Listed Investment Companies (LICs) have a lot in common with managed funds, but also have their own unique advantages and disadvantages.
For investors looking to get immediate diversification, an LIC makes a lot of sense. Most investors will gravitate towards the top two largest LICs – Australian Foundation Investment Co.Ltd. (ASX: AFI) and Argo Investments Limited (ASX: ARG), but there is a case to look beyond those two.
For one, their 10-year performance is average, coming in at 5.7% for AFIC and 4.9% for Argo. 6 LICs have performed better than AFIC.
These are the top 10 performing LICs over the past 10 years on a pre-tax net tangible assets basis. In other words, these companies have grown their assets the most – although their share price growth may not reflect that.
|Company||Last Price||Market Cap ($m)||10-Year return|
|Carlton Investments Limited (ASX: CIN)||$31.49||$833.7||9.7|
|WAM Capital Limited (ASX: WAM)||$2.26||$93.6||9.4|
|Australian Leaders Fund Limited (ASX: ALF)||$1.52||$411.6||9.3|
|Mirrabooka Investments (ASX: MIR)||$2.82||$286.0||8.2|
|WAM Research Limited (ASX: WAX)||$1.52||$264.7||6.7|
|AMCIL Limited (ASX: AMH)||$0.96||$247.7||6.6|
|Australian Foundation Investment Co.Ltd. (ASX: AFI)||$5.64||$6,374.9||5.7|
|Milton Corporation Limited (ASX: MLT)||$4.26||$2768.7||5.6|
|Flagship Investments Ltd (ASX: FSI)||$1.60||$40.7||5.5|
|Bki Investment Co Ltd (ASX: BKI)||$1.59||$948.5||5.4|
Source: Bell Potter
It also pays to remember that the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has returned 4.9% annualised, including dividends reinvested over the past 10 years. Which means that all companies above managed to beat the primary index – a fabulous result.
However, the SPDR S&P/ASX 200 Fund (ASX: STW) ETF has returned a compound annual return of 7.7% since inception in August 2001 – more than 15 years ago. That partly reflects the importance of investing for the long term.
Investing in LICs can be an easy way to gain instant diversification and exposure to different classes (like small and micro caps or international equities), but it’s also important to make sure that their performance is better than the index – otherwise investors may as well just put all their cash into a low-fee exchange traded fund (ETF).
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