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Speaker 1: Welcome back to another episode of Sugar Mama's Fireplay, the

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Speaker 1: podcast where we ignite your financial independence, your retire early strategies,

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Speaker 1: and empower you live a life on your own terms.

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Speaker 1: I am your host, passionate financial planner, Canna Campbell, and

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Speaker 1: today we are talking about one of my all time

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Speaker 1: favorite investment vehicles that are actually fueling my fire goals,

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Speaker 1: and that is listed investment companies also known as licks.

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Speaker 1: These long term passive income gems have been instrumental in

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Speaker 1: my own fire journey as I successfully and I say

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Speaker 1: that proudly, not smugly, work towards building a long term,

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Speaker 1: growing passive income stream of two hundred thousand dollars a year. Now,

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Speaker 1: if you've been following this show for a while, hopefully

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Speaker 1: you've heard my previous episode where I share with you

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Speaker 1: exactly the sources, how I'm tracking, and of course what

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Speaker 1: I have coming up to help make sure that I

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Speaker 1: am on track with my goals, if not hopefully smashing

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Speaker 1: my goals and exceeding them. So today, though, I really

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Speaker 1: want to share with you this particular topic around listed

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Speaker 1: investment companies because they could be a really powerful addition

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Speaker 1: to your existing portfolio. If you are part of the

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Speaker 1: fire movement, and of course you have a long term

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Speaker 1: investment time frame and you understand what your risk profile is,

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Speaker 1: particularly if you have a long term investment timeframe, and

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Speaker 1: you know and understand your risk profile, which is typically

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Speaker 1: around growth to high growth for this particular type of

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Speaker 1: asset class. Now, on that note of risks and asset class,

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Speaker 1: I need to remind you of my general advice warning.

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Speaker 1: Because I'm going to be really diving deep into this

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Speaker 1: particular topic listed investment companies, which is obviously a financial product,

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Speaker 1: I need to remind you that I'm not recommending this

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Speaker 1: particular asset or assets, and I will be listing some

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Speaker 1: examples of listed investment companies, some of which I have

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Speaker 1: personally invested in, both in my private share portfolio and

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Speaker 1: the thousand dollars project portfolio. So please know that just

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Speaker 1: because I'm talking about these particular assets, I'm not recommended

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Speaker 1: that you necessarily go and invest them. You've got to

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Speaker 1: go and get professional advice from a financial planner. And

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Speaker 1: of course, for those of you who are actually running

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Speaker 1: your own financial strategies and you think we'll let it,

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Speaker 1: want to see a financial planner. Can I really encourage

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Speaker 1: you to go and do a risk profile, do your

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Speaker 1: own research and work out the right percentage or the

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Speaker 1: right split as to what money you want to potentially

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Speaker 1: include with listed investment companies in your investment portfolio. But

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Speaker 1: again a reminder, these are long term investment vehicles and

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Speaker 1: typically for growth to high growth investors, So think about that, Blend.

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Speaker 1: I would never recommend someone puts all their eggs in

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Speaker 1: one basket. All right, Now that I've got that important

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Speaker 1: compliance disclosure out of the way, let's get started. All right.

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Speaker 1: First of all, what exactly are LICKS listed investment company?

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Speaker 1: So all right, let's set this up clearly the right

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Speaker 1: way their first time, because there's a lot of misconception

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Speaker 1: about what licks really are and how they differ from ETFs,

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Speaker 1: and how they fit into the fire strategy and of

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Speaker 1: course your long term goals. So I'm going to use

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Speaker 1: an analogy. I love a good analogy. So imagine you're

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Speaker 1: at a busy supermarket and there are countless aisles and

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Speaker 1: sections and different types of produce spread across this shopping supermarket,

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Speaker 1: and you've got to navigate this particular supermarket that you're

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Speaker 1: maybe new two you've never been to this particular one

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Speaker 1: before grab a trolley or a shopping basket and go

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Speaker 1: and find all of those items on your shopping list

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Speaker 1: as you go from aisle to aisle, and then you've

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Speaker 1: got to actually go and buy and pay for each

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Speaker 1: one individually. Now, of course, this is going to take time.

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Speaker 1: It's obviously going to be confusing trying to locate everything

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Speaker 1: and all the different aisles and all the different sections,

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Speaker 1: and of all the different levels, of all the shelves,

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Speaker 1: and all the different heights and levels that you find

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Speaker 1: items scattered across. Now, of course, as you're going up

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Speaker 1: and down the aisles, you run the risk that you

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Speaker 1: might forget something on your list, or you actually might

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Speaker 1: miss out on some really great weekly specials, you know,

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Speaker 1: miss out on those fabulous bargains that were hidden in

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Speaker 1: the corner, or you know, there were too many people

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Speaker 1: in the supermarket and they were blocking the sign for

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Speaker 1: you to see, you know, what particular meats or breads were,

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Speaker 1: you know slash that week or that particular time of

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Speaker 1: the day. Now that particular shopping technique buying things individually

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Speaker 1: is very much akin to buying individual stocks. However, when

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Speaker 1: you're using licks listed investment companies, It is literally like

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Speaker 1: turning up to the supermarket, walking through the door, and

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Speaker 1: then instead of having to go up and down all

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Speaker 1: the different aisles working through your list of items, you

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Speaker 1: just grab one of the pre packed shopping trolleys with

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Speaker 1: all the key ingredients and produce that you need in

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Speaker 1: order to be able to make and create a healthy, balanced,

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Speaker 1: nutritional meal for the next few weeks. And they've done

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Speaker 1: all the picking for you, and they've also included all

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Speaker 1: the great specials that they found in all the different

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Speaker 1: aisles hidden away behind the crowds. Now, because all that

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Speaker 1: convenience has been packaged up for you and it is

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Speaker 1: an efficient choice, you are going to have to pay

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Speaker 1: a small fee, but a fee for this service to

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Speaker 1: this value add in your life. But when you think

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Speaker 1: about all the hard work that has done, for all

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Speaker 1: the decisions that have been made, and the time that

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Speaker 1: you get back, you can actually see that buying that

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Speaker 1: or grabbing that pre packed shopping trolley is actually great

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Speaker 1: value for money, and you really appreciate it because you

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Speaker 1: can simply grab it, pay for it in one big transaction,

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Speaker 1: and then walk out the door continuing on with your day.

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Speaker 1: That is essentially what a listed investment company is and

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Speaker 1: to a certain degree obviously exchange traded funds. So think

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Speaker 1: of your lick as that prepackage shopping trolley, and it's

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Speaker 1: filled with healthy, nutritious food that's been picked out for

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Speaker 1: you by say a dietitian, a nutritionist, a fitness expert,

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Speaker 1: someone who's really sort of considered what is the best

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Speaker 1: ingredients in minerals and nutrients to build a really healthy

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Speaker 1: body for great longevity. There is your lick. Now, obviously

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Speaker 1: you lick isn't filled with food. Your listed investment company

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Speaker 1: investment has businesses, but a great mix of different diversified

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Speaker 1: businesses that have actually been hand picked by fire managers

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Speaker 1: with a huge amount of experience, experience of the long

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Speaker 1: term and success, consistent success. Now, if you want to

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Speaker 1: invest it in a lick, you normally need to do

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Speaker 1: this like you're buying shares, So you'd need like a

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Speaker 1: compsec account or a Moomo account, or a CMC account

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Speaker 1: or a NAB trade account, like an online share trading account.

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Speaker 1: Because when you invest in licks, you buy shares like

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Speaker 1: you would buy normal shares in any other company on

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Speaker 1: the AX. And of course, some examples of listed investment

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Speaker 1: companies in Australia are Whitefield, Irgo, Soul Patterson and of

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Speaker 1: course AFI. Now as I list those again reminded I'm

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Speaker 1: not giving you product device here whatsoever. Investment advice. Use

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Speaker 1: this as a start, use this as a guide to

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Speaker 1: start your own research, and of course make sure you

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Speaker 1: do your research before you actually make any major investments,

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Speaker 1: because I need you to just see and understand the

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Speaker 1: benefits of LICKS so that you can actually work out

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Speaker 1: whether licks are actually right for you and your financial goals.

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Speaker 1: Or perhaps after listening to the episode, you might think, actually, no,

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Speaker 1: licks are definitely not for me, because as I said,

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Speaker 1: these are long term buy and hold investments, which are

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Speaker 1: really for long term investors that are trying to build

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Speaker 1: up a passive income stream, which I'll explain in a moment.

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Speaker 1: So now I want to talk to you about the

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Speaker 1: key benefits that come with, you know, using a listed

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Speaker 1: investment company in your portfolio. And for full disclosure, yes

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Speaker 1: I have listed investment companies in the thousand dollars project

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Speaker 1: portfolio of my own private share portfolio and actually in

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Speaker 1: my superannuation account. So let's now explore the different reasons,

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Speaker 1: or the compelling reasons. I'd say why listed investment companies

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Speaker 1: can be a really powerful tool for you and your

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Speaker 1: own fire goals. So the first one is obviously the

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Speaker 1: immediate diversification. Diversification is the cornerstone of risk management when

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Speaker 1: it comes to investing. Instead of putting all your eggs

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Speaker 1: in one basket, listed investment companies spread all those investments

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Speaker 1: across various businesses, industry sectors, and sometimes even in different countries. Now,

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Speaker 1: what this does is it helps reduce the impact of

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Speaker 1: any single underperforming stock or asset in your overall investment portfolio. So,

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Speaker 1: for example, some listed investment companies give you exposure to

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Speaker 1: Australian shares, maybe some international shares, emerging markets, or particular

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Speaker 1: sectors that are quite niche and typically challenging to actually access.

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Speaker 1: So another way to understand this is is you've got

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Speaker 1: one thousand dollars to invest, and if you go and

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Speaker 1: try and invest that one thousand dollars, obviously ignoring for

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Speaker 1: a second micro investing platforms, and you're buying and parcels

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Speaker 1: of say five hundred dollars, that one thousand dollars is

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Speaker 1: really not diversified because you can only pick two companies

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Speaker 1: that you're going to invest in so there's a huge

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Speaker 1: amount of risk in that investment portfolio, and when you

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Speaker 1: decide instead to maybe look at a listed investment company,

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Speaker 1: you are potentially, you know, buying up to one hundred

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Speaker 1: and six different companies in that one simple transaction of

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Speaker 1: one thousand dollars. For example, Whitefield. If you look on

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Speaker 1: their website, you can see that they actually invest in

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Speaker 1: over I think of around about one hundred and sixty

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Speaker 1: different businesses, spread across different sectors, industries and obviously operating

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Speaker 1: in having exposure into other countries as well, so there

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Speaker 1: is immediate diversification. You're not putting all your eggs in

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Speaker 1: one basket. Of course, those decisions are outsourced. We'll come

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Speaker 1: to that in a second. The second benefit is accessing

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Speaker 1: professional management, someone who's making those decisions for you. So

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Speaker 1: navigating yourself the investment landscape can be daunting. I'm a

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Speaker 1: financial planner with over twenty something years experience. I find

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Speaker 1: it tough and overwhelming. The list of investment companies give

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Speaker 1: you the great advantage of having seasoned professionals manage your

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Speaker 1: whole entire portfolio, but the difference is also here they

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Speaker 1: actually have historical returns to show you how they have

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Speaker 1: typically performed, and how consistent they are over the long run,

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Speaker 1: and the actually you can see how they've handled stressful

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Speaker 1: times in history, and how they've sort of bounce back

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Speaker 1: or recovered how long it's taken for them to recover.

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Speaker 1: So they're actually making all of those really overwhelming investment

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Speaker 1: decisions on your behalf. And these experts they analyze market trends,

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Speaker 1: they have access to company performances. They even have direct

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Speaker 1: access to the CFOs and managing directors and owners of

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Speaker 1: these businesses, so they are literally sitting almost in the

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Speaker 1: office of these businesses working out whether they're great investments

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Speaker 1: for you and all the other shareholders or perhaps not.

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Speaker 1: And of course they're making all of those strategic choices

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Speaker 1: and decisions, which comes to making the most of your money,

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Speaker 1: optimizing returns, taking out rights, buybacks, all those sorts of

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Speaker 1: things that happen in the market, paying dividends and so forth,

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Speaker 1: and allowing you to benefit from their expertise without the

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Speaker 1: need to have to constantly monitor the markets continuously when

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Speaker 1: you're trying to do this yourself. So you get a

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Speaker 1: lot of time back for yourself and you take a

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Speaker 1: lot of stress and pressure off your shoulders when you

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Speaker 1: use a listed investment company, and I will say it

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Speaker 1: is obviously the same benefit that comes with managed funds

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Speaker 1: exchange traded funds. Now, this is a really big one,

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Speaker 1: and this is where we start to sort of see

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Speaker 1: the key differences. And I think, in my personal opinion,

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Speaker 1: how licks are actually more superior than exchange traded funds. Okay, So,

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Speaker 1: unlike exchange traded funds etips, listed investment companies operate as companies.

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Speaker 1: This tax structure actually allows them to pay dividends with

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Speaker 1: franking credits and reflecting that the tax has already been

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Speaker 1: paid at the corporate level. So for investors this means

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Speaker 1: potentially receiving tax effective income, as those franking credits can

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Speaker 1: actually help offset personal income tax liabilities. Also, some listed

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Speaker 1: investment companies, typically the older ones, like for example, Whitefields

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Speaker 1: over one hundred years old, they may have particular tax

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Speaker 1: advantages because they can sometimes distribute dividends source from capital gains,

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Speaker 1: which would then mean that as a shareholder, you're potentially

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Speaker 1: eligible for the capital gains tax discounts, which actually adds

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Speaker 1: a whole other level to the tax efficiency of a

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Speaker 1: listed investment company. So you need to understand ETFs and

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Speaker 1: licks are similar, but the key difference between the two

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Speaker 1: and ETF is an exchange traded fund and it typically

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Speaker 1: uses a trust structure, or a listed investment company uses

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Speaker 1: as a company structure. It can be a lot more

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Speaker 1: flexible when it comes to tax and of course the

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Speaker 1: tax efficiency. So that is essentially the big difference between

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Speaker 1: the two. And as I said, I feel like for

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Speaker 1: a lot of people who get this, they'll actually realize

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Speaker 1: it is a listed investment company when it comes to that,

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Speaker 1: just one key benefit instantly makes it far more superior

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Speaker 1: and efficient. The fourth benefit I would say to a

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Speaker 1: listed investment company is the administrative simplicity. Managing a portfolio

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Speaker 1: of numerous individual stocks can be extremely onerous burdensome, especially

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Speaker 1: when it comes to the end of the financial year,

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Speaker 1: because each stock that you buy generates statements, typically twice

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Speaker 1: a year, which means you have a mountain of paperwork

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Speaker 1: to go through and to get your accountant to go through,

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Speaker 1: which may end up being quite excit expensive. So for example,

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Speaker 1: if you have like say twenty or say thirty different

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Speaker 1: individual stocks in your share portfolio, that means you've got

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Speaker 1: sixty statements to go through at the end of each

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Speaker 1: financial year, whereas in contrast, when you're investing through a

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Speaker 1: listed investment company or even like your managed funder an ETF,

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Speaker 1: this is all consolidated for you as all your holdings

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Speaker 1: are paid detailed within the one or actually two statements

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Speaker 1: that are paid during that financial year. So it means

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Speaker 1: that your record keeping is so much more streamlined and efficient.

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Speaker 1: It makes you've also got a really great sense of

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Speaker 1: clarity when it comes to your investment portfolio and where

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Speaker 1: it's at, how much it's paid. It's just so much

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Speaker 1: easier to document and understand how are you actually progressing,

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Speaker 1: which is really important if you're part of the fire movement.

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Speaker 1: So this efficiency of having knowing that you're investing in,

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Speaker 1: say one hundred and sixty different companies, but yet you

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Speaker 1: only need to get two statements a year, which detail

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Speaker 1: obviously the income the franking credits how many units you've got,

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Speaker 1: is going to give you again back so much time

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Speaker 1: and allow you to see where you're progressing with your

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Speaker 1: financial goals and reducing those administrative headaches, particularly if you're

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Speaker 1: using a dividend reinvestment plan and have been using one

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Speaker 1: for quite some time. The next benefit to a listed

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Speaker 1: investment company and to really understand how powerful these are

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Speaker 1: is and this is probably i would say the biggest,

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Speaker 1: if not tying with the point number three being the

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Speaker 1: efficiency through a company tax structure, and that is consistent

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Speaker 1: growing dividends. Many listed investment companies have a track record

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Speaker 1: of providing consistent dividend payments, with some actually demonstrating a

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Speaker 1: history of growing dividends over time. Now, this can be

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Speaker 1: particularly appealing for passive income investors like myself who really

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Speaker 1: are trying to build long term passive income stream in

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Speaker 1: a stable, consistent way. This obviously includes the fire members,

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Speaker 1: but it also includes retirees people who need to know

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Speaker 1: that they're going to get their dividends, it's going to

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Speaker 1: be hopefully bigger than last year, and it's going to

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Speaker 1: continue on fueling their financial independence. Now, with a listed

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Speaker 1: investment company, they actually use a closed end structure which

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Speaker 1: allows the listed investment company to actually retain earnings during

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Speaker 1: profitable periods, which can then be used to maintain dividend

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Speaker 1: payments during less favorable market conditions. Now, if that doesn't

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Speaker 1: make sense, let me just explain it. It's like the

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Speaker 1: company has a bucket and the bucket is just continuously

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Speaker 1: being filled with water each year. But every now and

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Speaker 1: again there's a lot of water, there's a downpour, and

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Speaker 1: that bucket is a lot is full. It's got more

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Speaker 1: water in it than what it usually would because it's

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Speaker 1: got that flexibility of a company track structure, the person

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Speaker 1: managing that bucket of water can decide how they're going

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Speaker 1: to distribute that money to the shareholders, the people who

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Speaker 1: are holding their cups ready to have them filled up.

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Speaker 1: And because they may know that, for example, there might

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Speaker 1: be a drought or there might be some flooding coming up,

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Speaker 1: they know in advance to how to distribute that water

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Speaker 1: so that everyone is consistently getting their head rhydration needs.

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Speaker 1: Hopefully this analogy is making sense. So what essentially does

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Speaker 1: It allows the fund manager behind the listed investment company

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Speaker 1: to take a really proactive, mindful and intentional way in

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Speaker 1: paying consistent income out via dividends, but in a smooth way.

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Speaker 1: One of the things you'll notice if you look at

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Speaker 1: the historical returns of, say in exchange traded fund is

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Speaker 1: the income being paid can be very lumpy and chunky,

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Speaker 1: and that's because the fund manager uses a trust structure

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Speaker 1: and has had to pay capital gains out or special

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Speaker 1: dividends out for each financial year because that's what the

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Speaker 1: law says you have to do. So that can then

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Speaker 1: obviously then dramatically impact the share price or the unit

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Speaker 1: price of that ETF. This is something that is not

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Speaker 1: desirable and it can also create havoc for the individual

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Speaker 1: shareholders because they're getting all these capital gains taxes and

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Speaker 1: large income payment dumped on them, which doesn't necessarily work

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Speaker 1: for them from a timing point of view. And then

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Speaker 1: that often means that the following year the dividends aren't

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Speaker 1: going to be as strong. So this is what I'm

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Speaker 1: trying to explain to you. A listed investment company, as

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Speaker 1: I said, allows them to just retain earnings if and

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Speaker 1: when they want. They don't have to always pay them out.

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Speaker 1: They can decide, okay, well this year will pay out

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Speaker 1: this much, and this the following year will actually pay

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Speaker 1: out this much more or this much less. They have

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Speaker 1: that complete absolute control. The trust fund like an ETF,

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Speaker 1: doesn't have that flexibility at all. And you know, as

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Speaker 1: I said, when capital gains tax is triggered, they've got

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Speaker 1: to be paid out. They can't hold on and retain

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Speaker 1: those earnings, and I highly recommend going listening to my

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Speaker 1: podcast episode with Angus Gluski who runs Whitefield, because he

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Speaker 1: talks about this in more detail and how, in fact,

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Speaker 1: how incredibly powerful it is. Now, as you can say,

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Speaker 1: I love listed investment companies. Now, the next benefit to

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Speaker 1: a listed investment company is that transparency through the net

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Speaker 1: tangible assets. This is again really helpful and once this

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Speaker 1: year you'll be onto these websites in a hot second.

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Speaker 1: So a listed investment company has to regularly report their

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Speaker 1: net tangible assets, which is where they provide their investors

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Speaker 1: the insights as to you know, how the underlying portfolio,

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Speaker 1: how the underlying value of the portfolio is actually sitting at.

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Speaker 1: Now you'll be happy to hear this is actually really

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Speaker 1: easily found and you find it simply on the list

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Speaker 1: investment company's website. So last night I jumped on the

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Speaker 1: white Field website and I had a look at what

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Speaker 1: their net tangible asset was and as at it was

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Speaker 1: the twenty eighth of February I think twenty twenty five,

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Speaker 1: it was actually valued at six dollars thirty one, And

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Speaker 1: I then jumped on and had a look at what

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Speaker 1: the share price currently is it's five dollars thirty two. Now,

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Speaker 1: by comparing the net tangible asset that is, six dollars

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Speaker 1: thirty one against the listed investment company's share price which

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Speaker 1: is currently five dollars thirty two, investors like myself and

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Speaker 1: you can quickly identify if there is a potential buying

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Speaker 1: opportunity with this particular listed investment shares. When the net

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Speaker 1: tangible asset is bigger than the listed investment company's share price,

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Speaker 1: that is, the listed investment company shares are actually trading

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Speaker 1: at a discount to the net tangible assets, or vice versa.

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Speaker 1: If the listed investment company's share price is actually higher

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Speaker 1: than the net tangible asset, it means they're potentially going

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Speaker 1: to be paying for that share at a premium, which

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Speaker 1: of course we want to try and avoid. So this

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Speaker 1: transparency is really valuable and actually it helps us feel

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Speaker 1: more confident in our investment decisions and means that we're

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Speaker 1: making educated, informed decisions and thinking about our long term

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Speaker 1: goals and where we really want to go. You would

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Speaker 1: be a fool to just go out and buy a

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Speaker 1: listed investment company without checking the company's website, obviously doing

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Speaker 1: your research, but seeing what the net tangible asset is

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Speaker 1: and literally it's on the homepage. You can't miss it.

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Speaker 1: I'll even go and link some of these in the

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Speaker 1: podcast notes if it makes it easier for you. And

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Speaker 1: then finally, the other benefit to having a listed investment

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Speaker 1: company in your portfolio or a part of your overall

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Speaker 1: portfolio is Lenka says I said have close ended structures,

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Speaker 1: meaning that they have like a fixed pool of capital

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Speaker 1: and are not subject to investors' redemptions or even demands.

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Speaker 1: So let me quickly explain this. When it's closed ended,

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Speaker 1: it means they aren't issuing a continuous supply of shares

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Speaker 1: in the business. So it's like going to a shop

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Speaker 1: that's not producing any more stock. You can only buy

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Speaker 1: what's available. They're not going to be making more and

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Speaker 1: filling the shelves again. So you need to, you know,

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Speaker 1: buy for the long run, and you need to buy

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Speaker 1: exactly what you need. So when it comes to actually

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Speaker 1: buying shares in the listed investment company, you can only

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Speaker 1: actually buy those shares when they're available because another shareholder

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Speaker 1: is selling theirs. Now, what this does for the business

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Speaker 1: is really important that you understand. It actually helps create

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Speaker 1: a stability of cash flow for the underlying find manager

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Speaker 1: behind the listed investment company, and because of that, it

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Speaker 1: means that they can just focus on the long term

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Speaker 1: investment strategies without the pressure of having to meet short

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Speaker 1: term liquidity demands. Now, because of this strict requirement being

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Speaker 1: close ended, most of the shareholders in the listed investment

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Speaker 1: companies are all in it for the long run, for

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Speaker 1: that long run love of growth and income. And it's

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Speaker 1: very much akin to planting a fruit tree and you know,

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Speaker 1: allowing it to grow undisturbed, but obviously making sure it's

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Speaker 1: got sunlight and not disturbed by pests and weeds, and

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Speaker 1: doesn't obviously get too much water, but just letting it

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Speaker 1: do its thing, rather than constantly uprooting it and checking

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Speaker 1: its progress and then questioning why it hasn't produced any

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Speaker 1: fruit yet. If you can think of a listed investment

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Speaker 1: company as that fruit tree, leave it alone, let it grow,

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Speaker 1: let it create those deep roots first before it starts

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Speaker 1: to sprout and become that fruit tree, and that fruit

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Speaker 1: tree will then eventually give you this abundance supply of fabulous, nutritious,

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Speaker 1: delicious fruit which you can use for many, many years

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Speaker 1: to come by simply kicking the fruit and letting another

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Speaker 1: season come and it produces more fruit. Again. You're not

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Speaker 1: digging the whole fruit tree out and getting rid of

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Speaker 1: it and starting all over again from scratch. You let

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Speaker 1: it do its thick and that does require self control,

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Speaker 1: and of course a lot of patients, but definitely patients

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Speaker 1: that is well worthwhile having doing and following. And of

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Speaker 1: course and of course the flow on benefits from this

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Speaker 1: is it helped keeps those investment fees the mers down,

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Speaker 1: makes them competitive, makes them low, means that you're getting

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Speaker 1: even better value for money. Now, of course it wouldn't

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Speaker 1: be fair or ethical for me to just only talk

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Speaker 1: about how fabulous listed investment companies are without talking about

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Speaker 1: the limitations or frustrations even of licks. So let me

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Speaker 1: just quickly run you through the downsides. Look, there aren't

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Speaker 1: many in my opinion, but I still need to do

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Speaker 1: the right thing and make sure that you're aware because

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Speaker 1: this is all about financial education. So all right, these

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Speaker 1: are the drawbacks or potential drawbacks that you need to understand.

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Speaker 1: You're trying to build a balanced investment portfolio. The first

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Speaker 1: being the market price versus the net tangible assets. So

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Speaker 1: listed investment company shares can trade at a premium or

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Speaker 1: a discount to the ntaight, which we just discussed, and

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Speaker 1: buying at a premium obviously means that you're paying more

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Speaker 1: than the underlying assets are worth, which you obviously want

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Speaker 1: to avoid. And of course the flip side of that

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Speaker 1: is purchasing them at a discount that might indicate that

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Speaker 1: they're undervalued on the share market. However, when you're looking

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Speaker 1: at those two points of comparison, there is absolutely no

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Speaker 1: guarantee that the discount will close. That is, you know,

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Speaker 1: the for example, with Whitefield, that the share price is

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Speaker 1: going to bounce back up to six dollars thirty one

434
00:23:38,480 --> 00:23:41,040
Speaker 1: or even higher. There is nothing is ever guarantee when

435
00:23:41,040 --> 00:23:44,760
Speaker 1: it comes to investing, and of course that gap could

436
00:23:44,760 --> 00:23:48,000
Speaker 1: widen further. So you know, the net tangible asset right

437
00:23:48,040 --> 00:23:50,960
Speaker 1: now of Whitefield is six dollars thirty one currently trading

438
00:23:50,960 --> 00:23:54,440
Speaker 1: at five dollars thirty two. That could go lower. That

439
00:23:54,960 --> 00:23:57,760
Speaker 1: share price could actually drop below five dollars even These

440
00:23:57,800 --> 00:24:00,840
Speaker 1: are real risks that you need to understand before you

441
00:24:00,960 --> 00:24:04,440
Speaker 1: go and invest. The second downside, which obviously I don't

442
00:24:04,480 --> 00:24:06,920
Speaker 1: think is a downside if you're coming from a place

443
00:24:06,920 --> 00:24:09,920
Speaker 1: of scarcity, if you think this is the management fees. Obviously,

444
00:24:10,359 --> 00:24:13,280
Speaker 1: farm managers don't work for free. Listed investment companies charge

445
00:24:13,359 --> 00:24:16,800
Speaker 1: management fees for their professional services, for the advice they deliver,

446
00:24:16,920 --> 00:24:18,760
Speaker 1: what they go and do, and of course the value

447
00:24:18,760 --> 00:24:21,760
Speaker 1: that they add. Now, whilst these fees obviously they compensate

448
00:24:21,800 --> 00:24:25,000
Speaker 1: for that expert management, they can obviously vary between listed

449
00:24:25,040 --> 00:24:27,919
Speaker 1: investment company and listed investment company, and of course you know,

450
00:24:28,160 --> 00:24:30,520
Speaker 1: the more fees you're paying, it's going to impact the returns.

451
00:24:30,840 --> 00:24:32,719
Speaker 1: So it's you've got to sort of when you're doing

452
00:24:32,760 --> 00:24:35,119
Speaker 1: your research, it's really important you assess whether the fees

453
00:24:35,119 --> 00:24:37,920
Speaker 1: are justified by the listed investment company and the performance

454
00:24:37,960 --> 00:24:40,439
Speaker 1: they've delivered and the risks they're taking, and of course

455
00:24:40,800 --> 00:24:44,400
Speaker 1: if they are aligned to your long term financial goals. Now,

456
00:24:44,520 --> 00:24:46,840
Speaker 1: when I was on the Whitefield website last night, I

457
00:24:46,880 --> 00:24:49,199
Speaker 1: had a quick look at what their current MR is

458
00:24:49,280 --> 00:24:53,040
Speaker 1: and I actually remember interviewing Angus Gluski from Whitefield and

459
00:24:53,080 --> 00:24:57,520
Speaker 1: their farm manager fee was around about thirty two basis points. Anyway,

460
00:24:57,600 --> 00:24:59,960
Speaker 1: to my delight and hopefully you're delight, you can see

461
00:25:00,119 --> 00:25:03,000
Speaker 1: the MAI has now dropped to zero point two six

462
00:25:03,040 --> 00:25:05,000
Speaker 1: percent per anum. So if you think about one hundred

463
00:25:05,000 --> 00:25:08,240
Speaker 1: thousand dollars invested in Whitefield. Again not investment advice. This

464
00:25:08,280 --> 00:25:11,160
Speaker 1: is example. You're only paying two hundred and sixty dollars

465
00:25:11,240 --> 00:25:13,920
Speaker 1: a year for them to invest that money for you,

466
00:25:14,080 --> 00:25:17,120
Speaker 1: make all those indecisions and do all their statements for

467
00:25:17,160 --> 00:25:19,520
Speaker 1: you when it comes to tax time. I mean that

468
00:25:19,680 --> 00:25:21,520
Speaker 1: is that means that your fund manager is almost working

469
00:25:21,560 --> 00:25:23,600
Speaker 1: for a couple of cents in a minute. That's slave labor,

470
00:25:24,040 --> 00:25:26,520
Speaker 1: you know it is. That is in my mind, excellent

471
00:25:26,600 --> 00:25:28,760
Speaker 1: value for money, rather than you having to invest that

472
00:25:28,800 --> 00:25:31,080
Speaker 1: one hundred thousand dollars yourself and think about all the time,

473
00:25:31,320 --> 00:25:34,240
Speaker 1: knowing what's stock to buy, and when that's stocked to buy,

474
00:25:34,240 --> 00:25:36,639
Speaker 1: whether it's good value or not. You know which offers

475
00:25:36,680 --> 00:25:38,320
Speaker 1: to take up. You know if they have a buyback

476
00:25:38,480 --> 00:25:40,359
Speaker 1: or you can get some bonus shares. These are a

477
00:25:40,400 --> 00:25:42,480
Speaker 1: little decisions are done by a fundament measure, and they're

478
00:25:42,520 --> 00:25:44,280
Speaker 1: charging you two hundred and sixty dollars a year, which

479
00:25:44,400 --> 00:25:47,680
Speaker 1: might I add is also tax deductible. So to me, yes,

480
00:25:47,760 --> 00:25:49,960
Speaker 1: fund managers are part of the game, but and they're

481
00:25:50,040 --> 00:25:52,040
Speaker 1: well worth it in most situations. But you need to

482
00:25:52,080 --> 00:25:54,080
Speaker 1: understand the cost of it and how it impacts your return.

483
00:25:54,400 --> 00:25:58,080
Speaker 1: Next is liquidity. Now, this is one that you must understand.

484
00:25:58,520 --> 00:26:02,440
Speaker 1: Some listed investment companies, particularly the smaller ones, which I'm

485
00:26:02,480 --> 00:26:05,399
Speaker 1: not really comfortable with personally, but you always do your

486
00:26:05,440 --> 00:26:07,320
Speaker 1: reshares because there are some good ones out there. They

487
00:26:07,320 --> 00:26:11,240
Speaker 1: may have a lower trading volume leading to liquidity issues,

488
00:26:11,280 --> 00:26:14,280
Speaker 1: which means if you need to sell, you can't necessarily

489
00:26:14,320 --> 00:26:16,119
Speaker 1: offload your stocks, or you have to offload them at

490
00:26:16,119 --> 00:26:18,439
Speaker 1: a really low price, which is not ideal. So this

491
00:26:18,560 --> 00:26:21,760
Speaker 1: makes it really challenging to buy but also to sell

492
00:26:21,760 --> 00:26:24,800
Speaker 1: shares without it actually impacting the price. And this is

493
00:26:24,840 --> 00:26:29,760
Speaker 1: particularly relevant during really volatile muck conditions like we're experiencing

494
00:26:29,840 --> 00:26:32,160
Speaker 1: right now. So before you go and invest in a list

495
00:26:32,240 --> 00:26:34,320
Speaker 1: investment company, make sure you can see that there is

496
00:26:34,560 --> 00:26:37,360
Speaker 1: lots of liquidity before you invest, because you may get

497
00:26:37,400 --> 00:26:39,919
Speaker 1: caught out if you need to sell or if you

498
00:26:39,960 --> 00:26:42,000
Speaker 1: want to try and buy back more and you're stuck

499
00:26:42,040 --> 00:26:44,560
Speaker 1: because there's just there's no one else selling their shares

500
00:26:44,600 --> 00:26:48,560
Speaker 1: their stock in the company. And then finally, performance fariability.

501
00:26:49,000 --> 00:26:51,840
Speaker 1: Like all investments and the whole world of investing in

502
00:26:51,880 --> 00:26:55,960
Speaker 1: different asset classes and different stocks and industries, nothing performs equally.

503
00:26:56,000 --> 00:26:58,760
Speaker 1: You know, there is a negative correlation between the share

504
00:26:58,800 --> 00:27:04,879
Speaker 1: market fixed interest the US market, the Australian market, the

505
00:27:04,960 --> 00:27:07,960
Speaker 1: Asian market. Like they're not perfectly in sync with each other.

506
00:27:07,960 --> 00:27:10,000
Speaker 1: They don't all perform well at the same time, or

507
00:27:10,040 --> 00:27:12,480
Speaker 1: it's very rare that they do. And the success of

508
00:27:12,520 --> 00:27:15,560
Speaker 1: a listed investment company is exactly the same, you know,

509
00:27:15,560 --> 00:27:19,280
Speaker 1: obviously depends on the fund manager's skill and their investment strategy,

510
00:27:19,320 --> 00:27:23,160
Speaker 1: and past performance is never indicative of the future performance.

511
00:27:23,200 --> 00:27:24,840
Speaker 1: So whilst you might go and look at how they're

512
00:27:24,840 --> 00:27:27,760
Speaker 1: performed over the last couple of years, know that that

513
00:27:27,960 --> 00:27:30,760
Speaker 1: is not actually an accurate reflection of where they're necessarily

514
00:27:30,800 --> 00:27:33,199
Speaker 1: going in the future. And I will say when you

515
00:27:33,240 --> 00:27:35,679
Speaker 1: do look at historical returns, please don't just look at

516
00:27:35,720 --> 00:27:38,760
Speaker 1: the last couple of years. Try and look at the ten, fifteen,

517
00:27:38,880 --> 00:27:42,240
Speaker 1: twenty years worth of returns those historical returns to get

518
00:27:42,240 --> 00:27:46,080
Speaker 1: a much clearer picture as to how they perform consistently

519
00:27:46,240 --> 00:27:49,639
Speaker 1: over time. So do your research, look at that track record,

520
00:27:49,680 --> 00:27:52,280
Speaker 1: and of course look at the management team and making

521
00:27:52,320 --> 00:27:54,480
Speaker 1: sure that they've been around for a really long time

522
00:27:54,560 --> 00:27:56,679
Speaker 1: and you know that they're consistently there for the business

523
00:27:56,680 --> 00:27:59,080
Speaker 1: and not jumping from far manager to fund manager, which

524
00:27:59,080 --> 00:28:02,119
Speaker 1: can obviously be a risk in this particular market. Right

525
00:28:02,160 --> 00:28:04,919
Speaker 1: now now in summary list of investment companies, as you

526
00:28:04,920 --> 00:28:08,520
Speaker 1: can now hear, can be really valuable in your investment

527
00:28:08,600 --> 00:28:12,280
Speaker 1: portfolio and in that I guess toolkit that you have.

528
00:28:12,480 --> 00:28:16,280
Speaker 1: They give you the diversification you access, amazing professional management,

529
00:28:16,760 --> 00:28:22,040
Speaker 1: the tax efficiency, the growing passive income, the admin is

530
00:28:22,640 --> 00:28:25,439
Speaker 1: transparency of the net tangible assets on the website, and

531
00:28:25,480 --> 00:28:28,959
Speaker 1: of course that long term focus of building capital growth

532
00:28:29,040 --> 00:28:34,560
Speaker 1: and growing important growing passive income streams through dividends, ideally

533
00:28:34,640 --> 00:28:37,360
Speaker 1: fully frank dividends. However, at the end of the day,

534
00:28:37,440 --> 00:28:40,880
Speaker 1: it is vital to actually weigh these benefits against your

535
00:28:41,000 --> 00:28:45,320
Speaker 1: obviously potential drawbacks such as deviations and management fees and

536
00:28:45,360 --> 00:28:48,360
Speaker 1: liquidity issues and of course that performance of veriability. But

537
00:28:48,720 --> 00:28:51,280
Speaker 1: these can be also incredibly powerful and I'm happy to

538
00:28:51,280 --> 00:28:54,480
Speaker 1: disclose I own these myself. So with any investment, as

539
00:28:54,480 --> 00:28:57,120
Speaker 1: you know, due diligence is key. Look at your own

540
00:28:57,160 --> 00:28:59,760
Speaker 1: financial goals, and as I said, these are for long

541
00:28:59,840 --> 00:29:03,600
Speaker 1: term financial goals. Look at your risk profile, the risk tolerance,

542
00:29:03,800 --> 00:29:05,800
Speaker 1: and of course the time frame in which you want

543
00:29:05,840 --> 00:29:08,600
Speaker 1: to achieve your goals. Because a listed investment company is

544
00:29:08,640 --> 00:29:11,520
Speaker 1: for the long run ten years, if not longer. And

545
00:29:11,640 --> 00:29:13,840
Speaker 1: my goal with my listed investment company is to never

546
00:29:13,840 --> 00:29:16,840
Speaker 1: actually sell it, but to eventually build up enough passive

547
00:29:16,880 --> 00:29:19,640
Speaker 1: income through dividends. So I never sell those shares. I

548
00:29:19,760 --> 00:29:23,760
Speaker 1: just get my dividend checks or deposits, you know, twice

549
00:29:23,760 --> 00:29:26,360
Speaker 1: a year that cover my living expenses for the next

550
00:29:26,400 --> 00:29:28,760
Speaker 1: six months or beyond, and then once that runs out,

551
00:29:28,800 --> 00:29:31,640
Speaker 1: I get another dividend paid six months after that. So

552
00:29:31,680 --> 00:29:34,040
Speaker 1: this is a continuous flow of water. You know, that

553
00:29:34,120 --> 00:29:37,120
Speaker 1: bucket of water analogy just continues on filling up my cup.

554
00:29:37,160 --> 00:29:39,600
Speaker 1: Every time it's about to run dryer, it's looking like

555
00:29:39,640 --> 00:29:41,920
Speaker 1: it's a bit lower. I get. You know that dividend

556
00:29:41,920 --> 00:29:44,680
Speaker 1: comes in perfect timing. Now, of course, if this is

557
00:29:44,720 --> 00:29:46,880
Speaker 1: something of serious interest to you, I will always recommend

558
00:29:46,960 --> 00:29:49,080
Speaker 1: you go and speak to a financial planner and you

559
00:29:49,080 --> 00:29:51,160
Speaker 1: speak to them about how it is best for you

560
00:29:51,200 --> 00:29:53,840
Speaker 1: to use a listed investment company in your portfolio, but

561
00:29:53,880 --> 00:29:58,000
Speaker 1: potentially blended with your other investment assets, because you never

562
00:29:58,040 --> 00:30:00,560
Speaker 1: want any regrets when it comes to building your own

563
00:30:00,680 --> 00:30:03,720
Speaker 1: financial freedom and independence. All right, that is it for

564
00:30:03,800 --> 00:30:06,480
Speaker 1: this episode today. Thank you so much for tuning into

565
00:30:06,480 --> 00:30:09,200
Speaker 1: sugar Mama's fireplay. And I really hope that you enjoyed

566
00:30:09,200 --> 00:30:11,800
Speaker 1: this particular episode And do you feel so much more

567
00:30:11,920 --> 00:30:15,560
Speaker 1: motivated and inspired when it comes to this really powerful

568
00:30:15,760 --> 00:30:20,320
Speaker 1: investment asset class for your own goals. Now, until next time,

569
00:30:20,560 --> 00:30:25,200
Speaker 1: stay informed, stay empowered, and keep that financial fire burning bright.

570
00:30:25,800 --> 00:30:27,760
Speaker 1: This is sugar Mama's fire