A Listed Investment Company, or LIC, is a particular kind of investment fund that collects investor funds and invests them in accordance with a predetermined investment strategy. LICs are listed and traded on several stock exchanges across the world, including the Australian Stock Exchange (ASX). Although managed funds, exchange-traded funds, and other pooled investment products resemble LICs in a number of ways, there are also some key differences.
An actively managed stock portfolio with a typically qualitative and/or quantitative investment methodology makes up a listed investment company. A LIC simply needs to report its holdings on a monthly or quarterly basis and will distribute a dividend at its discretion. An LIC is closed-ended, meaning that its managers must raise money in order to issue additional shares because there is a finite number of them accessible.
Benefits
The skill of the manager, the performance of the underlying assets, and the premium trading of its shares all contribute to the LIC’s value, which appreciates over time. A portion of the LIC dividends’ earnings, frequently in fully franked form, will be distributed as dividends. Diversity is a given as LICs can lower your investment risk because they often invest in a broad portfolio of stocks and/or other assets. An LIC has the potential to deviate from certain market trends and excel. However, this potential involves some increased risks as well as expenses such stamping fees to pay for the active management team’s recommendations. In the end, it’s recommended to make your choice of investment vehicle with the assistance of a broker.
Investors can easily gain access to a diversified portfolio of many different shares through investing in an LIC. This strategy decreases the chance that one poor investment adversely affects your performance. Entry barriers are often low, with no hefty entry fees, no required minimum investment, and simple access to your money when you need it. This implies that you can start out modest and gradually increase. Recognize the investment you are making and investigate how the underlying investment has performed in both booming and lagging markets.
Any advice provided by Investor Desk is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
