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How safe are LICs through this time? (such as WAM)

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Barncore

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How safe are LIC's long term right now?

My GF has $60k invested in 4 portfolios with WAM (wilson asset management) since 2013 or so, that her dad set up for her. We brought up the idea of potentially pulling out of the shares, her dad insists to keep it in there says it will bounce back eventually and be fine. She is only 28 and the purpose is long-term nest egg, no urgent need to withdraw it now, but is there a chance she could lose it all?

It seems like the consensus forecast is that we have a multi-year recession ahead (which is technically a depression i guess). I have seen people forecast that this could even be worse than The Great Depression. It makes me think the best thing would be to cut the losses and take at least $10k out and put it in bitcoin/gold/silver. But i'm not experienced enough to back the notion fully.

What are the odds of the following things:
--Aussie dollar collapsing / losing significant value.
--Commonwealth bank goes bankrupt?
--Any chance WAM goes bankrupt?

Any other foreseeable way to lose it all?

Thanks for any input
 
Barncore said:
How safe are LIC's long term right now?
My GF has $60k invested in 4 portfolios with WAM
Click to expand...

I thought some brains trust would try to answer by now, I wrote down something last night but thought better of posting it. Looks like you're on your own, as far as this forum goes anyway,. We're not allowed to give advice. Almost no-one knows, not me, I've been buying a stock called Adairs (ADH) during the crash and today it's down another 20%, ADH put out an update just today - cancelled the dividend, pointed out with admirable clarity the threats in its situation and turns out it has $20m more long term debt than I realised or bothered to research.

I don't see how the Wilson's LICs can go broke. For a start four of them are 1/3rd in cash as of the February investment update which you should read if you haven't already: WAM, WAA, WMI, WAX 1/3rd in cash, WLE, WGB about 11% cash I think. That cash will probably be well deployed near bottom of the crash - definitely better than you or I could do.

Of the companies contained in the LICs they're mostly going down hard so far, maybe there'll be some bankruptcy of the contained companies but most or all? Very much doubt it. Commonwealth bank bankrupt, nah. Aussie dollar lower? Probably but just an opinion, lower Aud dollar good for some companies in the LICs, e.g BHP, NCM. Why worry about a lower AUD?

Selling means it's hard psychologically to get back in, too much negative association to overcome, won't pick the bottom, won't want to pay more than the bottom.

Geoff Wilson is heavily invested in his own LICs and he's been through this before.

You'd need to be braced for deeper falls from here if you're to hold, could go down another 50%, say, for all I know. I am holding WAM and WAX and not selling myself, but its less than $60k. But if you decide to hold be resolute with the decision, otherwise you might crack and sell near the bottom. Make a decision, don't second guess it and relax. Wish you luck, wouldn't lightly override what her father's saying specially if he donated any of the 60 grand. At 28, long time to recover from any setback.
 
Some of the longer term LICs have profit reserves. Dividends are paid from these. Rainy day stuff. But realistically pricing will reflect the sum of the parts NTA. And those are falling.
 
All I can think of is this:



Most people underperform the markets because they sell at the bottom and buy at the top.

You don't know what you're doing, you want to panic sell and buy what you think are safe assets.

Forget it. You are not qualified to make decisions about this investment or any other investment.

It's not your investment.
 
What if you believe that the governments could use this period of collapse to usher in a new one-world currency? Like an official federal crypto by the UN. Would LIC's be worthless after that? Or would they adapt?
 
That's all bull****. None of us are qualified to make a judgement on such fantasies. Keep your feet on the ground. Companies in the LICs are all providing goods or services that must be paid for, who cares if it's in 'one world currency', which it won't be anyway
 
InsvestoBoy said:
Stop listening to conspiracy theorists on YouTube.
Click to expand...
Is it that farfetched to believe there will be government official cryptos eventually?

The UNICEF launched a cryptocurrency fund in October last year: https://www.unicef.org/press-releases/unicef-launches-cryptocurrency-fund

And the UN appointed this guy as a special envoy on climate action and finance: https://www.un.org/sg/en/content/sg...nada-special-envoy-climate-action-and-finance

Also this: https://finance.yahoo.com/news/cryptocurrency-become-un-money-future-120035529.html
 
Barncore said:
Is it that farfetched to believe there will be government official cryptos eventually?

The UNICEF launched a cryptocurrency fund in October last year: https://www.unicef.org/press-releases/unicef-launches-cryptocurrency-fund

And the UN appointed this guy as a special envoy on climate action and finance: https://www.un.org/sg/en/content/sg...nada-special-envoy-climate-action-and-finance

Also this: https://finance.yahoo.com/news/cryptocurrency-become-un-money-future-120035529.html
Click to expand...

We already have govt money, it is called dollars, the Govt does not need to start a new one
 
as an advice I can give you:
your dad in law gifted the money, he says keep it in LIC;
If you sell and are right: he will hate you (more?) but it will be hidden..maybe you can live with that but not easy

If you sell and are wrong : he will hate you openly and you will never hear the end of it;

It is far too late to get out:
when we were -10 or 15% we were still overpriced and you could go out with reasonable chances of being right, now we are reaching irrational behaviour on the market, in crowds and governments: it is just a gamble on what the next announcement will be
If you are both redundant and need cash, then use that stash otherwise keep your family united, listen to the dad: after all, it is not really your money.
 
LICs are in the market like everything else, they rise and fall with the market.

In theory, they are better stock pickers than the average Joe Publc so that is why they exist
 
qldfrog said:
as an advice I can give you:
your dad in law gifted the money, he says keep it in LIC;
If you sell and are right: he will hate you (more?) but it will be hidden..maybe you can live with that but not easy

If you sell and are wrong : he will hate you openly and you will never hear the end of it;

It is far too late to get out:
when we were -10 or 15% we were still overpriced and you could go out with reasonable chances of being right, now we are reaching irrational behaviour on the market, in crowds and governments: it is just a gamble on what the next announcement will be
If you are both redundant and need cash, then use that stash otherwise keep your family united, listen to the dad: after all, it is not really your money.
Click to expand...
Hang on he didn't gift her the money. She was in a near-fatal car accident with a drunk driver 5-6 yrs ago that resulted in a payout. He invested it for her, cos she was 23 at the time.
 
Barncore said:
Hang on he didn't gift her the money. She was in a near-fatal car accident with a drunk driver 5-6 yrs ago that resulted in a payout. He invested it for her, cos she was 23 at the time.
Click to expand...
All right, is different so maybe keep good relations with your better half and make sure she makes the final call...
Believe me: in couple there are enough nagging reasons without adding one;
we can not give advices here, no one really knows, I was have suggested diversification 2 months ago, now too late and maybe let the pro at the LICS to handle any recovery?
Too late to rush to the exit in my opinion
 
@Barncore
If you're still checking in I feel compelled to put another approach. After all, I believe you looked for diverse views, thereafter to make your own decision. Hope it doesn't just add confusion. Anyone who disagees with what I say please put in.

If I'm frank I think the price could well go down to a dollar for WAM. I don't know this, it's just my current hunch. It is part subjective charting instinct after today's break of a level of support (the support at 1.90), part comparison to what happened to WAM 's share price in 2008 (see chart below).

During the GFC period, the share price dived roughly 60% from top to bottom (I've omitted the brief drop below 80c to 70c, too short a time to be painful. If that fall repeated this time, a 60% drop (rounded) from peak of 2.60 would be 1.60, which would take the price to ~$1.

So the question then is, if it happens, and remembering it might not, could you and she emotionally handle that sort of drop? If you think not, cashing out is a reasonable option I have to admit.

Take in that Wilsons will probably keep paying a reduced dividend during the dark period, as another poster mentioned, WAM has some retained profits. WAM paid one dividend per year in 2008 and 2009 (not the normal two per year) and it was also smaller.

Also, from the chart, take in that the WAM share price did recover from the GFC, however it took 5 years to equal the previous 2007 high of $2.00, then it continued on to the recent high of almost $2.60.

WAM All Data
big (20).gif
 
Definitely still reading, finicky. Yeah honestly i think she would be absolutely devastated if she lost it all. Which is the feeling i'm trying to get her to avoid. It's highly unlikely she'd be able to acquire that kind of money again within the next decade, given she works part time in retail + studying part time + renting. What's trickier is that she is, with all due respect to her, absolutely clueless with this stuff. She didn't even know what a LIC even was until i looked into it 2 weeks ago (she thought the 4 WAM portfolios were companies). So she is trusting my perspective on it. But i'm also inexperienced, but i AM really good at sitting at a computer for 14 hrs per day researching stuff, lol. And i've dived in deep the past week. And this crash looks like it will be much, much, much bigger than GFC.

Interested to see more minds chime in on your post.
 
It's too late to sell, most of the damage is done...in the GFC trillions were lost on dodgy derivatives.

Trillions will be lost in the VFC but not on anything dodgy, the economy and production is not broken, it's all just taking a holiday - perhaps an extended one, unpaid.
 

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