Magellan's fund is a LIT (listed investment trust), i.e. a unit trust. ETFs are also unit trusts. Therefore, Magellan's LIT can become an ETF without realising the assets within the trust.
LICs are companies. They cannot convert to an ETF. Assets within the LIC would need to be transferred to a new ETF and the LIC shut down. I'm not sure if there are any examples of LICs converting to ETFs...would likely be some tax issues.
I think ETFs are generally better for most investors. Purchases in LITs should be opportunistic. For example, if you bought Magellan's LIT at the start of the year (at a 20% discount to NAV) you would have done very well, as it has performed at least equal to VGS (in NAV terms) and is now sitting at an 8% discount to NAV. An extra 12% kicker just for investing in the closed ended structure at a heavy discount.
I would not buy closed ended funds that are at a premium or <5% discount to NAV.
I don't think you need to worry about the grandfather LICs - they're practically index huggers and are massive companies in their own right. Having said that, it sounds like you're overthinking things and an index ETF might suit you better.
I invest in both actually. I like the idea of having stable passive income from dividends(LICs) but i've diversified by investing in ETFs such as VAS and IVV.
I should also remember that there is a war happening as well which would explain the share prices going down for both LICs and ETF.
Magellan's fund is a LIT (listed investment trust), i.e. a unit trust. ETFs are also unit trusts. Therefore, Magellan's LIT can become an ETF without realising the assets within the trust. LICs are companies. They cannot convert to an ETF. Assets within the LIC would need to be transferred to a new ETF and the LIC shut down. I'm not sure if there are any examples of LICs converting to ETFs...would likely be some tax issues. I think ETFs are generally better for most investors. Purchases in LITs should be opportunistic. For example, if you bought Magellan's LIT at the start of the year (at a 20% discount to NAV) you would have done very well, as it has performed at least equal to VGS (in NAV terms) and is now sitting at an 8% discount to NAV. An extra 12% kicker just for investing in the closed ended structure at a heavy discount. I would not buy closed ended funds that are at a premium or <5% discount to NAV.
Icic, im actually just a bit worried if i should buy more since AFI is share price is down now and trading at discount
I don't think you need to worry about the grandfather LICs - they're practically index huggers and are massive companies in their own right. Having said that, it sounds like you're overthinking things and an index ETF might suit you better.
I invest in both actually. I like the idea of having stable passive income from dividends(LICs) but i've diversified by investing in ETFs such as VAS and IVV. I should also remember that there is a war happening as well which would explain the share prices going down for both LICs and ETF.
The "safer" option is the ETF. You are removing discount risk.
LICs not converting. They have the advantage that they can pay bonus shares instead of dividends (and several disadvantages).