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I’m a fan of these 3 LICs

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Unless you can commit a good amount of time to researching shares it’s likely you’ll need help to achieve average market returns, let alone market-beating returns. An investment service is probably the best way to do it, but there are also exchange-traded funds (ETFs), unlisted funds and listed investment companies (LICs) that can do the investing for you.

Not every ETF or LIC is good, some generate poor performances and erratic distributions. Here are three LICs I think would suit most investors:

Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC)

AFIC is the largest LIC in Australia. It has a long history going back to 1928 and is now one of the most trusted investment vehicles in Australia.

Its largest holdings are some of the largest businesses in Australia like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), BHP Billiton Limited (ASX: BHP), Wesfarmers Ltd (ASX: WES), National Australia Bank Ltd (ASX: NAB) and CSL Limited (ASX: CSL).

AFIC has a good history of paying a solid and slowly-growing dividend. The dividend has been growing gently over the past two decades and the grossed-up yield is currently a pleasant 5.46%.

WAM Leaders Ltd (ASX: WLE)

WAM Leaders is one of the newest LICs launched by Wilson Asset Management. Its investment area of focus is the S&P/ASX 200 Index, which means its holdings should be the safest compared to other WAM LICs.

Some of its top holdings include BHP, Commonwealth Bank, Woolworths Limited (ASX: WOW), Origin Energy Ltd (ASX: ORG) and Tabcorp Holdings Limited (ASX: TAH).

It has built up enough of a profit reserve to start paying out a decent dividend and the WAM team expect the yield will grow to be in line with the other ones in time as well.

WAM Leaders currently has a trailing dividend yield of 3.69%.

MFF Capital Investments Ltd (ASX: MFF)

MFF Capital has been one of the best performing LICs in the industry. This performance has partly been because the global share market has done better than Australia in recent years, but most of the outperformance is due to MFF Capital’s ability to identify the best long-term opportunities.

I think it’s very likely that MFF Capital will continue outperforming the market due to its current top holdings such as Visa, Mastercard, Home Depot and Bank of America.

MFF Capital currently has a grossed-up dividend yield of 1.3%.

Foolish takeaway

I like all three LICS, though I’m only a shareholder in MFF Capital at the moment. I strongly believe that small cap & mid cap Australia stocks and quality overseas shares are the best places for an investor’s cash over the next few years. Therefore, AFIC and WAM Leaders could underperform compared to WAM Capital Limited (ASX: WAM) and global shares.

However, these quality Aussie blue chips have a great chance of beating the market.

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Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd and WAM Capital Limited. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. 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.

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