I invested in shares for the first time this week: hereâs how I did it
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May 8, 2021 â 11.00pm
May 8, 2021 â 11.00pm
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Amid ultra-low interest rates, hundreds of thousands of Aussies are dipping their toe into the sharemarket for the first time, in search of a higher return on their savings.
This week, I joined them. And because I know you love details, let me walk you through exactly how I did it.
Credit:Dionne Gain
Decide a plan for your money
Donât just go throwing your money into the sharemarket on a whim. Take time to think about what time horizon you have to invest and the possible alternative uses of your money.
“Investors who bought LICs/LITs when they were trading cheaply relative to asset backing in 2020 have been able to generate particularly high returns. Not only have they benefited from the upswing in the market value of shares generally, but they have also received a supplementary return as the LIC/LIT shares themselves returned to a more normal trading level relative to asset backing,” Gluskie said.
“In an economic environment where income and yield are hard to find, these LICs/LITs have continued to generate return and income for their underlying investors.
“The combination of efficiency and stability of the closed-ended structure of both LICs and LITs are attractive to many investors in managing their portfolios.”
Rainmaker Information
The $44 billion Listed Investment Companies (LICs) sector is now dwarfed by other comparative segments: Exchange Traded Products (ETPs), Managed Accounts and mFunds.
As recently as 2015, LICs had almost 50% more funds under management (FUM) than ETPs and nearly triple that of managed accounts, according to findings from Rainmaker Information’s latest Wholesale Advantage Report.
In the five years to 30 June 2020, LICs grew 12% p.a. In comparison, ETPs grew 51% p.a., mFunds grew 71% p.a. and managed accounts had the largest growth being 87% p.a.
LICs, unlike ETPs and mFunds, are structured as a company, not a trust. They are also a closed investment, so the pool of capital held in an LIC is capped.