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Did you buy any shares back in 2012 when you posted the thread?
If you bought banks or telstra back then you would have made good money as I predicted. Property has been great also
Since there was an interest in Tesco shares above, here's a comment from the BBC today:
http://www.bbc.co.uk/news/business-17383241
Short version: The business is having problems in the UK, and the top man is taking direct control of this unit, along with his other responsibilities, in an attempt to fix it.
An example that solidified it for me is, say if I'm the unluckiest person on earth and purchased $1m in AFI (A listed investment company) in Nov 2007, on the eve of the GFC. That $1m would be worth approx $564K by late 2008.
However, AFI did not decrease its dividends during the course of the GFC. As long as I held, I would've earned almost $34K in fully franked dividends, or $48K grossed up dividends every year from 2007-2012, and more from 2013 onwards. The share price has now recovered and surpassed its previous peak. Meanwhile I would've collected $363K in grossed up dividends over this period.
I'd agree with all the above. And add that some LICs enhance their returns (slightly) using options. eg if they think CBA is a screaming bargain at $70 they will sell a PUT option for a few cents, and not really care if it gets exercised. Doing the opposite (buying PUTs) when stocks are overvalued allows them to avoid churning & the associated CGT.Phiber, my preference is LICs below NTA, then ETFs. The big LICs have a history of outperformance, have ETF like fees, have ETF like portfolio turnover (approx. 5%) and have rock solid dividend stability, more so than ETFs. The ETFs will have higher yield in good times, lower yield in bad years. They are always at NTA....so I use ETFs when I need to DCA and none of the big LICs are at a discount.
Understand the way that ARG/AFI/MLT manage their portfolios is for the long term, they have sidestepped some shockers that the ETF has to hold and this is where the outperformance comes from. They really came into their own around 2000 by sidestepping the tech bubble for example. Long term, this has provided 1%+ outperformance. I'd say that ARG/AFI/MLT are almost like a smart beta ETF (ie. QOZ) as they are applying value type filters, but they are cheaper than QOZ (40bps). ETF and LIC are both valid though, you might come to a different view but I don't think its a subject worthy of raging argument . Bear in mind I am only talking about the oldest blue chip LICs...there are plenty of other recent entrants that are real dogs.
They really came into their own around 2000 by sidestepping the tech bubble for example. Long term, this has provided 1%+ outperformance.
Fair enough, yes looks like AFI has significantly outperformed the index over the past 20+ years. That is very good.
I still have my doubts about outperformance continuing forever. But that is just me. I am just happy to stick to more conservative index fund investing.
Cheers,
Oracle.
JohnMichael I would argue 'Key man' risk is an issue the further you get away from vanilla investments.
Would just like to add. If you were to value AFI from fundamental analysis point of view it is currently trading at P/E ratio of 25. BHP trades at 17 while CBA trades at 16.
EPS growth since 1997 (10.4 cents) to 2014 (24.3 cents) is 5.1% pa. Similar to what you expect the index to return over the long term. 5% CG and 4 to 4.5% dividend growth.
Hence, most of the outperformance of AFI seems to be from P/E expansion. If AFI were to trade at P/E of 17 it's price would be $4.10. To me this is a risk. I don't know how big though.
Cheers,
Oracle.
What I would say is this ;
Bogle, Malkiel et al are wise men and they say a lot of good stuff. I recommend everyone read them. However, you need to understand that they are railing against a typical US unlisted mutual fund.....an open ended benchmark hugger charging 2%, or a hedge fund charging 2 & 20. What they say is correct. Lets not translate this to closed end funds (LICs) that have the same fees as an index ETF, are extremely tax aware (low turnover) and apply quality/value filters. Bogle himself has said that closed end funds below NTA are a valid investment. RAFI methodology is proven to work and guess what, the large Oz LICs already do this style of investing and cheaper than a RAFI ETF.