What is a Listed Investment Company (LIC)?
A listed investment company, or LIC, is a particular type of active investment fund. LICs are registered like public companies, and shares in LICs can be bought and sold on an exchange like the ASX.
As actively managed funds, LICs have a professional manager who decides which assets the fund should buy and sell and in what proportions.
Key Takeaways
- A stable capital base can allow the manager to more effectively implement their investment strategy.
- The ability to purchase LICs at a discount can provide the potential for additional investment returns.
- What makes LICs unique is that they are ‘closed-ended‘. This means there are restrictions on how many new shares they can create or cancel, so LICs can’t just issue more shares if there is a surge in demand from investors.
Examples of LICs
There are about 100 LICs listed on the ASX, most of which focus on investing in Australian and international shares.
These include the broad categories of:
- Australian shares funds
- International shares funds
- Private equity funds
- Specialist funds
The Bottom Line
Dividend investing has the potential to significantly enhance an investor’s portfolio, adding layers of value and stability.
The key lies in skillfully evaluating stocks to identify those poised to deliver robust returns while mitigating risks and maintaining a diversified portfolio.
You can download the offline guide here Listed Investment Company (LIC)
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