While some investors prefer to pick every stock individually for their portfolio, there are others who prefer to essentially outsource part or all of the stock picking decisions to a fund manager.
One easy way to outsource is via listed investment companies (LICs) such as BKI Investment Co Ltd (ASX: BKI), a near $1 billion portfolio of blue-chip stocks.
BKI Investment's stated aim is to "invest for the long term with an aim to create wealth for BKI shareholders, through an increasing fully franked dividend and capital growth."
What's more, unlike many other LICs, BKI maintains a low cost structure and does not charge external portfolio management or performance fees. This can be vitally important to an investor's long term returns, consider this…
A $100,000 investment that achieves a compound return of 10% per annum will grow to $651,072 over 20 years if the management expense ratio is 0.18% (that's BKI's rate). Meanwhile, if the MER is 2% (which many LICs are) the return to shareholders falls to just $466,096.
So the fees and charges that a portfolio incurs can certainly affect the long term return an investor achieves. Likewise, the stock picking ability of the fund manager also matters.
Here are four of the main purchases made during the 2015 financial year for the BKI portfolio.
- National Australia Bank Ltd. (ASX: NAB)
- Wesfarmers Ltd (ASX: WES)
- ASX Ltd (ASX: ASX)
- Transurban Group (ASX: TCL)
Amongst the reasons these four stocks were selected was that they are each in sectors possessing long term attractive thematics. In fact, Bki has identified the Healthcare, Finance, Energy, Infrastructure and Consumer sectors as key areas of focus.
Not only does the BKI portfolio hold many attractive companies with reasonable long term growth potential but the divided on offer looks appealing too. Based on comments by management at the group's recent annual general meeting, BKI is confident of at least maintaining the interim and final dividend. This implies a fully franked yield of 4.3% – grossed up that's close to 6.4%.
