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Listed Investment Companies (LICs)

Discussion in 'Other Asset Classes' started by The Falcon, 21st Jun, 2015.

  1. scoobie27

    scoobie27 Active Member

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    I only have only a smallish amount. MIR is one of 12 LICs I own which also includes VAS and VHY plus a bit of the banks so pretty well spread out. Not regretting buying it in spite of the premium. I feel the premium will always be there so thought I might as well bite the bullet. Didn't worry about too much the premiums as austing had mentioned many times. I just bought them on a dip as I did the other LICs. MIR would have to drop a lot or the market rise while it's price stayed put for the gap to narrow. Will wait for the premium to disappear before buying more but I doubt that will happen anytime soon. Actually I'm itching to buy more LICs but haven't been able to the past few months as the markets has surged:mad:. I guess I just have to be patient and wait.
     
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  2. austing

    austing Well-Known Member

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    That's the problem with generalisations. I wrote that with the older style LICs in mind such as AFI, ARG, BKI, MLT, AUI, WHF. That is, widely diversified market index proxies. MIR is a niche LIC focused on stocks outside the Top 50. I, Thornhill and others make these generalised statements but it would be wise for investors to make an effort to understand NTA and apply a "reasonableness" test. It doesn't have to be working out an up to date NTA for a given day but simply even a quick glance at the monthly NTA reports freely available. Up to around 5% or so premium to NTA is fine but once the premium blows right out better to avoid.

    However some investors just don't want to make the effort to understand NTA and if they buy the old index proxy LICs regularly over a very long period of time including taking up discounted SPPs, Rights Issues and DRPs etc NTA tends to even itself out.

    Take the following NTA chart of AFI (the largest and most popular LIC) shown here:

    AFIC :: Australian Foundation Investment Company (NTA chart)

    Because of it's popularity and size it's one of the worst older style LICs for trading at a premium. However if you purchased it regularly and took advantage of DRPs and SPPs often offered at 2.5 - 5% discount much of the premium is reduced to an acceptable level.
    As mentioned above MIR is a niche LIC and hence they tend to behave differently. Best to make an effort to understand these. You don't need to own them but if you do knowledge and patience can be useful.

    Above all don't fret about a minor thing such as buying a parcel of MIR at a high NTA. If that was the worst thing I did over the years whilst investing in Shares I would be a very happy man.
     
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  3. scoobie27

    scoobie27 Active Member

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    Exactly as per above, no regrets at all buying MIR. I knew there was a premium when I bought it. Also same with ARG and AFI, if I were to wait for the premium to disappear I would be waiting a loooonng time and still be waiting today. Would not have participated in their share price rises and dividends. Buying on dips and small corrections was more of what I was looking for. Premiums and discounts will always be there
     
  4. scoobie27

    scoobie27 Active Member

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    I'm more concerned with the current overall market euphoria than any premium or discounts, preventing any new purchases.
     
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  5. austing

    austing Well-Known Member

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    Very good. I'm a lot more prepared to pay an NTA premium when the market has tanked. In theory the LIC mgrs are hopefully picking up bargains for us shareholders at these times.
     
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  6. Barny

    Barny Well-Known Member

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    So from what I have been reading lately I've done my head in and I give up with lic's.
    Discounted NTA are good but not if markets hot, slight premium is ok if markets falling, market euphoria at the moment so I guess don't buy, some Focus on the amount of shares which means you must buy in at a lower share price but share price isn't something you should focus on....omg. No wonder people buy houses instead.
     
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  7. Pier1

    Pier1 Well-Known Member

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    All of the above is just trying to optimize it.
    Keep eye on the plan;
    Spend less than you earn,
    Borrow less than you can,
    Select your chosen LIC/s of choice,
    Buy what you can when you can,
    Reinvest all the dividends,
    Participate in SPP where offered,
    Pin the ears back buying when the market collapses,
    Never sell :)
     
  8. scoobie27

    scoobie27 Active Member

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    Yep, I prefer buying when the overall market is depressed. Its is difficult for me to buy now despite some advocating regular purchases. After buying, I am not fussed if prices rises or drops. Please note I am not copying anyone here but just feel comfortable with what I am doing now from reading these non advisory threads. To think just 18 months ago in was too scared to own shares. Now I just need to be tested by a GFC type event:confused:
     
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  9. austing

    austing Well-Known Member

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    Probably the best post in this whole thread, pin it next to your bathroom mirror so you see it everyday. It should be a sticky at the top of the LIC thread followed by a warning that reading any other posts is only for enthusiasts:eek:. Sensible investors who don't want their brain to explode won't bother reading any further:). Will probably also mean I won't get anymore PMs from confused readers and can finally have a holiday:D. Thank you @Pier1.
     
    Last edited: 9th Jan, 2017
  10. Barny

    Barny Well-Known Member

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    It's the 'buy what you can when you can' that's confusing after reading So many different opinions.
    So I ask. 100k to spend now. Arg, whf, bki and mlt chosen lic's.
    Do you spead 100k today on them?
    Arg 2.2% discount
    Bki 1% premium
    Whf 7.7% discount
    Mlt 2.2% discount.
     
  11. Anne11

    Anne11 Well-Known Member

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    You are so wise Pier1. It is so simple right? One of the best posts here.
     
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  12. Anne11

    Anne11 Well-Known Member

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    I was in this situation few over a year or two ago. I set a target allocation for each LIC, then started to buy the LICs with bigger discount. In this example, I would buy WHF then MLT and ARG. ( Just my choice only, i am a beginner as well).

    Just keep it simple i think will make it easier, and the key thing is to take actions.
     
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  13. Pier1

    Pier1 Well-Known Member

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    It is all in the post. it is up to you.
    Your earning capacity
    Your spending habits
    Your borrowing appetite
    Your chosen LIC/s

    Stop looking at the chart from left to right and start looking at the chart only on the rhs, chances are that the price on the rhs of the chart today will be substantially lower than the price on the rhs of the chart in 10, 20, years.

    No that wise Anne11, like most have chased the Get Rich Quick until the true wisdom kicks in: COMPOUNDING

    If there haven't been enough hints yet, as suggested numerous times here, get yourself a copy of Motivated Money by PT and work out what you want.
     
  14. pippen

    pippen Well-Known Member

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    Great response particularly in regards to the looking at the chart from right to left! Read this segment in motivated money this afternoon and struck a chord with me!
     
  15. Barny

    Barny Well-Known Member

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    I was fine until I read everyone's differing opinions. Ok thanks everyone, back to buying more. I'll stop reading this thread as it might give me other ideas when someone gives another opinion and stuff up the long term game.
     
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  16. Pier1

    Pier1 Well-Known Member

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    Literally what I have done, laminated and posted to bathroom mirror, cant go wrong.
     
  17. austing

    austing Well-Known Member

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    You've done it now @Pier1. Forum guru status has now been bestowed upon you:). PMs to me have ceased since your post. May your PC inbox overflowith:D:D. I'm finally free, amateur status reinstated, the shackles have been removed:cool:.
     
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  18. Il Falco

    Il Falco Member

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    @austing i'll still send you some spam.
     
  19. austing

    austing Well-Known Member

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    What the ..., who is this @Il Falco? With such a sinister name (rumour is he's the Ring leader of the Market Mafia) I'm very concerned:eek:. In fact terrified, spam to my inbox with evil intent maybe even booby trapped to self-destruct:eek::eek:. That's it, I'm going into hiding:cool::cool:.
     
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  20. willair

    willair Well-Known Member Premium Member

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    It's always a lot safer on the back deck with a home brew and unlinked..
     
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