Benefits of investing in LIC

Listed Investment Company (LIC) is a popular investment option for investors in ASX. Generally speaking, LICs are suitable for investors who have longer investment time frame. As a matter of fact, many Listed Investment Companies take the value investing approach. Also you might find their performance mirrors stock market. When the market goes up or down, so are the LICs. Some LICs has been around for many years and their performance are consistently trace the market index.

A LIC works similarly to a managed fund, but you buy shares of the LIC on the stock exchange rather than units. The LIC invests in a variety of other businesses, allowing you to diversify your portfolio with only one purchase. That is one of the greatest benefits of buying LIC: diversification. It is not realistic to use your own money to buy so many companies. But buying LIC can help you achieve that indirectly.

Since LICs typically have low management expense ratios, they can be a relatively cost-effective way to invest.

A lot of them have consistent dividend payment history which attract dividend investors. If a LIC pays dividend, it is quite often they offer dividend reinvestment plan, enabling you to take advantage of the power compound interest.

LIC Fees

In terms of fees involved, there are two types for fees involved when you invest in LIC,namely management fee or MER and performance fee. Not every listed investment company charges performance fee and their management fee varies quite a lot range from 0.1% to 3%.

How to invest LIC?

It is quite easy to buy and sell LICs. LICs can be bought and sold on the ASX, through a broker, or through an online share trader, just like ordinary shares. Bear in mind, for smaller LIC, liquidity could be an issue, which means it may take longer to buy and sell and the spread could be higher than big LICs with a lot of interest from investors.

Top 10 LICs in ASX

Here are top 10 LIC in terms of market capitalisation in ASX:

  1. Australian Foundation Investment Company Ltd (AFI)
  2. Argo Investments Ltd (ARG)
  3. Milton Corporation Ltd (MLT)
  4. Magellan Global Trust (MGG)
  5. MFF Capital Investments Ltd (MFF)
  6. WAM Capital Ltd (WAM)
  7. MCP Master Income Trust (MXT)
  8. BKI Investment Company Ltd (BKI)
  9. Australian United Investment Company Ltd (AUI)
  10. Diversified United Investment Ltd (DUI

Complete LIC list

Note: data on this table is subject to change and may not 100 percent accurate.