Thursday, January 4, 2007

Sample LIC Portfolio

I have decided to run a sample portfolio of Listed Investment Companies starting in this the new year. I first had the idea in a previous post on Listed Investment Companies. The basic premise behind the portfolio is that a group of investment companies bought at a discount to their net tangible asset backing would, over the long term, provide a good return.

The mechanics of this exercise are quite simple.
  • Once per month, the Listed Investment Company trading at the steepest discount to it's lasted reported net tangible assets per share will be purchased, and the one with the smallest discount (or greatest premium) will be sold.
  • There will be 8 companies included in the portfolio.
  • All companies will have equal weighting.
  • All LIC's must be listed on the Australian Stock Exchange.

As with the Australian Investing Sample Portfolio, the following should be noted:

  • It is a sample portfolio only. Any trades which occur are theoretical in nature. They do not represent real trades.
  • Brokerage costs will be ignored. This is to keep the exercise simple.
  • Tax on both capital gains and dividends will be ignored. Again, this is to keep things simple.
  • There will be no interest taken into account for un-invested funds. This will penalize the performance of the portfolio until it is fully invested, but will simplify things once again.
  • Any trades which take place should not be treated as recommendations. Idependent advice should alway be sought.

The portfolio will start with $40,000 (to keep the maths simple). The trades will take place around the middle of each month after all of the LIC's for reported their NTA for the previous month.

Stay tuned for the first purchase.


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