Should I Buy ASX Shares Now?

Should I buy AFIC or Argo shares?

Less extreme premiums to NTA have been seen recently in these two, but still baffling to me. I have said that before of course. Despite some discounts occurring after that, we have swung around now to the point that nothing much has changed. So I have been proved wrong again, the premiums have more or less been sustainable so far.

Be careful of buying in this range of 10% though, pretty sure many were buying in March at a premium of more than 12%. Seems excessive for a fund with the inflexibility of built in unrealised capital gains and one with no clear evidence of any active performance edge.

Below is a chart of the movements in the discount / premium of AFIC over the years.

AFIC premium / discount to NTA

Beware future tax policy

If you were buying a lot of WAM, AFIC or Argo during the share market falls I would want to think that the debate around policies on franking don’t resurface again. When this occurred in early 2019 pre the election premiums quickly shrunk or disappeared on these LIC dividend favourites. WAM from around a 25% premium to only 10%. AFIC / Argo from 5% premiums to 5% discounts.

I suggest all investors should ponder how future taxation policies can be unreliable. With the economic headwinds from COVID-19 I think this is the case more than ever. I discussed this topic in a blog post here from 2018, on the very day Labor proposed some changes in regard to franking.

As crazy as it seems right now, the S&P 500 (SPY) would only have to climb around 12% to get to all-time highs again!

Does it feel kind of wrong that us investors could soon potentially seeing new high levels of personal wealth, at the same time of unemployment rates of circa 20%? In that environment will there be much sympathy for those worrying about their franking credits?

Perhaps the saviour will be if the government locates another $60 billion of loose change behind the couch when reflecting on their next budget forecasts.

NAB SPP 2020

Just one final word before I wrap up. I get a bit tired of reading on Hotcopper that the system is all rigged in favour of the big institutions. I was a holder of close enough to zero NAB shares but get an opportunity to try my luck in buying $30k shares in a SPP that is 10% “in the money”.

Now my suspicions is I will be disappointed and get a measly $4k or something per a $30k application. Still you never know. I remember ANZ in 2009 treating me well not scaling back anyone after their SPP then being well oversubscribed.

Wish me luck. It’s a bit embarrassing the number of small shareholdings I have now for this type of thing, yet so far in 2020 this is my only hopeful one of making a buck. Which as I said may be disappointingly scaled back.

Still I don’t think there is much risk at all playing this game. Just thought I would mention it as investors who perform poorly often like to complain about the disadvantages of being a small investor.

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Disclaimer: These views on excessive premiums to NTA have been made before on this blog. Not much has changed so I have been wrong on this before and may well be so in the future!

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