Listed Investment Companies (LICs)
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What is a listed investment company (LIC)?
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How do LICs differ from ETFs and managed funds?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from HowToMoney and Owen Rascovich from Rask Finance.
Kate, welcome back to the Australian Finance Podcast.
Yes. Today we're going to be talking about listed investment companies, otherwise known as LICs.
Can I buy LICs on the ASX?
LICs. Okay. So L-I-C is not L-I-C-K. Yeah. Okay.
No licking anybody.
Yeah. Nice. So these are pretty popular on the ASX, the Australian Stock Exchange. And some people might weigh them up beside managed funds or ETFs and index funds.
What are the risks associated with investing in LICs?
They might be thinking LICs sound very similar to those things, but they're a little bit different, right? Okay. Do you want to explain what a LIC is or do you want me to explain it?
I'll give it a go. You can jump in. So we're talking about a company that's listed on the Australian Stock Exchange, which is the major market in Australia for buying and selling shares. And instead of being just a privately traded company where you can't really access it, it's publicly traded where you can buy and sell shares in the company. And the company itself then invests in, it could be shares. I think they can invest in all sorts of different things. Yeah, whatever.
How do the fees for LICs compare to ETFs?
And you can buy and sell shares in that company without actually having to buy and sell the underlying assets.
Okay. So let's imagine, because I find these are really good to use an example because we're about to talk about two different types of prices. So let's imagine I give you $10,000 and then you go invest that in some shares. I could actually invest in the structure or the way that they're held and those things that you manage instead of the actual underlying investments, right?
Yeah.
So I'm paying for not only the investments that are inside the thing, but also your skill, right?
Mm-hmm.
And those things have two different prices, right? There's the price of like you and the assets, which is what we call the share price of the listed investment company.
What factors affect the share price of LICs?
And then there's the assets that are inside or the net tangible assets or NTA, right? That's kind of the way I think about it anyway. And that's why, so one of the things that people get confused about with listed investment companies is the discounted premiums. So people say it's trading at a discount to NTA or it's trading at a premium to NTA. So can you maybe explain those things?
Yes, so the underlying assets are one thing, but the interesting thing about listed investment companies is once they initially list, so they raise their capital at the start, say they want $100 million, all these investors love whatever the company is raising the money, apply for their shares, and they list, and they buy everything as per their mandate on the first week.
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Chapters
8 chapters
1
What is a listed investment company (LIC)?
0:00–0:57
2
How do LICs differ from ETFs and managed funds?
0:57–2:12
3
Can I buy LICs on the ASX?
2:12–2:31
4
What are the risks associated with investing in LICs?
2:31–3:10
5
How do the fees for LICs compare to ETFs?
3:10–3:54
6
What factors affect the share price of LICs?
3:54–4:59
7
How can investors benefit from franking credits with LICs?
4:59–6:01
8
Are LICs still a viable investment option in the age of ETFs?
6:01–21:26
Speakers
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