Q: After reading Peter’s book (Join the Rich Club), I’m looking to invest in the banks for the long term e.g. 10 years for my kids, myself and my wife. Which bank do you see has the best value/dividends for the long term? I am considering CBA.
A: The Commonwealth Bank (CBA) is Australia’s best bank – best leadership, number 1 or number 2 in most markets, best technology, best capitalised, strongest balance sheet. It is also the most expensive in a relative sense and trades at a premium to its major bank peers.
For value, I like Westpac (WBC) – but it is out of favour with the market.
Investing 10 years with a bit of safety, I would probably invest in CBA. Investing 10 years and happy to take a bit more risk, I would probably add some Westpac – maybe split 50/50 between Westpac and CBA.
Q: Could you please tell me the difference with investing in Argo (ARG) or Switzer Dividend Growth Fund (SWTZ)? One being a listed investment company (LIC), and the other a trust. Also the implication for the investor as I think it may be tied up with tax.
A: Argo (ARG) is a listed company, close ended. Has shares, pays dividends. Dividends are discretionary (as declared by the Directors) and will typically be fully franked. Trading on the ASX has no direct bearing to its underlying value – may trade at a discount or premium to its net tangible asset value.
Switzer Dividend Growth Fund (SWTZ) is a listed trust, open ended. Has units, pays distributions. Distributes all its income, and any associated tax benefits. Will trade on the ASX very close to its NTA – engages a market maker to ensure that there is an active, two-way market in its units.
Both investments have similar, albeit slightly different, investment objectives.
From a tax point of view, there shouldn’t be much difference. Argo will pay half yearly franked dividends. With SWTZ, you get quarterly distributions, largely franked, and an annual tax statement that sets out the various components.
Q: I’m wanting to buy the US FAANG stocks (Facebook, Alphabet, Apple, Amazon and Netflix) for some additional diversification in my SMSF. What ASX ETFs would you suggest?
A: There is no locally listed ETF. The closest is BetaShares (NDQ), which tracks the NASDAQ 100 index.
Q: AVITA Medical (AVH) announced its intention to redomicile to the USA. To this end, what are the implications for shareholders from this move? Should shareholders be concerned? Does this move erode value?
A: You should read the pros and cons in the Scheme booklet, plus the Independent Expert’s Report.
Theoretically, it should be a positive because:
- a)It will save the Company money; and
- b)put the Company in touch with a larger pool of investors and customers.
Australian shareholders will be able to trade CDIs in Australia on the ASX. This structure is used by companies such as ResMed (RMD).
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Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.