about the concept when it couldn't even raise some $100M with all the cash around which is looking for a home?

 

Yes it’s a worry that I’m even wondering about such things. Maybe I should seek medical help?

Well some occasional blue sky so time to get off my ar*e and do some work in the yard. PCer’s rejoice, a break from Nodrog’s incessant rambling.

 

I was thinking of buying WHF to start a Thornhill portfolio. However, I was a bit a bit concerned after reading the below:

https://cuffelinks.com.au/wp-content/uploads/LMI-Quarterly-170918.pdf

I haven't been able to find anything in regards to this on WHF website. The move away from a long-term objective seems like a big deal. How significant is this change?

 

Hmm that’s interesting, I have no insights on this.

Could have something to do with WHF moving from a 50 stock portfolio to become 160+ stocks now essentially replicating the Industrials index.

Its pretty much an industrials index with more stable dividends, where the discount sorta compensates for the higher fee.

 

Snowball has done another great review of an Aussie lic.
https://www.strongmoneyaustralia.com/australian-united-investment-company-

I didnt previously know much about AUI. Great to see some discussion outside the usual few covered here.