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Beginner's Guide to Long Term Investing in LICs

Discussion in 'Listed Investment Companies (LIC) and Trusts (LIT)' started by austing, 20th Jan, 2017.

  1. austing

    austing Well-Known Member

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    I had a go at creating a basic beginner's guide to LICs. Hopefully it might be of some use to the intended audience. I'm also considering creating a LIC Frequently Asked Questions (FAQ) guide at some stage.

    See attached PDF document.

    I'd welcome any feedback such as missed errors, ommisions that might be useful etc. The intent however was to keep it basic and not too long and overwhelming for beginners including those who have little or no experience in the sharemarket.

    Cheers
     

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  2. twisted strategies

    twisted strategies Well-Known Member

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    first area ( even for novices)

    is your plan , is your plan still right for you ( check regularly ) you may need to tweak a little ,adapt a fair bit , or make big changes .

    next CHECK your LIC is not changing focus/mandate in a way that drifts away from your goals .( there are more than 1,000 fellow holders he/she won't always make the right choices for everyone 100% of the time)

    now IF your LIC choices no longer are a perfect fit , you DO have options ( including selling out entirely ).

    i favour putting new cash into a different investment that suits my ( future ) needs better ( instead of more in the same , when changes warrant it ).

    which LIC ( s) to buy ??

    using the main names in austing's list

    i recently ( middle of last year ) bought into BKI (please research carefully some quiet changes are happening in this LIC )

    in a DEFENSIVE (like a safe haven style play ) move having bought higher growth/risk styles early in my investing days.

    some LICs ( prefer investing in companies with a low risk of failure resisting the lure of high SP growth and/or irregular but higher divs. ).

    now NTA( net tangible assets ) i class as a distraction in assessing LICs

    if choosing between (nearly ) identical LICs i look for DIV.YIELD v. current SP v. risk

    ( i see investing as buying income for a long time , but also resisting the ravages of inflation in years to come )
     
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  3. Hodor

    Hodor Well-Known Member

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    Are you referring to NTA premium/discount?

    When I look at an LIC two main measures are stable dividend growth and NTA growth. NTA growth should result in div growth, yet div growth could be at the expense of NTA so without context it means little. NTA premium/discount means little to me, although a significant discount would warrant investigation as to why and I am loath to pay a premium when other options are available, overall a distraction that could be ignored in general.
     
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  4. austing

    austing Well-Known Member

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    Based on feedback to the initial LIC beginners guide on the sister forum where the LIC thread is now 87 pages long I have updated it accordingly. Note it's a beginner's guide hence the guide is very basic.

    @twisted strategies all good points. I've found that beginners get overwhelmed very easily. So I've tried to keep it relatively simple. It's not an entire guide to investing, just LIC basics and some food for thought that may help others with how they can make use of LICs.

    As for the LICs mentioned I obviously can't give advice but only provide some examples. All these LICs are very conservative, focused on paying reliable dividends, low fee and other than BKI have proven themselves over many decades. They're unlikely to cause any potential investors grief. Why invest in more than one despite their similarities well the opportunity for value is there at different times and it increase the frequency of discounted SPPs etc.

    Given the mention of BKI (which I own along with the other Millner LIC Milton) yes I suppose you could say there are changes afoot. Contact now externally managing BKI. Contact also looking to list a new IPO URB with urban renewal the theme for investing. Mostly property focused. Not for me. I don't do property in any of its forms. Not too bothered as long as the focus on the new LIC doesn't distract Millner and Culbert from the management of BKI.

    Cheers
     

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  5. twisted strategies

    twisted strategies Well-Known Member

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    Hodor

    ** Are you referring to NTA premium/discount? **

    yes but no

    NTA premium/discount is considered when timing a buy .

    but would rather buy based on portfolio content and how those shares will grow in div.payments

    WAX for one is an exception as the portfolio may change completely in 12 months (i hold WAX now free-carried )
    WAX is essentially an investment in a trading style and fund management .

    i still haven't dabbled in the art of options much ( the exception being exercising free options when the outcome is attractive to me )

    in hindsight a lucky choice for me personally , but so far can rarely get options to work they way i want them to work , neither could i get SFI warrants to work my way either .( Self Funding Installments )

    convertible preference shares i currently hold CAMPA (and CAM ) have filled my aims better and may venture into that again ( CAMPA convert in April 2017 )

    WHF and CIN preference shares have been looked at without buying yet .

    have in the last 12 months bought into BST and CIE as LICs that will grow and mature (copping early low yields , while hoping for portfolio capital growth)

    using them to ( hopefully ) resist future inflation.

    BKI was bought into as a proxy safe haven , i still have ( mostly )planned for a correction/crash this year ( but do have a strategy if a 10% rally occurs as well )

    (to me 'safety' = NOT having bet 100% on a particular event ).

    novices are in the best of times, but also the worst of times.

    higher risk investing , but better education in learning .

    food for thought is what i need , and hopefully novices will grow with it as well .

    maybe i resisted being overwhelmed by fortunate timing starting to splash cash in 2011 has proved unexpectedly positive .

    but having a near term target (mine was 2020 back then) , flavoured many decisions , maybe a similar strategy might help novice investors .... say plan to thoroughly reassess their portfolio over the Xmas break in 2022 and adjust if needed .
     
    Last edited: 22nd Jan, 2017
  6. twisted strategies

    twisted strategies Well-Known Member

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    please note all the LICs i have bought have suited MY intentions at the time , other LICs were NOT discounted as inferior , but not quite the best tool for the job either .( at the time )

    and times change , sometimes i add to existing holdings , sometimes i choose a different LIC
     
  7. austing

    austing Well-Known Member

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    Updated Beginner's Guide to LICs V2. See attached PDF.
     

    Attached Files:

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  8. twisted strategies

    twisted strategies Well-Known Member

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  9. austing

    austing Well-Known Member

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    Hi mate,

    Are you referring to their "find a fund" page or is the link not working correctly?

    I will add this specific page in the Resources or other relevant Section. Thanks for that.

    The beginner's guide to LICs is a work in progress with updates being regularly added to the main thread below as questions arise:

    Beginner's Guide to Investing in Listed Investment Companies

    I'm about to post another guide update with a new section on:
    LICs vs ETFs

    And add to the FAQ:
    1. Why own multiple similar LICs?
    2. When looking to buy a discounted LIC should I check NTA historical average?
    3. What are Rights / Bonus Issues?
    4. DRP vs Bonus Share Plan?

    I don't profess to being a guru on LICs but the subject is very popular on the sister forum below and beginners keep asking the same questions over and over. Hence I started this guide to avoid the following thread getting bogged down with repetition:

    Listed Investment Companies (LICs)

    Cheers
     
  10. twisted strategies

    twisted strategies Well-Known Member

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    i was hoping we were learning , exploring LICs together , however you do seem to be more advanced than me .

    but the selected link was right near the end of the article where many a novice ( like i nearly did ) are likely to have skipped it thinking just another link to an ad.( a little bit exhausted by then )

    please feel encouraged to post more , sometimes i find i don't know as much about a topic as i thought i did .

    your 'work in progress ' may yet be an eternal task , as LICs ( and ETFs ) are added and restructured ( and refocused ).

    owning LICs ( and ETFs ) is not as simple as some make it out to be , but selecting correctly can be very rewarding .

    not everybody needs the same solutions .

    i was also hoping some other novices would ask some innocent ( intelligent by accident usually ) questions giving room for extra thought and examination .

    high-flying gurus would rather make it all seem so easy and simple ( and thus look so clever ).

    cheers !!
     
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  11. austing

    austing Well-Known Member

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  12. austing

    austing Well-Known Member

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    Hi @twisted strategies,

    I don't consider myself overly advanced in any way. I have been following LICs for over thirty years but that said my personal investing approach is very simple. It's all about dividends. An amateur investor is all I am.

    The funny thing is I love learning about investing but it rarely translates into me doing anything much different to what I've been doing for a long time. If anything it just reinforces and reminds me to stick to our simple plan.

    Tax and Super changes are where I'm always keeping a look out for. Investing is often the easier part. Minimising tax is also crucial to maximimising one's investment outcome.

    Cheers
     
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