It’s difficult knowing where to invest when you’re just starting out in the stock market. There are hundreds, if not thousands, of potential options that you could invest in. I think the best way to start is to invest in a listed investment company (LIC). A LIC is a business on the ASX which just invests in other businesses. There are a lot of different types of LICs, some focus on blue chips, some focus on small cap stocks and some invest in overseas businesses. Some of the safest LICs are the ones that have been running for many decades…
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It’s difficult knowing where to invest when you’re just starting out in the stock market. There are hundreds, if not thousands, of potential options that you could invest in.
I think the best way to start is to invest in a listed investment company (LIC). A LIC is a business on the ASX which just invests in other businesses.
There are a lot of different types of LICs, some focus on blue chips, some focus on small cap stocks and some invest in overseas businesses.
Some of the safest LICs are the ones that have been running for many decades and have been paying a solid dividend for decades. These safe LICs all own the blue chips we all know like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and Wesfarmers Ltd (ASX: WES).
Here are four of the best places to start on the ASX in my opinion:
Australian Foundation Investment Co. Ltd. (ASX: AFI) has been operating since 1928. It’s currently the biggest LIC on the ASX with a market capitalisation of $6.9 billion. It has maintained or increased its dividend for more than two decades and is trading with a grossed-up dividend yield of 5.86%.
Whitefield Limited (ASX: WHF) has been operating since 1923. It has a market capitalisation of $381 million and has maintained or grown its dividend every year since 1995. It is currently trading with a grossed-up dividend yield of 5.34%.
Argo Investments Limited (ASX: ARG) has been operating since 1946 and has a market capitalisation of $5.3 billion. Argo has maintained or grown its dividend every year since 2010. It is currently trading with a grossed-up dividend yield of 5.7%.
Australian United Investment Company Ltd (ASX: AUI) has been operating since Sir Ian Potter set it up in 1953. It has a market capitalisation of $1 billion and has grown or maintained its dividend every year since 1992. It is currently trading with a grossed-up dividend yield of 5.92%.
I think LICs could have a place in every portfolio but once you get going I wouldn’t want too much of the portfolio made up of LICs due to their slow-growth nature. If you buy too much of the same types of LICs then you are doubling up on the blue chip stocks you indirectly own in each one.
The above four options are all paying out solid dividends every six month, whilst potentially also providing shareholders with long-term capital growth as well.
Out of the four, it’s hard to pick a favourite because they all have slightly different qualities that makes them better in their own way.
The best of both worlds could be to have a slice of LICs in your portfolio and the rest of your portfolio is full on market-beaters like these growth stocks.
For many, blue chip stocks means stability, profitability and regular dividends, often fully franked..
But knowing which blue chips to buy, and when, can be fraught with danger.
The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2017."
Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.
If you’re expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you’ll be sorely disappointed. Not only are their dividends growing at a snail’s pace, their profits are under pressure too due to the increasing competitive environment.
The contrast to these “new breed” blue chips couldn’t be greater… especially the very real prospect of significant share price gains, something that’s looking less likely from the usual blue chip suspects.
The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.
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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Telstra Limited and Wesfarmers Limited. Motley Fool contributor Tristan Harrison has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.