The ASX has been flooded with listed investment companies (LICs) over the last decade or two. It's hard to know whether some of them are worth investing in because of how new they are.
One of the most reliable LICs is also the biggest. Australian Foundation Investment Co. Ltd (ASX: AFI) (AFIC) has a market capitalisation of around $7 billion, its only job is to invest in other shares on behalf of shareholders.
Here are some of the main things to know about AFIC:
History and objectives
AFIC was set up in 1928 and specialises in investing in ASX shares.
It aims to provide shareholders with a growing stream of fully franked dividends and long-term capital growth. Its benchmark is the S&P/ASX200 Accumulation Index.
Management cost
One of the key factors when comparing passive index-style investments is cost.
AFIC has an annual cost of 0.14% with no performance fees.
Performance
AFIC's investment managers aren't trying to generate huge short-term returns. Instead, the aim is to beat the market over the long-term.
Over the last five years the net asset per share growth plus dividends has been 10.8% per annum.
Dividends
A lot of the investment returns are paid out as a dividend each year. AFIC has maintained or increased its dividend for the past two decades.
It currently has a grossed-up dividend yield of 5.83%.
Holdings and future performance
Its top holdings generally match the index, but there are some differences in names and percentages.
Its top holdings are Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), BHP Billiton Limited (ASX: BHP), National Australia Bank Ltd (ASX: NAB) and Wesfarmers Ltd (ASX: WES).
The next few years could be rocky, there problems facing most of Australia's largest businesses, but we'll see what happens.
Is it the best and is it worth a buy?
I think it's one of the best LICs that focuses on the large caps of the ASX market. It's nearly always a long-term buy for beginners and very passive investors. However, I'll be waiting for a cheaper entry price before I buy, at least $5.25, if not lower.
