ETFs vs LICs

The A to Z of ASX ETFs​

i hold a selection of both ETFs and LICs

each has their flaws and strengths

divs4ever said:

The A to Z of ASX ETFs​

The A to Z of ASX ETFs

If you’re new to investing or even if you’ve been investing for a while but haven’t yet explored the world of ETFs, this article is for you!

www.livewiremarkets.com

i hold a selection of both ETFs and LICs

each has their flaws and strengths

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Ditto

Why LICs may be close to bottoming​

i disagree with the title , i see more downside ( especially if the XJO now at record highs starts to retrace )

i hold several ETFs as well as PL8 , AUI ( a recent buy ),BKI and several other LICs not mentioned in the article and currently have an order for QRI in the market

i have recently exited QVE rather than take the Wilson's deal

It's nearly a year since my last post on this thread and until recently the price to NAV ratio hasn't improved much for the LICs I have been watching. All (bar MIR) have continued to trade at substantial discounts to their NAV.

The recent pull back in markets has seen the discount start to reduce. LIC prices are falling, but ETFs such as A200 and VAS are falling faster.

I believe there is a strong chance that markets will fall a good deal more over the next few months and I'm pondering a strategy that might be able to take advantage of this.

If the fall continues, I believe we will see LICs trading above their NAV some time this year. My proposed strategy is to sell down the AFI, ARG and DJW LICs that I hold at this time. I would invest the proceeds in A200, which would have fallen further than the LICs by my theory. It might take years, but eventually markets will recover and the LICs may trade at a discount to NAV again, at which time I can sell down the A200 and reinvest in the LICs.

This strategy involves a bit of work and wouldn't appeal to many who hold LICs and ETFs for the sake of simplicity. I find a bit of trading in the market fun, so it lets me hold safe but boring LICs and ETFs and still have that fun.

Apart from my record keeping work, I will need to consider the CGT costs of the strategy. Brokerage is another cost, but not likely to be material.

Any thoughts from the ASF brains trust welcome!

well i buy LICs based on dividend yield ( and their investment focus/style ) so a LIC trading at a 20% discount isn't tempting until the YIELD is attractive AND most of my held LICs 'smooth the divs. ' so you have a fair guide to the divs in the coming two years

HOWEVER ETFs trade ( with the help of the market makers ) very close to their NTA ( and the div. payouts can be quite volatile )

currently i am trying ( unsuccessfully ) to add to some LICs that focus on small/mid. cap. stocks

but SOON if the market keeps sliding , i will be looking an ETFs hoping the share prices will drop quicker than the future div. yields .

good luck on your strategy , this is a very uncertain market , maybe you ( and i ) can time it correctly , or near enough

Ferret said:

It's nearly a year since my last post on this thread and until recently the price to NAV ratio hasn't improved much for the LICs I have been watching. All (bar MIR) have continued to trade at substantial discounts to their NAV.

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AFI and the three offshoots have a Presentation out, to accompany the Investor Briefings held in various cities around the country in March- April



...also their house view

As an observation, LICs can make decisions ETFs cannot. For example, I was informed AFI sold entirely one holding when poor corporate governance came to it's attention. ETFs do not take any heed of those issues. If it's in the index, it's in the index.

A foot in both the LIC & ETF camps is a happy medium for me. It's said there is no perfect portfolio, so best to do what suits the individual so one can sleep well at night.

monkton said:

A foot in both the LIC & ETF camps is a happy medium for me. It's said there is no perfect portfolio, so best to do what suits the individual so one can sleep well at night.

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sometimes that active manager ( even a very conservative one ) will win and sometimes lose , but they know that and often build up a buffer of a div. reserve base ( 'div. smoothing ' )

but your active manager (s ) can be mixed and matched to suit the market you see ahead ( and how you want to navigate it ) the index fund just 'goes with the flow '

( i hold both LICs and ETFs , and a 'managed fund' , formerly a LIC )

watch out for LICs that seem to be plagued by 'discount to NTA ' complaints from the unit-holders

i buy extra when they are GOOD value NOT when they are at a premium to NTA ( so buy-backs , aren't a welcome remedy to me )

after all i buy LICs ( and ETFs ) for income not so much for capital gains

divs4ever said:

sometimes that active manager ( even a very conservative one ) will win and sometimes lose , but they know that and often build up a buffer of a div. reserve base ( 'div. smoothing ' )

but your active manager (s ) can be mixed and matched to suit the market you see ahead ( and how you want to navigate it ) the index fund just 'goes with the flow '

( i hold both LICs and ETFs , and a 'managed fund' , formerly a LIC )

watch out for LICs that seem to be plagued by 'discount to NTA ' complaints from the unit-holders

i buy extra when they are GOOD value NOT when they are at a premium to NTA ( so buy-backs , aren't a welcome remedy to me )

after all i buy LICs ( and ETFs ) for income not so much for capital gains

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monkton said:

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Nothing to gain there when a post is not even tangential to the underlying point of a previous comment so the best response is not to.