The share market is the best place to have your money invested, the difficulty is knowing which shares to be invested in.
Many investors like the idea of choosing blue chips. I think that's a good strategy but you don't want to have all of your portfolio invested in just the big four banks and Telstra.
Perhaps the best way to get exposure to investments like Commonwealth Bank of Australia (ASX: CBA), BHP Billiton Limited (ASX: BHP) and Telstra Corporation Ltd (ASX: TLS) is to invest in listed investment companies (LICs).
Some of the best LICs have been around for many decades and don't rely on any one individual to generate impressive long-term returns. It also means there's little chance of the business going bust, unlike holding individual companies.
Most of the biggest LICs have fairly similar holdings to each other, but small differences can have long-term effects on returns, which is why some outperform others.
Here are three of the safest LICs in Australia:
Australian Foundation Investment Co.Ltd. (ASX: AFI) has a grossed-up dividend yield of 5.67% and pays half-yearly in February and August.
Argo Investments Limited (ASX: ARG) has a grossed-up dividend yield of 5.49% and pays in March and September.
Whitefield Limited (ASX: WHF) has a grossed-up dividend yield of 5.37% and pays in June and December.
By combining the above three LICs you can build a fairly diverse portfolio and spread out the dividend payments throughout the year for regular cashflow.
Foolish takeaway
LICs aren't for everyone but I think that they are worth exploring for most investors, particularly retirees who just want to enjoy their retirement without worrying about buying or selling shares.
