I just wanted to get peoples thoughts on LICs v ETFs.
For the sake of the argument, assume that the fees are roughly the same (0.10 - 0.25%)
Now assume that the ETFís are traded in an efficient market (i.e. they always reflect the movements of the underlying index) while the LICS may trade at a discount or premium.
I see LICs as a superior investment for the following reasons. But I would like to know what others think.
Actively managed, but in a buy and hold way. So someone, probably much better informed than me, is thinking about what companies are doing well and which ones arenít. I know some people here refuse to acknowledge that actively managed can possible be any better than passive, but the evidence would suggest otherwise on some of the old school LICís, even if only by a fraction of a percent pa.
Dividend is usually 100% franked with LICís, as opposed to ~70% with domestic ETF, so better tax outcomes.
Ease of accounting. The dividend is just like any other company, div + franking credit (sometimes a cap gain). To me the ETFís complicate it for no real gainÖ you have div, franking, interest, foreign income, cap gains, etc.
In my limited experience, LICís tend to have a more dependable and predictable dividend.
Share Purchase Plan (SPP) with LICís. Most now have a SPP every year for $15k with a set price. This is effectively a free option on the shares that can occasionally turn out to be quite profitable in the short term.
Some LICís have dividend reinvestment plans (DRP) with a discount to the current price.
So, assuming that you agree with the above, what is an acceptable premium to pay for all these benefits? 0.5%? 2.0%? Or do you use the spread to your advantage (which I agree is ideal, but not always practical) and only buy when thereís a discount, and only sell when thereís a premium and play with ETFís at all other times?