Here’s why I sold my bank shares

Towards the end of last week, I sold my holdings in National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC). These weren’t large holdings mind you, but I enjoyed the dividends from these companies nevertheless.

You’d have to be living under a rock to not have heard about the banks’ woes of late. The Royal Commission has brought the scandals and questionable practices to the surface for the country to see.

There’s also other headwinds for the banks, like slowing credit growth and recent dips in Sydney and Melbourne house prices, which could lead to a further decline in demand for loans.

Next, we have some reported figures showing the big banks are losing market share to their smaller competitors. And last but not least, technological disruption. It’s very hard to see what the finance industry will look like in 20 years’ time.

Will we use banks the same way we do today? Or will there be new fintech startup ideas that take off and undercut the banks in the mortgage business?

In any case, none of these reasons are why I decided to sell my bank shares. The real answer is, I did it out of a desire for simplicity.

Like many Aussie share investors, I own direct stocks, but I also invest heavily in Listed Investment Companies (LICs). To be precise, the classic names that have been around for over 70 years, like Argo Investments Limited (ASX: ARG) and Australian Foundation Investment Co. Ltd (ASX: AFI).

These quality LICs are popular with investors because they’re a set and forget type approach to owning a diversified portfolio of Aussie shares.

All are managed at extremely low fees and have a strong focus on providing a growing stream of fully franked dividends, which they’ve done successfully for decades.

The portfolios of these LICs are similar and all have a decent exposure to our large banks. So it started to seem unnecessary for me to own individual bank shares too. The banks may prosper over the next 20 years, or they may even become less profitable.

Regardless of the outcome, I’m happy for these LICs to make portfolio decisions, if they deem it makes sense to do so.

I’ve learned simplicity is a very underrated aspect in investing.

The less decisions we have to make, the more likely it is we make better ones. Or, to put it another way, the less likely we are to make a bad decision. The easier we make our investing, the better chance we have of building large and lasting wealth.

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Motley Fool contributor Dave Gow owns shares of Argo Investments Limited and Australian Foundation Investment Company 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 Scott Phillips.

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